     Case: 10-60571 Document: 00511460900 Page: 1 Date Filed: 04/28/2011




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                 FILED
                                                                            April 28, 2011

                                       No. 10-60571                         Lyle W. Cayce
                                                                                 Clerk

GERALD LEE KYLE,

                                                   Plaintiff - Appellant
v.

CIRCUS CIRCUS MISSISSIPPI, INCORPORATED, doing business as Gold
Strike Casino Resort,


                                                   Defendant - Appellee




                    Appeal from the United States District Court
                      for the Northern District of Mississippi
                               USDC No. 2:09-CV-14


Before DAVIS, CLEMENT, and ELROD, Circuit Judges.
PER CURIAM:*
       Gerald Lee Kyle, a former employee of Circus Circus Mississippi, Inc.,
doing business as Gold Strike Casino Resort (“Gold Strike”), brought a claim
alleging that Gold Strike terminated his employment in retaliation for reporting
allegedly criminal activity. The district court granted summary judgment in
favor of Gold Strike. We AFFIRM.



       *
         Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
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                        FACTS AND PROCEEDINGS
      Kyle was the poker room manager at the Gold Strike Casino in Tunica,
Mississippi. Gold Strike hosts two large poker tournaments, the Poker Classic
and the World Poker Open. At these tournaments, player tips are collectively
pooled and then divided into shares for distribution to casino personnel. At Gold
Strike, Johnny Grooms, the tournament director, and Ken Lambert, Gold
Strike’s director of poker operations for the Mississippi region and Kyle’s
supervisor, were responsible for the division and distribution of shares. After the
June 2006 Poker Classic, Kyle alleges he was promised ten shares of the tip pool
but only received nine shares. After the January 2007 World Poker Open, Kyle
alleges that he was given seven shares of the tip pool after being promised eight
shares. He spoke to Lambert and Grooms about the discrepancies. Lambert told
Kyle that he had given Kyle and himself one less share so that lower-level
employees could receive additional money. In March 2007, Kyle wrote a letter
to Eric Wolfman, Gold Strike’s Chief Financial Officer, and asked for an
accounting of the tip shares. In the letter, Kyle also wrote, “I reported my 9
shares to the IRS this year, and I hope that everyone involved in June’s Poker
Classic did the same. . . . [t]he morning after this year’s [World Poker Open], I
received 7 shares which will be reported on my 2007 return.”
      Wolfman forwarded Kyle’s letter to Rogena Barnes, a vice president of
human resources. Barnes conducted an investigation into Kyle’s concerns.
During a meeting with Barnes, Kyle raised a concern that the casino was not
paying payroll taxes on the tip pool distributions and showed Barnes a copy of
a document he had printed off of the IRS’s website entitled “Examples of General
Tax Fraud Investigations.” Among other cases, the document contained a two-


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paragraph summary of the IRS’s investigation and prosecution of the owner of
a Las Vegas strip club who was convicted of conspiracy to commit tax fraud. In
that case, the owner and his employees conspired to under report certain cash
payments received by the employees. The conspiracy included the delivery of
inaccurate records to the club’s accountant, the preparation of inaccurate
quarterly financial reports, tax returns, and W-2 forms, and the underreporting
of the true amount of earnings received by the employees on quarterly federal
employment tax returns to conceal the fraud. After a thorough investigation,
Barnes provided Kyle with a memorandum detailing her findings. She concluded
that she was unable to determine whether Kyle should have received an
additional share of the tip pool. Barnes also acknowledged Kyle’s concerns about
the appropriate reporting of income and taxes to the IRS and stated that the
casino was “in the process of developing policies and procedures that will be
communicated to employees and implemented shortly to address the income
reporting and tax issues.” Barnes’s investigation also revealed that several of
Kyle’s subordinates had made complaints about Kyle. Specifically, various
employees claimed that Kyle did not “assist with problems,” “does not do
anything,” “threatens the employees with discipline [and] is vindictive,” and
“makes [them] feel stupid.”
      Complaints about Kyle continued. In October 2007, approximately ten
poker room employees requested a meeting before Lambert and Lissa Ross, Gold
Strike’s Employee Relations Manager, to discuss several grievances. The
employees lodged eleven specific complaints against Kyle. The casino provided
Kyle a written performance improvement plan; Kyle refused to sign it, disputing
the issues. In November 2007, Kyle sent two nearly identical letters to the IRS


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two weeks apart. The letters alleged that Gold Strike was not properly
withholding and reporting tip money paid to tournament workers. Kyle referred
to Gold Strike’s “improper tax reporting procedures” as “illegal practices” in the
letter and also stated his belief that his termination was imminent. He did not
provide anyone at Gold Strike a copy of these letters. The IRS took no action in
response.
      In January 2008, during the World Poker Open, a compliance concern
arose related to an inventory of playing cards. Kyle did not notify Lambert
within fifteen minutes of discovering of the discrepancy as required by casino
policy and Mississippi Gaming Regulations. He did notify Lambert the following
day. The discrepancy ultimately was found to be the result of a shipping
shortage. At Lambert’s recommendation, Kyle was suspended pending further
investigation. Kyle was fired approximately two weeks later for his failure to
immediately notify his supervisor of the inventory discrepancy.
      Kyle filed suit in federal court, claiming his termination was for retaliatory
reasons and that Gold Strike’s stated reasons for his discharge were wholly
pretextual. Gold Strike filed a motion for summary judgment, which Kyle
opposed. The district court granted Gold Strike’s motion and entered final
judgment. Kyle timely appealed.
                          STANDARD OF REVIEW
      “The grant or denial of a motion for summary judgment is reviewed de
novo.” Smith v. Am. Family Life Assur. Co. of Columbus, 584 F.3d 212, 215 (5th
Cir. 2009). Summary judgment is proper only if there are no genuine issues of
material fact and the moving party is entitled to judgment as a matter of law.




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F ED. R. C IV. P RO. 56(a). We apply Mississippi law in this diversity action. See
Krieser v. Hobbs, 166 F.3d 736, 739 (5th Cir. 1999).
                                 DISCUSSION
      Kyle raises two alternative arguments. First, he argues that this court
should certify two questions of law to the Mississippi Supreme Court to seek
clarification on issues regarding the “public policy exception” to Mississippi’s
employment-at-will doctrine that was first announced in McArn v. Allied
Bruce-Terminix Co., Inc., 626 So. 2d 603 (Miss. 1993). In the alternative, Kyle
argues that even in the absence of clarification, the district court erred in
granting summary judgment on his claim of wrongful termination. We consider
each argument seriatim.
A.    The Employment-at-Will Doctrine and the McArn Exception
      Mississippi is an employment-at-will state that follows the common law
rule that one who is under a contract of employment for an indefinite term may
quit or may be terminated at the will of the employer. “[E]ither the employer or
the employee may have a good reason, a wrong reason, or no reason for
terminating the employment contract.” Kelly v. Miss. Valley Gas Co., 397 So. 2d
874, 874–75 (Miss. 1981). In McArn, the Mississippi Supreme Court carved out
“a narrow public policy exception” to the employment-at-will doctrine. 626 So.
2d at 607. Regardless of whether a written contract governs an employment
relationship, “(1) an employee who refuses to participate in an illegal act as in
Laws [v. Aetna Finance Co., 667 F. Supp. 342 (N.D. Miss. 1987)], shall not be
barred by the common law rule of employment at will from bringing an action
in tort for damages against his employer; (2) an employee who is discharged for
reporting illegal acts of his employer to the employer or anyone else is not barred


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by the employment at will doctrine from bringing action in tort for damages
against his employer.” McArn, 626 So. 2d at 607.
      Kyle argues that this court should certify the following questions
regarding the McArn exception to the Mississippi Supreme Court:
      (1) Whether a “good faith belief” that the activity reported was
      illegal qualifies for the public policy exception to the At Will
      Doctrine, and

      (2) Whether the activity reported must be “criminally” illegal to
      qualify for the McArn Exception to the At Will Doctrine.

In Wheeler v. BL Development Corp., this court answered the very questions
proposed by Kyle. 415 F.3d 399, 402–04 (5th Cir. 2005). The issue posed in
Wheeler was “whether the exception to Mississippi’s employment at will doctrine
requires the conduct reported to actually be criminal in nature.” Id. at 402. We
held that the appellants’ “attempt to equate an employee’s ‘good faith effort’ in
reporting illegal activity, which is protected under the common law exception,
with a good faith belief that illegal activity is taking place is misplaced.” Id. at
403 (emphasis in original). We additionally held that because the activity
reported in Wheeler “did not constitute any form of criminally illegal activity
. . . McArn’s ‘narrow public policy exception’ is not applicable in this instance.”
Id. at 404. See also Howell v. Operations Mgmt. Int’l, Inc., 77 F. App’x 248, 252
(5th Cir. 2003) (“Our own court’s prior cases involving the McArn exception have
involved criminal illegality.” (emphasis added)).
      Kyle recognizes that this court has already answered the questions he
poses, but “believes the Fifth Circuit has misconstrued Mississippi law.” His
subjective belief does not warrant the certification of questions to the Mississippi
Supreme Court. We are a strict stare decisis court. FDIC v. Abraham, 137 F.3d

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264, 268 (5th Cir. 1998). “One aspect of that doctrine to which we adhere without
exception is the rule that one panel of this court cannot disregard, much less
overrule, the decision of a prior panel.” Id; see also United States v. Taylor, 933
F.2d 307, 313 (5th Cir. 1991) (“Taylor acknowledges these decisions. He urges
their abrogation. That course of action is not open to this Court: it is the firm
rule of this circuit that one panel may not overrule the decisions of another.”).
“Adherence to this rule is no less immutable when the matter determined by the
prior panel is the interpretation of state law: Such interpretations are no less
binding on subsequent panels than are prior interpretations of federal law.”
Abraham, 137 F.3d at 268.
      In a diversity case, this court must, of course, “follow subsequent state
court decisions that are clearly contrary to a previous decision of this court.”
Farnham v. Bristow Helicopters, Inc., 776 F.2d 535, 537 (5th Cir. 1985)
(emphasis added). As Kyle acknowledges, the Mississippi Supreme Court has not
addressed the questions he proposes. He argues that East Mississippi State
Hospital v. Callens, 892 So. 2d 800 (Miss. 2004), supports his belief that the
Mississippi Supreme Court would reach a conclusion contrary to Wheeler. We
disagree. In the first instance, Callens predates Wheeler; it is not a “subsequent
state court decision.” Second, although the court characterized one of Callens’s
assertions as alleging “that his firing was in retaliation for his reporting
improper operations at East Mississippi State Hospital, thus making his
termination actionable under Mississippi common law as an exception to the
employee-at-will doctrine first recognized in McArn,” 829 So. 2d at 804, and
affirmed the trial court’s verdict in favor of Callens on his retaliation claim,
Callens contains no discussion of whether the “improper operations” reported


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there were also criminally illegal. The only Mississippi case to squarely confront
this question is Hammons v. Fleetwood Homes of Mississippi, Inc., 907 So. 2d
357 (Miss. Ct. App. 2004). In Hammons, the Mississippi Court of Appeals
required that the act reported by the appellant be criminal to fall under the
McArn exception. Id. at 360 (holding the McArn exception “require[s] that the
acts complained of warrant the imposition of criminal penalties, as opposed to
mere civil penalties.”). Hammons is consistent with our decision in Wheeler.
      “[W]hen a panel is considering a governing question of state law on which
a prior panel has ruled, the subsequent panel’s obligation to follow that ruling
is not alleviated by intervening decisions of intermediate state appellate courts
unless such ‘subsequent state court decisions . . . are clearly contrary to a
previous decision of this court.’” Abraham, 137 F.3d at 269 (alteration in
original). There being no such “subsequent state court decisions,” we are bound
by Wheeler and decline to certify Kyle’s proposed questions to the Mississippi
Supreme Court
B.    Whether the District Court Erred in Granting Summary Judgment
      to Gold Strike

      Kyle alternatively argues that even under this court’s current
interpretation of the McArn exception, the district court erred by granting
summary judgment to Gold Strike. The district court held that Kyle’s claims
“fail[ed] as a matter of law since the plaintiff did not demonstrate with
substantial evidence or citation to binding statutory and/or case law that the
activities the plaintiff complained of to his employer ‘warrant[ed] the imposition
of criminal penalties, as opposed to mere civil penalties,’” which is required for




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a McArn claim. Kyle v. Circus Circus Miss., Inc., No. 09-CV-104, 2010 WL
2539576, at *4 (N.D. Miss. June 15, 2010). We agree.
      In Wheeler, we held that “the district court did not err when it determined
that Appellants are precluded from recovering under the [McArn] exception
because they have failed to come forth with evidence establishing that the [act
reported] itself constituted criminal activity.” 415 F.3d at 404. Kyle argues that
the two acts that he reported constituted criminal activity and are therefore
sufficient to invoke the McArn exception: (1) his receipt of one less share of the
tip distribution pool than he was promised, which he alleges constitutes larceny;
and (2) Gold Strike’s failure to adhere to pay payroll taxes on the cash tips it
distributed to its employees, which he alleges constitutes criminal tax evasion.
      In King v. Newton County Board of Supervisors, a court clerk discovered
that checks that had been tendered to the Clerk’s office for payment of traffic
fines had not been deposited into the County’s bank account and that a large
quantity of traffic citations had not been entered into the Clerk’s computer
system. 144 F. App’x 381, 382 (5th Cir. 2005). The clerk notified her supervisor,
who contacted the State Auditor to initiate an investigation. Id. After the County
Board of Supervisors became dissatisfied with King’s work, she was forced to
resign. Id. at 383. King sued, alleging, inter alia, that she had been discharged
in retaliation1 for reporting the aforementioned discrepancies. Id. The district
court granted summary judgment in favor of defendants, and we affirmed. Id.
at 386. As to her whistleblowing claim, we held that “King cites to no authority
explaining how the mismanagement she discovered qualifies as a criminal


      1
        We assumed, arguendo, that King’s forced resignation was equivalent to being
terminated. King, 144 F. App’x at 384.

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violation. Indeed, the State Auditor brought no criminal charges, and King
acknowledges as much.” Id.
       To invoke the McArn exception, Kyle must demonstrate that the activities
that he complained of constituted either criminal activity or a directive that he
engage in criminal activity. Kyle presented no evidence on this point to the
district court. The undisputed evidence before the district court showed that the
casino had delegated to Lambert and Grooms discretion to allocate and
distribute the tip pool money. Kyle presented no argument and offered no
authority to support his belief that the discretionary distribution of tip pool
money constituted larceny.2
       Kyle’s allegation that he complained to his employer of criminal tax
evasion is based on his “(1) making passing reference in his March 2007 letter
to CFO Wolfman that he, the plaintiff, had reported his tip income and that he
hoped other employees had as well; (2) bringing a case printed from the IRS
website regarding a strip club found criminally liable for failing to report tips to
Rogena Barnes, the VP of Human Resources; and (3) writing a letter to the IRS
in November 2007 alleging the casino had not reported the tip pool income.”
Kyle, 2010 WL 2539576, at *4. None of these actions establish that the conduct
he reported constitutes a criminal offense.
       The elements of criminal tax evasion are (1) willfulness; (2) the existence
of a tax deficiency; and (3) an affirmative act constituting an evasion or
attempted evasion of the tax. See Sansone v. United States, 380 U.S. 343, 351


       2
         Kyle has also arguably waived his argument that the conduct he complained of
constituted larceny by failing to adequately brief it in his initial brief on appeal. E.g., Cinel
v. Connick, 15 F.3d 1338, 1345 (5th Cir. 1994) (“An appellant abandons all issues not raised
and argued in its initial brief on appeal.”).

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(1965); see also United States v. Nolen, 472 F.3d 362, 376 (5th Cir. 2006). Kyle
“cites no authority explaining how the [tax deficiency he allegedly] discovered
qualifies as a criminal violation.” King, 144 F. App’x at 386. He argues that
“[e]veryone knows that failure to pay your taxes is illegal, and you can go to jail
for not doing so.” This misses the point. Wheeler requires that a reported act be
criminally illegal in order to invoke the McArn exception. To be criminally
illegal, a tax deficiency must be the result of willful behavior. “Willfulness, as
construed by our prior decisions in criminal tax cases, requires the Government
to prove that the law imposed a duty on the defendant, that the defendant knew
of this duty, and that he voluntarily and intentionally violated that duty.” Cheek
v. United States, 498 U.S. 192, 201 (1991) (emphasis added). Kyle has made no
allegation or demonstration that Gold Strike’s alleged failure to withhold payroll
taxes from the tip pool was the result of a voluntary and intentional violation of
its duty to do so. Additionally, as in King, the administrative body responsible
for investigating criminal charges declined to pursue Kyle’s allegations. 144 F.
App’x at 386. “In sum, the district court did not err when it determined that
[Kyle is] precluded from recovering under the public policy exception because [he
has] failed to come forth with evidence establishing that the [acts he reported]
constituted criminal activity.” Wheeler, 415 F.3d at 404.
                                CONCLUSION
      The judgment of the district court is AFFIRMED.




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