Yurk v. Application Software Technology Corp.

Filing 15

OPINION and ORDER Granting in Part 5 MOTION to Dismiss Count II of Plaintiff's First Amended Complaint (Rule 12(b)(6)) - Signed by District Judge Laurie J. Michelson. (JJoh)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
DALE YURK,
Plaintiff,

Case No. 2:15-cv-13962
Honorable Laurie J. Michelson

v.
APPLICATION SOFTWARE
TECHNOLOGY CORP.,
Defendant.
OPINION AND ORDER
GRANTING IN PART DEFENDANT’S MOTION TO DISMISS COUNT II [5]
Plaintiff Dale Yurk was formerly employed by Defendant Application Software
Technology. While working for AST, Yurk learned that AST was engaged in or planning
conduct that he thought might be illegal. Yurk raised the conduct with his superiors. According
to Yurk, his superiors did not quell his concerns and, worse, AST retaliated against him by first
removing him from a project and then offering him a separation agreement. Yurk maintains that
AST’s retaliation violates Michigan’s Whistleblower Protection Act and Michigan public policy
and thus filed a two-count complaint against AST.
AST has moved to dismiss Yurk’s public policy claim. (R. 5.) As will be explained, the
Court agrees with AST that Yurk has not adequately pled a public policy claim and so the Court
will grant AST’s motion on that basis.

I.
The Court recites as fact the non-conclusory allegations of Yurk’s Amended Complaint.
See Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009).
In 2014, Yurk, an experienced computer programmer, started working for Applications
Software Technology. (R. 1–2 at PID 12, ¶¶ 5, 7.) Yurk was part of a team tasked with
“develop[ing] a software solution to unify the City of Detroit’s computer systems.” (Id. ¶ 9.)
Yurk “developed coding specific for the City of Detroit’s solution.” (Id. ¶ 10.)
At some point, “Yurk discovered that AST was planning on using the coding structures
specifically for the City of Detroit as a product to be resold/remarketed to future customers.” (R.
1–2 at PID 12, ¶ 12.) Yurk thought that this plan could be illegal as the City owned the software
solution that he had helped develop. (Id. ¶ 13.) In addition, Yurk was concerned that AST “was
overcharging” the City of Detroit for the project. (Id. ¶ 14.)
So on July 7, 2015, Yurk emailed two of his superiors. (R. 1-2 at PID 3, ¶¶ 16–17.) One
responded that his concerns were not “relevant to the project.” (Id. ¶ 19.) And the manager of the
City of Detroit project (who had also been included in the email chain) told Yurk that
challenging AST’s decisions was “not conducive or productive.” (Id. ¶¶ 19, 20.)
On July 9, Yurk contacted another person in AST’s management, Tim Broker. (See R. 12 at PID 14, ¶ 23.) Yurk’s email “advis[ed] AST that [Yurk] would report these issues to the City
if he did not receive appropriate assurances that AST’s conduct was legal.” (Id.) The next day,
AST removed Yurk from the City project. (Id. ¶ 24.)
A few days later, and with no response from Broker, Yurk forwarded the same email to
AST’s CEO. (R. 1-2 at PID 14, ¶ 25.) (Broker would respond that night stating that Yurk had

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“gone way too far here.” (Id. ¶ 26.)) On July 16, AST’s CEO “set up a time to talk to Yurk about
his concerns.” (Id. ¶ 27.)
The next day, “Broker told Yurk that his employment was no longer required, and [Yurk]
was presented with [a] separation agreement.” (Id. ¶ 28.)
A few months later, Yurk filed this lawsuit. (See R. 1.) Count I of his Amended
Complaint asserts that AST’s retaliatory conduct violated Michigan’s Whistleblower Protection
Act. Count II claims that AST’s retaliation was contrary to Michigan public policy. (See
generally R. 1-2.)
AST has moved to dismiss Count II pursuant to Federal Rule of Civil Procedure 12(b)(6).
(R. 5.)
II.
To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is plausible on its face. See
Aschcroft Corp. v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)). A claim is facially plausible when a plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.
Iqbal, 556 U.S. at 663. Whether a plaintiff has presented enough factual matter to “‘nudg[e]’” his
claim “‘across the line from conceivable to plausible’” is “a context-specific task” requiring this
Court to “draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679, 683
(quoting Twombly, 550 U.S. at 570).
III.
AST argues that Count II of the Amended Complaint must be dismissed for two reasons.
AST’s primary argument is that the Whistleblower Protection Act is Yurk’s exclusive means of

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recovery so his public-policy claim is “preempted.” (R. 5 at PID 38–41.) Alternatively, AST
argues that the facts alleged do not amount to a violation of public policy. (R. 5 at PID 41–42.)
Because AST’s alternative argument carries the day, the Court starts there.
A.
AST asserts that Michigan law has not recognized that it is contrary to public policy for
an employer to retaliate against an employee because the employee reported unlawful conduct to
his superiors. (R. 5 at PID 41–42.) Building on this legal premise, AST asserts that Yurk’s public
policy claim must be dismissed because all Yurk has pled is that he reported unlawful conduct to
his superiors. (R. 5 at PID 42.) The Court agrees.
Although employment in Michigan is presumed to be at will, Michigan has recognized
that “some grounds for discharging an employee are so contrary to public policy as to be
actionable.” Suchodolski v. Michigan Consol. Gas Co., 316 N.W.2d 710, 711 (Mich. 1982). The
Michigan Supreme Court has identified three such grounds: “(1) the employee is discharged in
violation of an explicit legislative statement prohibiting discharge of employees who act in
accordance with a statutory right or duty; (2) the employee is discharged for the failure or refusal
to violate the law in the course of employment; or (3) the employee is discharged for exercising a
right conferred by a well-established legislative enactment.” McNeil v. Charlevoix Cnty., 772
N.W.2d 18, 24 (Mich. 2009) (citing Suchodolski, 316 N.W.2d at 711–12). But, and most
important for present purposes, “no law or policy tells Michigan employers that they must not
retaliate against employees who report legal violations to their supervisors.” Scott v. Total Renal
Care, Inc., 194 F. App’x 292, 298 (6th Cir. 2006).
Yurk asserts that AST has wrongly “pigeon hol[ed]” his claim by asserting that he has
pled nothing more than reporting illegal activity to superiors. (R. 7 at PID 54.) Properly

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understood, says Yurk, his claim “is based on his active opposition to and refusal to participate in
defendant’s unlawful plan to sell intellectual property that belonged to the City of Detroit.” (Id.)
In other words, Yurk says his claim falls within the second public-policy exception to the
employment-at-will doctrine.
But Yurk’s Amended Complaint does not plead that he refused to participate in AST’s
plan to resell the software. As far as the Court can tell, AST—independent of Yurk—planned to
resell the software developed for the City. The Court infers this from Yurk’s allegations that he
“discovered that AST was planning” on reselling the code (R. 1–2 at PID 12, ¶ 12 (emphasis
added)), that he thought “AST’s activity” could be illegal (id. at PID 13, ¶ 13 (emphasis added)),
and that, when Yurk contacted his superiors about the issue, they essentially told him to mind his
own business (see id. PID 13–14, ¶¶ 19, 20, 26, 27). As such, Yurk has not pled that he refused
to participate in his employer’s unlawful conduct—AST had apparently planned to resell without
involving Yurk.
Yurk also asserts that his claim falls within the second public policy exception to the atwill doctrine because he has pled that “he refused to permit defendant from violating intellectual
property laws[.]” (R. 7 at PID 55.) It is perhaps fair to say, based on the allegations, that Yurk
“refused” to allow AST to resell the software. But, again, he did so by raising his concerns about
AST’s decision with his superiors. And, as noted, the Sixth Circuit has drawn a distinction
between refusing to participate in unlawful activity, which is a recognized public policy
exception, and reporting unlawful activity to superiors, which is not. Scott, 194 F. App’x at 298;
see also Weir v. Seabury & Smith, Inc., No. 13-CV-14329, 2015 WL 3755331, at *14 (E.D.
Mich. June 16, 2015) (Michelson, J.) (applying Scott and finding that the plaintiff’s public policy
claim was based on the plaintiff’s “internal complaints about the alleged illegal scheme, not on

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[the plaintiff’s] refusal to participate” in that scheme and that “a public policy claim cannot be
based on internally reporting alleged unlawful conduct to a supervisor”).
Finally, Yurk argues that his allegations are similar to the facts of Robinson v. Radian,
Inc., 624 F. Supp. 2d 617 (E.D. Mich. 2008), where the court found that the plaintiff’s public
policy claim was viable. The Court disagrees. In Robinson, there was evidence the employee
refused to aid in the employer’s wrongful conduct. In particular, the employee believed that his
employer was not complying with federal regulations governing hiring and produced evidence
that he thus refused to sign off on the hire of several candidates. Id. at 641. Yurk’s allegations are
not similar: as explained, AST’s plan to resell software developed for the City was independent
of Yurk’s involvement.
Accordingly, the Court finds that Yurk has not adequately pled that AST retaliated
against him “for the failure or refusal to violate the law in the course of employment,” McNeil,
772 N.W.2d at 24, and that Count II of the Amended Complaint thus fails to state a claim for
relief.
B.
The Court grants AST’s motion solely on the foregoing reasoning. But, in the course of
researching AST’s primary argument, the Court uncovered two issues worth noting given that
Yurk may seek to amend his complaint and that AST may file additional dispositive motions.
For one, AST has treated Yurk’s claim under Michigan’s Whistleblower Protection Act
as resting on a single factual basis. This is not correct. Yurk asserts that AST retaliated against
him (1) because he threatened to tell the City that “AST was planning” on reselling the software
developed for the City project (R. 1-2 at PID 12, ¶ 12) and (2) because he threatened to report
AST’s overcharging to the City. The distinction matters because the WPA does not cover

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“future, planned, or anticipated acts amounting to a violation or a suspected violation of a law,”
Pace v. Edel-Harrelson, — N.W.2d —, 499 Mich. 1, 8 (2016); see also id. at 9–10 (“[B]ecause
plaintiff reported a suspected future violation of a law, not a suspected existing violation,
plaintiff did not engage in ‘protected activity’ for purposes of the WPA[.]”).
Second is the legal issue of the WPA preempting—if that is the correct term—a public
policy claim where the public policy claim is based on conduct that violates the WPA. The issue
can be stated this way: if a plaintiff adequately pleads all the elements of a WPA claim (or, at
summary judgment, shows that a reasonable jury could find all the elements of a WPA claim),
and the same allegations (or facts) are the basis for a public policy claim, must the Court dismiss
the public policy claim? Or may the plaintiff maintain the public policy claim on the possibility
that, ultimately, it may not be able to prove the WPA claim? AST answers yes to the first
question, Yurk answers yes to the second. The Court believes the answer is less than clear and
not adequately briefed by the parties.
A pair of Michigan Supreme Court cases lend support to AST’s view of the law. In
Dudewicz v. Norris-Schmid, Inc., the plaintiff claimed that his employer violated both
Michigan’s WPA and Michigan public policy. 503 N.W.2d 645, 646 (Mich. 1993). The trial
court found that “the public policy argument failed to state a claim upon which relief could be
granted” and, on the WPA claim, it directed a verdict in favor of the employer. Id. at 646–47. On
appeal, the Michigan Supreme Court held that the trial court erred in finding for the employer on
the WPA claim. Id. at 649. But the Court found that dismissal of the public policy claim was
warranted on the theory that the WPA provided the exclusive remedy for the employer’s
conduct. The Court explained that “[a]s a general rule, the remedies provided by statute for
violation of a right having no common-law counterpart are exclusive, not cumulative,” that “[a]t

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common law, there was no right to be free from being fired for reporting an employer’s violation
of the law,” and so, the remedies provided by the WPA “are exclusive and not cumulative.” Id. at
649–50. The Court summarized the exclusive-remedy rule this way: “[a] public policy claim is
sustainable . . . only where there also is not an applicable statutory prohibition against discharge
in retaliation for the conduct at issue.” Id. at 650. Because the WPA was an applicable statutory
prohibition against discharge in retaliation for the conduct at issue (filing criminal charges for a
co-worker’s workplace assault), the Michigan Supreme Court affirmed the grant of summary
disposition on the public policy claim—despite that, on remand, a jury might find the WPA
claim not viable. Id.
Dolan v. Cont’l Airlines/Cont’l Exp., 563 N.W.2d 23 (Mich. 1997), is procedurally
similar to Dudewicz. The trial court in Dolan dismissed the plaintiff’s WPA claim and public
policy claim as inadequately pled. See id. at 26–27. On appeal, the Michigan Supreme Court
ruled that the trial court erred in finding that the plaintiff had not stated a viable WPA claim. Id.
at 27–28. Then, citing Dudewicz, the Court held, “Because the WPA is the exclusive remedy
against discharge in retaliation for the conduct at issue, the grant of the motion for summary
disposition on the public policy claim is affirmed.” Id. at 28. This was so even though the
Michigan Supreme Court remanded for further litigation on the WPA claim, and thus, the WPA
claim might have ultimately been found not viable. See also Scott v. Total Renal Care, Inc., No.
04-71700, 2005 WL 1680677, at *9 (E.D. Mich. July 19, 2005) (“When the plaintiff’s claim falls
within the protection of the WPA, she cannot sustain a public policy tort claim for the same
alleged wrongful conduct. Contrary to Plaintiff’s arguments here, the test is not whether the
plaintiff can successfully prove the elements of her WPA claim. Rather, it is whether the alleged
underlying conduct, if proven, falls within the protection of the WPA.”).

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But Dudewicz and Dolan are not the end of the story. Aside from the fact that those cases
did not squarely present the question of whether a plaintiff can plead a WPA claim and—in the
alternative—a public policy claim, a Michigan Court of Appeals case supports Yurk’s view of
the law.
In Driver v. Hanley, the plaintiff claimed that her employer violated the WPA, Michigan
public policy, and breached their employment agreement. 575 N.W.2d 31, 33 (Mich. Ct. App.
1997). The case was appealed twice. On the first appeal, the Michigan Court of Appeals
determined that the plaintiff’s WPA claim should survive and then applied “the well established
rule that the WPA provides the exclusive remedy for an employee who has been discharged
wrongfully from employment for reporting an employer’s violation of the law” to conclude that
the plaintiff could not proceed with her breach of contract claim. Id. at 35. But, on remand, the
trial court granted the employer summary disposition on the plaintiff’s WPA claim. Id. at 34. The
plaintiff appealed, arguing, in part, that because the trial court had dismissed her WPA claim,
which the Michigan Court of Appeals previously found to have been her “exclusive remedy,” the
trial court should have reinstated her breach of contract claim. Id. at 35. The Michigan Court of
Appeals agreed. It explained,
The Michigan Supreme Court, in Dudewicz, held that because the WPA provided
relief, the plaintiff’s cumulative public policy claim was not sustainable. The
Court explained that a public policy claim is sustainable ‘only where there is not
an applicable statutory prohibition against discharge in retaliation for the conduct
at issue.’ In this case, the circuit court determined that the WPA was not
applicable to the facts regarding plaintiff’s discharge. Because the WPA provided
no remedy at all, it could not have provided plaintiff’s exclusive remedy.
Driver, 575 N.W.2d at 36 (citations omitted). The Michigan Court of Appeals thus held that the
trial court should have reinstated the plaintiff’s breach of contract claim. Driver, 575 N.W.2d at
36; cf. I.B. Mini-Mart II, Inc. v. JSC Corp., No. 296982, 2011 WL 1435978, at *3 (Mich. Ct.

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App. Apr. 14, 2011) (explaining, where defendant moved to dismiss the plaintiff’s complaint for
failure to state a claim upon which relief may be granted, that “[plaintiff] is not required to elect
to proceed under one theory or the other but can seek recovery on the basis of either an express
contract or an implied contract until the fact finder determines that an express contract does not
exist or is unenforceable”).
Driver thus lends support to Yurk’s argument that he should be able to plead a WPA
claim and a public policy claim in the alternative: if this Court were to dismiss his public policy
claim at the pleading stage under Dudewicz’s rule, Driver suggests that this Court would be
required to reinstate that claim should the WPA claim falter later in litigation. (Driver also
suggests that if the Court dismissed Yurk’s public policy claim because the WPA provided his
exclusive remedy, and a jury found that the WPA claim was not viable, the public policy claim
would have to be reinstated post-verdict.)
Given that it is not apparent how to reconcile, on the one hand, the rule that inconsistent
claims may be pled in the alternative and, on the other, Dudewicz’s rule that “[a] public policy
claim is sustainable . . . only where there also is not an applicable statutory prohibition against
discharge in retaliation for the conduct at issue,” and because the Court has found that Yurk has
not pled a public policy claim, the Court says no more. But should Yurk move to amend his
complaint or should AST file another motion based on Dudewicz’s exclusive-remedy rule, the
parties should thoroughly address this issue.
IV.
For the reasons provided, Yurk has not stated a viable breach of public policy claim
because he has merely pled that AST retaliated against him for bringing AST’s suspected

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unlawful conduct to the attention of his superiors. On that basis only does the Court GRANT
AST’s Rule 12(b)(6) Motion to Dismiss Count II of Plaintiff’s First Amended Complaint (R. 5).
SO ORDERED.
s/Laurie J. Michelson
LAURIE J. MICHELSON
UNITED STATES DISTRICT JUDGE
Dated: June 24, 2016

CERTIFICATE OF SERVICE
The undersigned certifies that a copy of the foregoing document was served on the attorneys
and/or parties of record by electronic means or U.S. Mail on June 24, 2016.
s/Jane Johnson
Case Manager to
Honorable Laurie J. Michelson

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