Articles

What's Next For Whistleblowers?

Marshall H. Tanick
(email)
Mansfield, Tanick & Cohen, P.A.
1700 U. S. Bank Plaza South
Minneapolis, MN 55402
Tel: 612.339.4295
FAX: 612.339.3161

The year 1998 may go down in the annals of Minnesota jurisprudence as the Year of the Whistleblower. Whether viewed as idealistic individuals who are seeking to remedy evils in the workplace or troublesome tattletales who seek to advance their own personal agendas, whistleblowers have been a major force on the legal landscape throughout the country, particularly in Minnesota, over the past decade. Their prominence and prevalence was reflected in a series of legal cases during the past year, highlighted by triumphs at several different judicial levels in Minnesota until a major adverse ruling by the Minnesota Court of Appeals at the end of the year.

These legal victories may pave the way for more whistleblower litigation, which is likely to become more pervasive (in the eyes of employees and their advocates) or perverse (in the view of many employers and their representatives).

Whistleblowers Win!

If the late baseball broadcaster Harry Caray were reviewing the results of litigation in 1998, he might be inclined to modify his patented remark after a Chicago Cubs victory as follows: "Whistleblowers win! Whistleblowers win!"

They prevailed in at least seven cases, all during the latter part of 1998, while suffering a simple, but significant setback in the Minnesota Court of Appeals. This spate of cases extended the scope of whistleblowing laws at both federal and state levels, although the solitary loss in late 1998 casts those triumphs into question.

In a pair of separate decisions on the same day, the 8th Circuit Court of Appeals held that a whistleblowing claim under the Federal False Claims Act, 31 U.S.C. § § 3729-3733, can be brought against the state and its instrumentalities. The law, which derives from a measure first enacted in the Civil War known as the "Honest Abe" law, provides financial incentives and rewards for individuals who pursue qui tam claims that uncover abuses and improprieties in connection with governmental contracts or federal spending programs.

In United States ex rel Zillser v. Regents of the University of Minnesota, 154 F.3d 870 (8th Cir. 1998), a private party plaintiff sued under the act alleging that the University of Minnesota misused federal grant money. The Federal Government intervened in the suit. The University moved to dismiss the case on the ground that: 1) the act imposes liability only on "[a]ny person" who makes false statements or claims to the United States Government; and 2) an instrumentality of a state is not a "person" within the meaning of the act. The Court of Appeals disagreed and ruled that the University is a "person" for purposes of the act.

A companion case also was brought by a private party, but without intervention by the Federal Government. In United States ex rel. Rodgers v. Arkansas, 154 F.3d 865 (8th Cir. 1998), an individual sued school districts and a state education department, alleging that the defendants had obtained federal funding by filing false claims of compliance with federal civil rights laws. The public entities argued that the 11th Amendment bars claims brought against the state under the False Claims Act.

The appellate court held that the 11th Amendment does not bar False Claims Act actions against states, even when the United States is not an intervening plaintiff. The Court explained that even when a False Claims Act suit is brought by a private plaintiff acting alone, the United States is still the real party in interest. Thus, a state's 11th Amendment immunity from suit is defeated due to the fact that the 11th Amendment does not provide immunity from suit by the federal government.

In both cases, the Court emphasized the important role that private plaintiffs play in their qui tam cases for advancing the public interest.

Public Policy "Permutations

The dichotomy between self interest and the public interest was at the heart of a trio of cases subsequently decided by the Minnesota Supreme Court and Court of Appeals under the state whistleblower statute, Minn. Stat. § 181.932, late in 1998. The cases turned on whether whistleblowers must advance "public policy" in their whistleblowing activities in order to be protected from adverse action, including discharge attributable to their whistleblowing. The Courts declined to read a "public policy" requirement into the whistleblower statute, although permutations of the cases were noteworthy.

The "public policy" issue was presented squarely to the Supreme Court in Hedglin v. City of Willmar, 582 N.W.2d 897 (Minn. 1998). This case arose after a pair of Willmar firefighters alleged that they had been forced to quit because they were hassled by the colleagues after they reported falsification of attendance records, drunkenness on duty, and intoxicated driving by firefighters. They sought refuge under the first prong of the whistleblower statute, Minn. Stat. § 181.932 subd. 1(a), which proscribes an employer from taking adverse action against an employee because the employee reports actual or suspected violation of "any federal or state law or rule."

The Kandiyohi County District Court dismissed the lawsuit on grounds that the alleged improprieties were only "internal" matters and did not invoke protection under the Act. The Minnesota Court of Appeals reversed, and the Supreme Court affirmed the intermediate court ruling, finding in favor of the whistleblowers and reinstating the case for trial.

The issue before the Supreme Court was whether the alleged infractions constitute a violation of "public policy," which the municipality maintained was an essential requirement of the whistleblower statute. The argument of the municipality was predicated upon a footnote in Williams v. St. Paul Ramsey County Medical Ctr., 551 N.W.2d 483, 484, n. 1 (Minn. 1996). There the Court stated that the statute does not protect those who blow the whistle to advance their own personal interests; rather, said the court, they must act for "protection of the general public or, at the least, some third person or persons in addition to the whistleblower." The Supreme Court brushed aside the Williams footnote as dictum, constituting "cautionary language" reining in the scope of the statute. Addressing the issue as one of "first impression" under Minnesota law, the Court did not expressly pass upon whether "public policy" was an essential element of a whistleblower claim. However, it found, on the facts, that the allegations of false recordkeeping and inebriated driving of fire vehicles on duty constituted statutory violations that were covered by the language of the statute, which "clearly and unequivocally" applied to "any" violation of law.¹

Although the Court did not explicitly rule on the "public policy" argument, the reasoning of the Hedglin decision seems to eschew that element. After fretting over the bitter and prolonged litigation, which it deemed may have jeopardized the quality of fire protection services in the community, the Court looked to the specific language of the whistleblower statute, finding that the statutory reference to violation of "any" law did not invoke a "public policy" requirement. Nevertheless the Court found that the allegations of falsification of records and drunken driving of fire vehicles on duty were sufficiently grave to implicate the public interest if a "public policy" requirement were appended to the statute.

The debate over "public policy" as a necessary ground for invoking the whistleblower statue was ironic because the law was borne out of concern for "public policy" slightly more than a decade ago. In Phipps v. Clark Oil & Refining Corp, 396 N.W.2d 588 (Minn.App. 1986), aff'd. 408 N.W.2d 569 (Minn. 1987), Minnesota first recognized the tort of wrongful termination on grounds of "public policy" on behalf of an attendant at a gasoline service station. The attendant alleged that he was fired because he refused to obey an illegal directive from his supervisor to put leaded gasoline in a car that was required to take only unleaded fuel. The Phipps case led to enactment, a year later, of the whistleblower state. The statute prohibits adverse employment action against an employee on account of the employee's 1) refusal, in good faith, to obey a directive by management that is deemed illegal; 2) report of actual or suspected illegality in the workplace; or, 3) participation in a governmental investigation of the workplace.²

Cases arising subsequent to Phipps suggested an implicit "public policy" requirement, rejecting claims of employees that whistleblowing does not involve personal or internal matters remote from the public interest.³ Those cases presaged the footnote in the Williams case, which was downplayed, if not disowned, in Hedgin and then totally disregarded by the appellate court in cases following Hedgin.

Wake of Willmar

The Court's refusal in Hedglin to impose a "public policy" requirement was the touchstone for several subsequent Appellate Court cases in the wake of the firefighters' case.

Shortly after Hedgin, the Court of Appeals reversed dismissal of a whistleblower claim, rejecting a requirement that a whistleblower's action must "benefit the public." In Bersch v. Rgnonti & Associates, Inc., 554 N.W.3d 783 (Minn. App. 1998), an employee who was fired after participating in a governmental investigation of her employer's billings for state-funded work was protected by the statute. The court rebuffed the contention that an employee who assists in an official inquiry must provide "useful information," fearing that a "public policy" requirement would result in "inconsistent application" of the statute based upon the quality and result of an investigation.

In an unpublished ruling in Bertagnoli v. Carlson Marketing Group, Inc., 1998 WL 665085 (Minn. App. 1998), the court held that an employee's complaint of fraudulently-inflated bills to customers was covered by the whistleblower statute. Reversing dismissal of the lawsuit, the Court of Appeals overruled the trial court's determination that the employee's complaint did not implicate "public policy." Relying upon Hedglin, the court "declined to read an additional requirement" of "public policy" into the whistleblower statute. A concurrence by Judge Marianne Short viewed Hedglin differently, suggesting that the claim would be actionable only if there is some "nexus" between the alleged billing improprieties and "public policy."

But the "public policy" requirement, apparently discarded in Hedgin, was revived by the Court of Appeals in a subsequent decision authored by Judge Short. Ruling a couple of weeks before the end of 1998, the court in Donahue v. Schwegman, Lundberg, Woessner & Kluth, P.A., 1998 WL 865126, (Minn. App. 1998), held that an attorney's complaint to the management of his firm, about the firm's internal payroll practice of surcharging employees for long-distance telephone calls and deducting those charges from their pay, did not activate the whistleblower statute. The court deemed the statute in applicable because the employee's accusation concerned only an internal matter and "failed to implicate public policy." The court deemed it essential that a whistleblower's complaint seek "to promote the public's morals, health, safety, and welfare," a seeming departure from the less rigorous view of the law expressed in Hedglin and progeny.

The ruling in Donahue may overshadow the triumphs of whistleblowers in the bevy of other cases in 1998. Donahue furnishes employers with a defense that can be carried in numerous cases that fall short of clear-cut violations of major statutes, rules, or regulations. It also provides another defense. The court noted that management was aware of the claimed impropriety due to other complaints before the employee blew the whistle. Therefore, the employee's charge did not constitute a statutorily protected "report" of wrongdoing since the employer already "acknowledged" the existence of the practice. This gives rise to a "prior awareness" defense by which an employer can fend off a claim under Minn. Stat. § 181.932 subd. 1(a), the provision of the statute that deals with reporting suspected or actual violation of law, by establishing that management already knew of the perceived problem before the whistle was blown.

In addition to these assertions, allied grounds are available on which to defend whistleblower claims. Complaints about suspected or actual violations of the law that are singular to an employee, or a small group of employees, and do not affect a broader segment of the workplace or society at large, may still be regarded as outside the purview of the statute under cases predating Hedglin. The line may be drawn between shrieks by whistleblowers that implicate issues affecting the public in general, which would be protected, and those lesser emissions that concern issues more personal to the employee and less profound to third parties.

Thus, claims of sexual harassment, while odious, may arguably be outside of the scope of the whistleblower law if the alleged misconduct is directed only to the complaining employee, or a few others, and does not affect the general public. Similarly, assertions that an employee is not being paid in accordance with law - such as minimum wage, overtime, and like requirements - might also fall within this unprotected category, at least if the alleged violation is not pervasive. Claims that involve public health and safety, on the other hand, would be more likely to fall within the ambit of the statute.⁴

Mundane Matters

These weighty issues were a far cry from the mundane matters that were addressed and resolved in favor of whistleblowers in a pair of decisions by the Minnesota Court of Appeals at the close of 1998. In Abraham v. County of Hennepin, 1998 WL 202771 (Minn. App. 1998), claims of a pair of fired public sector whistleblowers had been dismissed on summary judgment at the district court level because of their failure to establish a prima facie case and to refute the strong defenses advanced by their employer.

But the appellate court reversed and remanded. It determined that the trial court misapplied the required three-part standard for adjudication of whistleblower claims. The test, which is identical of the standard for discrimination claims under McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), requires that the court consider whether the adverse action was motivated by whistleblowing, whether the employer has a legitimate reason for the action, and then whether the claimant can show that the proffered reason is pretextual.

The trial court was reversed in Abraham for two reasons: failure to determine if a "causal connection" existed between the whistleblowing and the discharge; and failure to determine if there was a factual dispute regarding the employer's motivation.

Although these issues of causation and motivation seem mundane and often fact-intensive, they form the battleground in many whistleblower lawsuits.

Wary Whistleblowers Warning

Despite their recent successes, whistleblowers need to be wary of a number of obstacles that remain in their paths. Some of the impediments of success include the following:

• Settlement Struggles: Whistleblowing claims are notoriously difficult to settle. Because employers generally are accused of heinous conduct, they often react with particular hostility to the claims and are unlikely to settle them readily. Further, whistleblowing claims often are accompanied by charges made with investigative bodies. Once those investigations are launched, settlement of private civil claims becomes more problematic. In high profile cases, whistleblower claims attract public notoriety, which also often impairs the prospects for settlement.

• Causal Connection: Whistleblowers also must establish, as an evidentiary matter, the causal connection between the adverse action, usually termination, and the whistleblowing activity. Demonstrating the nexus can often be difficult, particularly if the employee has had a troublesome work history that is adequately documented by the employer.

• Mixed Motivations: Purported whistleblowers often are terminated for multiple reasons, some legitimate and others not. The law in Minnesota is unclear concerning what proof is required to establish that illicit motivation prompted the termination and thereby invokes the protection of the statute. Basically, this involves determining whether retaliation more likely than not prompted the adverse action. Employers who can show that an employee would have been terminated regardless of whistleblowing can prevail notwithstanding claims that the termination was in response to the whistleblowing.

• Whistleblower Wrongdoing: Whistleblowers often are aware of improprieties in the workplace because they are implicated in the mischief. However, such involvement in the misconduct they report does not per se preclude a whistleblower from asserting a claim. But miscreants are unlikely to be accorded the protection of the statute in the eyes of either the court or a jury.

• Pleading Problems: Whistleblowers need to be careful in their pleadings. Cases where whistleblowing occurs in the context of harassment or discrimination, which violates the Human Rights Act, are preempted by the Human Rights Statute.⁵ Thus, an employee who asserts both whistleblower and human rights claims arising out of the same factual core may be precluded from pursuing the whistleblower claim, thereby being deprived of a jury and some of the potent remedies under the whistleblower statute which are less fulsome under the human rights statute. They also could be time barred, because the statute of limitations for a human rights claim is one year, whereas a whistleblower claim runs for two years.⁶

• Trial Tactics: Whistleblowers often find more success in theory than in practice. While the Minnesota Court of Appeals and Supreme Court may be prone, as a practical matter, to uphold whistleblower claims, juries are not inclined to be so favorable. For instance, the employee in Phipps, the case that launched whistleblowing in Minnesota, ultimately lost at trial after remand.⁷ More recently, a high profile whistleblower claim, which also had been remanded by the Supreme Court, ended up in a jury verdict for the employer in Ramsey County.⁸

This is not to suggest that whistleblowers are destined to lose at trial. Rather, it is simply to recognize that the cases are hard to pursue and not easy to win.

Whither Whistleblowing

The recent surge in whistleblowing cases in Minnesota, both at trial and appellate court levels, reflects a continued growth in this type of litigation. These claims are likely to increase for several reasons.

First, a key number of employees and their advocates have a growing awareness of their rights. The generally sympathetic rulings of appellate tribunals motivate them to pursue these kinds of claims.

Government agencies have shown greater responsiveness to these improprieties. As they increase their scrutiny of the workplace, these agencies create more opportunities for whistleblowers to pursue and prove their claims.

Because of these trends, the series of whistleblower cases in 1998 in Minnesota may be a harbinger of more whistleblowing in the future. Thus, the workplace is likely to become a noisier place, for better or worse, as the Millennium approaches. Both employers and employees will likely look back upon 1998 as the landmark Year of the Whistleblower.

This article originally appeared in the Bench & Bar, in February, 1999.

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NOTES

1. The Court's reliance upon the clear language of the statute was reminiscent of a case earlier in the year in which the Court similarly looked to the "plain language" of a statute as dispositive. See Haghighi v. Russian-American Broad. Co., 577 N.W.2d 927 (Minn. 1998).

2. A fourth and narrow category of protected activity comprises employee reports of improprieties involving the quality of health care services provided by a health care organization. Minn. Stat. § 181.932, subd. 1(d).

3. See e.g., Vonch v. Carlson Cos., Inc., 439 N.W.3d 406 (Minn. Ct. App. 1989), rev. denied (Minn. July 12, 1989); Wheeler v. St. Paul Cos., 1994 WL 1272 (Minn. App. 1994) (unpublished), rev. denied (Minn. March 15, 1994); Dawn v. Central St. Croix Joint Cable Communications Comm'n, 1994 WL 1109 (Minn. App. 1994), rev. denied (Minn. March 15, 1994).

4. E.g., Phipps, 408 N.W.2d at 571; Freidrichs v. Western Nat'l Mut. Ins. Co., 410 N.W.2d 62 (Minn. Ct. App. 1987); Meyer v. Electro Static Finishing, Inc., 1995 WL 366093 (Minn. App. 1995); rev. denied, (Minn. Aug. 30, 1995); Cox v. Crown Coco, 544 N.W.2d 490 (Minn. Ct. App. 1996).

5. Williams, supra 551 N.W.3d at 483.

6. Minn. Stat. § 363.06, subd. 3, Larson v. New Richland Care Center, 538 N.W.2d 915 (Minn. Ct. App. 1995), 11 IER Cases 211 (Minn. App. 1995).

7. Phipps v. Clark Oil Refining Corp., File No. CT 85-16468, Hennepin County District Court (1988).

8. Bischel v. State of Minnesota, File No. CO-93-13987, Ramsey County District Court (1998).