This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-1503

 

Kevin D. Grothe,

Appellant,

 

vs.

 

Ramsey Action Programs, Inc.,

Respondent.

 

Filed June 6, 2006

Affirmed in part, reversed in part, and remanded

Randall, Judge

 

Ramsey County District Court

File No. C5-04-7602

 

Sonja Dunnwald Peterson, Dunnwald & Peterson, P.A., 1150E Grain Exchange Building, 412 South Fourth Street, Minneapolis, MN 55415 (for appellant)

 

Teresa M. Thompson, Anh Le Kremer, Parsinen Kaplan Rosberg & Gotlieb P.A., 100 South Fifth Street, Suite 1100, Minneapolis, MN 55402 (for respondent)

 

Considered and decided by Lansing, Presiding Judge; Randall, Judge; and Willis, Judge.

U N P U B L I S H E D   O P I N I O N

RANDALL, Judge

Appellant challenges the district court’s summary judgment on his whistleblower and defamation claims, alleging that (1) the results of an arbitration reinstating him with back pay did not preclude his whistleblower claim; (2) he sufficiently presented genuine issues for trial under the Minnesota Whistleblower Act; and (3) his complaint sufficiently alleged defamatory statements, or in the alternative, the district court abused its discretion by failing to allow amendment of the complaint.

We conclude that appellant’s whistleblower claim was not precluded by the results of his union arbitration proceeding and that he presented sufficient evidence to withstand summary judgment on that claim.  We reverse summary judgment on this issue and remand for trial. 

We affirm the district court’s summary judgment and dismissal of appellant’s defamation claim.  

 FACTS 

 

      Appellant Kevin Grothe began work in 1990 as an energy conservation specialist with respondent Ramsey Action Programs, Inc. (RAP), a private, non-profit agency.  RAP’s energy conservation department provides energy assessments, insulation and heating system repairs, and energy education to low-income households in Ramsey and Washington counties.  RAP is a subgrantee of the Minnesota Department of Commerce (DOC) weatherization assistance program, which received federal funds from the United State Department of Energy (DOE) weatherization assistance program and other government funding sources.  Appellant’s duties included performing energy audits and inspecting program homes.  In 1994 appellant was promoted to a lead energy conservation specialist position, with some supervisory duties.  His position remained governed by the union collective bargaining agreement.

In November 2000, RAP hired, as appellant’s supervisor, a new employee as energy program manager.  Appellant observed problems with that person’s management, including that he allowed grant-acquired property to be disposed of for greatly less than fair market value and that he failed to communicate properly with staff.  In January 2002, appellant and ten other employees signed a petition calling for department “accountability and management improvements,” which they forwarded to the DOE.  Specifically, the petition alleged the illegal disposition of grant-acquired property with a total value of $3,000-$5,000 at a price of about $25; management “in disarray”; gender and race discrimination; carpenter review issues; and inequity in staff training opportunities.  The DOE, in turn forwarded the petition to the DOC, which informed RAP that the improper disposition of items purchased with grant funds could violate federal regulations.

In March 2002, RAP placed its executive director on administrative leave and assigned two RAP employees as co-acting executive directors.  The next month, RAP hired an independent consultant to investigate the petition allegations.  The consultant interviewed the signing employees, including appellant, and RAP management and administrative staff.  Appellant informed the consultant that he feared retaliation for his involvement in the petition. 

The consultant issued his report in May, indicating that he was unable to prove allegations of illegal disposition of grant-acquired property, but did express significant leadership and management concerns.  Appellant, believing that management had not sufficiently addressed the petition issues, wrote a response to the consultant’s report on behalf of the petitioners.  That response was submitted first to RAP’s board chair and then, in July, to the DOE.  The response reiterated the petition concerns, including illegal disposal of property, and included further allegations that RAP management had retaliated against petition signers by rifling personal office desks and deleting e-mail and voice-mail messages. 

The DOC conducted an audit of RAP, including file reviews, home inspections, and employee and management interviews.  The DOC investigator accompanied staff on home visits and checked file documentation, which revealed that official records differed from physical home inspections.  After the DOC visits, the energy program manager examined several of appellant’s weatherization audit reports with other staff members and determined that appellant had falsified recordkeeping information.  The human resources director also provided documentation that appellant had claimed mileage for final home inspections when the homes had not in fact been inspected.  On August 5, acting on behalf of RAP, the energy program manager terminated appellant’s employment with the stated reason of misconduct for falsifying documents.  

The DOC report, issued after appellant’s termination, concurred with the consultant’s conclusion that, although he was unable to prove allegations on the illegality of the disposition of grant-acquired property, there were numerous management problems.  RAP terminated the energy program manager a few months later.  Appellant applied for the vacant position but did not receive the job.  

Appellant grieved his termination under his union’s collective bargaining agreement.  The arbitrator found that the certificates of completion appellant was alleged to have falsified contained ambiguous language as to what was being certified as completed and that appellant had a right to claim inspection mileage when he drove to a home site but was unable to gain entrance.  The arbitrator concluded that RAP had failed to establish just cause for appellant’s termination and ordered his reinstatement with back pay and benefits.  In November 2003, after a reorganization had eliminated appellant’s previous position, RAP reinstated him to an energy conservation specialist II position, with the same salary range and step as his previous position, but no supervisory duties.   

Appellant filed a complaint alleging violation of the Minnesota Whistleblower Act, Minn. Stat. § 181.932 (2002), and defamation.  The district court granted RAP’s motion for summary judgment on both claims.  This appeal followed. 

D E C I S I O N

 

      On appeal from summary judgment, this court applies a de novo standard of review to determine whether any genuine issues of material fact exist and whether the district court erred in applying the law.  STAR Ctrs., Inc. v. Faegre & Benson, L.L.P., 644 N.W.2d 72, 76 (Minn. 2002).  This court views the evidence in the light most favorable to the party against whom judgment was granted.  Id. at 76-77. 

I.

Minnesota’s whistleblower law states that “[a]n employer shall not discharge, discipline, threaten otherwise discriminate against, or penalize an employee . . . because . . . the employee, . . . in good faith, reports [to the employer]  a violation or suspected violation of any federal or state law or rule adopted pursuant to law . . . .”  Minn. Stat. §181.932, subd. 1 (2004).  This court considers appellant’s claim for wrongful termination under the McDonnell Douglas burden-shifting analysis.  Hubbard v. United Press Int’l, Inc., 330 N.W.2d 428, 444 (Minn. 1983).  Under that analysis, if the plaintiff is able to establish a prima facie case, the burden shifts to the employer to show a legitimate, non-retaliatory reason for the discharge.  Cokley v. City of Otsego, 623 N.W.2d 625, 630 (Minn. App. 2001), citing McDonnell Douglas Corp v. Green, 411 U.S. 792, 802, 93 S. Ct. 1817, 1824 (1973), review denied (Minn. May 15, 2001).  The burden then shifts back to the employee to demonstrate that the employer’s justification is pretexual.  Id. The burden remains with the employee throughout the proceeding to prove by a preponderance of the evidence that the basis for the employer’s action was impermissible.  Id. 

A prima facie case of retaliatory discharge consists of “(1) statutorily-protected conduct by the employee; (2) adverse employment action by the employer; and (3) a causal connection between the two.”  Hubbard, 330 N.W.2d at 444.  The district court granted summary judgment to the employer on the whistleblower claim on the basis that any adverse employment action “was reversed”  because appellant was “totally reinstated” with back pay and benefitsby the arbitration action; that no other adverse employment action occurred when he was not hired for the energy program manager position because he was not an employee when that hire was made; and that the seven-month period between the submission of the January petition and his termination, as a matter of law, was too lengthy to demonstrate a causal connection between his termination and the submission of the earlier petition.

The whistleblower act, by its plain language, protects good faith reports of violations or suspected violations of a state or federal law.  Anderson-Johanningmeier v. Mid-Minnesota Women’s Ctr. Inc., 637 N.W.2d 270, 274 (Minn. 2002).  To satisfy the good faith requirement, an employee must show that “the report [was] made for the purpose of blowing the whistle, i.e., to expose an illegality.”  Obst v. Microtron, Inc., 614 N.W.2d 196, 202 (Minn. 2000); Gee v. Minnesota State Colleges and Universities, 700 N.W.2d 548, 555 (Minn. App. 2005).  An employee need not identify the specific law that he believes violated “so long as there is a federal or state law or rule adopted pursuant to law that is implicated by the employee’s complaint . . . and the employee alleges facts that, if proven, would constitute a violation of law or rule adopted pursuant to law.”  Abraham v. County of Hennepin, 639 N.W.2d 342, 355 (Minn. 2002). 

In granting summary judgment, the district court did not analyze the sufficiency of the petition to allege a good-faith violation of a statute or regulation.  Whether an employee filed a report in good faith is generally a question of fact for resolution at trial.  Cokley, 623 N.W.2d at 630.  RAP has not alleged that appellant lacked good faith in submitting the petition.  RAP argues that appellant has failed to satisfy the requirement that the allegations in the petition would, if proven, constitute a violation of a specific law or regulation.  See Obst, 614 N.W.2d at 205 (affirming denial of motion for JNOV, holding that employee had failed to demonstrate that reports to employer implicated a violation of law or regulation).   

           The petition alleged that RAP property had been “sold or given away at far below market values” to persons selected by the energy program manager; namely, that equipment with an estimated market value of $3,000-$5,000 had been improperly disposed of for about $25.  Federal regulations require that a grantee or subgrantee  use  proper procedures for selling grant-acquired property to ensure a high return if a grantee or subgrantee is “authorized or required” to sell the property. 10 C.F.R. §600.232 (d) (5) (2006).  Respondent asserts that these regulations are implicated only if that property sold has a per unit value of more than $5,000, rather than a total value of up to $5,000, as alleged in the petition.  See 20 C.F.R. § 600.232 (e) (2) (2006) (stating that, in selling or disposing of property with a per unit value of more than $5,000, awarding agency has right to amount calculated by multiplying current market value or proceeds from sale by awarding agency’s share of equipment).  But, we conclude that the behavior alleged, selling up to $5,000 worth of grant-acquired property for a total of $25 to selected persons within RAP, sufficiently implicated, at least in good faith, a violation of federal regulations. 

We next consider the requirement of an adverse employment action.  This court in a whistleblower action has adopted the definition of adverse employment action used by the Eighth Circuit to evaluate Title VII violations: an ultimate employment decision that creates a “material change in the terms or conditions of . . . employment.”  Lee v. Regents of the University of Minnesota, 672 N.W.2d 366, 374 (Minn. App. 2003) (citing Ledergerber v. Stangler, 122 F.3d 1142, 1144 (8th Cir. 1997); see also Manning v. Metro Life Ins. Co., Inc., 127 F.3d 686, 692 (8th Cir. 1997) (indicating that ultimate employment decision includes “tangible change in duties or working conditions that constitute[] a material employment disadvantage”).[1] 

      The district court, in granting summary judgment, determined that an adverse employment action did not occur because the arbitration “reversed” appellant’s job loss.  But the arbitration board’s decision reinstating appellant has no preclusive effect on this statutory whistleblower action.  See Alexander v. Gardner-Denver Co., 415 U.S. 36, 59-60, 94 S. Ct. 1011, 1025 (1974) (holding that employee’s right to trial de novo under equal employment provisions of federal Civil Rights Act was not foreclosed by employee’s prior submission of claims to arbitration under collective bargaining agreement);  see also Follmer v. Duluth, Missabe and Iron Range Railway Co., 585 N.W.2d 87, 94-95 (Minn. App. 1998)  (holding that decision by  mediation board reinstating employee did not preclude district court action asserting employer’s violation of Minnesota Drug and Alcohol Testing in the Workplace Act, stating that issues raised in district court were not raised or determined by board and that “[a]rbitration is conclusive only as to claims arising out of a collective bargaining agreement”) (citation omitted)).   

We recognize that a successful whistleblower claimant may be entitled to damages that exceed an arbitration award.  See Minn. Stat. §181.935 (2004) (stating that whistleblower action, employee may seek “any and all damages recoverable at law”); see also Abraham, 639 N.W.2d at 353 (stating that retaliatory discharge claim is tort claim for which law recognizes right to consequential money damages).  For example, because unemployment benefits are considered collateral sources and not deductible from damages in whistleblower actions, a whistleblower plaintiff may seek recovery of unemployment benefits previously deducted from an arbitration award.  See Gaworski v. ITT Commercial Fin. Corp.,  17 F.3d 1104, 1112-13 (8th Cir. 1994) (holding that under collateral source rule, social security and unemployment benefits are considered collateral sources and are not deductible from awards in analogous ADEA actions).  Further, he can seek costs and attorney fees in the whistleblower action.  Minn. Stat. § 181.935.

We find that the district court erred in ordering summary judgment on the ground that any adverse employment action had been reversed.  Appellant’s receipt of back pay and benefits in the arbitration decision does not preclude him from submitting to the jury evidence of further damages (understandably, he still retains the burden of proof) recoverable in this statutory action. 

To establish a prima facie case, a whistleblower claimant must also sufficiently show a causal connection between the report and the adverse employment action.  “In order to prove causation, [a] plaintiff must show . . . intent to retaliate.”  Ring v. Sears, Roebuck & Co., 250 F. Supp. 2d 1130, 1135-36 (D. Minn. 2003) (citing Hubbard, 330 N.W. 2d at 445).  If no direct evidence exists, a causal connection may be shown by circumstantial evidence justifying an inference of retaliatory motive.  Cokley, 623 N.W. 2d at 632.  Relevant circumstantial evidence includes evidence on the employer’s knowledge of the protected activity and the timing of the adverse employment action.  See Kunferman v. Ford Motor Co., 112 F.3d 962, 965 (8th Cir 1997) (stating that “[a]n employee must establish the employer’s knowledge of protected activity”); Hubbard, 300 N.W.2d at 445 (stating that adverse employment action occurring shortly after protected conduct is evidence of circumstances justifying inference of retaliatory motive). 

      Appellant submits the existence of a material factual issue on whether a casual connection exited between the report and his termination.  We agree.  RAP knew of appellant’s activity in submitting the petition.  Appellant points out that, although the interval between the January petition and his termination was seven months, he was terminated only three weeks after presenting a second document to DOE, which contained the same allegations, in July 2002.  RAP contends that the second document was not a report within the definition of the whistleblower act because RAP already knew about the asserted violations.  Obst, 614 N.W.2d at 200 (holding that reports of regulatory violations did not constitute good faith reports within meaning of whistleblower statute when company was already aware of problems asserted in reports, and purpose was therefore not to expose illegality).  But appellant’s termination shortly after he submitted the second document to DOE permits a reasonable inference that RAP terminated him for a continuing course of conduct in reporting asserted violations.  Appellant is entitled to have a jury is entitled to determine this issue.  See, e.g., Bersch v. Rgnonti & Assocs., 584 N.W.2d 783, 787 (Minn. App. 1998) (holding that genuine issue of material fact precluded summary judgment on whistleblower claim when employee participated in continuing legislative auditor’s investigation).    

            The record raises material factual issues as to whether RAP had a legitimate business reason for terminating appellant and whether that reason reflected the real reason for his termination.  Therefore, we conclude that the district court erred in granting summary judgment on appellant’s whistleblower claim, and we remand that issue for trial on the merits. 

II.

Appellant contends that the district court erred in granting summary judgment on his defamation claim based on inadequate pleading.  A defamation claim requires that the statement in question be false, be communicated to someone other than the plaintiff, and tend to harm the plaintiff’s reputation in the community.  Stuempges v. Parke, Davis, 297 N.W.2d252, 255 (Minn. 1980).  Minnesota law requires that the defamatory statement be specifically set out in the complaint.  See Moreno v. Crookston Times Printing Co., 610 N.W.2d 321, 326 (Minn. 2000) (stating that “defamatory matter [must] be set out verbatim”); see also Pope v. ESA Servs. Inc., 406 F. 3d 1001, 1011 (8th Cir. 2005) (stating that plaintiff must, at a minimum, “allege who made the allegedly libelous statements, to whom they were made, and where” (quotation omitted)).

The complaint does not identify who made the claimed defamatory statements.  Further, although we could extrapolate what appellant meant, the complaint alleging that RAP terminated him for falsifying inspection reports and mileage reports is, literally, true.  He was terminated for that reason.  What appellant claims is that the termination for that reason was improper because he had not “intentionally” falsified inspection reports and mileage reports.  When appellant was exonerated by the examiner, the examiner did not come to a conclusion that the reports were completely accurate in all respects, but, rather, came to the conclusion that there were some ambiguities into what was to be expected.  Appellant’s complaint alleges that RAP terminated him, “falsely alleging that [he] had falsified inspection reports and mileage reports.”  We cannot conclude the district court erred in finding that the complaint lacks the required element of specificity.

Appellant argues, in the alternative, that the district court abused its discretion by failing to grant leave to amend the complaint based on allegations in two affidavits submitted the day before the originally scheduled summary judgment hearing.  After a response is filed, a party may only amend a complaint with consent of the adverse party or leave of court.  Minn. R. Civ. P. 15.01.  A district court has broad discretion in determining whether to grant leave to amend a complaint.  Warrick v. Giron, 290 N.W.2d 166, 169 (Minn. 1980). 

A motion to amend a complaint is properly denied if the additional claim would not survive summary judgment.  Bebo v. Delander, 632 N.W.2d 732, 740-41 (Minn. App. 2001), review denied (Minn. Oct. 16, 2001).  Appellant’s affidavit on compelled self-publication contradicts his earlier deposition testimony and does not create a genuine issue of material fact.  See Banbury v. Omnitrition Int’l, Inc., 533 N.W.2d 876, 881 (Minn. App. 1995) (stating that self-serving affidavit contradicting earlier damaging deposition testimony is insufficient to create material factual issue).  The other affidavit, in which a former co-worker alleges he was told that appellant was fired for “doing something dishonest,” may present an actionable statement.  But we conclude that the district court did not abuse its discretion in failing to allow amendment of the complaint when the affidavit was filed nine months after the complaint, after discovery was completed, and when the defendant would be prejudiced by the need for additional discovery.  See Bebo, 632 N.W.2d at 741 (upholding denial of amendment to complaint to allege defamation when motion to amend was filed nearly a year after complaint filed and one week before summary judgment hearing, when defendant would have been prejudiced by need for additional discovery).  We affirm summary judgment on this issue.   

Affirmed in part, reversed in part, and remanded.