The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
NO. 5:20-CV-543-FL
GREGORY LAHR, )
)
Plaintiff, )
)
v. )
ORDER
)
TCFI AEVEX LLC & TCFI AEVEX )
HOLDINGS LLC d/b/a Aevex Aerospace, )
)
Defendant.1 )
This matter is before the court on defendant’s motion to dismiss for failure to state a claim.
(DE 7). The motion has been briefed fully, and the issues raised are ripe for ruling. For the
following reasons the motion is granted.
STATEMENT OF THE CASE
Plaintiff commenced this action in Cumberland County Superior Court on April 15, 2020,
asserting wrongful discharge in violation of public policy against defendant, plaintiff’s former
employer.2 Plaintiff seeks compensatory and punitive damages, as well as fees and costs.
1 The court constructively has amended the caption of this order to reflect dismissal of former defendant
Companion Security Group LLC (“CSG”), as set forth in more detail herein.
2 Plaintiff also originally asserted his claim against former defendant CSG, which was an entity owned by
defendant, as well as several individuals, Brian Raduenz (“Raduenz”), Robert Ferriol (“Ferriol”), and Edward Lake
(“Lake”), who are employed by defendant. Plaintiff voluntarily dismissed former defendants Raduenz, Ferriol, and
Lake, in state court on October 9, 2020. The court dismissed former defendant CSG on February 1, 2021, for failure
to serve.
Defendant removed the action to this court, on October 12, 2020, on the basis of diversity
jurisdiction. Defendant filed the instant motion to dismiss on October 19, 2020.3 Plaintiff
responded in opposition on December 17, 2020.4 Defendant replied on December 29, 2020. On
January 5, 2021, the court stayed scheduling conference activities pending decision on the instant
motion.
STATEMENT OF FACTS
The facts alleged in the complaint may be summarized as follows. Plaintiff was “the Vice
President of Operations” for former defendant CSG, which is owned and controlled as a business
unit of defendant. (Compl. ¶ 12). Plaintiff had worked for former defendant CSG since January
2017, and “helped said company, and later business unit of [defendant], grow from 80 employees
to over 220 employees.” (Id. ¶ 13). “Plaintiff was promoted, given raises, given bonuses and was
generally praised for his work and his work ethic.” (Id. ¶ 14).
In 2018, defendant and former defendant CSG “were ‘capitalized by Trive Capital, which
is a private equity firm that capitalizes growing companies, and then seeks to sell them to a profit
to larger or different private equity firms.” (Id. ¶ 15). In 2020, defendant and former defendant
CSG were “actively trying to assist Trive Capital in selling the aforementioned Defendant
companies so that huge profits and gains could be realized by various companies and individuals
to include, inter alia, [former defendants] Raduenz . . . Ferriol and . . . Lake.” (Id. ¶ 16).
3 Defendant filed a motion to dismiss for failure to state a claim in state court on July 2, 2020, and a
memorandum in support thereof, on September 16, 2020, which motion the state court denied on September 24, 2020,
following a hearing. (See DE 1-1 at 50).
4 The court granted plaintiff’s motion to file a response out of time on December 11, 2020.
On February 3, 2020, plaintiff “noticed an irregularity within an ‘Excel’ spreadsheet that
was being used as a ‘New AOP5 format’ wherein $10,000.00 was added to the formula for each
month as revenue being generated within the ‘other direct costs’ row within the ‘Excel’
spreadsheet.” (Id. ¶ 17). “Plaintiff had no idea why said monetary amounts were added into the
formula.” (Id. ¶ 18). “Accordingly, he immediately went to go see the General Manager, Jason
Link [‘Link’], to question the phantom amounts of money.” (Id.). [Link] did not have any
information regarding the situation, and advised [plaintiff] to question [defendant’s] Director of
Finance, Dan LaRese [‘LaRese’].” (Id.).
Plaintiff questioned LaRese “regarding why non-existent monies were being reported on
the new AOP’s.” (Id. ¶ 19). LaRese allegedly responded “it was to fluff the numbers so the CEO
[Raduenz] and VP of Finance [Lake] could get the numbers where they needed to be for the on-
going acquisition.” (Id. ¶ 20). “This greatly alarmed [p]laintiff because it appeared that
[defendant] and [former defendant] CSG were reporting false revenues on financial reports within
the company so as to make them appear more profitable to the ownership team at Trive Capital,
and to entice a new private equity firm to purchase the corporate Defendants.” (Id. ¶ 21). “It
appeared that the Defendants were ‘cooking the books’ to make themselves appear far more
profitable than they were in reality.” (Id.). “Plaintiff questioned other co-workers regarding these
false and phantom monies, and no one within his physical office site had any knowledge of why
said numbers were added to the AOP’s other than the explanation given by [LaRese].” (Id. ¶ 22).
5 The term or acronym “AOP” is neither defined nor spelled out in the complaint. Defendant offers an
explanation in its memorandum in support of its motion, including reference to “Investopedia.com,” (Def’s Mem. (DE
8) at 3), which the court does not consider for purposes of the instant motion.
On February 19, 2020, plaintiff met with Link, LaRese, “the contracts manager and all five
‘PM’s’ and two ‘DPM’s.’”6 (Id. ¶ 23). In this meeting, LaRese allegedly “mentioned when he
sends the AOP’s to [Lake] and [Raduenz], they use a technique called ‘smoothing’ on the numbers
to get them right.” (Id.). “Plaintiff, in front of everyone within the meeting, then asked why a
non-existent $10,000.00 was being added each month to the numbers.” (Id. ¶ 24). LaRese then
allegedly “told everyone that, ‘it’s to get the numbers where they need them for the acquisition.’”
(Id.).
“In said meeting, [p]laintiff questioned the ethics and legality of said practice of
‘smoothing’ the numbers in conversation with [LaRese] in front of everyone.” (Id. ¶ 25). “Plaintiff
also stated that he wanted no part of ‘smoothing’ because said practice appeared fraudulent.” (Id.).
“Later that day, [p]laintiff was terminated for allegedly uttering an off-color remark that was
allegedly first made by a co-worker regarding a female co-worker.” (Id. ¶ 27). Plaintiff did not
make nor repeat, or even recall, such a remark being made. Even if he had, other employees were
not terminated for far worse alleged violations.
According to plaintiff, the reason given for his termination was “merely a pre-text,” where
he was instead “terminated for refusing to participate or otherwise condone ‘smoothing’ or
‘fluffing’ which is the practice of [Raduenz, Lake, and Ferriol] adding phantom monies to internal
financial documents . . . to make the Defendant companies appear more profitable than they are in
reality to entice private equity investment firms to purchase or invest in them which has resulted
in huge profits for the Defendants.” (Id. ¶ 29). According to plaintiff, “[t]he unethical and illegal
conduct of the Defendants is often referred to as ‘cooking the books,’ and [plaintiff] refused to
participate in such conduct and was terminated for said refusal.” (Id. ¶ 30).
6 The terms or acronyms “PM’s” and “DPM’s” are neither defined nor spelled out in the complaint.
“[T]he efforts of the Defendants to entice a new private equity firm were successful.” (Id.
¶ 31). According to plaintiff, “Defendants successfully ‘cooked the books’ to entice two new
private equity firms to purchase the Defendant Companies,” and former defendants Raduenz, Lake
and Ferriol “have reaped huge personal profits and ownership value increases as a result of their
[allegedly] fraudulent conduct.” (Id. ¶ 32).
COURT’S DISCUSSION
A. Standard of Review
To survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“Factual allegations must be enough to raise a right to relief above the speculative level.”
Twombly, 550 U.S. at 555. In evaluating whether a claim is stated, “[the] court accepts all well-
pled facts as true and construes these facts in the light most favorable to the plaintiff,” but does not
consider “legal conclusions, elements of a cause of action, . . . bare assertions devoid of further
factual enhancement[,] . . . unwarranted inferences, unreasonable conclusions, or arguments.”
Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009) (quotations
omitted).
B. Analysis
Defendant argues that plaintiff’s complaint fails to state a claim for wrongful discharge in
violation of public policy on three grounds: 1) plaintiff has not alleged a violation of a specific
public policy of North Carolina, 2) there is no public policy against general ‘whistleblowing’ of
an employee’s subjective belief that an employer is behaving improperly, and 3) plaintiff has not
alleged that he was encouraged or requested to break the law. The court agrees that the complaint
is insufficient on the third ground, and that dismissal is required with opportunity to file an
amended complaint.7
As a general rule, “a contract of employment, even though it expressly refers to the
employment as ‘a regular, permanent job,’ is terminable at the will of either party irrespective of
the quality of performance by the other party.” Still v. Lance, 279 N.C. 254, 259 (1971). “The
narrow exceptions to [this rule] have been grounded in considerations of public policy designed
either to prohibit status-based discrimination or to insure the integrity of the judicial process or the
enforcement of the law.” Kurtzman v. Applied Analytical Indus., Inc., 347 N.C. 329, 333–34
(1997). Under the public-policy exception to the at-will-employment rule, “while there may be a
right to terminate a contract at will for no reason, or for an arbitrary or irrational reason, there can
be no right to terminate such a contract for an unlawful reason or purpose that contravenes public
policy.” Coman v. Thomas Mfg. Co., 325 N.C. 172, 175 (1989) (quoting Sides v. Duke University,
74 N.C. App 331, 342 (1985)).
The North Carolina Supreme Court has “recognized a public-policy exception to the
employment-at-will rule” in several contexts. Kurtzman, 347 N.C. at 331. In Amos v. Oakdale
Knitting Co., 331 N.C. 348 (1992), the court held that discharging employees “for refusing to work
for less than the statutory minimum wage” violated the public policy of North Carolina. Id. at 354.
In Coman v. Thomas Mfg. Co., 325 N.C. 172 (1989), the court held that discharging an employee
for refusing to falsify his driver records to show compliance with federal transportation regulations
violates public policy. Id. at 176. There, the court also approved Sides, in which the court held
7 Because dismissal is warranted on this ground, the court does not decide the motion on the other grounds
asserted by defendant. Nevertheless, the court addresses several aspects of defendant’s arguments on these other
grounds in the analysis below.
that discharging an employee “for her refusal to withhold testimony or testify untruthfully in a
lawsuit” violates public policy. 74 N.C. App. at 335.
By contrast, in Kurtzman, the court held that neither a public-policy exception nor any
other exception to the employment-at-will rule applied to a plaintiff who had been discharged after
moving from Massachusetts to North Carolina to accept a job based upon an employer’s
“assurances of continued employment.” 347 N.C. at 334. The court reasoned, “[t]he facts here
do not present policy concerns” justifying the public-policy exception to the employment-at-will
rule. Id. Moreover, the court cautioned that “[a]dditional exceptions . . . demand careful
consideration and should be adopted only with substantial justification grounded in compelling
considerations of public policy.” Id.
Likewise, in Garner v. Rentenbach Constructors Inc., 350 N.C. 567, 572, 515 S.E.2d 438,
441 (1999), the court held that evidence that a defendant employer “violated [a] Controlled
Substance Examination Regulation by failing to utilize an approved laboratory to conduct
plaintiff’s drug testing,” the result of which was used to discharge the employee, was insufficient
to support a public policy wrongful discharge claim. Id. at 572. In so holding, the court reasoned
that “the termination itself must be motivated by an unlawful reason or purpose that is against
public policy,” and an employer may “terminate an employee for suspected drug use as part of an
effort to maintain a drug-free workplace.” Id. at 571-572.
Although the North Carolina Supreme Court has not delineated the outer contours of the
public policy exception, the North Carolina Court of Appeals has opined that –
[W]rongful discharge claims have been recognized in North Carolina where the
employee was discharged (1) for refusing to violate the law at the employers [sic]
request, see Sides v. Duke University, 74 N.C. App. 331 (2) for engaging in a
legally protected activity, or (3) based on some activity by the employer contrary
to law or public policy, see Garner [129 N.C. App. 624, 628 (1998)].
Ridenhour v. Int’l Bus. Machines Corp., 132 N.C. App. 563, 568–69 (1999). In Ridenhour, the
court held that a plaintiff failed to establish a claim of wrongful discharge where, inter alia, there
was “no indication [the plaintiff] was asked by his employer to violate any federal or state law or
to perform any activity injurious to the public or against the public good.” Id. at 569 (quotations
omitted). Rather, the plaintiff “of his own accord, reported . . . fraudulent activity to” his employer.
Id.
Similarly, in Considine v. Compass Grp. USA, Inc., 145 N.C. App. 314 (2001), the court
held that the plaintiff failed to state a claim for wrongful discharge in violation of public policy
where the plaintiff “discovered unlawful conduct on the part of the defendant which affected both
federal, state and local government service contracts,” plaintiff “advised his supervisor . . .
regarding the conduct he had discovered,” and was discharged shortly thereafter. Id. at 316. The
court reasoned that no claim was stated where the “complaint does not allege that defendant's
conduct violated any explicit statutory or constitutional provision, nor does it allege defendant
encouraged plaintiff to violate any law that might result in potential harm to the public.” Id. at
321.
By contrast, in Combs v. City Elec. Supply Co., 203 N.C. App. 75, 84–85 (2010), the court
found the public-policy exception applicable where the plaintiff, who “oversaw the [defendant’s]
financial operations,” was discharged after requesting that defendant refund customers who
overpaid for electrical work. Id. at 77. In particular, “plaintiff’s immediate supervisor, . . . told
plaintiff not to send out negative account balance statements” to such customers. Id. at 84. In a
meeting with another supervisor, plaintiff asserted that the defendant “was stealing money from
its customers.” Id. at 85. Shortly thereafter, plaintiff was discharged. Id. at 78.
A common thread running through the foregoing cases is that, to state a claim for wrongful
discharge in violation of public policy for a refusal to act, a plaintiff must allege that he refused to
violate the law at an employer’s request or encouragement. Here, plaintiff does not allege
sufficient facts to permit a plausible inference that defendant requested or encouraged plaintiff to
take any unlawful act. While it is conceivable that plaintiff could allege facts, in addition to those
already alleged, that would permit an inference of a request or encouragement to take such action,
plaintiff has not done so. Rather, plaintiff alleges that he discovered allegedly unlawful conduct,
raised this up with supervisors and co-workers, and then stated “that he wanted no part” of the
alleged unlawful conduct. (Compl. ¶ 25).
Plaintiff suggests that it is enough that plaintiff “refused to participate in such conduct,” or
“otherwise condone” such conduct. (Compl. ¶¶ 29-30). This suggestion fails as a matter of law
for two reasons. First, the case law cited above does not support a claim based upon the mere
refusal to participate in or otherwise condone unlawful conduct by others. Sitting in diversity
jurisdiction, this court is “called upon to predict how [the North Carolina Supreme Court] would
rule if presented with the issue.” Ellis v. Louisiana-Pac. Corp., 699 F.3d 778, 783 (4th Cir. 2012).
Moreover, “a federal court should not create or expand a State’s public policy.” Time Warner
Ent.-Advance/Newhouse P'ship v. Carteret-Craven Elec. Membership Corp., 506 F.3d 304, 314
(4th Cir. 2007) (quotations omitted). “Absent a strong countervailing federal interest, the federal
court . . . should not elbow its way into this controversy to render what may be an uncertain and
ephemeral interpretation of state law.” Id. (quotations omitted).
Plaintiff cites Johnson v. Friends of Weymouth, Inc., 120 N.C. App. 255 (1995), for the
proposition that “[i]t is unlawful to terminate an employee for refusing to participate in unlawful
conduct.” (Pl’s Resp. (DE 13) at 6). In Johnson, the plaintiff was discharged after she “encouraged
officers of defendant to return [insurance] proceeds to the insurance company,” after items subject
of a previous claim for loss had been found. Id. at 256. Plaintiff asserted that she was subject to
wrongful discharge “because it was in retaliation for her refusal to cooperate and participate in
Defendants[’] unlawful conversion of the insurance proceeds.” Id. at 257. The court of appeals
held that the following issue should have been presented to the jury: “Was plaintiff’s suggestion
that insurance proceeds be returned to the insurance company a substantial factor in defendant’s
decision to terminate her employment?” Id. at 259.
The court declines to adopt Johnson as authority for the sweeping proposition that “refusing
to participate in unlawful conduct,” alone, can give rise to a claim for wrongful discharge in
violation of public policy. In analyzing jury instructions in that case, the court did not cite any
North Carolina Supreme Court law. See 120 N.C. App. at 256-260. Nor did the court discuss the
standard for the public policy exception to the employment-at-will rule. See id. In this context,
Johnson does not provide a valid basis for this court to give an expansive reading of the public
policy exception.
Second, even if a “refusal to participate” can in some cases be sufficient to state a claim,
plaintiff has not alleged sufficient facts here to nudge his claim from conceivable to plausible.
Stating that he “refused to participate” (Compl. ¶¶ 29-30), is a conclusory statement, tracking what
plaintiff asserts is an element of the claim. (See Pl’s Opp. (DE 13) at 6). This statement is “devoid
of further factual enhancement” that would enable the court to find a plausible claim for relief.
Nemet Chevrolet, 591 F.3d at 255. For instance, plaintiff does not allege in what respect plaintiff’s
participation in the alleged unlawful conduct was expected or even possible. Plaintiff does not
allege, for example, that his job duties encompassed creation or dissemination of the “AOP,”
referenced in the complaint. (See Compl. ¶¶ 17, 19). 8 Nor does plaintiff allege, for instance, that
his position involved financial forecasting or evaluation of financial forecasting.
In this respect, plaintiff’s allegations are in contrast to those in Combs, where the plaintiff
had responsibility for oversight of defendant’s “financial operations and his job duties included
allocating the monies received by [defendant] to its various customer accounts,” 203 N.C. Ap. at
75, and the plaintiff’s supervisor expressly directed the plaintiff not to send out negative balance
statements. Id. at 84. Similarly in contrast is Sides, where the plaintiff refused to follow
instructions she thought were harmful to a patient, and where she was instructed to withhold
testimony about treatment of the patient who died. 74 N.C. App. at 333. Likewise, in Coman,
the employee was instructed to falsify his own driving logs. 325 N.C. at 173. Rather, plaintiff’s
allegations are more akin to those in Ridenhour or Considine, where the plaintiffs merely expressed
concern with the conduct of others. 132 N.C. App at 778-779; 145 N.C. App. at 316, 321.
Accordingly, there is no basis upon which to conclude that the North Carolina Supreme
Court would extend the “narrow exceptions” to the employment-at-will rule to circumstances
presently alleged, where plaintiff was not requested or encouraged to take unlawful action.
Kurtzman, 347 N.C. at 333. Thus, plaintiff’s complaint must be dismissed for failure to state a
claim for wrongful discharge in violation of public policy.
In so holding, the court notes one reason for not granting defendant’s motion on the
alternative grounds raised. In arguing that plaintiff has not alleged a violation of a specific public
policy or any unlawful act, defendant draws inferences in its favor and introduces facts not alleged
in the complaint. For example, defendant argues:
8 Plaintiff suggests in his brief that he “refused to conspire along with the Defendants to defraud potential
investors by creating and/or condoning, as Vice President of Operations, ‘AOP’s’ with fictitious and false revenues.”
(Pl’s Opp. (DE 13) at 8) (emphasis added). There is no allegation in the complaint, however, that defendant’s position
involved creation of “AOP’s.” (See, e.g., Compl. ¶¶ 17-26).
Plaintiff alleges that he was told [defendant] “smoothed” the “numbers” on an
internal financial forecasting and revenue projection document. Even if [defendant]
did partake in what Plaintiff erroneously refers to as “smoothing,” “smoothing” is
not per se unlawful. As noted on the popular website “Investopedia,” “Income
smoothing is not illegal if the process follows generally accepted accounting
principles (GAAP). Talented accountants are able to adjust financial books in an
above-board way to ensure the legality of income smoothing.” And, of course,
Plaintiff does not even allege that [defendant] committed fraudulent accounting
practices like in Combs. Plaintiff has merely alleged that [defendant] included a
line item on an internal, prospective financial forecasting document which Plaintiff
did not understand. Finally, unlike in Combs, Plaintiff does not allege that
[defendant] profited from its alleged “cooking the books” or “income smoothing.”
(Def’s Mem. (DE 8) at 13-14) (emphasis added). None of the language emphasized in the quotation
above is alleged in the complaint, nor is it an accurate representation of what is alleged in the
complaint. 9 Rather, plaintiff alleges that the “AOP” spreadsheet, which was used “to entice private
equity investment firms to purchase or invest” in defendant, included “phantom amounts of
money,” “non-existent monies,” and “false and phantom monies.” (Compl. ¶¶ 18, 22, 29). Plaintiff
describes the practice as allegedly “reporting false revenues on financial reports within the
company so as to make them appear more profitable to the ownership team at Trive Capital, and
to entice a new private equity firm to purchase the corporate Defendants.” (Id. ¶ 21). It is further
described as “‘smoothing’ on the numbers to get them right,” and “fluff[ing] the numbers,” and
allegedly “‘cooking the books’ to make themselves appear far more profitable than they were in
reality.” (Id. ¶¶ 20, 21, 23). These practices allegedly “resulted in huge profits for the
Defendants.” (Id. ¶ 29).
9 Defendant also mischaracterizes the facts in Combs. According to defendant, the plaintiff in Combs “alleged
that he was terminated for reporting that his employer City Electric Supply Company, which provided electricity to
the residents of Greensboro, North Carolina, stole money from the Greensboro residents by deleting residents’
‘negative’ accounts (credits to residents’ accounts when the residents had overpaid for their energy services).” (Def’s
Mem. (DE 8) at 12-13) (emphasis added). Combs did not involve residential customers, or services. Rather, the
defendant provided electrical supplies to an “Entertainment and Sports Arena located in Raleigh,” to “Turnage
Corporation located in Morehead City,” and “Wilbur’s BBQ & Restaurant, Inc. located in Goldsboro.” 203 N.C. App.
at 81-82.
The characterization of the alleged unlawful conduct in the light most favorable to plaintiff
is an important component of the analysis of both whether plaintiff has identified a public policy
violation and an unlawful act. See, e.g., Considine, 145 N.C. App. at 321. Defendant, of course,
may present evidence at a later juncture in the case explaining the asserted innocent nature of the
alleged financial reporting practices. For present purposes, however, the court does not rest
disposition of the instant motion on defendant’s arguments premised, at least in part, upon
defendant’s view of the facts.
In sum, plaintiffs complaint must be dismissed for failure to allege that he was discharged
for refusing to violate the law at defendant’s request. Because dismissal is based upon
insufficiency of factual allegations in the complaint, dismissal is without prejudice, and with leave
to file an amended complaint within 28 days of the date of this order.
CONCLUSION
Based on the foregoing, defendant’s motion to dismiss (DE 7) is GRANTED. Plaintiff’s
complaint is DISMISSED WITHOUT PREJUDICE for failure to state a claim upon which relief
can be granted. Plaintiff is granted leave to file an amended complaint within 28 days of the date
of this order. In the event plaintiff does not file an amended complaint within this time period, the
clerk is DIRECTED, without further order of the court, to enter judgment for defendant on the
basis of this order and close the case.
SO ORDERED, this the 30th day of April, 2021.
United States District Judge
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