Hall v. St. Jude Medical S.C., Inc.

Background

St. Jude Medical S.C., Inc. employed Herbert H. Hall as a sales representative and later as a clinical specialist. Hall worked in Michigan. The parties’ employment agreement stated that it would be governed by Minnesota law and required related actions or proceedings to be litigated in Minnesota state or federal courts.

Hall alleged that an employee at a Michigan doctor’s office asked whether St. Jude would sponsor a party for the office. Hall refused because he believed sponsorship could violate the Physician Payments Sunshine Act, a federal reporting law concerning payments or other transfers of value to physicians and teaching hospitals, and the Anti-Kickback Statute, which prohibits certain payments intended to influence purchases or recommendations of medical goods or services. Hall also alleged that he refused an order to access the doctor’s patient files during a medical-device recall because he believed doing so would violate the Health Insurance Portability and Accountability Act, a federal law protecting identifiable health information.

Hall alleged that, after these refusals, the doctor filed falsified complaints about Hall’s work, those complaints were relayed to St. Jude supervisors, and St. Jude terminated Hall’s employment. He brought a retaliation claim based on Michigan and Minnesota public policy. The case was initially filed in Michigan state court, removed to federal court, transferred to the District of Minnesota, and amended there. St. Jude moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim for relief.

Choice of Law

The court first considered whether Minnesota or Michigan law governed Hall’s retaliation claim. It held that the employment agreement’s governing-law clause did not cover the claim. The clause was narrow because it said the agreement itself would be governed by Minnesota law; Hall’s retaliation claim was based on a tort-like public-policy theory and could be resolved without interpreting the agreement’s terms.

The court therefore applied Minnesota’s choice-of-law rules. It found a conflict between the two states’ laws: Minnesota law requires an employee to allege a good-faith belief that the requested conduct violated a state or federal law, while Michigan law requires the employee to allege that the conduct actually would have violated the law. The court determined that both states had sufficient connections to the dispute to apply their laws constitutionally.

The court concluded that Michigan law applied. Hall was a Michigan resident who worked in Michigan, and the court reasoned that the parties likely would have expected Michigan employment law to govern. Applying Michigan law also respected Michigan’s interest in setting employment policies for work performed in Michigan. The court found the judicial-task factor neutral and did not need to decide which state had the better rule of law.

Retaliation Claim

Under Michigan law, an employee may have a retaliation claim when the employee is discharged for refusing to violate a law in the course of employment. The employee must allege that the refused action was actually illegal; a good-faith but mistaken belief that the action was illegal is not enough.

Regarding the Physician Payments Sunshine Act, the court held that Hall did not allege facts showing that he was asked to violate the Act, refused such a request, or was terminated because of that refusal. The complaint did not allege that Hall was responsible for filing reports, that St. Jude had previously required him to file false reports, or that he would have been required to falsify a report about the party. The court also did not consider an affidavit Hall submitted with his opposition because it was outside the pleadings and was not attached to or referenced in the complaint.

Regarding the Anti-Kickback Statute, the court held that Hall did not allege a factual connection between sponsoring the party and an illegal payment intended to influence the medical office’s purchases or recommendations. The complaint did not describe the party, the compensation involved, or the relationship between the entertainment expenses and the office’s use of St. Jude’s products or services.

Regarding the Health Insurance Portability and Accountability Act, the court held that Hall did not allege facts or provide legal authority showing that accessing patient information for the purpose of notifying patients about a recalled medical device would violate the law. The court noted that federal regulations permit certain disclosures to facilitate medical-device recalls and rejected Hall’s argument that possible access to unrelated protected information, by itself, established an unlawful access.

Disposition

The court held that Hall failed to allege that any action he refused to take would have been unlawful under Michigan law. It granted St. Jude’s motion to dismiss and dismissed the amended complaint without prejudice. The order directed that judgment be entered.