September 6, 2013

Summer 2013 Civil Case Law Update: Four Noteworthy Decisions from the Iowa Supreme Court

It was a productive summer for the Iowa Supreme Court, which issued a number of noteworthy decisions. Below are four decisions of particular relevance to clients and practitioners litigating civil cases in Iowa:
  • In Ackelson v. Manley Toy Direct, LLC, decided June 21, 2013, the Court held that punitive damages are not recoverable under the Iowa Civil Rights Act.
  • In Nelson v. James H. Knight, DDS, P.C., decided July 12, 2013, the Court held that terminating an employee due to a consensual, personal relationship does not constitute sex discrimination under the Iowa Civil Rights Act. The Court also reaffirmed that the Iowa Civil Rights Act is not a general fairness statute and employment decisions that are merely unfair or arbitrary are not illegal.
  • In Miranda v. Said, decided July 19, 2013, the Court held for the first time that emotional distress damages are recoverable in some legal malpractice cases.
  • In Dorshkind v. Oak Park Place of Dubuque II, LLC, decided August 2, 2013, the Court held that internal whistleblowing concerning violations of statutes or regulations can support a wrongful termination claim even if the statute or regulation itself does not offer protection for whistleblowing.
The cases are discussed in more detail below.
Ackelson v. Manley Toy Direct, LLC In a unanimous decision, the Iowa Supreme Court reaffirmed that punitive damages are not recoverable under the Iowa Civil Rights Act. The plaintiff in Ackelson asked the Court to overrule precedent dating back to 1986. The Court refused to do so, basing its decision on principles of stare decisis and legislative acquiescence. The Court stated that this precedent was "ingrained in our legal culture" and should be departed from only under "the most cogent circumstances." The Court found those circumstances lacking, noting that there were public policy considerations on both sides of the issue. Moreover, because the issue was injected with public policy considerations, the Court found it to be an issue "particularly appropriate for legislative consideration." The Court noted that, over the past twenty-seven years, the Court had clearly and repeatedly stated its position that the Iowa Civil Rights Act does not permit an award of punitive damages, yet the legislature had taken no action to change that result. The Court stated that "[w]hen many years pass following such a case without a legislative response, we assume the legislature has acquiesced in our interpretation."
Nelson v. James H. Knight, DDS, P.C. In a controversial decision that garnered national attention, the Iowa Supreme Court held that a male employer's decision to terminate a female employee because of a consensual, non-sexual relationship which was perceived by the employer's wife as threatening to their marriage did not constitute actionable sex discrimination under the Iowa Civil Rights Act. The plaintiff, a long-time dental assistant for the defendant, was terminated after the defendant's wife became concerned with the closeness of the plaintiff's relationship with her husband. The plaintiff filed suit against the defendant for sex discrimination, but did not make a claim for sexual harassment or hostile work environment. The plaintiff argued that her termination constituted sex discrimination because it was motivated by her gender insofar as she would not have been terminated if she had been a man. The Iowa Supreme Court rejected this argument. The Court drew a distinction between (1) an isolated employment decision based on personal relations, even if the relations would not have existed if the employee had been of the opposite gender, and (2) a decision based on gender itself. The Court stated that "[i]n the former case, the decision is driven entirely by individual feelings and emotions regarding a specific person. Such a decision is not gender-based, nor is it based on factors that might be a proxy for gender." The Court further explained that Title VII and the Iowa Civil Rights Act are not general fairness laws, and an employer does not violate them by treating an employee unfairly so long as the employer does not engage in discrimination based upon the employee's protected status.
Miranda v. Said The Iowa Supreme Court for the first time allowed a plaintiff to recover emotional distress damages in a legal malpractice action. The defendant in Miranda provided negligent legal advice to the plaintiffs, both of whom were illegal immigrants seeking citizenship, which resulted in the plaintiffs being separated from their children and barred from reentry to the United States for a period of ten years. Prior cases had denied emotional distress damages in legal malpractice cases on the grounds that such damages are not reasonably foreseeable in most attorney-client relationships. However, the Court in Miranda held the relationship between an immigration attorney and a client facing deportation and possible separation from their children involved a transaction charged with emotions in which negligent conduct by the attorney was very likely to cause severe emotional distress. Accordingly, emotional distress damages were available.
Dorshkind v. Oak Park Place of Dubuque II, LLC Over a vigorous dissent, a majority of the Court held that internal whistleblowing concerning violations of statutes or regulations can support a wrongful termination claim even when there is no express statutory protection for whistleblowing. The plaintiff in Dorshkind was an employee of an assisted living facility who complained to a co-worker about other employees forging training documents which were required by state law. The co-employee reported the allegation to their supervisor, and the plaintiff was subsequently terminated. Under Iowa law, a wrongful termination claim is actionable only where an employee is terminated for engaging in an activity protected by a statute or regulation. Thus, in the context of internal whistleblowing claims, the Court had previously held that the employee's reporting itself had to be protected by statute or regulation, not merely that the employee reported on a subject that was protected by statute or regulation. In Dorshkind, the Court changed course and held that terminating an employee for internally reporting violations of state law violates public policy even where the statute itself does not protect whistleblowing. The Court found that preventing the retaliatory termination of internal whistleblowers would protect the public by ensuring that infractions of rules, regulations, or laws pertaining to public health, safety, and general welfare are properly reported.
Ahlers & Cooney's Litigation, Dispute Resolution & Investigations Group

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