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Yurk v. Application Software Technology Corp.

United States District Court, E.D. Michigan, Southern Division

February 17, 2017

DALE YURK, Plaintiff,
v.
APPLICATION SOFTWARE TECHNOLOGY CORP., Defendant.

          OPINION AND ORDER GRANTING IN PART DEFENDANT'S SECOND MOTION TO DISMISS COUNT II [23]

          LAURIE J. MICHELSON U.S. DISTRICT JUDGE.

         Plaintiff Dale Yurk claims that while he was employed with Defendant Application Software Technology, he discovered that AST was reusing and reselling the software that he had developed for the City of Detroit. Yurk believed the resale infringed the City's intellectual property rights to the software. So Yurk contacted his superiors about the issue. Their answers did not quell his concerns, and they removed him from the City project. Yurk eventually contacted AST's CEO. Shortly thereafter, Yurk was terminated. Yurk says that his termination was unlawful retaliation for questioning AST's resale practice. As such, he filed a two-count complaint asserting that AST violated Michigan's Whistleblower Protection Act and Michigan public policy.

         In a prior opinion and order, the Court dismissed the public-policy claim. Yurk v. Application Software Tech. Corp., No. 2:15-CV-13962, 2016 WL 3457945 (E.D. Mich. June 24, 2016). The Court explained that while Michigan public policy prohibits terminating an employee “for [his] failure or refusal to violate the law in the course of employment, ” “‘no law or policy tells Michigan employers that they must not retaliate against employees who report legal violations to their supervisors.'” Id. at *2 (quoting Scott v. Total Renal Care, Inc., 194 F. App'x 292, 298 (6th Cir. 2006)). The Court concluded that the conduct alleged in Yurk's (first amended) complaint was simply that AST had retaliated for Yurk's complaints to his superiors:

As far as the Court can tell, AST-independent of Yurk-planned to resell the software developed for the City. The Court infers this from Yurk's allegations that he “discovered that AST was planning” on reselling the code, that he thought “AST's activity” could be illegal, and that, when Yurk contacted his superiors about the issue, they essentially told him to mind his own business. As such, Yurk has not pled that he refused to participate in his employer's unlawful conduct- AST had apparently planned to resell without involving Yurk.

Id. at *3 (emphasis in original, record citations omitted).

         As the Court found that Yurk's complaint did not state a violation of Michigan public policy, it did not reach AST's other basis for dismissing that claim: that the claim was preempted by the Whistleblower Protection Act. See Dudewicz v. Norris-Schmid, Inc., 443 Mich. 68, 70, 503 N.W.2d 645, 646 (1993). But the Court did note that it was unclear how Dudewicz's rule should be applied, remarking, “should Yurk move to amend his complaint or should AST file another motion based on Dudewicz's exclusive-remedy rule, the parties should thoroughly address this issue.” Id. at *5.

         Yurk has filed a Second Amended Complaint (to which the Court will more simply refer to as the complaint). (R. 22.) And AST has filed another motion to dismiss it. (R. 23.) AST says that even with additional allegations, the complaint still does not state a public-policy claim, and, in any event, the claim is preempted by the WPA. The Court disagrees with AST's primary argument, but agrees that the WPA is Yurk's exclusive remedy. Accordingly, the Court will dismiss Yurk's public-policy claim on that basis.

         I.

         As compared to the prior complaint, the current complaint alleges Yurk's role in the allegedly unlawful scheme. In particular, the complaint asserts, “One of Yurk's projects with AST was developing a software solution to unify the City of Detroit's computer systems” (R. 22, ¶ 9); “Yurk believed that the manner in which AST was developing the project infringed on the City's intellectual property” (R. 22, ¶ 15); and “Yurk also learned that the reusable design of the City's new computer system was substantially more expensive than if the system were designed in a cheaper, yet non-reusable manner” (R. 22, ¶ 23). These allegations suggest that Yurk's coding was part of AST's resale plan. Notably, this is more than just alleging that Yurk wrote software for the City and, later, AST decided to resell that software. In that scenario (which is more what the prior complaint suggested), Yurk would still be a but-for cause of the resale (absent having written the software, there would be nothing to be resold), but he would not have been involved in the only part of the plan that was unlawful: reselling the software. The scenario suggested by the quoted allegations, however, indicates that the allegedly unlawful activity included the software's development: it was being written in a way that allowed for its reuse. And, as AST admits, Yurk “was employed as a software consultant to develop the software[.]” (R. 26, PID 311.) Thus, unlike the prior complaint, Yurk has alleged that the unlawful scheme included his participation.

         The question thus becomes whether Yurk has adequately pled that he refused to continue to participate in the allegedly unlawful scheme, i.e., that he refused to violate the law. While close, the Court believes the answer is “yes.” The complaint alleges that when Yurk contacted his superiors claiming that the reuse and resale practice was unlawful (R. 22, ¶¶ 13, 26-27, 29- 30), they told him not to “engage in discussions which are not relevant to the project.” (R. 22, ¶ 32.) Implicit in AST's response was that Yurk should do his job without concerning himself with how the code would be used. See Morrison v. B. Braun Med. Inc., 663 F.3d 251, 257 (6th Cir. 2011); Giron v. Tyco Elecs. Corp., No. 2:16-CV-11803, 2016 WL 7405805, at *1 (E.D. Mich. Dec. 22, 2016) (“To state a plausible claim, a plaintiff need not show that the employer directed her to violate the law.”). But Yurk refused to do this. He sent another email “explaining that he had personal experience with a similar situation with his former employer” and that he refused to “blindly follow orders.” (R. 22, ¶ 38.) AST then removed him from the City project. (R. 22, ¶ 40.) Together, these allegations permit the reasonable inference that Yurk did not want to continue writing the software for the City in a reusable fashion and that when he made that known to AST, AST removed him from the project (and, ultimately, terminated his employment). The Court thus finds it plausible that Yurk “refus[ed] to violate the law in the course of [his] employment, ” McNeil v. Charlevoix Cnty., 772 N.W.2d 18, 24 (Mich. 2009).

         The fact that the software was designed for resale, and that it was Yurk who was writing the software, also shows why the allegations of the complaint are now more analogous to the facts of Robinson v. Radian, Inc., 624 F.Supp.2d 617 (E.D. Mich. 2008), a case which the Court previously found inapposite. In its earlier opinion, the Court noted that unlike Robinson, where “the employee believed that his employer was not complying with federal regulations governing hiring and produced evidence that he thus refused to sign off on the hire of several candidates, ” “AST's plan to resell software developed for the City was independent of Yurk's involvement.” Yurk, 2016 WL 3457945, at *3. But if, as the complaint now alleges, Yurk was writing software in a manner that allowed for its reuse, then AST's resale plan was not independent of Yurk's involvement.

         In short, the Court can reasonably infer from the complaint, see Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), that AST retaliated against Yurk for his refusal to violate the law.

         II.

         AST alternatively argues that the Court should dismiss Yurk's public-policy claim with prejudice because “the Whistleblower Act provides Plaintiff with his exclusive remedy in the event he could prevail at trial.” (R. 23, PID 183.) The Court agrees that, based on the ...


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