Wrongful termination case against Enterprise Rent-A-Car going back

St. Louis Daily Record & St. Louis Countian, Apr 14, 2005 by Emily Umbright

A former Enterprise Rent-A-Car executive might sleep better knowing he made a submissible case illustrating wrongful termination for refusing to violate securities regulations and public policy, but because he did not point to the law the leasing company allegedly violated, he will have to go back to court.

This, the Missouri Court of Appeals, Eastern District, held Tuesday in a partially reversed decision that affirmed the St. Louis County trial court's granting of Enterprise's motion for judgment notwithstanding the $4,000,000 verdict the jury granted in favor of Thomas P. Dunn. The appellate court denied the lower court's decision to grant Enterprise's motion for a directed verdict.

Dunn should not be denied protection under the public policy exception to the employment at-will doctrine for refusing to perform an illegal act or act contrary to a clear mandate of public policy simply because Enterprise decided to postpone IPO and not complete its alleged unlawful act, Judge Booker T. Shaw wrote for the court.

Viewing the evidence in the light most favorable to Dunn, we find Dunn presented sufficient evidence at trial that the conduct he was asked to engage in with respect to Enterprise's financial statements in preparation for the IPO would have been in violation of federal securities regulations and a clear mandate of public policy as enunciated in those regulations, Shaw continued.

Enterprise hired Dunn in 1986 as an accountant, and in 1993, he became corporate comptroller, which gained him vice president-level status a year later. In this capacity, he was responsible for certifying the company's financial statements were prepared in accordance with generally accepted accounting principles.

In May 1998, the company's chief financial officer, John O'Connell, instructed Dunn to prepare the company for its initial public offering. Dunn discovered senior management received high cash compensation, which would not allow the company to go public, so he advised the company substitute stock options for cash compensation.

The company followed his advice, but when he expressed concerns about the financial statements pertaining to customer surcharges and billing for damaged cars, the company did not make any changes.

Dunn also found the 2 percent depreciation rate of the vehicles was too high for a public company. Hence, he recommended the company lower its depreciation rate to 1.5 percent, which would bring it into compliance with GAAP, but the company declined to do so. It also declined to follow his suggestion of reporting its car sales as a gross revenue figure and separate line of business for Securities and Exchange Commission purposes.

Following a warning at work, the company placed Dunn on probation. Dunn also testified that after competing this probationary period [Enterprise President and CEO] Andy Taylor told O'Connell that Dunn could stay with Enterprise 'as long as [he] behaved,' the opinion stated.

Once Dunn returned to work, he continued to push the company to gross up its retail car sales to show the revenue generated from the sales as well as the sales' costs.

As a private company, Enterprise's financial statements disclosed only the net revenues generated from retail car sales, and not the gross revenues generated from those sales, Shaw explained. This permitted Enterprise the potential to reflect a higher level of profit on its statements.

Subsequently, O'Connell told Dunn management did not want to do this and asked Dunn to look for ways to avoid lowering the company's vehicle depreciation rate.

When it came time to fill out Form S-1 with the SEC, Dunn would have to sign the document attesting to the fact that the financial statements were in accordance with GAAP. Then, the company's auditor, Ernst & Young, would use those statements as a basis for its opinion. Enterprise set the Form S-I completion for October 2000.

While preparing the SEC form, Dunn sent out a memo known as the white papers that documented his recommendations pertaining to the vehicle depreciation rate and gross sales reports. He later testified someone rewrote the memo changing his recommendations without his knowledge or approval.

In November 2000, O'Connell released a memo stating the depreciation rate would change from 2 percent to 1.7 percent, but Dunn maintained the switch was still not in accordance with the GAAP. Nevertheless, O'Connell set a spring 2001 target for moving the IPO forward.

In January 2001, Enterprise terminated Dunn, and Dunn filed a wrongful discharge claim in St. Louis County in May. The case went to trial, and following Dunn's arguments, the trial court granted Enterprise's motions for directed verdicts on Dunn's claims of wrongful termination for whistle blowing and refusing to commit an unlawful act.

Dunn's whistle-blowing claim pertaining to Enterprise's alleged unlawful conduct proceeded to a jury, which awarded him $4,000,000. That judgment, however, did not stick as the trial court granted Enterprise's motions for judgment notwithstanding the verdict and a new trial.