Appellate Case: 22-3240 Document: 010110939010 Date Filed: 10/20/2023 Page: 1
`FILED
`United States Court of Appeals
`Tenth Circuit
`
`October 20, 2023
`
`Christopher M. Wolpert
`Clerk of Court
`
`UNITED STATES COURT OF APPEALS
`
`FOR THE TENTH CIRCUIT
`_________________________________
`
`DANIEL HOLT,
`
` Plaintiff - Appellant,
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`v.
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`FOOT LOCKER RETAIL, INC.,
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` Defendant - Appellee.
`_________________________________
`
`
`
`
`
`No. 22-3240
`(D.C. No. 5:21-CV-4039-JWB)
`(D. Kan.)
`
`ORDER AND JUDGMENT*
`_________________________________
`
`Before TYMKOVICH, McHUGH, and MORITZ, Circuit Judges.
`_________________________________
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`Daniel Holt was employed as the Senior Director of Operations at a Foot
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`Locker Retail, Inc. distribution center in Junction City, Kansas. In May 2020, in
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`response to the spreading COVID-19 pandemic, Foot Locker required employees to
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`wear masks. Mr. Holt was terminated a few days later for comments he made on
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`social media and in meetings about the mask mandate. His supervisor determined he
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`undermined the company’s health and safety protocols.
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`Mr. Holt sued Foot Locker for retaliatory discharge under Kansas’s
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`whistleblower-protection exception to at-will employment. He claims Foot Locker’s
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`* This order and judgment is not binding precedent, except under the doctrines
`of law of the case, res judicata, and collateral estoppel. It may be cited, however, for
`its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
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`Appellate Case: 22-3240 Document: 010110939010 Date Filed: 10/20/2023 Page: 2
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`stated reason for terminating him was pretextual, and he was terminated because of
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`his reports and complaints to management of inventory irregularities. He claims the
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`irregularities would mislead investors and thus contradicted Kansas public policy.
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`The district court granted summary judgment to Foot Locker on Holt’s claim.
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`Exercising our jurisdiction under 28 U.S.C. § 1291, we affirm. Kansas law requires
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`the employee, i.e., the whistleblower, to report a violation of rules, regulations, or
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`law that would violate public health, safety, and the general welfare. Under Kansas
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`law, the whistleblower exception applies only when it is necessary to protect a
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`strongly-held state public policy. Because Kansas courts have not extended the
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`whistleblower exception to the types of reports made by Mr. Holt, we decline to
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`extend it on the facts here. And even if his reports did pertain to public health,
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`safety, or welfare, Mr. Holt has not made the required showing by clear and
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`convincing evidence that a reasonably prudent person would have concluded these
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`inventory requests amount to legal violations.
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`I. Background
`Mr. Holt was the most senior Operations employee at the Foot Locker
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`distribution center in Junction City. He had responsibility over the warehouse
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`inventory and managed 600 to 700 employees. For multiple years, Mr. Holt received
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`irregular inventory requests from other departments within the company. These
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`allegations are outlined as follows:
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` August 19, 2015: Mr. Holt receives a request from a
`manager in the Transportation Department to reject a
`shipment because it had not been approved for delivery. Mr.
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`Appellate Case: 22-3240 Document: 010110939010 Date Filed: 10/20/2023 Page: 3
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`inventory
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`Holt denies the request and receives the product into
`inventory. No inventory irregularities occur.
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`2018: Mr. Holt
` September
`questions
`irregularities in an internal company survey.
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` December 20, 2019: Mr. Holt receives a request from the
`Director of Accounts Payable to receive product into
`inventory that had not yet shipped. The Director explains
`the intent is to make the product available online to
`consumers. Mr. Holt denies the request and states that this
`would be falsifying company records. He reports this to his
`supervisor and a human resources manager. The human
`resources manager thanks him and offers to assist. No
`inventory irregularities occur.
`
` December 27, 2019: Mr. Holt’s team receives a request to
`reject a shipment because it was sent in error. Mr. Holt did
`not see the request. A member of his team tried to comply
`but ended up receiving the product into inventory and
`shipping it back to the vendor. This caused an error in
`inventory records. Mr. Holt testifies in his deposition that
`it is possible the issue was resolved before the end of the
`quarter, and, if so, would not affect Foot Locker’s financial
`statements.
`
` January 3, 2020: Mr. Holt receives a request from the
`Director of Logistics not to receive a defective product into
`inventory until it is inspected. Mr. Holt denies the request
`and receives the product into inventory before inspecting it.
`Mr. Holt reports this to his supervisor and a human
`resources manager.
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` April 13, 2020: Mr. Holt receives a request from the
`Logistics team not to receive product into inventory until
`the end of the fiscal quarter. At times this would be
`appropriate, but Mr. Holt denies the request and receives the
`product into inventory. He reports this to his supervisor and
`human resources manager. No inventory irregularities
`occurred.
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`Appellate Case: 22-3240 Document: 010110939010 Date Filed: 10/20/2023 Page: 4
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`In May 2020, Mr. Holt’s supervisor told him several times that managers and
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`supervisors were urged to wear masks. Appellant Br. at 17. Mr. Holt did not wear a
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`mask. Then, in late May, Mr. Holt’s supervisor informed him that all employees
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`were required to wear masks. That night, Mr. Holt posted on Facebook that he
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`thought people who wore masks were “sheep.” Employees who reported directly to
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`Mr. Holt were his friends on Facebook. Mr. Holt wore a mask to work the next day,
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`but during a morning meeting he made a comment about the mask mandate that his
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`supervisor found sarcastic and insubordinate. Mr. Holt was terminated a few days
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`later.
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`Mr. Holt brought an action against Foot Locker for retaliatory discharge.
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`Although Foot Locker contends Mr. Holt was terminated because he undermined the
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`mask mandate, Mr. Holt argues that Foot Locker’s motivation for terminating him
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`was because he reported inventory irregularities.
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`II. Discussion
`Mr. Holt believes the district court erred in granting summary judgment on his
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`retaliatory discharge claim. As we explain below, we disagree.
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`We review the district court’s entry of summary judgment de novo, applying
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`the same standard as the district court. Summary judgment is appropriate “if the
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`movant shows that there is no genuine dispute as to any material fact and the movant
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`is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “[W]e view the
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`facts and any reasonable inferences in the light most favorable to the non-moving
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`Appellate Case: 22-3240 Document: 010110939010 Date Filed: 10/20/2023 Page: 5
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`party.” Arnold v. City of Olathe, 35 F.4th 778, 788 (10th Cir. 2022) (citations
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`omitted).
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`A. Kansas Whistleblower Exception
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`Because Kansas follows the common-law doctrine of employment-at-will, an
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`employer usually may “terminate an employee for good cause, no cause, or even for
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`wrongful cause.” Shaw v. Sw. Kan. Groundwater Mgmt. Dist. Three, 219 P.3d 857,
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`861 (Kan. Ct. App. 2009). But there are exceptions to the common law that allow a
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`retaliatory-discharge claim, one of which is the whistleblower exception. Id. That
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`exception prohibits “[t]ermination, in retaliation for the good faith reporting of a co-
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`worker’s or employer’s serious infraction of rules, regulations, or law pertaining to
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`public health, safety, and the general welfare[.]” Flenker v. Willamette Indus., Inc.,
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`967 P.2d 295, 298 (Kan. 1998) (citing Palmer v. Brown, 752 P.2d 685, 690 (Kan.
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`1988)). A termination in violation of this provision “is an actionable tort.” Id.
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`To establish a prima facie case of retaliatory discharge for whistleblowing, the
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`employee must prove by clear and convincing evidence that a reasonably prudent
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`employee would believe the employer had violated public health, safety, or the
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`general welfare. Kansas courts have established three elements for a retaliatory
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`discharge claim:
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`[1] [A] reasonably prudent person would have concluded the
`employee’s co-worker or employer was engaged
`in
`activities in violation of rules, regulations, or the law
`pertaining to public health, safety, and the general welfare;
`[2] the employer had knowledge of the employee’s reporting
`of such violation prior to discharge of the employee; and [3]
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`Appellate Case: 22-3240 Document: 010110939010 Date Filed: 10/20/2023 Page: 6
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`the employee was discharged in retaliation for making the
`report.
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`Palmer, 752 P.2d at 690.
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`The “whistleblowing must be based on violations of specific and definite rules,
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`regulations, or laws.” Goodman v. Wesley Med. Ctr., L.L.C., 78 P.3d 817, 822 (Kan.
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`2003); see also Palmer v. Pentair, No. 18-02638-CM-TJJ, 2019 WL 3239350, at *8 (D.
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`Kan. July 18, 2019) (acknowledging the plaintiff must “clearly allege a violation of
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`specific and definite rules, regulations, or laws beyond a mere feeling of wrongdoing”).
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`If the employee can establish a prima facie case, the burden shifts to the employer to
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`show it terminated the employee for a legitimate reason, and then shifts back to the
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`employee to show the employer’s purported reason was pretextual. Shaw, 219 P.3d
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`at 862 (citing Goodman, 78 P.3d at 821).
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`The whistleblower exception is narrow. “Kansas courts permit the common-
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`law tort of retaliatory discharge as a limited exception to the at-will employment
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`doctrine when it is necessary to protect a strongly held state public policy from being
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`undermined.” Hill v. State, 448 P.3d 457, 466 (Kan. 2019) (quoting Campbell v.
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`Husky Hogs, L.L.C., 255 P.3d 1, 5 (Kan. 2011)). “The public policy of protecting
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`employees from retaliatory discharge is to ensure that infractions of rules, regulations, or
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`laws pertaining to public health and safety are properly reported.” Moyer v. Allen Freight
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`Lines, Inc., 885 P.2d 391, 394 (Kan. Ct. App. 1994) (citing Palmer, 752 P.2d at 689)).
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`The Kansas Supreme Court ruled that “[b]efore courts are justified in declaring the
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`existence of public policy, however, ‘it should be so thoroughly established as a state of
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`Appellate Case: 22-3240 Document: 010110939010 Date Filed: 10/20/2023 Page: 7
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`public mind so united and so definite and fixed that its existence is not subject to any
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`substantial doubt.’” Palmer, 752 P.2d at 687–88 (quoting Noel v. Menninger Found.,
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`267 P.2d 934, 941 (Kan. 1954)).
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`As a general matter, Kansas courts have applied the whistleblower exception in
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`cases involving reports of serious public health and safety issues. See, e.g., White v. Gen.
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`Motors Corp., 908 F.2d 669, 671 (10th Cir. 1990) (public interest in report of defects in
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`brake installations at automobile plant); Shaw, 219 P.3d at 864 (public interest in
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`employee report of groundwater waste violation); Moyer, 885 P.2d at 392–93 (public
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`interest in report by truck driver of equipment failures that occurred in her truck); cf. Love
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`v. Johnson Cnty. Parks & Recreation Dist., No. 72,050, 1995 WL 18253445, at *8 (Kan.
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`Ct. App. Aug. 18, 1995) (technical violation of budget laws did not pertain to public
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`health, safety, and general welfare). But no case has extended the doctrine to reports
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`involving internal inventory controls.
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`B. Mr. Holt’s Retaliatory Discharge Claim
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`Mr. Holt bases his argument on two theories. First, he points to Kansas Blue Sky
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`laws prohibiting fraud in the sale of securities and false or misleading financial
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`filings. Kan. Stat. Ann. §§ 17-12a501, 17-12a505. Second, he relies on federal
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`Securities regulations which require publicly-traded company financial statements to be
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`prepared in accordance with Generally Accepted Accounting Principles (GAAP). See
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`SEC Regulation S-X, 17 C.F.R. Part 210. He argues that these provisions protect the
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`public’s interest in publicly-traded companies like Foot Locker being financially
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`transparent and truthful.
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`Appellate Case: 22-3240 Document: 010110939010 Date Filed: 10/20/2023 Page: 8
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`But no Kansas case has yet recognized a cause of action for retaliatory
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`discharge based on reported violations of the Kansas Blue Sky laws or SEC
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`regulations.1 Thus, before recognizing a new cause of action, we must “determine
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`that some strong public policy required it.” Conrad v. Bd. of Johnson Cnty. Comm’rs,
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`237 F. Supp. 2d 1204, 1265 (D. Kan. 2002) (quoting Dickens v. Snodgrass, Dunlap &
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`Co., 872 P.2d 252, 262 (Kan. 1994)). “The Kansas Supreme Court has made it clear that
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`this is a very hard test to satisfy.” Conrad, 237 F. Supp. 2d at 1265. Because Kansas
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`courts have not extended the whistleblower exception to the types of internal inventory
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`reports made by Mr. Holt, we agree with the district court that Kansas would not extend
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`its judge-made retaliatory discharge doctrine to this application.
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`Even so, his claim falters for another reason. Kansas law requires that a public
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`policy violation must be established by clear and convincing evidence that a
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`reasonably prudent person would have concluded Foot Locker was engaged in
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`activities in violation of rules, regulations, or law. Palmer, 752 P.2d at 690. We
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`1 Missouri has recognized violations of financial law are against “clearly
`mandated public policy[.]” Dunn v. Enter. Rent-A-Car Co., 170 S.W.3d 1, 8 (Mo. Ct.
`App. 2005) (citing Johnson v. World Color Press, Inc., 498 N.E.2d 575, 576 (Ill.
`App. 1986)). In Missouri, an employee must prove he was terminated for refusing to
`commit an “illegal act or an act contrary to a strong mandate of public policy.” Id. at
`6-7. All the employee must demonstrate to prove this is that “the conduct required of
`him by the employer would have amounted to a violation of a statute, constitutional
`provision or regulation [.]” Id. at 7 (citations omitted). Kansas, however, recognizes
`only a “few and narrowly defined” public policy concerns, Riddle v. Wal-Mart
`Stores, Inc., 998 P.2d 114, 119 (Kan. App. Ct. 2000), that pertain to public health,
`safety, and the general welfare.
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`Appellate Case: 22-3240 Document: 010110939010 Date Filed: 10/20/2023 Page: 9
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`conclude that no reasonably prudent person would have determined these inventory
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`requests amounted to legal violations.
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`As discussed above, Mr. Holt alleges that a reasonable person would have
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`concluded these inventory requests were violations of Kansas Blue Sky laws and
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`federal SEC regulations because they could have resulted in inaccurate financial
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`statements. He contends he need not show that an actual violation of law occurred,
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`just that a reasonably prudent person would have concluded there was a violation.
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`See Doud v. Countrywide Home Mortg. Loan, No. 96-2079-JWL, 1997 WL 292127,
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`at *10 (D. Kan. May 5, 1997). He fails to make such a showing.
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`A reasonable person would conclude these irregular inventory requests were
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`potential internal company policy violations. And an internal policy violation
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`generally does not support a whistleblower claim. See Herman v. W. Fin. Corp., 869
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`P.2d 696, 703–05 (Kan. 1994) (concluding the failure to follow company guidelines
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`could not support a whistleblower claim); Palmerin v. Johnson Cnty., Kan. Bd. of Cnty.
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`Comm’rs, 524 F. App’x 431, 433 (10th Cir. 2013) (noting Kansas has held that violations
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`of internal policy do not qualify as rules, regulations, or the law pertaining to public
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`health, safety, and the general welfare); Taylor v. Home Depot USA, Inc., 506 F. Supp.
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`2d 504, 520 (D. Kan. 2007) (concluding the whistleblower exception “would not
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`extend to merely reporting suspected failures to comply with internal company
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`policies or procedures unrelated to such laws”); Duffey v. Bd. of Comm’rs of Butler
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`Cnty., No. 08–1186–WEB, 2011 WL 1118585, at *16 (D. Kan. Mar. 25, 2011)
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`(“Reported violations of internal policies are insufficient to establish a claim for
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`Appellate Case: 22-3240 Document: 010110939010 Date Filed: 10/20/2023 Page: 10
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`whistleblowing. The reported conduct must violate the law.”). And there is no basis
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`to believe that these incidents in any way could or did result in unlawful public
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`filings.
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`A reasonable person would also not conclude Foot Locker was violating the
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`law based on the inventory requests themselves. The requests are all different in kind
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`and it is hard to decipher any pattern of potentially illegal conduct. The departments
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`making these requests had legitimate reasons for making such requests—and made
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`those reasons clear to Mr. Holt. Lastly, and importantly, Foot Locker did not have
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`any inaccurate financial statements. The only time an error occurred because of an
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`inventory request was when his staff tried to comply with a request to reject a
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`product sent in error, but ended up receiving it and shipping it back to the vendor.
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`Mr. Holt admits, however, that this mistake could have been corrected before the end
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`of the quarter. In Love v. Johnson Cnty. Parks & Recreation Dist., the plaintiff
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`alleged a “potential technical violation of budget laws.” 1995 WL 18253445, at *8.
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`The court found that a reasonable person would not believe there was a violation of
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`law because although “the uncontroverted evidence would support an inference that
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`monies were transferred into the wrong type of fund[,] [n]othing in the record
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`supports a conclusion that the funds themselves were misused.” Id. Similarly, even
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`if the inference is that Foot Locker was trying to falsify inventory records, there is no
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`evidence that any financial statements could or were ever falsified.
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`Because Mr. Holt fails to establish the first element of his prima facie case, we
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`need not reach the burden-shifting analysis.
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`Appellate Case: 22-3240 Document: 010110939010 Date Filed: 10/20/2023 Page: 11
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`III. Conclusion
`For these reasons, we affirm the district court’s grant of summary judgment.
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`Entered for the Court
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`Timothy M. Tymkovich
`Circuit Judge
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