TFS of Gurdon, Inc. v. Hook

Cite as 2015 Ark. App. 601

ARKANSAS COURT OF APPEALS
DIVISION II
No. CV-15-207

OPINION DELIVERED OCTOBER 28, 2015
TFS OF GURDON, INC.
APPELLANT APPEAL FROM THE HOT SPRING
COUNTY CIRCUIT COURT
[NO. 30 CV-11-289]
V.
HONORABLE EDDY ROGER
EASLEY, JUDGE
KAY HOOK
APPELLEE AFFIRMED

ROBERT J. GLADWIN, Chief Judge

This appeal arises from a wrongful-discharge suit. Appellee Kay Hook was discharged

from her former employer, appellant TFS of Gurdon, Inc. (TFS). A Hot Spring County jury

found in favor of Hook on her claim that she was discharged in violation of the public policy

of Arkansas for complaining about and investigating suspected Medicaid fraud. TFS argues

that there was insufficient evidence to support a verdict for wrongful discharge and the

award of damages. We affirm on both points.

I. Statement of Facts

Hook filed a complaint on December 15, 2011, alleging that she was hired by TFS

as clinical director and was told that her job was to “keep Medicaid off [their] backs.” She

claimed that she realized this to mean that “she was expected to cover up for Medicaid

fraud.” Hook claimed that she found “suspicious” a TFS therapist’s report that she spent five

hours at a client’s home for therapy and reported it to Abby Kyle, assistant to the CEO of
Cite as 2015 Ark. App. 601

TFS, David Miller. She claimed that Kyle told her that the therapist complained of was “a

big producer.”

The complaint alleged that Hook complained to Kyle about Randy Green, another

therapist, based on an allegation that Green reported that he had met with children when no

children were in the clinic. She claimed that her request to see Green’s billing was denied

and that she was told to “back off looking into this therapist because he ‘pays our

paychecks.’” Hook also claimed that, in August 2011, she found that a child had gone

missing, and she initiated the missing-child protocol. The child was later found at Magic

Springs, where his therapy group had been taken earlier that day. She claimed that when the

therapist, Green, turned in his logs for that day, the missing child was included for the time

during which the child had been missing. She alleged that the child’s name was then crossed

off the logs, but she did not know if his name was on the ticket submitted to Medicaid.

Hook admits in her complaint that she scored poorly on her ninety-day review and

was placed on ninety days’ probation. She alleged that, during the meeting with Kyle to

discuss the review, Kyle accused her of “targeting certain employees,” which Hook claimed

was a clear reference to her attempts to investigate potential Medicaid fraud. She further

admitted that, during a staff meeting on November 9, 2011, she referred to the CEO, Miller,

as “Mr. Abby.” She claimed that she received text messages from Miller the next day that

referred to her “targeting employees.” She contended that this was another reference to her

investigation of potential Medicaid fraud. On November 11, 2011, she was fired. She

claimed that she was terminated in violation of public policy for complaining about and

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investigating suspected Medicaid fraud. In her complaint, she asked for compensatory and

punitive damages.

TFS denied her allegations and filed a motion for summary judgment, alleging that

there were no genuine issues of material fact. Attached to its motion were several exhibits,

including portions of depositions from Abby Kyle, David Miller, and appellee Kay Hook,

an affidavit by Jane Sherrill, TFS’s Corporate Compliance Officer, and Hook’s termination

letter. The termination letter states that Hook’s ninety-day evaluation extended her

probationary period for another ninety days, citing her poor communication skills with staff

and school personnel. It also cited the “Mr. Abby” statement, characterizing it as gross

misconduct, as the reason for her termination.

In Hook’s deposition excerpt, she stated that she complained only to Kyle and

Sherrill. Kyle testified in her deposition that Hook never came to her to complain about

potential Medicaid fraud. In her affidavit, Sherrill stated that she never informed Miller

about the complaints that Hook made to her about alleged Medicaid fraud. Sherrill stated

that she investigated each complaint pursuant to her role as compliance officer, and she never

found any evidence of Medicaid fraud. David Miller testified in his deposition that Hook

alienated some of the schools that she worked with, overstepped her bounds by approving

expenditures that were not in her purview, and called him “Mr. Abby” in a staffing. He

denied that she ever came to him alleging Medicaid fraud among the therapists. He denied

knowing if Hook went to anyone else with concerns regarding Medicaid fraud. He stated

that the final reason for Hook’s discharge was her “Mr. Abby” comment. He admitted

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sending Hook text messages the day before she was discharged. One message stated, “Aside

from pissing schools off, targeting certain employees and making comments about the CEO

and administrative assistant, I would like to know what [Hook had to offer TFS].”

Also attached to the motion was Hook’s ninety-day evaluation, given on September

13, 2011, which contained three satisfactory, two fair, and one poor-performance ratings.

Under the additional comments, Kyle wrote,

Your communication is extremely poor. You relay information to staff and “outside”
individuals in a manner that they consider to be negative and demeaning. Your
listening skills are ineffective as well because you do not follow through with
information you are given. Your probationary period is extended for 90 more days
from the date of this evaluation.

TFS argued in its summary-judgment motion that Hook could not establish that she

had engaged in a protected activity because she had made complaints to the compliance

officer, who investigated those complaints. TFS claimed that none of the complaints dealt

with actual violations of state or federal law. It further alleged that, after Hook had been

discharged, an anonymous caller reported TFS for suspected Medicaid fraud, and after a

detailed audit, no Medicaid fraud was found. Also, TFS argued that Hook could not

establish that Miller was aware of her reports of alleged Medicaid fraud. TFS asserted that,

even if Hook had established a prima facie case, her claim should fail because TFS established

a legitimate, nondiscriminatory reason for her termination, and she could not rebut that

reason. Finally, TFS argued that her claim for back pay was precluded because she failed to

accept the job she was offered within a week of her losing her position at TFS.

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Hook responded, denying that summary judgment was appropriate, and attaching her

own affidavit, along with her and Kyle’s deposition excerpts, the text messages between

Hook and Miller, the ninety-day evaluation, and her termination letter from TFS. In her

affidavit, Hook stated that she was told by Tonya Hunt, biller for TFS, and Kyle that Miller,

whom they referred to as “Cuz,” told her to “back off” when she complained of a therapist’s

billing sheets. She also stated that Kyle’s attitude toward her changed after the ninety-day

review, and Kyle began to instruct her to not visit certain clinics and to not check into things

happening at these clinics. She stated that she felt she was being prevented from doing her

job, and she became very concerned about suspected fraudulent and illegal billing practices.

She stated that Sherrill told her that Sherrill could not afford to lose her job and was afraid

of reporting TFS. Hook claimed that the position she was offered after she had been

terminated was in Little Rock and, as a widowed single mother of two, the commute was

too long, the company had recent problems with Medicaid, and the position paid $20,000

less per year than her position at TFS. She alleged in her response to summary judgment that

material questions of fact remained regarding whether she had engaged in a protected

activity, whether the “Mr. Abby” statement had been a pretext for her termination, and

whether she had been diligent in her attempts to mitigate damages.

The trial court denied TFS’s motion for summary judgment in a ruling made prior

to the trial on Hook’s claims. At trial, Nick Ward testified that he had been employed with

TFS and was hired by Hook. He worked as a paraprofessional, helping to deliver therapeutic

services. He said that he had concerns regarding billing practices at the Hot Springs location.

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He explained that he would note the times for each client in a three-ring binder, initial it,

and then turn in the note. He said that there were times when he found his time had been

“whited out,” and he would have to change his time if he wanted to get paid for it. He

thought this was an unethical billing practice because Medicaid regulations stated that they

were to “put exact times.” He complained to Shannon Wynn, who was clinical director at

the time, but she did not rectify the situation. When Hook took Wynn’s place, the billing

practices that concerned him stopped. He had a close working relationship with Hook,

whom he described as good at communicating at staffing and with him. He said that he

never saw any personality clashes or miscommunication with Hook and other staff members.

He admitted on cross-examination that the “white out information” was not on time sheets

submitted to Medicaid and that he did not know what went to Medicaid. He said that he

thought the practice was Medicaid fraud, and he reported it to the clinical director.

Kay Hook testified, expounding on the statements she attested to in her affidavit and

those made in her deposition testimony. She explained that the “Mr. Abby” comment was

made in a joking manner, and that she immediately apologized for it. She said that she meant

the statement to be a joke and that the other staff members thought it was a joke, and they

laughed.

TFS moved for a directed verdict, arguing that Hook failed to produce any evidence

of Medicaid fraud. Counsel argued, “They put in evidence that she made reports, but the

evidence indicates clearly that she was fired for her statements, and even she admits that her

statements were inappropriate.” Hook’s counsel responded that the text messages suggest

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targeting of certain employees was a factor in her termination. The trial court denied the

directed-verdict motion, stating that it was a question for the jury.

Kyle, Miller, and Green testified on behalf of TFS. Following the testimony, the trial

court considered jury instructions, rejecting TFS’s request to instruct the jury that Hook had

to prove that she had made a report to Medicaid, that TFS knew that she had made a report

to Medicaid, and that TFS had fired her for reporting to Medicaid. The trial court also

denied TFS’s request to instruct the jury that if it found that TFS did not commit the alleged

fraud complained of by Hook, the verdict must be for TFS. Finally, TFS’s request for the

jury to be given a verdict form that found TFS did or did not commit fraud was denied.

Following Sherrill’s testimony, TFS again moved for a directed verdict, arguing that

there was insufficient evidence to find for Hook. Counsel for Hook argued that there was

enough evidence that Hook made the reports, that “they” had knowledge of the reports, and

that a reasonable jury could find that “it was the primary motivating factor in her

termination.” The trial court denied the motion.

After rebuttal testimony given by Hook, TFS renewed its motion for a directed

verdict, and the trial court denied the renewed motion. On October 10, 2014, the jury

returned a verdict for Hook, awarding damages in the amount of $50,000. TFS moved to

set aside the verdict based on insufficient evidence. The trial court denied the motion.

On October 17, 2014, TFS filed a motion for new trial under Arkansas Rule of Civil

Procedure 59(a) (2014), arguing that the jury’s verdict was clearly against a preponderance

of the evidence, the jury’s damages award was clearly against the preponderance of the

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evidence, the damages award was excessive and given under the influence of passion or

prejudice, and the award of damages was too large. Also on that day, TFS filed a motion for

judgment non obstante veredicto pursuant to Arkansas Rule of Civil Procedure 50 (2015),

asking that the verdict be set aside because the law framed to the jury was improper and

created an unjust result. The trial court denied both motions by order filed November 10,

2014, finding that there was sufficient evidence to sustain both the verdict on liability and

the amount of damages awarded. The trial court also found that the jury had been presented

with the proper law. On November 10, 2014, the trial court granted Hook judgment against

TFS on her wrongful-discharge claim in the amount of $50,000. A timely appeal was filed

on November 14, 2014, and this appeal filed by TFS followed.1

II. Standard of Review

Our standard of review of the denial of a motion for a directed verdict is whether the

jury’s verdict is supported by substantial evidence. City of Huntington v. Mikles, 96 Ark. App.

213, 240 S.W.3d 138 (2006). Similarly, in reviewing the denial of a motion for judgment

notwithstanding the verdict, we will reverse only if there is no substantial evidence to

support the jury’s verdict, and the moving party is entitled to judgment as a matter of law.

1
On November 19, 2014, Hook filed a motion for attorney’s fees, seeking $31,445.13,
combined with a motion to strike the notice of appeal as premature. TFS filed a response,
objecting. By order filed January 30, 2015, the trial court granted Hook attorney’s fees and
costs in the amount of $25,165, pursuant to Arkansas Code Annotated section 16-22-308
(Repl. 1999) and Sterling Drug, Inc. v. Oxford, 294 Ark. 239, 743 S.W.2d 380 (1988). The
portion of the motion pertaining to striking the notice of appeal was dismissed by agreement
of the parties. TFS’s notice of appeal was not amended to include the order awarding
attorney’s fees. An order not mentioned in a notice of appeal is not properly before this
court. See Midyett v. Midyett, 2013 Ark. App. 597, at 6.

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Id. Substantial evidence is that which goes beyond suspicion or conjecture and is sufficient

to compel a conclusion one way or the other. Id. It is not this court’s place to try issues of

fact; rather, this court simply reviews the record for substantial evidence to support the jury’s

verdict. Id. In determining whether there is substantial evidence, we view the evidence and

all reasonable inferences arising therefrom in the light most favorable to the party on whose

behalf judgment was entered. Id.

III. Sufficiency of the Evidence for Wrongful Discharge

First, TFS contends that there was insufficient evidence to render a verdict for Hook

on her wrongful-discharge claim in violation of public policy.

[A]n employer may terminate the employment of an at-will employee without cause.
See Faulkner v. Ark. Children’s Hosp., 347 Ark. 941, 69 S.W.3d 393 (2002); Crain
Indus., Inc. v. Cass, 305 Ark. 566, 810 S.W.2d 910 (1991); Gladden v. Ark. Children’s
Hosp., 292 Ark. 130, 728 S.W.2d 501 (1987). However, an at-will employee has a
cause of action for wrongful discharge if he or she is fired in violation of a
well-established public policy of the state. Northport Health Svcs. v. Owens, 356 Ark.
630, 158 S.W.3d 164 (2004). The public policy exception presents an exclusive
contract cause of action. See Howard Brill, Arkansas Law of Damages (3d ed.) § 19-2;
Sterling Drug, Inc. v. Oxford, 294 Ark. 239, 743 S.W.2d 380 (1988). The exception is
limited and not meant to protect merely private or proprietary interests. Sterling Drug,
Inc. v. Oxford, supra. The burden of establishing a prima facie case of wrongful
discharge is upon the employee, but once the employee has met his burden, the
burden shifts to the employer to prove that there was a legitimate, nonretaliatory
reason for the discharge. Gen. Elec. Co. v. Gilbert, 76 Ark. App. 375, 65 S.W.3d 892
(2002).

Mikles, 96 Ark. App. at 219, 240 S.W.3d at 143.

TFS argues that Hook was not able to establish a prima facie case because she did not

establish that (1) she was engaged in any protected activity; (2) the decision maker was aware

of her complaints, whether protected or not; or (3) there was any relationship between the

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complaints and her termination from employment. Regarding the protected activity, TFS

contends that Hook must have proved to the jury that TFS was in violation of the law in

order to prevail. For this theory, it cites Singley v. USFilter Recovery Services, 395 F. Supp. 2d

758 (E.D. Ark. 2005) (where alleged termination of an employee for voicing complaints

about the environmental condition of a facility on multiple occasions did not fall under

Arkansas’s public-policy exception to the general at-will employment rule, absent proof that

he reported conduct that violated federal or state law), and Skrable v. St. Vincent Infirmary, 57

Ark. App. 164, 943 S.W.2d 236 (1997) (where this court held that the termination of an

employee who divulges or threatens to expose mere deficiencies in an employer’s

performance of its contractual obligations does not offend public policy).

However, we agree with Hook’s contention that there is no precedent for the

argument that an employee in a wrongful-discharge claim must also prove an actual violation

of law in addition to proving that she was terminated for reporting suspected violations of

law. Neither Singley, supra, nor Skrable, supra, hold that an employee making a wrongful-

discharge claim has to prove an actual violation of law; rather, they both hold that an

employee making such a claim must prove that she reported a violation of law. In both

cases, the reported conduct, even if true, would not have been a violation of law. See

Singley, supra; Skrable, supra.

TFS also argues that whether a termination decision was a violation of a well-

established public policy of the state is a question of law because the jury is not equipped to

research the statutes in order to determine public policy. Koenighain v. Schilling Motors, Inc.,

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35 Ark. App. 94, 811 S.W.2d 342 (1991). TFS claims that the trial court erred by letting the

jury determine the issue of whether the public policy of Arkansas was violated. Again, we

agree with Hook that TFS’s claim is inaccurate. A public-policy-discharge action is

predicated on the breach of an implied provision that an employer will not discharge an

employee for an act done in the public interest. Oxford, supra. The public policy of the state

is contravened if an employer discharges an employee for reporting a violation of state or

federal law. Id. By denying the motion for summary judgment, the trial court, not the jury,

made the determination that, if Hook’s allegations were accepted as true by the jury, she had

made a report of suspected illegal activity and could have a valid claim for wrongful

termination in violation of public policy.

Alternatively, TFS submits that Hook must prove that she had an objectively

reasonable basis to believe that TFS violated the law. TFS asserts the following: Hook

admitted at trial that she never saw what was actually submitted to Medicaid; TFS had never

been sanctioned by Medicaid for fraud; Hook’s witness, Nick Ward, testified that all unfair

billing practices that he was aware of actually stopped after Hook took over as clinical

director; and an audit by Medicaid after Hook was discharged found no fraud. TFS seems

to contend that, because there was no violation of law found, public policy is not offended,

and Hook had no basis for a claim for wrongful discharge. For this argument, TFS cites a

case from Missouri, Bazzi v. Tyco Healthcare Group, 652 F.3d 943 (8th Cir. 2011) (citing

Margiotta v. Christian Hosp. Ne. Nw., 315 S.W.3d 342 (Mo. 2010)). TFS claims that, because

Hook points to no specific law that was violated, any internal reports made by her are

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governed by the at-will employment doctrine, not by the narrow public-policy exception.

However, TFS misinterprets Bazzi, supra, because the case does not state that plaintiffs

are required to prove an actual violation under Missouri law. The case states that a plaintiff

making a wrongful-discharge claim must show only a good-faith, objectively reasonable

belief that his former employer was violating public policy, not prove an actual violation.

Bazzi at 948.

Second, TFS claims that a new trial should be granted because the trial court rejected

its proposed jury instruction on the elements of a wrongful discharge. TFS’s proffered

instruction contained the element that Hook had to prove an actual violation of law to

succeed on her claim. However, as stated above, there is no precedent requiring an actual

violation of law to be found; rather, reporting a suspected violation of law is enough. Because

Arkansas law does not require an actual violation of law for a wrongful-discharge claim in

violation of public policy, TFS’s proposed instruction was improper.

Third, TFS argues that Hook cannot establish that Miller was aware of her complaints.

Miller swore under oath that he was the only decision maker in her termination. Kyle

testified that Miller was the sole decision maker in Hook’s termination. Miller also testified

that he was unaware of Hook’s internal complaints. Sherrill testified that she never told

Miller about Hook’s concerns. Thus, TFS contends that there was no causal connection to

support the jury verdict of wrongful discharge. See Jackson v. United Parcel Serv., Inc., 548

F.3d 1137 (8th Cir. 2008) (holding no causal connection existed where the decision makers

were unaware of EEOC charges when they made the adverse employment decision).

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In contrast, Hook contends that she established that Miller was aware of her

complaints of suspected Medicaid fraud. She testified that Miller was directly aware of her

complaints because she personally spoke with him about therapists “whiting out” therapy

times on handwritten notes. She also testified that, when she became suspicious of Green’s

billing activities, she reported this to Kyle, Miller’s assistant, and on two occasions, Kyle told

her that Miller had said to “back off” her attempts to investigate the therapist. Also, Hook

cites the text message from Miller in which he claimed that she targeted certain employees.

Hook claims that this text was a clear reference to her complaints about, and attempts to look

into, the billing practices of Green.

The jury is the sole judge of the credibility of the witnesses and of the weight and

value of their evidence. Wallis v. Keller, 2015 Ark. App. 343, at 4, 464 S.W.3d 128, 131. It

may believe or disbelieve the testimony of any one or all of the witnesses, though such

evidence is uncontradicted and unimpeached. Id. Accordingly, based on Hook’s testimony

and the supporting evidence she presented, the jury was able to determine that a causal

connection existed to support the wrongful discharge.

Fourth, TFS contends that it proved legitimate, nondiscriminatory reasons for Hook’s

discharge. See Wingfield v. Contech Constr. Prods., Inc., 83 Ark. App. 16, 115 S.W.3d 336

(2003) (the burden of establishing a prima facie case of wrongful discharge is upon the

employee, but once the employee has met its burden, the burden shifts to the employer to

prove that there was a legitimate, nonretaliatory reason for the discharge). TFS claims that

Hook presented no evidence to refute its reason for her termination. It argues that Miller

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was free to conclude that Hook’s insubordination had reached a level where the relationship

with TFS needed to be severed. Hook admitted that her “Mr. Abby” comment was

inappropriate.

Hook maintains that she proved that the reasons given for her termination were

pretextual and that her complaints of suspected fraud were the primary motivating factor for

her termination. There was evidence that she was told to “back off.” She contends that the

characterization of the “Mr. Abby” joke as “gross misconduct” suggests that TFS was looking

for any pretextual reason to justify terminating her. Finally, she claims that Miller’s reference

to her targeting employees is substantial evidence to support the jury’s verdict. We hold that,

when viewed in the light most favorable to Hook, the evidence she presented was sufficient

to allow the jury to determine that she was wrongfully discharged and that TFS’s stated

reasons for her termination were pretextual.

IV. Sufficiency of Evidence to Support Damages Award

First, TFS argues that the damages awarded were based on speculative calculations.

It submits that Hook was granted an excessive jury award and that there was insufficient

evidence submitted at trial to support the jury’s award. TFS contends that, had Hook

accepted the job she was offered in Little Rock, her annual difference in pay between the

Little Rock job and her prior TFS position would have been $20,000 annually. Thus, over

the three-year period between her termination and trial, Hook would have earned $60,000

less than she earned in her new positions. Thus, TFS claims that the $50,000 award was

speculative. Second, TFS argues that Hook failed to mitigate her damages because she did

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not take the similar job that was offered to her in Little Rock almost immediately after her

discharge from TFS. A discharged employee must mitigate her damages by seeking

substantially equivalent work. Ford Motor Co. v. EEOC, 458 U.S. 219 (1982).

The proper measure of damages in a public-policy wrongful-discharge action is the

sum of lost wages from termination until day of trial, less the sum of any wages that an

employee actually earned or could have earned with reasonable diligence; additionally, an

employee may recover for any other tangible benefit lost as a result of the termination. Gen.

Elec. Co. v. Gilbert, 76 Ark. App. 375, 385, 65 S.W.3d 892, 900 (2002). The party asserting

entitlement to damages has the burden to prove the claim. Id. Damages must not be left to

speculation and conjecture. Id.

The evidence presented was that Hook earned about $6000 per month working for

TFS. She also said that she had earned about $100,000 from the time of her termination in

November 2011 until the trial in October 2014. If she had remained at her job as clinical

director, she would have earned about $210,000 during this same time period. Therefore,

the jury had sufficient evidence to award her up to $110,000 in lost wages. Hook claims that

she did meet her duty to mitigate her damages because the job offered to her immediately

after her termination was not substantially equivalent to her job with TFS. The salary was

$20,000 less per year, and it would have required her to commute two hours each day for

work. We hold that there was sufficient evidence for the jury to determine that Hook met

her duty to mitigate her damages and to award her damages in the amount of $50,000

without resorting to speculation.

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Affirmed.

HARRISON and GRUBER , JJ., agree.

The Lancaster Law Firm, PLLC, by: Clinton W. Lancaster and Angela Echols, for

appellant.

Nicholas R. Windle, for appellee.

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