McManus v. McManus Financial Consultants

 dismiss McManus's claims for a failure to state a claim, which the district
court granted. McManus now appeals. The issue on appeal is whether the
district court erred by dismissing McManus's tortious discharge claim. 2
The district court correctly dismissed McManus's tortious discharge claim
In our de novo review of the district court's order dismissing a
claim, "[we] will recognize all factual allegations in [a plaintiffs] complaint
as true and draw all inferences in its favor." Buzz Stew, LLC v. City of N.
Las Vegas, 124 Nev. 224, 228, 181 P.3d 670, 672 (2008).
"[A]ll employees in Nevada are presumptively at-will
employees" and their "employment can be terminated without liability by
either the employer or the employee at any time and for any reason or no
reason' unless the termination violates "strong public policy. Martin v.
Sears, Roebuck & Co., 111 Nev. 923, 926-27, 899 P.2d 551, 553-54 (1995).
"Terminating an employee for reasons which violate public policy gives
rise to an action for tortious discharge." Wayment v. Holmes, 112 Nev.
232, 236, 912 P.2d 816, 818 (1996). Nevada recognizes two strong public
policies limiting an employer's ability to terminate an employee that are
relevant here: (1) protecting an employee who reports illegal activity to
outside authorities, Wiltsie v. Baby Grand Corp., 105 Nev. 291, 293, 774
P.2d 432, 433 (1989), and (2) protecting an employee who refuses to
participate in conduct the employee reasonably believes is illegal. Allum
v. Valley Bank of Nev., 114 Nev. 1313, 1323-24, 970 P.2d 1062, 1068
(1998).
2 McManus waived the issue of the dismissal of his intentional
interference with contractual relations claim by not raising it in his
opening brief. Powell v. Liberty Mitt. Fire Ins. Co., 127 Nev. , n.3,
252 P.3d 668, 672 n.3 (2011) ("Issues not raised in an appellant's opening
brief are deemed waived.").
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McManus failed to state a claim of tortious discharge for reporting
illegal conduct to outside authorities
McManus argues that because he reported the purportedly
illegal transaction to API's CEO, the chairman of its board, and its outside
legal counsel, he engaged in protected conducts
Nevada recognizes a strong public policy protecting an
employee who reports illegal conduct to outside authorities. Wiltsie, 105
Nev. at 293, 774 P.2d at 433. However, this policy does not protect
internal reporting, as internal reporting serves an employer's private
interests and not a public purpose. Id.
Here, McManus alleged that he reported the suspected illegal
activity to three persons or entities: API's CEO, the chairman of its board,
and its outside legal counsel. Because the CEO and the chairman were
part of API, McManus's alleged reporting to them was unprotected
internal reporting. See id. at 293, 774 P.2d at 433-34.
Similarly, McManus failed to allege that his reporting of
illegal conduct to API's outside legal counsel is protected external
reporting, because he did not allege facts to suggest that outside legal
counsel was an appropriate authority which could enforce securities laws
against API. See id. Furthermore, McManus did not allege that API's
outside legal counsel was authorized to inform the government about the
alleged illegal conduct without API's permission, since he failed to allege
how his communications with API's outside counsel were outside of the
protection afforded API under its attorney-client privilege. See Ward leigh
3 McManus's argument that this court should overrule Wiltsie and
protect internal reporting is without merit because McManus fails to
present a compelling reason for his proposed change in law. See Miller v.
Burk, 124 Nev. 579, 597, 188 P.3d 1112, 1124 (2008) (holding that this
court will not overrule precedent absent a compelling reason to do so).
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v. Second Judicial Dist. Court, 111 Nev. 345, 352, 891 P.2d 1180, 1184-85
(1995) (observing that an employer's attorney-client privilege protects an
employee's communications with the employer's attorneys); see also NRS
49.095(1) (codifying the attorney-client privilege). Because McManus did
not allege that he engaged in protected external reporting, the district
court did not err by dismissing his claim with regard to this theory.
McManus failed to state a claim for tortious discharge based on a
refusal to participate in illegal conduct
McManus alleged that he was tortiously discharged for
refusing to participate in a securities transaction that he reasonably
believed to be illegal. Though McManus did not expressly state in his
complaint that he signed API's SEC filing, he admitted at oral argument
that he signed it. He alleges that he did so to avoid being fired. 4
Tortious discharge can occur when an employee "was
terminated for refusing to engage in conduct that he, in good faith,
reasonably believed to be illegal." Allum, 114 Nev. at 1324, 970 P.2d at
1068. If an employee actually participated in the purported illegal
activity, however, the protection afforded by this public policy does not
apply. See Schlang v. Key Airlines, Inc., 794 F. Supp. 1493, 1506-07 (D.
Nev. 1992), vacated in part on other grounds, 158 F.R.D. 666, 671 (D. Nev.
1994).
Here, McManus conceded that he participated in the illegal
activity because he signed API's SEC filing. Thus, McManus failed to
4McManus contended at oral argument that the purported illegal
activity he refused to participate in also involved recommending the
transaction to API's board of directors. However, he did not allege in his
complaint that this was the illegal activity in which he refused to
participate and that led to his termination. Thus, his purported refusal to
recommend the transaction does not prevent the dismissal of this claim.
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state a claim for tortious discharge based on the refusal to participate in
an illegal activity. 5 Therefore, the district court did not err by dismissing
McManus's tortious discharge claim with regard to this theory.
Conclusion
McManus failed to state a claim for tortious discharge because
he did not allege that he was terminated for externally reporting illegal
activity or for refusing to participate in illegal activity. Thus, the district
court did not err in dismissing his claim. Therefore, we
ORDER the judgment of the district court AFFIRMED.
J.
J.
Parraguirr,e
J.
Saitta
cc: Hon. David A. Hardy, District Judge
Wm. Patterson Cashill, Settlement Judge
Cavanaugh-Bill Law Offices, LLC
Laxalt & Nomura, Ltd./Reno
Washoe District Court Clerk
5 SinceMcManus concedes that he participated in the illegal activity,
we do not address whether he alleged a reasonable belief that the activity
was illegal. Furthermore, we do not address whether issue preclusion
prevents McManus from stating a tortious discharge claim.
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