Pang v. International Document Services ( 2015 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2015 UT 63
IN THE
SUPREME COURT OF THE STATE OF UTAH
DAVID K. PANG,
Appellant,
v.
INTERNATIONAL DOCUMENT SERVICES; PROGRESSIVE FINANCE; and
MANAGEMENT INCORPORATED,
Appellees.
No. 20120983
Filed: August 5, 2015
Third District, Salt Lake
The Honorable William W. Barrett
No. 120904043
Attorneys:
David K. Pang, Salt Lake City, appellant pro se
Jason Boren, Karen M. Clemes, and Tyler Hawkins, Salt Lake City,
for appellees
CHIEF JUSTICE DURRANT authored the opinion of the Court in which
ASSOCIATE CHIEF JUSTICE LEE, JUSTICE DURHAM, JUSTICE PARRISH, and
JUDGE BLANCH joined.
JUSTICE NEHRING did not participate herein due to his retirement;
THIRD DISTRICT COURT JUDGE JAMES T. BLANCH sat.
JUSTICE DENO G. HIMONAS became a member of the Court on
February 13, 2015, after oral argument in this matter, and
accordingly did not participate.
CHIEF JUSTICE DURRANT, opinion of the Court:
Introduction
¶1 This case requires us to determine whether rule 1.13(b) of
the Utah Rules of Professional Conduct reflects a clear and
substantial public policy of the kind sufficient to prevent companies
from terminating in-house legal counsel for reporting illegal activity
to management. David K. Pang, an attorney, filed a complaint
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Opinion of the Court
against his employer alleging that he was terminated for refusing to
ignore the company‘s violation of several states‘ usury laws. He
asserted that the company had effectively asked him to violate the
Utah Rules of Professional Conduct in order to keep his job. The
district court dismissed his complaint, concluding that Mr. Pang was
an at-will employee and that his firing did not violate a clear and
substantial public policy of the State of Utah. We affirm the district
court‘s decision. Rule 1.13(b) does not constitute a clear and
substantial public policy that prevents the termination of an at-will
employee. And even if it did, other rules of professional conduct
evince strong policy choices that favor allowing clients to terminate
the attorney-client relationship at any time, including firing an in-
house lawyer with whom an organizational client disagrees.
¶2 Mr. Pang also argues that the district court improperly
dismissed his claims without holding an oral hearing. The Utah
Rules of Civil Procedure require district courts to grant a litigant‘s
request for a hearing on a dispositive motion unless the motion is
frivolous or the issue has been authoritatively decided. We agree
with Mr. Pang that his opposition to the motion was not frivolous
and the issues had not been authoritatively decided, so the district
court erred when it denied his request for a hearing. But because
Mr. Pang has not identified any substantive argument he would
have raised if his request had been granted, we conclude that the
error was harmless. We note, however, that because a rule 12(b)(6)
dismissal is generally not a judgment on the merits and the district
court did not dismiss the complaint with prejudice, nothing in our
decision precludes Mr. Pang from filing a new complaint.
Background
¶3 On appeal from a motion to dismiss, we must accept the
factual allegations in the complaint as true1 and view all reasonable
inferences from them in the light most favorable to the plaintiff.2 We
outline the pertinent facts consistent with this standard.
¶4 Between 2009 and 2012, Mr. Pang worked as a compliance
officer for Internal Document Services (IDS) and Progressive
Finance. Resource Management Incorporated (RMI) also hired Mr.
Pang in 2012, becoming a ―co-employer‖ with the other two
companies. IDS promoted Mr. Pang to in-house counsel in 2011,
1 Hudgens v. Prosper, Inc., 2010 UT 68, ¶ 2, 243 P.3d 1275.
2 Moss. v. Parr Waddoups Brown Gee & Loveless, 2012 UT 42, ¶ 3,
285 P.3d 1157.
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making him responsible for its compliance with state regulatory
requirements in several different jurisdictions. Mr. Pang apparently
worked in this same capacity for the other two companies. Because
the relationship between these three entities is not relevant to the
merits of the issues presented on appeal, we will refer to them
collectively as ―the Company‖ throughout this opinion.
¶5 Beginning in September 2011, Mr. Pang became concerned
that the Company was violating ―usury laws in numerous states by
charging an interest rate above statutory limits and not registering as
a loan institution.‖ He warned the Company‘s owners ―repeatedly‖
that these oversights ―rendered their out of state practice illegal.‖
Mr. Pang ―made a final attempt to convince‖ the Company of its
―illegal lending practices‖ in May 2012. He ―printed, and took home,
loan contracts from different states in order to develop a spreadsheet
report to show the specific number of . . . usury violations.‖ Two
weeks later, the Company fired Mr. Pang ―for taking home
documents,‖ citing a provision of the employee handbook that
prohibited such conduct. ―[A]t the time of his termination,‖ Mr.
Pang learned ―for the first time‖ that ―the owners were aware of the
problems but did not plan to correct‖ them. And he ―was told to
ignore‖ the Company‘s ―non-compliance.‖
¶6 According to Mr. Pang, the ―real reason‖ for his termination
was ―the fear that [he] would expose [the Company‘s] illegal
activities, and to punish and intimidate him into silence.‖ He sued
the Company for wrongful termination, breach of the implied
covenant of good faith and fair dealing, and intentional infliction of
emotional distress. With respect to the wrongful termination claim,
Mr. Pang alleged that his termination ―violated the public policy of
the State of Utah and the Rules of Professional Conduct‖ because the
Company fired him for ―(1) refusing to be unethical, (2) [refusing] to
break the law by complying with their illegal activities, [and] (3)
refusing [the Company‘s] orders to ignore their illegalities.‖3
¶7 The Company moved to dismiss the complaint under rule
12(b)(6) of the Utah Rules of Civil Procedure. After determining that
a ―hearing was requested but . . . not necessary‖ to rule on the
3 Mr. Pang also alleged that he had an implied contract of
employment and was not an at-will employee. The district court
dismissed this claim, and he has not challenged that decision on
appeal.
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motion, the district court dismissed all of Mr. Pang‘s claims. He
appeals. We have jurisdiction under Utah Code section 78A-3-102(3).
Standard of Review
¶8 Mr. Pang argues that the district court should have granted
his request for a hearing before ruling on the motion to dismiss.
Whether a litigant is entitled to a hearing on a dispositive motion
under rule 7(e) of the Utah Rules of Civil Procedure is a question of
law, which we review for correctness.4 He also argues that the
district court improperly dismissed his wrongful termination claim
by concluding that his termination did not violate a clear and
substantial public policy. ―We review the grant of a motion to
dismiss for correctness, granting no deference to the decision of the
district court.‖5
Analysis
¶9 We first address Mr. Pang‘s contention that the district
court erred in denying his request for a hearing. We conclude that
even though the court erred in refusing to hold a hearing on the
motion to dismiss, Mr. Pang has not demonstrated on appeal that the
outcome of his case would have been any different absent the error,
so the court‘s mistake was harmless. We then discuss Mr. Pang‘s
wrongful termination claim and hold that he has not identified a
clear and substantial public policy sufficient to prevent his
termination. And even if he had, we conclude that other
countervailing policies outweigh an in-house lawyer‘s right to
―report up‖ illegal activity without fear of termination.
I. The District Court Should Have Held a Hearing,
but the Error Was Harmless
¶10 Rule 7(e) of the Utah Rules of Civil Procedure provides that
the ―court shall grant a request for a hearing‖ on a dispositive
motion unless it ―finds that the motion or opposition to the motion is
frivolous or the issue has been authoritatively decided.‖ Mr. Pang
requested an oral hearing in his memorandum opposing the
Company‘s motion to dismiss. In the district court‘s written order
dismissing the complaint, it noted that a ―hearing was requested,‖
but found that it was ―not necessary for the Court to decide the
Defendants‘ Motion to Dismiss.‖
4 See Price v. Armour, 949 P.2d 1251, 1254 (Utah 1997).
5 Hudgens v. Prosper, Inc., 2010 UT 68, ¶ 14, 243 P.3d 1275.
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¶11 Mr. Pang contends that this was improper for two reasons:
(1) rule 7(e) requires district courts to make explicit written findings,
and (2) his opposition to the motion was not frivolous, nor had the
pertinent issues been authoritatively decided, so rule 7(e) required
the court to hold an oral hearing on the motion. We reject Mr. Pang‘s
contention that rule 7(e) requires explicit oral or written findings, but
we agree that in this case the court erred in denying his request for
an oral hearing. Nevertheless, because Mr. Pang has failed to show
that granting his request would have had any effect on the outcome
of the case, we conclude that the error was harmless.
¶12 Nothing in the rules of civil procedure requires district
courts to make specific written or oral findings of fact before denying
a litigant‘s request for a hearing. Rule 7(e) provides that a district
court ―shall grant a request for a hearing‖ on a dispositive motion
―unless the court finds that the motion or opposition to the motion is
frivolous or the issue has been authoritatively decided.‖6 But the
rules also provide that a court ―need not enter findings of fact and
conclusions of law in rulings on [non-dispositive] motions.‖7 And
with respect to orders on dispositive motions, the rules require
nothing more than ―a brief written statement of the ground for [the
court‘s] decision‖ only ―when the motion is based on more than one
ground.‖8 Here, a request for a hearing under rule 7(e) is not a
dispositive motion, and Mr. Pang has not offered any reason why
the ―brief statement‖ rule should apply to hearing requests or why
such requests should be treated any differently than ordinary
motions. We therefore conclude that rule 7(e) does not require
district courts to enter specific findings before denying a request for
a hearing.
¶13 Even though the court had no obligation to make explicit
findings before refusing to hold a hearing, we agree with Mr. Pang
that the court erred because it does not appear that his opposition to
the Company‘s motion was ―frivolous‖ or that the pertinent issues
had been ―authoritatively decided.‖9 We have not yet interpreted the
terms ―frivolous‖ or ―authoritatively decided‖ in rule 7. But in other
contexts, we have indicated that an argument is ―frivolous‖ if it is
6 UTAH R. CIV. P. 7(e).
7 Id. 52(a).
8 Id.
9 See id. 7(e).
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―obviously without merit‖ or has ―no reasonable likelihood of
success.‖10 Likewise, the Utah Rules of Appellate Procedure state
that a frivolous appeal is ―one that is not grounded in fact, not
warranted by existing law, or not based on a good faith argument to
extend, modify, or reverse existing law.‖11 This is a high bar. Even
bad arguments are not necessarily frivolous—we sanction attorneys
for frivolous appeals only in the most ―egregious cases‖ where an
obviously meritless appeal ―result[s] in the delay of a proper
judgment.‖12
¶14 Mr. Pang‘s arguments before the district court do not meet
this standard. The court acknowledged in its written order that Mr.
Pang‘s wrongful termination claim was not completely unfounded.
As we discuss in more detail in part II of this opinion, to withstand
dismissal on his wrongful termination claim, Mr. Pang needed to
allege that a clear and substantial public policy prohibited his
firing.13 And to meet this standard, a policy must be reflected in
sources of law that we have recognized as an authoritative statement
of state public policy, like a judicial decision. 14 Mr. Pang argued that
the Company fired him for making an internal report of illegal
activity as required by the Utah Rules of Professional Conduct. The
district court acknowledged that the rules were ―[a]rguably ‗judicial
decisions‘‖ that could qualify as an authoritative source of state
public policy. But the court ultimately concluded that ruling in Mr.
Pang‘s favor would be ―acting outside its role‖ because ―there is no
public policy that is plainly defined by legislative enactments,
constitutional standards, or judicial decisions that apply to this
case.‖
¶15 Thus, the court seems to concede in its order that Mr. Pang‘s
argument was not frivolous, in that an issue of first impression that
could ―arguably‖ go the plaintiff‘s way cannot be said to be a claim
that is ―not warranted by existing law, or not based on a good faith
argument to extend, modify, or reverse existing law.‖15 There are
Redd v. Hill, 2013 UT 35, ¶ 28, 304 P.3d 861 (internal quotation
10
marks omitted).
11 UTAH R. APP. P. 33(b).
12 Redd, 2013 UT 35, ¶ 28 (internal quotation marks omitted).
13 See infra II.A.
14 See infra II.A.
15 See UTAH R. APP. P. 33(b).
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certainly problems with Mr. Pang‘s wrongful termination claim that
we discuss later in this opinion. But it is difficult to see how the court
determined that it was ―frivolous‖ or ―authoritatively decided‖ by
existing precedent when the order dismissing the claim seems to
acknowledge otherwise. Accordingly, we conclude that the district
court erred in denying Mr. Pang‘s request for a hearing on the
motion to dismiss.
¶16 But even though Mr. Pang was entitled to a hearing, that
error alone is insufficient to justify reversal. A court‘s erroneous
refusal to grant a requested hearing does not warrant reversal unless
there is a ―reasonable likelihood that it affected the outcome of the
case.‖16 For example, in Price v. Armour, we held that the erroneous
denial of a litigant‘s request for a hearing on a motion for summary
judgment was harmless error because the litigant failed to show
―that he would have made new or additional arguments at the
hearing that were not covered by his memorandum of points and
authorities.‖17 Consequently, the litigant could not show that there
was any reasonable likelihood that a hearing would have affected
the outcome of the case, so reversal was not justified.18
¶17 Like the litigant in Price, Mr. Pang has not identified any
substantive arguments he would have made at a hearing had the
court granted him one. Instead, he asserts that he would have ―made
an oral motion to amend his complaint‖ if, ―after oral arguments[,]
the District Court found his Complaint still to be lacking.‖ But Mr.
Pang overlooks the fact that he could have amended his complaint at
any time without asking the court‘s permission. Rule 15(a) allows a
party to ―amend his pleading once as a matter of course at any time
before a responsive pleading is served.‖19 Here, the Company moved
to dismiss the complaint without ever filing an answer, and under
our caselaw, a ―motion to dismiss is not a responsive pleading.‖20
Moreover, even after the court dismissed his complaint, Mr. Pang
16 Price v. Armour, 949 P.2d 1251, 1255 (Utah 1997); see also UTAH
R. CIV. P. 61 (―The court at every stage of the proceeding must
disregard any error or defect in the proceeding which does not affect
the substantial rights of the parties.‖).
17 949 P.2d at 1255–56.
18 Id.
19 UTAH R. CIV. P. 15(a).
20 Hudgens v. Prosper, Inc., 2010 UT 68, ¶ 24, 243 P.3d 1275.
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could have moved to reopen the judgment under rule 59 or rule 60 of
the Utah Rules of Civil Procedure.21
¶18 Accordingly, Mr. Pang‘s ability to amend his complaint did
not hinge on whether the court granted his request for an oral
hearing, so he has failed to advance any reason why the error
affected the outcome of his case. And for that reason, the court‘s
erroneous denial of his hearing request was harmless error.
¶19 We note, however, that while Mr. Pang was not prejudiced
by the district court‘s denial of his request for a hearing, the district
court did not dismiss his complaint with prejudice. Under our
caselaw, the ―general rule‖ is ―‗that a dismissal under [r]ule
12(b)(6) . . . is not final or on the merits.‘‖22 Consequently, nothing in
our decision prevents Mr. Pang from filing a new complaint.
II. The District Court Properly Dismissed Mr. Pang‘s
Wrongful Termination Claim
¶20 Having concluded that the denial of Mr. Pang‘s request for a
hearing was harmless error, we now turn to his wrongful
termination claim. In Utah, all employment relationships are
presumed to be at-will, meaning that the employer can terminate the
relationship at any time for any reason, or no reason at all.23 There
21 See Nichols v. State, 554 P.2d 231, 232 (Utah 1976) (stating that
after an order of dismissal, a plaintiff may ―move under [r]ules 59(e)
or 60(b) to reopen the judgment‖ to file an amended complaint);
Nat’l Adver. Co. v. Murray City Corp., 2006 UT App 75, ¶ 15, 131 P.3d
872 (noting that courts have discretionary power to treat a motion to
amend a complaint filed after dismissal ―‗as including a rule 59(e)
motion to amend judgment or a rule 60(b) motion for relief from
judgment‘‖ (quoting Combs v. PricewaterhouseCoopers LLP, 382 F.3d
1196, 1205 (10th Cir. 2004) (quoting 3 JAMES W. MOORE ET AL.,
MOORE‘S FEDERAL PRACTICE § 15.12[2] & n.19 (3d ed. 2004)))).
22 Alvarez v. Galetka, 933 P.2d 987, 991 (Utah 1997) (quoting 5A
CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE &
PROCEDURE § 1357 (2d ed. 1990)); see also Carlton v. Brown, 2014 UT 6,
¶ 14 n.5, 323 P.3d 571 (noting that dismissal under rule 12(b)(6)
―generally is not final or on the merits and the court normally will
give plaintiff leave to file an amended complaint except in situations
where it appears to a certainty that plaintiff cannot state a claim, in
which case dismissal with prejudice is appropriate‖ (internal
quotation marks omitted)).
23 Hansen v. Am. Online, Inc., 2004 UT 62, ¶ 7, 96 P.3d 950.
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are several exceptions to the at-will employment doctrine.24 The
exception at issue in this case applies when ―the termination of
employment constitutes a violation of a clear and substantial public
policy.‖25 To state a claim under the public policy exception to at-will
employment, Mr. Pang must allege ―(i) that his employer terminated
him; (ii) that a clear and substantial public policy existed; (iii) that
[Mr. Pang‘s] conduct brought the policy into play; and (iv) that the
discharge and the conduct bringing the policy into play are causally
connected.‖26
¶21 Mr. Pang characterizes the wrongful termination issue as
whether Utah law should ever permit an in-house lawyer to bring a
wrongful termination claim. This is a matter of first impression in
Utah. Other state supreme courts have held that in-house counsel
can bring wrongful termination claims, but they limit the extent to
which the plaintiff can rely on confidential attorney-client
communications to support them.27 Mr. Pang urges us to follow
these decisions and argues that he can sustain such a claim for two
reasons: (1) the Company fired him for refusing to commit an illegal
act, and (2) he was fired for reporting illegal activity to his superiors
under rule 1.13(b) of the Utah Rules of Professional Conduct.
24 We have recognized three exceptions to at-will employment:
―(1) there is an implied or express agreement that the employment
may be terminated only for cause or upon satisfaction of [some]
agreed-upon condition; (2) a statute or regulation restricts the right
of an employer to terminate an employee under certain conditions;
or (3) the termination of employment constitutes a violation of a
clear and substantial public policy.‖ Id. (alteration in original)
(internal quotation marks omitted).
25 Id. (internal quotation marks omitted). In his memorandum
opposing the Company‘s motion to dismiss, Mr. Pang argued that
other exceptions to the at-will employment doctrine barred his
termination. The district court rejected these arguments, and he has
not challenged that decision on appeal.
26 Ryan v. Dan’s Food Stores, Inc., 972 P.2d 395, 404 (Utah 1998)
(footnote omitted).
27See, e.g., Gen. Dynamics Corp. v. Superior Court, 876 P.2d 487,
493–94, 496–504 (Cal. 1994) (explaining the California rule and
discussing the approach taken in other jurisdictions).
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¶22 We do not reach the broader question of whether an in-
house lawyer may ever bring a wrongful termination claim, because
even if such a claim existed in Utah, Mr. Pang has not identified a
constitutional provision, statute, or judicial decision that amounts to
a ―clear and substantial‖ public policy to support a claim under the
circumstances of this case. And even if he had, rule 1.13 and other
rules of professional conduct express strong countervailing policy
interests that outweigh any policy Mr. Pang raises in this case.
A. Mr. Pang’s Complaint Does Not Implicate a State Public Policy of
Sufficient Magnitude to Qualify as an Exception to At-Will
Employment
¶23 On appeal, Mr. Pang has conceded that he was an at-will
employee. But he argues that his firing falls within an exception to
the at-will employment doctrine because he was terminated in
―violation of a clear and substantial public policy.‖28 Courts often
use the term public policy as a broad reference to anything that ―has
a tendency to be injurious to the public, or against the public
good.‖29 But in the context of a wrongful termination claim, the term
encompasses considerations that are ―much narrower than
traditional notions of public policy.‖30 This is by design—by cabining
the scope of the public policy exception, we ―avoid unreasonably
eliminating employer discretion in discharging employees.‖31
Accordingly, to support a wrongful discharge claim under the public
policy exception, Mr. Pang‘s complaint must identify a public policy
―so clear and weighty,‖ and as to which ―the public interest is so
strong‖ that the policy should be ―place[d] . . . beyond the reach of
contract.‖32
¶24 To make this determination, we consider a number of
factors: (1) whether the policy at issue is reflected in authoritative
28 Hansen, 2004 UT 62, ¶ 7 (internal quotation marks omitted).
29 See Berube v. Fashion Ctr., Ltd., 771 P.2d 1033, 1043 (Utah 1989)
(internal quotation marks omitted).
30 Rackley v. Fairview Care Ctrs., Inc., 2001 UT 32, ¶ 15, 23 P.3d
1022.
31 Ryan, 972 P.2d at 405.
32 See Touchard v. La-Z-Boy Inc., 2006 UT 71, ¶ 13, 148 P.3d 945
(internal quotation marks omitted); see also Hansen, 2004 UT 62,
¶¶ 10–11; Ryan, 972 P.2d at 404–06.
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sources of state public policy,33 (2) whether the policy affects the
public generally as opposed to the private interests of the employee
and employer,34 and (3) whether countervailing policies outweigh
the policy at issue.35 Below, we discuss each factor and conclude that
rule 1.13 does not reflect a public policy of sufficient magnitude to
qualify as an exception to the at-will employment doctrine.
1. Mr. Pang has not raised a policy that is adequately reflected in the
kind of sources we have recognized previously as authoritative
expressions of Utah public policy
¶25 First, the facts pled in Mr. Pang‘s complaint do not implicate
a public policy defined with sufficient clarity in the types of sources
we have recognized as authoritative expressions of Utah public
policy. By ―sources,‖ we do not refer to particular institutions or
public officials, but rather the laws they produce that have state-
wide application. In other words, we generally will not recognize a
policy as an exception to at-will employment unless it is ―plainly
defined‖ in authoritative sources of state law, such as ―legislative
enactments, constitutional standards, or judicial decisions.‖36 We
have also stated that ―our case law does not allow for administrative
regulations alone to constitute expressions of clear public policy,‖
though regulations may provide some ―support to a legislatively or
judicially created public policy.‖37
¶26 In this case, Mr. Pang relies on four categories of public
policy exceptions we have previously recognized in our caselaw: an
employer may not terminate someone for (1) refusing to commit an
illegal act, (2) performing a public obligation, (3) exercising a legal
33Touchard, 2006 UT 71, ¶ 12. As we explain in more detail below,
we have recognized federal law and the laws of other states as the
type of authoritative sources that may reflect Utah public policy. We
have cautioned, however, that ―[a]lthough many state and federal
laws . . . reflect Utah public policy, and may, in fact, provide a source
of Utah public policy, a plaintiff must establish a connection
between‖ the federal or state law ―and the public policies of Utah‖ to
establish an exception to the at-will rule. Peterson v. Browning, 832
P.2d 1280, 1283 (Utah 1992).
34 Touchard, 2006 UT 71, ¶¶ 13–14, 18.
35 Hansen, 2004 UT 62, ¶¶ 10–11.
36 Ryan, 972 P.2d at 405.
37 Rackley, 2001 UT 32, ¶ 27 & n.8.
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right or privilege, or (4) reporting illegal activities to a public
authority.38 We conclude that Mr. Pang‘s reliance on the first
category is misplaced because the allegations in his complaint are
legally deficient and he also failed to preserve any argument that he
refused to commit an illegal act. Additionally, his claims under the
other three categories depend on establishing rule 1.13 as a clear and
substantial expression of Utah public policy, and we conclude that it
is not.
¶27 As a general proposition, ―[p]ersons who are terminated
from their employment because they refuse to engage in illegal
activities that implicate clear and substantial Utah public policy
considerations should be protected regardless of whether the
applicable law is that of Utah, the federal government, or another
state.‖39 But the public policy exception does not apply simply
because an employee was fired for refusing to violate a statute.
Rather, the ―violation of a state or federal law must contravene the
clear and substantial public policy of the state of Utah.‖40 And
―[a]lthough many state and federal laws will reflect Utah public
policy, and may, in fact, provide a source of Utah public policy, a
plaintiff must establish the connection between the law violated and
the public policies of Utah.‖41 To ―properly preserve‖ such an issue
for appeal, ―the issue must be raised in a timely fashion,‖ it must ―be
specifically raised,‖ and the litigant ―must introduce supporting
evidence or relevant legal authority.‖42 Mr. Pang‘s ―refusal to
commit an illegal act claim‖ fails for two reasons: (1) there are no
allegations in the complaint that Mr. Pang was ever asked to commit
an illegal act, much less that he refused such a request, and (2) he
failed to preserve any argument based on out-of-state statutes he
claims the company violated.
¶28 The factual allegations in Mr. Pang‘s complaint do not
suggest that the Company ever asked him to commit an illegal act
prior to his termination. In both the complaint and his memorandum
opposing the motion to dismiss, Mr. Pang alleges generally that he
was terminated for ―refusing . . . to break the law by complying with
38 Touchard, 2006 UT 71, ¶ 6 (internal quotation marks omitted).
39 Peterson, 832 P.2d at 1283.
40 Id. (emphasis added).
41 Id.
O’Dea v. Olea, 2009 UT 46, ¶ 18, 217 P.3d 704 (internal quotation
42
marks omitted).
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[the Company‘s] illegal activities‖ and ―refusing defendants‘ orders
to ignore their illegalities.‖ But the specific factual allegations in the
complaint do not support these assertions. According to the
complaint, Mr. Pang first warned the Company in September 2011
that it was ―violating usury laws in numerous states by charging an
interest rate above statutory limits and not registering as a loan
institution.‖ And he continued to ―repeatedly warn[]‖ the
Company‘s owners that ―their out of state practice was illegal.‖ After
making ―a final attempt to convince‖ the Company of its ―illegal
lending practices‖ in May 2012, the company fired Mr. Pang for
taking home documents, citing a provision of the employee
handbook that prohibited such conduct. And according to his
complaint, he was told ―for the first time, at the time of his
termination‖ that ―the owners were aware of the problems but did
not plan to correct it‖ and that he should ―ignore their non-
compliance.‖ Thus, even accepting the allegations in the complaint
as true and drawing all reasonable inferences from them in Mr.
Pang‘s favor, the allegations are legally insufficient. Nowhere in the
complaint does Mr. Pang allege that he was asked to break the law,
much less that his refusal of such a request led to his termination.
Accordingly, Mr. Pang has failed to state a claim that he was
terminated for refusing to commit an illegal act.
¶29 In addition to the deficiency in Mr. Pang‘s pleadings, he also
failed to preserve the argument that he was terminated for refusing
to violate out-of-state statutes. He never presented the district court
with the statutes he claims the company violated. They appear
nowhere in the complaint or Mr. Pang‘s memorandum opposing the
motion to dismiss. And he never specified before the district court
whether these laws are criminal or civil statutes or agency
regulations, nor does he discuss the penalties for violating them. ―In
order to preserve an issue for appeal[,] the issue must be presented
to the trial court in such a way that the trial court has an opportunity
to rule on that issue.‖43 Without this information, the district court
could not evaluate whether serious criminal penalties, hefty civil
fines, or the nature of the violations themselves would provide a
basis to determine that these laws reflect a clear and substantial Utah
public policy. And as we have just noted, it was Mr. Pang‘s burden
to furnish them.
43 See 438 Main Street v. Easy Heat, Inc., 2004 UT 72, ¶ 51, 99 P.3d
801 (alteration in original) (internal quotation marks omitted).
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Opinion of the Court
¶30 Mr. Pang attempts to remedy this deficiency on appeal by
citing laws in California, Florida, and Washington that he claims the
Company violated. But because he never brought these laws to the
district court‘s attention, we conclude that any argument based on
the out-of-state statutes referenced in Mr. Pang‘s brief is
unpreserved.44
¶31 Having concluded that the district court properly dismissed
Mr. Pang‘s claim that he was terminated for refusing to commit an
illegal act, we now turn to his claims on each of the other public
policies we have recognized previously—exercising a legal right or
privilege, performing a public obligation, or reporting illegal
activities to a public authority. We begin by noting that each of these
hinges on whether rule 1.13 of the Utah Rules of Professional
Conduct expresses a clear and substantial public policy of sufficient
magnitude to qualify as an exception to at-will employment. To
make out a claim that he was improperly fired for exercising a legal
right, Mr. Pang must do more than simply ―point to a legal right or
privilege‖ he exercised prior to his termination. 45 He must establish
that the legal right he claims to have exercised embodies the type of
clear and substantial public policy we recognize as being beyond the
reach of contract.46 Similarly, to show he was improperly fired for
performing a public obligation, Mr. Pang must identify such an
obligation that is founded in a clear and substantial public policy.47
44See Peterson, 832 P.2d at 1283 (noting that although federal law
and other states‘ statutes may ―reflect‖ the kind of ―Utah public
policy‖ sufficient to support a wrongful discharge claim, ―a plaintiff
must establish the connection between the law violated and the
public policies of Utah‖). We also note that Mr. Pang conceded at
oral argument that his public policy argument before the district
court hinged entirely on rule 1.13(b).
45 See Touchard, 2006 UT 71, ¶ 9 (―Nevertheless, the fact that an
employee can point to a legal right or privilege does not
automatically mean that the employee has established a clear and
substantial public policy for purposes of the exception to the at-will
rule.‖).
46 See id.
47Hansen, 2004 UT 62, ¶ 10 (―An employer owes a duty to an
employee, independent of any duty imposed by the contract of
employment, not to exploit the employment relationship by
demanding that an employee choose between continued
(Continued)
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In this regard, he argues that the Company fired him for reporting
the Company‘s illegal activity to his superiors as required by rule
1.13. He claims he had both a legal right under the rule and an
obligation to the public to make this report. And with respect to the
third policy—reporting illegal activity to a public authority—Mr.
Pang relies on the fact that rule 1.13 directs in-house counsel to
internally report such conduct. So even though he never contacted
law enforcement, Mr. Pang argues that reporting to the Company‘s
owners amounted to a report to law enforcement because the
―proper authorities‖ under rule 1.13 were his superiors.
¶32 As we have discussed, a policy cannot be clear and
substantial unless it is recognized by an authoritative source of Utah
public policy. In other words, the policy must be ―plainly defined‖
by authoritative sources of state law, such as ―legislative enactments,
constitutional standards, or judicial decisions.‖48 Rule 1.13 directs an
in-house counsel to ―refer‖ any ―matter to higher authority in the
organization‖ that ―is a violation of a legal obligation to the
organization, or a violation of law that reasonably might be imputed
to the organization, and that is likely to result in substantial injury to
the organization.‖49 Mr. Pang argues that the rules of professional
conduct qualify as an authoritative source of Utah public policy
because they are both a ―judicial decision‖ and a ―constitutional
standard‖ under article VIII, section 4 of the Utah Constitution. That
section states, ―The Supreme Court by rule shall govern the practice
of law, including admission to practice of law and the conduct and
discipline of persons admitted to practice law.‖50
¶33 We do not decide whether the rules of professional conduct
qualify as ―judicial decisions‖ that could independently establish an
exception to at-will employment. This is because even if some of the
rules may reflect a public policy of sufficient magnitude to override
at-will employment, rule 1.13, upon which Mr. Pang exclusively
relies, clearly does not. First, the rule regulates private conduct
between attorneys and their clients, not matters of broad public
importance. And second, the rules of professional conduct articulate
employment and violating a law or failing to perform a public
obligation of clear and substantial public import.‖).
48 Ryan, 972 P.2d at 405.
49 UTAH R. PROF‘L CONDUCT 1.13(b).
50 UTAH CONST. art. VIII, § 4.
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PANG V. INT‘L DOCUMENT
Opinion of the Court
a strong, countervailing policy of allowing organizational clients to
obtain the representation of their choice, and this policy outweighs
any Mr. Pang has raised in this case.
2. Rule 1.13 regulates private attorney-client conduct, not matters of
broad public importance
¶34 In addition to being defined by an authoritative source, clear
and substantial public policies must be ―of overarching importance
to the public as opposed to the parties only.‖51 Otherwise, we will
not conclude that ―the public interest is so strong and the policy so
clear and weighty that we should place the policy beyond the reach
of contract.‖52 Policies that ―inure[] solely to the benefit of the
employer and employee‖ are accordingly ―insufficient to give rise to
a substantial and important public policy.‖53 Mr. Pang has not
shown that the policy he identifies in rule 1.13 meets this standard
for two reasons. First, while rule 1.13, like many of the rules of
professional conduct, indirectly benefits the public, its primary
purpose is to regulate private conduct between a lawyer and his or
her client. Second, the policy Mr. Pang urges us to adopt is not in the
same class as other policies we have recognized previously as clear
and substantial. Accordingly, rule 1.13 does not reflect a policy of
sufficient public importance to qualify as an exception to at-will
employment.
¶35 It is true that when in-house attorneys report illegal conduct
to their superiors, the public reaps incidental benefits from corrective
action the company might undertake to comply with the law. But
rule 1.13 regulates conduct that is, at its core, a private matter
between attorneys and their clients, not one of broad public concern.
And in similar contexts, we have explicitly characterized an
employee‘s duty to disclose information to an employer as ―serv[ing]
the private interest of the employer, not the public interest.‖54
¶36 For instance, our caselaw has established that even though
the public may reap incidental benefits when a company polices its
own activity through hiring compliance officers, the principal
51 Touchard, 2006 UT 71, ¶ 13 (internal quotation marks omitted).
52 Id. (internal quotation marks omitted).
53 Id.
54 Fox v. MCI Commc’ns Corp., 931 P.2d 857, 861 (Utah 1997); see
also Touchard, 2006 UT 71, ¶ 45.
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benefits flow to the employer by minimizing its risk of liability.55 For
example, in Touchard v. La-Z-Boy, a company fired a compliance
officer hired to investigate its handling of workers‘ compensation
claims after she told management that she believed some claims
were being ―intentionally mismanaged.‖56 We held that a worker
―who has been terminated for exercising his or her workers‘
compensation rights has a wrongful discharge cause of action under
the public policy exception.‖57 But we concluded that no public
policy prevented the company from firing the compliance officer.58
We noted that the compliance officer‘s complaints ―were all made in
furtherance of her job duties‖ and that ―[w]hile the public may
benefit when an employer chooses to create [an internal monitoring]
position, the creation of an investigatory or supervisory position is
likely designed to serve the employer‘s private interests by
minimizing its risk of liability.‖59 And consequently, employers ―are
free to disagree with the findings made by such employees and
terminate employees who make findings with which the employer
does not agree.‖60
¶37 Similarly, in Fox v. MCI Communications Corp., we concluded
that an employee did not have a wrongful termination claim after
she was fired for reporting her coworkers‘ fraudulent practice of
classifying old customer accounts as new accounts to increase their
pay.61 We observed that ―[a]lthough employees may have a duty to
disclose information concerning the employer‘s business to their
employer, that duty ordinarily serves the private interest of the
employer, not the public interest.‖62
¶38 These cases are dispositive. Mr. Pang characterizes his in-
house counsel duties as ―a broad array of compliance assignments,‖
including ―ensuring that [the Company] complied with all state
regulatory requirements.‖ But like the plaintiffs in Fox and Touchard,
55 See Touchard, 2006 UT 71, ¶ 45; Fox, 931 P.2d at 859.
56 Touchard, 2006 UT 71, ¶ 43 (internal quotation marks omitted).
57 Id. ¶ 25.
58 Id. ¶ 47.
59 Id. ¶ 45.
60 Id.
61 931 P.2d at 858–59.
62 Id. at 861.
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PANG V. INT‘L DOCUMENT
Opinion of the Court
he does not allege that he reported the Company‘s illegal activity to
anyone outside the organization or that rule 1.13 required him to
contact public authorities. And the fact that Mr. Pang had an ethical
obligation as an attorney under rule 1.13 to take the action he did
does not distinguish his case from either Fox or Touchard; the
employees in both cases acted on similar legal obligations to disclose
information to their employers.63
¶39 Moreover, rule 1.13‘s plain terms characterize the attorney‘s
duty to ―report up‖ as serving the employer‘s private interest, not an
obligation to the public. The rule requires attorneys who suspect that
their employer may be involved in illegal activity ―that is likely to
result in substantial injury to the organization‖ to ―refer the matter to
higher authority in the organization, including, if warranted by the
circumstances, to the highest authority that can act on behalf of the
organization.‖64 Other provisions in the rule allow disclosure of
confidential information ―to the extent the lawyer reasonably
believes necessary to prevent substantial injury to the organization.‖65
And it instructs lawyers representing the employer to inform
―directors, officers, [and] employees‖ within the organization that
the lawyer represents the employer when its ―interests are adverse to
those of the constituents with whom the lawyer is dealing.‖66
Consequently, the duty to ―report up‖ under the rule is like the
regular duty an employee might have to ―disclose information
concerning the employer‘s business to [his or her] employer,‖67 a
duty we characterized in Touchard and Fox as distinctly private.68
Accordingly, we conclude that an in-house counsel‘s duty to ―report
up‖ illegal activity to his or her superiors is not the type of clear and
substantial public policy that qualifies as an exception to the at-will
employment doctrine.
¶40 This conclusion is buttressed by the significant weight and
overarching importance of other clear and substantial public policies
we have recognized previously, which contrast sharply with the
private nature of the policy Mr. Pang has raised in this case. As we
63 See Touchard, 2006 UT 71, ¶ 43; Fox, 931 P.2d at 861–62.
64 UTAH R. PROF‘L CONDUCT 1.13(b) (emphasis added).
65 Id. 1.13(c)(2) (emphasis added).
66 Id. 1.13(f).
67 Fox, 931 P.2d at 861.
68 See supra ¶¶ 36–37.
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have already discussed, Utah public policy does not allow an
employer to fire someone for refusing to commit a crime or for
reporting illegal activity to law enforcement.69 This is because of the
substantial benefits such policies confer on the public at large.
Criminal codes are ―designed to protect both society at large and
specific individuals from antisocial acts,‖ and the law therefore
―ought not to allow those prohibitions to be circumvented by
employers who seek to secure an objective prohibited by the criminal
law while avoiding a technical violation . . . because of the means
used.‖70 Likewise, ―[t]he public policies embedded in the criminal
laws have long been deemed of such importance that the law also
encourages persons to report criminal activity to the public
authorities.‖71 We have also held that an employer cannot terminate
anyone for attempting to exercise his or her workers‘ compensation
rights72 or for pressuring an employee to ignore state reporting
requirements that ―ensure[] the safety of financial institutions in the
state.‖73
¶41 These examples share a common feature—they involve
overarching statutory frameworks designed by the legislature to
protect the public from bodily injury and financial harm. Mr. Pang‘s
claim, by contrast, involves an internal report he was required to
make as in-house counsel to minimize the regulatory risks of his
employer‘s out-of-state lending practices. It would be one thing if
Mr. Pang‘s complaint invoked other rules of professional conduct—
like rule 1.6—that are designed to protect others from death,
substantial bodily injury, and serious financial harm.74 That might be
69 See Fox, 931 P.2d at 861–62.
70 Id. at 860 (internal quotation marks omitted).
71 Ryan, 972 P.2d at 408 (internal quotation marks omitted).
72 See Touchard, 2006 UT 71, ¶ 25.
73 Heslop v. Bank of Utah, 839 P.2d 828, 837 (Utah 1992).
74 See UTAH R. PROF. CONDUCT 1.6(b) (providing that lawyers may
reveal confidential information to ―prevent reasonably certain death
or substantial bodily harm,‖ ―to prevent the client from committing
a crime or fraud this is reasonably certain to result in substantial
injury to the financial interests or property of another,‖ and ―to
prevent, mitigate or rectify substantial injury to the financial
interests or property of another that is reasonably certain to result or
has resulted from the client‘s commission of a crime or fraud‖).
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PANG V. INT‘L DOCUMENT
Opinion of the Court
a different case. But here, the policy Mr. Pang asks us to recognize is
a distinctly private matter of attorney-client relations, an issue that is
qualitatively different than other public policies we have recognized
previously.
3. Any policy reflected in rule 1.13 is outweighed by other
countervailing interests
¶42 Mr. Pang‘s claim fails for one additional reason. Even if an
employee raises a policy that is plainly defined by the requisite
authoritative sources and of broad importance to the public, the
employer‘s countervailing interest in regulating its workplace
environment may nevertheless outweigh the policy at issue and
permit the employee‘s termination.75 And here, even if an in-house
counsel‘s duty to ―report up‖ was clear and substantial, we are
persuaded that other provisions of the ethical rules express
countervailing policy interests that outweigh any Mr. Pang has
raised in this case.
¶43 Two such policies are protecting a client‘s right to choose
representation and deterring illegal conduct. And the rules strike a
delicate balance between allowing clients to secure the
representation of their choice and guarding against a client‘s use of
an attorney‘s services to engage in criminal activity. For example,
rule 1.2(a) provides that lawyers must ―abide by a client‘s decisions
concerning the objectives of representation‖ but cannot ―assist a
client[] in conduct that the lawyer knows is criminal or fraudulent.‖76
Other provisions give these directives some teeth—rule 1.16 requires
an attorney to ―withdraw from the representation of a client‖ if ―the
representation will result in violation of the rules of professional
conduct or other law.‖77 And the lawyer must also withdraw if ―the
lawyer is discharged‖ by the client.78 Comment 4 to that rule further
75 See Touchard, 2006 UT 71, ¶ 9 (―The analysis of whether the
public policy exception applies to a particular legal right or privilege
will frequently require a balancing of competing legitimate interests:
the interests of the employer to regulate the workplace environment
to promote productivity, security, and similar lawful business
objectives, and the interests of the employees to maximize access to
their statutory and constitutional rights within the workplace.‖
(internal quotation marks omitted)).
76 UTAH R. PROF. CONDUCT 1.2(a), (d).
77 Id. 1.16(a)(1).
78 Id. 1.16(a)(3).
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emphasizes that the client ―has a right to discharge a lawyer at any
time, with or without cause.‖79
¶44 Accepting Mr. Pang‘s argument would upset this careful
weighing of two important public policies—deterring crime and
protecting a client‘s right to choose a lawyer. If organizational clients
faced a potential wrongful termination suit every time they
terminate an in-house lawyer with whom they disagreed, it would
be more difficult for such clients to secure the representation of their
choice—and there is no doubt that a client‘s right to choose a lawyer
occupies a position of paramount importance throughout the rules of
professional conduct. Accordingly, we conclude that countervailing
policies outweigh the public policy Mr. Pang has raised in this
case—that an in-house counsel who ―reports up‖ illegal activity
under rule 1.13 should be shielded from the consequences of the at-
will employment doctrine.
¶45 In so concluding, we recognize that in-house attorneys are
situated differently than those at law firms who can withdraw from
a case without becoming unemployed. That may well cause
attorneys who suspect their employer is engaged in harmful, illegal
conduct trepidation. We emphasize, however, the narrow scope of
our decision today—we do not hold that in-house attorneys may
never raise a wrongful termination claim, nor do we foreclose the
possibility that an attorney fired for complying with an ethical rule,
such as reporting criminal activity to public authorities under rule
1.6, could ever make out such a claim.80 We hold only that an
attorney‘s duty to ―report up‖ illegal activity to an organizational
client‘s highest authority is not founded in the type of clear and
substantial public policy that qualifies as an exception to the at-will
employment doctrine. We leave these broader issues to a future case
that squarely presents them.
79 Id. cmt. 4.
80 See id. 1.6(b) (providing that lawyers may reveal confidential
information to ―prevent reasonably certain death or substantial
bodily harm,‖ ―to prevent the client from committing a crime or
fraud this is reasonably certain to result in substantial injury to the
financial interest or property of another,‖ and ―to prevent, mitigate
or rectify substantial injury to the financial interests or property of
another that is reasonably certain to result or has resulted from the
client‘s commission of a crime or fraud‖).
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Opinion of the Court
Conclusion
¶46 We affirm the district court‘s decision. Even though the
court erroneously denied Mr. Pang‘s request for a hearing, the error
was harmless. Mr. Pang fails to invoke a clear and substantial public
policy that would have prohibited the Company from terminating
him. The specific allegations in his complaint do not support the
assertion that he was terminated for refusing to commit an illegal
act, and rule 1.13(b) does not, standing alone, reflect the type of
public policy that qualifies as an exception to the at-will employment
rule.
22