Whistleblower and defamation claims

Minnesota Reports

Unpublished

GROTHE v. RAMSEY ACTION PROGRAMS, INC., A05-1503 (Minn.App.
6-6-2006) Kevin D. Grothe, Appellant, v. Ramsey Action
Programs, Inc., Respondent. No. A05-1503. Minnesota Court
of Appeals. Filed June 6, 2006.

[EDITOR’S NOTE: This case is unpublished as indicated by the
issuing court.] This opinion will be unpublished and may not
be cited except as provided by Minn. Stat. §
480A.08, subd. 3 (2004).

Appeal from the District Court, Ramsey County, File No.
C5-04-7602.

Sonja Dunnwald Peterson, Dunnwald & Peterson, P.A., (for
appellant).

Teresa M. Thompson, Anh Le Kremer, Parsinen Kaplan Rosberg
& Gotlieb P.A., (for respondent).

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

UNPUBLISHED OPINION

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.

DECISION

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 benefits by 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”).[fn1]

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.

[fn1] A Sixth Circuit case adopting a more-expansive
standard for adverse employment action in a Title VII
action is currently on review to the United States Supreme
Court. See White v. Burlington N. & Santa Fe Ry. Co., 364
F.3d 789, 801-03 (6th Circ. 2004), cert. granted in part,
___ U.S. ___, 126 S. Ct. 797 (Dec. 5, 2005) (holding that
employee’s temporary 37-day suspension without pay,
followed by reinstatement with back pay in grievance
process, was adverse employment action).