Kim Shook v. NCG Acquisition, LLCKim Shook v. NCG Acquisition, LLC
Argued: May 10, 2024
Decided: August 14, 2024
Before THACKER, BENJAMIN, and BERNER, Circuit Judges.
Reversed and remanded by published opinion. Judge Berner wrote the opinion, in which Judge Thacker and Judge Benjamin joined.
ARGUED: Chris William Haaf, WALDREP WALL BABCOCK & BAILEY PLLC, Winston-Salem, North Carolina, for Appellants. Matthew Traynham Anderson, WILLIAMS MULLEN, Richmond, Virginia, for Appellees. ON BRIEF: Mark R. Sigmon, MILBERG COLEMAN BRYSON PHILLIPS GROSSMAN, PLLC, Raleigh, North Carolina, for Appellants. Edward S. Schenk III, Raleigh, North Carolina, Laura D. Windsor, WILLIAMS MULLEN, Richmond, Virginia, for Appellees.
North Carolina adheres to the presumption of “at-will” employment. This means that, unless otherwise agreed upon by employment contract or a collective bargaining agreement, an employee may generally be terminated for no reason, or even for an arbitrary or irrational reason. While applicable in most cases, this presumption is not inviolate. To the contrary, it is subject to a number of exceptions, some statutory and others developed through common law. Wrongful termination in violation of public policy is one such commоn law exception. The North Carolina Supreme Court explained the importance of protecting employees against termination in violation of public policy:
[T]here can be no right to terminate [an at-will employee] for an unlawful reason or purpose that contravenes public policy. A different interpretation would encourage and sanction lawlessness, which law by its very nature is designed to discourage and prevent.
Coman v. Thomas Mfg. Co., 381 S.E.2d 445, 447 (N.C. 1989) (quoting Sides v. Duke Univ., 328 S.E.2d 818, 826 (N.C. App. 1985)). This case asserts a cause of action under the public policy exception to the at-will presumption.
Kim Shook, Kylie Scolaro-Conti, and John Szwyd (we will refer to them as “the Counselors“) are licensed substance use disorder professionals who worked for NCG Acquisition, LLC and NCG CARE, Inc. (collectively referred to here as “NCG“). The Counselors allege that NCG terminated their employment in contravention of the laws governing their profession, specifically the North Carolina Substance Use Disorder Professional Practice Act (“SUDPPA“) and its attendant regulations. The district court dismissed the Counselors’ complaint, ruling they failed to allege a plausible claim for relief under Nоrth Carolina law. We conclude that SUDPPA constitutes an express public policy of the State of North Carolina, and the Counselors plausibly allege in the complaint that they were terminated in violation of this express public policy. Accordingly, we reverse the district court‘s order and remand for further proceedings.
I. Background
A.
NCG owns and operates facilities in North Carolina that provide mental health counseling and substance use disorder treatment and recovery services.1 The Counselors worked together to provide such services at several NCG facilities in western North Carolina.
As substance use disorder professionals, the Counselors were at times called upon to act as first responders for clients in crisis. When working with such clients, the Counselors would develop a crisis prevention and intervention plan, which they subsequently followed to address the clients’ medical needs.
Crisis prevention and intervention plans include an assessment of the necessary level of care for the client. Levels of care are standards established by the American Society of Addiction Medicine. Under these standards, intensive outpatient treatment, like that provided by the Counselors, is deemed “Level II” care. J.A. 13. “Level III” care is a higher level of care than Level II care and generally includes inpatient hospitalization. J.A. 13.
Shook then contacted the Client‘s probation officer to discuss next steps. The probation officer informed Shook that in order to move the Client to inpatient hospitalization he would need a letter from NCG discharging the Client from NCG‘s care and recommеnding the move. Shook and Scolaro-Conti notified Szwyd, their clinical supervisor, of the situation. The three Counselors agreed Scolaro-Conti would prepare a draft letter recommending that the Client be moved to inpatient hospitalization.
NCG policy required letters of this kind be approved in advance and co-signed by Assistant Director of Outpatient and Community-Based Services Jessica Tewell. Thus, Scolaro-Conti sent the draft letter to Tewell. Rather than approving Scolaro-Conti‘s draft, Tewell replaced certain clinical information with falsе and inaccurate information. Critically, Tewell modified the treatment recommendation for the Client from a “higher level of care” to a “different level of care.” J.A. 13. Without a recommendation for a “higher level of care,” the Client could not be moved to inpatient hospitalization, which the Counselors believed was clinically indicated.
Concerned about the Client‘s well-being, the Counselors attempted repeatedly for over a week to persuade Tewell to approve their recommendation of a “higher level of care” for the Client. Tewell steadfastly refused, even after the Client‘s probation officer reminded NCG that the Client would be ineligible for inpatient hospitalization without this recommended change. Left with no alternative, Shook sent the letter as modified by Tewell which recommended a “different level of care,” rather than a “higher level of care.” As a result, the Client was not moved to inpatient treatment.
Three days after Shook sent the letter, the Client died of a drug overdose. Szwyd informed Tewell about the Client‘s death and directed Shook to complete an incident report. Shook was the only NCG employee with first-hand knowledge of the Client‘s condition. Shook was precluded from completing an incident report, however, because Tewell insisted upon completing the incident report herself. Tewell did so without any direct knowledge of the Client‘s condition and without conferring with Shook or the other Counselors.
The Counselors were concerned that Tewell‘s refusal to approve the letter recommending a “higher level of care” may have contributed to the Client‘s death because this omission prevented the Client from being moved to inpatient hospitalization. To prevent such occurrences from happening in the future, Szwyd shared the concerns about Tewell‘s actions with a higher-level manager at NCG, Regional Director Ron Ross. Szwyd informed Ross that, in the Counselors’ view, Tewell‘s refusal to approve their recommendation for a higher level of care was contraindicated under the circumstances.
Ross responded to Szwyd‘s concerns with a warning: “if I were you, I would watch what you say and who you say it to.”
Nine days after Szwyd told Ross about Tewell‘s actions, NCG terminated the Counselors.
B.
Several months after they were terminated, the Counselors filed a complaint with the North Carolina Department of Health and Human Services about Tewell‘s refusal to approve their draft letter, including the recommendation of inpatient hospitalization. The Department conducted an unannounced investigation of NCG‘s facilities and found Tewell had violated North Carolina law. The Department determined that:
[Tewell] failed to demonstrate competency – she failed to sign a letter for [the Client] that was requested by probation and forwarded to her by Substance Abuse Intensive Outpatient Program (“SAIOP“) staff referencing a need for a higher level of care for 7 business days, from 3/22/21–4/2/21 and edited information in the letter; the edited information included inaccuracies regarding lack of progress in the program, and a recommendation for a differеnt service that was not recommended by the clinicians; [Tewell] based her edits upon review of the client record. She had never met [the Client].
JA17.
II. Procedural History
A.
The Counselors filed suit in the Western District of North Carolina alleging wrongful termination in violation of public policy. Specifically, they allege that they were terminated in contravention of the
SUDPPA governs the practice of substance use disorder professionals in North Carolina. It was enacted:
to safeguard the public health, safety, and welfare, to protect the public from being harmed by unqualified persons, to assure the highest degree of professional care and conduct on the part of credentialed substance use disorder professionals, to provide for the establishment of standards for the education of credentialed substance use disorder professionals, and to ensure the availability of credentialed substance use disorder professional services of high quality to persons in need of these services.
B.
The district court dismissed the Counselors’ wrongful termination claim for failure to state a plausible claim for relief. Shook v. NCG Acquisition, LLC, No. 1:22-CV-65-MR-WCM, 2022 WL 18893035 (W.D.N.C. Dec. 7, 2022), report and recommendation adopted, No. 1:22-CV-00065-MR-WCM, 2023 WL 2496179 (W.D.N.C. Mar. 14, 2023). The district court agreed with the Counselors that SUDPPA and its attendant regulations are an expression of the public policy of the State of North Carolina. Id. at *5, *8. The district cоurt concluded, however, that the Counselors failed to adequately plead that NCG terminated them in contravention of SUDPPA. Id. at *8-*9. The district court limited its analysis to whether the Counselors adequately pled a claim for termination in contravention of two specific SUDPPA regulations,
The district court first analyzed whether the Counselors sufficiently alleged that their termination contravened SUDPPA Rule 68.0503(e). That rule requires a “substance use disorder professional who knows of unethical conduct ... by a substanсe use disorder professional [to] report such violations to the Board.”
The district court next analyzed the Counselors’ claim for wrongful termination in contravention of Rule 68.0503(d). That rule requires substance use disorder professionals to “assist in eliminating prevention, intervention, treatment, and supervision practices by persons unqualified or unauthorized to practice in the field.”
Though noting the outcome was a “close call,” the district court granted NCG‘s motion to dismiss the Counselors’ claim for wrongful termination in violation of public policy, finding neither SUDPPA Rule 68.0503(d) nor Rule 68.0503(e) was contravened by the facts alleged in the complaint. Id. at *8–*10. Critically, the district court never analyzed the Counselors’ claims under the SUDPPA rules specified in the complaint, Rules 68.0507, 68.0503(a), and 68.0503(h).
III. Standard of Review
We review de novo a district court‘s decision to grant a motion to dismiss pursuant to
When a plaintiff alleges wrongful termination in violation of public policy under North Carolina law, the inquiry at the pleading stage is two-fold. First, does the complaint identify a specific North Carolina public policy that the employer allegedly contravened in terminating the employee? Considine v. Compass Grp. USA, Inc., 551 S.E.2d 179, 183–84 (N.C. App. 2001), aff‘d, 557 S.E.2d 528 (N.C. 2001). Second, does the complaint make a plausible showing that the public policy was contravened? Bigelow v. Town of Chapel Hill, 745 S.E.2d 316, 324 (N.C. App. 2013) (quoting Garner v. Rentenbach Constructors Inc., 515 S.E.2d 438, 441 (N.C. 1999)).
A.
Turning to step one of our inquiry, we must determine whether the Counselors adequately identify “a specific exprеssion of North Carolina public policy.” Horne v. Cumberland Cnty. Hosp. Sys., Inc., 746 S.E.2d 13, 18 (N.C. App. 2013) (quoting Considine, 551 S.E.2d at 184). While the public policy exception to the at-will presumption has been described as narrow, see, e.g., Considine, 551 S.E.2d at 183, North Carolina‘s appellate courts have repeatedly affirmed that the North Carolina General Statutes and attendant regulations constitute the express public policy of the state. Amos v. Oakdale Knitting Co., 416 S.E.2d 166, 169 (N.C. 1992) (“[A]t the very least public policy is violated when an employee is fired in contravention of express policy declarations contained in the North Carolina General Statutes.“); see also Coman, 381 S.E.2d at 447–48; Bigelow, 745 S.E.2d at 324.
This bright-linе principle has been applied where, as here, health care professionals allege their employer terminated them in contravention of the statutes and regulations governing their profession. North Carolina appellate courts consistently find such statutes and regulations to be the express public policy of the state for the purpose of analyzing claims of wrongful termination in violation of public policy. See, e.g., Deerman v. Beverly Cal. Corp., 518 S.E.2d 804, 809 (N.C. App. 1999) (recognizing the Nursing Practice Act and its attendant regulations as the express public policy of North Carolina); Salter v. E & J Healthcare, Inc., 575 S.E.2d 46, 51–52 (N.C. App. 2003) (recognizing the Adult Care Home Residents’ Bill of Rights); Lenzer v. Flaherty, 418 S.E.2d 276, 287 (N.C. App. 1992), disc. rev. denied, 421 S.E.2d 348 (N.C. App. 1992) (recognizing the Mental Health, Developmental Disabilities, and Substance Abuse Act).
In support of their public policy claim, the Counselors cite to SUDPPA broadly. They also reference three specific regulations promulgated under SUDPPA. The first, Rule 68.0507, establishes the basic requirements for maintaining client welfare. Subsections of Rule 68.0507 require substance use disorder professionals to “protect the safety and welfare of the client,”
Because the provisions of SUDPPA and its attendant regulations specified by the Counselors in the complaint govern their profession, we agree with the district court that they constitute an expression of North Carolina public policy. Accordingly, we find that the Counselors meet their burden under the first step of our inquiry.
B.
Although NCG apparently agrees with our conclusion, Appеllee‘s Resp. Br. at 27 (“It is without argument that the SUDPPA sets forth the public policy of North Carolina that the public be protected from unqualified individuals from treating substance use disorders.“), NCG argues that it would not be appropriate for us, as a federal court sitting in diversity jurisdiction, to be the first court to recognize SUDPPA as the express public policy of North Carolina,
This court‘s ruling in Washington exemplifies this distinction. There, the employee sued his former employer for termination in violation of public policy after the employer allegedly retaliated against him for filing safety complaints. Washington, 870 F.2d at 958. West Virginia, like North Carolina, requires a claim of retaliatory discharge to “rest upon a statutory articulation of public policy by the West Virginia legislature.” Id. at 963. Yet the employee failed to specify a source of express public policy that had allegedly been contravened by the employer. Id. Because the employee failed to point to any “West Virginia statute or case recognizing a ‘public policy’ in favor of private sector employees who file safety complaints with their employers,” this court concluded that he failed to state a plausible claim. Id. This court noted, however, that identifying a state statute would have been sufficient. Id. (stating that the “presence of [state] statutes was the critical factor in identifying the state‘s public policy“).
Here, unlike in Washington, the Counselors met their burden to identify a specific source of public policy. As we have еxplained, North Carolina‘s appellate courts have repeatedly held that state statutes and regulations constitute express public policy. See, e.g., Amos, 416 S.E.2d at 169. We apply the principles laid down by North Carolina‘s courts and recognize SUDPPA and its attendant regulations as the express public policy of North Carolina.2
C.
Having established that SUDPPA and its attendant Rules 68.0507, 68.0503(a), and 68.0503(h) constitute an express
i.
In conducting this analysis, we look to the North Carolina Court of Appeals’ ruling in Deerman v. Beverly California Corporation, a case on all fours with this one. The plaintiff, Dixie Deerman, was a registered nurse caring for a patient experiencing serious medical complications. Deerman, 518 S.E.2d at 805. Deerman believed the patient‘s attending physician had failed to provide adequate care and monitoring. Id. When the patient‘s family contacted Deerman, she shared her concerns about the physician‘s care. Id. Deerman ultimately advised the patient‘s family to change physicians. Id. When the employer discovered what Deerman had done, the employer promptly terminated her “for vocalizing to a patient‘s family member her criticisms of the treatment provided to the patient by the attending physician.” Id. at 805–06.
Deеrman sued her employer for wrongful termination in violation of public policy, alleging that she had been terminated in contravention of the
On the first step of the wrongful termination analysis, the North Carolina Court of Appeals determined that the NPA and attendаnt regulations set out “a clear public policy in North Carolina to protect public safety and health by maintaining minimum standards of nursing care.” Deerman, 518 S.E.2d at 807. The NPA establishes that the “practice of nursing by a registered nurse” includes “[p]roviding teaching and counseling about the patient‘s health care.”
Turning to the adequacy of the pleadings on the second step, the court reasoned that if Deerman, “as alleged, was terminated for meeting the minimum requirements of the practice of nursing as established and mandated by the NPA and regulations thereunder, then such termination violated the public policy of this state to ensure the public a minimum level of safe nursing care.” Id. at 810. The court
ii.
The similarities between this case and Deerman are readily apparent and mandate the same result. Like the plaintiff in Deerman, the Counselors are governed by a regulatory scheme which establishes standards of their profession.
The Counselors informed NCG Regional Director Ross about NCG Assistant Director Tewell‘s refusal to approve their recommended care plan. They told Ross that Tewell substantively changed the text of the draft letter to the probation officer in the face of repeated requests to leave the Counselors’ recommendation as written. The Counselors also shared their view that these changes prevented the Client from being moved to inрatient treatment and may have contributed to her death.
NCG argues that Assistant Director Tewell‘s modification of the letter was purely “semantic,” and the Counselors’ wrongful termination claim hinges solely upon the change of “one word” in their draft letter. Appellees’ Resp. Br. at 13. The allegations in the complaint demonstrate otherwise. The Counselors describe additional changes Tewell made to the letter, including replacing certain clinical information with inaccurate information.
Even if it were true that Tewell changed only one word in the letter, thе Counselors allege that altering this particular word significantly impacted the Client‘s care. Not only is the distinction between a “higher level of care” and “different level of care” an obvious one – “different” can also mean a lower level of care – but also, inpatient hospitalization would only be available under a higher of level of care in accordance with the standards established by the American Society of Addiction Medicine. Inpatient hospitalization is precisely what the Counselors had determined, in their professional opiniоn, was clinically indicated.4
The Counselors further allege they were terminated in retaliation for actions taken in compliance with Rule 68.0503(h), which requires substance use disorder professionals to “complete reports and record keeping functions in a manner that supports the client‘s treatment experience and welfare.”
Based on the facts set forth in the complaint, we find the Counselors plausibly allege NCG terminated them in retaliation for complying with their professional obligations under SUDPPA and its attendant regulations. We therefore conclude that the Counselors satisfy the second step of our inquiry.
V. Conclusion
Because the Counselors identify a specific public policy of the State of North Carolina and they allege facts sufficient to show their termination contravened this public policy, we hold the Counselors plausibly allege a cause of action for wrongful termination in violation of the express public policy of the State of North Carolina. We therefore reverse the order of the district court and remand for further proceedings.
REVERSED AND REMANDED