Vance D. Miller, Robert A. Kaiser, John A. Vering, III, and Joan Z. Cohen, Editors
Armstrong Teasdale LLP

Vol. 18, No. 2
April 2008

EMPLOYER RETALIATION

Missouri court overturns large punitive damages award to whistleblower

John Vering

The Missouri Court of Appeals in St. Louis recently ruled that a punitive damage jury award of $2.8 million in favor of a whistleblower against Bass Pro Outdoor World, LLC, was excessive and threw it out. Read further to learn why the jury thought $2.8 million in punitive damages was appropriate and why the Missouri Court of Appeals disagreed.

Facts

Bass Pro operates a sporting goods and outdoor equipment retail store in St. Charles. Kyle Kelly worked for the company as a loss prevention agent. In that position, he monitored closed-circuit televisions, conducted investigations, and participated in the apprehension of alleged shoplifters.

One day, Deborah Bost was driving by Bass Pro when her Buick had mechanical problems. She parked the car in a parking space in front of the shop on the company's property. Karl Ritter, the store's loss prevention manager, requested that the Buick be towed, but the police declined because it was on private property.

Ritter decided to gain entry to the Buick to find out who owned it. He told coworker Michael McKernon that if he wanted "to see something funny," to watch the security camera, which produced a videotape of the incident. Ritter then used a Slim Jim (a lock pick) to gain access to the Buick. McKernon and another coworker believed he had committed the crime of "breaking and entering or tampering" with the Buick, and they expressed those concerns to Kelly. Kelly stated that he thought Ritter "lacked probable cause" to enter the vehicle and had used the Slim Jim improperly and may have damaged the Buick.

After anonymously contacting the St. Charles Police Department, Kelly decided to report the incident to Bass Pro management because he believed a crime had been committed. He reported the incident to assistant manager Lee Beasley, who claims that he directed Kelly not to talk with anyone about it except him and Jerry Rogers, another manager. Rogers discussed the issue with Ritter and concluded that Ritter's explanation that he obtained access to the Buick to find out who owned it was reasonable. He didn't reprimand Ritter for his actions.

Despite Beasley's warning, Kelly discussed the matter with other members of the loss prevention department. When Ritter found out about Kelly's threat to contact Bass Pro's corporate loss prevention manager in an effort to get him fired and that someone had placed an anonymous call to the police, he allegedly threatened to terminate whoever made the call.

A short time later, Kelly was fired, allegedly because he failed to follow management's directive not to discuss the incident with anyone else. Kelly denied receiving that order. Rather, he claimed that he had been told only to keep the discussion within the loss prevention department.

Kelly sued Bass Pro, claiming it terminated him for reporting Ritter's crime of breaking and entering a motor vehicle and seeking damages for lost wages and benefits plus punitive damages. The jury found in his favor and awarded him $4,300 in actual damages (he had promptly obtained another job) plus $2.8 million in punitive damages.

Appeals court's decision

Bass Pro appealed the case to the Missouri Court of Appeals for the Eastern District, claiming that Kelly didn't have enough evidence to support a jury verdict in his favor. The appeals court ruled that he had presented sufficient evidence to establish that he had a reasonable belief that Ritter had committed a crime when he entered Bost's Buick without her consent.

The appeals court emphasized that under Missouri law, it isn't necessary for the employee to conclusively prove that the law had been violated to assert a whistleblower claim. Proving that he believed the law had been violated was all Kelly needed on that point. The court also found that there was ample evidence to link his termination with the reporting of the incident.

The court found it significant that no one in management had viewed the videotape of Ritter breaking into the Buick to ascertain the facts before determining what, if any, disciplinary action should be taken against Kelly. Moreover, Kelly produced evidence that Rogers had told the loss prevention team that he had given Ritter permission to "break into" the Buick when in fact he had no knowledge of the incident until two days after it had occurred. In addition, Rogers threatened that anyone who continued to discuss the issue would be terminated.

Based on that and other evidence, the court found that Kelly's award of actual damages and the jury's decision to award punitive damages were proper.

The appeals court noted, however, that the punitive damage award of $2.8 million was 651 times the actual damages of $4,300. Relying on U.S. Supreme Court decisions that punitive damages of more than 10 times the actual damages typically are excessive and unconstitutional ― and may be excessive if they exceed four times the actual damages ― the court ordered a new jury trial on the amount of punitive damages. Kelly v. Bass Pro Outdoor World, LLC, 2007 WL 4390671 (No. ED 88392)(December 18, 2007).

Lessons to be learned

This case teaches us several important lessons:

• If an employee reports a possible violation of the law, taking disciplinary action against him could subject you to actual and punitive damages, even if the law isn't actually violated or broken.
• Carefully investigate claims of criminal misconduct by employees. Bass Pro's failure to fully investigate the claim by viewing the videotape or interviewing anyone other than Ritter showed evidence of a reckless indifference to the possible criminal misconduct by a senior member of its management team.
• Don't punish whistleblowing. Rogers testified that he was going to terminate Kelly regardless of whether Ritter had committed an actual crime.
• Don't try to cover up. Rogers' statement that he had given permission to break into the Buick when in fact he didn't even learn of the incident until two days after it happened was viewed as evidence of legal malice that would support a punitive damage award.
• Awards to terminated whistleblowers can be very substantial. For example, in the last few months, a Clay County jury awarded $1 million against Harrah's after an employee claimed she was fired for reporting to the Missouri Gaming Commission that customers were using multiple plastic gambling cards (the employer claimed she should have reported the misconduct through proper internal channels).
• In January 2008, a Jackson County jury awarded $300,000 to a nurse who allegedly was fired for complaining about supervisors directing employees to leave gaps in medical records so medical documentation could be added after the fact yet appear contemporaneous. And in late 2007, a jury verdict of $125,000 was awarded to a St. Louis-area whistleblower who alleged that she had been fired for cooperating with the U.S. Department of Labor in a wage and hour investigation.
• When faced with disciplining a whistleblower, get advice from counsel before you act. Making a mistake could cost you a bundle.

Copyright 2008 M. Lee Smith Publishers LLC

MISSOURI EMPLOYMENT LAW LETTER is intended for general information purposes only and does not constitute legal advice. The reader should consult qualified legal counsel to determine how laws apply to specific situations.