Wayne J. KRATZER, Respondent, v. WELSH COMPANIES, LLC, Appellant.
No. A06-2284.
Supreme Court of Minnesota.
July 30, 2009.
771 N.W.2d 14
James H. Kaster and Jessica J. Clay, Nichols, Kaster & Anderson, PLLP, Minneapolis, MN, for respondent.
GILDEA, Justice.
Respondent Wayne Kratzer brought this action against his former employer, Welsh Companies, LLC (Welsh), alleging that Welsh terminated his employment in violation of Minnesota‘s whistleblower statute,
Kratzer‘s whistleblower claim stems from a transaction for the purchase of the Park Square Shopping Center (Park Square) in Brooklyn Park, Minnesota. John Hancock Real Estate Investment Group (John Hancock) owned Park Square. In early 2000 John Hancock retained Welsh to act as the brokerage firm in connection with its efforts to sell Park Square. John Hancock set the original list price at $10 million and agreed to pay Welsh a 2.5% commission on the purchase price. Pete Rand acted for Welsh as John Hancock‘s broker on the Park Square transaction.
Simultaneously with his broker work for John Hancock, Rand also represented WelshInvest, an affiliate of Welsh, in connection with WelshInvest‘s efforts to acquire properties. When WelshInvest expressed interest in acquiring Park Square, Rand acted as its broker, and Kratzer assisted Rand with the Park Square deal on the acquisition side, representing WelshInvest.
Rand testified that he presented WelshInvest to John Hancock as a potential buyer for the Park Square property. Because he also represented WelshInvest, Rand said that he discussed with John Hancock the potential conflict of interest for the Park Square transaction.3 According to Rand, John Hancock chose not to pursue WelshInvest as a buyer at the time that Park Square was first on the market because of the conflict. After considering several offers, however, John Hancock changed its mind.
Initially John Hancock received three offers for Park Square: WelshInvest‘s offer for $8.025 million and two others for $8 million and $8.6 million. Rand testified that John Hancock wanted to complete the sale by the end of 2000, and that only WelshInvest was in a position to complete the deal by that deadline. With WelshInvest as the most viable prospect, John Hancock decided to entertain WelshInvest‘s offer.
As the predicate for his claims, Kratzer relies on the fact that at some point during negotiations for Park Square, Rand entered into an agreement with WelshInvest for an additional commission. Kratzer characterizes this agreement as WelshInvest agreeing to pay Rand an “extra two points on his commission if he could convince [John] Hancock to lower their asking price by [$1.5 million].”
But on August 29, 2000, WelshInvest purchased Park Square from John Hancock for $6.5 million. According to the complaint, Rand earned an additional $130,000 commission from WelshInvest for securing the price reduction on the transaction.
Sometime in January 2002, WelshInvest decided to sell Park Square. Rand represented WelshInvest in this transaction, and assigned Kratzer to handle marketing materials for the sale. Rand told Kratzer that the sale should not be advertised to John Hancock because Rand did not want John Hancock to question WelshInvest‘s asking price for Park Square, which was higher than the purchase price WelshInvest paid to John Hancock. Kratzer then questioned Rand regarding the additional commission agreement, and Rand said that John Hancock was not aware of that agreement.
Kratzer told Rand that Kratzer believed it would be illegal to exclude John Hancock from the marketing of the Park Square property.4 According to Kratzer, Rand responded, “You can go to management if you disagree with me, but if you do, this will be your last deal at Welsh.” Rand removed Kratzer from the Park Square sale that day, and removed Kratzer‘s name from marketing materials several weeks later.
Around the same time as this conversation with Rand, Kratzer also met with Angleson to describe what Kratzer thought was illegal conduct on the Park Square transaction. Kratzer contends that Angleson did not address his concerns.
Several months after his meeting with Angleson, Kratzer received a letter from Angleson informing Kratzer that his compensation would be adjusted from that of a salaried employee to the company‘s standard commission program. Kratzer alleges that on August 30, 2002, he discovered that Rand had prevented Kratzer from receiving a commission he believed he was owed in connection with a different transaction.
On September 6, 2002, Kratzer presented his concerns about Rand, the Park Square transaction, and the actions taken by Angleson and Rand to Welsh‘s Chief Executive Officer, Dennis Doyle. Doyle told Kratzer that Doyle would “get to the bottom of it,” but also stated his desire to maintain his “longterm relationship with Rand.” Kratzer alleges that Doyle‘s attitude toward Kratzer changed after this meeting.
On October 14, 2002, Welsh terminated Kratzer‘s employment. Angleson stated in an affidavit that Welsh terminated Kratzer‘s employment because of Kratzer‘s “lack of productivity and focus in the brokerage area.”
As a result of Kratzer‘s termination and issues surrounding commissions, Kratzer commenced legal action against Welsh. After discovery, Welsh moved for sum
The court of appeals reversed. Kratzer, 2008 WL 1747607, at *1. The court held that Rand‘s activities, as reported by Kratzer, violated
This case comes to us after the district court granted Welsh‘s motion for summary judgment. We apply a de novo standard of review to a grant of summary judgment. Zip Sort, Inc. v. Comm‘r of Revenue, 567 N.W.2d 34, 37 (Minn.1997). Because the district court granted Welsh‘s summary judgment motion against Kratzer, we view the evidence in the light most favorable to Kratzer. See Grondahl v. Bulluck, 318 N.W.2d 240, 242 (Minn.1982). The judgment will be affirmed, however, if no genuine issues of material fact exist and if the court below properly applied the law. Zip Sort, Inc., 567 N.W.2d at 37; see also
I.
This issue presented in this case is whether Kratzer engaged in conduct that the whistleblower statute,
To state a claim under the whistleblower statute, the employee does not need to identify in the report the exact law that is violated, but the conduct reported must at least implicate a federal or state law. Abraham v. County of Hennepin, 639 N.W.2d 342, 354-55 (Minn.2002) (“A whistleblower claim need not identify the specific law or rule that the employee suspects has been violated, so long as there is a federal or state law or rule adopted pursuant to law that is implicated by the employee‘s complaint, the employee reported the violation or suspected violation in good faith, and the employee alleges facts that, if proven, would constitute a violation of law or rule adopted pursuant to law.“). To determine whether Kratzer‘s report is protected conduct, we turn first to a discussion of the law Kratzer claims his report implicated.
Section 82.27 is a licensing statute that allows the Commissioner of Commerce to deny, revoke, or suspend a real estate broker‘s license for fraudulent and deceptive practices:
The commissioner may by order deny, suspend or revoke any license or may censure a licensee if the commissioner finds (1) that the order is in the public interest, and (2) that the applicant or licensee or, in the case of a broker, any officer, director, partner, employee or agent or any person occupying a similar status or performing similar functions...:
(b) has engaged in a fraudulent, deceptive, or dishonest practice....
For the purposes of Minnesota Statutes, section 82.27, subdivision 1, clause (b), the following acts and practices constitute fraudulent, deceptive, or dishonest practices:
A. act on behalf of more than one party to a transaction without the knowledge and consent of all parties....
A.
Kratzer argues that Rand‘s failure to disclose the terms of his fee agreement with WelshInvest violates
The plain language of the rule requires that Rand disclose the fact of his dual agency, and on this record, there is no dispute that the dual agency disclosure was made. The rule does not require that Rand disclose the details of his compensation or anything beyond the fact that he is acting for both sides. See
The court of appeals adopted this approach and decided that it could not ascertain whether John Hancock had “knowledge” or had given “consent” under the rule without examining the meaning of those words under the common law. Kratzer, 2008 WL 1747607, at *5. In urging that we affirm the court of appeals, Kratzer argues that the terms “fraud” and “knowledge and consent” are “technical terms with specialized meanings that have been regularly interpreted under the common law.” Kratzer argues that we therefore must turn, as did the court of appeals, to the common law to interpret these terms. But Kratzer has not demonstrated that the terms “knowledge and consent” are “technical” terms in the statutory context presented here.
Kratzer has not otherwise provided a reason we should look outside the plain language of the rule. We look beyond the plain language of the statutory or regulatory provision only if the text is ambiguous. State v. Gorman, 546 N.W.2d 5, 8 (Minn.1996). Ambiguous text is susceptible to more than one reasonable meaning. Amaral v. Saint Cloud Hosp., 598 N.W.2d 379, 384 (Minn.1999). The court of appeals did not find any ambiguity in the rule, and the parties do not argue that the rule is ambiguous. We likewise find no ambiguity in the rule. In a situation such as this, “[w]here the words of [the rule] are clear and free from ambiguity, we have no right to construe or interpret the [rule‘s] language. Our duty in such a case is to give effect to the [rule‘s] plain meaning.” Tuma v. Comm‘r of Econ. Sec., 386 N.W.2d 702, 706 (Minn.1986).
The plain language of the rule is dispositive. The applicable rule provides that the parties must have knowledge of and consent to a broker‘s “act[ion] on behalf of more than one party to a transaction.”
B.
As an alternative to his argument that Rand‘s conduct violated the rule, Kratzer argues that whether Rand‘s conduct actually violated
We have “caution[ed] ... against construing
In our most recent application of this principle, Obst v. Microtron, we said: “While there need not be an actual violation of law, the reported conduct must at least implicate a violation of law.” 614 N.W.2d at 200. Kratzer and the dissent would read this sentence to mean that the reported conduct need only seem, in the eyes of the employee, to be unlawful, even if that conduct is lawful. We disagree.
The proper standard to apply when assessing the legal sufficiency of a claim under the whistleblower statute is to assume that the facts have occurred as reported and then determine, as we said in Abraham, whether those facts “constitute a violation of law or rule adopted pursuant to law.” 639 N.W.2d at 355 (citing Obst, 614 N.W.2d at 204). The sentence in Obst thus refers to the existence of the facts as reported, it does not stand for the proposition that the law the employee claims to have been violated need not to exist.14 In other words, to find protected conduct, there need not be an actual violation of the law, as we said in Obst, because the facts may not be as the employee reported them to be. Although there need not be an actual violation, the law alleged to have been violated must exist. If it later turns out that the facts are not as the employee reported them in good faith to be, the
This standard is consistent with the approach we adopted in both Obst and Hedglin. We recognized in both cases that a report about conduct-assuming that conduct had occurred-that did not violate a state or federal law was not protected activity. Obst, 614 N.W.2d at 204; Hedglin, 582 N.W.2d at 902. We removed all doubt about the scope of the rule in Obst when responding to the dissent. The Obst dissent contended that we did not need “to find a law implicated by the conduct reported when the employee‘s belief that a law was violated was held in good faith.” 614 N.W.2d at 204. We said that this view was “simply wrong” and concluded: “it is clear that the report of a suspected violation of federal or state law must implicate an actual federal or state law and not one that does not exist.” Id.16
We reach the same conclusion in this case. Because Kratzer‘s report does not implicate a violation of any federal or state law or rule, we hold that Kratzer did not engage in protected conduct and, therefore, his whistleblower claim fails as a matter of law.
Reversed.
DISSENT
MEYER, Justice (dissenting).
I respectfully dissent. The majority opinion correctly states that the question in this case is whether Kratzer‘s report-that Rand failed to disclose the terms of his commission agreement with WelshInvest to John Hancock-was protected conduct under the whistleblower statute. In its analysis, however, the majority incorrectly limits the whistleblower statute to protect only reports of conduct that actually violate a law or rule, and then unneces
As stated by the majority, we review de novo a district court‘s order of summary judgment to determine whether there is any genuine issue of material fact and whether the district court correctly applied the law. Zip Sort, Inc. v. Comm‘r of Revenue, 567 N.W.2d 34, 37 (Minn.1997). On appeal, the evidence is viewed in the light most favorable to the party against whom summary judgment was granted. Funchess v. Cecil Newman Corp., 632 N.W.2d 666, 672 (Minn.2001). The question before us-which reports are protected by the whistleblower statute-is one of statutory interpretation, which we also review de novo. Gomon v. Northland Family Physicians, Ltd., 645 N.W.2d 413, 415-16 (Minn.2002). When interpreting statutes, our goal is to “ascertain and effectuate the intention of the legislature.”
The Whistleblower Act provides in relevant part:
An employer shall not discharge, discipline, threaten, otherwise discriminate against, or penalize an employee regarding the employee‘s compensation, terms, conditions, location, or privileges of employment because:
(a) the employee, or a person acting on behalf of an employee, in good faith, reports a violation or suspected violation of any federal or state law or rule adopted pursuant to law to an employer or to any governmental body or law enforcement official[.]
We first did an in-depth examination of the meaning of “a violation or suspected violation of any federal or state law or rule” under the whistleblower statute in Hedglin v. City of Willmar, 582 N.W.2d 897 (Minn.1998). We examined whether reports made by three firefighters to their fire department constituted reports of state law violations. Id. at 902. After separating the reports into three categories of conduct, we concluded that the first two categories of reported conduct “implicated” a number of statutes. Id. After broadly listing the statutes “implicated,” we stated:
There may be fact questions as to whether any of these statutes were actually violated, but for purposes of the whistleblower statute, it is irrelevant whether there were any actual violations; the only requirement is that the reports of state law violations were made in good faith. See Minn.Stat.
§ 181.932, subd. 1(a). Because [the] reports of roll call sheet falsification and [the] report of firefighters driving fire trucks while drunk implicate possible state law violations, we conclude that these reports are protected by the statute if they were made in good faith.
Id. We then went on to analyze the third category of reported conduct; because we found “no statute or rule that is violated by such conduct, nor could [the firefighters‘] counsel point to any such statute or rule,” those reports were not protected. Id.
We relied on Hedglin soon after in our decision in Obst v. Microtron, Inc., 614 N.W.2d 196 (Minn.2000). In Obst, an employee invoked the whistleblower statute by claiming he was terminated because (1) he reported to his employer that it needed to tell the manufacturer to which the company supplied windshield wipers that the employer had deviated from agreed-to wiper control testing requirements; or (2) he reported to the company about defective wiper controls being shipped to the manufacturer. Id. at 200. The employee argued both reports were of conduct that violated federal law. Id.
On the first claim, we held that the federal law that the employee invoked was not “implicated.” Obst, 614 N.W.2d at 202. The law only required the manufacturer to be notified of a defect-the manufacturer was well aware of the defect before the employee‘s report, which was known to the employee. Id. at 202-03. The employee‘s stated purpose in making the reports was to inform the manufacturer, but as the manufacturer knew of the defect, “it is difficult, if not impossible, to say that at the time the reports were made, his purpose was to expose an illegality.” Id. at 202. We noted that our conclusion did not turn on the employee‘s knowledge or understanding of the law, but instead turned on “the content of his reports and his purpose in making the reports at the time they were made.” Id. at 203.
On the second claim, the federal law at issue was expressly limited to windshield wiper systems in finished motor vehicles, and not to the vehicle‘s component parts, as shipped by the company. Id. at 204. The company‘s deviation from the testing procedures therefore “did not implicate a violation of law.” Id. After a discussion of Hedglin, we commented that “it is clear that the report of a suspected violation of federal or state law must implicate an actual federal or state law and not one that does not exist.” Id. (emphasis added).
We then relied on Obst in our short analysis of this issue in Abraham v. County of Hennepin:
A whistleblower claim need not identify the specific law or rule that the employee suspects has been violated, so long as there is a federal or state law or rule adopted pursuant to law that is implicated by the employee‘s complaint, the employee reported the violation or suspected violation in good faith, and the employee alleges facts that, if proven, would constitute a violation of law or rule adopted pursuant to law.
639 N.W.2d 342, 354-55 (Minn.2002) (emphasis added) (citing Obst, 614 N.W.2d at 204). We held that the whistleblower statute “does not require that an employee specifically identify in the pleadings the law or rule adopted pursuant to law that the employee suspects has been violated ... so long as the alleged facts, if proven, would constitute a violation of the law or rule adopted pursuant to law.” Id. at 355.
The majority relies heavily upon Obst to support its assertion that “suspected violation” encompasses only suspect or mistak
I acknowledge, though, that the majority appears to be following a developing trend in this court of construing “violation or suspected violation” in the whistleblower statute more and more narrowly, especially in terms of what can constitute a suspected violation of the law. However, if this trend continues, we will be requiring employees who wish to make a report of wrongful conduct to have enough knowledge of the law to know if a set of alleged facts would, if proven, be a violation as a matter of law. In other words, if the employee suspects wrongful conduct is a violation of a law, and is later determined to be wrong as to the law, that employee loses all protection from the whistleblower statute. Our holding in Abraham, that the employee does not have to identify in the pleadings the law or rule suspected to have been violated to be protected by the whistleblower statute, as long as some law is implicated, goes against requiring such legal analysis from employees.18
In Hedglin, we stated that the reported conduct must “implicate possible state law violations,” and we continued to use the term “implicated” in referring to the connection between a statute or rule and the whistleblower claim. 582 N.W.2d at 902 (emphasis added). Thus, once a rule is “implicated,” the analysis should turn on whether there was a good faith report of a suspected violation of that statute or rule.19 A definitive analysis of the rule does not, and should not, have to be done the only
The crux of this issue then becomes whether Kratzer‘s report was a good faith report of a suspected violation of the implicated rule,
We have repeatedly said that statutory language is ambiguous if it is susceptible to more than one reasonable interpretation. State v. Mauer, 741 N.W.2d 107, 111 (Minn.2007). The interpretation set forth by Welsh Companies, which is followed by the majority, is that “knowledge and consent” under
It is not necessary for us to analyze which interpretation is correct. Suffice it to say that Kratzer‘s interpretation of the rule supports a conclusion that he was reporting a suspected violation of the rule. Cf. Obst, 614 N.W.2d at 203 (concluding that employee‘s purpose was not to expose an illegality; the law only required the third party to be aware of a defect, and the employee knew the third party was aware). Viewing the facts in the light most favorable to Kratzer, he made a report believing that Rand‘s failure to disclose the terms of Rand‘s commission agreement to John Hancock was illegal. Specifically, he believed that the failure to disclose meant that John Hancock‘s consent to Rand‘s dual representation was not a knowing consent, and thus that failure was a fraudulent, deceptive, or dishonest practice under
PAGE, Justice (dissenting).
I join in the dissent of Justice Meyer.
Lorie Skjerven Gildea
Justice of the Minnesota Supreme Court