Sunday, December 21, 2008

Whistleblowing in Indiana - When an Employee Can Get Fired

The Indiana Lawyer published Man not fired for being whistle-blower a while back but I have not had time to write up a post on the case. First, you will find the IL report and then my comments on the actual opinion follows.

In Donald A. Bregin v. Liquidebt Systems Inc. and SIRVA Inc.,
No. 08-1390, Donald Bregin filed a suit against Liquidebt (LSI) and
SIRVA, claiming LSI fired him in retaliation for his refusal to
participate in illegal accounting practices. LSI provided collection
services for SIRVA, where Bregin originally worked until LSI hired him as vice president of operations. LSI had a contract with SIRVA to meet certain collection goals or face a financial penalty.

The 7th Circuit Court of Appeals found undisputed facts that Bregin's suit must fail. Indiana is an employment-at-will state, and there are only rare occasions in which an employer can't terminate any employee for any reason, such as not firing someone who doesn't want to participate in criminal conduct, as in McClanahan v. Remington Freight Lines, Inc, 517 N.E.2d 390 (Ind. 1988).

Bregin claimed he couldn't lawfully stay silent about SIRVA's allegedly illegal accounting practices, but he never offered any specifics or identified what illegal act he was asked to commit or condone, wrote Judge Terence Evans.

Bregin also wanted the appellate court to find a new exception under Indiana's employment-at-will doctrine - that as a whistle-blower under the Sarbanes-Oxley Act, he's afforded certain protections against wrongful discharge under state law. But again, Bregin failed to specify any law that has been violated and is vague in describing the irregularities in SIRVA's accounting practices, wrote Judge Evans.
Here is the passage from the actual opinion dealing with Bregin's attempt to make a whistleblower exception to Indiana's at-will employment law:
We cannot agree. As we just discussed, Bregin does not pinpoint any law that has been violated. He says because SIRVA was in the process of issuing an initial public offering (IPO), the company did not want any irregularities to come to light. But, again, the irregularities he is talking about are vague. We cannot conclude that, contrary to what the Indiana courts have repeatedly said, they would now decide—especially based on the facts before us—that whistle-blowing is an exception to the employment-at-will doctrine. That they would not is clear from Campbell v. Eli Lilly & Co., 413 N.E.2d 1054 (Ind.App. 1980). In that case the court rejected a claim by an employee who was terminated after complaining to allowing an exception to the employment-at-will doctrine for whistle-blowers. But that view did not carry the day. At this time, whistle-blowing simply does not form the basis for an exception to Indiana’s employment-at-will doctrine.
Having read the opinion, I am not so sure that Bregin was a whistleblower but that is only a minor point for our discussion.

My second observation has to do more with the forum where Bregin put his case - federal court. If I wanted to change Indiana law I would start in an Indiana court. Indiana's federal courts have the right to interpret Indiana but I think federal courts tend to interpret state law narrowly. Starting in an Indiana state court presents the possibility of a less narrow interpretation of Indiana. Even more importantly, it presents the possibility of an appeal to the Indiana Supreme Court whose opinion would trump the Campbell decision.

Third, I present this as a more general view on Indiana law - I am curious just how well Campbell would stand up today. Indiana law has changed a bit in twenty-eight years. In 1980, the Indiana Supreme Court was mired in criminal cases and heard few civil appeals. Changes have happened in that time - including exceptions to the employment-at-will doctrine. It may be time to bring this sort of case before our Supreme Court. The case that does try to overturn Campbell must have better facts than Bregin.