No. C 98-4047
August 24, 1999.
ORDER OPINION AND ORDER ON MOTION FOR SUMMARY JUDGMENT
Before the Court is a defense motion for summary judgment. Plaintiff Michael Ferrell filed a three-count complaint against Defendant IBP, Inc. ("IBP") which alleges that he was wrongfully discharged in violation of public policy (Count I). Ferrell also alleges that IBP breached its fiduciary duties to Ferrell (Count II) and violated the Iowa Wage Payment Collection Law ("IWPCL"), Iowa Code chapter 91A (1998). IBP moved for summary judgment on all three counts. (Doc. 27.) The Court heard oral argument on June 25, 1999, and the matter is ready for decision.
In the complaint, Ferrell characterizes Count I as a claim wrongful discharge in violation of public policy. (Doc. 1, ¶¶ 67-76.) Iowa courts have also referred to this cause of action as tortious discharge, wrongful discharge, and malicious discharge. See French v. Foods, Inc., 495 N.W.2d 768, 771 (Iowa 1993). In this Order, the Court will refer to the claim as wrongful discharge.
IBP, a Delaware corporation, operates meat processing plants across the country. (IBP SEC Report, Doc. 47, Ex. 3.) IBP has plants in a number of Iowa communities, including Council Bluffs, Denison, Columbus Junction, Perry, Storm Lake, Tama, and Waterloo.
Before beginning work at IBP in 1991, Ferrell worked for H.B. Maynard ("Maynard") in Pittsburgh, Pennsylvania from 1969-1991. Ferrell first came into contact with IBP when Maynard assigned Ferrell to perform consulting work for IBP. IBP had retained Maynard to help the meatpacker reduce its costs and increase its productivity. While Ferrell performed as an outside consultant for IBP, he worked closely with Robert Peterson, IBP's Chairman of the Board and Chief Executive Officer (CEO) in IBP's Dakota City, Nebraska headquarters. Ferrell's consulting work also compelled him to visit most of IBP's packing plants. In late 1991, Peterson asked Ferrell to leave Maynard and start work at IBP. (Ferrell Aff., Doc. 47, Ex. 1, at 2.) After preliminary negotiations, Peterson created a new position at IBP expressly for Ferrell, Vice President of Process Improvement, and Ferrell began working for IBP on November 4, 1991. Ferrell signed an Employment Agreement ("Agreement") on February 9, 1993 at his home in Sioux City, Iowa. IBP drafted the Agreement for Ferrell's signature. When Ferrell asked IBP's corporate counsel about the terms of the Agreement, he was informed that he must sign the Agreement or look for another job. (Doc. 47, ¶ 141.)
From the time that Ferrell began working at IBP in late 1991 until approximately June 1992, Ferrell lived in the Comfort Inn hotel in Sioux City, Iowa. Ferrell moved into a house located in Sioux City on approximately April 1, 1992. Ferrell and his family continue to live in the Sioux City house today.
At the time Ferrell began work for IBP, all the corporate officers, including Peterson, worked at IBP's corporate headquarters in Dakota City, Nebraska. In 1992, IBP began building a new corporate headquarters in Dakota Dunes, South Dakota to replace the old headquarters in Dakota City, Nebraska. In 1994, Peterson and approximately eighty corporate employees moved to the new Dakota Dunes, South Dakota headquarters. (Ferrell Aff., ¶ 25.) The next year, several departments moved to the Zenith Building in Sioux City, Iowa. Since the Dakota Dunes, South Dakota headquarters was completed in 1997, a large number of additional corporate employees have moved to Dakota Dunes, South Dakota. (Ferrell Aff., ¶ 39-41.)
The industrial engineering and health and safety groups which Ferrell supervised remained at the Dakota City site while Ferrell worked at IBP. Nonetheless, Ferrell's duties required him to visit not only the IBP facilities in the Nebraska, South Dakota, Iowa tri-state area ("the tri-state area"), but also IBP's packing plants across the country.
The terms of the Agreement provided that Ferrell would serve a five-year term of employment. (Agreement, Doc. 47, Ex. 5, at 3.) The Agreement also provided that IBP could terminate Ferrell for (1) cause, (2) incapacity, or (3) without cause, provided that IBP satisfied specific compensation and notice requirements. The Agreement also provided that Ferrell was eligible to receive bonus awards "subject to the discretion of senior management." (Agreement, at 1.)
At IBP, Ferrell supervised a number of corporate functions, including industrial engineering, health and safety, ergonomics, automation, improved management process, worker's compensation, and training. Initially, Ferrell reported directly to Peterson. However, IBP changed its organizational structure in November 1995, and Ferrell's title was changed to Vice President of Productivity Services. In his new position, Ferrell reported to Eugene Leman, President of IBP's Allied Groups Division. IBP maintains that this change in Ferrell's reporting structure occurred because Peterson was dissatisfied with Ferrell's performance.
The record reflects that, almost from the outset of his employment with IBP, Ferrell was dissatisfied with the attitude of IBP's senior management towards the safety program in the plants. Ferrell "came to believe that the heavy emphasis on `production' far outweighed any concern for `safety.'" IBP maintains that Ferrell experienced difficulty at IBP because he disagreed with IBP's decisions and policies. For example, Ferrell did not approve of IBP's practice of "pitting the plants and divisions against each other . . ." (Pla.'s St. of Undisp. Facts, Doc. 47, at ¶ 9.) IBP also maintains that Ferrell's management style sharply contrasted with the management style of other IBP executives. Ferrell testified that he frequently delegated tasks and decisions to subordinates while Peterson and the other IBP managers delegated far fewer tasks and employed a "hands-on" management style. (Doc. 47, ¶ 11-14.)
Ferrell maintains that Peterson exerted tremendous pressure on managers to achieve numerical safety targets. Ferrell asserts that this pressure caused IBP plant managers to misrepresent the safety records of each individual plant, misrepresentations that Peterson implicitly condoned. As a result, Ferrell was forced to terminate an employee who had manipulated a computerized safety measurement scoring system. Soon after he began working for IBP, Ferrell concluded that Peterson intended to expand the company so that IBP dominated the market for pork and beef, fresh meat, slaughter, and meat processing.
In 1995, IBP set out to purchase the Vernon Calhoun Packing Plant in Palestine, Texas. As part of a due diligence inspection, IBP sent employees to the Palestine plant to assess the potential liability for worker's compensation injuries and investigate any environmental problems. Ferrell maintains that although the due diligence inspection was scheduled to last two days, the team spent only four hours at the plant.
Ferrell maintains that despite his position as Vice President of Productivity Services and his corresponding safety-related responsibilities, the senior management at IBP excluded him from the due diligence inspection process at the Palestine Plant. Ferrell asserts that Peterson never spoke to Ferrell about IBP's purchase of the Palestine plant.
In early 1996, IBP acquired the Palestine plant and a plant in Sealy, Texas. (Doc. 47, ¶ 16.) From the time IBP took over operations at the Palestine plant, Ferrell maintains that the company exhibited a reckless disregard for safety. IBP transferred an employee from its Logansport, Indiana plant, Ron Cox, to Palestine to assume the role of plant safety and personnel manager. However, when Cox reported several safety violations to OSHA, IBP terminated him. (Doc. 47, ¶ 18.) Ferrell also maintains instead of sending a trained engineer to work on deficiencies in the refrigeration system, IBP sent a production operation employee.
Between June 12, 1996 and October 2, 1996, OSHA inspected the Palestine plant. OSHA cited IBP for a number of workplace safety violations, including the exposure of workers to ammonia refrigeration system leaks. (Doc. 47, Ex. 9, at 13-19.) Ferrell visited the Palestine plant on July 24, 1996 to "get a feel for the Palestine operations and the safety `opportunities' [the plant] presented." Ferrell also visited the plant to ascertain why safety personnel were encountering such difficulty in their efforts to implement safety programs. (Doc. 47, ¶ 22.)
While visiting the plant, Ferrell discovered that the refrigeration system was dangerously overcharged with ammonia. Ferrell stated that while the plant employees "toed the company line" and disingenuously asserted that the system was charged to only 9,000 pounds, the system was actually charged to more than 20,000 pounds. Federal law requires that if a refrigeration system is charged above 10,000 pounds, the operator must institute a program called Process Safety Management (PSM). Ferrell asserts that IBP failed to institute a PSM program at the Palestine plant. Ferrell also maintains that IBP employees used "cow magnets" and wood chips to bypass safety devices at the plant. (Doc. 47, ¶ 29, 44.)
On December 10, 1996, an IBP employee named Clarence Deupree had his arm amputated in machinery while working at the Palestine plant. Two days later, IBP employee William Morris was killed at the plant while checking problems with the plant's refrigeration system. Morris was called to the plant in the early morning hours of December 12, 1996. When Morris attempted to lower the liquid ammonia level in the accumulator, the pressure inside the crankcase caused a structural failure in the system. Morris was thrown backward into a compressor, and covered in ammonia and oil. As he attempted to reach a wash basin, he had a heart attack. He died shortly after the explosion. (Doc. 47, ¶ 30.)
The day after the mishap, Richard Bond (President — Fresh Meats) and Wesley Hodge (Vice President-Cow Division) signed an emergency Project Expenditure Request (PER) approving the expenditure of $33,100 for a PSM program at the Palestine plant. While IBP procedures dictated that the PER be submitted to Ferrell for his signature, Ferrell was never asked to sign the request.
OSHA investigated the plant immediately after the Deupree and Morris incidents, and cited IBP for (1) failing to adequately prepare for ammonia spills and plant emergencies, (2) failing to implement procedures for confined space entry and personal equipment, and (3) failing to implement personal protective equipment policies. (Doc. 47, ¶ 30-31.) Ferrell asserts that IBP's failure to implement the OSHA-required policies directly impeded the efforts to decontaminate and rescue Morris.
Immediately after Morris was killed, Ferrell and a group of IBP engineers which included Dale Goetz (Vice President of Engineering Services), Nasser Karimzadeh (Assistant Vice President of Engineering Services), Wayne Jordan, Hector Gutierrez, Bob Smith, Mike Morrin, and Larry Wiese, (collectively, "the engineers") flew from the tri-state area to Palestine, Texas. After a thorough inspection of the plant, Ferrell and the engineers determined that the electrical, mechanical, and refrigeration systems posed a danger to the workers at the plant. (Doc. 47, at ¶ 33-34.) Ferrell and several of the engineers, including Ed Fick, Walter Beckwith, Wayne Jordan, Dale Goetz, Hector Guttierez and James Hatch, agreed that all operations at the plant needed to be shut down until the hazards could be remedied. Ferrell maintains the engineers expressed concern that they could lose their professional engineering licenses if they failed to shut down the plant. (Ferrell Depo. in Morris Case, Doc. 47, Ex. 7, p. 168-70.) However, the engineers were reluctant to recommend a plant shutdown because they worried that such a recommendation would anger senior IBP executives and the engineers would lose their jobs. Id. Ferrell informed the engineers that he would "make the call" to shut down the Palestine plant, but asked for their support in making such an important decision. Each of them responded that they would support him, but again expressed concern about repercussions from the upper management.
On December 16, 1996, Ferrell called Leman to recommend closing the plant. Leman initiated a conference call with several IBP senior executives, including Peterson, Richard Bond (President-Fresh Meats), and Jim Lochner (Vice President of Technical Services). Ferrell chaired the safety discussion and reiterated to the group that safety concerns mandated that the plant should be closed. (Doc. 47, ¶ 38-39.) IBP shut down the Palestine plant for approximately one month. (Def.'s Sta. Of Undisp. Facts, Doc. 29, ¶ 21.)
During the conference call regarding the Palestine plant, Ferrell mentioned that he and the group of engineers were scheduled to visit the packing plant in Sealy, Texas the next day. Peterson became irate and told Ferrell: "No goddamn it, don't you go [to Sealy]. You'll find the same thing there and shut that plant down, too." (Doc. 47, ¶ 41.) At the end of the conference call, Leman reiterated that Ferrell should not go to Sealy. Id.
On December, 17, 1996, IBP employee Jim Hatch called IBP corporate headquarters from Palestine and suggested that a December 1995 memorandum prepared by Mike Morrin should be destroyed because it documented previous problems at the Palestine plant. Ferrell voiced objections to destroying this document. (Doc. 47, ¶ 42.) Ferrell also alleges that IBP corporate employee Don Jefferson transported the operational logs for the ammonia system from the Palestine plant to corporate headquarters to avoid the impending OSHA investigation. Ferrell also voiced objections to the removal of the logs.
When Ferrell returned to his office in Dakota City, he was excluded from meetings pertaining to the Palestine plant. Additionally, the amount of contact he had with Peterson decreased dramatically. Ferrell maintains that he continued to express concern to Leman that the Palestine plant remained unsafe, but Leman responded that IBP had never shut down a plant for safety reasons and he was under tremendous pressure to get the plant up and running again by January 13, 1997. (Doc. 47, ¶ 48-50.)
Ferrell asserts that IBP engineering records show that IBP charged the Palestine refrigeration system to 12,000 pounds on January 10, 1997 without instituting a PSM program, and re-opened the plant on January 13, 1997. Ferrell alleges that he voiced his concern about re-opening the plant without a functioning PSM program to number of IBP executives on a number of different occasions.
On February 18, 1997, Leman and IBP Human Resources Director met with Ferrell in Leman's office. Leman informed Ferrell that he was terminated "without cause" pursuant to the Agreement. At the meeting, Leman and Jochum denied that Ferrell's termination was related to the events following the Morris mishap at the Palestine plant. Ferrell maintains Peterson decided to terminate Ferrell and that Leman and Jochum were only the messengers.
The first year that Ferrell worked for IBP, his salary was $90,000 and his bonus was $37,500. (Doc. 29, ¶ 4-5.) Ferrell's salary and bonus increased steadily each year that he worked at IBP. However, the bonus IBP paid Ferrell for 1996 decreased dramatically from its 1995 level of $125,000 to $50,000. ( Id.) Ferrell maintains that his bonus decreased and he was fired because he objected to IBP's conduct at the Palestine plant and because of other actions he took to promote health and safety for IBP employees. (Complaint, Doc. 1, ¶ 70.) IBP asserts that Ferrell was fired because he performed poorly.
Summary judgment is appropriate if the record shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Berryhill v. Schriro, 137 F.3d 1073, 1075 (8th Cir. 1998) (citing Fed.R.Civ.P. 56(c)). At the summary judgment stage, the court should not weigh the evidence, make credibility determinations, or attempt to determine the truth of the matter. Quick v. Donaldson Co., 90 F.3d 1372, 1376-77 (8th Cir. 1996) (quoting Anderson v. Liberty Lobby Inc., 477 U.S. 242, 249 (1986)). Rather, the Court's function is to determine whether a dispute about a material fact is genuine, that is, whether a reasonable jury could return a verdict for the nonmoving party based on the evidence. Liberty Lobby, 477 U.S. at 256. If reasonable minds could differ as to the import of the evidence, summary judgment is inappropriate. Id. at 250.
A. Choice of Law
The events giving rise to this dispute occurred in a number of states, including Iowa, Nebraska, South Dakota, and Texas. IBP insists that Nebraska law should apply even though the IBP-drafted Agreement contains the following forum selection clause:
11. Applicable Law. This agreement is made and entered into in the state of Iowa, which is also the domicile of the Employee. The validity, interpretation, performance and enforcement of this agreement shall be governed by the internal laws of said State of Iowa, without giving effect to the conflict of law provisions thereof.
Ferrell, however, maintains that the law of Iowa should apply to the case, but also that his claims are valid under the law of both states. Because the Court has noted differences in the law of the two states discussed infra, the Court must determine which state's law governs this dispute.
The Court has diversity jurisdiction in this case pursuant to 28 U.S.C. § 1332 (1998). In a diversity case, the Court applies the choice-of-law rules of the forum state, so Iowa's choice-of-law rules govern. Baxter Int'l, Inc. v. Morris, 976 F.2d 1189, 1195 (8th Cir. 1995). Iowa has adopted the Second Restatement of Conflicts as its choice-of-law provision. Henriksen v. Younglove Constr., 540 N.W.2d 254, 259 (Iowa 1995). Because Ferrell has advanced three separate claims-wrongful discharge in violation of public policy, breach of fiduciary duty, and violation of the Iowa Wage Payment Collection Law ("IWPCL"), Iowa Code chapter 91A-the Court must make three distinct choice of law determinations. See Smith v. Gould, Inc., 918 F.2d 1361, 1365 n. 4 (8th Cir. 1990).
1. The Forum Selection Clause
In Iowa, Ferrell's claim that IBP wrongfully discharged him in violation of public policy is a claim sounding in tort. Lara v. Thomas, 512 N.W.2d 777, 782 (Iowa 1994); French, 495 N.W.2d at 771. "Whether tort claims are to be governed by forum selection provisions depends upon the intention of the parties reflected in the wording of particular clauses and the facts of each case." Terra Int., Inc. v. Mississippi Chem. Corp., 119 F.3d 688, 693 (8th Cir. 1997), cert. denied, 118 S.Ct. 629 (1997). Although the cases deciding whether very similarly worded forum selection clauses cover tort claims have reached different conclusions, the majority of these cases suggests that the clauses apply to tort claims as well as contract claims. Id.
While determining the scope of a forum selection clause is a "rather case-specific exercise," the Eighth Circuit has used three "variously phrased general rules" to ascertain whether a forum selection clause applies to tort claims. Id. at 694. The clearest of the three tests and the one most applicable to this case is the Third Circuit rule. Under that rule, a forum selection clause will dictate choice of law where tort claims "ultimately depend on the existence of a contractual relationship." Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 203 (3d Cir. 1983), cert. denied, 464 U.S. 938 (1983). The Third Circuit amplified the meaning of "depend on the existence of a contract" in a later case by stating, "If the tort claims arise out of the contractual relationship and implicate the contract's terms, the forum selection clause will apply." Crescent Int., Inc. v. Avatar Communities, Inc., 857 F.2d 943, 944 (3d Cir. 1988).
Ferrell's wrongful discharge claim stems directly from his employee-employer relationship with IBP. The Agreement documents and describes the rights and duties of each party to the contract. The fact that Ferrell believes he was terminated for unlawful reasons and IBP believes that he was terminated in compliance with the terms of the contract will necessarily depend on the existence of a contractual relationship. Moreover, any discussion of the merits of Ferrell's wrongful discharge claim will most certainly include a discussion of the terms of the contract. Simply stated, if this matter goes to trial, the parties will most likely offer evidence of the Agreement and the details of the contractual relationship between IBP and Ferrell. Accordingly, the forum selection clause applies to Ferrell's tort claims under the Third Circuit rule and weighs heavily in favor of applying Iowa law.
The First Circuit rule, also cited approvingly by the Eighth Circuit in Terra Int., 119 F.3d 688, provides additional guidance as to whether the forum selection clause applies to Ferrell's tort claims. Under that Circuit's rule, "contract-related tort claims involving the same operative facts as a parallel claim for breach of contract should be heard in the forum selected by the contracting parties." Lambert v. Kysar, 983 F.2d 1110, 1121-22 (1st Cir. 1993). Notably, Ferrell's failure to plead a parallel contract claim does not render Lambert inapposite. Where the relationship of the parties is contractual, the pleading of alternative non-contractual theories of liability should not prevent the enforcement of a forum selection clause. See Terra Int., 119 F.3d at 695 (forum selection clause applies even though plaintiff did not plead any claims for breach of contract). Thus, the First Circuit's "same operative facts" test provides guidance when, as in this case, a contract claim goes unpleaded.
In this case, Ferrell's claim that he was wrongfully discharged draws into question the same operative facts that would be relevant under a breach of contract claim. The fact that Ferrell did not plead breach of contract does not transform his cause of action into one based exclusively in tort. Ferrell could have asserted a parallel claim for breach of contract in the same complaint in which he pleaded the other claims. The important point is that the contract and tort claims would implicate the same operative facts. It follows that under the First Circuit rule, the forum selection clause applies to the tort claims.
The forum selection provision applies to the tort claims for one additional reason. One can, it is true, find cases that hold forum selection provisions govern only contractual disputes and not torts. E.g., Lazard Freres Co. v. Protective Life Ins. Co., 108 F.3d 1531, 1540 (2d Cir. 1997), cert denied, 118 S.Ct. 669 (1997). But what these cases actually hold is that such a provision will not be construed to govern tort as well as contract disputes unless it is clear that this is what the parties intended. Kuehn v. Children's Hosp., Los Angeles, 119 F.3d 1296, 1302 (7th Cir. 1997) (emphasis provided). Accordingly, under the rule, if the parties intended and expected Iowa law to apply to any potential dispute at the time they signed the Agreement, this Court must apply Iowa law.
IBP drafted the Agreement and presented it to Ferrell for his signature. When Ferrell asked IBP's counsel about some of the terms of the contract, he was informed that he could sign the Agreement or look for another job. (Doc. 47, ¶ 141.) The last sentence of the Agreement states, "The validity, interpretation, performance and enforcement of this agreement shall be governed by the internal laws of the said State of Iowa, without giving effect to the conflict of law provisions thereof." IBP typed " Iowa" in the blank space. Apparently, IBP believed that Iowa law was beneficial to its interests when it drafted the Agreement. Yet today, IBP urges the Court to apply Nebraska law. The Court believes that applying Nebraska law would run contrary to the intent and to the reasonable expectations of the parties. Accordingly, the intent and reasonable expectations of the parties weigh in favor of enforcing the forum selection clause and applying Iowa law.
2. The Most Significant Relationship Test
Even if the Court disregarded the Agreement's forum selection clause, Iowa choice of law principles do not weigh so heavily in favor of any other particular state's. At best, under a traditional conflict of law analysis, this case is an extremely close one.
Iowa follows the Restatement's "most significant relationship" methodology on choice of law issues. Veasley v. CRST Int. Inc., 553 N.W.2d 896, 897 (Iowa 1996). The Court must consider the following principles:
(1) The rights and liabilities of the parties with respect to an issue in tort determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in § 6.
(2) Contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:
(a) the place where the injury occurred,
(b) the place where the conduct causing the injury occurred,
(c) the domicile, residence, nationality, place of incorporation, and place of business of the parties, and
(d) the place where the relationship, if any, is centered.
Restatement (Second) Conflict of Laws § 145 (1971).
The circumstances surrounding IBP's termination of Ferrell occurred in Iowa, South Dakota, Nebraska, and to a lesser extent, Texas. While IBP's corporate headquarters was located in Nebraska during much of the relevant time period, IBP began construction of a new corporate headquarters in 1992. In 1994, Peterson and eighty corporate employees moved to the new corporate headquarters in Dakota Dunes, South Dakota. In 1995, several departments moved to offices in the Zenith Building in Sioux City, Iowa.
Ferrell's was fired in Leman's Dakota City, Nebraska office, so it is accurate to state that Ferrell's injury occurred in Nebraska. However, it is likely that Peterson, as CEO and Chairman, made the ultimate decision to terminate Ferrell in his office in Dakota Dunes, South Dakota. The record reflects that Peterson employed a "hands-on" management style and rarely delegated important decisions to subordinates. Ferrell was a Vice President of the company. Presumably, it was Peterson's decision to terminate a high-ranking executive. At least, he had a hand in the decision. Consequently, since Peterson worked in South Dakota at the time Ferrell was fired, the conduct that ultimately caused Ferrell's injury likely occurred in South Dakota.
While Ferrell was an Iowa resident, IBP is a Delaware corporation with its principal place of business in Nebraska. IBP runs, and Ferrell worked, at packing plants across the country. The employment relationship was primarily centered around the tri-state area of Iowa, Nebraska, and South Dakota. Each of the three states has a significant relationship to the alleged wrongful termination and to the parties. To further complicate the choice of law issue, the incident that allegedly precipitated Ferrell's wrongful termination occurred in Texas at the Palestine plant. In weighing the various factors of the most significant relationship test, the Court concludes that the test provides limited guidance to the Court to make a choice of law determination. Moreover, the parties were unable to provide the Court at oral argument with information as to when the relevant individuals moved from the Nebraska headquarters to the South Dakota headquarters or the Iowa offices.
This case has significant connections to at least three different states. Since the parties have failed to establish that one particular state holds the most significant relationship to the dispute or to the parties, the forum selection clause assumes increased importance in the Court's choice of law analysis. In light of the varied connections, it is difficult for the Court to ignore the forum selection clause since it best manifests the intent and reasonable expectations of the parties. Consequently, the Court will apply Iowa law to Ferrell's wrongful discharge claim.
B. Wrongful Discharge in Violation of Public Policy
Ferrell claims that he was discharged because he made the decision to close the Palestine plant and because he aggressively pursued policies at IBP promoting health and safety. Ferrell asserts that he was fired because he had difficulty complying with the corporate philosophy at IBP of production at the expense of safety. Ferrell also asserts that after the Palestine plant closing, he was excluded from the safety decisionmaking process. IBP, however, asserts "that there is absolutely no evidence that [Ferrell] was terminated" because he reported safety violations to his superiors at IBP. (Doc. 54, at 13.) IBP, who fired Ferrell "without cause," states that Ferrell has failed to raise a genuine issue of material fact that a connection existed between Ferrell's termination and the safety program at IBP.
When an employee is terminated for a reason that violates public policy, the employee has a remedy for damages. Springer v. Weeks Leo Co., 429 N.W.2d 558, 559-60 (Iowa 1988). It makes no difference if the plaintiff was an at-will employee. Teachout v. Forest City Comm. School Dist., 584 N.W.2d 296, 299 (Iowa 1998). In order to establish a claim for wrongful discharge, the plaintiff must establish (1) engagement in a protected activity, (2) adverse employment action, and (3) a causal connection between the two. Teachout, 584 N.W.2d at 299; Iowa Civil Jury Instruction 3100.1 (1989).
The parties do not dispute that Ferrell suffered an adverse employment action-he was terminated. The dispute in this case centers on (1) whether Ferrell engaged in a protected activity, and (2) whether there was any causal connection between Ferrell's termination and the protected activity. If Ferrell can generate a jury question on each of these two issues, the Court must deny IBP's motion for summary judgment.
1. Engagement in a Protected Activity
There need not be an express statutory mandate of protection before an employee's conduct is shielded from adverse employment action. Teachout, 584 N.W.2d at 300. Nevertheless, the employee's activity must advance a well-recognized and defined public policy of the state to constitute a protected activity. Id. Federal law can also serve as an appropriate source for state public policy. Smuck v. National Management Corp., 540 N.W.2d 669, 673 (Iowa Ct.App. 1995). Iowa has recognized wrongful discharge claims in a number of disparate circumstances. Weinzetl v. Ruan Single Source Transp. Co., 587 N.W.2d 809, 810-11 (Iowa 1998) (termination after plaintiff claimed a right to workers' compensation benefits); Lara v. Thomas, 512 N.W.2d 777, 782 (Iowa 1994) (termination after plaintiff filed a claim for unemployment benefits); Teachout, 584 N.W.2d at 303 (termination after plaintiff voiced a good faith intent to report suspected child abuse); Smuck, 540 N.W.2d at 668-69 (termination after plaintiff refused to violate federal law and falsify tenant records).
Ferrell maintains that his termination violated the public policies of Iowa, Texas, and the United States to protect workers from unsafe conditions, promote safety measures in the workplace, and encourage the correction of unsafe working conditions. (Doc. 1, ¶ 17.) In his resistance, Ferrell points to the Iowa Occupational Safety and Health (OSHA) statutory framework, Iowa Code ch. 88 (1997), as the source for the public policy. Chapter 88 states that "[i]t is the policy of this state to assure so far as possible every working person in the state safe and healthful working conditions and to preserve human resources." Iowa Code § 88.1. Not only does Iowa Code ch. 88 encourage employees to report safety hazards to their employers or appropriate regulatory officials, the statute provides protection to the reporting employees: "A person shall not discharge . . . an employee because the employee has filed a complaint [related to Iowa's workplace safety regulations."]. Section 88.9(3) also provides the following remedy:
Iowa administrative regulations indicates that complaints to an individual's employer are also covered under Iowa's OSHA Act. Iowa Admin. Code r. 875-9.9(3) (1998).
An employee who believes that the employee has been discharged or otherwise discriminated against by a person in violation of this subsection may, within thirty days after the violation occurs, file a complaint with the commissioner alleging discrimination. Upon receipt of the complaint, the commissioner shall conduct an investigation as the commissioner deems appropriate. If, upon investigation, the commissioner determines that the provisions of this subsection have been violated, the commissioner shall bring an action in the appropriate district court against the person. In any such action, the district court has jurisdiction to restrain violations of this subsection and order all appropriate relief including rehiring or reinstatement of the employee to the employee's former position with back pay. Within ninety days of the receipt of a complaint filed under this subsection, the commissioner shall notify the complainant of the commissioner's determination under this subsection.
Iowa Code ch. 88.9(3).
IBP maintains that since § 88.9(3) provides a remedy, i.e., petition to the labor commissioner with judicial review in the district court, the action is preempted. Ferrell maintains that petition to the labor commissioner is discretionary, and his common law action for wrongful discharge is not preempted. "The common-law action for wrongful or retaliatory discharge exists for the purpose of protecting an employee against retaliation when a statutory right is conferred but no statutory remedy is provided, or where the right is otherwise clearly articulated." Thompto v. Coburn's Inc., 871 F. Supp. 1097, 1121 (N.D. Ia. 1994) (emphasis added). A wrongful discharge cause of action is precluded if a statutory remedy is available. Borschel v. City of Perry, 512 N.W.2d 565, 567-68 (Iowa 1994) (civil rights statute preempts an employee's wrongful discharge claim).
The parties have presented this Court with a difficult question of Iowa law. No Iowa case has yet resolved whether the remedy described in § 88.9(3) is exclusive or discretionary. In fact, only one published Iowa case has even mentioned § 88.9. Midwest Carbide Corp. v. Occup. Safety Health Rev. Comm'n, 353 N.W.2d 399, 400 (Iowa 1984). To complicate matters, this Court's review of decisions interpreting similar statutes has yielded varying results. Compare Flenker v. Willamette Indus., Inc., 967 P.2d 295, 299 (Kan. 1988) (statute substantially similar to Iowa's statute held not to be the plaintiff's exclusive remedy); Kulch v. Structural Fibers, Inc., 677 N.E.2d 308, 324 (Ohio 1997), cert. denied, 118 S.Ct. 586 (1997) (remedies in statute are inadequate and thus not exclusive); Hejmadi v. AMFAC, Inc., 202 Cal.App.3d 525, 545 (Cal.Ct.App. 1988) ("Employees who complain about workplace safety . . . in violation of California OSHA standards are protected from discharge. Although an administrative remedy has been afforded, . . . that remedy [is] not exclusive. . .") with Hines v. Elf Atochem North America, Inc., 813 F. Supp. 550, 552 (D. Ky. 1993), affirmed, 47 F.3d 1169 (6th Cir. 1995) (both the federal and state OSHA statutes preempt wrongful discharge claims); Miles v. Martin Marietta Corp., 861 F. Supp. 73, 74 (D. Colo. 1994) (same). It is within the discretion of this Court, sitting in diversity, to predict how the Iowa Supreme Court would resolve the question. Marvin Lumber Cedar Co. v. PPG Indus., 34 F. Supp.2d 738, 751 (D. Minn 1999); see also Harder v. Acands, 1999 WL 373539, *3 (8th Cir. June 9, 1999). Accordingly, the Court will predict whether the Iowa Supreme Court would find that § 88.9(3) abrogates Ferrell's common law wrongful discharge claim.
On its face, § 88.9(3) contains no prohibition on wrongful discharge claims. Section 88.9(3) states that an employee may file a complaint with the labor commissioner. Such action is permissive and is required to initiate the remedial process detailed specifically in the statute. The remedial process consists of an investigation of the employee's complaint. The labor commissioner then has the option to prosecute the case in the district court. However, § 88.9(3) does not show an intent on the part of the legislature to preclude an employee from suing on his own behalf. If the legislature had wanted to foreclose a private common law cause of action, it could have done so expressly. Reed v. Municip. of Anchorage, 782 P.2d 1155, 1158-59 (Alaska 1989) (interpreting Alaska statute nearly identical to § 88.9(3)). Consequently, this Court holds that the Iowa legislature did not intend for the procedures detailed in § 88.9(3) to serve as the sole avenue of relief available to Ferrell and his claim for wrongful discharge is not precluded by § 88.9(3).
Additionally, the remedial process contemplates investigating workplace safety violations in Iowa, and not other states. In this case, the primary incident that precipitated Ferrell's discharge, his actions at the Palestine plant, occurred in the state of Texas. IBP corporate offices were located in Nebraska, South Dakota, and Iowa. The remedial provisions described in § 88.9(3) seem inadequate in such a case. Consequently, it is even less likely that the Iowa legislature intended § 88.9(3) to preclude a wrongful discharge claim based on diversity.
Ferrell's claim is also valid for one additional reason. Although Iowa Code ch. 88 is the only statute Ferrell has cited specifically as a source of public policy, Iowa's OSHA framework is not the exclusive source of public policy in this case. In Iowa, an employee who is terminated because he advances a well-recognized and defined public policy, even if the policy is nonstatutory, is shielded from adverse employment action. Teachout, 584 N.W.2d at 300. "There is no public policy more important or more fundamental than the one favoring the effective protection of the lives and property of citizens." Wheeler v. Catepillar Tractor Co., 485 N.E.2d 372, 377 (Illinois 1985); see also Watkins Products, Inc. v. McBirnie, 201 N.W.2d 484, 485 (Iowa 1972) ("The employer is not an insurer of the employee's safety, but must exercise the degree of care which a person of ordinary care and prudence would use under all the circumstances and conditions to provide appliances, machinery and tools which are reasonably safe."). The reporting of unsafe conditions in the workplace by an employee is an action in furtherance of this firmly held policy. Concomitantly, retaliation against the reporting employee as a punitive measure and as a deterrent to the other employees who may observe unsafe conditions, directly affronts Iowa's policy in favor of workplace safety. Thus, this Court believes that under Iowa law, an employee may maintain a private action in tort for wrongful discharge as a result of reporting unsafe working conditions because such discharge contravenes Iowa's public policy.
The Court recognizes that no published Iowa case has explicitly stated that an employee who reports workplace safety violations has a valid wrongful discharge claim. Nonetheless, this Court is reluctant to state that, in the state of Iowa, reporting safety violations in the workplace is not a well-recognized and defined public policy. Consequently, this Court finds, viewing the evidence in a light most favorable to the plaintiff, that Ferrell's efforts to promote safety at IBP, especially as they related to the Palestine plant, constituted a protected activity.
2. Causal Connection Between the Termination and the Protected Activity
Next, the Court must determine whether Ferrell has raised a jury question on the existence of a causal connection between Ferrell's termination and the protected activity of reporting safety violations. Ferrell asserts that he was terminated on February 18, 1997, two months after he voted to close down the Palestine plant and one month after the plant reopened over his objections. Ferrell maintains he was fired because of his aggressive stance on safety clashed with Peterson's philosophy of production at the expense of safety. Ferrell asserts that this clash was exemplified by Peterson's outburst on the conference call following the Palestine mishap, "No goddamn it, don't you go [to Sealy]. You'll find the same thing there and shut that plant down, too." IBP maintains that Ferrell's termination had no connection with the Palestine plant or any other safety issue.
The causation standard in a common-law retaliatory discharge case is high. Teachout, 584 N.W.2d at 301-02. The employee's engagement in protected conduct must be the determinative factor in the employer's decision to take adverse action against the employee. See Smith v. Smithway Motor Xpress, Inc., 464 N.W.2d 282, 686 (Iowa 1990); Graves v. O'Hara, 576 N.W.2d 625, 628 (Iowa Ct.App. 1998). A factor is determinative if it is the reason that "tips the scales decisively one way or the other," even if it is not the predominant reason behind the employer's decision. See Smith, 464 N.W.2d at 686. Thus, the Court must examine the evidence to determine whether a reasonable fact finder could conclude that Ferrell's aggressive posture on safety issues and his decision to close the Palestine plant were the determinative factors in IBP's decision to terminate him.
The Court finds that the temporal chain of events in this case is persuasive evidence of a causal connection between Ferrell's safety efforts at Palestine and his ultimate termination. Moreover, the engineers that traveled to Palestine with Ferrell stated that they believed Ferrell would be terminated because of the decision to close the plant. When Ferrell returned to IBP corporate headquarters after the trip to the Palestine plant, his access to Peterson was restricted and he was not included in meetings that he had regularly attended. But the most persuasive evidence is Peterson's reaction on the conference call to Ferrell's plans to visit the Sealy plant and check for safety violations. This reaction coupled with the criticism Peterson and other IBP executives directed at Ferrell for shutting down the Palestine plant are strong evidence of wrongful discharge. These events, viewed in a light most favorable to Ferrell, is more than enough evidence to survive IBP's motion for summary judgment. Accordingly, the Court finds that Ferrell has generated a genuine issue for trial on his claim for wrongful discharge.
The Court recognizes that under Iowa law, the mere fact that an adverse employment decision follows engagement in a protected activity is insufficient to generate a jury question in a wrongful discharge claim. Phipps v. IASD Health Serv. Corp., 558 N.W.2d 198, 203 (Iowa 1997). However, the close proximity of the termination and the events at Palestine are not the only evidence of a causal connection. The additional factors persuade the Court that there is a jury question as to whether Ferrell's termination was a result of his stance on safety.
IBP spent a substantial portion of its brief arguing that Nebraska does not recognize the tort of wrongful discharge in violation of public policy. While the Court has already discussed supra that Iowa choice of law rules dictate that the Court apply Iowa law in this case, a brief discussion of Nebraska law is appropriate.
Even if the Court were to apply Nebraska law, the Court has strong reservations about IBP's position that wrongful discharge claims fail as a matter of law in Nebraska. While it is true that in 1993, the Nebraska Supreme Court "decline[d] to adopt the public policy exception," Blair v. Physicians Mut. Ins. Co., 496 N.W.2d 483, 487 (Neb. 1993), later cases suggest that the rule is not so hard and fast. In Simonsen v. Hendricks Sodding, 558 N.W.2d 825 (Neb.Ct.App. 1997), the Nebraska Court of Appeals affirmed a jury verdict in a wrongful discharge case. The Court concluded that a mechanic who was discharged for refusing to drive a truck with defective brakes stated a viable claim for wrongful discharge. Additionally, other Nebraska cases suggest that wrongful discharge claims are valid if the source of the public policy is a constitution or statute. See e.g., Blair, 496 N.W.2d at 487. Consequently, IBP's alleged conduct raises serious concern under both Nebraska and Iowa law.
C. Punitive DamagesFerrell also maintains that he is entitled to punitive damages on his wrongful discharge claim. (Doc. 1, ¶ 76.). IBP moved for summary judgment on punitive damages because under Nebraska law, punitive damages are constitutionally prohibited. However, under Iowa law, punitive damages are available to employees who are wrongfully discharged. Tullis v. Merrill, 584 N.W.2d 236, 237, 241 (Iowa 1998); Sanford v. Meadow Gold Dairies, Inc., 534 N.W.2d 410, 413 (Iowa 1995). Accordingly, IBP's motion on these grounds is without merit.
IBP also moves for summary judgment on the issue of punitive damages because it asserts that Ferrell's claim because it is a newly recognized cause of action. The Court agrees that this is a newly recognized cause of action, and punitive damages are thus precluded. Lara, 512 N.W.2d at 782. Accordingly, IBP's motion for summary judgment on punitive damages is granted.
C. Breach of Fiduciary Duty
Ferrell also alleges that a fiduciary duty existed between himself and IBP arising from his employment relationship, his duties and responsibilities in the area of workplace safety, and his status as an executive officer of IBP. (Doc. 46, at 48.) Ferrell maintains that Peterson had a "unique" relationship with the upper management employees because he made all of the key corporate decisions personally, and this decision-making process engendered him with power and influence over each corporate executive. When IBP terminated Ferrell, IBP allegedly breached this its fiduciary duty to Ferrell. IBP asserts that Iowa law does not recognize a fiduciary duty between the CEO and the executives of a company. The parties agree that Iowa law applies to the breach of fiduciary claim, so a conflict of law analysis is unnecessary.
A fiduciary relationship is a relationship is a relationship of trust and confidence on a subject between two persons. Kendall/Hunt Publishing Co. v. Rowe, 424 N.W.2d 235, 243 (Iowa 1986). A fiduciary relationship exists when one of the persons is under a duty to act for or give advice for the benefit of another upon matters within the scope of the relationship. Id.
Ferrell's claim is a novel one. He has not cited, and this Court has been unable to identify, a single case in which a Court has found a fiduciary relationship existed between a CEO and another corporate officer. Additionally, Ferrell has failed to identify any compelling reason to impose a duty on company's chief executive to his executive subordinates. Accordingly, IBP's motion on this claim is granted.
D. The Iowa Wage Payment Collection Law
Ferrell alleges that the yearly bonus IBP paid constituted a "wage" under the IWPCL, Iowa Code ch. 91A. Ferrell maintains that since his bonus decreased from $105,000 in 1995 to $50,000 in 1995, he has a claim under the IWPCL. IBP maintains that Ferrell's bonus was discretionary, and his IWPCL claim fails as a matter of law. Iowa statutory law governs this claim.
The purpose of the IWPCL is to facilitate the collection of wages owed to employees. Phipps, 558 N.W.2d at 201. An employer must pay all wages due its employees. Id. If an employer fails to pay an employee wages, the employer is subject to liability for unpaid wages or expenses, court costs, and attorney fees. Iowa Code § 91A.8; Dallenbach v. MAPCO Gas Prods., Inc., 459 N.W.2d 483, 489 (Iowa 1990). The Act defines "wages" as compensation owed by an employer. Iowa Code § 91A.2(7). If the employee was never entitled to compensation, he has no claim under the IWPCL.
The Agreement plainly reveals that Ferrell's bonus was discretionary: "[The employee] may receive awards . . . subject to the discretion of the senior management of Employer." Ferrell admitted that the bonus was discretionary in deposition testimony. (Doc. 31, at 42.) This Court finds that Ferrell's claim is not the type appropriately pursued under the IWPCL. Accordingly, IBP's motion on this claim is granted.
This decision does not address the question of what damages, if any, may be recoverable under the wrongful discharge claim. Whether the Court will submit the bonus issue to the jury under that theory is not being resolved in this decision.
ORDERUpon consideration of IBP's motion for summary judgment and the record in this case,
IT IS ORDERED that IBP's motion for summary judgment is DENIED with respect to Count I (wrongful discharge). IBP's motion for summary judgment is GRANTED with respect to Count II (breach of fiduciary duty) and Count III (IWPCL). IBP's motion for summary judgment on the issue of punitive damages is also GRANTED.