Associate Can't Sue Firm for Firing Him After Refusal to Accede to Referral Scheme

By Joan C. Rogers  

A law firm associate has no viable wrongful discharge claim against a firm that allegedly fired him for refusing to take part in what he believed was a suspect referral arrangement with medical providers, the U.S. District Court for the Western District of Kentucky held Dec. 29 (Gadlage v. Winters & Yonker, Attorneys at Law PSC, W.D. Ky., Civ. No. 3:11-CV-354-H, 12/29/11).

Termination of an at-will employee gives rise to a wrongful discharge claim only if the firing violates public policy evidenced in a constitutional or statutory provision, Judge John G. Heyburn II explained. The public policy expressed in legal ethics rules is insufficient to support a wrongful discharge claim, he decided.

Got Your Back

In a lawsuit removed to federal court, Anthony Gadlage asserted that while he was working at the personal injury firm Winters & Yonker, it told him to steer clients toward Kentucky Spine and Rehab for medical treatment. Gadlage said he routinely advised his clients to seek treatment elsewhere because he found it more difficult to settle claims for clients treated at Kentucky Spine and Rehab.

Gadlage alleged that Kentucky Spine and Rehab refers hundreds of injured Kentuckians to Winters & Yonker and in return expects an equal number of referrals to its own medical clinics.

He asserted that at one point, the law firm told him that Kentucky Spine and Rehab was displeased with the number of the firm's referrals and that it would stop sending patients to Winters & Yonker if the firm did not boost its referrals to the clinics. According to Gadlage, a spreadsheet showed that he had signed up most of the clients who were not referred to a Kentucky Spine and Rehab clinic.

Gadlage's complaint alleged that he continued to refer clients to other medical clinics, believing it to be in their best interests. He contended that a quid-pro-quo referral arrangement existed between the law firm and Kentucky Spine and Rehab, creating a conflict of interest under Kentucky ethics rules.

The firm terminated his employment because he refused to participate in the referral scheme, the plaintiff asserted.

For purposes of the law firm's motion to dismiss, the court took the facts alleged in the complaint at face value. Even so, Heyburn concluded that the complaint did not state a viable claim against the firm under Kentucky law.

Court Rule Isn't Enough

At-will employees generally can be fired with or without cause, Heyburn said. Kentucky recognizes a narrow exception, he added, in cases where an employee's termination violates public policy. The Kentucky Supreme Court has made clear that the public policy supporting a wrongful discharge claim must be evidenced by a constitutional or statutory provision, Heyburn said.

Gadlage argued that his firing violated the public policy against conflicts of interest in lawyer-client relationships expressed in Kentucky Supreme Court rules.

The court decided, however, that in Kentucky, “a public policy from a court rule is insufficient to support a wrongful discharge claim.” The constitutional source of the state supreme court's authority to establish rules does not transform those rules into the equivalent of a constitutional or statutory provision, it said.

“Although it would be reasonable to find public policy in a wider scope of legal material—and other jurisdictions do exactly that—Kentucky has fairly drawn the line at constitutional and statutory provisions,” Heyburn wrote.

‘Not a Pretty Business.'

The court also tossed out Gadlage's claim for retaliation. The law firm's alleged conduct—firing him for refusing to participate in a quid-pro-quo referral scheme and contesting his claim for unemployment benefits—does not constitute the sort of outrageous and intolerable behavior needed to establish the tort of intentional infliction of mental distress, it found.

In a footnote, the court commented on Gadlage's belated invocation of a Kentucky statute that prohibits lawyers from soliciting clients within 30 days of an injury and forbids knowing acceptance of a client from an attorney referral service in violation of the 30-day rule. Nothing in the complaint suggested that Winters & Yonker was violating that statute or that Gadlage was terminated for conforming to it, Heyburn said.

Heyburn expressed some reluctance about having to dismiss the complaint. His opinion concludes: “This is not a pretty business that Mr. Gadlage has seen and fought against in his own way. Unfortunately, Kentucky does not afford him a legal remedy in these circumstances.”

Garry R. Adams Jr. of Thomas E. Clay PSC and Steven M. Frederick of Clay Frederick Adams, Louisville, Ky., represented Gadlage. James M. Inman and Ronald L. Green of Green & Chestnut, Lexington, Ky., represented Winters & Yonker.

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