#29081-a-PJD 2020 S.D. 34
IN THE SUPREME COURT OF THE STATE OF SOUTH DAKOTA
****
STEPHANIE HENNING, Plaintiff and Appellant,
v.
AVERA MCKENNAN HOSPITAL, Defendant and Appellee.
APPEAL FROM THE CIRCUIT COURT OF THE SECOND JUDICIAL CIRCUIT MINNEHAHA COUNTY, SOUTH DAKOTA
THE HONORABLE ROBIN J. HOUWMAN Judge
SCOTT G. HOY of Hoy Trial Lawyers, Prof. LLC Sioux Falls, South Dakota
MICHAEL W. STRAIN of Strain Morman Law Firm Sturgis, South Dakota Attorneys for plaintiff and appellant.
LISA HANSEN MARSO MATTHEW D. MURPHY of Boyce Law Firm, LLP Sioux Falls, South Dakota Attorneys for defendant and appellee.
CONSIDERED ON BRIEFS APRIL 20, 2020 OPINION FILED 06/17/20 #29081
DEVANEY, Justice
[¶1.] Avera McKennan Hospital terminated Stephanie Henning, a nurse in
its intensive care unit, after it discovered errors in Henning’s documentation of
controlled substances. Henning brought suit against Avera alleging multiple claims
including: wrongful discharge, breach of contract, and defamation. The circuit court
granted Avera summary judgment on all claims. Henning appeals, and we affirm.
Factual and Procedural Background
[¶2.] Avera McKennan Hospital hired Stephanie Henning as a registered
nurse in its intensive care unit in the fall of 2014. As part of its regular internal
process, Avera tracks the handling of controlled substances by Avera employees to
identify possible drug diversion issues. Avera uses an automated medication
dispensing system to track medications administered to patients. Avera explained
that its dispensing system logs when each employee accesses the system and
withdraws certain medications. The employee must then track the medications by
scanning the bar code at the time they are administered to patients or by manually
entering into the system the time and amount administered. To account for waste,
the employee must also note whether any of the withdrawn medications were not
administered. Avera then uses the dispensing system to generate reports showing
the information tracked.
[¶3.] In March 2016, the report run by Avera indicated an atypically high
removal rate of Fentanyl by Henning in comparison to her coworkers between
March 1, 2015 and March 1, 2016. Avera assigned a review committee consisting of
Henning’s nurse manager (Amy Boyd), a pharmacist, and a nurse to conduct a more
-1- #29081
thorough review of Henning’s charts. The reviewers examined 16 charts and issued
a written summary of their findings. The summary revealed 12 areas of concern,
including that they could not account for 275 micrograms of Fentanyl, 3 milligrams
of Ativan, and 3 milligrams of Hydromorphone under Henning’s possession and
control. 1 The summary further indicated that Henning did not scan 66 of the 669
medications to denote that the medications removed by her had been administered
to a patient, the time of administration, and whether there was any leftover
medication. Avera observed that these scanning errors would not on their own be
concerning, but the fact that a large portion of the errors related to Fentanyl raised
a red flag.
[¶4.] On March 28, Henning arrived for her scheduled shift, but instead of
beginning her duties, she was asked to meet with Boyd and Teresa Frederick from
Human Resources. At the meeting, Boyd and Frederick presented Henning with
the information obtained during the committee’s review of Henning’s charts.
According to Henning, Frederick told her that she would be reported to the South
Dakota Board of Nursing for suspected drug diversion unless she accounted for the
drugs she had removed but did not properly document in the dispensing system.
Henning denied any wrongdoing.
[¶5.] At some point during the meeting, Agent Doug Heilman from the
Department of Criminal Investigation (DCI) came into the room. Avera had
1. Avera also related that the dollar value of the drugs unaccounted for is $7.00. The report to the Department of Health included greater amounts of unaccounted for drugs: 325 micrograms of Fentanyl, 4 milligrams of Ativan, and 3.0 milligrams of Hydromorphone.
-2- #29081
contacted the DCI to report possible drug diversion or a discrepancy/potential
discrepancy in the tracking of controlled substances. The record suggests that Boyd
and Frederick left the room while Agent Heilman questioned Henning. Henning
points out that Agent Heilman told her he was there to help and that no one would
be arrested that day. During Heilman’s interview, Henning denied any use of
narcotics and any sale or diversion of drugs. That same day, she also underwent a
urinalysis, which, according to Henning, later came back negative for any of the
controlled substances allegedly diverted. 2
[¶6.] Avera terminated Henning after the interview due to her
documentation errors and her inability to account for the controlled substances
removed from the dispensing system. Following her termination, Henning sent text
and Facebook messages to at least 13 of her coworkers claiming that Avera had
accused her of stealing narcotics and that Avera terminated her for documentation
errors.
[¶7.] The next day, Avera reported Henning’s suspected drug diversion to
the South Dakota Board of Nursing. Henning had already self-reported. The Board
conducted an independent investigation, and Henning hired counsel to represent
her in the process. Following its investigation, the Board issued a confidential
letter of concern and ordered Henning to attend counseling with the Health
Professionals Assistance Program and complete remedial education. In early April
2016, Avera similarly reported Henning’s suspected drug diversion to the South
2. The report from the urinalysis is not in the record; however, Avera has not disputed Henning’s assertion that the results were negative.
-3- #29081
Dakota Department of Health, the Drug Enforcement Agency (DEA), and the South
Dakota Board of Pharmacy. Each entity investigated the report and did not take
action against Henning.
[¶8.] In September 2017, Henning brought suit against Avera alleging that
Avera accused her without sufficient evidence or cause of stealing controlled
substances and ingesting or selling them. She asserted that Avera’s “breach of
contract and tortious actions” caused her to lose “her job and her ability to find like
work” and caused her to have to retain counsel to defend the allegations before the
Board of Nursing. Henning further claimed that she suffered the loss of past and
future wages, mental and emotional distress, loss of enjoyment of life, and other
personal injuries. Finally, she alleged that Avera’s actions constituted libel and
slander.
[¶9.] Avera moved for summary judgment on all of Henning’s claims,
arguing that Henning could not, as a matter of law, prove wrongful termination or
breach of contract because she was an at-will employee. Avera further asserted
that no issue of material fact was in dispute on Henning’s libel and slander claims
because Avera reported the truth, and that its reporting to the governmental
agencies was privileged and without malice. In response, Henning asserted that
she was entitled to due process prior to being discharged because of Avera’s
controlled substance use policy and further asserted that a public policy exception to
the at-will doctrine should apply. Henning additionally argued that Avera’s failure
to provide her due process caused her emotional distress.
-4- #29081
[¶10.] The circuit court held a hearing on Avera’s motion and thereafter
issued a memorandum decision granting Avera summary judgment. The court
noted that Henning admitted in her deposition that she was an at-will employee
and that Avera had not provided her anything, written or verbal, indicating that
she was something other than an at-will employee. Therefore, the court concluded
that Henning could not proceed on her breach of contract or wrongful termination
claims. The court further reasoned that Henning failed to identify any evidence to
support her claim that a public policy exception to the at-will doctrine applies here.
[¶11.] On Henning’s defamation claim, the court noted that Henning testified
in her deposition that she was unaware of any false information reported by Avera
related to either her documentation errors or her inability to account for controlled
substances. The court also noted that Henning had not pointed to any statements
by Avera that would imply a false assertion of an objective fact about Henning.
Rather, the court determined that the record revealed that Avera’s reports
described suspected diversion. The court further concluded that the
communications were privileged because Avera reported its suspicions to persons
and entities with a common interest in the diversion of controlled substances.
Finally, the court held that because malice could not be inferred, Henning would
have to prove malice to destroy the privilege. In the court’s view, Henning could not
show malice because she did not produce evidence showing that Avera had doubts
about the truth of the particular statements communicated to these entities.
[¶12.] Although Henning did not directly plead a claim for intentional
infliction of emotional distress, the court addressed this issue because counsel
-5- #29081
argued it “was implied in several paragraphs of the Complaint that used terms
‘mental distress’ and ‘emotional distress.’” The court characterized Henning’s claim
as follows: “Avera reported her to [the] DCI, the DEA, and the Nursing Board when
it had, or should have had, serious doubts about Henning diverting based on the
lack of evidence.” The court noted that Avera had a duty (under the law and its own
policies) to report possible theft or loss of controlled substances to those agencies.
The court thus determined that Henning failed to identify a material issue of fact in
dispute to support that Avera acted so outrageously in character and extreme in
degree as to go beyond all bounds of decency.
[¶13.] Henning appeals, asserting that the circuit court erred in granting
summary judgment.
Standard of Review
[¶14.] “We review a summary judgment de novo.” Heitmann v. Am. Family
Mut. Ins. Co., 2016 S.D. 51, ¶ 8, 883 N.W.2d 506, 508. In doing so, we determine
whether there are any genuine issues of material fact in the case and whether the
law was correctly applied. Id. (quoting Ass Kickin Ranch, LLC v. N. Star Mut. Ins.
Co., 2012 S.D. 73, ¶ 6, 822 N.W.2d 724, 726). However, “[w]e view the evidence
‘most favorably to the nonmoving party and reasonable doubts should be resolved
against the moving party.’” Dowling Family P’ship v. Midland Farms, LLC, 2015
S.D. 50, ¶ 9, 865 N.W.2d 854, 859 (quoting Peters v. Great W. Bank, Inc., 2015 S.D.
4, ¶ 5, 859 N.W.2d 618, 621).
-6- #29081
Analysis and Decision
Wrongful Termination
[¶15.] Henning does not dispute that she was an at-will employee. However,
she argues that Avera’s controlled substance abuse policy created an express or
implied exception to the at-will doctrine in cases of suspected theft or diversion of
controlled substances. She further contends that Avera failed to follow its policy by
not arranging for drug screening, not suspending her without pay pending further
investigation, and not conducting a further investigation. Finally, she argues that
Avera’s failure to follow its policy deprived her “of any meaningful opportunity to
clear her name, save her job and prevent irreparable harm to her personal
reputation and professional license.”
[¶16.] Under SDCL 60-4-4, “[a]n employment having no specified term may
be terminated at the will of either party on notice to the other[.]” As such, an at-
will employee has no right to due process and may be terminated “at any time for
any reason.” 3 Hollander v. Douglas Cty., 2000 S.D. 159, ¶ 13, 620 N.W.2d 181, 185
(quoting Petersen v. Sioux Valley Hosp. Ass’n, 486 N.W.2d 516, 520 (S.D. 1992)).
However, an employer may either expressly or impliedly surrender its statutory at-
will power. Aberle v. City of Aberdeen, 2006 S.D. 60, ¶ 21, 718 N.W.2d 615, 621.
“An express surrender occurs when the employer affirmatively indicates such intent
by adopting written personnel policies or manuals that explicitly state that a for-
3. In Novotny v. Sacred Heart Health Services, we explained that a due process violation requires that a state actor deprive the plaintiff of a protected property or liberty interest. 2016 S.D. 75, ¶ 15, 887 N.W.2d 83, 91. Henning has not claimed that Avera is a state actor; nor has she identified a protected property or liberty interest at issue here.
-7- #29081
cause termination procedure must be followed.” Id. An implied surrender occurs
when “policies or handbooks ‘contain[] a detailed list of exclusive grounds for
employee discipline or discharge and a mandatory or specific procedure which the
employer agrees to follow prior to any employee’s termination[.]” Id. (citation
ommited). In either regard, the employer’s intent to surrender its right to
terminate an employee at will must be clear. Id. ¶ 22.
[¶17.] Here, Henning has not established that Avera either expressly or
impliedly surrendered its at-will power via its controlled substance use policy. The
policy neither affirmatively indicates an intent to relinquish its authority to
terminate Henning at will; nor does the language of the policy support that Avera
adopted a detailed list of exclusive grounds for discipline or termination and agreed
to follow a specific procedure prior to making a termination decision. More
importantly, Henning agreed in her deposition that Avera never represented to her,
in writing or orally, that she was anything other than an at-will employee.
[¶18.] In her reply brief on appeal, Henning asks this Court to recognize a
public policy exception to the at-will doctrine, “if it isn’t already recognized in our
law,” for “termination based upon criminal accusations that are not sufficiently
substantiated[.]” Henning, however, cites no law from this Court or any jurisdiction
to support her conclusory statement. Further, even if we were inclined to consider
this argument absent a more developed legal analysis, the exception suggested by
Henning is a nebulous concept in terms of what constitutes “sufficient
substantiation” to terminate an employee suspected of committing a crime.
Therefore, we decline to adopt such an exception. As we noted in Harvey v.
-8- #29081
Regional Health Network, Inc., adopting unfounded public policy exceptions “would
eviscerate the at-will doctrine in favor of judicial management of
employee/management relations.” 2018 S.D. 3, ¶ 50, 906 N.W.2d 382, 397. The
circuit court properly granted summary judgment on Henning’s wrongful
termination claim.
Defamation
[¶19.] Henning contends that material issues of fact are in dispute on her
defamation claim. She directs this Court to Boyd’s deposition testimony, namely
that Boyd did not believe there was enough evidence to support that Henning
diverted controlled substances. She further contends that Avera acted with malice
when it repeatedly represented and characterized Henning “as a drug user, thief or
diverter[.]” Relying on this premise, along with Avera’s failure to investigate
further before reporting to the various agencies, Henning contends a jury should
determine whether Avera defamed her by wrongfully accusing her of suspected
diversion of controlled substances.
[¶20.] As we recently recognized in Hernandez v. Avera Queen of Peace
Hospital, “[d]efamation under SDCL 20-11-2 includes libel and slander.” 2016 S.D.
68, ¶ 29, 886 N.W.2d 338, 348. “Libel” is defined in SDCL 20-11-3 as “a false and
unprivileged publication by writing, printing, picture, effigy, or other fixed
representation to the eye which exposes any person to hatred, contempt, ridicule, or
obloquy, or which causes him to be shunned or avoided, or which has a tendency to
injure him in his occupation.” “Slander is a false and unprivileged publication,
other than libel” under certain circumstances. SDCL 20-11-4. However, “[b]oth
-9- #29081
libel and slander require false and unprivileged communications.” Hernandez, 2016
S.D. 68, ¶ 29, 886 N.W.2d at 348. Under SDCL 20-11-5(3), a privileged
communication includes one made:
without malice, to a person interested therein, by one who is also interested, or by one who stands in such relation to the person interested as to afford a reasonable ground for supposing the motive for the communication innocent, or who is requested by the person interested to give the information . . . .
[¶21.] Here, Henning does not dispute that some of the controlled substances
she removed from the dispensing system could not be accounted for. She similarly
does not dispute that Avera was required to report the suspected diversion of
controlled substances to the various agencies and that the various agencies to whom
Avera reported shared a common interest with Avera. Nevertheless, Henning asks
us to find that a material issue of disputed fact exists on the question of malice
because Avera did not conduct a further investigation before reporting the
suspected drug diversion. “But ‘malice cannot be inferred from the defamatory
communication alone.’” Hernandez, 2016 S.D. 68, ¶ 29, 886 N.W.2d at 348 (quoting
Schwaiger v. Avera Queen of Peace Health Servs., 2006 S.D. 44, ¶ 10, 714 N.W.2d
874, 878). Moreover, in Harvey, we recognized that an employer’s failure to
investigate further does not alone establish a question of fact on whether the
employer “entertained serious doubts as to the truth of the publication or acted in
reckless disregard for the truth.” 2018 S.D. 3, ¶ 33, 906 N.W.2d at 393. Because
Henning failed to produce any other evidence from which it can be inferred that
Avera recklessly disregarded the truth when it reported the suspected drug
-10- #29081
diversion here, the circuit court properly granted summary judgment on Henning’s
defamation claim.
Intentional or Negligent Infliction of Emotional Distress
[¶22.] Lastly, Henning argues that summary judgment was improperly
granted because reasonable minds could differ on whether Avera’s conduct was
extreme and outrageous under the circumstances. She acknowledges that Avera
reported suspected diversion, but according to Henning, “the basic nature of the
charge could only be reasonably understood as alleged theft of controlled
substances.” Henning again points to her supervisor’s deposition testimony that
there was not sufficient evidence to support a claim of diversion.
[¶23.] In response, Avera argues that Henning failed to plead these causes of
actions in her complaint; therefore, they were properly dismissed. Alternatively,
Avera argues that summary judgment should be upheld because Henning failed to
present evidence in support of each element required to support these causes of
action. For intentional infliction of emotional distress, Avera contends that
Henning failed to clear the “rigorous benchmark” that must be established to
support such a claim with proof of conduct “so outrageous in character, and so
extreme in degree, as to go beyond all bounds of decency, and be regarded as
atrocious, and utterly intolerable in a civilized community.” See Harris v. Jefferson
Partners, L.P., 2002 S.D. 132, ¶ 11, 653 N.W.2d 496, 500 (citation omitted). In
response to Henning’s claim of negligent infliction of emotional distress, Avera
notes that it owed Henning no duty to investigate further, no duty to withhold its
-11- #29081
report, and no duty to continue her employment, and could not, therefore, be found
negligent.
[¶24.] Although Henning’s complaint did not clearly delineate a claim for
intentional or negligent infliction of emotional distress, we need not determine
whether she complied with our notice pleading statutes. Summary judgment was
proper as to Henning’s emotional distress claims because she failed to establish that
material facts are in dispute as to any element of these claims. Intentional
infliction of emotional distress requires evidence of:
(1) an act by the defendant amounting to extreme and outrageous conduct; (2) intent on the part of the defendant to cause the plaintiff severe emotional distress; (3) the defendant’s conduct was the cause in-fact of plaintiff’s distress; and (4) the plaintiff suffered an extreme disabling emotional response to defendant’s conduct.
Anderson v. First Century Fed. Credit Union, 2007 S.D. 65, ¶ 38, 738 N.W.2d
40, 51–52. To prove negligent infliction of emotional distress, Henning must
establish that Avera engaged in negligent conduct, including that Avera
breached a legal duty imposed by statute or common law. See Harvey, 2018
S.D. 3, ¶ 51, 906 N.W.2d at 397.
[¶25.] Henning bases both emotional distress claims on Avera’s failure
to investigate further before terminating her and before reporting suspected
drug diversion to the various agencies. But even if we conclude that Avera
could have investigated more thoroughly, a failure to further investigate does
not create an issue of fact in dispute on the question whether Avera’s conduct
was extreme and outrageous. It is undisputed that Henning could not account
for certain controlled substances she removed from the dispensing system.
-12- #29081
Moreover, Henning does not dispute that Avera had a duty to report theft or
loss of controlled substances to the Department of Health, the DEA, and the
Pharmacy Board and that it had a policy to report potential theft or diversion
of controlled substances to the DCI and Nursing Board. 4 The circuit court,
therefore, properly granted summary judgment on her claim of intentional
infliction of emotional distress.
[¶26.] The circuit court did not rule on Henning’s claim of negligent
infliction of emotional distress. This is likely because she did not specifically
plead the claim in her complaint and did not clearly argue the claim during
the summary judgment hearing. Nevertheless, after our de novo review of
the record, Henning has not presented “specific facts showing that a genuine,
material issue for trial exists.” See Hamilton v. Sommers, 2014 S.D. 76, ¶ 17,
855 N.W.2d 855, 861 (citation omitted). In particular, although Henning
claims that Avera “summarily terminated” her without conducting an
“additional employee investigation,” she was an at-will employee and has not
established that Avera owed her a duty to investigate prior to terminating
her. Because Avera could terminate Henning at any time for any reason,
summary judgment on this claim is also proper.
4. Avera did not cite specific laws or regulations requiring the reporting of potential drug diversion. However, Robert Coolidge from the Board of Pharmacy agreed in his deposition that the South Dakota Department of Health regulates narcotics under SDCL chapter 34-20B, and that Avera, as an entity registered to distribute narcotics, must report possible drug diversion to the Department of Health, the Board of Pharmacy, and the DEA. Avera’s controlled substance use policy provides that Avera notify the same entities as well as the appropriate licensing agency and the DCI.
-13- #29081
[¶27.] Affirmed.
[¶28.] GILBERTSON, Chief Justice, and KERN, JENSEN, and SALTER,
Justices, concur.
-14-