                 IN THE COURT OF APPEALS OF TENNESSEE
                              AT JACKSON
                                    April 30, 2001 Session

             JULIA BETH CREWS v. BUCKMAN LABORATORIES
                         INTERNATIONAL, INC.

                 A Direct Appeal from the Circuit Court for Shelby County
                 No. CT-001642-00    The Honorable D'Army Bailey, Judge



                     No. W2000-01834-COA-R3-CV - Filed June 18, 2001


Plaintiff, attorney employed in legal department of corporation, sued the corporation for retaliatory
discharge. Plaintiff alleges that she was discharged in retaliation for her reporting her superior,
general counsel of the corporation, for the unauthorized practice of law, because her supervisor was
unlicensed in the State of Tennessee. The trial court dismissed plaintiff’s complaint pursuant to
Tenn.R.Civ.P. 12.02(6) for failure to state a claim upon which relief can be granted. Plaintiff
appeals. We affirm.


    Tenn.R.App.P. 3; Appeal as of Right; Judgment of the Circuit Court Affirmed and
                                      Remanded

W. FRANK CRAWFORD , P.J., W.S., delivered the opinion of the court, in which DAVID R. FARMER ,J.
and JOE G. RILEY, J., joined.

Donald A. Donati, William B. Ryan, Memphis, For Appellant, Julia Beth Crews

Frederick J. Lewis, Thomas L. Henderson, Whitney K. Fogerty, Memphis, For Appellee, Buckman
Laboratories International, Inc.

                                            OPINION

       Plaintiff/Appellant, Julia Beth Crews (“Ms. Crews”), appeals the order of the trial court
dismissing her complaint against Defendant, Buckman Laboratories International, Inc. (Buckman),
pursuant to Tenn.R.Civ.P. 12.02(6) for failure to state a claim upon which relief can be granted.

       A motion to dismiss pursuant to Tenn.R.Civ.P. 12.02(6) for failure to state a claim upon
which relief can be granted is the equivalent of a demurrer under our former common law procedure
and thus is a test of the sufficiency of the leading pleading. See Cornpropst v. Sloan, 528 S.W.2d
188, 190 (Tenn. 1975). The motion admits the truth of all relevant and material averments in the
complaint but asserts that the statements do not constitute a cause of action. See id. at 190. In
considering whether to dismiss a complaint for failure to state a claim, the court should construe the
complaint liberally in favor of the plaintiff, taking all of the allegations of fact therein as true. See
Huckeby v. Spangler, 521 S.W.2d 568, 571 (Tenn. 1975). A complaint should not be dismissed
upon such a motion “unless it appears beyond doubt that the plaintiff can prove no set of facts in
support of his claim that would entitle him to relief.” Fuerst v. Methodist Hospital South, 566
S.W.2d 847, 848 (Tenn. 1978). Obviously, we are limited to an examination of the complaint alone,
thus the factual material in the opinion is taken solely from the complaint.

        Ms. Crews was serving as an in-house attorney1 for Buckman when she discovered that her
supervisor, Katherine Buckman Davis (“Ms. Davis”), was not licensed to practice law in the State
of Tennessee. Ms. Crews and a co-worker, David Bowles2, contacted Joe M. Duncan, an attorney
and a member of Buckman’s board of directors, and expressed their concern that Ms. Davis was
engaged in the unauthorized practice of law. As a result of this conversation, Mr. Duncan submitted
a hypothetical set of facts to the Tennessee Board of Professional Responsibility (the “Board”) that
mirrored those of the Buckman situation. Additionally, Mr. Duncan asked the Board to give an
opinion as to: 1) whether a person with a valid law license in another state can be employed as
general counsel in Tennessee, and, 2) if such a situation required a Tennessee law license, whether
failure to obtain such a license constituted the unauthorized practice of law.

        In response to Mr. Duncan’s inquiries, the Board wrote that, “a person with a valid license
from another state may not be employed as general counsel in Tennessee, unless that person also has
a valid Tennessee law license.” The Board also stated that, unless the general counsel in question
was being supervised pursuant to Section 10.04 of Supreme Court Rule 7, failure of the general
counsel to obtain a Tennessee license would appear to constitute the unauthorized practice of law.

        After advising Ms. Crews of the opinion of the Board of Professional Responsibility, Mr.
Duncan told Ms. Crews that Ms. Davis intended to take the Tennessee Bar Examination and obtain
the required license. However, Ms. Crews later learned that Ms. Davis had not registered to take the
next available bar exam. At this point, Ms. Crews and her co-worker confronted Ms. Davis with
their concerns and notified Buckman’s president, Steve Buckman, of the potential liability to the
company. Ms. Davis eventually took the July, 1997 Tennessee Bar Exam and, later that year
announced that she had passed, leaving Ms. Crews and other of Buckman’s employees with the
impression that she was licensed in Tennessee.

       In May of 1999, Ms. Crews became concerned that Ms. Davis had not, in reality, completed
the requirements for licensure in Tennessee. Upon contacting the Board of Professional
Responsibility, Ms. Crews discovered that Ms. Davis had not taken the Multi-State Professional


        1
          Buckman initially employed Ms. Crews in 1995 as a legal assistant. After Ms. Crews passed the Tennessee
Bar Ex amination tha t year, she bega n working as an attorney in B uckman’s leg al departm ent.

        2
            Mr. Bowles left Buckman’s employ in 1998.

                                                        -2-
Responsibility Examination (“MPRE”), and that her application with the Board was still pending.
After determining that Ms. Davis was still not licensed in Tennessee, Ms. Crews again discussed the
situation with Ms. Davis and Steve Buckman. The complaint states in pertinent part:

                          Plaintiff informed Davis and officials of the corporation that
                  this matter had to be corrected immediately and that it had serious
                  implications for the company, Davis, and Plaintiff. Plaintiff advised
                  Davis and the corporation that the following steps needed to
                  immediately occur in order to protect Buckman: (1) identify all
                  potential sources of liability, including review of all E-mail,
                  documents, and mail to determine what documents were tainted with
                  the impression that Davis was an attorney; (2) immediately register
                  for the MPRE; (3) obtain an opinion from outside counsel about all
                  steps to be taken as individuals and the company; and (4) full
                  disclosure of the events to the Board of Professional Responsibility.

        Following an angry confrontation with Ms. Davis, and concerned that Ms. Davis had not fully
disclosed the situation to Buckman’s board of directors, Ms. Crews sought the advice of independent
legal counsel in August of 1999. Shortly thereafter, upon advice of counsel, Ms. Crews contacted
the President of the Board of Law Examiners and informed him of the situation involving Ms. Davis.
In October of 1999, Ms. Davis told Ms. Crews that she had received a “show cause” order from the
Board of Law Examiners, asking Ms. Davis for clarification regarding her Tennessee Bar
application.

         Over the course of the above events, the relationship between Ms. Crews and Ms. Davis
deteriorated. Ms. Crews received a below-average raise for the first time in her employment with
Buckman in July of 1999. Ms. Crews spoke to the Vice President of Human Resources and Steve
Buckman regarding the situation, and told them the situation with Ms. Davis had become untenable.
Ms. Crews and Buckman sought to find a way for Ms. Crews to transfer to a position which was not
under Ms. Davis’s supervision and eventually leave the company. Before this arrangement was
settled, Ms. Davis informed Ms. Crews that the company no longer required Ms. Crews’s services.
         Ms. Crews brought this action seeking compensatory and punitive damages for wrongful
discharge. In response to Ms. Crews’s complaint, Buckman filed a Rule 12.02(6) motion to dismiss.
The trial court granted Buckman’s motion, and Ms. Crews has appealed. The sole issue on appeal
is whether Ms. Crews has stated a common law claim for retaliatory discharge in violation of the
public policy of the State of Tennessee.3


         3
           W e note that Ms. Crews has not proceeded under T.C.A. § 50-1-304, which provides a statutory remedy for
wrongful discharge. H owever, o ur reasoning in this case wou ld apply eq ually to any cause of action premised upon that
statute because the Tenness ee Supre me Cou rt has held this statutory reme dy to be cumulative of the common law action.
See Reynolds v. O zark Motor Lines, Inc., 887 S.W.2d 822, 825 (Tenn. 1993) (citing Hodges v. S.C.Toof & Co., 833
S.W.2d 896, 899 (Tenn. 1992)).

                                                                                                          (continued ...)

                                                          -3-
        In Tennessee, “an employee-at-will can be discharged without breach of contract for good
cause, bad cause or no cause at all.” Clanton v. Cain-Sloan Co., 677 S.W.2d 441, 445 (Tenn. 1984)
(citing Payne v. Railroad Company, 81 Tenn. 507 (1884)). See also Johnson v. Saint Francis
Hosp., Inc., 759 SW.2d 915, 928 (Tenn. Ct. App. 1988). In Clanton, our Supreme Court recognized
a public policy exception to the At-Will Employment Doctrine and allowed an employee to sue his
employer for retaliatory discharge. 677 S.W.2d at 445. The Clanton Court held that such a cause
of action was “necessary to enforce the duty of the employer, to secure the rights of the employee
and to carry out the intention of the legislature” under Tennessee’s workers’ compensation law. Id.
The Tennessee Supreme Court has since expanded the exception:

                   In Tennessee an employee-at-will generally may not be discharged for
                   attempting to exercise a statutory or constitutional right, or for any
                   other reason which violates a clear public policy which is evidenced
                   by an unambiguous constitutional, statutory, or regulatory provision.
                   See e.g., Mason v. Seaton, 942 S.W.2d 470 (Tenn.1997); Conatser
                   v. Clarksville Coca-Cola, 920 S.W.2d 646 (Tenn.1995); Reynolds
                   v. Ozark Motor Lines, Inc., 887 S.W.2d 822 (Tenn.1994); Anderson
                   v. Standard Register Co., 857 S.W.2d 555 (Tenn.1993); Hodges v.
                   S.C. Toof & Co., 833 S.W.2d 896 (Tenn.1992); Chism v. Mid-South
                   Milling Co., 762 S.W.2d 552 (Tenn.1988); Clanton v. Cain-Sloan
                   Co., 677 S.W.2d 441 (Tenn.1984).


         3
          (...continued)
T.C.A. § 50-1-30 4 (Supp . 2000) p rovides, in rele vant part:

                   § 50-1-304. Retaliatory discharge

                            (a) No employee shall be discharged or terminated so lely for refusing to
                   participate in, or for refusing to remain silent about, illegal activities.

                             (b) In addition to all employees in private employment, the provisions of
                   this section shall ap ply to all employees who receive compensation from the federal
                   government for services performed for the federal government, notwithstanding that
                   such perso ns are not full-time e mployees of the federal g overnme nt.

                             (c) As used in this section, "illegal activities" means activities which are
                   in violation of th e criminal or civil code of this state or the United States or any
                   regulation intended to protect the public health, safety or welfare.

                           (d)(1) Any employee terminated in violation of subsection (a) shall have
                   a cause of actio n against the em ployer for re taliatory d ischarge and any other
                   damages to which the employee may be entitled.

                            (2) Any emplo yee terminate d in violation o f subsection (a ) solely for
                   refusing to participate in, or for refusing to remain sile nt about, illegal activities
                   who prevails in a cause of action against an employer for retaliatory discharge for
                   such actions shall be entitled to recover re asonable attorney fees and c osts.

                                                            -4-
Stein v. Davidson Hotel Co., 945 S.W.2d 714, 717 (Tenn. 1997).

        The question of whether an in-house attorney may state a claim of retaliatory discharge is an
issue of first impression in Tennessee. Ms. Crews urges this Court to hold that such a common-law
claim is appropriate under the “public policy” exception to the At-Will Employment Doctrine. For
the reasons below, we are constrained to hold that the public policy exception does not apply to the
particular facts of this case.

        A survey of the dozen or so cases from other jurisdictions which have addressed this issue
reveals three basic approaches: 1) allow the cause of action under a breach of contract theory;
2) allow the cause of action if it does not involve a breach of client confidentiality; and 3) do not
allow the cause of action under any circumstances. The breach of contract theory, which is not at
issue in this case4, allows an at-will employee to sue an employer based upon an implied “just-cause”
contract. Under this theory, an employer’s statements of company policy may give rise to an implied
contract between the employer and in-house attorney. See Golightly-Howell v. Oil, Chemical &
Atomic Workers Int’l Union, 806 F.Supp. 921, 924 (D.Colo. 1992); Mourad v. Automobile Club
Ins. Ass’n, 465 N.W.2d 395, 399-400 (Mich. Ct. App. 1991).

        The second approach permits in-house counsel to file a claim for retaliatory discharge if “the
claim can be proved without any violation of the attorney’s obligation to respect client confidences
and secrets.” GTE Products Corp. v. Stewart, 653 N.E.2d 161, 167 (Mass. 1995). See also General
Dynamics Corp. v. Superior Court, 876 P.2d 487, 503-04 (Cal. 1994). The GTE Court confined
its holding to a very narrow set of circumstances, noting that even a “non-attorney colleague”
bringing an action for wrongful discharge would need to establish that such a claim could “be proved
without any violation of the attorney’s obligation to respect client confidences and secrets.” 653
N.E.2d at 168.

        The last approach is to completely deny such retaliatory discharge claims. The leading case
for this view is Balla v. Gambro, Inc., 584 N.E.2d 104 (Ill. 1991). Balla is a very well-reasoned
opinion and involved an in-house attorney who reported his employer to the FDA for selling medical
equipment which did not comply with FDA regulations. Id. at 106. The Illinois Supreme Court held
that neither the public policy considerations underlying the tort of wrongful discharge, nor the ethical
constraints of the legal profession would be served by enlarging the scope of the public policy
exception to include in-house attorneys. Id. at 108.

        In Tennessee, as in Illinois, the narrow public policy exception to at-will employment reflects
a balance between the interests of the employer in making independent business judgments and the
freedom of employees to exercise their rights under clearly expressed public policy. See, e.g., Stein,
945 S.W.2d at 717. Ms. Crews argues that “Tennessee has expressed a strong public policy for the
regulation of lawyers” and that this policy is evidenced by the laws of the State of Tennessee and the
Code of Professional Responsibility which the Tennessee Supreme Court adopted through Rules 8


       4
           Ms. Crews has not argued that such a theory applies in the instant case.

                                                          -5-
and 9 of the Rules of the Supreme Court. We wholeheartedly agree. However, we believe that this
important public policy is adequately served by the existing protections of Tennessee’s statutes and
the Code of Professional Responsibility.

         T.C.A. § 23-3-103 (Supp. 2000) provides in pertinent part:

                  § 23-3-103. Unlawful practice prohibited - Penalty. -

                  (a) No person shall engage in the “practice of law” or do “law
                  business,” or both, as defined in § 23-3-101, unless such person
                  has been duly licensed therefor, and while such person’s license
                  therefor is in full force and effect, nor shall any association or
                  corporation engage in the “practice of the law” or do “law
                  business,” or both as defined in § 23-3-101.

Under the Code of Professional Responsibility, “A lawyer shall not aid a non-lawyer in the
unauthorized practice of law.” Tenn.S.Ct.R. 8, DR 3-101(A). The Supreme Court Rules also
require an attorney with unprivileged knowledge of a violation of a Disciplinary Rule to report
the violation. See Tenn.S.Ct.R. 8, DR 1-103(A). The penalties for violating a Disciplinary Rule
can be very severe, ranging from “private informal admonition” to disbarment. See Tenn.S.Ct.R.
9, § 4. Therefore, under the law of Tennessee, once Ms. Crews had knowledge that Ms. Davis
was engaged in the unauthorized practice of law, the Disciplinary Rules required her to report
Ms. Davis’s conduct. We believe that this well-established disciplinary requirement is, in and of
itself, sufficient to protect the public policy concerns at issue in this case.

         Ms. Crews argues, among other things, that expanding the public policy exception to
include in-house counsel would serve to promote “lawful conduct by counsel” and “protect and
promote the rule of law and the integrity of the profession.” Essentially, Ms. Crews is arguing
that lawyers need motivation to abide by the Disciplinary Rules and report conduct which is
violative of those rules.5 This argument also implies that an in-house attorney has a choice
between the Disciplinary Rules and retaining his or her job. No such choice exists. As the
Illinois Supreme Court, in Balla, noted:

                  . . . appellee argues that not extending the tort of retaliatory
                  discharge to in-house counsel would present attorneys with a
                  “Hobson’s choice.” According to appellee, in-house counsel
                  would face two alternatives: either comply with the
                  client/employer’s wishes and risk both the loss of a professional
                  license and exposure to criminal sanctions, or decline to comply
                  with client/employer’s wishes and risk the loss of a full-time job


         5
          This is the main argument the dissent in Balla made in sup port of reco gnizing a retaliato ry discharge claim
for in-house c ounsel. See 584 N.E.2d at 113-15.

                                                          -6-
               and the attendant benefits. We disagree. Unlike the employees. . .
               which this court recognized would be left with the difficult
               decision of choosing between whether to file a workers’
               compensation claim and risk being fired, or retaining their jobs and
               losing their right to a remedy, in-house counsel plainly are not
               confronted with such a dilemma. In-house counsel do not have a
               choice of whether to follow their ethical obligations as attorneys
               licensed to practice law, or follow the illegal and unethical
               demands of their clients. In-house counsel must abide by the
               Rules of Professional Conduct. Appellee had no choice but to
               report to the FDA Gambro’s intention to sell or distribute these
               dialyzers, and consequently protect the aforementioned public
               policy.

584 N.E.2d at 109 (citations omitted)(emphasis added).

        Ms. Crews also argues that enlarging the scope of the public policy exception
“encourages employers to comply with the law.” We believe that, rather than encouraging
compliance, such an action could seriously impair the special relationship of trust between an
attorney and his or her client. In Tennessee, as well as practically every other jurisdiction, a
client may fire attorney at any time and for any reason. See, e.g., Chambliss, Bahner and
Crawford v. Luther, 531 S.W.2d 108, 109 (Tenn. Ct. App. 1975). Once a client decides to
terminate his relationship with the attorney, the attorney is under a mandatory duty to withdraw
from his client’s employment. See Tenn.S.Ct.R. 8, DR 2-110(B)(4). These rules reflect the need
for the client to have complete trust in his attorney. See Chambliss, 531 S.W.2d at 110. As the
Balla Court noted:

               We believe that if in-house counsel are granted the right to sue
               their employers for retaliatory discharge, employers might be less
               willing to be forthright and candid with their in-house counsel.
               Employers might be hesitant to turn to their in-house counsel for
               advice regarding potentially questionable corporate conduct
               knowing that their in-house counsel could use this information in a
               retaliatory discharge suit.

Id. at 109. We believe the same logic applies to the argument that this Court should expand the
tort of retaliatory discharge where a plaintiff/attorney can prove his or her case without violating
the rules of privilege. In the unlikely event that the in-house attorney were able to prove
retaliatory discharge without violating privilege, such a claim might have the effect of chilling
the attorney-client relationship.

       Ms. Crews suggests that allowing money damages as a remedy for wrongful discharge of
in-house counsel would serve to satisfy the employer/client’s right to discharge in-house counsel


                                                 -7-
for any reason, as well as the withdrawal requirement of the Disciplinary Rules. However, this
“middle ground” still does not address the issue of the potential chilling of the attorney-client
relationship. Additionally, allowing money damages in this type of case has the effect of shifting
the costs of in-house counsel’s adherence to the Disciplinary Rules from the attorney to the
employer/client. See id. at 110. As the Balla Court pointed out, “all attorneys know or should
know that at certain times in their professional career, they will have to forgo economic gains in
order to protect the integrity of the legal profession.” Id. at 110.

        For the foregoing reasons, we affirm the order of the trial court dismissing
Plaintiff/Appellant’s lawsuit for failure to state a claim. This case is remanded to the trial court
for any further proceedings consistent with this opinion. Costs of this appeal are assessed to the
Appellant and her sureties.



                                       __________________________________________
                                       W. FRANK CRAWFORD, PRESIDING JUDGE,W.S.




                                                 -8-
