Anthony Gadlage v. WINTERS & YONKER, Attorneys at Law, PSC

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 13a0916n.06
No. 12-5401
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
ANTHONY GADLAGE,
Plaintiff-Appellant,
v.
WINTERS & YONKER, Attorneys at Law,
PSC,
Defendant-Appellee.
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ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF KENTUCKY
Before: GUY, DAUGHTREY, and WHITE, Circuit Judges.
PER CURIAM. Plaintiff Anthony Gadlage, a Kentucky attorney, appeals the district
court’s judgment granting the defendant’s motion to dismiss and its order denying a motion
to alter or amend that judgment. Gadlage filed this diversity action against Winters &
Yonker (W&Y), a law firm incorporated in Florida and doing business in Louisville. The
parties have expressly waived oral argument, and we agree that oral argument is not
needed. See Fed. R. App. P. 34(a).
Requesting injunctive and declaratory relief, as well as compensatory damages,
Gadlage alleged that he was wrongfully terminated from his position as an associate for the
firm after he refused to follow W&Y’s policy of referring personal-injury clients to certain
medical clinics owned by Dr. Gary Kompothecras, a Florida chiropractor. Gadlage claimed

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that he “refused to engage in the [firm’s] quid-pro-quo referral arrangement” because he
believed that this arrangement created a conflict of interest in violation of the Kentucky
Supreme Court Rules. He also claimed that W&Y retaliated against him by contesting his
subsequent application for unemployment benefits.
W&Y moved to dismiss the complaint for failure to state a claim upon which relief
may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court
granted the motion, concluding that Gadlage’s allegations failed to establish that his
termination was in violation of any public policy that would except him from the “at-will”
employment doctrine in Kentucky. The district court also rejected Gadlage’s post-
termination retaliation claim. Gadlage then filed a motion to alter or amend the district
court’s order, along with a motion to hold the case in abeyance so that the district court
could certify to the Kentucky Supreme Court the question of whether “a violation of the
Kentucky Supreme Court Rules can form the basis of a wrongful discharge claim as a
‘public policy’ exception to the employment-at-will doctrine.” The district court denied the
motion and refused to certify this question, finding that the Kentucky Supreme Court had
sufficiently addressed the issue in Firestone Textile Co. Div. v. Meadows, 666 S.W.2d 730
(Ky. 1983), and Grzyb v. Evans, 700 S.W.2d 399 (Ky. 1985).
On appeal, Gadlage argues that the Kentucky Supreme Court Rules derive from the
commonwealth’s constitution and, therefore, trigger the public policy exception to the at-will
doctrine. Gadlage cites two Kentucky statutes that allegedly reinforce his claim and three
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cases in support of his interpretation: a recent case from the United States District Court
for the Eastern District of Kentucky, decided within the context of state contract law,
Martello v. Santana, 874 F. Supp. 2d 658, 670 (E.D. Ky. 2012), and two state circuit court
cases, Greissman v. Rawlings and Associates, No. 12-CI-00744 (Oldham Cir. Ct. Apr. 8,
2013), and Isaacs & Isaacs, PSC v. Rigor, No. 05-CI-7688 (Jefferson Cir. Ct. Oct. 18,
2010). Gadlage also filed with this court a motion to certify to the Kentucky Supreme Court
the same question that he presented in his motion to certify filed in the district court.
We review de novo a district court’s decision to deny a motion to dismiss for failure
to state a claim under Federal Rule of Civil Procedure 12(b)(6). Berrington v. Wal-Mart
Stores, Inc., 696 F.3d 604, 607 (6th Cir. 2012). When considering a Rule 12(b)(6) motion,
“we must accept as true any well-pleaded allegations,” but “need not accept any legal
conclusions or unwarranted factual inferences.” Id. (citations omitted).
In cases arising under federal diversity jurisdiction, we review de novo a district
court’s interpretation of state law. Berrington, 696 F.3d at 607. In such cases, we apply
the substantive law of the forum state, “anticipat[ing] how the relevant state’s highest court
would rule in the case . . . .” In re Dow Corning Corp., 419 F.3d 543, 549 (6th Cir. 2005).
Because Kentucky has not addressed the precise issue presented, we must predict how
the state supreme court would rule “by looking to all the available data.” Allstate Ins. Co.
v. Thrifty Rent-A-Car Sys., Inc., 249 F.3d 450, 454 (6th Cir. 2001). We must be “extremely
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cautious about adopting substantive innovation in state law.” Combs v. Int’l Ins. Co., 354
F.3d 568, 578 (6th Cir. 2004) (internal quotation marks and citation omitted).
As an at-will employee, Gadlage could be discharged for “for good cause, no cause,
or for a cause that some might view as morally indefensible.” Firestone, 666 S.W.2d at
731. Kentucky applies a narrow exception to this general rule when the termination
undermines a “most important public policy.” Id. at 733 (internal quotation marks and
citation omitted). The state permits this exception only when the discharge is shown to be
“‘contrary to a fundamental and well-defined public policy as evidenced by existing law,’”
and when the policy is “‘evidenced by a constitutional or statutory provision.’” Id. at 731
(quoting Brockmeyer v. Dun & Bradstreet, 335 N.W.2d 834, 835 (Wis. 1983)). This
“narrowly defined exception” requires that any cause of action contrary to the at-will
doctrine must be “clearly defined and suitably controlled.” Id. at 733.
After Firestone, the Kentucky Supreme Court adopted the additional caveat that
“only two situations exist where ‘grounds for discharging an employee are so contrary to
public policy as to be actionable’ absent ‘explicit legislative statements prohibiting the
discharge.’” Grzyb, 700 S.W.2d at 402 (quoting Suchodolski v. Mich. Consol. Gas Co., 316
N.W.2d 710, 711 (Mich. 1982)). The first situation is “where the alleged reason for the
discharge . . . was the failure or refusal to violate a law in the course of employment,” and
the second is “when the reason for a discharge was the employee’s exercise of a right
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conferred by a well-established legislative enactment.” Id. (internal quotation marks and
citation omitted).
Gadlage’s strongest support for his claim derives from orders by two Kentucky circuit
courts. In Isaacs & Isaacs, a lawyer alleged that he was fired in retaliation for threatening
to contact the Kentucky Bar Association for an ethical opinion as to whether a questionable
practice by his firm violated the Supreme Court Rules. The circuit court held that the
lawyer’s actions were sufficiently protected and that his discharge was sufficiently close in
time to this threat, such that the lawyer alleged a prima facie case of wrongful discharge.
Case No. 05-CI-7688, at 8. Similarly in Greissman, a different circuit court relied heavily
on Isaacs & Isaacs to hold that the obligatory Supreme Court Rules “supply a source of
authority that can ground a claim from wrongful termination in violation of public policy.”
Case No. 12-CI-00744, at 5.
We need not resolve here whether these two lower courts accurately anticipated
how the Kentucky Supreme Court would rule on the question. Even if obligatory Supreme
Court Rules can ground a public-policy exception to the at-will doctrine, Gadlage does not
allege a single particularized Rule violation in his complaint or in his appellate briefing. He
relies instead on vague and generalized statements about third-party conflicts of interests
and obligations to clients. Gadlage has thus failed to state a claim that is “plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). We are not convinced that
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the Kentucky Supreme Court would decide otherwise, considering “all available data.” See
Combs, 354 F.3d at 578; Allstate Ins. Co., 249 F.3d at 454.
We also affirm the district court’s dismissal of Gadlage’s post-termination retaliation
claim, because he did not establish a factual basis to support his claim that W&Y’s conduct
rose to the level of outrageousness necessary to meet his burden of establishing this claim.
See Kroger Co. v. Willgruber, 920 S.W.2d 61, 65 (Ky. 1996). In regard to his motion to
certify, we decline to “trouble” the Kentucky Supreme Court with this question of state law,
because we have a “reasonably clear and principled course” to follow to resolve the matter.
Pennington v. State Farm Mut. Auto. Ins. Co., 553 F.3d 447, 450 (6th Cir. 2009) (internal
quotation marks and citation omitted).
Accordingly, the motion to certify is DENIED, and the district court’s judgment is
AFFIRMED.
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HELENE N. WHITE, Circuit Judge, dissenting. I respectfully dissent. I would grant
Gadlage’s motion to certify to the Kentucky Supreme Court the question whether a violation
of the Kentucky Supreme Court Rules can form the basis of a wrongful-termination claim
as a public- policy exception to the employment-at-will doctrine.
Neither the Kentucky Supreme Court or its courts of appeals have addressed this
question. However, two recent Kentucky circuit-court decisions squarely answered the
question in the affirmative, see Greissman v. Rawlings & Assoc., No. 12-CI-00744 (Oldham
Cir. Ct. Apr. 8, 2013); Isaacs & Isaacs, PSC v. Rigor, No. 05-CI-7688 (Jefferson Cir. Ct.
Oct. 18, 2010).
I do not agree that Gadlage’s complaint fails to state a plausible claim. Accepting
the allegations as true, as we must, Gadlage’s complaint pleaded sufficient facts to raise
a plausible inference of wrongdoing. See 16630 Southfield Ltd. Partnership v. Flagstar
Bank, F.S.B., __ F.3d__, No. 12-2620, 2013 WL 4081909, at *1 (6th Cir. Aug. 14, 2013)
(noting that under Iqbal and Twombly a plaintiff is required “to plead enough ‘factual matter’
to raise a ‘plausible’ inference of wrongdoing”).
The verified complaint alleged that Winters & Yonker “primarily represents
individuals with personal injury claims sustained in motor vehicle accidents,” that “associate
attorneys[’] job duties include traveling to the home of new clients, conducting a thorough
interview of the client, and having the client sign various forms including a contract of
representation,” that Winters & Yonker “specifically instructs their associate attorneys to
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use this ‘sign up’ process as an opportunity to get clients to seek medical care at Kentucky
Spine and Rehab,” which is owned and operated by Florida chiropractor Dr. Gary
Kompothecras, that Kompothecras “advertises in Florida and Kentucky, not as a
chiropractor, but as a ‘medical and lawyer referral service’ under the pseudonym ‘1(800)
ASK-GARY” and that Kompothecras “refers hundreds of Kentucky injury patients to Winters
& Yonker.” Gadlage’s complaint alleged that “[i]n return Kompothecras/1 (800) ASK-GARY
expects hundreds of referrals from Winters & Yonker to his Kentucky medical clinics.”
Gadlage “found that it was more difficult to successfully resolve injury claims for individuals
who treated at 1(800) ASK-GARY clinics, and therefore believed it was in the best interest
of his clients and their claims to seek medical treatment with providers other than
1(800)ASK-GARY clinics.” PID 5. Gadlage “refused to engage in the quid-[pro-quo]
referral arrangement mandated by Winters & Yonker and its agents,” and “believed
that referring his clients to Kentucky Spine and Rehab created a third party conflict of
interest under the Kentucky’s Supreme Court Rules.” Gadlage alleged that shortly
after he and other associates were shown a spreadsheet indicating that he was the
associate who most often did not refer cases to Kentucky Spine & Rehab, his employment
was terminated. His complaint alleged that “[a]s a result of his refusal to place Winters &
Yonker and 1(800)ASK-GARY/Kentucky Spine and Rehab’s financial interest above the
interests of his clients,” his employment was terminated. PID 6.
Gadlage’s counsel would have been well advised to cite specific Supreme Court
Rule(s) in the complaint. But the Winters & Yonker firm was not baffled; its own motion to
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dismiss identified a specific Supreme Court Rule: “it appears to be [Gadlage’s] current
claim that a referral to Kentucky Spine and Rehab might violate SCR 3.130(1.7)(a).” PID
29. The conclusion that Gadlage’s complaint did not state a claim plausible on its face
because it failed to cite a specific Supreme Court Rule is unfounded under these
circumstances.
Finally, I note that during the pendency of this appeal this court affirmed another
case Gadlage relied on below, Martello v. Santana, 874 F. Supp. 2d 658, 670 (E.D. Ky.
2012), aff’d 713 F.3d 309 (6th Cir. 2013), rejecting the argument that public policy can be
created only by the Kentucky Legislature and not the Supreme Court of Kentucky:
Martello argues that public policy can only be created by the Kentucky
Legislature and not by the Supreme Court of Kentucky. However, Kentucky
courts have held that, in the absence of legislative guidance, courts may
determine public policy. Yeager v. McLellan, 177 S.W.3d 807, 809 (Ky.
2005) . . . .
The Kentucky bar is a mandatory unified bar and the Kentucky Rules of
Professional Conduct are public policy set by the Kentucky Supreme
Court. Ex parte Auditor of Pub. Accounts, 609 S.W.2d 682, 689 (Ky. 1980).
These attorney standards are not created only “for the private benefit of the
legal community.” Id. (noting the Kentucky Bar Association’s mission is to
maintain “a high standard of professional competence” and help promote
improvement of the judicial system); Kentucky Bar Ass’n v. Chesley, 393
S.W.3d 584, 2011–SC–000382–KB, 2013 WL 1197510 (Ky. Mar. 21, 2013).
The Kentucky Rules of Professional Conduct require lawyers to meet many
ethical standards to ensure they properly represent their clients, the public.
SCR 3.130 (preamble). Under Kentucky Rule of Professional Conduct 5.4
“[a] lawyer or law firm shall not share legal fees with a nonlawyer. . . .” Id. at
3.130–5.4 (professional independence). Here, Martello was not an attorney
at any point during her work with Santana. She has a law degree, but has
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never been admitted to any state’s bar. Thus, the fee-sharing contracts
violate Rule 5.4.
Martello, 713 F.3d at 313–14 (emphasis added).
Two on-point Kentucky circuit-court decisions favor Gadlage’s position as does
Martello. Our task is to “ascertain from all available data what the state law is and apply
it.” General Elec. Co. v. Sargent & Lundy, 916 F.2d 1119, 1125 (6th Cir. 1990). I disagree
with the majority that we have a reasonably clear and principled course to follow based on
25 to 30 year-old Kentucky Supreme Court decisions that do not address the question
presented and would thus grant Gadlage’s motion to certify the question.
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