Late last month, the Holmes County Court of Appeals reversed a jury verdict in favor of a discharged controller on the grounds that the trial court should have entered summary judgment in favor of the defendant employer on the claim of wrongful discharge in violation of public policy. Schwenke v. Wayne-Dalton Corp., 2008-Ohio-1412 (3/27/08). In that case, the plaintiff controller alleged that he had been terminated for complaining about corporate officer misfeasance and misappropriation. However, the court determined that the plaintiff had failed to identify a specific source of public policy which was violated by the alleged corporate misfeasance and misappropriation. The defendants had claimed that the plaintiff had been fired because of “his inability to work with his direct supervisor and with senior management, his negative and arrogant attitude and "the on-going degenerative nature of [his] work performance.” Accordingly, the judgment of $72,000 and $148,000 in attorneys fee was reversed.
The plaintiff had alleged that the CFO and president of the privately-held corporation had engaged in misappropriation and malfeasance in engaging in the following actions for over three years:
* The “corporate office would `issue' credits for expenses incurred in Europe (France was facility location). The driver of the amount of the credit would be based on the financial deficit reflected on Europe's financials that the executives were looking to conceal. Credits would be issued against the Mt. Hope manufacturing facility and possibly other facilities;”
* The American “facilities would as a matter of business sell products to [the company]. As such the US had an ongoing receivable for which Europe would have to issue payments to the US. These `credits' would be used to offset legitimate receivables. The credit would reduce [corporate] expenses, and the offset to A/R would allow for no exchange of cash for this specific issue, [r]esulting in overstated [corporate] Europe profits; [r]esulting in fictitious [corporate] cash flow; [r]esulting a stronger appearing [corporate] Europe balance sheet; [f]avorable credit terms from vendors for the [corporate] entity; and [r]esulting in overstated costs in the USA and if the Credit was treated as a return, an understatement of revenues (same P & L effect but in different areas of the income state).”
* “[C]orporate accounting personnel, under the direction of the executives, would write-up manual journal entries to decrease costs in Europe and increase costs in the US. On occasion there would be no credits issued, just a transfer of costs on paper that would inflate US costs while masking costs and losses in Europe.”
* The defendant corporate officers “misused company assets for personal gain. Specifically, [one] defendant . . . received massive personal loans (to fund personal assets such as homes) from [the corporation] at interest rates significantly below the Fair Market Value (i.e. 2.5%) while earning large interest rates on their deferred compensation (i.e. 13%-17%). This occurred over a 3 1/2 year period between January 2001 and July 2004. The inappropriate moving of costs across [corporate] facilities allowed for inaccurate bonus accruals, rewards, and deferred compensation accruals for [the individual corporate officer defendants]. Numerous employee (management, supervisory and non-supervisory) bonus awards (and sometimes departments) were subjectively lowered, with no basis, to decrease lower ranking employees' annual bonus payouts allowing for inflated executive . . . . bonus and deferred compensation awards;”
* The corporate individual defendants “were engaged in inappropriate accounting procedures and misappropriation of corporate assets. Specifically, defendants implemented the `3-B Plan', which allowed major shareholder . . . . to receive undisclosed commissions in the amount of millions of dollars by selling products in Europe below costs (i.e. `dumping').”
The plaintiff controller denied that his claims were governed by Ohio’s Whistleblower statute, and thus, he had not been required to prove that he had put his concerns in writing to his supervisors or complained to a government agency. Rather, he claimed that his protests were protected as a matter of public policy and that his retaliatory discharge violated public policy.
In order to prevail on such a claim, a plaintiff must demonstrate: "1. That clear public policy existed and was manifested in a state or federal constitution, statute or administrative regulation, or in the common law (the clarity element); 2. That dismissing employees under circumstances like those involved in the plaintiff's dismissal would jeopardize the public policy (the jeopardy element); 3. The plaintiff's dismissal was motivated by conduct related to the public policy (the causation element); and 4. The employer lacked overriding legitimate business justification for the dismissal (the overriding justification element)."
The court determined that, notwithstanding the detailed allegations, the plaintiff controller could not prevail because he had failed to satisfy the clarity element by identifying a public policy existed. “Nor did [the controller] cite or present the trial court with any legal authority in support of his argument that his termination violated public policy. [The controller] merely alleged that he questioned [the individual corporate officer defendants] about alleged inappropriate accounting practices and misappropriations of corporate assets and was fired and that his firing violated public policy. [The controller], . . . merely alleged that his firing violated public policy. In short, . . . [the controller] never offered any legal authority suggesting that [appellant's] conduct and alleged reaction from or by his employer forms a basis for a "public policy' exception to Ohio's at will relationship."
While the concurring judge was willing to consider that fiduciary duties may have been violated, the judge was unwilling to believe that breach of fiduciary duty constitutes a source of public policy sufficient to override the employment at will doctrine.
Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/5/2008/2008-ohio-1412.pdf.
NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.
