GTE Products Corporation vs. Jefferson Davis Stewart, Third

GTE Products Corporation vs. Jefferson Davis Stewart, Third; Dean T. Langford & others, defendants-in-counterclaim. Essex. May 3, 1995. August 1, 1995. Present: Abrams, Lynch, O’Connor, & Greaney, JJ. Employment, Constructive discharge. Contract, Employment. Public Policy. Attorney at Law, In-house counsel. Discussion of out-of-State cases considering whether an attorney employed as in-house counsel to a corporation is barred from maintaining any action for wrongful discharge. [26-29] This court concluded that an in-house attorney should be permitted to pursue a claim for wrongful discharge against the attorney’s corporate employer in the narrow circumstances where the claim is founded on allegations that the employer’s demands would have required violation of statutory or ethical rules, embodying important public policy, and where the claim can be proved without violation of client confidences and secrets. [29-32] Discussion of State and Federal cases addressing the elements for proof of constructive discharge. [34-35] In an action for wrongful discharge in which there was no claim of formal termination, summary judgment was correctly entered for the employer where the employee did not demonstrate that he could prove he was constructively discharged by being forced to work under conditions so intolerable that a reasonable person would have felt compelled to resign. [32-34, 35-36] Civil action commenced in the Superior Court Department on October 16, 1991. A motion for summary judgment was heard by John P. Forte, J., sitting under statutory authority. The Supreme Judicial Court granted an application for direct appellate review. Arthur G. Telegen for the plaintiff. Earle C. Cooley (Paul F. Beckwith with him) for Jefferson Davis Stewart, III. Earl E. Lawson and Rolfe D. Trevisan. Greaney, J. We granted the defendant’s application for direct appellate review in this case to decide whether summary judgment was properly granted to GTE Products Corporation (GTE), and individual officers and officials of the company on counterclaims brought by Jefferson Davis Stewart, III, a former in-house counsel for the lighting companies of GTE. Stewart’s counterclaims were raised in his answer to an action brought by GTE seeking the return of documents, papers, and other materials taken or retained by Stewart when he left GTE’s employment. (Some of the background of the case is reported in the appeal concerning GTE’s seeking injunctive relief and damages, 414 Mass. 721 [1993].) The counterclaims were based on the assertion by Stewart that he had been wrongfully discharged in retaliation for his continual attempts to convince GTE management to warn the public about safety risks associated with the use of certain GTE products, and his insistence that GTE comply with Federal law governing the disposal of hazardous waste. We conclude that summary judgment properly was ordered in favor of GTE and the remaining defendants in counterclaim, and we direct the entry of an appropriate judgment. The facts, stated in the light most favorable to Stewart based on the materials in the summary judgment record, see Alioto v. Marnell, 402 Mass. 36, 37 (1988), are as follows. Stewart began working for GTE in March, 1980, as an attorney in GTE’s electrical equipment group. In 1986, he was named general counsel to GTE’s lighting businesses, which included U.S. Lighting and Sylvania Lighting. In his capacity as general counsel, Stewart wrote a series of communications to corporate officers and officials concerning safety and liability issues related to three products manufactured by GTE’s lighting businesses. In these communications, he advocated that the company take aggressive and (presumably) costly measures to protect consumer safety and guard against possible corporate liability. In addition, when new Federal regulations on the disposal of hazardous waste were adopted, he advised GTE that a subsidiary of the company which provided lighting maintenance services would have to take the costly step of treating fluorescent and incandescent light bulbs as hazardous waste for purposes of disposal. Stewart asserts that his advice was disregarded on some occasions and generally was not well received. Stewart’s immediate supervisor was Rolfe Trevisan, general counsel for GTE. Trevisan had consistently given Stewart high annual performance ratings, raised his salary each year, and recommended that he receive substantial bonuses. A few months before Stewart left the company, Trevisan told Stewart that his performance was “above expectations” and gave him a good rating, a raise and a bonus of over $30,000. At some point during 1991, however, Trevisan lowered Stewart’s confidential promotability rating on the law department’s executive continuity charts from “promotable immediately” to the lowest promotability rating of “not promotable for three to five years.” According to Stewart, it became clear to him that he was being “squeezed out” of the company after a meeting he had with Trevisan on August 7, 1991. Trevisan told him that Earl Lawson, a corporate officer and manager, had become dissatisfied with Stewart’s domineering and “confrontational” style and that Stewart was going to have to learn to get along with Lawson or his future with GTE would be at risk; that Stewart should stop being the “social conscience” of the company; and that Trevisan intended to develop a set of performance objectives to “rehabilitate” Stewart as a productive member of the law department. Based on his experience advising the company on how to terminate employees, Stewart believed that Trevisan’s actions likely were intended as a precursor to discharge. Concluding that he would have to abandon unpopular but (in his opinion) legally sound positions were he to remain, Stewart resigned from his employment with GTE on August ,8, 1991. After Stewart left, Trevisan tried unsuccessfully to persuade him to return. 1. As a threshold question, we must decide whether Stewart’s status as an attorney and in-house counsel for GTE should bar him from maintaining any action for wrongful discharge. As a general rule, an employee at will (Stewart was employed at will) may be terminated by an employer, without notice, “for almost any reason or for no reason at all.” Jackson v. Action for Boston Community Dev., Inc., 403 Mass. 8, 9 (1988). In company with a majority of other jurisdictions, however, this court has recognized that an at-will employee may sue a former employer for wrongful discharge when that discharge can be shown to be in violation of a clearly defined public policy. “Redress is available for employees who are terminated for asserting a legally guaranteed right (e.g.,- filing workers’ compensation claim), for doing what the law requires (e.g., serving on a jury), or for refusing to do that which the law forbids (e.g., committing perjury).” Smith-Pfeffer v. Superintendent of the Walter E. Fernald State Sch., 404 Mass. 145, 149-150 (1989). In limited circumstances, we also have permitted redress “for employees terminated for performing important public deeds, even though the law does not absolutely require the performance of such a deed.” Flesner v. Technical Communications Corp., 410 Mass. 805, 810-811 (1991) (employee terminated for cooperating with criminal investigation of employer permitted to sue for retaliatory discharge). It has been suggested that a “whistleblower” might be entitled to protection on this basis. See id. at 811 n.3. Courts in jurisdictions which generally recognize an employee’s action for wrongful or retaliatory discharge have, however, differed on the question whether an attorney, employed as in-house counsel, should be permitted the same right to sue for wrongful discharge as that enjoyed by other corporate employees. In Balla v. Gambro, Inc., 145 Ill. 2d 492, 501 (1991), the Supreme Court of Illinois concluded “that, generally, in-house counsel do not have a claim ... of retaliatory discharge.” The court based its decision on the destructive impact recognition of the claim would have on the attorney-client relationship that exists between an employer and in-house counsel, id., and on its conclusion that the policy of preserving public health and safety, the basis for recognizing an employee’s wrongful discharge claim, is protected adequately without recognition of the claim by the attorney’s obligations under the Illinois Rules of Professional Conduct to attempt to prevent his employer from committing an illegal or harmful act and to withdraw from employment if he is requested to engage in conduct that would violate those obligations. Id. at 501-502, 504. It has also been noted that ethical canons and disciplinary rules give to a client the unfettered right to discharge an attorney in whom the client has lost confidence, and it has been reasoned that this precept should apply with full force to an attorney employed as in-house counsel. See Willy v. Coastal Corp, 647 F. Supp. 116, 118 (S.D. Tex. 1986) (applying Texas law), rev’d on other grounds, 855 F.2d 1160 (5th Cir. 1988), affd, 503 U.S. 131 (1992). See also Herbster v. North Am. Co. for Life & Health Ins., 150 Ill. App. 3d 21, 28-30 (1986), cert, denied, 484 U.S. 850 (1987). The judge granted GTE’s motian for summary judgment largely on the basis of the reasoning in these decisions. In contrast, in the case of General Dynamics Corp. v. Rose, 7 Cal. 4th 1164 (1994), decided after the judge in this case ruled on GTE’s motion for summary judgment, the Supreme Court of California concluded that there were sound reasons for recognizing the right of in-house counsel to sue for wrongful discharge in certain limited situations. The court noted that a claim of wrongful discharge protects more than the private interests in job security and professional reputation of the claimant. Protection of the policy expressed in the statute or rule claimed to have been violated by the employer is equally at stake, and the claimant’s status as an attorney does not diminish the public interest in the furtherance of that policy. Id. at 1181. In the view of the Supreme Court of California, certain mandatory obligations and prohibitions in the ethical rules of California governing an attorney’s professional conduct embody “by their nature and goals . . . important values affecting the public interest at large.” Id. at 1181-1182. The court observed that “[ajmong other strictures on their conduct, [attorneys] may not be a party to the commission of a crime, destroy evidence or suborn perjury.” Id. at 1186. Thus, “[t]he case for shielding the in-house attorney . . . from retaliation by the employer for either insisting on adhering to mandatory ethical norms of the profession or for refusing to violate them is . . . clear,” id. at 1182, and in-house counsel should be permitted to pursue a claim for wrongful discharge if the claim is “founded on allegations that an in-house attorney was terminated for refusing to violate a mandatory ethical duty embodied in [California’s code of professional conduct].” Id. at 1188. In addition, the court reasoned, in-house counsel should be permitted to pursue a claim in the “limited circumstances in which in-house counsel’s nonattorney colleagues would be permitted to pursue a [wrongful] discharge claim and governing professional rules or statutes expressly remove the requirement of attorney confidentiality” (emphasis in original). Id. The court pointed out, however, that instances in which disclosure of client confidences is permissible are rare, and emphasized that it would not condone any dilution of the obligation of secrecy in the context of the attorney-client relationship between a corporate employer and in-house counsel. We find the latter approach more persuasive. We would be reluctant to conclude that an employee, solely by reason of his or her status as an attorney, must be denied all protection from wrongful discharge arising from the performance of an action compelled by a clearly defined public policy of the Commonwealth. As was pointed out in a treatise critical of the decision in the Balia case, “[i]t is clear that there would have been a right of action had the employee not been a lawyer. It thus seems bizarre that a lawyer employee, who has affirmative duties concerning the administration of justice, should be denied redress for discharge resulting from trying to carry out those very duties” (footnote omitted). 1 G.C. Hazard & W.W. Hodes, Law of Lawyering § 1.16:206, at 477 (Supp. 1994). We agree with the Supreme Court of California that public interest is better served if in-house counsel’s resolve to comply with ethical and statutorily mandated duties is strengthened by providing judicial recourse when an employer’s demands are in direct and unequivocal conflict with those duties. See General Dynamics Corp. v. Rose, supra at 1188. We stress, however, that a claim for wrongful discharge brought by in-house counsel will be recognized only in narrow and carefully delineated circumstances. To the extent that in-house counsel’s claim depends on an assertion that compliance with the demands of the employer would have required the attorney to violate duties imposed by a statute or the disciplinary rules governing the practice of law in the Commonwealth, that claim will only be recognized if it depends on (1) explicit and unequivocal statutory or ethical norms (2) which embody policies of importance to the public at large in the circumstances of the particular case, and (3) the claim can be proved without any violation of the attorney’s obligation to respect client confidences and secrets. See S.J.C. Rule 3:07, Canon 4, DR 4-101 (A) and (B), as appearing in 382 Mass. 778 (1981). “Except in those rare instances when disclosure is explicitly permitted ... [by the disciplinary rules governing the practice of law in the Commonwealth], it is never the business of the lawyer to disclose publicly the secrets of the client.” General Dynamics Corp. v. Rose, supra at 1190. The exceptions to an attorney’s obligation to guard client confidences under S.J.C. Rule 3:07, Canon 4, DR 4-101 (C), as appearing in 382 Mass. 778 (1981), are extremely limited. While confidentiality concerns may to some degree be ameliorated by a trial court’s use of protective orders and other protective devices, the circumstances in which in-house counsel may pursue a claim for wrongful discharge will, of necessity, be limited by the broad obligation to guard client confidences. See G.M. Tuoni, Massachusetts Attorney Conduct Manual § 4-12 (1992) (discussing breadth of definition of client confidences). Similarly, if the claim for wrongful discharge is one that might be brought by a nonattorney colleague, based on the public policy exception as delineated in the Smith-Pfeffer and Flesner cases, it must be established that the claim can be proved without any violation of the attorney’s obligation to respect client confidences and secrets. 2. Having concluded that we shall, in limited circumstances, recognize the right of in-house counsel to bring suit for wrongful discharge, we turn to whether summary judgment was, nonetheless, properly granted. GTE, as the moving party, having met its initial burden of demonstrating by indicia of admissible evidence, see Mass. R. Civ. P. 56 (b) and (c), 365 Mass. 824 (1974), that Stewart cannot prevail, we inquire whether Stewart has established that there exists a genuine dispute as to essential factual elements of his claim. See Kourouvacilis v. General Motors Corp., 410 Mass. 706, 711, 716 (1991). Stewart maintains that officials at GTE plotted his dismissal in retaliation for the tenor of the legal advice he offered with respect to product safety in three specific instances, and for advising the company that it must comply with Federal regulations despite the cost entailed by compliance. For the most part, Stewart’s claims appear to rest on his advice relating to the avoidance of possible legal liability, rather than with compelling issues of product design directly affecting public health and safety. His insistenpe that GTE conduct its business “in compliance with the highest ethical business standards,” by doing more than was absolutely required by law, met some resistance from others legitimately concerned about profitability. We would be reluctant to conclude that disagreements over the wording of a product warning label, or the hypothetical risk posed by a product, which are matters committed to the business judgment of a company and do not rise to the requisite level of public concern, could be the basis for a wrongful discharge claim. See King v. Driscoll, 418 Mass. 576, 583 (1994) (“internal administration, policy, functioning, and other matters of an organization cannot be the basis for public policy exception”); Wright v. Shriners Hosp. for Crippled Children, 412 Mass. 469, 474 (1992); Smith-Pfeffer v. Superintendent of the Walter E. Fernald State Sch., supra at 151; Mello v. Stop & Shop Cos., 402 Mass. 555, 560-561 (1988); Mistishen v. Falcone Piano Co., 36 Mass. App. Ct. 243, 245-246 (1994). However, we need not decide whether Stewart’s allegations are sufficient in this regard because we conclude, as matter of law, that Stewart has failed to present sufficient proof of constructive discharge. Stewart has not claimed that he was formally terminated from his position at GTE. Thus, to sustain his claim for wrongful discharge, it must appear that he will be able to prove that he was constructively discharged from his position as general counsel. A “[cjonstructive discharge occurs when the employer’s conduct effectively forces an employee to resign. Although the employee may say, T quit,’ the employment relationship is actually severed involuntarily by the employer’s acts, against the employee’s will. As a result, a constructive discharge is legally regarded as a firing rather than a resignation.” Turner v. Anheuser-Busch, Inc., 7 Cal. 4th 1238, 1244-1245 (1994). We have not had occasion to address what an employee must prove to establish a constructive discharge. The elements for proof of constructive discharge have been discussed in a number of cases decided by Federal and State appellate courts, however, and there is general agreement on the elements pertinent to a decision in this case. See, e.g., id. at 1247. See also Slack v. Kanawha County Hous. & Redevelopment Auth., 188 W. Va. 144, 153 (1992) (collecting cases). In a frequently cited decision, the United States Court of Appeals for the First Circuit has stated that in order for a constructive discharge to be found, “the trier of fact must be satisfied that the new working conditions would have been so difficult or unpleasant that a reasonable person in the employee’s shoes would have felt compelled to resign.” Alicea Rosado v. Garcia Santiago, 562 F.2d 114, 119 (1st Cir. 1977). The test is met if, based on an objective assessment of the conditions under which the employee has asserted he was expected to work, it could be found they were so difficult as to be intolerable. See Turner v. Anheuser-Busch, Inc., supra at 1248. See also Vega v. Kodak Caribbean, Ltd., 3 F.3d 476, 481 (1st Cir. 1993); Aviles-Martinez v. Monroig, 963 F.2d 2, 6 (1st Cir. 1992); Pena v. Brattleboro Retreat, 702 F.2d 322, 325 (2d Cir. 1983). A single, isolated act of an employer (or an agent of the employer) usually will not be enough to support a constructive discharge claim. Thus, evidence of a single unfavorable performance review or even of a demotion generally will not be deemed sufficient to support a claim. See Turner v. Anheuser-Busch, Inc., supra at 1247. “In order to amount to a constructive discharge, adverse working conditions must be unusually ‘aggravated’ or amount to a ‘continuous pattern’ before the situation will be deemed intolerable.” Id. For example, in Aviles-Martinez v. Monroig, supra at 6, the court held that an employee had present