On December 1, 2014, in Ferrick v. Santa Clara University (H040252), the California Court of Appeal rejected a university employee’s attempt to support her wrongful termination claim with allegations of embezzlement, tax evasion, or other alleged improprieties in public financing and real estate deals.  However, the employee successfully stated a claim for wrongful termination based on her allegation that a supervisor accepted kickbacks for placing university tenants with a private landlord, which provided a reasonable basis for the employee to suspect commercial bribery under Penal Code section 641.3.

Facts:

Linda Ferrick, a former Santa Clara University (“SCU”) senior administrator in SCU’s real estate department, alleged that her Department Director had bad character and behaved unprofessionally.  The Director allegedly sent “‘inappropriate emails,” arrived late to the office, took long lunches, sometimes failed to come into work, “frequently drank alcohol at work and left empty beer cans in his office” and drove a university golf cart on campus after his drivers’ license had been suspended.

Ferrick also allegedly witnessed and reported other “illegal” conduct by the Director, including embezzling funds and misdirecting public monies to purchase furniture used on campus, making false representations in real estate deals, threatening public health and safety, evading taxes by using on campus housing and engaging in kickback schemes.

Ferrick further alleged  she reported the Director’s conduct more than once to SCU’s Director of Finance and/or SCU’s Risk Manager, and claimed she provided SCU’s Budget Director with a list of SCU tenants of a private property owner whom she claimed paid the Director a fee of 3 percent on new leases.  SCU then audited the real estate department and Ferrick was subsequently terminated.  She responded by suing, alleging she was fired for reporting the Director’s activities.

Analysis:

To establish wrongful termination in violation of public policy in California, a whistleblowing plaintiff must show he or she: (1) was employed by the defendant; (2) discharged from employment; (3) a violation of public policy was the motivating reason for the discharge; and (4) damages.  Importantly, the public policy in question must be supported by either constitutional or statutory provisions; must inure to the benefit of the public interest; must have been articulated at the time of the employee’s discharge; and must be “fundamental and substantial.”

The Court concluded that except for the bribery allegations, Ferrick’s claim lacked factual support.  For example, Ferrick could not explain how the Director living on university property rent free violated any specific income tax reporting laws or how other alleged violations harmed the public.  Additionally, because Plaintiff did not allege the Director lacked authority to use SCU’s credit card to purchase furniture for SCU-owned housing, there could be no inference that public policy was violated based on alleged “embezzlement.”  Similarly, while Ferrick alleged the Director drove a golf cart on school property after his license was suspended for driving under the influence, she failed to allege facts to demonstrate that he drove in a dangerous manner or endangered others.  Accordingly, the Director’s alleged violation of the Vehicle Code is insufficient to support Ferrick’s whistleblowing claim.  On the other hand, the Court found the Director’s alleged participation in a kick-back scheme with a private landlord potentially violated the Penal Code and thus allowed Ferrick’s claim to proceed on that theory.

Conclusion:

Not all alleged violations of existing law satisfy the public policy requirements necessary to establish a valid whistleblower claim. Ferrick v. Santa Clara University draws helpful distinctions between the types of misconduct that do and do not rise to actionable levels.