UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


LIBERATORE, JAMES

v.

MELVILLE CORP


96-7067a

D.C. Cir. 1999


*	*	*


Rogers, Circuit Judge: James Liberatore appeals from the  grant of
summary judgment to his former employer, the  Melville Corporation
("Melville") on his claim for wrongful  discharge. Although hired as
an at-will employee, he con- tends that his discharge was in
retaliation for his threat to  report to the Federal Drug
Administration ("FDA") the  unlawful condition in which his employer
was storing pharma- ceutical drugs, and that his claim of wrongful
discharge  therefore falls within the public policy exception to the
at-will  employment doctrine under District of Columbia law. While 
his appeal was pending, the District of Columbia Court of  Appeals
decided Carl v. Children's Hospital, 702 A.2d 159  (D.C. 1997) (en
banc), in which the court held that the public  policy exception was
not limited to cases where an at-will  employee was discharged for
having outright refused to vio- late a law.1 Id. at 160. Thereafter,
in Washington v. Guest  Services, 718 A.2d 1071 (D.C. 1998), that
court held Carl was  retroactive.2 Accordingly, we hold that
Liberatore has stated  a cause of action for wrongful discharge under
Carl's expand- ed public policy exception to the at-will employment


I.


James Liberatore was employed from 1980 to 1993 as a  pharmacist for
People's Drug Store, and subsequently for  CVS when CVS's parent
company, the Melville Corporation,  purchased People's in 1990. It is
undisputed that he was an 




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n 1 After Liberatore filed his appeal of the October 2, 1995 order 
granting summary judgment to the Melville Corporation, he filed a 
motion to stay the appeal on October 18, 1996 pending the District  of
Columbia Court of Appeals' en banc decision in Carl. The  motion to
stay was granted on November 8, 1996.


2 Following oral argument, this court held Liberatore's appeal  in
abeyance pending a decision by the D.C. Court of Appeals on  whether
Carl was retroactive. Order of April 16, 1998. That issue  was decided
in Washington, which became final on December 17,  1998, when the D.C.
Court of Appeals denied a petition for rehear- ing en banc.


at-will employee.3 At the time of his discharge, Liberatore  was the
manager of the pharmacy department at the Thomas  Circle drug store in
the District of Columbia. In late Janu- ary 1993, the pharmacy was
relocated to a glass enclosed area  that protruded beyond the
building's exterior wall. Libera- tore and other employees began to
notice that inadequate  temperature control in the pharmacy was
adversely affecting  the condition of certain drugs. Liberatore
initially brought  the matter to the attention of his immediate
supervisor, Nita  Sood, and later to her supervisor, Jon Roberts.
Liberatore  continued to report his concerns to upper-level management
 as the temperature in the pharmacy rose, causing visible 
adulteration of a number of drugs. Although management  informed
Liberatore that it was working on the problem, the  problem persisted


On July 29, 1993, Liberatore told the Area Vice President,  Larry
Merlo, that although he "didn't want to have to do  this," he had a
neighbor who was the "number three guy in  the FDA," and he wondered
what the FDA "would think  about a seven month delay in a drugstore
that can't control  the temperatures of the pharmacy." That evening,
manage- ment authorized the removal of drugs worth $250,000 from  the
pharmacy for reclamation.4 On August 2, 1993, Libera- tore's immediate
supervisor notified the loss prevention de- partment that certain
other drugs were missing from invento- ry. After the department
questioned pharmacy staff about  the shortage, Liberatore was
identified as a suspect, and  management turned over the investigation
to the Metropoli- tan Police Department. On August 6, Liberatore was
ques- tioned by the police. On the same date, Liberatore was 
discharged; the stated reason was not the drug loss investi-




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n 3 Under District of Columbia law, "employment is presumed to  be at
will, unless the contract of employment expressly provides 
otherwise." Carl, 702 A.2d at 162.


4 Reclamation is the process by which drugs unfit for sale are 
reclaimed, removed from the store's inventory, and eventually 


gation, but the lapse of Liberatore's pharmacy license, which 
management claimed not to have discovered until that date.


Liberatore sued Melville for wrongful discharge and defa- mation.5 He
alleged that he was fired because he threatened  to report the
temperature control problem in the pharmacy to  the FDA, and that his
lapsed license was a pretext because  other pharmacists were not fired
for failing to renew their  licenses and his supervisor had known of
his lapsed license  for months. The district court dismissed
Liberatore's wrong- ful discharge claim for failure to state a cause
of action within  the narrow public policy exception to at-will
employment set  forth by the District of Columbia Court of Appeals in
Adams  v. George W. Cochran & Co., 597 A.2d 28, 34 (D.C. 1991). 
Although Liberatore had complained to various supervisors  and
threatened to report the temperature control problem to  the FDA, the
district court concluded that because he contin- ued to dispense drugs
voluntarily, unlike the plaintiff in  Adams, he did not present his
employer with an outright  refusal to violate a specific statute or


II.


An employee who serves at the will of his or her employer  may be
discharged "at any time and for any reason, or for no  reason at all."
Adams, 597 A.2d at 30; see Pfeffer v. Ernst,  82 A.2d 763, 764 (D.C.
1951). This proposition "has long been  settled in the District of
Columbia," Adams, 597 A.2d at 30,  and it is only in recent years that
the District of Columbia  Court of Appeals has identified a public
policy exception to  the at-will employment doctrine. In Adams, the
D.C. Court  of Appeals held that an at-will employee stated a cause of
 action for wrongful discharge where the employee would have  been
forced to violate the law in order to avoid termination.  The employer
in Adams had allegedly fired a delivery truck  driver after he had
refused to drive a truck that did not have  an inspection sticker on
its windshield because it was illegal 




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n 5 Liberatore does not appeal the award of no damages on his 
defamation claim arising from a CVS security guard's statement  that
Liberatore had been using or taking drugs.


to operate a motor vehicle in the District of Columbia without  one.
Id. at 29-30 & n.1. The D.C. Court of Appeals conclud- ed that because
the employer's instructions would have forced  Adams to violate the
law, strong public policy considerations  weighed in favor of a narrow
exception to the at-will employ- ment doctrine. The court explained:


Appellant Adams was forced to choose between violating  the regulation
and keeping his job--the very choice  which, ... he should not have
been required to make.  Even though the criminal liability facing him
was not  very great, it was nonetheless unacceptable and unlawful  for
his employer to compel him to choose between break- ing the law and
keeping his job. We therefore hold, ...  that there is a very narrow
exception to the at-will  doctrine under which a discharged at-will
employee may  sue his or her former employer for wrongful discharge 
when the sole reason for the discharge is the employee's  refusal to
violate the law, as expressed in a statute or  municipal regulation.


Id. at 34.


After Adams, the D.C. Court of Appeals resisted further  expansion of
the public policy exception to the at-will employ- ment doctrine. See,
e.g, Gray v. Citizens Bank of Washing- ton, 602 A.2d 1096 (D.C. 1991),
reh'g en banc granted and  opinion vacated, id. at 1102, opinion
reinstated on denial of  reh'g en banc, 609 A.2d 1143 (D.C. 1992). In
Gray, a bank  employee alleged that he was fired after reporting to
his  superior evidence of illegal activities by other employees. Id. 
at 1096. The court held that Gray did not fall within Adams'  narrow
public policy exception to the at-will employment  doctrine, and
declined to expand the scope of possible excep- tions. A cause of
action for wrongful discharge would lie only  where the employee
refuses to violate a specific law and the  employer puts to the
employee the choice of breaking the law  or losing his job. Although
the court initially granted rehear- ing en banc, it ultimately
declined reconsideration. Similarly,  in Thigpen v. Greenpeace, Inc.,
657 A.2d 770, 771 (D.C. 1995),  the D.C. Court of Appeals declined to


exception where an employee, somewhat like Liberatore,  communicated
with his superiors and filed a complaint with  the District
authorities about his employers' alleged violation  of the minimum
wage law, but "continued to work as before  and did not refuse to
carry out any instructions from his  employer." This was the state of
the District of Columbia  law when the district court granted summary
judgment in the  instant case.


During the pendency of Liberatore's appeal, however, the  D.C. Court of
Appeals decided in Carl, 702 A.2d 159, that an  expansion of the
public policy exception was warranted even  in the absence of a
refusal by an employee to violate the law.  In Carl, the at-will
employee, a nurse, alleged inter alia, that  she was wrongfully
discharged in retaliation for testifying  before the Council of the
District of Columbia on proposed  tort reform legislation, taking a
position that advocated pa- tients' rights adverse to the interests of
her employer. Id. at  160. Her employer claimed she was fired for
failing to meet  orientation requirements for probationary employees.
See id.  D.C. Code s 1-224 makes it unlawful to intimidate or impede 
a witness in any proceeding before the D.C. Council. Be- cause the
employee alleged she was discharged in retaliation  for her testimony
before the D.C. Council, the court held that  the public policy
embodied in s 1-224 warranted expansion of  the exception to the
at-will employment doctrine. At the time  Liberatore's appeal was
argued in this court, it was unclear,  however, whether as a matter of
District of Columbia law,  Carl was retroactive. That question was
decided by the D.C.  Court of Appeals in Washington, 718 A.2d 1071.


In Washington, a cafeteria employee alleged that she was  discharged in
retaliation for following the District of Colum- bia health laws.
After Washington, a cook in a retirement  home, told a fellow worker
to stop spraying poisonous clean- ing fluid next to uncovered food,
she alleged that the manager  told her he had ordered the employee to
clean the area, and  for her to tell the employee otherwise
constituted insubordi- nation. See id. at 1072. Because the conduct at
issue had  occurred prior to Carl, the court had to decide whether
Carl  would be retroactive. In concluding that it would, the court 


applied Mendes v. Johnson, 389 A.2d 781 (D.C. 1978) (en  banc),
pretermitting a determination of whether Mendes was  implicitly
overruled by the Supreme Court in James B. Beam  Distilling Co. v.
Georgia, 501 U.S. 529 (1991), and Harper v.  Virginia Department of
Taxation, 509 U.S. 86 (1993). Under  Mendes, the court considers four
factors in determining  whether to apply a new civil rule
retroactively: the extent of  the parties' reliance on the old
precedent, the avoidance of  altering vested contract or property
rights, the desire to  reward plaintiffs seeking to initiate just
changes in the law,  and the fear of burdening the administration of
justice by  disturbing decisions reached under the overruled


In Washington, the court concluded that the employer's  stated reason
for firing Washington belied any notion of  actual reliance on the
narrow public policy exception an- nounced in Adams, and that in
general, neither employers  nor the public could reasonably have
relied on the Adams  standard because the court had never explicitly
held that  there was only one narrow public policy exception. 718 A.2d
 at 1076-77. The court took note of the expanded public  policy
exception in other jurisdictions6 and supervening Su- preme Court
decisions on the retroactivity of new civil rules  in Beam Distilling,
501 U.S. 529, and Harper, 509 U.S. 86,  and concluded that it gave
employers fair warning of the  retroactive application of any
expansion of the public policy  exception. Washington, 718 A.2d at
1078. The employer  cited no authority for a vested right to discharge
an at-will  employee, and the court was unpersuaded that an employer's




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n 6 See id. at 1079 (citing Bernstein v. Aetna Life & Cas., 843  F.2d
359, 363-64 (9th Cir. 1988) (applying Arizona law); Newman v.  Emerson
Radio Corp., 772 P.2d 1059, 1062-72 (Ca. 1989); Martin  Marietta Corp.
v. Lorenz, 823 P.2d 100, 110-14 (Colo. 1992); McGe- hee v. Florafax
Int'l , 776 P.2d 852, 853-54 (Okla. 1989)); id. at 1077  (citing 82
Am. Jur. 2d on Wrongful Discharge s 15, at 688 (1992),  noting that
courts generally protect three categories of protected  employee
conduct: (1) exercising a statutory right or civil obli- gation, (2)
refusing to engage in illegal activity, and (3) reporting  criminal
conduct to supervisors or outside agencies)).


expectation that the public policy exception would remain  limited, as
announced in Adams, created such a right. See id.  Noting that
Washington had not brought her lawsuit to effect  a change in the law,
the third Mendes factor did not weigh in  her favor. On the other
hand, the court rejected the notion  that applying Carl retroactively
would result in a plethora of  wrongful discharge lawsuits. Id. at


Melville's contentions that Carl should not apply to Libera- tore's
case are unpersuasive. As in Washington, the employ- er's stated
reason for firing was Liberatore's lapsed license,  thereby belying
actual reliance on the narrower public policy  exception announced in
Adams. 718 A.2d at 1076. The D.C.  Court of Appeals in Washington
rejected the argument that  Carl broke completely new ground and was
not foreshadowed  by any prior holdings. Id. at 1077-78. Any reliance
on the  old at-will employment doctrine fails the reasonable reliance 
test, the D.C. Court of Appeals concluded, in light of Adams,  the law
in other jurisdictions, and the supervening Supreme  Court decisions
on retroactivity. Id. To no more avail is a  contention based on the
burden on the administration of  justice, for as the Washington court
noted, there is nothing of  record to suggest that a substantial
number of pending  appeals would be subject to being reopened. Id. at


Consequently, we conclude that the grant of summary  judgment for
failure to state a cause of action within the  public policy exception
must be reversed. Although there  was no agreement by the D.C. Court
of Appeals in Carl about  the nature of the conduct that would qualify
under its expand- ed public policy exception, the separate views of
the judges  indicate that "the effective holding of the en banc
court," 702  A.2d at 197 n.2 (Steadman, J. dissenting), is that
circum- stances other than an employee's outright refusal to violate a
 law constitute grounds for a public policy exception if "solidly 
based on a statute or regulation that reflects the particular  public
policy to be applied." Id. at 163; see also id. at 164 n.6  (Terry,


In his brief, Liberatore cites both federal and District of  Columbia
law proscribing the improper storage of drugs. 


The FDA regulations require the storage of drug products  under
appropriate conditions of temperature, humidity, and  light so that
the identity, strength, quality, and purity of the  drugs products are
not affected. 21 C.F.R. s 211.142(b).  Failure to comply results in
adulterated drugs as defined by  Section 501 of the Food, Drug, and
Cosmetic Act, 21 U.S.C.  s 351, see 21 C.F.R. s 210.1(b), and the
violator is subject to  a fine, imprisonment up to one year, or both.
21 C.F.R.  s 333(a)(1). Under D.C. Code s 2-2013(a) (1981), "[d]rugs 
which may deteriorate shall at all times be stored under  conditions
specified on the label of the original container and  in accordance
with applicable District of Columbia or federal  laws or


The conduct that Liberatore claims resulted in his termi- nation
implicates the public policy underlying the legal pro- scriptions on
the storage and handling of drugs. On nu- merous occasions, Liberatore
notified management of the  temperature control problems in the
pharmacy, and when  the problems continued, he threatened to alert the
FDA.  His claim that he was discharged for his threat to report 
conditions to the FDA that were in violation of federal and  District
of Columbia laws protecting the public from the  purchase of
adulterated drugs implicates the kind of public  policy embodied in a
statute or regulation underlying the  D.C. Court of Appeals' decision
in Carl to expand Adams'  narrow exception to the at-will employment
doctrine. See  702 A.2d 164-65; Washington, 718 A.2d at 1080.


Contrary to the Melville's contentions, neither Adams nor  its progeny
indicates that the D.C. Court of Appeals would  draw a distinction
between a threat and an actual complaint  to the appropriate
enforcement official. In Washington, the  employee did not threaten to
notify health authorities but  simply informed management of the
alleged law violations.  See 718 A.2d at 1072; cf. Adler v. American
Standard Corp.,  538 F. Supp. 572, 577-80 (D. Md. 1982); Sheets v.
Teddy's  Frosted Foods, Inc., 427 A.2d 385, 388 (Conn. 1980);  McQuary
v. Bel Air Convalescent Home, Inc., 684 P.2d 21,  22-23, 24 (Or. Ct.
App. 1984). In other cases cited by  Melville, the employee simply
disagreed with management 


decisions and did not allege a violation of law or action  contrary to
public policy.7 Were the court to agree that  discharges from
employment in retaliation for internal com- plaints of law violations
are not protected by the public policy  exception, it would "create
perverse incentives by inviting  concerned employees to bypass
internal channels altogether  and immediately summon the police."
Belline v. K-Mart  Corp., 940 F.2d 184, 187 (7th Cir. 1991).


Nor is there authority to support the proposition that  Liberatore has
failed to state a cause of action because he  violated the same drug
safety standards that are the basis of  his alleged wrongful
discharge. Liberatore's violation does  not excuse the employer's like
failure, itself an independent  violation of the public policy
underlying the legal proscrip- tions, much less permit retaliatory
discharges. The conten- tion that Liberatore was properly discharged
for jeopardizing  the employer's interests is a question of disputed
fact, and  hence, summary judgment on that basis would be inappropri-
ate. Melville's reliance on Korb v. Raytheon Corp., 574  N.E.2d 370
(Mass. 1991), involving a lobbyist who spoke to  the press against his
employer's interest in greater defense  spending, is misplaced because
Liberatore's duties as a man- ager of the pharmacy department were
neither incompatible  with the employer's interests nor such as to
preclude him  from complaining about temperature control problems in


Accordingly, because the complaint states a cause of action  for
wrongful discharge under the expanded public policy  exception to the
at-will employment doctrine recognized by  the D.C. Court of Appeals
in Carl, and there remains a  genuine issue of material fact as to the
employer's stated 




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n 7 See Suchodolski v. Michigan Consol. Gas Co., 316 N.W.2d  710,
711-12 (Mich. 1982); Pierce v. Ortho Pharm. Corp., 417 A.2d  505,
513-14 (N.J. 1980); DeVries v. McNeil Consumer Prod. Co.,  593 A.2d
819, 825-27 (N.J. Super. Ct. App. Div. 1991); House v. 
Carter-Wallace, Inc., 556 A.2d 353, 356 (N.J. Super. Ct. App. Div. 
1989); Jones v. Gilstrap, 343 S.E.2d 646, 646-49 (S.C. Ct. App. 


reason for Liberatore's discharge, we reverse the grant of  summary
judgment.




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n 1986); cf. Mello v. Stop & Shop Cos., 524 N.E.2d 105, 106-08 (Mass. 
1988).