Sears, Roebuck and Co. v. Wholey

DEBORAH S. EYLER, Judge. After Sears, Roebuck and Co. (“Sears”), the appellant, terminated Edward L. Wholey, the appellee, from his position ⁶⁴⁴ as Security Supervisor at the Sears store in Glen Bumie, Maryland, Wholey sued Sears and Paul Eiseman, a Regional Manager of Asset Protection Services for Sears, for wrongful discharge and defamation, among other claims. The case was tried before a jury, in the Circuit Court for Anne Arundel County, which returned a verdict against Sears on Wholey’s wrongful discharge claim, in favor of Sears on the defamation claim, and in favor of Eiseman on both claims. The jury awarded Wholey $166,000 in damages.

From a judgment entered on that verdict, Sears appeals, presenting five questions for review. Four of the questions it presents raise a single legal issue: Whether, on the facts most favorable to Wholey, his termination violated a clear mandate of public policy. For the following reasons, we answer that question in the negative, and reverse the judgment. FACTS AND PROCEEDINGS Wholey was employed by Sears in its Glen Bumie store for 24 years.

He began as a security officer in 1972, and within a year was promoted to Assistant Security Manager. In 1980, Wholey again was promoted, to Security Manager. Finally, in 1994, he became a Security Supervisor. From 1980 until Sears terminated his employment in 1996, Wholey’s work involved investigating employee theft.

Beginning in 1973, Wholey also worked as a constable for the District Court of Maryland. In 1980, Wholey became a deputy sheriff for the Anne Arundel County Sheriffs Office. He still was working in that position as of the date of trial. In 1994, a new store manager was hired at the Glen Bumie Sears.

Around March of 1995, Wholey began to notice that the store manager sometimes would remove items of merchandise from store display areas and put them in his office. As far as Wholey could tell, the items then would “just disappear.” Wholey did not see the store manager remove any of these items from his office or take any of them from the store without paying for them. Wholey suspected, however, that the store manager was stealing the merchandise. ⁶⁴⁵ In November 1995, Wholey noticed that the store manager had two pairs of pants, “one or two” sweaters, and a jacket-all Sears merchandise-in his office. The items all bore store price tags.

Wholey checked the store’s cash registers to see if the store manager had purchased any of the items. When he found no receipts reflecting purchases, Wholey suspected that the store manager was going to steal the items by wearing or carrying them out of the store. He contacted Eiseman, who was responsible for security at the Glen Bumie Sears, and told him of his suspicions. Eiseman suggested that Wholey use a van to perform surveillance on the store manager’s office from an outside window.

Wholey did so, but the view from the van was so limited that Wholey could not tell from his surveillance whether the store manager was removing, or had removed, any of the items of merchandise from his office. Wholey reported to Eiseman that the surveillance from the van was inadequate and asked permission to enter the store manager’s office at night to search it. Eiseman granted permission. On the night of November 29, 1995, Wholey entered and searched the store manager’s office.

He also searched a locked drawer in the office, which he opened with his fingernail. Wholey’s search revealed some but not all of the merchandise that he earlier had seen in the office. He did not know what had happened to the missing items of merchandise. He acknowledged at trial that these items could have been returned to the display floor.

From November 30, 1995 through December 14,1995, Who-ley continued to observe the store manager’s movements. During that time, he did not see the store manager remove any of the items from his office. On December 15, 1995, Wholey learned that the store manager had made an inquiry about what time one of the security guards would be coming on shift. When he learned that, he suspected that the store manager was going to remove the items of merchandise in his office from the store early the next morning and take them without paying for them.

Wholey contacted Eiseman, told him of his suspicions, ⁶⁴⁶ and requested permission to install cameras in the ceiling of the store manager’s office, to observe the store manager’s actions. 1 According to Wholey, Eiseman gave him permission to install the cameras. During the early morning hours of December 16, 1995, Wholey and Darlene Hill, the Security Manager for the Glen Bumie Sears, installed the cameras. Afterward, Hill went home and Wholey remained at the store. Later that morning, but before the store manager arrived at work, Wholey called Eiseman and reported that the cameras had been installed.

During this conversation, Wholey was watching the store’s security cameras and noticed Sam Alexander, the District Store Manager and Eiseman’s superior, enter the store. Wholey asked Eiseman whether he had told Alexander about the installation of the cameras in the store manager’s office. Eiseman replied that he had not. Eiseman then ended the conversation with Wholey and called Alexander.

Sometime in the next two hours, Eiseman made a return call to Wholey and told him not to use the cameras in the store manager’s office and to disable them. Eiseman explained that he had told Alexander and Thomas Peake, Sears’s Human Resources Manger for the Northeast Region, about the cameras and they had ordered that the cameras not be used, because the store manager “deserve[d] more respect.” Who-ley complied with Eiseman’s directive and disabled and removed the cameras. He discontinued his investigation of the store manager. Throughout the time he was investigating the store manager, Wholey never saw the store manager commit the crime of theft (or any other crime).

Also, at no time during the investigation did Wholey act in his capacity as a deputy sheriff for the Anne Arundel County Sheriffs Department. On February 6, 1996, Wholey was terminated from his employment by Sears. Eiseman met with him that day and ⁶⁴⁷ told him that Alexander and Peake had not approved of his handling of the investigation of the store manager (particularly, the installation of cameras in the store manager’s office). When Eiseman asked Wholey to resign, Wholey refused, and then was fired.

Seven months later, Wholey brought this suit against Sears and Eiseman, in the Circuit Court for Anne Arundel County. 2 Sears maintained that it terminated Wholey’s employment because he mishandled security problems that occurred at the Glen Bumie store during a severe blizzard in January 1996. Wholey took the position that that was a pretext, and that the true reason for his firing was in retaliation for his investigating suspected theft by the store manager. In the posture in which this appeal presents itself, we shall assume that Sears discharged Wholey for his handling of the investigation of the store manager, as Wholey contended, and not for any alleged actions or inactions by him during the January 1996 blizzard. With respect to the wrongful discharge claim, Sears filed a motion to dismiss, which was denied, and then a motion for summary judgment, which also was denied.

In both motions, it argued that, assuming the facts as alleged and as later testified by Wholey in deposition, Wholey’s termination from employment did not violate a clear mandate of public policy, and thus was not actionable. See Adler v. American Standard Corp., 291 Md. 31 , 432 A.2d 464 (1981) (“Adler /”). Sears advocated that position again during trial, when it moved for judgment at the close of Wholey’s case and again at the close of the entire case. Each time Sears raised this issue, Wholey responded by arguing that the public policy of Maryland favors the investigation and prosecution of crimes and that when Sears terminated him for investigating suspected theft by the store manager, it did so in contravention of that clear mandate of public policy. ⁶⁴⁸ The trial court agreed with Wholey on the public policy issue.

After denying Sears’s motions for judgment, it instructed the jury as follows, over Sears’s objection: [I]n order to recover for wrongful discharge, [Wholey] must show, one, an at-will employment relationship; two, that he was terminated by the employer and that the discharge was contrary to a clear mandate of public policy.... Now, there is a clear public policy in Maryland favoring the investigation and prosecution of criminal offenses. If you find that the motivation of [Sears] in firing [Who-ley] was in retaliation to [Wholey’s] investigatory activities, then that motivation would contravene the stated public policy of Maryland. You must also find that [Wholey’s] investigatory activities were lawful and in accordance with the stated procedures set forth by [Sears].

Within ten days after entry of judgment, Sears filed a motion for judgment notwithstanding the verdict, again asserting that Wholey’s discharge did not violate a clear mandate of public policy. Sears also filed a motion for a new trial, in which it argued that the jury had failed to consider the issue of mitigation of damages. The circuit court denied both motions on July 12,1999. Sears then noted a timely appeal.

DISCUSSION Sears contends that with respect to Wholey’s wrongful discharge claim, the circuit court erred in denying its motions to dismiss, for summary judgment, for judgment, and for judgment notwithstanding the verdict, and in instructing the jury, because on the version of the facts most favorable to Wholey, his termination from employment did not violate a clear mandate of public policy, as a matter of law. Sears argues that there is no clear mandate of public policy favoring the investigation of suspected criminal activity in Maryland; therefore, Wholey’s claim was without legal foundation. In pressing this argument, Sears relies primarily upon the decision of the United States Court of Appeals for the Fourth ⁶⁴⁹ Circuit in Adler v. American Standard Corporation, 830 F.2d 1303 (4th Cir.1987) (‘Adler III”) 3 Wholey counters that the circuit court properly concluded, as a matter of law, that in Maryland there is a clear mandate of public policy in favor of investigating criminal activity. Therefore, its denial of Sears’s motions and its instruction to the jury were not in error.

In advancing his argument, Wholey relies primarily upon the Court of Appeals’s favorable reference to Palmateer v. International Harvester, 85 Ill.2d 124 , 52 Ill.Dec. 13 , 421 N.E.2d 876 (1981), in Adler I, 291 Md. at 39 , 432 A.2d 464 . Wholey was an at-will employee of Sears: He did not have an employment contract and was hired for an indefinite term. See Samuels v. Tschechtelin, 135 Md.App. 483, 525 , 763 A.2d 209 (2000) (citing Hrehorovich v. Harbor Hosp. Ctr., 93 Md.App. 772, 790 , 614 A.2d 1021 (1992); Shapiro v. Massengill, 105 Md.App. 743, 754 , 661 A.2d 202 (1995)).

Ordinarily, an at-will employee may be discharged by his employer for any reason or for no reason. Bagwell v. Peninsula Reg’l Med. Ctr., 106 Md.App. 470, 494-95 , 665 A.2d 297 (citations omitted). The tort of -wrongful discharge is a narrow exception to this well-established principle.

The elements of the tort are: “(1) that the employee was discharged; (2) that the dismissal violated some clear mandate of public policy; and (3) that there is a nexus between the defendant and the decision to fire the employee.” Shapiro, 105 Md.App. at 764 , 661 A.2d 202 (citing Leese v. Baltimore County, 64 Md.App. 442, 468 , ⁶⁵⁰ 497 A.2d 159 (1985)). A public policy must be clearly mandated to serve as a basis for a wrongful discharge action because that “limits judicial forays into the wilderness of discerning ‘public policy’ without clear direction from a legislature or regulatory source.” Milton v. IIT Research Inst., 138 F.3d 519, 523 (4th Cir.1998); see also Gaskins v. Marshall Craft Assocs., 110 Md.App. 705, 715 , 678 A.2d 615 (1996) (citation omitted). “When a plaintiff fails to demonstrate that his or her grievance is anything more than a private dispute regarding the employer’s execution of normal management operating procedures, there is no cause of action for [wrongful] discharge.” Lee v. Denro, 91 Md.App. 822, 833 , 605 A.2d 1017 (1992). “ ‘Legislative enactments, prior judicial decisions, [and] administrative regulations’ are ‘the chief sources of public policy.’ ” Bleich v. Florence Crittenton Servs. of Baltimore, Inc., 98 Md.App. 123, 134 , 632 A.2d 463 (1993) (quoting Lee, 91 Md.App. at 830 , 605 A.2d 1017 (citation omitted). While it is possible that a clear mandate of public policy may exist in the absence of a constitutional, statutory, or regulatory pronouncement, this possibility “should be accepted as the basis of judicial determination, if at all, only with the upmost circumspection.’ ” Townsend v. L.W.M. Mgmt., Inc., 64 Md. App. 55, 61-62 , 494 A.2d 239 (1985) (quoting Patton v. United States, 281 U.S. 276, 306 , 50 S.Ct. 253 , 74 L.Ed. 854 (1930)); see also Bagwell, 106 Md.App. at 495-96 , 665 A.2d 297 (“[R]ecognition of an otherwise undeclared public policy as a basis for judicial decision involves the application of a very nebulous concept to the facts of the case, a practice which should be employed sparingly, if at all.” (citations and internal quotation marks omitted)); Lee, 91 Md.App. at 831 , 605 A.2d 1017 (noting that, although “Maryland appellate courts have decided several cases involving [wrongful] discharge claims since Adler, they have never found such a claim to be stated absent a discharge which violates a public policy set forth in the constitution, a statute, or the common law”) (citations omitted). ⁶⁵¹ The Court of Appeals first recognized the tort of wrongful discharge in Adler I, supra, 291 Md. 31 , 432 A.2d 464 , in which it was responding to two certified questions posed by the United States District Court for the District of Maryland. The pertinent facts of Adler I are as follows.

Three years after Gerald F. Adler was hired by American Standard, he was appointed acting president of one of its subsidiary companies. Adler discovered that the outgoing president of the subsidiary, Bernard Greene, had been using a company account to pay kickbacks to clients and had been altering company records to cover up the scheme. Adler reported this information to two of his superiors and told them that he planned to disclose it to high company officials at an upcoming meeting. The night before the meeting, Adler’s superiors fired him.

Soon afterwards, Greene was reappointed president of the subsidiary company. Adler sued American Standard for wrongful discharge, alleging, inter alia, that he had been discharged to prevent his disclosure of a number of “improper and possibly illegal practices,” by Greene and American Standard. (These practices included attempts to treat capital expenditures as expenses; payment of commercial bribes; falsification of corporate sales and income data and alteration of commercial documents to support the falsified information; misuse of corporate funds by officers for their personal benefit; manipulation of work-in-progress inventory information; and alteration of forecasts in connection with intra-corporate financial reporting.) Adler I, 291 Md. at 33 , 432 A.2d 464 . The district court certified two questions to the Court of Appeals: (1) Is a cause of action for “[wrongful] discharge” recognized under the substantive law of the State of Maryland? [and] (2) Do the allegations [by Adler], if taken as true, state a cause of action for “[wrongful] discharge” under the substantive law of the State of Maryland?

Id. at 32 , 432 A.2d 464 . After surveying decisions of courts that had considered the cause of action for wrongful discharge, discussing those deci ⁶⁵² sions adopting the tort, and examining the violations of public policy that other courts had ruled sufficient to make the discharge of an at-will employee actionable, the Court of Appeals responded affirmatively to the first question. It answered the second question in the negative, however, saying that Adler’s allegations were not sufficient to state a cause of action for wrongful discharge. Adler had argued, inter alia, that Greene’s conduct violated Md.Code (1957, 1976 Repl.Vol.) art. 27 § 174, which makes it a crime for officers of a corporation to fraudulently sign or assent to any statement “containing untruthful representations of [the corporation's] affairs, assets or liabilities with a view either to enhance or depress the market value of the shares therein, or the value of its corporate obligations, or in any manner to accomplish any fraud thereby____” The Court held that the averments in Adler’s complaint were “too general, too conclusory, too vague, and lacking in specifics to mount up to a prima facie showing that the claimed misconduct contravened § 174 and hence violated the public policy of this State.” Adler I, 291 Md. at 44 , 432 A.2d 464 .

Adler’s complaint does not assert that the falsification of corporate records was done with an intent to defraud either stockholders or the public at large by enhancing or depressing the market value of [American Standard’s] shares or other obligations. As a result, the allegations of the complaint do not set forth a violation of the conduct proscribed by § 174. Indeed, during oral argument of the case before us, Adler’s counsel was asked whether his complaint was intended to allege the commission of a crime. In response, he stated that he could not say one way or the other whether the claimed misconduct constituted a crime.

Id. at 44, 432 A.2d 464 . After the case was returned to the district court, Adler amended his complaint to allege, inter alia, that other employees of American Standard had violated various federal and state tax laws and that he was terminated from employment so as to conceal these alleged violations. American Standard again moved to dismiss, arguing that the statutes in question ⁶⁵³ did not establish a clear mandate of public policy that would support a cause of action for wrongful discharge. The court denied the motion, ruling that Adler had alleged, with sufficient particularity, that he threatened the exposure of [American Standard’s] violations of federal tax laws, that he was fired as a result and that the tendency of such firing was to prevent the disclosure of these violations, in contravention of a clear federal public policy, which is incorporated as a public policy by the State of Maryland.

Adler v. American Standard Corp., 538 F.Supp. 572, 580 (D.Md.1982) (“Adler II ”). On the eve of trial, Adler told the court that he intended to prove that American Standard had terminated him to conceal violations of theft and federal mail fraud statutes in addition to the statutes that he had identified in his second amended complaint. At the close of the evidence, the federal district court ruled that Adler had failed to prove that American Standard had violated any of the statutes referenced in his second amended complaint. Nonetheless, it sent the wrongful discharge claim to the jury.

It instructed the jury to find for Adler on that claim if it determined that his termination had resulted from his stated intention to disclose the kickbacks and from the ensuing cover-up. The jury found for Adler and awarded $1,232,000 in compensatory damages. In Adler III, the United States Court of Appeals for the Fourth Circuit reversed, holding that Adler had failed to prove that the decision to terminate his employment had been in violation of a clear mandate of public policy. The Court held that, while the public policy of Maryland clearly proscribes terminating an at-will employee for refusing to engage in illegal activity or for complying with, or stating an intention to fulfill, a statutorily prescribed duty, it did not proscribe terminating such an employee for “whistle blowing.” The Fourth Circuit made the following pertinent observations: Limitation of the claim for [wrongful] discharge to situar tions involving the actual refusal to engage in illegal activity, or the intention to fulfill a statutorily prescribed duty, ties [wrongful] discharge claims down to a managea ⁶⁵⁴ ble and clear standard.

This analysis is consonant with the stated intention of the Maryland Court of Appeals in Adler [/] to preserve the rights of the employer to terminate employees at will, subject only to the limited exceptions created by statute and to the relatively limited instances where a clear mandate of public policy has been violated. As a general prudential rule, legislatures have traditionally been reluctant to impose affirmative obligations on citizens to report or prevent crimes because defining what is a crime and to whose knowledge is a very difficult and intrusive inquiry. This reluctance imparts caution to this court.... In the absence of a clear declaration by a legislature or the Maryland Court of Appeals that an action for [wrongful] discharge should be extended to situations where the discharged employee claims to have had the knowledge and the intent to report wrongdoing to a higher corporate official, this court should not create such a ruling.

We find that the district court erred in determining that the plaintiff had properly stated and proved a cause of action for [wrongful] discharge