Opinion
No. CV 06-4019412
January 19, 2007
MEMORANDUM OF DECISION RE MOTION TO STRIKE (#127)
This case arises from an action brought by the plaintiff [TyMetrix] to enforce a non-compete clause contained in an employment agreement with the defendant [Szymonik]. Szymonik filed an amended counterclaim dated April 19, 2006, alleging wrongful discharge in violation of public policy. Tymetrix, has moved to strike the defendant's counterclaim on the grounds that the defendant's counterclaim is insufficient because it does not fall within Connecticut's narrow public policy exception to the doctrine of at-will employment.
The gravamen of each count in the three-count counterclaim — wrongful discharge in violation of public policy — is based on the following allegations. Senior executives at Tymetrix made numerous misrepresentations "to customers and to executives of CT Corporation [the plaintiff's sole shareholder] regarding the security of customers' financial and health and medical data and TyMetrix's ability to assist customers in achieving their internal compliance with [SARBANES OXLEY] and HIPAA . . . [and misrepresentations about] Tymetrix's financial forecast and status of hew product development and sales and marketing efforts." The defendant "reasonably believed that these misrepresentations exposed TyMetrix and its customers to penalties for violations of [SARBANES OXLEY], HIPAA, and other civil and criminal liabilities." The defendant informed senior executives of his concerns regarding these misrepresentations. In response to these concerns, the Tymetrix General Manager, John Webber, "made it clear that, unless Mr. Szymonik was willing to participate in the dishonest, unethical and likely illegal actions being promulgated at TyMetrix, he would no longer have a job." On March 14, 2005, the defendant was terminated from employment. The defendant alleges he was terminated in order to cover up the plaintiff's "misrepresentations and fraudulent conduct."
The defendant cites public policy contained in Connecticut General Statutes and federal law to support his claim of wrongful discharge in violation of public policy. Specifically, the defendant cites the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a, et seq., for the public policy that business contracts and business transactions be honest and acted upon with good faith and fair dealing; and the Health Insurance Portability and Accountability Act (HIPAA), 42 U.S.C. § 1320d, et seq., for the public policy that companies are required to protect the security and privacy of personal health and medical information. The defendant further argues that the plaintiff's alleged misrepresentations violated judicially conceived notions of public policy that impose civil and criminal penalties for misrepresentations and fraud.
In ruling on a motion to strike, "[t]he court must construe the facts in the complaint most favorably to the plaintiff." Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997). "This includes the facts necessarily implied and fairly provable under the allegations . . . It does not include, however, the legal conclusions or opinions stated in the complaint." (Internal quotation marks omitted.) Westport Bank Trust Co. v. Corcoran, Mallin Aresco, 221 Conn. 490, 495, 605 A.2d 862 (1992). "If any facts provable under the express and implied allegations in the plaintiff's complaint support a cause of action . . . the complaint is not vulnerable to a motion to strike." (Internal quotation marks omitted.) Bouchard v. People's Bank, 219 Conn. 465, 471, 594 A.2d 1 (1991).
"As a general rule, an employer is free to terminate an at-will employee's employment with impunity" (Internal quotation marks omitted.) Fenner v. Hartford Courant Co., 77 Conn.App. 185, 194, 822 A.2d 982 (2003). An exception to this rule was introduced in Sheets v. Teddy's Frosted Foods, Inc., in which the Connecticut Supreme Court recognized that an employee should not be placed in a situation in which he is forced to either risk a criminal penalty or jeopardize his future employment. Sheets v. Teddy's Frosted Foods, Inc., 179 Conn. 471, 480, 427 A.2d 385 (1980). As a result of the holding in Sheets, the Connecticut courts have recognized "a common law cause of action in tort for discharges if the former employee can prove a demonstrably improper reason for dismissal, a reason whose impropriety is derived from some important violation of public policy." (Internal quotation marks omitted; emphasis in original.) Morris v. Hartford Courant Co., 200 Conn. 676, 678-79, 513 A.2d 66 (1986).
The Connecticut Supreme Court has recognized, however, "the inherent vagueness of the concept of public policy and the difficulty encountered when attempting to define precisely the contours of the public policy exception. In evaluating claims, [a court must look] to see whether the plaintiff has . . . alleged that his discharge violated any explicit statutory or constitutional provision . . . or whether he alleged that his dismissal contravened any judicially conceived notion of public policy." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., supra, 240 Conn. 581. The question of whether a challenged discharge falls within the contours of the public policy exception is in the first instance "a question of law to be decided by the court . . ." See id., 588.
Ultimately, in recognizing an exception to the doctrine of at-will employment, the Connecticut Supreme Court has repeatedly underscored the narrowness of the exception and the Court's continued "adherence . . . to the general rule allowing unfettered termination of an at-will employment relationship . . ." (Internal quotation marks omitted.) Thibodeau v. Design Group One Architects, LLC, 260 Conn. 691, 701, 802 A.2d 731 (2002).
The Connecticut Court of Appeals has adhered to the limited application of the public policy exception to the doctrine of at-will employment. See Fenner v. Hartford Courant Co., supra, 77 Conn.App. 194. In Fenner, a plaintiff appealed a trial court's judgment in favor of the defendant. Id., 186. The plaintiff had brought a claim against the defendant alleging that he was wrongfully discharged in violation of public policy for refusing to provide information on an insurance form that he "reasonably believed was false information . . ." Id., 187. In reviewing the plaintiff's claim, the Fenner court determined that because the plaintiff's allegations were based solely on subjective beliefs, the claim did not fall within the public policy exception to at-will employment. Id., 196-97. The court stated that it "find[s] no support for the proposition that [an] employee's subjective beliefs can be the basis for the public policy exception in an action for the wrongful termination of an at-will employee." Id., 196. The court in Fenner concluded that "[t]o hold otherwise would defeat the general immunity allowed an employer to discharge an at-will employee." Id., 197.
In the present case, the plaintiff argues that the defendant's counterclaim for wrongful discharge in violation of public policy is invalid because it does not fall within Connecticut's narrow exception to the doctrine of at-will employment. In this emerging and evolving area of the law, identification of "important public policy" is troublesome and has spawned a myriad of cases. See e.g., Faulkner v. United Technologies, Corp., supra, 585-87. (Listing line of cases.) See also e.g., annot., 93 A.L.R. 5th 269 (1994) (Liability Under Common Law for Wrongful or Retaliatory Discharge of At-Will Employee for In-House Complaints or Efforts Relating to Health or Safety); 105 A.L.R. 5th 351 (2003) (Common Law Retaliatory Discharge of Employee for Disclosing Unlawful Acts or Other Misconduct of Employer or Fellow Employees); 10 A.L.R. 6th 531 (2096) (What Constitutes Activity of Employee Protected Under State Whistleblower Protection Statute Covering Employee's "Report," "Disclosure," "Notification," or the Like of Wrongdoing — Sufficiency of Report); 13 A.L.R. 6th 499 (2006) (What Constitutes Activity of Employee, Other than "Reporting" Wrongdoing Protected Under State Whistleblower Protection Statute).
Turning to the defendant's allegations that his discharge violated the public policy expressed in CUTPA, "an employment relationship does not constitute trade or commerce for the purposes of CUTPA." (Internal quotation marks omitted.) Muniz v. Kravis, 59 Conn.App. 704, 711, 757 A.2d 1207 (2003). In addition, "purely intra corporate conflicts do not constitute CUTPA violations . . ." Ostrowski v. Avery, 243 Conn. 355, 379, 703 A.2d 117 (1997). As to the references to HIPAA, and SARBANES OXLEY, the defendant does not allege that those statutes apply to TyMetrix or allege facts which would identify a violation of those statutes by TyMetrix or facts which would support a claim that TyMetrix required the defendant to violate either of those statutes. Even reading the allegations broadly, the claims implicating CUTPA, HIPAA and SARBANES OXLEY are too attenuated to overcome the doctrine of at-will employment. As to the claims of misrepresentation and fraud, TyMetrix argues that the public policy embodied in General Statutes § 31-51m does not pertain when a private employee who has only reported fraud internally claims wrongful discharge. That is not so.
Section 31-51m is Connecticut's general `whistle blower' statute and protects both private and public employees from retaliatory discharge for reporting fraud externally to a public body. Review of the legislative history for General Statutes § 31-51m reveals no expression of intent by the legislature to create contravening public policy that employees of private companies are not protected from wrongful discharge if they report fraud internally. In contrast, in Thibodeau v. Design Group One Architects, LLC, the court did find contravening public policy that the legislature intended General Statutes 46a-82 to not apply to companies with fewer than three employees, because the legislative history revealed that the statute had been revised downward from five employees to three employees, but still did not apply to companies with fewer than three employees. See Thibodeau v. Design Group One Architects, LLC, supra, 260 Conn. 706 n. 17.
In Schmidt v. Yardney Electric Corporation, a case involving an internal disclosure of fraud, the Appellate Court held it was error to strike counts in which the plaintiff alleged he was wrongfully terminated for cooperating with investigators and auditors of his employer's parent corporation and disclosing that he was ordered to falsify a fire insurance claim. Schmidt v. Yardney Electric Corporation, 4 Conn.App. 69, 74-75, 492 A.2d 512 (1985). The court identified the important public policy against fraud, "which is deeply rooted in our common law; see Broome v. Beers, 6 Conn. 198, 210-12 (1826); and in our criminal statutes. See, e.g., General Statutes § 53a-119(2) (obtaining property by false pretenses) . . . [and] the public policy in favor of encouraging citizens `to raise the `hue and cry' and report [crimes] to the authorities.' Branzburg v. Hayes, 408 U.S. 665, 696, 92 S.Ct. 2646, 33 L.Ed.2d 626 (1971); see General Statutes § 31-51m (protection of employee who discloses employer's illegal activities to public body)." Id., 75.
Also, in Chenarides v. Best Foods Baking, the court denied a motion to strike upon determining that public policy embodied in § 33-51m and § 33-1336 does support such a cause of action. Chenarides v. Best Foods Baking, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 03-197877 (March 30, 2005, Hiller, J.) [ 39 Conn. L. Rptr. 90].
Section 33-1336 protects employees of public corporations from retaliatory discharge if they make an internal reporting of fraud.
The court in Yardney and Chenarides determined that the public policy exception to at-will employment may be applied to a wrongful discharge claim brought by a private employee terminated for reporting fraud relating to illegal conduct internally. The defendant's counterclaim in the present action, however, is not such a claim. In order to constitute a violation of public policy, the alleged wrongful act of an employer must be based on more than a subjective "reasonable belief" in the existence of an inchoate violation of law. See Fenner v. Hartford Courant Co., supra, 77 Conn.App. 196-97. The alleged wrongful act must be demonstrably improper and derived from some important violation of public policy. See Morris v. Hartford Courant Co., supra, 200 Conn. 679.
In Chenarides, the plaintiff alleged in his Revised Complaint dated June 21, 2004, specific instances of fraudulent conduct and violations in that "vendors performed personal services for bakery employees and billed the services to [the defendants]; vendors billed in excess of the cost of services and equipment to maintain business relationships with the company; vendors billed for services, equipment and materials that were never provided in exchange for merchandise and personal favors, equipment and other material . . . was being stolen . . ." Plaintiff's Revised Complaint in Chenarides v. Best Foods Baking, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 03 197877 (March 30, 2005, Hiller, J.). And in Yardney, the plaintiff alleged a specific instance of fraudulent and criminal conduct in that the president of Yardney Electric had ordered the plaintiff to "falsify an insurance claim by grossly exaggerating losses by the amount of approximately $350,000." Schmidt v. Yardney Electric Corporation, supra, 4 Conn.App. 73.
"There is no question . . . concerning our power to take judicial notice of files of the Superior Court, whether the file is from the case at bar or otherwise." (Internal quotation marks omitted.) Oliphant v. Commissioner of Correction, 274 Conn. 563, 579 n. 17, 877 A.2d 761 (2005).
In contrast to Chenarides and Yardney, in the present action, the defendant has not alleged an important violation of public policy based on an actual or imminent violation of law, he only alleges that he "reasonably believed" misrepresentations made by the plaintiff might "expose Tymetrix and its customers to violations of law." He further alleges that it was made clear to the defendant by a Tymetrix senior executive that unless Szymonik was willing to participate in the "dishonest, unethical and likely illegal actions being promulgated at TyMetrix, he would no longer have a job." (Emphasis added.) "[W]hile certain actions may abrogate public policy, not every act in derogation of a general statute, nor all conduct contrary to the common law, rises to the level of a violation of an important public policy." Rafael v. St. Vincent's Medical Center, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 287705 (August 26, 1993, Ballen, J.) [ 9 Conn. L. Rptr. 610]. Our Supreme Court has cautioned that "courts should not lightly intervene to impair the exercise of managerial discretion or to foment unwarranted litigation." (Internal quotation marks omitted.) Burnham v. Karl Gelb, P.C., 252 Conn. 153, 158, 745 A.2d 178 (2000).
The court, in deciding a motion to strike, on the one hand, must read the factual allegations of the complaint broadly, and on the other-hand, it must assess, narrowly, whether as a matter of law, a claim is based on an explicit and clearly articulated public policy. After reviewing the counterclaim in light of these principles, the court concludes that the claims of wrongful discharge alleged by the defendant do not contain allegations of an important public policy violation by Tymetrix, whether it be constitutional or statutory, or arising out of judicial decision. The allegations are insufficient to support a cause of action for wrongful discharge in violation of public policy. Consequently, the plaintiff's motion to strike the counterclaim based on wrongful discharge in violation of public policy is granted.