Opinion
No. 27160-9-III.
April 2, 2009.
Appeal from a judgment of the Superior Court for Spo-kane County, No. 06-2-04363-9, Kathleen M. O'Connor, J., entered May 13, 2008.
Affirmed by unpublished opinion per Korsmo, J., concurred in by Kulik, A.C.J., and Sweeney, J.
Daniel Daniels was fired by the City of Spokane (City). He sued the City, contending that he was fired in violation of public policy for refusing to perform an illegal act. We conclude that his subjective belief that an action was improper is not a basis for asserting the public policy exception to the termination at-will doctrine. We also conclude that his other claims are without merit and that the trial court properly granted summary judgment. Thus, we affirm the trial court's dismissal of this case.
FACTS
Mr. Daniels worked for the City as an accountant in the Community Development Department protected by the City's Civil Service Rules. He subsequently was named assistant director of the Retirement Department. In 2000, he became the Director of that department. Subsequently, Jim West was elected Mayor of Spokane and took office in January 2004.
Representatives of Mayor West reportedly indicated to Mr. Daniels that the mayor wanted to participate in the Spokane Employee Retirement Plan System (SERS) and that he believed his state retirement program, PERS 3, was "portable" with the City's plan. In reliance upon a previous e-mail from an assistant city attorney, Mr. Daniels repeatedly stated that the plan was not portable. Mayor West terminated Mr. Daniels from employment August 24, 2004, citing "differing management styles."
Portability is a term of art under our retirement statutes. RCW 41.54.010 permits a person who has worked in more than one public retirement system to combine years of service for purposes of eligibility and use the highest salary as a basis for calculating retirement benefits. Mayor West had long served in the Legislature and was part of the PERS 3 retirement system before becoming mayor.
After the termination, Mr. Daniels was placed on the Civil Service Transfer List for the position of Accountant II and was placed on the Civil Service Voluntary Demotion and Layoff List for the position of Accountant I. In April 2005, an Accountant II position became open in the Accounting Department and was submitted to Civil Service. The Civil Service Commission certified Mr. Daniels as the top person on the list for the position.
The Accounting Department Director, Pam Dolan, and Human Resources Director, Mike Shea, met with Mr. Daniels. They told him he was being "passed over" for consideration by the Accounting Department for cause. Mr. Shea explained that an audit of the Retirement Department after Mr. Daniels' departure showed a number of discrepancies in accounting and information procedures that reflected on his ability as an accountant. Mr. Daniels appealed the "pass over" to the Civil Service Commission and Mr. Shea filed a letter with the Commission explaining the basis for the "pass over." Before the Commission issued a ruling, the Accounting Department withdrew the request for the position. The Commission ruled that the appeal was moot. No review of that decision was sought.
Three reasons were stated in the letter for the City's decision not to offer the Accountant II position: (1) Mr. Daniels allowed cash basis accounting, not in conformance with generally accepted accounting principles, resulting in $104,000 in invoices representing an unrecorded liability in the 2003 SERS annual report; (2) Mr. Daniels made changes to a copy of an actuarial valuation report which resulted in incorrect pension plan data being published in the annual report; (3) Mr. Daniels incorrectly advised employees that PERS 3 was not portable with SERS, leading employees to make irrevocable decisions based on inaccurate information.
In October 2006, Mr. Daniels filed suit against the City alleging that he was wrongfully terminated, the City failed to follow its Civil Service Rules when he was not rehired for an Accountant position, and that there had been tortious interference with a business expectancy. The City eventually moved for summary judgment, arguing that Mr. Daniels was an at-will employee terminable at the pleasure of the mayor. The trial court granted the motion. With respect to the wrongful termination claim, the court found there was no illegal act committed and no implication that there was a violation of law. On the Civil Service and tortious interference claims, the court found that Mr. Daniels only had a right to be rehired in the Community Development Department and there had not been an Accountant opening there. The court also concluded that the failure to appeal the mootness ruling also precluded the claim. Mr. Daniels timely appealed.
ANALYSIS
This court reviews a summary judgment de novo, performing the same inquiry as the trial court. Lybbert v. Grant County, 141 Wn.2d 29, 34, 1 P.3d 1124 (2000). The facts, and all reasonable inferences to be drawn from them, are viewed in the light most favorable to the nonmoving party. Id. If there is no genuine issue of material fact, summary judgment will be granted if the moving party is entitled to judgment as a matter of law. Id. Wrongful Discharge Claim. The common law of Washington permits at-will employees to be fired for any reason. Roberts v. Atlantic Richfield Co., 88 Wn.2d 887, 891, 568 P.2d 764 (1977). There are exceptions to this doctrine, including terminations that are in violation of public policy. The tort of wrongful discharge is available when employment termination violates a clear mandate of public policy. Korslund v. Dyncorp Tri-Cities Servs., Inc., 156 Wn.2d 168, 178, 125 P.3d 119 (2005); Gardner v. Loomis Armored, Inc., 128 Wn.2d 931, 935-936, 913 P.2d 377 (1996). This exception is to be "narrowly construed in order to guard against frivolous lawsuits." Gardner, 128 Wn.2d at 936 (citing Thompson v. St. Regis Paper Co., 102 Wn.2d 219, 232, 685 P.2d 1081 (1984)). There are four circumstances in which the public policy exception has been recognized. Gardner, 128 Wn.2d at 936. The circumstance argued here is when an employee is fired for refusing to commit an illegal act. Id.; Korslund, 156 Wn.2d at 178.
To establish a tort of wrongful discharge based on the illegal act prong, an employee must establish four elements:
(1) The existence of a clear public policy;
(2) Discouraging the employee's conduct would
jeopardize public policy;
(3) The public policy linked conduct caused the dismissal;
(4) The defendant was not able to offer an overriding justification for the dismissal.
Korslund, 156 Wn.2d at 178. These are known as the (1) clarity, (2) jeopardy, (3) causation, and (4) absence of justification elements. Id.
The trial court concluded that Mr. Daniels' claim foundered on the clarity element. We agree. A disagreement over policy or a course of action, even one based on a good faith belief and backed by a lawyer's opinion, does not make a proposed action "illegal" for purposes of the tort of wrongful discharge. A clear public policy is not founded upon the subjective belief of an employee. Our court has recognized that the public policy at issue must be one that has been "either legislatively or judicially recognized." Thompson, 102 Wn.2d at 232. Accordingly, the asserted public policy must be based on an objective view of the legality of the action involved rather than the subjective perceptions of the employee. Were it otherwise, any at-will employee who disagreed with a course of action could establish the public policy exception to the at-will employment doctrine. For instance, a city treasurer who refused to issue paychecks to employees she thought were paid too much might well have an honestly held belief that making the payments would violate our state constitution's prohibition on gifts of public funds. Nonetheless, the treasurer is not the one who makes local public policy concerning appropriate pay for employees. Such a belief would not immunize the treasurer from termination. Where this element has been established in the past, there was in fact a clear violation of recognized law or policy. For instance, a planning department director who refused a directive to rezone property in violation of the zoning code stated a claim for wrongful discharge in violation of public policy in Hubbard v. Spokane County, 146 Wn.2d 699, 50 P.3d 602 (2002). The statutory zoning code created the public policy that he was asked to violate. Id. A sound technician who was fired because he refused to bypass a fire alarm safety protocol also stated a claim for discharge in violation of public policy. Ellis v. City of Seattle, 142 Wn.2d 450, 13 P.3d 1065 (2000). The public policy was found in Fire Department regulations prohibiting anyone other than a trained fire fighter from disabling the security system. Id. at 459-460. Similarly, a guard who abandoned his post to save the life of a woman he saw being attacked with a knife was fired in violation of the clear public policy of protecting human life. Gardner, 128 Wn.2d at 944-945. Recognition of that public policy was found in the criminal law. Id. An accountant who alleged he was fired for setting up an accounting procedure that guaranteed compliance with a federal anti-bribery statute stated a claim for wrongful termination in violation of public policy. Thompson, 102 Wn.2d at 234. Once again, the public policy was found in statutory law. Id.
In light of our conclusion, we do not analyze the other elements. We note, however, that the City extensively argued that the fourth element, absence of justification, also favored the dismissal. The City alleged that Mr. Daniels was fired for being a bad manager, which included watching television and doing personal income tax returns for others at work, as well as falsifying the annual report. Clerk's Papers (CP) 173, 291, 334.
The beliefs of the employee are a consideration in determining whether the jeopardy element has been met. Ellis v. City of Seattle, 142 Wn.2d 450, 460-461, 13 P.3d 1065 (2000). Even at that, the employee's belief must be objectively reasonable.
Wash. const. art. VIII, § 7.
The argument made by Mr. Daniels did not establish that he was fired in violation of a clear public policy. There was no clear law establishing that the PERS 3 retirement program was not portable. In fact, the Legislature had made the state retirement programs portable in 1987, and expressly made Spokane's pension system portable with the various state plans, including the statewide retirement plan, chapter 41.40 RCW, in 1988. See Laws of 1988, ch. 195, § 1. The Legislature added PERS 3 to title 41.40 RCW when the plan was created in 2000. See Laws of 2000, ch. 247. PERS 3 was thus portable with Spokane's system from the very time it was enacted. Accordingly, Mr. Daniels has not shown that his termination, even if based entirely on the portability issue, was in violation of public policy. The trial court properly granted summary judgment on this issue.
In fact, the City alleges that the front page of the Department of Retirement Systems web page expressly said the program was portable with SERS. CP 39.
See Laws of 1987, ch. 192. The definition section was codified as RCW 41.54.010.
Civil Service Rules. Mr. Daniels raises two related claims concerning the City's failure to hire him for the Accountant II position. First, he contends that the City failed to follow its own rules when it passed him over for that position. The City contends otherwise, pointing to the testimony of the Civil Service Director who said that all rules were followed. Civil Service found that the issue was moot once the posting was withdrawn. There was no appeal from that ruling.
Assuming, without deciding, that the Civil Service Rules give rise to an individual cause of action, we conclude that the failure to appeal the mootness ruling precludes our review of this issue. It is a basic principle of administrative law that an aggrieved party must pursue all administrative remedies before turning to the courts if the agency has the power to grant the relief sought. CLEAN v. City of Spokane, 133 Wn.2d 455, 465, 947 P.2d 1169 (1997), cert. denied, 525 U.S. 812 (1998). Where an administrative appeal process exists, a party's failure to appeal establishes that administrative remedies have not been exhausted. Id.
The City contends that the Civil Service Rules do not create a private right of action. We do not find it necessary to resolve the issue.
The City argued exhaustion of remedies to the trial court, but claims on appeal that the issue is actually one of estoppel. See Br. of Respondent at 45-46. We address the matter as an exhaustion question because it goes to the jurisdiction of this court.
Mr. Daniels had the ability to administratively appeal the mootness ruling. He did not. Accordingly, he has failed to exhaust his administrative remedies. Id. Thus, he could not bring this claim to the courts. The trial court properly dismissed it. Id. Tortious Interference. Mr. Daniels also contends that the City tortiously interfered with a business expectancy when it passed him over for the Accountant II position. He contends that he established a circumstantial case showing that employees of the City acted to prevent him from reclaiming an Accountant II position. The basic problem with his argument is that it does not state a claim of tortious interference.
There are five elements to a claim of tortious interference with a business expectancy:
(1) Existence of a valid business expectancy;
(2) The defendants have knowledge of that expectancy;
(3) Intentional interference causing breach or termination of the expectancy;
(4) The defendants interfered for improper purposes or by improper means;
(5) Damages.
Commodore v. Univ. Mech. Contractors, Inc., 120 Wn.2d 120, 137, 839 P.2d 314 (1992). This tort is aimed at interfering outsiders rather than parties to the contract or expectancy. Houser v. City of Redmond, 91 Wn.2d 36, 39, 586 P.2d 482 (1978). The remedy for interference with a contract or expectancy by a party to the agreement is an action for breach of contract. Id.
These principles extend to employees or agents of a party. Id. Thus, when City of Redmond employees allegedly interfered with the employment contract of another city employee, our court ruled that the employee could not pursue a tort action against the city, but was required to pursue a contract-based claim. Id. at 39-41.
The same result follows here. Mr. Daniels sued the City even while contending that various City employees interfered in his expectancy of employment as an accountant. As in Houser, this fails to state a claim for relief. The City was the other party to the contract or expectancy that Mr. Daniels claimed to hold. It could not be sued in tort for allegedly interfering with that contract. Relief, if any was available, had to be pursed on a breach of contract theory. Id.
The tortious interference with a business expectancy claim was without foundation. The trial court properly dismissed the claim on summary judgment.
The judgment is affirmed.
A majority of the panel has determined this opinion will not be printed in the Washington Appellate Reports, but it will be filed for public record pursuant to RCW 2.06.040.
KULIK, A.C.J. and SWEENEY, J., concur.