N.C. Business Court Dismisses Inadequately Pled Retaliation and Wrongful Discharge Claims.

In Michael J. Kelley v. Charlotte Radiology, P.A., 2019 NCBC 14 (N.C. Super Feb. 27, 2019), Judge Conrad granted a motion to dismiss claims alleging wrongful discharge and a violation of the Retaliatory Employment Discrimination Act (REDA). The case involved a dispute between a radiologist and a Charlotte-based physician practice in which he had been a shareholder. The wind-down of their relationship, which commenced in an amicable matter, ultimately occasioned a lawsuit advancing breaches of contract and fiduciary duty, as well as violations of the North Carolina Securities Act. The Court’s ruling solely concerned two later-added claims that arose from the parties’ continuing efforts to negotiate the terms of their waning professional relationship.

Takeaways:

  • The Business Court will not strain to identify an allegedly protected employment activity when a party’s own pleadings undercut its position. 
  • The Court declined to create new law that an “anticipated, but never consummated, renewal of a term contract gives rise to an at-will employment relationship.” ¶ 33.

The decision arose from a fairly simple factual template. Dr. Kelley had decided to retire at the end of 2016, but ultimately changed his mind and entered with the practice a Retiree Employment Agreement that governed his work for the first six months of 2017. The practice informed Dr. Kelley he would no longer be a shareholder, and redeemed his shares without apparent dispute. ¶¶ 5-6. However, when Dr. Kelley later learned that the practice was considering a “refinance transaction” that would benefit shareholders, he claimed a continuing interest in such benefits. ¶ 7.

Dr. Kelley filed his complaint, alleging that Charlotte Radiology wrongfully redeemed his shares knowing of the impending, profitable transaction, at the same time he was attempting to negotiate an extension of his Retiree Employment Agreement. The practice withdrew a pending offer regarding a renewed agreement after the suit was filed. ¶¶ 9-10.

The Court first considered whether Charlotte Radiology violated REDA when it decided not to extend or renew the Retiree Agreement with Dr. Kelley. While the practice appears to have conceded that “the failure to renew an employment contract constitutes an adverse employment action for purposes of REDA,” Johnson v. Trs. Of Durham Tech. Cmty. Coll., 139 N.C. App. 676, 682, 535 S.E.2d 357, 362 (2000), it contended that any retaliation that might be present was not actionable because Dr. Kelley did not exercise a statutorily protected right. Dr. Kelley’s alleged protected activity was that his original complaint exercised his rights under the Wage and Hour Act. ¶¶ 19-20.

However, the Court demurred, noting that none of his original claims were made under the Act, nor was the Act even mentioned in the original complaint. “It would be odd,” the Court held, “to hold that an employee, having chosen not to bring a Wage and Hour Act claim, nevertheless engaged in protected activity by instead filing claims based on other statutory or common-law rights not protected by REDA.” ¶ 21. Moreover, the Court held that the original complaint could not have given Charlotte Radiology fair notice that Dr. Kelley was exercising a statutorily protected right, given its drafting flaws and its statement that he sought to “vindicate [his] rights as a shareholder.” ¶ 23.

The Court dispatched Dr. Kelley’s wrongful termination claim in a brief analysis. While noting that the Retiree Agreement raised interesting questions about whether Dr. Kelley was an at-will employee under the Agreement, the Court did not reach the issue because Dr. Kelley was not terminated, and had stayed on through the term of the Agreement. The Court relied on what it termed consistent holdings that “the tort of wrongful discharge in violation of public policy does not contemplate failures to rehire or reappoint.” Randleman v. Johnson, 162 F. Supp. 3d 482, 488 (M.D.N.C. 2016).

 

Brad Risinger is a partner in the Raleigh office of Fox Rothschild LLP. He maintains a commercial litigation practice that frequently involves business disputes before the North Carolina Business Court, and the state’s federal and state trial courts.