Hagen v. Siouxland Obstetrics & Gynecology, PC , 799 F.3d 922 ( 2015 )

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 14-2580
No. 14-2648
___________________________
Edward P. Hagen, DO
lllllllllllllllllllll Plaintiff - Appellee/Cross-Appellant
v.
Siouxland Obstetrics and Gynecology, PC, et al.
lllllllllllllllllllll Defendants - Appellants/Cross-Appellees
______________
Appeals from United States District Court
for the Northern District of Iowa - Sioux City
____________
Submitted: April 13, 2015
Filed: August 20, 2015
____________
Before RILEY, Chief Judge, LOKEN and SHEPHERD, Circuit Judges.
____________
LOKEN, Circuit Judge.
Siouxland Obstetrics & Gynecology, P.C. (“Siouxland”), of Sioux City, Iowa,
terminated Edward Hagen, its President and an equity owner, invoking the for-cause
termination provision in Hagen’s January 1, 1993, Employment Agreement. Hagen
filed this diversity action against Siouxland and three co-owners and partners in its
Ob/Gyn practice, Drs. Paul J. Eastman, Tauhni T. Hunt, and Angela J. Aldrich
(collectively, “Siouxland”). Hagen’s complaint alleged, inter alia, breach of contract
and wrongful retaliatory discharge in violation of Iowa public policy. After an eight-
day trial, a jury upheld the public policy tort claim, awarding Hagen $1,051,814 in
compensatory damages. The district court denied Siouxland’s motion for judgment
as a matter of law or a new trial and Hagen’s motion for additur. Siouxland appealed;
Hagen cross-appealed. Reviewing issues of Iowa law de novo, we conclude that
Hagen failed to prove he was an at-will employee who may assert a tort claim for
wrongful discharge in violation of Iowa public policy and therefore reverse.
I. Background Facts
We view the facts relevant to the controlling issue of law in the light most
favorable to the jury’s verdict. At the time in question, Siouxland was a professional
corporation conducting the group practice of four obstetrician/gynecologists and was
one of two “women’s clinics” in Sioux City. It was located across the street from St.
Luke’s Hospital. Siouxland was established in the early 1960s by Hagen’s father,
also an Ob/Gyn doctor. Hagen received an Iowa license to practice medicine and
joined his father’s practice in 1992.
Hagen’s Employment Agreement was executed by his father on behalf of
Siouxland as Employer. The Agreement guaranteed Hagen an initial monthly salary,
subject to adjustment; a discretionary bonus “to make the total compensation . . .
equal to the reasonable value of his services”; deferred compensation in the event of
death or disability and continuation of his salary during the first six months of
disability; office space and staff “adequate for the performance of his duties”; and
four weeks of paid vacation per year. Hagen agreed “to devote substantially all of his
time and attention” to Siouxland’s practice of medicine and not to engage in the
practice of medicine other than as Siouxland’s employee. Article I provided that the
Agreement was for automatically renewable one-year terms “subject, however, to
prior termination.” Article XI, the lengthy Termination section, provided that the
-2-
Agreement would terminate upon Hagen’s death, permanent disability, or loss of
license to practice medicine in Iowa; by mutual agreement of the parties; at the option
of either party upon ninety-days written notice of cancellation; or by Siouxland -
in the event of embezzlement or other theft; willful contravention of
professional ethics; substantial and willful violation of any other terms
or conditions of this Employment Agreement, all subject to
determination by the Board of Directors of the CORPORATION.
Hagen helped his father recruit defendants Hunt, Aldrich, and Eastman to the
Siouxland practice group later in the 1990s. When Hagen’s father retired in the early
2000s, Hagen became President of Siouxland. The four physicians were on-call for
the group the same number of nights, weekends, and holidays. All four had privileges
at St. Luke’s hospital. Hagen testified that Hunt and Aldrich, both females, attracted
more patients than Eastman and Hagen, causing “some friction in the office.”
Turning to the events at issue, Dr. Hagen testified that, shortly before his on-
call shift began at 5:00 on November 5, 2009, Dr. Eastman called to advise that his
patient, Maria Maeda, was thirty-four weeks pregnant, previously had a liver
transplant, and now had sepsis, an infection that can endanger an unborn baby.
Maeda was admitted to St. Luke’s early that afternoon with premature contractions.
Eastman had not seen her. He thought Maeda’s medical doctors were transferring her
to a hospital in Omaha, but had learned she was still at St. Luke’s because the Omaha
hospital considered her too sick to travel. Hagen then called or was paged by St.
Luke’s and was told by the labor and delivery unit that the baby’s heart rate was 130
and they were trying to transfer Maeda to intensive care.
When Dr. Hagen arrived at the hospital, he was told by the ultrasound
technician and confirmed that the baby was no longer alive. Hagen asked one of the
delivery room nurses how long the baby had been dead. She did not know. Hagen
-3-
testified he then said to two nurses, “How the fuck can this happen at St. Luke’s that
they watch a baby die on the monitor, suffocate, and do nothing?” He then told the
nurses, “You killed this baby. You watched this baby die on the monitor. I mean,
you guys did nothing.” Hagen then called Eastman and told him, “You didn’t come
see her, and this baby is dead, and now I’ve gotta do a C-section on a mother and
deliver a dead body.” Hagen then informed Maria’s husband of the baby’s death.
The next day, Hagen told the head of St. Luke’s medical staff and its chief
financial officer that he was “reporting” himself for yelling and swearing at the
nurses, the nurses for “not treat[ing] this patient well,” and Eastman for not coming
to see Maeda. Hagen returned to the Siouxland office where he consulted several
attorneys about the incident. One said Hagen may have a duty to report what he
believed was Eastman’s malpractice to the Iowa state medical board. Hagen informed
Eastman he had been advised to report him to the medical board and told his other
partners he was inclined to report Eastman.
On Monday, November 9, the head of St. Luke’s medical staff called and
informed Hagen he was being suspended for ten days for yelling at the nurses and
cursing in the intensive care unit. He received the suspension notice on Tuesday and
told his partners, “I’m going to tell the patient, you know, to sue this hospital . . . .
You know, we’re going to take St. Luke’s down. I can’t take St. Luke’s down.
There’s nothing for me to sue the hospital for. But the patient can, so I’m going to
tell the patient to call a lawyer and investigate this.” On Wednesday night, Hagen
called Maeda at the hospital and told her: “Maria, you were mistreated. This is
malpractice. The nurses missed the boat. Dr. Eastman missed the boat, and I think
you should get an attorney.” On Thursday, November 12, Hagen told his Siouxland
partners about the phone call and left for a long weekend at his cabin in Wisconsin.
After Hagen left, Aldrich told her partners she was leaving Siouxland because
of Hagen’s behavior. Hunt and Eastman said they would leave, too. After consulting
-4-
Siouxland’s attorney, the three physicians agreed to terminate Hagen for cause
instead of leaving the group. Hagen attended a meeting of the Siouxland principals
on Monday, November 16, and was fired “for willful contravention of professional
ethics and substantial and willful violation of other terms or conditions of his
employment agreement.”
At trial, Hunt testified to a history of workplace conflict involving Hagen that
increased as Hagen gained seniority:
[I]t turned into more of a bully type of atmosphere. [Hagen] became a
little more dominant, and it was -- it seemed a little bit more abusive at
times too because really you just wanted to avoid him. He made the
rules. He would change the rules. You didn’t know when the rules
changed. And you really just wanted to stay away from him.
Eastman described Hagen’s outbursts at hospitals, including throwing a vacuum
against a wall during a C-section, leading to blood splattering over the wall, and
breaking instruments during surgery. Aldrich explained she voted to terminate Hagen
because “I could not work with him anymore with the way that he is, him yelling,
disruptive, patients telling me they don’t like him, please stick around, Dr. Aldrich,
for the weekend. I don’t want Dr. Hagen to deliver me . . . . I just could not work
with him anymore.” Aldrich also worried that Hagen’s suspension would hurt
Siouxland’s reputation. On cross-examination, Hagen admitted he yelled at nurses,
once broke hospital equipment, and had used the nickname “All Bitch” to describe
Aldrich. Hunt testified that Hagen was fired because the other doctors did not “feel
comfortable having one partner that’s so abusive and so erratic.”
Siouxland’s attorney testified that, in his opinion, Hagen’s conduct provided
four reasons justifying immediate termination: (1) harming the practice’s relationship
with St. Luke’s hospital by threatening to sue it; (2) conducting another medical
practice without the consent of the other Siouxland directors, contrary to the terms
-5-
of employment; (3) disruptive behavior; (4) inability to cover calls at the hospital due
to the suspension. He also believed that Hagen’s disruptive behavior causing his
suspension at St. Luke’s could constitute breach of an ethical duty.
II. Procedural History
Hagen’s twelve-count Complaint included claims for breach of contract and
retaliatory discharge in violation of public policy. After the district court denied
Siouxland summary judgment on the contract claim, Hagen’s Trial Brief advised the
court that breach of contract was one of nine claims that “are not being pursued by
Plaintiff.” Only the public policy tort claim is at issue on appeal.
Over Siouxland’s objections, the district court instructed the jury that the
following conduct, “if engaged in by Dr. Hagen, is protected by Iowa public policy:”
Dr. Hagen reporting, stating an intention to report, or stating that he
might report to a hospital conduct of nurses that Dr. Hagen believed may
have involved wrongful acts or omissions
Dr. Hagen disclosing to a patient or a patient’s family that the patient
may have been the victim of negligent care or malpractice
Dr. Hagen consulting with an attorney, stating an intention to consult
with an attorney, or stating that he might consult with an attorney about
whether Dr. Eastman or nurses had committed wrongful acts or
omissions that Dr. Hagen should report to the Iowa Board of Medicine
or a hospital.
The jury found that Defendants had wrongfully discharged Hagen in violation of
public policy because those three protected activities were a “determining factor” in
Siouxland’s decision to terminate.
-6-
Defendants moved for judgment as a matter of law pursuant to Federal Rule of
Civil Procedure 50(b) and for a new trial pursuant to Rule 59. Siouxland argued,
inter alia, that Hagen’s conduct was not protected by Iowa public policy and,
alternatively, that Hagen failed to prove he was an at-will employee, an essential
element of the wrongful discharge tort claim under Iowa law. Hagen argued
Siouxland had not preserved the latter theory before the case was submitted to the
jury. Before ruling on Siouxland’s motion, the district court certified three questions
to the Supreme Court of Iowa: (1) “Does Iowa law recognize [the conduct found by
the jury] as protected conduct on which a doctor-employee can base a claim for
wrongful discharge in violation of Iowa public policy”; (2) “Does Iowa law allow a
contractual employee to bring a claim for wrongful discharge in violation of Iowa
public policy, or is the tort available only to at-will employees”; (3) “Under Iowa law,
is an employer’s lack of an ‘overriding business justification’ for firing an employee
an independent element of a wrongful discharge claim, or is that element implicit in
the element requiring that an employee’s protected activity be the determining factor
in the employer’s decision to fire the employee?” The Order Certifying Questions
included a lengthy analysis explaining why the district court concluded that the tort
claim applies to contractual employees and that the activities in question were
protected conduct. Hagen v. Siouxland Obstetrics & Gynecology, P.C., 964 F. Supp.
2d 951 (N.D. Iowa 2013).
In an unpublished opinion, the Supreme Court of Iowa declined to answer the
certified questions. “[T]he justices are equally divided on the first certified question,”
the Court explained. “Because a negative answer to the first question would be
dispositive of the case, we will not answer the second or third certified question when
the court is equally divided on the answer to the first certified question.” Hagen v.
Siouxland Obstetrics & Gynecology, P.C., No. 13-1372 (Iowa May 9, 2014). The
district court then denied Siouxland’s post-verdict motions. Hagen v. Siouxland
Obstetrics & Gynecology, P.C., 23 F. Supp. 3d 991 (N.D. Iowa 2014).
-7-
Hagen filed a post-trial motion seeking pre- and post-judgment interest plus an
additur for $112,727 in past lost earnings and $4,406,870 in future lost earnings. The
district court granted Hagen pre- and post-judgment interest but denied his motion for
additur. Siouxland appealed, arguing five issues, only one of which we need discuss.
Hagen cross-appealed the denial of his motion for additur. The cross appeal is
mooted by our determination that the district court should have entered judgment as
a matter of law in favor of Siouxland.
III. Discussion
A. Siouxland argues that the contractual protections provided in Hagen’s
Employment Agreement preclude him from asserting a tort claim for wrongful
discharge in violation of Iowa public policy. Although Siouxland made Rule 50(a)
motions for judgment as a matter of law at the close of plaintiff’s case, and again at
the close of all the evidence, alleging insufficient evidence to establish a claim of
wrongful discharge in violation of public policy, Siouxland concedes that it first
explicitly raised the contractual employee legal theory in defendants’ post-trial Rule
50(b) motion. Hagen argues that Siouxland “cannot establish that reversal is
warranted under the narrow ‘plain error’ standard.”
We agree the general rule is that, “if the movant’s legal theories are not
articulated before the verdict, review is limited to whether the judgment sought is
‘required to prevent manifest injustice,’” the plain error standard of review. Alternate
Fuels, Inc. v. Cabanas, 538 F.3d 969, 973 (8th Cir. 2008) (citation omitted); see
United States v. 353 Cases Mountain Valley Mineral Water, 247 F.2d 473, 477 (8th
Cir. 1957). But a pre-verdict Rule 50(a) motion does not require “technical
precision,” and therefore grounds that are “inextricably intertwined” to those in the
Rule 50(a) motion may be raised in a post-trial Rule 50(b) motion. Rockport
Pharmacy, Inc. v. Dig. Simplistics, Inc., 53 F.3d 195, 197-98 (8th Cir. 1995). As the
Supreme Court recently explained, a Rule 50(b) movant must have “sought relief on
-8-
similar grounds under Rule 50(a).” Whether to consider on appeal a matter not
properly preserved in the district court is “left primarily to the discretion of the courts
of appeals.” Exxon Shipping Co. v. Baker, 554 U.S. 471, 485 n.5 & 487 (2008).
In this diversity case, though Hagen argued that Siouxland failed to preserve
this issue, the district court nonetheless included it in the issues of law the court
certified to the Supreme Court of Iowa for de novo review on the merits. By inviting
de novo review by the Supreme Court of Iowa, the district court obviously concluded
that the certified issues were sufficiently intertwined or similar to the issues preserved
by Siouxland’s Rule 50(a) motions and therefore would have followed that Court’s
controlling interpretation of Iowa law. In these circumstances, we, too, will exercise
our discretion and review this issue de novo. And in any event, we would reach the
same conclusion applying plain error review.
B. Turning to the merits, most States recognize a claim for wrongful discharge
of an at-will employee in violation of public policy. The Supreme Court of Iowa
initially recognized this tort as a “narrow exception[] to the employment at-will
doctrine” and has consistently described the tort in those terms. Fogel v. Trs. of Iowa
Coll., 446 N.W.2d 451, 455 (Iowa 1989); see Ballalatak v. All Iowa Agric. Ass’n, 781
N.W.2d 272, 275 (Iowa 2010); Jasper v. H. Nizam, Inc., 764 N.W.2d 751, 762-63
(Iowa 2009); Harvey v. Care Initiatives, Inc., 634 N.W.2d 681, 683 (Iowa 2001);
Fitzgerald v. Salsbury Chem., Inc., 613 N.W.2d 275, 280-81 (Iowa 2000). Adhering
to that Court’s controlling precedents, we described the elements of this tort in
Mahony v. Universal Pediatric Services, Inc., 643 F.3d 1103, 1106 (8th Cir. 2011):
Iowa law provides that an at-will employee may be discharged at
any time, without cause, but a well-recognized exception to the at-will
doctrine is the tort action for wrongful discharge in violation of public
policy. Fitzgerald v. Salsbury Chem., Inc., 613 N.W.2d 275, 280-81
(Iowa 2000). The elements of this cause of action are (1) existence of
a clearly defined public policy that protects an activity; (2) discharge
-9-
from employment would undermine the policy; (3) the plaintiff was
discharged as the result of participating in the protected activity; and (4)
lack of other justification for the termination. Lloyd v. Drake Univ., 686
N.W. 2d 225, 228 (Iowa 2004). . . . Iowa courts “proceed cautiously,
and will only extend such recognition to those policies that are well
recognized and clearly defined.” Lloyd, 686 N.W.2d at 229 (quotation
omitted).
Courts in other States are divided over whether to limit the tort to at-will
employees. Compare, e.g., Willitts v. Roman Catholic Archbishop of Boston, 581
N.E.2d 475, 479 (Mass. 1991), with Keveney v. Mo. Military Acad., 304 S.W. 3d 98,
102-03 (Mo. 2010). The Supreme Court of Iowa has not explicitly addressed the
issue. In concluding that the Iowa Court would not “foreclose a wrongful discharge
suit to a contractual employee” (contrary to prior decisions by two other Iowa district
court judges), the district court did not cite our decision in Mahony, much less
acknowledge its precedential effect. This was error. “In the absence of an
intervening decision of the Iowa Supreme Court on the issue, the Eighth Circuit . . .
decision in [Mahony] is controlling precedent.” Stults v. Symrise, Inc., 989 F. Supp.
2d 735, 762 n.10 (N.D. Iowa 2013) (citations omitted).
Our research has uncovered three decisions of the Supreme Court of Iowa
addressing the public policy wrongful discharge tort since our decision in Mahony.
In Berry v. Liberty Holdings, Inc., 803 N.W.2d 106, 109, 112 (Iowa 2011), the Court
again emphasized that it has “adopted a narrow public-policy exception to the general
rule of at-will employment” and concluded that Iowa’s comparative negligence
statute “does not articulate a clearly defined and well-recognized public policy
protecting the filing of a personal injury lawsuit.” In Dorshkind v. Oak Park Place
of Dubuque II, LLC, 835 N.W.2d 293, 300 (Iowa 2013), the Court again described
the tort as “a public-policy exception to the general rule of at-will employment.” In
the very recent case of Rivera v. Woodward Resource Center, 2015 WL 3958720(Iowa June 30, 2015), the Court answered the third question certified by the district
-10-
court in this case. The Court again noted that, in prior cases, “we have found multiple
public policy rationales may support a wrongful termination claim of at-will
employees in a variety of settings.” Id. at *5. Thoroughly addressing the question
of causation, the Court held that an employer’s lack of an “overriding business
justification” is not an independent element of the claim; rather, “legitimate business
reasons supporting [the employer’s action may] defeat the conclusion that the
protected conduct was the determining factor in the adverse employment decision.”
Id. at *11. The Court concluded that the jury was wrongly instructed in Rivera but
affirmed a jury verdict for the employer based on harmless error analysis.
None of these recent cases undermines our conclusion in Mahony that the
wrongful discharge/public policy tort under Iowa law is a narrow, well-recognized
exception to the at-will doctrine. As the Supreme Court of Iowa explained in
Dorshkind, 835 N.W.2d at 303, “the exception is narrowly circumscribed to only
those policies clearly defined and well-recognized to protect those with a compelling
need for protection from wrongful discharge.” (Emphasis added.) This focus on the
at-will employee’s need for protection, and the Court’s refusal to address this certified
question in the abstract in this case, strongly suggest that the district court erred in
defining the question as being whether the tort protects “contractual employees” in
general. There are many types of employment contracts that address the question of
termination in a variety of ways. For example, in Stiles v. American General Life
Insurance Co., 516 S.E.2d 449, 451 (S.C. 1999), the court extended the public policy
exception for at-will employees to an employee whose written employment agreement
allowed either party to terminate without cause on thirty days written notice because
“the employee does not have an alternate [contract] remedy based on an allegation of
wrongful discharge.” We think it likely that, presented with an employment contract
having the same without-cause provision, the Supreme Court of Iowa would agree.
The issue is far different where, as here, “an employee is protected from
wrongful discharge by an employment contract.” Silva v. Albuquerque Assembly &
-11-
Distrib. Freeport Warehouse Corp., 738 P.2d 513, 515 (N.M. 1987). Employer
Siouxland invoked the for-cause termination provision in a comprehensive
Employment Agreement negotiated by Hagen when he joined his father’s medical
practice years before he helped recruit the defendant physicians, Eastman, Hunt, and
Aldrich. The contract provided Hagen a wrongful discharge remedy. At the time of
termination, Hagen was President and co-owner of a professional corporation in
which the physicians functioned as partners in a group practice, but enjoyed the
advantage of limited liability afforded business corporation shareholders. See Iowa
Code § 496C.9. He was an employee of a professional corporation that could only
practice medicine through employees “who are licensed to practice the same
profession in this state.” § 496C.7. He was not an employee “with a compelling
need for protection from wrongful discharge.”
This analysis is entirely consistent with the Supreme Court of Iowa’s analysis
in Harvey v. Care Initiatives, Inc., where the Court refused to apply the wrongful
discharge tort to an independent contractor allegedly terminated for reporting
employer conduct that she believed violated the rights of nursing home residents. 634
N.W.2d at 682-83. The Court noted that the wrongful discharge tort was “derived
from the inequity of the bargaining position in a typical at-will employer-employee
relationship, and the inability of employees to otherwise obtain protection.” 634
N.W.2d at 684. Independent contractors do not require the same type of protection
as at-will employees, the Court concluded:
[A]n independent contractor can not only negotiate the circumstances
governing termination of a contract, but has contract remedies to enforce
all expressed or implied terms of a contract. This diminishes the need
for court-based remedies. Moreover, judicial extension of tort remedies
into contracts without clear legislative authority can essentially nullify
terms agreed to by the parties to the contract. We find no compelling
need, as we did for at-will employees, to support a wrongful termination
tort for independent contractors.
-12-
Id. The same is true of physicians who agree to share a group practice. Moreover,
applying this judicially-created remedy to groups of practicing medical professionals
would raise public policy questions quite unlike those raised by the typical at-will
employment relationships, well-illustrated by the professional dispute in this case.
The Supreme Court of Iowa ended its analysis in Harvey by noting that an
independent contractor’s contract remedies would not be exclusive if a statute clearly
prohibited discharging a person in that position who engaged in well-defined
protected conduct. 634 N.W.2d at 685. Applying that inquiry to this case, we note
that the Iowa Code and the Iowa Administrative Code bar an employer from
discriminating against a person who files a complaint with a medical licensing board,1
but not a complaint to a hospital, a patient, or an attorney. See Iowa Code
§ 272C.8(1)(c); Iowa Admin. Code §§ 653-22.2, 653.24.1(3).
The Supreme Court of Iowa has consistently and carefully applied its wrongful
discharge tort precedents to the specific facts of each case. Here, we conclude that
the Court would hold that the exclusive remedy of a medical professional practicing
under Hagen’s Employment Agreement is a breach of contract claim for wrongful
discharge, a claim that would permit inquiry into the professional conduct the district
court concluded was separately protected by the tort of wrongful termination in
violation of public policy. As Hagen pleaded a breach of contract claim but declined
to pursue that claim at trial, the judgment of the district court is reversed and the case
is remanded with directions to enter judgment as a matter of law for defendants.
______________________________
1
The jury found that two types of protected conduct as defined by the district
court were not determining factors in Hagen’s discharge. One was: “Dr. Hagen
reporting, stating an intention to report, or stating that he might report to the Iowa
Board of Medicine conduct of Dr. Eastman that Dr. Hagen believed may have
involved acts, omissions, negligence, or malpractice.”
-13-