ESS Group, Inc

The plaintiff, Christopher G. Rein, appealed from a Superior Court order granting a motion to dismiss his action, which was brought by the defendants, ESS Group, Inc., Charles J. Natale, Jr., and the Charles J. Natale, Jr. 2003 Trust u/d/t January 23, 2003, as amended. Rein argued that the Superior Court justice erred in finding that Rein's complaint failed to state a claim under the Rhode Island Business Corporations Act (BCA) because ESS is incorporated in Delaware and Rhode Island does not have the authority to regulate the internal affairs of a foreign corporation, such as ESS. Rein also asserted that the hearing justice erred in dismissing his claim brought under the Whistleblowers' Protection Act (WPA) after finding that the WPA claim was premised on a violation of the BCA, to which the hearing justice had found ESS not subject. On appeal, the Supreme Court reversed the hearing justice's decision in part and affirmed it in part. Specifically, the Court concluded that the BCA count was properly dismissed because the defendants' alleged violations of the BCA constitute "internal affairs," which Rhode Island has no authority to regulate. The Court held, however, that Rein's complaint sufficiently pled a WPA claim because, under the WPA, he need not prove that an actual violation of a law occurred, only that he reasonably believed that a violation occurred. The Court concluded that Rein's belief that the defendants were subject to and violated the BCA may well have been reasonable. Accordingly, the Court affirmed the decision of the hearing justice to dismiss the BCA count of Rein's complaint, and it reversed the dismissal of the WPA count.