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Newsome v. Kansas City, Missouri School District

Supreme Court of Missouri, En Banc

May 16, 2017

CARY NEWSOME, Respondent,
v.
KANSAS CITY, MISSOURI SCHOOL DISTRICT, Appellant.

         APPEAL FROM THE CIRCUIT COURT OF JACKSON COUNTY The Honorable S. Margene Burnett, Judge

          Zel M. Fischer, Judge

         The Kansas City School District appeals the circuit court's judgment awarding Cary Newsome $500, 000 in damages on his claim for wrongful discharge in violation of public policy. The District argues the circuit court erred in: (1) overruling its motion for judgment notwithstanding the verdict because Newsome failed to make a submissible case; (2) overruling its motion for new trial because the verdict director submitted to the jury was erroneous; and (3) overruling its motion for remittitur because the award exceeded that which is allowed by law. This Court remits the award to $403, 139, and affirms the circuit court's judgment in all other respects.

         I. Factual and Procedural History

         Working for the District as a purchasing manager, Newsome was responsible for administering the District's purchasing and contract functions in compliance with state law and the District's policies and procedures. Relevant to this appeal are two requests Newsome received shortly before his termination. In June 2011, the District's superintendent asked Newsome to adjust the purchase order for Ron Epps so Epps, an independent consultant, could be paid for additional visits not specified in his contract with the District. Newsome, believing it was illegal in Missouri to alter contracts after the fact, reported his concerns about the Epps payment request to his supervisor, Rebecca Lee-Gwin. Lee-Gwin agreed with Newsome and took the request under advisement.

         Later that week, Newsome objected to a separate request. After the District's facilities department made a purchase request for three vehicles, Newsome identified a state contract with a Ford dealership for Explorers and Escapes on which the District could "piggyback." The school board approved the purchase of three Explorers from the dealership, but Newsome subsequently learned the dealership could only provide three Escapes by June 30, the desired procurement date. Despite the vehicle change, the facilities department wanted to proceed with the purchase of Escapes-which had a lower value than the Explorers-for a price that was at or near the same price as the Explorers and was higher than the price provided for Escapes under the state contract. Concerned this purchase would violate state law and the District's policies, Newsome reported the proposed Escapes purchase order to Lee-Gwin, who initially agreed with Newsome and told him to cancel it. Lee-Gwin, though, later changed her mind and told Newsome to go ahead and issue the Escapes purchase order. When Newsome objected, Lee-Gwin told him that she "didn't want to hear anything else about it" and that he "needed to take care of it." Newsome prepared the Escapes purchase order and placed a memorandum in the District's electronic accounting system documenting his concerns that the purchase was for different vehicles and a different price than approved by the school board. He also attached a hard copy of his memorandum to the Escapes purchase order.

         Three days later, on June 27, the District presented Newsome with the option of resigning and accepting $20, 000 or being terminated. To receive the $20, 000, Newsome had to sign a "General Release and Waiver of Claims, " which waived all claims he may have against the District. He signed the waiver that day and resigned but, as allowed by the terms of the waiver, timely revoked his signature and rescinded his resignation on June 30. The District then terminated Newsome's employment.

         Newsome filed a petition for damages against the District, asserting a claim of wrongful discharge in violation of public policy.[1] The case proceeded to a jury trial. At the close of evidence, the District moved for a directed verdict, which was overruled. The circuit court, over the District's objection, then submitted to the jury a verdict director ("Instruction 15") requiring the jury to find, among other elements of the claim, that Newsome either "refused to approve a payment to Ron Epps that he reasonably believed would violate School District contracting law" or "reported to a superior that he reasonably believed the purchase of Ford Escapes would violate School District contracting law."

         The jury returned a verdict in favor of Newsome on his wrongful discharge claim and assessed Newsome's damages at $500, 000. The circuit court entered judgment in accordance with the jury's verdict. The District then filed motions for judgment notwithstanding the verdict, a new trial, and remittitur, all of which were overruled. The District appealed and, after opinion by the court of appeals, this Court transferred the case pursuant to article V, § 10 of the Missouri Constitution. The District raises six points on appeal, which are divisible into three categories: claims the circuit court erred in overruling its motion for judgment notwithstanding the verdict (Points I and IV); claims the circuit court erred in overruling its motion for new trial (Points II and III); and claims the circuit court erred in overruling its motion for remittitur (Points V and VI).

         II. Motion for Judgment Notwithstanding the Verdict

         In Points I and IV, the District argues the circuit court erred in overruling its motion for judgment notwithstanding the verdict because Newsome did not make a submissible case.[2] When reviewing a circuit court's overruling of a motion for judgment notwithstanding the verdict, "[t]his Court must determine whether the plaintiff presented a submissible case by offering evidence to support every element necessary for liability." Fleshner v. Pepose Vision Inst., P.C., 304 S.W.3d 81, 95 (Mo. banc 2010). "Evidence is viewed in the light most favorable to the jury's verdict, giving the plaintiff all reasonable inferences and disregarding all conflicting evidence and inferences." Id. "Whether the plaintiff made a submissible case is a question of law that this Court reviews de novo." Ellison v. Fry, 437 S.W.3d 762, 768 (Mo. banc 2014). A motion for judgment notwithstanding the verdict "should be granted if the defendant shows that at least one element of the plaintiff's case is not supported by the evidence." Id.

         Point IV will be addressed first because it raises a threshold matter of sovereign immunity. "Sovereign immunity is not a defense to suit but, rather, it is immunity from tort liability altogether . . . ." State ex rel. City of Grandview v. Grate, 490 S.W.3d 368, 369 (Mo. banc 2016). For suits against public entities, sovereign immunity is the rule, not the exception. Metro. St. Louis Sewer Dist. v. City of Bellefontaine Neighbors, 476 S.W.3d 913, 921-22 (Mo. banc 2016). As such, to make a submissible case, Newsome had the burden of proving the District waived its sovereign immunity. See Randel v. City of Kansas City, 467 S.W.3d 383, 387 (Mo. App. 2015); see also St. John's Clinic, Inc. v. Pulaski Cnty. Ambulance Dist., 422 S.W.3d 469, 471 (Mo. App. 2014) ("Sovereign immunity is not an affirmative defense but is part of the plaintiff's prima facie case. This is well settled.") (internal citation and quotations omitted).

         Pursuant to § 537.610.1, [3] a political subdivision, such as the District, may purchase liability insurance for tort claims and, in doing so, waive its sovereign immunity for claims covered by the insurance policy. Here, it is undisputed the District purchased liability insurance covering the type of claim Newsome brought. The District, though, argues it preserved its sovereign immunity that would have otherwise been waived by its purchase of liability insurance because its 2011-12 policy included an endorsement ("Endorsement 13") stating the insurer "shall not be liable to make any payment for Loss in connection with any Claim made against any Insured . . . that is barred by the defense of sovereign immunity" and "nothing contained in this Policy shall constitute a waiver of the defense of 'sovereign immunity.[']" This Court has held a political subdivision preserves its sovereign immunity when it "purchase[s] an insurance policy that disclaim[s] coverage for any actions that would be prohibited by sovereign immunity." City of Grandview, 490 S.W.3d at 372.

         While both the District and Newsome argue over the effective date of Endorsement 13, as well as whether the District's 2011-12 policy or 2010-11 policy applies to Newsome's claim, [4] this Court need not reach those issues because Endorsement 13 never became part of the 2011-12 policy. Section 432.070 provides:

No county, city, town, village, school township, school district or other municipal corporation shall make any contract, unless the same shall be within the scope of its powers or be expressly authorized by law, nor unless such contract be made upon a consideration wholly to be performed or executed subsequent to the making of the contract; and such contract, including the consideration, shall be in writing and dated when made, and shall be subscribed by the parties thereto, or their agents authorized by law and duly appointed and authorized in writing.

(Emphasis added). As Newsome points out, Endorsement 13, which was not part of the original 2011-12 policy but was negotiated several months later, was not subscribed to by any authorized and appointed agent of the District.[5] This fact is not disputed. Section 432.070 "requires the contracts made by a [school district] must be in writing and duly executed as provided in said statute. The requirements of the statute are mandatory, not directory, and a contract not so made is void." Burger v. City of Springfield, 323 S.W.2d 777, 782 (Mo. 1959).[6] Because the attempted execution of Endorsement 13 did not comply with all of the requirements of § 432.070, the District cannot rely on Endorsement 13 to preserve sovereign immunity that was otherwise waived by its purchase of liability insurance.[7]

         With that threshold issue aside, the District argues in Point I that the circuit court erred in overruling its motion for judgment notwithstanding the verdict because Newsome failed to present substantial evidence in support of every element of a claim for wrongful discharge in violation of public policy. "The public policy exception to the at-will employment rule, often called the wrongful discharge doctrine, is very narrowly drawn." Margiotta v. Christian Hosp. Ne. Nw., 315 S.W.3d 342, 346 (Mo. banc 2010). "An at-will employee may not be terminated (1) for refusing to violate the law or any well-established and clear mandate of public policy as expressed in the constitution, statutes, regulations promulgated pursuant to statute, or rules created by a governmental body or (2) for reporting wrongdoing or violations of law to superiors or public authorities." Fleshner, 304 S.W.3d at 92. There are thus two distinct categories recognized by this Court: (1) refusal to violate public policy; and (2) reporting violations of public policy, also known as "whistleblowing."

         The District first argues Newsome's claim cannot fall under the whistleblowing category because he reported wrongdoing only to Lee-Gwin, the alleged wrongdoer. The District relies on Drummond v. Land Learning Foundation, 358 S.W.3d 167, 171 (Mo. App. 2011), which held "a report of wrongdoing to the wrongdoer is insufficient to invoke the whistleblowing public policy exception." While the District makes this argument for both the Epps payment request and the Escapes purchase order, only the Escapes purchase order was submitted to the jury based on a whistleblowing theory; the Epps payment request was submitted to the jury based on a theory of refusal, not whistleblowing. As for the Escapes purchase order, this Court has no occasion to either adopt or reject the rule expressed in Drummond because, in this case, the report of wrongdoing was not to the wrongdoer. Lee-Gwin was not the alleged wrongdoer when Newsome first reported to her that the facilities department's request to purchase Escapes would violate the District's policies and state law. Instead, she initially agreed with Newsome and told him to cancel the purchase order. That she later directed him to process the purchase order does not make her a wrongdoer at the time of the report.[8]

         In addition, the District argues Newsome presented no evidence that either the Epps payment request or the Escapes purchase order violated public policy. For a wrongful discharge claim, "the public policy must be reflected by a constitutional provision, statute, regulation promulgated pursuant to statute, or a rule created by a governmental body." Fleshner, 304 S.W.3d at 96. Newsome, for both the Epps payment request and the Escapes purchase order, presented evidence he was asked to facilitate transactions that were outside the terms of the District's approved contracts and he argued to the circuit court these transactions would violate the public policy reflected by § 432.070. Unauthorized transacting by a school district indeed violates the public policy reflected by the mandatory contracting requirements for school districts, discussed above, in § 432.070:

The manifest purpose of [ยง 432.070] is that the terms of the contract shall, in no essential particular, be left in doubt, or to be determined at some future time, but shall be fixed when the contract is entered into. This was one of the precautions taken to prevent extravagant demands, and ...

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