Hodge v. NC DOTÂ , 246 N.C. App. 455 ( 2016 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA15-596
Filed: 5 April 2016
Wake County, No. 11 CVS 14374
GLENN I. HODGE, JR., Plaintiff,
v.
NORTH CAROLINA DEPARTMENT OF TRANSPORTATION, Defendant.
Appeal by Plaintiff from order entered 6 February 2015 by Judge Michael J.
O’Foghludha in Wake County Superior Court. Heard in the Court of Appeals 2
December 2015.
Law Offices of Michael C. Byrne, by Michael C. Byrne, for Plaintiff.
Attorney General Roy Cooper, by Assistant Attorney General Allison Angell, for
Defendant.
STEPHENS, Judge.
Plaintiff Glenn I. Hodge, Jr., appeals from the trial court’s order granting
summary judgment in favor of Defendant North Carolina Department of
Transportation (“DOT”) against his claim for violation of our State’s Whistleblower
Act. Hodge argues that he satisfied each element of his prima facie case by forecasting
evidence that DOT took adverse employment actions against him in retaliation for
engaging in activities protected by section 126-84 of our General Statutes, and that
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the trial court therefore erred in granting DOT’s motion for summary judgment. We
affirm the trial court’s order.
I. Factual Background and Procedural History
Hodge first began working for the State of North Carolina in 1990 as an
accountant in the Department of Human Resources, then transferred in January
1992 to work as an auditor for DOT. In May 1992, he was promoted to the position
of Chief of DOT’s Internal Audit Section (“IAS”). This is Hodge’s fourth lawsuit
against DOT to reach this Court.
A. Hodge’s prior lawsuits
(1) Hodge I: Chief of IAS is not a policymaking exempt position
In May of 1993, Hodge’s position was designated by the Governor as
policymaking exempt pursuant to N.C. Gen. Stat. § 126-5(d)(1). N.C. Dep’t of Transp.
v. Hodge, 347 N.C. 602, 604, 499 S.E.2d 187, 188 (1998) (“Hodge I”). Before his
eventual termination in December of 1993, Hodge filed for a contested case hearing
in the Office of Administrative Hearings (“OAH”) challenging this designation. Id.
The evidence presented during the OAH hearing demonstrated that DOT’s IAS Chief
had: (1) “considerable independence to direct and supervise audits inside the DOT”;
(2) “supervisory authority within the section over other auditors’ work and
assignments”; and (3) responsibility for “consult[ing] with the heads of units being
audited and with higher-ranking DOT officials and ma[king] recommendations for
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changes based on the result of audits.” Id. at 604, 499 S.E.2d at 189. However, “the
evidence also showed that the Chief of [IAS] had no inherent or delegated authority
to implement recommendations or order action based on audit findings.” Id. Based on
this evidence, the presiding ALJ issued a decision recommending that the designation
of Hodge’s position as policymaking exempt be reversed, based in part on a factual
finding that:
As Chief of [IAS], the Petitioner [Hodge] exercised broad
flexibility and independence. In addition to supervising
other auditors, he could decide who, what, when, how, and
why to audit within the Department. While he could not
order implementation of any recommendations, he was free
to contact the State Bureau of Investigation concerning his
findings.
Id. After the State Personnel Commission adopted the ALJ’s findings of fact and
conclusions of law and ordered that the designation of the position as policymaking
exempt be reversed, DOT appealed and the case eventually came before our Supreme
Court, which ruled in Hodge’s favor, holding that the position of DOT’s Chief of IAS
did not meet the statutory definition of policymaking provided in our General
Statutes. Id. at 606-07, 499 S.E.2d at 190. Specifically, the Court held that although
Hodge “could recommend action on audit findings,” he had “no authority to impose a
final decision as to a settled course of action within . . . DOT or any division of . . .
DOT, and his authority at the section level did not rise to the level of authority
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required by [section] 126-5(b) to be considered policymaking.” Id. at 606, 499 S.E.2d
at 190.
(2) Hodge II: North Carolina Administrative Code requires reinstatement of
dismissed employees to “same or similar” position
As a result of our Supreme Court’s decision in Hodge I, Hodge was awarded
back pay and reinstated to employment in May 1998 as an Internal Auditor in DOT’s
Single Audit Compliance Unit at the same paygrade he held as IAS Chief. See Hodge
v. N.C. Dep’t of Transp., 137 N.C. App. 247, 249-50, 528 S.E.2d 22, 25, reversed for
the reasons stated in the dissent by 352 N.C. 664, 535 S.E.2d 32 (2000) (“Hodge II”).
In July 1998, Hodge sought reinstatement to his previous position by filing a motion
in Wake County Superior Court pursuant to 25 N.C.A.C. 1B.0428, which defines
reinstatement as “the return to employment of a dismissed employee, in the same or
similar position, at the same pay grade and step which the employee enjoyed prior to
dismissal.” Id. at 250, 528 S.E.2d at 25. Hodge sought injunctive relief to compel DOT
to reinstate him to the position of Chief of the Internal Audit Section and to bar DOT
from filling the position with anyone other than himself. Id.
After granting Hodge’s motion for a preliminary injunction, the trial court
granted summary judgment in Hodge’s favor and DOT appealed to this Court, where
the majority of a divided panel held the trial court had erred in granting Hodge’s
request for injunctive relief because Hodge had “failed to show that he would suffer
irreparable harm absent issuance of the injunction.” Id. However, after comparing
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the duties of his new, reinstated position as an Internal Auditor with the description
provided in Hodge I of Hodge’s responsibilities as Chief of IAS, the dissent concluded
that Hodge’s reinstatement did not comply with the express requirement in 25
N.C.A.C. 1B.0428 that Hodge be returned to the “same or similar position.” Id. at 255-
56, 528 S.E.2d at 28-29 (Walker, J., dissenting). On appeal, our Supreme Court
reversed this Court’s decision for the reasons stated in the dissent. Hodge v. N.C.
Dep’t of Transp., 352 N.C. 664, 535 S.E.2d 32 (2000). Thereafter, Hodge was
reinstated to the position of Chief of IAS, effective 30 October 2000.
(3) Hodge III: Lawsuit for reinstatement is not protected activity under North
Carolina’s Whistleblower Act
On 4 June 2003, Hodge filed another complaint against DOT in Wake County
Superior Court, alleging this time that DOT had violated our State’s Whistleblower
Act, codified at section 126-84 et seq. of our General Statutes, by unlawfully
retaliating and discriminating against him due to his “reporting and litigating
unlawful and improper actions[,]” specifically those at issue in Hodge I & II. Hodge
v. N.C. Dep’t of Transp., 175 N.C. App. 110, 112-13, 622 S.E.2d 702, 704 (2005), disc.
review denied, 360 N.C. 533, 633 S.E.2d 816 (2006) (“Hodge III”). Hodge’s allegations
included, inter alia, that after his 1998 reinstatement, DOT failed to provide him with
“1) an adequate work space; 2) a computer with [updated] software; 3) training
regarding either the procedures or computer equipment in the unit he was working
in; and 4) an access number to the DOT database to gain information useful to
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complete assignments.” Id. at 113, 622 S.E.2d at 704. Hodge alleged further that
although he did not receive any indication that his work performance was
unsatisfactory until after he filed for the injunction at issue in Hodge II, he thereafter
began to receive negative evaluations from his superiors, which he viewed as evidence
of an elaborate scheme to manufacture his termination. See id. Hodge responded by
refusing to complete any auditing assignments until after the alleged adverse
conditions were eliminated. Id. For its part, DOT contended that Hodge was provided
with “office space, computer equipment, and training comparable to others in [his]
division”; that Hodge did not notify his superiors of the allegedly adverse conditions
he faced until after his job performance was criticized; and that once notified, DOT
worked to remedy the issues identified. Id. As a result of multiple poor performance
evaluations and other written warnings spanning from fall 1998 into summer 2000,
Hodge missed out on several increases to his salary and benefits, and he also alleged
that after his original termination in 1993, DOT deliberately failed to increase the
paygrade as scheduled for the Chief of the IAS in order to limit his back pay. Id. at
114, 622 S.E.2d at 705. The trial court granted summary judgment in DOT’s favor
based in pertinent part on its conclusions that:
First, the [c]ourt finds and concludes as a matter of law
that, the institution of civil actions by State Employees to
secure their employment rights allegedly violated by a
state agency such as [DOT], or the institution of
administrative proceedings in [OAH], are NOT acts which
trigger the right to sue for retaliation under The
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Whistleblower Act, particularly [section] 126-84. . . .
Second, assuming arguendo that The Whistleblower Act
would be triggered by the filing of a civil action or an
administrative proceeding relating to the terms and
conditions of employment under the State Personnel Act,
the record does not support any of [Hodge’s] alleged claims
for retaliation in violation of [section] 126-84 et seq. . . .
Id. at 115, 622 S.E.2d at 705 (emphasis in original).
Hodge appealed to this Court, arguing that DOT had violated the
Whistleblower Act by retaliating against him for filing his lawsuit for reinstatement
in Hodge II, but we rejected this argument and affirmed the trial court’s decision. Id.
at 117, 622 S.E.2d at 707. In so holding, we examined the broad range of cases in
which our State’s appellate courts had previously found the protections afforded
under the Whistleblower Act applicable—including cases involving State employees
“who bring suit alleging sex discrimination, who allege retaliation after cooperating
in investigations regarding misconduct by their superiors, and who allege police
misconduct” as well as “alleged whistleblowing related to misappropriation of
governmental resources”—and we recognized an important limitation on the scope
of the Act’s protections. Id. at 116-17, 622 S.E.2d at 706 (citations and internal
quotation marks omitted). Specifically, as we explained, “[i]n all of these cases, the
protected activities concerned reports of matters affecting general public policy,”
whereas Hodge’s lawsuit “did not concern matters affecting general public policy”
because “[his] ‘report’ was his 1998 lawsuit seeking reinstatement to his former
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position,” the allegations of which “related only tangentially at best to a potential
violation of the North Carolina Administrative Code.” Id. at 117, 622 S.E.2d at 707.
Because we ultimately concluded that our General Assembly did not intend for the
Whistleblower Act “to protect a State employee’s right to institute a civil action
concerning employee grievance matters,” this Court “decline[d] to extend the
definition of a protected activity [under the Whistleblower Act] to individual
employment actions that do not implicate broader matters of public interest.” Id. We
also rejected Hodge’s argument that the trial court erred in granting summary
judgment to DOT when there was a genuine issue of material fact as to whether
DOT’s adverse actions toward him constituted intentional retaliation because, as we
explained, “[a]ssuming arguendo that [Hodge] engaged in a protected activity, DOT
presented legitimate, non-retaliatory reasons for all of the actions it has taken, and
in his deposition testimony, [Hodge] acknowledged that there were legitimate
explanations for the actions he alleged were retaliatory.” Id. at 118, 622 S.E.2d at 707
(citation and internal quotation marks omitted).
B. Hodge’s present lawsuit
Hodge continued to work as the Chief of IAS until 2008, when DOT
implemented an agency-wide reorganization. Prior to the 2008 reorganization, DOT’s
auditing functions were divided between IAS, which had the “authority and
responsibility to conduct information technology, investigative, and performance
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audits,” and its External Audit Branch (“EAB”), which was divided into three units
that focused on single audit compliance, railroad and utility audits, and consultant
audits. Until the 2008 reorganization, IAS was housed separately from other DOT
units in a leased office space in downtown Raleigh with free parking in an adjacent
lot for Hodge, who was the only DOT supervisor in the building, and his small staff
of auditors and support personnel. Hodge spent most of his time reviewing the work
of his staff auditors, rather than conducting audits himself. Until May 2008, Hodge
reported directly to DOT’s Deputy Secretary of Administration and Business
Development, Willie Riddick, who reported to DOT’s Chief Deputy Secretary Dan
DeVane, who reported in turn to DOT Secretary Lyndo Tippett. Riddick retired in
May 2008 and was replaced as Deputy Secretary of Administration and Business
Development by Anthony W. Roper. DOT’s reporting chain of command remained
otherwise unchanged.
In September 2006, the Office of State Auditor Performance Report, “Internal
Auditing in North Carolina Agencies and Institutions,” found that IAS was
experiencing significant difficulties with completing audits and producing reports,
resulting in a lack of productivity, compromised independence due to reporting levels,
and the need for auditing standards to be addressed in policy and procedures
manuals. In 2007, DOT hired the global management consulting firm of McKinsey &
Company to serve as an external consultant to “launch a three phase process to (1)
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diagnose the ‘health’ of the department, (2) design systems and processes to more
efficiently support the organization, and (3) implement specific initiatives to create
improvements in performance.” In June 2007, McKinsey published a report
recommending that DOT reorganize its structure to maximize collaboration and
efficiency. Among numerous specific recommendations, the McKinsey report
advocated for restructuring and unifying DOT’s auditing functions into one unit,
called the Office of Inspector General (“OIG”). Upon receiving the McKinsey report,
DOT assembled a Transformation Management Team (“TMT”) in order to “reassess
DOT’s vision, goals, and priorities, and to efficiently align its resources and activities
with them.”
In August 2007, our General Assembly enacted the State Governmental
Accountability and Internal Control Act (“Accountability Act”) and the Internal Audit
Act (“IAA”). The Accountability Act, codified in chapter 143D of our General Statutes,
provides that “[t]he State Controller, in consultation with the State Auditor, shall
establish comprehensive standards, policies, and procedures to ensure a strong and
effective system of internal control within State government,” while also requiring
“[t]he management of each State agency [to] bear[] full responsibility for establishing
and maintaining a proper system of internal control within that agency.” N.C. Gen.
Stat. §§ 143D-6, -7 (2015). The IAA, codified in section 143-745 et seq. of our General
Statutes, provides in pertinent part that each State agency “shall establish a program
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of internal auditing” that “[p]romotes an effective system of internal controls that
safeguards public funds and assets and minimizes incidences of fraud, waste, and
abuse” and ensures that agency operations are “in compliance with federal and state
laws, regulations, and other requirements.” N.C. Gen. Stat. § 143-746(a) (2015). As
originally enacted, the IAA required that the head of each State agency “shall appoint
a Director of Internal Auditing who shall report to the agency head and shall not
report to any employee subordinate to the agency head.” See 2007 N.C. Sess. Laws
424, § 1; N.C. Gen. Stat. § 143-746(d) (2007).1 In addition, the IAA established a
Council of Internal Auditing—composed of the State Controller, the State Budget
Officer, the Secretary of Administration, the Attorney General, the Secretary of
Revenue, and the State Auditor—to “promulgate guidelines for the uniformity and
quality of State agency internal audit activities.” See 2007 N.C. Sess. Laws 424, § 1;
N.C. Gen. Stat. § 143-747(a), (c)(3) (2007).
In December 2007, as TMT and several other DOT subcommittees tasked with
implementing the structural changes recommended in the McKinsey Report
continued their work, members of DOT’s OIG Assessment Team consulted with
counterparts from other states, including Florida’s Inspector General Cecil Bragg and
1 This subsection of the Act has since been amended, and now provides that, “The agency head shall
appoint a Director of Internal Auditing who shall report to, as designated by the agency head, (i) the
agency head, (ii) the chief deputy or chief administrative assistant, or (iii) the agency governing board,
or subcommittee thereof, if such a governing board exists. The Director of Internal Auditing shall be
organizationally situated to avoid impairments to independence as defined in the auditing standards
referenced in subsection (b) of this section.” N.C. Gen. Stat. § 143-746(d) (2015).
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his staff. Members of the OIG Assessment Team later explained that they approached
Bragg to learn more about Florida’s “audit organization, independence, and
structure” because Florida’s DOT features an OIG “which is highly regarded in the
auditing field.” In February 2008, the OIG Assessment Team recommended that DOT
adopt a model similar to the one used in Florida. On 12 March 2008, members of TMT
attended a meeting of the Council of Internal Auditing and presented DOT’s plan for
creating an OIG with all audit functions reporting to an Inspector General who would
act as the functional equivalent of the Director of Internal Auditing envisioned under
the IAA. DOT’s proposal won unanimous approval from the Council, which found that
the restructuring met with both the intent and spirit of the IAA.
Hodge would later claim that around this time, his supervisor, Riddick,
specifically asked what he thought about DOT’s pending reorganization and the
creation of the OIG. According to Hodge, he told Riddick that he believed the proposed
OIG plan was a direct violation of the IAA as well as our Supreme Court’s rulings in
Hodge I and II. During his deposition for the present lawsuit, Hodge testified that he
believed Riddick had asked for his opinion because “he wanted to know for [DOT’s]
management and wanted to see a reaction as to how I would react to it.” Hodge also
testified that he did not know for a fact whether Riddick ever shared his views with
anyone else at DOT, but Hodge assumed that he had based on his “gut feeling.” Hodge
also claimed that he had a similar conversation with Roper after Riddick retired,
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explaining that he believed Roper was trying to gauge whether Hodge would initiate
litigation in response to DOT’s reorganization because, in Hodge’s view, DOT’s
management “may have been a little gun-shy from [my] prior cases.”
On 29 August 2008, DOT Secretary Tippett announced the creation of the OIG
and named the former director of EAB, Bruce Dillard, as Inspector General. DOT’s
new OIG consisted of three separate units: the External Audit Unit, which oversees
external and compliance audits; the Investigations Unit, which oversees
investigations and bid monitoring; and the Financial and Organizational
Performance Audit (“FOPA”) Unit, which was comprised of three sub-units including
the Internal Audit Unit, the Information Technology Audit Unit, and the
Performance Audit Unit. As part of the reorganization, DOT relocated IAS from its
old offices, which were under a lease that cost approximately $4,000.00 per month
and was due to expire, to the second floor of the Transportation Building, which had
been remodeled so that all DOT audit units could be centrally located under one roof.
Hodge remained as Chief Internal Auditor of his sub-unit and reported to Acting
FOPA Director Willard Young, who reported in turn to Inspector General Dillard,
who reported directly to the Secretary, thus leaving the same number of links
between Hodge and DOT’s Secretary—two—as existed before the agency-wide
reorganization.
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In 2008, pursuant to the requirements of the Accountability Act, the Office of
the State Controller established a new internal control program called “EAGLE,”
which stands for “Enhancing Accountability in Government through Leadership and
Education.” DOT’s OIG was tasked with creating templates and reports to test and
assist in EAGLE’s implementation. In October 2008, Inspector General Dillard
assigned nine employees, including Hodge, to work on the EAGLE project. Hodge was
the only DOT employee who failed to turn in his assignment on time. Throughout
November and December, Hodge requested and received multiple extensions to
complete his EAGLE assignment, ignored instructions from his superiors, Dillard
and Young, to initially prioritize and then work exclusively on his EAGLE
assignment, and repeatedly missed deadlines for completing the assignment. On 16
December 2008, Dillard and Young met with Hodge, issued him a written warning
for unsatisfactory job performance due to his failure to complete a critical work
assignment in a satisfactory and timely manner, and cautioned Hodge that if his
performance did not improve immediately, he would be subject to further disciplinary
action up to and including dismissal.
On 22 December 2008, Hodge filed a complaint against DOT in Wake County
Superior Court alleging that DOT had taken adverse action against him in retaliation
for engaging in activities protected by our State’s Whistleblower Act. Specifically,
Hodge alleged that he had “reported on multiple occasions” during 2008 that DOT
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had violated the IAA’s requirement that the head of each State agency appoint a
Director of Internal Auditing “who shall report to the agency head and shall not
report to any employee subordinate to the agency level” because Hodge, as Chief of
IAS, did not report directly to DOT’s Secretary.2 Hodge alleged further that his
superiors at DOT, including Dillard and Young, had illegally retaliated against him
for making these reports by reducing his position within DOT and further distancing
him in the reporting chain of command from DOT’s Secretary; discriminating against
Hodge and other members of IAS regarding pay raises; and taking disciplinary action
against Hodge “that was not motivated by legitimate disciplinary concerns but rather
out of a desire to retaliate against and harass [Hodge] and harm [Hodge’s] career with
DOT.”3
Hodge remained employed at DOT through the first half of 2009 but, despite
regular meetings during which Willard and Young urged him to complete his 2008
EAGLE assignment and additional EAGLE-related follow-up assignments, Hodge
continued his pattern of failing to submit completed work assignments after
2 When asked to elaborate on this point during his deposition, Hodge testified that he believed he
should have been named Director of Internal Auditing under the IAA because “[t]hat was my job title
[in IAS before the 2008 reorganization]. On top of that, I spent thousands of dollars and [a] couple of
trips to the Supreme Court to prove that.”
3 These allegations come from the complaint Hodge refiled in September 2011 after voluntarily
dismissing his original complaint in 2010. The original complaint does not appear in the record, but
there is no dispute that Hodge’s refiled 2011 complaint was substantially similar to his original 2008
complaint. Indeed, Hodge’s deposition and the affidavits filed by DOT in support of its motion for
summary judgment in the present lawsuit were initially collected during discovery for Hodge’s original
complaint prior to its voluntary dismissal.
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requesting and receiving multiple extensions on deadlines. On 4 June 2009, Hodge
received a “Does Not Meet Expectations” rating from Young on his annual
performance evaluation. On 17 June 2009, Hodge was issued a Corrective Action Plan
to remedy his performance deficiencies. However, during a follow-up meeting on 26
June 2009, Hodge informed Young that “on the advice of his lawyer” he would not be
completing any of his EAGLE assignments and stated that he believed Dillard and
others at DOT were out to get him because of his previous lawsuits against the
agency. When Hodge was notified during a meeting with Dillard on 30 June 2009
that any further refusals to complete his work assignments would be considered
insubordination, and thus potentially grounds for termination, Hodge confirmed that
he would continue to refuse to complete his work assignments. Hodge’s only comment
during a pre-disciplinary conference held on 8 July 2009 was that he believed that
DOT’s newly created OIG was illegal and that any disciplinary actions taken against
him by Dillard and Young would likewise be illegal. Hodge was notified by letter
dated 10 July 2009 that he would be terminated from DOT’s employment as a result
of his insubordination.
On 22 July 2009, Hodge filed a written request with DOT’s Human Resources
Division to appeal his termination, arguing that it had been without just cause.
However, because Hodge thereafter failed to comply with the time limits and filing
requirements of DOT’s employee grievance policy and procedures, his case was
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administratively closed. On 19 January 2010, Hodge filed a petition for a contested
case hearing in the OAH alleging he had been terminated without just cause. At some
point thereafter, Hodge attempted to add a claim for retaliation in violation of the
Whistleblower Act, and DOT filed a motion to dismiss Hodge’s claims for lack of
subject matter jurisdiction. On 14 June 2010, the presiding ALJ issued an Amended
Final Decision, which concluded that OAH lacked subject matter jurisdiction to
consider either of Hodge’s claims because—given his noncompliance with DOT’s filing
requirements and the fact that he failed to file his claim under the Whistleblower Act
within 30 days of his termination as required by 25 N.C.A.C. 01B .0350—Hodge failed
to timely exhaust his administrative remedies. Consequently, the ALJ dismissed
Hodge’s claims with prejudice. On 25 June 2010, Hodge filed a petition for judicial
review in Wake County Superior Court. On 31 October 2010, after a hearing, Superior
Court Judge Paul C. Ridgeway entered an order affirming the ALJ’s decision in favor
of DOT, and Hodge did not pursue any appeal to this Court.
Meanwhile, on 25 October 2010, Hodge filed a voluntary dismissal of his
pending Whistleblower Act claim in Wake County Superior Court. Hodge refiled a
substantially similar complaint on 16 September 2011. On 13 June 2012, DOT filed
an answer in which it denied Hodge’s allegations of retaliation in violation of the
Whistleblower Act, stated that any adverse actions taken against Hodge were for
legitimate, non-retaliatory reasons, and raised the defense of lack of subject matter
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jurisdiction. On 23 December 2014, DOT filed a motion for summary judgment. In
support of its motion, DOT provided affidavits from:
 Roberto Canales, who served as a TMT Project Leader in planning DOT’s 2008
reorganization, described the process that led to the creation of the OIG, and
explained how the reorganization had nothing to do with Hodge or his prior
litigation against DOT;
 Riddick, who served as Hodge’s superior until 1 May 2008 and who swore that
he did not recall Hodge ever discussing his opinions about the IAA or the OIG
and that even if they had discussed these matters, he would not have
communicated Hodge’s objections to others in DOT’s chain of command
because “[t]he transformation recommendations and subsequent restructuring
[were] a DOT management decision and did not involve [Hodge]”;
 Roper, who served as Hodge’s superior from May 2008 until the
implementation of DOT’s OIG several months later; he swore that he
remembered Hodge approaching him at one point and stating his belief that
OIG was created to “get back at him” for his previous cases against DOT but
Roper “saw no reason to repeat [Hodge’s] statement because the restructuring
within DOT was an extensive and well-researched management decision and
was not for the purpose of retaliating against [Hodge]”; he also recalled Hodge
complaining on one occasion that there had been a pay disparity between IAS
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and EAB since his reinstatement in 1998, to which Roper responded by
explaining that the two sections “were distinct business units with separate
auditing functions” and that a review of employee salaries was not warranted;
 Dillard and Young, who both swore that they were unaware of Hodge’s
opinions regarding the IAA or DOT’s creation of the OIG until counsel from the
State Attorney General’s office informed them in January 2009 that Hodge had
filed a whistleblower action against them, and that the disciplinary actions
taken against Hodge were solely the result of his insubordinate refusal to
complete his EAGLE assignments.
In opposition to DOT’s motion for summary judgment, Hodge submitted an
affidavit specifying that his reports “were made to [Riddick and Roper] . . . . regarding
the establishment of the DOT [OIG] together with another two layers of management
between my position as Chief Internal Auditor, or Director of [IAS]. This, as noted,
was a direct violation of the [IAA] which requires that I as Director of Internal
Auditing report directly to the [DOT] Secretary.” Hodge characterized the creation of
OIG as a reduction in his position, “an alteration of the terms, conditions, and/or
privileges of [his] employment” and “a de facto demotion.” Hodge also stated that any
claims by DOT officials that they did not remember or were unaware of Hodge’s report
were false, as were any claims that the adverse actions taken against Hodge were
anything other than “successful efforts to engineer and obtain [his] dismissal from
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DOT” in retaliation for his report. Regarding the written warning he received in
December 2008 for failing to complete his EAGLE assignment, Hodge averred that
he “had repeatedly protested this assignment because it was work properly assigned
to a staff auditor, a fact of which Dillard was aware” and further contended that
Dillard “had no legal authority to either act as my supervisor or to assign me the
duties of a staff auditor.” To support this assertion, Hodge noted that:
In previous litigation with DOT involving my position, the
[North Carolina] Supreme Court has established the duties
and responsibilities of the Director or Chief of Internal
Audit for DOT. As the Supreme Court stated in the
relevant opinion, “As Chief of [IAS], [I] exercised broad
flexibility and independence. In addition to supervising
other auditors, [I] could decide who, what, when, how, and
why to audit within [DOT].”
This additionally constituted, I contend, a violation of the
[IAA]. Especially given that my specific duties were
established by the Supreme Court, DOT cannot de facto
remove me as Chief Auditor under the guise of a
“reorganization” or other such action.
At the conclusion of a hearing held on DOT’s motion for summary judgment on 6
February 2015, the trial court announced that it would grant the motion and entered
a written order to that effect the same day. Hodge gave notice of appeal to this Court
on 27 February 2015.
II. Analysis
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Opinion of the Court
Hodge argues that the trial court erred in granting DOT’s motion for summary
judgment. We disagree.
A. Jurisdiction
As a preliminary matter, we first address DOT’s argument that Hodge’s
whistleblower claim is barred by lack of subject matter jurisdiction as a result of the
OAH proceedings below. Specifically, DOT relies on our decision in Swain v. Elfland,
145 N.C. App. 383, 550 S.E.2d 530, cert. denied, 354 N.C. 228, 554 S.E.2d 832 (2001),
for the proposition that although our General Statutes provide two possible avenues
to redress violations of the Whistleblower Act—with jurisdiction in the OAH as
provided by section 126-34.02(b)(6), or in superior court as provided by section 126-
86—a plaintiff “may choose to pursue a [w]histleblower claim in either forum, but not
both” in order to avoid “the possibility that different forums would reach opposite
decisions, as well as engender needless litigation in violation of the principles of
collateral estoppel.” Id. at 389, 550 S.E.2d at 535. Thus, in DOT’s view, the fact that
the ALJ’s Amended Final Decision in this matter dismissed Hodge’s claims for both
termination without just cause and retaliation in violation of the Whistleblower Act
should prohibit Hodge’s current lawsuit.
Our Supreme Court rejected a similar argument in Newberne v. Dep’t of Crime
Control & Pub. Safety, 359 N.C. 782, 797-98, 618 S.E.2d 201, 211-13 (2005). There,
the defendant State agency contended that the plaintiff’s lawsuit in superior court
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Opinion of the Court
should have been barred because he had already raised his whistleblower claim
before the OAH. Id. at 797, 618 S.E.2d at 211. However, the only evidence in the
record regarding the OAH proceedings was a copy of the plaintiff’s petition for a
contested case hearing, on which the plaintiff had checked two pre-printed boxes to
indicate that the grounds for his request were (a) that he was discharged without
cause and (b) that his termination was due to “discrimination and/or retaliation for
opposition to alleged discrimination” on the basis of race. Id. at 798-99, 618 S.E.2d at
212. The only other pertinent information on the plaintiff’s petition was his brief
statement that he “was dismissed as a Highway Patrolman without just cause based
upon a complete misinterpretation of [his] actions and statements re: a case of
excessive force.” Id. at 799, 618 S.E.2d at 212. Our Supreme Court noted that
although the plaintiff’s statement was “not inconsistent with the factual allegations
in [the plaintiff’s] subsequently filed whistleblower claim, the language in his petition
in no way states a claim under the Whistleblower Act.” Id. at 799, 618 S.E.2d at 213.
Given the two grounds clearly indicated for his requested OAH hearing and the
conspicuous absence of any allegation in his petition that his dismissal was the result
of retaliation in violation of the Whistleblower Act, the Court held that “the doctrine
of administrative exhaustion does not prevent [the] plaintiff from filing a
whistleblower claim in superior court.” Id.
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Opinion of the Court
In the present case, the record is similarly sparse when it comes to what the
parties actually argued at the OAH level. However, the only basis stated on Hodge’s
petition for a contested case hearing is that he was discharged without just cause.
DOT emphasizes the fact that the ALJ’s Amended Final Order indicates Hodge
subsequently attempted to raise claims for discrimination and retaliation before the
OAH. Yet the Amended Final Order also makes clear that the ALJ dismissed those
claims for lack of subject matter jurisdiction because Hodge failed to timely raise
them within 30 days as required by the North Carolina Administrative Code.
Moreover, by DOT’s logic, our holding in Swain would have blocked Hodge from ever
raising such claims before the OAH because he had already filed a lawsuit in superior
court in December 2008, more than six months before he ever petitioned for
administrative review of his termination in the OAH in July 2009. Although Hodge
eventually took a voluntary dismissal of his superior court action in October 2010, he
did not do so until after his claims before the OAH were dismissed with prejudice.
Thus, despite DOT’s claims to the contrary, because the OAH never acquired subject
matter jurisdiction over Hodge’s claim that he suffered retaliation after engaging in
activity protected under the Whistleblower Act, we conclude that here, as in
Newberne, the doctrine of administrative exhaustion does not bar Hodge’s current
lawsuit.
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Opinion of the Court
B. Hodge’s appeal
Hodge argues that he was disciplined and eventually terminated from
employment with DOT in retaliation for reporting his belief that the 2008
reorganization and creation of the OIG violated the IAA and our Supreme Court’s
holdings in Hodge I & II. Hodge argues further that the trial court erred by granting
DOT’s motion for summary judgment because he established each element of his
prima facie claim under the Whistleblower Act. However, we conclude that
irrespective of whether Hodge satisfied his prima facie burden, this argument fails.
As our Supreme Court has explained,
[s]ummary judgment is appropriate if the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is
no genuine issue as to any material fact and that any party
is entitled to a judgment as a matter of law. The trial court
may not resolve issues of fact and must deny the motion if
there is a genuine issue as to any material fact. Moreover,
all inferences of fact must be drawn against the movant
and in favor of the party opposing the motion. The standard
of review for summary judgment is de novo.
Forbis v. Neal, 361 N.C. 519, 523-24, 649 S.E.2d 382, 385 (2007) (citations, internal
quotation marks, and ellipsis omitted).
North Carolina’s Whistleblower Act, codified at section 126-84 et seq. of our
General Statutes, provides that:
State employees shall be encouraged to report verbally or
in writing to their supervisor, department head, or other
appropriate authority, evidence of activity by a State
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Opinion of the Court
agency or State employee constituting:
(1) A violation of State or federal law, rule or regulation;
(2) Fraud;
(3) Misappropriation of State resources;
(4) Substantial and specific danger to the public health and
safety; or
(5) Gross mismanagement, a gross waste of monies, or
gross abuse of authority.
N.C. Gen. Stat. § 126-84(a) (2015). Section 126-85 states that
[n]o head of any State department, agency or institution or
other State employee exercising supervisory authority
shall discharge, threaten or otherwise discriminate against
a State employee regarding the State employee’s
compensation, terms, conditions, location, or privileges of
employment because the State employee, or a person
acting on behalf of the employee, reports or is about to
report, verbally or in writing, any activity described in
[section] 126-84, unless the State employee knows or has
reason to believe that the report is inaccurate.
N.C. Gen. Stat. § 126-85 (2015). In order to succeed on a claim for retaliatory
termination,
the Act requires plaintiffs to prove, by a preponderance of
the evidence, the following three essential elements: (1)
that the plaintiff engaged in a protected activity,4 (2) that
4 DOT offers several arguments for why Hodge cannot satisfy the first element of his prima facie case,
but none of them is availing. DOT argues that Hodge’s report that the creation of OIG violated the
IAA and our Supreme Court’s holdings in Hodge I & II only amounts to a personal grievance relating
to the terms and conditions of Hodge’s own employment, and thus does not satisfy the first element of
his prima facie case in light of this Court’s holding in Hodge III that the scope of activities protected
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Opinion of the Court
the defendant took adverse action against the plaintiff in
his or her employment, and (3) that there is a causal
connection between the protected activity and the adverse
action taken against the plaintiff.
Newberne, 359 N.C. at 788, 618 S.E.2d at 206. Regarding the third element for
establishing a plaintiff’s prima facie case under the Act,
[t]here are at least three distinct ways for a plaintiff to
establish a causal connection between the protected
activity and the adverse employment action under the
Whistleblower Act. First, a plaintiff may rely on the
employer’s admission that it took adverse action against
the plaintiff solely because of the plaintiff’s protected
activity. . . .
Second, a plaintiff may seek to establish by circumstantial
evidence that the adverse employment action was
retaliatory and that the employer’s proffered explanation
for the action was pretextual. Cases in this category are
commonly referred to as pretext cases. . . .
....
under the Whistleblower Act extends only to “matters affecting general public policy.” 175 N.C. App.
at 117, 622 S.E.2d at 707. While it is undoubtedly true that Hodge’s current lawsuit emerges from the
context of over a decade of acrimonious litigation between the parties over his employment at DOT,
this argument misapprehends the procedural posture and holding of Hodge III. Our holding there was
based not on the fact that Hodge’s allegations of retaliation revolved around an employment-related
grievance, but instead on the fact that, by his own admission, the only relevant, allegedly protected
activity Hodge engaged in was the filing of his lawsuit in Hodge II for reinstatement to his previous
position, which “related only tangentially at best to a potential violation of the North Carolina
Administrative Code.” Id. Here, by contrast, Hodge has alleged that DOT sought to circumvent State
laws and court rulings designed to safeguard public funds and minimize fraud, waste, and abuse in
State government. We disagree that such allegations do not address matters affecting general public
policy. We likewise decline to hold that Hodge cannot satisfy the first element of his prima facie case
based on DOT’s argument that Hodge was wholly mistaken to conclude any violation of the IAA or any
other law had occurred. This argument fails because the relevant inquiry at this stage is not the
substantive accuracy of the violations a plaintiff alleges, but instead whether it can be shown that
adverse employment action was taken against him in retaliation for his allegations. See, e.g.,
Newberne, 359 N.C. at 795-96, 618 S.E.2d at 210-11.
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Opinion of the Court
Third, when the employer claims to have had a good reason
for taking the adverse action but the employee has direct
evidence of a retaliatory motive, a plaintiff may seek to
prove that, even if a legitimate basis for discipline existed,
unlawful retaliation was nonetheless a substantial
causative factor for the adverse action taken.
Id. at 790-91, 618 S.E.2d at 207-08 (citations, internal quotation marks, and certain
brackets omitted). Although he does not so state in his complaint, Hodge contends in
his brief to this Court that the third element of his prima facie case can be established
through circumstantial evidence.5 Therefore, his claim falls within the second
category described in Newberne, which means that to prevail, he must show that
5 Specifically, Hodge relies on this Court’s prior holding in Fatta v. M&M Props. Mgmt., Inc., 221 N.C.
App. 369, 373, 727 S.E.2d 595, 599, disc. review denied, 366 N.C. 407, 735 S.E.2d 182 (2012), and 366
N.C. 601, 743 S.E.2d 182 (2013), to support his assertion that “[i]t is solid law that temporal causality
between the protected activity and the adverse action, standing alone, is sufficient to satisfy the third
[element]” of his prima facie burden. Although Fatta involved an alleged violation of the North
Carolina Retaliatory Employment Discrimination Act, codified at section 95-241(a) of our General
Statutes, rather than a claim under the Whistleblower Act, our State’s appellate courts have
consistently applied the same burden-shifting model derived from federal law for claims arising under
both statutes. See id. at 371-72, 727 S.E.2d at 599. The evidence of temporal proximity found sufficient
to satisfy the plaintiff’s prima facie burden on the element of causation in Fatta was that “[the] plaintiff
demonstrated that he was terminated from employment five days after informing [the] defendant of
his work-related injury and of his intention to file a worker’s compensation claim.” Id. at 373, 727
S.E.2d at 599. Here, by contrast, Hodge purports to have reported a violation of State law a minimum
of several months before any adverse actions were ever taken against him. However, we need not
determine whether Hodge’s argument extends beyond the point of what qualifies as “temporally
proximate,” because Fatta also makes clear that the burden-shifting inquiry does not end merely
because a plaintiff has satisfied his prima facie case. Indeed, in Fatta, this Court ultimately upheld
the trial court’s decision granting summary judgment in favor of the defendant-employer based on our
conclusion that the plaintiff failed to offer any evidence other than “conclusory allegations, improbable
inferences and unsupported speculation” to show that the legitimate nondiscriminatory reasons
offered by the defendant-employer for the adverse actions taken against the plaintiff were merely
pretextual. See id. at 375, 727 S.E.2d at 601 (citation omitted).
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Opinion of the Court
DOT’s proffered reasons for taking adverse actions against him were merely
pretextual. As our Supreme Court explained in Newberne,
[pretext cases] are governed by the burden-shifting proof
scheme developed by the United States Supreme Court in
McDonnell Douglas Corp. v. Green and Texas Department
of Community Affairs v. Burdine.
Under the McDonnell Douglas/Burdine proof scheme, once
a plaintiff establishes a prima facie case of unlawful
retaliation, the burden shifts to the defendant to articulate
a lawful reason for the employment action at issue. If the
defendant meets this burden of production, the burden
shifts back to the plaintiff to demonstrate that the
defendant’s proffered explanation is pretextual. The
ultimate burden of persuasion rests at all times with the
plaintiff.
Id. (citations omitted).
As noted supra, in the present case, Hodge argues that the trial court’s order
granting summary judgment in favor of DOT must be reversed because he has
established each element of his prima facie case. However, this Court recently
rejected a virtually identical argument in Manickavasagar v. N.C. Dep’t of Pub.
Safety, __ N.C. App. __, 767 S.E.2d 652 (2014), where we held that the trial court did
not err in granting the defendant State agency’s motion for summary judgment
against the plaintiff’s claim under the Whistleblower Act that he had been terminated
in retaliation for reporting fraud, misappropriation of State resources, and gross
mismanagement. See id. at __, 767 S.E.2d at 660. Although the plaintiff in
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Opinion of the Court
Manickavasagar insisted this Court should reverse the trial court’s decision because
he had satisfied each element of his prima facie case, we explained that
[e]ven if we were to assume arguendo that [the p]laintiff
has established a prima facie claim, his suit against [the
d]efendants was still properly disposed of through
summary judgment. [The d]efendants have articulated
some legitimate, non-retaliatory reasons for terminating
[the p]laintiff’s employment . . . , specifically his reported
clashes with . . . personnel and ongoing refusal to follow . . .
protocol. Therefore, under the McDonnell Douglas/Burdine
burden-shifting proof scheme, in order to survive summary
judgment, [the p]laintiff would have to raise a factual issue
regarding whether these proffered reasons for firing [the
p]laintiff were pretextual. To raise a factual issue
regarding pretext, the plaintiff’s evidence must go beyond
that which was necessary to make a prima facie showing
by pointing to specific, non-speculative facts which
discredit the defendant’s non-retaliatory motive.
Id. at __, 767 S.E.2d at 659 (citation and internal quotation marks omitted). Because
the plaintiff failed to provide any “express argument that the [d]efendants’ stated
reasons for firing him were pretextual,” we affirmed the trial court’s decision. Id.
Similarly here, even assuming arguendo that Hodge has satisfied his prima
facie burden, Newberne and Manickavasagar make clear that Hodge cannot prevail
unless he is able to demonstrate that DOT’s stated reasons for taking adverse
employment actions against him were merely a pretext for unlawful retaliation.
Setting aside the substantive flaws in Hodge’s broader legal argument6 to focus on
6Apart from Hodge’s own self-serving speculation, our review of the record discloses no evidence
whatsoever to support the premise implicit in his argument that DOT’s 2008 reorganization and
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Opinion of the Court
the second prong of the burden-shifting approach our Supreme Court outlined in
Newberne, it is clear from the record before us that throughout this litigation DOT
has articulated several legitimate, non-retaliatory reasons for disciplining and
eventually terminating Hodge—specifically, Hodge’s prolonged, consistent, and
extensively documented pattern of insubordinately refusing to complete his work
assignments after DOT’s 2008 reorganization. Thus, as we explained in
Manickavasagar, “under the McDonnell Douglas/Burdine burden-shifting proof
scheme, in order to survive summary judgment, [Hodge] would have to raise a factual
issue regarding whether these proffered reasons for firing [him] were pretextual,”
which means Hodge must produce evidence “beyond that which was necessary to
make a prima facie showing by pointing to specific, non-speculative facts which
discredit [DOT’s] non-retaliatory motive.” Id. at __, 767 S.E.2d at 659 (citation
omitted).
creation of the OIG were engineered primarily as an attempt to circumvent our Supreme Court’s
holdings in Hodge I & II in order to “get back at” Hodge. Indeed, the evidence in the record indicates
that one of the motivating factors behind DOT’s decision to hire McKinsey was the deficient
performance of Hodge’s own IAS unit as described by the State Auditor. Moreover, we note that the
alleged violation of the IAA that Hodge complains of was unanimously approved by the Council of
Internal Auditing created by the IAA’s enactment to enforce its provisions, and—despite Hodge’s
protestations to the contrary—did not have any effect on Hodge’s reporting level, insofar as both before
and after DOT’s 2008 reorganization and creation of the OIG, Hodge remained two levels removed
from the agency Secretary. Hodge’s complaint that the IAA required that he personally should have
been named DOT’s Director of Internal Auditing is similarly misplaced, given that it depends upon
accepting Hodge’s related and wholly unpersuasive argument that he can never be removed from his
position as Chief of IAS, and DOT is forever prohibited from reorganizing its auditing functions in a
way that would do so, simply because our Supreme Court previously concluded that such position
cannot properly be classified as policymaking exempt and that the North Carolina Administrative
Code requires that a State employee who has been improperly discharged and then reinstated must
be returned to the “same or similar” position.
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Opinion of the Court
On this point, Hodge makes no express argument whatsoever, and our review
of the record reveals no competent evidence to support any finding of pretext. Indeed,
Hodge’s deposition testimony and affidavit in opposition to summary judgment
provide little more than conclusory allegations, improbable inferences, and
unsupported speculation, rather than the sort of specific, non-speculative facts
sufficient to show that the reasons DOT articulated for disciplining and terminating
him from employment were merely pretextual. Given Hodge’s failure to articulate
any argument on the third prong of the burden-shifting analysis—and, in light of our
Supreme Court’s admonition that “[i]t is not the role of the appellate courts . . . to
create an appeal for an appellant,” Viar v. N.C. Dept. of Transp., 359 N.C. 400, 402,
610 S.E.2d 360, 361, reh’g denied, 359 N.C. 643, 617 S.E.2d 662 (2005)—we hold that
the trial court did not err in granting DOT’s motion for summary judgment.
Accordingly, the trial court’s order is
AFFIRMED.
Judges HUNTER, JR., and INMAN concur.
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