COA upholds judgment for university against former employees

The Indiana Court of Appeals affirmed the denial of two former Oakland City University employees’ claims against the school and its president, concluding they were not fraudulently induced into their employment or fired in retaliation for uncovering misuse of public funds. 

While employed at Oakland City University as its vice president for advancement and vice president for administration and finance, respectively, Grady Jones and Susan Lockwood found evidence of misappropriation of endowment funds among OCU officers.  

Among their discoveries, Jones and Lockwood found that OCU president Ray Barber had created an entity called Blue Oak, LLC, in collaboration with former vice president Robert Yeager for the purpose of controlling funds provided to OCU by the U.S. Department of Agriculture and Indiana Regional Cities Initiative. Neither Barber nor Yeager informed the OCU Board of Trustees of the creation of Blue Oak.

It was also uncovered that more than $25,000 was designated in the proposed budget to a local law firm for expenses associated with Blue Oak, and that Yeager was to be compensated from OCU funds associated with a capital project, which constitutes misuse of public resources by the terms of the award.

Following the presentation of their discoveries to the OCU Board of Trustees, Jones and Lockwood were fired.

Both ultimately sued OCU and Barber, alleging they were retaliatorily discharged, fraudulently induced into the execution of their OCU employee agreements and that they were at-will employees and therefore protected against dismissal without cause based on a theory of promissory estoppel and/or a theory of “independent consideration.”

A trial court rejected their claims and instead granted OCU and Barber’s joint motion for judgment on the pleadings under Indiana Trial Rule 12(C) in light of the “clear and unambiguous” “language of the contract[s],” especially “the integration clause[s].”

On appeal, Jones and Lockwood argued that the trial court erred in its decision, but the Indiana Court of Appeals affirmed in Grady B. Jones and Susan R. Lockwood v. Oakland City University Founded by General Baptists, Inc. and Ray G. Barber, 18A-PL-2994.

The appellate court first addressed Jones and Lockwood’s allegations that OCU and Barber fraudulently induced them into executing their employment agreements, siding with the latter that the plaintiffs failed to plead a misrepresentation of a past or existing fact.

Relying on Kopis v. Savage, 498 N.E.2d 1266, 1272 (Ind. Ct. App. 1986), the appellate court found that the representations of OCU’s officers to Jones and Lockwood during their negotiations for employment “were not misrepresentations of existing fact[] but were promises of future conduct.”

“That is, they were promises as to what the Employment Agreements would say when those agreements were eventually reduced to writing,” Judge Edward Najam wrote for the unanimous panel. “That the Employment Agreements ended up saying something different might go to the parties’ meeting of the minds in the formation of a valid contract, but it does not go to a tort claim for fraud.”

It similarly rejected Jones and Lockwood’s assertion that they were discharged in retaliation for reporting the misuse of public funds by OCU or its officers, noting that the plaintiffs’ reliance on Indiana Code Section 22-5-3-3 (2018) could not stand on the argument that they were not required to make a report in writing in order to remain protected under the statute.

“The statute’s use of ‘may’ means that an employee ‘may’ report misuse but is not legally compelled to do so. However, if the employee chooses to make a report, he or she must do so ‘in writing’ to be protected under the statute,” Najam wrote. “As Jones and Lockwood did not make their report in writing, the trial court properly entered judgment on the pleadings for OCU and Barber on the retaliatory discharge count.”

Lastly, the appellate court determined Jones and Lockwood were not at-will employees as they contended.

Rather, it concluded that while the employment agreements were contracts for definite terms, the termination clauses also reserved OCU’s right to terminate Jones’ and Lockwood’s employment before the end of those terms under the conditions provided in those clauses.