MITCHELL (TIMOTHY) VS. COLDSTREAM LABORATORIES, INC.
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RENDERED: SEPTEMBER 24, 2010; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2009-CA-001885-MR
TIMOTHY MITCHELL
v.
APPELLANT
APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE PAMELA R. GOODWINE, JUDGE
ACTION NO. 09-CI-01341
COLDSTREAM LABORATORIES, INC.
APPELLEE
OPINION
VACATING AND REMANDING
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BEFORE: CAPERTON AND COMBS, JUDGES; LAMBERT,1 SENIOR
JUDGE.
COMBS, JUDGE: Appellant, Timothy Mitchell, appeals from an order of the
Fayette Circuit Court pursuant to Kentucky Rule(s) of Civil Procedure (CR)
12.02(f) dismissing on the pleadings his counterclaims against his former
employer, Coldstream Laboratories, Inc. Mitchell contends that the court erred by
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Senior Judge Joseph E. Lambert sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and KRS 21.580.
prematurely concluding that he had failed to state a claim. After considering
counsels’ arguments and pertinent law, we are compelled to agree. Consequently,
we vacate and remand for further proceedings.
Coldstream Laboratories is a contract pharmaceutical development
company and a small volume generic drug manufacturer. In July 2007,
Coldstream hired Mitchell as an at-will employee to serve as the company’s Vice
President for Quality and Regulatory Compliance. Following a brief suspension,
he was discharged on February 10, 2009.
On March 13, 2009, Coldstream Laboratories filed a civil action
against Mitchell and its former Vice President of Finance, Thomas I. Evans.
Coldstream alleged that in late 2008 and early 2009, Mitchell and Evans colluded
to deprive the company of a legitimate and lucrative business opportunity. As an
executive team, they allegedly used Coldstream’s equipment, confidential
information, and other resources surreptitiously to create a competing business
venture. Coldstream charged that Mitchell and Evans each breached his fiduciary
duty and duty of loyalty to the company and that each of them had breached a
confidentiality agreement. Along with its complaint, Coldstream filed a motion
requesting entry of a restraining order and a temporary injunction. By agreement
of the parties, Coldstream’s action against Evans was eventually dismissed with
prejudice.
On May 18, 2009, Mitchell filed his answer denying Coldstream’s
allegations. He also filed a counterclaim alleging that he had been wrongfully
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discharged. Referring specifically to his interaction with an investigator from the
Federal Drug Administration, Mitchell alleged that he had been discharged for his
“refusal to violate the law in the course of his employment” and that his dismissal
was “contrary to a fundamental and well defined public policy.” Answer and
Counterclaim at 3. He also stated that his discharge had been “connected to his
protected and lawful actions. . . .” Id. at 4. Finally, Mitchell alleged that his
discharge violated federal whistleblower laws. Id. at 4.
Coldstream promptly moved to dismiss the counterclaim pursuant to
CR 12.02(f). In its memorandum, it argued that the facts as alleged did not support
Mitchell’s counterclaim and that Mitchell had filed the counterclaim without
identifying any legal basis for it. Arguing in the alternative, Coldstream contended
that Mitchell should be ordered to provide a more definite statement pursuant to
the provisions of CR 12.05.
During a hearing on the motion, the Fayette Circuit Court observed
that “Coldstream is entitled to know what they’re being accused of.” The court
was apparently concerned by Mitchell’s failure to provide more specific
information relative to his allegations after Coldstream had filed its motion to
dismiss. At the conclusion of the hearing, the court ordered that Mitchell’s
counterclaim be dismissed. Mitchell filed a timely motion to alter, amend, or
vacate the order, which was denied. This appeal followed.
A motion to dismiss is governed by a rigorous and sweeping standard
which dictates that it should be granted only where “it appears the pleading party
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would not be entitled to relief under any set of facts which could be proved in
support of his claim.” Pari-Mutuel Clerks’ Union v. Kentucky Jockey Club, 551
S.W.2d 801 (Ky. 1977). When considering the motion, the allegations contained
in the pleading are to be treated as true and must be construed in a light most
favorable to the pleading party. See Gall v. Scroggy, 725 S.W.2d 867 (Ky.App.
1987). The test is whether the pleading sets forth any set of facts which – if
proven – would entitle the party to relief. If so, the pleading is sufficient to state a
claim. See CR 8.01. Since the trial court is not required to make factual findings,
the determination is purely a matter of law. James v. Wilson, 95 S.W.3d 875
(Ky.App. 2002). Consequently, we review the decision of the trial court de novo.
Revenue Cabinet v. Hubbard, 37 S.W.3d 717 (Ky. 2000).
On appeal, Mitchell contends that the court erred by granting
Coldstream’s motion to dismiss his counterclaim for failure to state a claim. He
claims that he pled “all the minimal requirements under the law for both wrongful
termination and for a violation of the Whistleblower laws.” Appellant’s Brief at 2.
He argues that his counterclaim specifically stated a claim for wrongful discharge
because he provided some factual background, alleging in short but plain
statements that he was terminated “for his refusal to violate the law in the course of
his employment” and that he was wrongfully discharged “contrary to a
fundamental and well defined public policy, as set forth in the law.” Answer and
Counterclaim at 3.
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The discharge of an at-will employee generally does not support an
action for wrongful termination in Kentucky. Wymer v. JH Properties, Inc., 50
S.W.3d 195 (Ky. 2001). However, as Mitchell correctly notes in his brief, a
narrow public policy exception to our “terminable-at-will” doctrine was
established by the Supreme Court of Kentucky in Firestone Textile Co. Div.,
Firestone Tire and Rubber Co. v. Meadows, 666 S.W.2d 730 (Ky. 1983). While
recognizing employers’ interest in having a cause of action for wrongful discharge
“clearly defined and suitably controlled,” Firestone permitted the action to
continue where: (1) the discharge is contrary to a fundamental and well-defined
public policy and (2) the policy is evidenced by a constitutional or statutory
provision. Firestone, 666 S.W.2d at 733 (citing Brockmeyer v. Dun & Bradstreet,
113 Wis.2d 561, 335 N.W.2d 834 (1983)). Whether a public policy is
fundamental, well-defined, and evidenced by existing law is a question of law for
the court to decide. Grzyb v. Evans, 700 S.W.2d 399 (Ky. 1985). A claim for
wrongful discharge can be based on an employee’s failure or refusal to violate the
law. Id.
In support of his contentions on appeal, Mitchell relies upon our
decision in Follett v. Gateway Regional Health System, Inc., 229 S.W.3d 925 (Ky.
App. 2007). In Follett, we examined whether the trial court erred by granting
summary judgment in favor of Follett’s former employer.
Follett alleged in her complaint that she had been wrongfully
discharged from her position as Director of Nursing at Mary Chiles Hospital on
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two grounds: (1) for reporting her suspicion that an emergency room doctor was
under the influence of alcohol while on duty and (2) for advising her staff to report
suspected emergency room billing irregularities. We reiterated that in a non-civil
rights wrongful discharge case, a plaintiff must show “at a minimum that he was
engaged in a statutorily protected activity, that he was discharged, and that there
was a connection between the ‘protected activity’ and the discharge.” Id., citing
Willoughby v. GenCorp, Inc., 809 S.W.2d 858, 861 (Ky. App. 1990).
After reviewing the record in Follett, we determined that statutory
bases for her allegations existed. Thus, we concluded that genuine issues of
material fact remained as to whether Follett was engaged in statutorily protected
activities when she made her reports to investigators associated with the Board of
Medical Licensure (pursuant to the specific provisions of Kentucky Revised
Statute(s) (KRS) 311.990) and when she advised her staff to report suspicious
billing irregularities to Medicaid or to the hospital’s corporate compliance officer
(pursuant to the specific provisions of KRS 205.8465). We also concluded that
genuine issues of material fact remained as to whether Follett had shown a
sufficient connection between those protected activities and her discharge.
Consequently, we held that the trial court had erred by granting summary
judgment.
Like the plaintiff’s generalized complaint in Follett, Mitchell’s
counterclaim did not allege that his employer’s conduct violated an explicit statute
or constitutional provision. Instead, Mitchell alleged that his discharge violated a
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well defined public policy requiring “honest and full compliance with the FDA
investigators” and that his discharge came as a result of his refusal to violate law –
albeit unspecified by name or number.
Coldstream contends that Mitchell’s counterclaim was properly
dismissed since it failed to identify with specificity the statute that he allegedly
refused to violate. The company argues that Mitchell “must articulate a statutory
basis for his claim in order for the court to engage in even the primary levels of
analysis” and that “[a]bsent some indication of what law [Mitchell] refused to
violate, Coldstream’s defense of the counterclaims is severely hampered.”
Appellee’s Brief at 4-5.
Based upon the nature of wrongful discharge claims, we agree that
Coldstream may have been entitled to more detailed information regarding
Mitchell’s allegations before it was required to file a reply. A vehicle for seeking
such expansion of the allegation exists by recourse to CR 12.05, which provides
for a motion for a more definite statement. Coldstream clearly was aware of this
remedy since it sought relief in the alternative pursuant to CR 12.05.
CR 8.06 provides that we are to construe the pleadings “as to do
substantial justice.” Moreover, CR 8.05 provides that each averment of the
pleading “shall be simple, concise, and direct.” Finally, CR 11 dictates that
pleadings (in this case, Mitchell’s counterclaim) be well grounded in fact and
warranted by law. It is noteworthy that Coldstream did not challenge the
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presumption of Mitchell’s good faith by seeking sanctions for an alleged violation
of CR 11.
We are persuaded that Mitchell articulated a set of facts sufficient to
support his initial claim of wrongful discharge. We cannot surmise whether his
counterclaim can or will survive another dispositive motion made by Coldstream.
However, at this juncture, we conclude that Mitchell’s allegations appear to meet
at least the bare elements of a recognized cause of action and that a dismissal on
the pleadings was premature.
The order of the Fayette Circuit Court dismissing this action is
vacated, and this matter is remanded for additional proceedings.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Rocky L. McClintock
Georgetown, Kentucky
Catherine S. Wright
Drew B. Miller
Lexington, Kentucky
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