GATES v LIFE OF MONTANA INS CO
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No. 82-468 I N THE SUPREME COURT O THE STATE O M N A A F F O T N 1983 MARLENE S. GATES, P l a i n t i f f and A p p e l l a n t , -vsLIFE O MONTANA INSURANCE COMPANY, F Defendant and Respondent. Appeal from: District Court of t h e Eighteenth J u d i c i a l District, I n and f o r t h e County o f G a l l a t i n , The H o n o r a b l e J a c k D. S h a n s t r o m , J u d g e p r e s i d i n g . C o u n s e l o f Record: For Appellant: Wellcome & F r o s t ; Page Wellcome a r g u e d , Rozeman, Montana For Respondent: Landoe, Brown, P l a n a l p , Komrners & L i n e b e r g e r ; Gene I . Brown a r g u e d , Bozeman, Montana Submitted: Decided: Filed: Abr"G 5 1983 Clerk - J u n e 6 , 1983 August 5 , 1983 Mr. Justice Frank B. Morrison, Jr. delivered the Opinion of the Court. Plaintiff brought this action to recover damages for breach of implicit the in covenant of an at-will, good faith employment and fair dealing contract. Summary judgment for defendant was reversed in Gates v. Montana (1982), 16. Mont . , 638 P.2d 1063, Life of 39 St.Rep. The case was remanded for trial and resulted in a jury verdict in favor of plaintiff for $1,891 in compensatory damages and $50,000 in punitive damages. The trial court entered judgment for plaintiff on compensatory damages but entered judgment notwithstanding defendant on punitive damages. granting of the judgment Appellant respondent on commenced the verdict in favor of Plaintiff appeals from the n.0.v. employment as a cashier with July 29, 1976, under an oral contract of indefinite duration. On October 19, 1979, she was called to meet with her supervisor, Roger Syverson, and without prior warning she was given the option of resigning or being fired. She testified that while in a distraught condition and under duress she signed a letter of resignation which was handed to her by Syverson. Appellant stated that she signed the letter of resignation because she thought it would be better for her record and because Syverson told her he would give her a letter of recommendation so that she could be reemployed. Appellant went home and discussed the situation with her husband who advised her to retrieve the letter of resignation and inform her supervisor that she was not resigning. Appellant stated that she immediately called Syverson and demanded the letter be returned and that he promised to do so. Syverson testified that she only requested a photocopy of the letter. Respondent's discharged for insubordination. witnesses testified carelessness, appellant was incompetency and In the first appeal we held there was a submissible jury issue on breach of the implied covenant of fair dealing in that appellant was discharged without warning and an opportunity for hearing. The jury here found that this covenant was indeed breached and awarded damages. On appeal, we are concerned with two issues. First, can punitive damages be awarded for breach of the covenant to deal fairly? Secondly, does the evidence here create a jury issue on punitive damages? In ~ipinski v. Title Insurance Co. (19821, Mont . , 655 P.2d 970, 39 St.Rep. 2283, this Court held that punitive damages could be assessed for bad faith insurance practices in absence of a statutory violation. We said in Lipinski: "Should there be any doubt, we now expressly hold that insurance companies have a duty to act in good faith with their insureds, and that this duty exists independent of the insurance contract and independent of statute. Any statements in our cases, to the extent they may be or appear to be in conflict with this holding, are expressly overruled." Likewise, punitive damages may be assessed for breach of the obligation owed to deal fairly with an employee, if the provisions of section 27-1-221, MCA, are satisfied. That section provides: "In anv action for a breach of an obliaation not arisini from contract where the defendant has been guilty of oppression, fraud, or malice, actual or presumed, the jury, in addition to the actual damages, may give damages for the sake of example and by way of punishing the defendant." (emphasis added) An action for breach of an implied covenant of fair dealing, at first blush, may sound both in contract and tort. The duty arises out of the employment relationship yet the duty exists apart from, and in addition to, any terms agreed to by the parties. the duty to In this respect, the duty is much like act in good See Lipinski v. Title Ins. Co., contractual obligations. supra. faith in discharging insurance The duty is imposed by operation of law and therefore its breach should find a remedy in tort. Mfg. C0.v. Beckette 505. Flint and Walling (1906), 167 Ind. 491, 498, 79 N.E. 503, Also see W. Prosser, Law of Torts (4th ed. 1971), 592 at 617-618. We hold that section 27-1-221, MCA, only exempts breach of contract actions from its provisions. Breach of the duty owed to deal fairly and in good faith in the employment relationship is a tort for which punitive damages can be recovered if defendant's conduct is sufficiently culpable. We must examine the record in this case to determine whether there is evidence which would permit a jury to find malice, oppression or fraud attributable to the defendant. Motions for judgment notwithstanding the verdict are only to be granted when there is a complete absence of any credible evidence to support the verdict. All evidence and all inferences drawn therefrom must be considered in the light most favorable to this appellant. Company (1983), 23. Mont . Barmeyer v. Montana Power , 657 P.2d 594, 40 St-Rep. "The courts will exercise the greatest self-restraint in interfering with the constitutionally mandated processes of jury decision." Barmeyer at 40 St.Rep. Montana National Guard (1982), Mont 25; Jacques vs. . , 649 P.2d 1319, 1325-26, 39 St.Rep. 1565, 1573-74. With these rules in mind we review the testimony upon which appellant must necessarily rely in her contention that a jury issue was created on the matter of punitive damages. We have divided the testimony which was offered to show that a letter of resignation was coerced by misrepresentation. Secondly, we refer to that testimony bearing upon the issue of whether appellant's supervisor agreed to return the resignation letter and then subsequently failed to do so. With resepect appellant's to tendering the a conversation resignation surrounding letter, appellant testified as follows: "Q. And did he point out to you that he would give you this letter of recommendation? "A. Yes, he did, and he even stated that I was a good worker, he had nothing against me and that he would give me a letter of recommendation. "Q. And did you understand by that that he would give you a positive letter of recommendation? "A. Yes. "Q. Not merely as he has said a statement that you had worked for two or three years? "A. That's right." Syverson, appellant's supervisor, testified that he offered to give appellant a letter of recommendation if she resigned. However, he testified that he only planned to give her a letter which would state that appellant was employed by Life of Montana Insurance Company; he never intended to provide appellant with a favorable letter of recommendation. There was evidence from which the jury might infer that appellant understood she was to receive a favorable letter of recommendation and that Syverson allowed her to resign on this basis. By way of deposition, Syverson testified: "Q. And then I asked you finally, "Question: Don't you think she understood when you said, 'We will give you a letter of recommendation,' that you would give her a favorable letter or recommendation to a subsequent employer? And your answer to that was what? "A. At line 15, Answer: I believe so." From the foregoing the jury could have found that (1) Syverson acting for defendant told appellant if she resigned she would receive a favorable letter of recommendation in order to obtain reasonably subsequent expected to receive recommendation to assist her appellant employment; (2) a favorable letter of in gaining reemployment; (3) appellant relied upon this representation and tendered her resignation; (4) Syverson never intended to give a favorable letter of recommendation to appellant. This evidence was sufficient for the jury to find fraud, oppression or malice. Additional evidence supports appellant's position. After appellant returned home her husband advised her to demand return of the resignation letter. Appellant testified she immediately called Syverson and discussed the resignation letter. "Q. Her testimony follows: And what did you say? "A. I told him that I had discussed this with my husband and that it was my prerogative that I could ask for my letter of resignation back because I had no intentions of resigning. "Q. And what did Mr. Syverson say to you? "A. He indicated to me that he wanted to keep the letter over the weekend and that on Monday he would mail it to me. "Q. He would mail you the letter of resignation? "A. He would mail me the original copy of the letter of resignation. "Q. Now, when we are talking here, original and copy two different things? are "A. On the original letter? "Q. The original letter that you had signed? "A. the Yes. "Q. Did you make clear to%him that that's what you wanted back? "A. Yes, I did. "Q. Because you said you didn't intend to resign? That's right." Appellant testified that Syverson promised to send her the letter of corroborated by resignation. Appellant's her husband who testimony was testified that he heard appellant, in a telephone conversation with Syverson, demand return of the resignation letter. returned. The letter was never Syverson's position at trial was that he only agreed to give appellant a copy of the letter. From this evidence appellant demanded the return of jury could infer that (1) the resignation letter; (2) Syverson acting on behalf of respondent said that the letter would be returned; (3) Syverson never intended to return the resignation letter to appellant. This evidence, when considered with the testimony surrounding the giving of the resignation letter, supports an award of punitive damages. Respondent argues that it should not be liable for punitive damages for terminating appellant without warning because at the time of appellant's termination there was an absolute right to fire Respondent asserts that appellant in the first without new any type of legal rights were appeal of this case process. given and to that respondent could not have known of the duty it owed appellant at the time of her termination. Respondent is not being assessed punitive damages for failing to provide a warning prior to the firing. Rather respondent's conduct in obtaining the letter of resignation and refusing appellant's demand for return forms the basis for a jury finding of fraud, oppression or malice. An employer stands to gain by an employee's resignation and such gain may be at the employee's expense. rather than discharge, immediately becoming benefits. may protect an Resignation, employer from liable for unemployment compensation Furthermore, the employer may, by obtaining a letter of resignation, be insulating itself from a claim of wrongful discharge. The courts must vigilantly assure that employers, as well as employees, are treated fairly. The sting of punitive damages will only be sanctioned where there is evidence that the tort feasor's conduct rose to a level of oppression, fraud or malice. Here we have a close case. However, when the evidence is viewed in a light most favorable to the employee, there is sufficient evidence for a jury to find that employer's conduct rose to the requisite level of culpability. We reverse the granting of judgment notwithstanding the verdict and remand to the trial court with directions to reinstate the award of punitive damages. We concur: 2*&$#(&/q,&gq Chief Jus ice Justices ! Mr. J u s t i c e L . C. G u l b r a n d s o n d i s s e n t i n g : I respectfully dissent. I would a f f i r m t h e D i s t r i c t C o u r t s e t t i n g a s i d e t h e award of p u n i t i v e damages. I n t h e f i r s t a p p e a l of t h i s c a s e , G a t e s v. ( 1 9 8 2 ) , 638 P.2d 1 0 6 3 , 39 S t . R e p . L i f e of Montana, 16, t h i s Court s t a t e d : "The c i r c u m s t a n c e s of t h i s c a s e a r e t h a t t h e e m p l o y e e e n t e r e d i n t o a n employment c o n t r a c t t e r m i n a b l e a t t h e w i l l of e i t h e r p a r t y a t any time. The e m p l o y e r l a t e r p r o m u l g a t e d a handbook of p e r s o n n e l p o l i c i e s e s t a b l i s h i n g cert a i n procedures with regard t o terminations. The e m p l o y e r need n o t h a v e d o n e s o , b u t p r e sumably sought t o s e c u r e an o r d e r l y , cooperat i v e and l o y a l work f o r c e by e s t a b l i s h i n g uniform p o l i c i e s . The employee h a v i n g f a i t h t h a t s h e would be t r e a t e d f a i r l y , t h e n devel o p e d t h e p e a c e of mind a s s o c i a t e d w i t h j o b security. I f t h e employer h a s f a i l e d t o f o l l o w i t s own p o l i c i e s , t h e p e a c e of mind of i t s e m p l o y e e s i s s h a t t e r e d and a n i n j u s t i c e i s done. "We h o l d t h a t a c o v e n a n t of good f a i t h and f a i r d e a l i n g was i m p l i e d i n t h e employment c o n t r a c t of t h e a p p e l l a n t . There remains a g e n u i n e i s s u e of m a t e r i a l f a c t which p r e c l u d e s a summary j u d g m e n t , i . e . w h e t h e r t h e r e s p o n dent failed t o afford appellant the process r e q u i r e d and i f s o , w h e t h e r t h e r e s p o n d e n t t h e r e b y b r e a c h e d t h e c o v e n a n t of good f a i t h and f a i r d e a l i n g . "As t o a l l o t h e r c l a i m s a g a i n s t t h e r e s p o n d e n t , h o w e v e r , summary judgment was p r o p e r l y entered. The District Court correctly concluded t h a t a p p e l l a n t ' s claim i n t o r t f o r wrongful discharge i s u n s u p p o r t e d by any s h o w i n g of a v i o l a t i o n of p u b l i c p o l i c y a s r e q u i r e d u n d e r K e n e a l l y v. O r g a i n , s u p r a . " G a t e s ' c l a i m f o r i n t e n t i o n a l i n £ l i c t i o n of emotional d i s t r e s s must a l s o f a i l . The u n c o n t r a d i c t e d f a c t s show t h a t s h e was ' r a t h e r d i s t u r b e d ' and ' k i n d of i n s h o c k . ' Under any known s t a n d a r d t h e s e a l l e g a t i o n s a r e i n s u f f i c i e n t t o e n t i t l e her t o recover. K e l l y v. Lowney & W i l l i a m s , I n c . ( 1 9 4 2 ) , 1 1 3 Mont. 3 8 5 , 1 2 6 P.2d 486; H e l t o n v. R e s e r v e L i f e I n s u r a n c e Co. (D.Mont., 1 9 7 5 ) , 399 F.Supp. 1 3 2 2 . " 638 P.2d a t 1 0 6 7 , 39 S t . R e p . a t 20-21. The majority, in its valiant and successful c l a s s i f y t h e c o n d u c t of t h e d e f e n d a n t a s t o r t u o u s , effort states: "Respondent is n o t b e i n g a s s e s s e d p u n i t i v e damages f o r f a i l i n g t o p r o v i d e a w a r n i n g p r i o r t o the firing. R a t h e r , r e s p o n d e n t ' s conduct i n o b t a i n i n g t h e l e t t e r of r e s i g n a t i o n and r e f u s i n g a p p e l l a n t ' s demand f o r r e t u r n , f o r m s to the basis for a jury oppression, or malice." finding I n o t e t h a t jury i n s t r u c t i o n twenty-three of fraud, reads: "You are instructed that the letter of r e s i g n a t i o n d a t e d O c t o b e r 1 9 , 1 9 7 9 , became t h e p r o p e r t y of d e f e n d a n t L i f e of Montana, and d e f e n d a n t L i f e of Montana was u n d e r no l e g a l o b l i g a t i o n t o r e t u r n t h e l e t t e r of r e s i g n a t i o n t o the plaintiff. " T h a t was t h e o n l y i n s t r u c t i o n g i v e n t h e j u r y where t h e l e t t e r of r e s i g n a t i o n was m e n t i o n e d . The c a s e was o b v i o u s l y s u b m i t t e d and a r g u e d by p l a i n t i f f t o the jury on the basis mination without notice. that liability also resulted from ter- ( S e e i n s t r u c t i o n s no. 1 7 , 1 9 , and 2 1 , w h i c h g e n e r a l l y s t a t e t h a t l i a b i l i t y c a n a r i s e from f a i l u r e t o f o l l o w e s t a b l i s h e d company p o l i c y . ) I f t h e j u r y f o l l o w e d i n s t r u c t i o n no. 2 3 ( n o d u t y of d e f e n d a n t t o r e t u r n t h e l e t t e r of r e s i g n a t i o n ) and i f , a s t h e m a j o r i t y s t a tes, t h e respondent is n o t b e i n g a s s e s s e d p u n i t i v e damages f o r f a i l i n g t o p r o v i d e a w a r n i n g p r i o r t o t h e f i r i n g , t h e n t h e award m u s t be b a s e d on t h e d e f e n d a n t ' s c o n d u c t i n o b t a i n i n g t h e l e t t e r of r e s i g n a t i o n . In that regard the plaintiff Marlene Gates testified follows: "Q. Have you e v e r c o n s i d e r e d why you would be g i v e n t h a t o p t i o n , t h e r e s i g n i n g o r being fired? A. No. "Q. Well, i f he wanted t o g e t r i d of you, i t would have b e e n s i m p l e enough t o s a y , ' Y o u ' r e f i r e d , ' wouldn't i t ? A. Yes. "Q. A. B u t he a l l o w e d you t o r e s i g n . Yes. "Q. And d i d you t h i n k t h a t o v e r ? Did you t h i n k o v e r t h a t d e c i s i o n of w h e t h e r you s h o u l d r e s i g n o r be f i r e d ? A. Yes. How l o n g d i d you t h i n k i t o v e r ? Well, I s a t t h e r e I s u p p o s e i t was minut e s , you know. I t was a f t e r f i v e o ' c l o c k . I was w a n t i n g t o g e t home and I ' m s u r e he was w a n t i n g t o g e t o u t of t h e o f f i c e , and s e v e r a l t h i n g s went t h r o u g h my mind, and I had t o make a d e c i s i o n one way o r t h e o t h e r . "Q. A. as "n. You d e c i d e d t o r e s i g n . A. That's right. Why was t h a t ? B e c a u s e I t h o u g h t it would l o o k b e t t e r f o r my r e c o r d , and I ' m s u r e i t w o u l d n ' t be v e r y good f o r t h e i r r e c o r d t o be known t o be f i r i n g people. "Q. A. "Q. You were l o o k f o r you? A. Yes. concerned about how it would "Q. I f you s i g n e d t h e l e t t e r of r e s i g n a t i o n , you c o u l d t e l l p e o p l e , ' I r e s i g n e d ,' and you w o u l d n ' t h a v e t o s a y , ' I was f i r e d , ' r i g h t ? A. Right. "Q. And a l s o , when you went o u t t o seek a n o t h e r j o b , you w o u l d n ' t have t o s a y you w e r e f i r e d from y o u r l a s t o n e . You c o u l d s a y you resigned A. That's right. . "Q. So t h a t was done a s a b e n e f i t t o you, that right? A. Right. is "Q. Now, when you went i n t o t h i s m e e t i n g w i t h Roger S y v e r s o n when you w e r e t e r m i n a t e d , was t h e r e any l o u d t a l k o r l o u d l a n g u a g e ? A. No, t h e r e was n o t . "Q. Was the businesslike? A. Yes. conversation calm A. Were you n e r v o u s ? Yes. "Q. A. a nd Was Roger n e r v o u s ? H a p p e a r e d t o be v e r y n e r v o u s , y e s . e "Q. "Q. Would you t e l l u s which of you w e r e t h e most nervous? A. I d i d n ' t weigh i t o u t , no. "Q. A t l e a s t you Mr. S y v e r s o n was situation? A. Yes. "Q. A. "Q. A. could t e l l obviously t h a t n e r v o u s a b o u t t h i s whole Did he i n t i m i d a t e you? No. Did you i n t i m i d a t e him? I don't believe I did. "Q. Now, when you were a s k e d t o make a d e c i s i o n w h e t h e r you wanted t o r e s i g n o r be f i r e d , you t h o u g h t t h a t o v e r p r e t t y c l o s e l y ? A. Yes, I d i d . "Q. And y o u r d e c i s i o n was t h a t you p r e f e r r e d t o resign? A. Yes. "Q. And you h a v e , a t t h a t t i m e you f e l t t h a t was a good d e c i s i o n ? A. W e l l , it was t h e b e t t e r d e c i s i o n , y e s . "Q. And i t was b a s e d on y o u r d e t e r m i n a t i o n t h a t w i t h t h e l e t t e r of r e s i g n a t i o n , you would b e b e t t e r a b l e t o g e t a j o b , p l u s i t would be e a s i e r t o h a n d l e q u e s t i o n s of f e l l o w e m p l o y e e s and f r i e n d s ? A. Yes. "Q. T h o s e w e r e y o u r r e a s o n s l e t t e r of r e s i g n a t i o n ? A. Yes. for signing the "Q. And when you l e f t t h e o f f i c e t h a t a f t e r n o o n , O c t o b e r 1 9 , 1 9 7 9 , you had c o n c l u d e d t h a t t h a t was t h e b e s t t h i n g t o do. A. Yes. " The m a j o r i t y o p i n i o n s t a t e s : " t h e s t i n g of p u n i t i v e damages w i l l o n l y be s a n c t i o n e d w h e r e t h e r e is e v i d e n c e t h a t t h e t o r t feasor's conduct rose to a level of oppression, fraud, or malice." I do not the trial did damage. case, f i n d t h a t o p p r e s s i v e l e v e l of judge when setting aside c o n d u c t and n e i t h e r t h e award for punitive H i s memorandum of S e p t e m b e r 2 8 , 1 9 8 2 , s t a t e d : I find "in this no e v i d e n c e t h a t t h e d e f e n d a n t k n o w i n g l y v i o l a t e d any duty t o the p l a i n t i f f . d a n t acted maliciously, T h e r e is no e v i d e n c e t h a t t h e d e f e n - intentionally, or willfully, and t h e r e - f o r e t h e c l a i m f o r p u n i t i v e damages m u s t f a i l . " This Court, i n the f i r s t Gates opinion, c o r r e c t l y identified t h e t h r e s h o l d q u e s t i o n of w h e t h e r t h e e m p l o y e e ' s r e s i g n a t i o n was voluntary. Unfortunately, t h e j u r y was n o t i n s t r u c t e d on t h i s p o i n t and no s p e c i a l v e r d i c t was r e q u e s t e d . In the f i r s t Gates Western E l e c t r i c den., the Company ( 1 9 7 6 ) , 424 U.S. court decision, decided the the Court cited Molinar v. (1st C i r . 1 9 7 5 ) , 5 2 5 F.2d 521, 9 7 8 , 96 S . C t . 1 4 8 5 , 47 L.Ed.2d 748, where applicable rule that "an cert. employee who v o l u n t a r i l y r e s i g n s c a n n o t m a i n t a i n a c a u s e of a c t i o n f o r wrongf u l discharge." The c o u r t t h e r e s t a t e d : d i f f i c u l t i s s u e is whether M o l i n a r ' s l e t t e r of r e s i g n a t i o n r a i s e d a j u r y i s s u e of voluntariness. M o l i n a r a r g u e s t h a t he was i n d u c e d t o r e s i g n by t h e f r a u d u l e n t p r o m i s e t h a t i f he d i d s o he would r e c e i v e good recommendations. "A more . . . " [where] [a] voluntary r e s i g n a t i o n bars a s u i t f o r wrongful discharge, t h e following s t a n d a r d h a s b e e n l a i d down: " ' E v e n where t h e employee is t o l d t h a t he m u s t c h o o s e b e t w e e n r e s i g n a t i o n and s e p a r a t i o n , t h e subsequent choice of resignation is not c o e r c e d u n l e s s t h e employee c a n show t h a t h i s s u p e r i o r knew o r b e l i e v e d t h a t t h e r e a s o n s f o r the proposed separation could not be 1 11 substantiated. ... "Cosby v. U n i t e d S t a t e s , [ ( I 9 6 9 C t . C l . ) , 417 F.2d 13451 a t 1 3 5 5 . T h i s s t a n d a r d , which w e t h i n k New York would a d o p t , l i m i t s a c l a i m of d u r e s s t o r e s i g n a t i o n s e x t o r t e d a s a cover f o r w r o n g d o i n g , and r e c o g n i z e s t h a t r e s i g n a t i o n s i n l i e u of d i s c h a r g e may i n many o t h e r i n s t a n c e s r e f l e c t a m u t u a l l y b e n e f i c i a l , good f a i t h c o m p o s i t i o n b e t w e e n a n employer and employee h a v i n g d i f f e r e n t v i e w s a s t o what e a c h owes t o t h e o t h e r . Thus, h e r e , f o r M o l i n a r ' s r e s i g n a t i o n t o be t r e a t e d a s c o e r c e d and l e g a l l y i n e f f e c t i v e , i t m u s t be shown n o t o n l y t h a t t h e p r o j e c t e d d i s c h a r g e would amount t o a l e g a l b r e a c h of c o n t r a c t b u t t h a t t h e r e was bad f a i t h , i n t h a t W e s t e r n E l e c t r i c knew o r b e l i e v e d t h a t t h e d i s c h a r g e c o u l d n o t be substantiated." I n my v i e w , decision, the majority, by e x t e n d i n g the original Gates has s e t t h e s t a g e f o r a " j u s t cause standard f o r at- w i l l e m p l o y e e s , " which I b e l i e v e i s a l e g i s l a t i v e r a t h e r t h a n a judicial function. S e c t i o n 39-2-503, MCA, provides t h a t employment, having no s p e c i f i e d t e r m , may be t e r m i n a t e d a t t h e w i l l of e i t h e r p a r t y on notice to each established, other. This section but recently questioned, codifies "at-will" the rule. long- Although t h i s C o u r t h a s r e c o g n i z e d t h a t t h i s r u l e may be o u t d a t e d , w e have a l s o r e c o g n i z e d t h a t " i t is u n i q u e l y a p r o v i n c e of t u r e t o change i t . " Mont. , Reiter v. Y e l l o w s t o n e County 627 P.2d 8 4 5 , 8 4 9 , 38 S t . R e p . the legisla(1981), 6 8 6 , 690. I n R e i t e r , w e n o t e d t h a t b e c a u s e of t h e o p e r a t i o n of s e c t i o n 39-2-503, MCA, the at-will employee " d i s c h a r g e f o r cause only" b a s i s . was not employed on a W s t a t e d , "assuming arguendo e t h a t a p p e l l a n t had a n i m p l i e d c o n t r a c t w i t h a n i m p l i e d c o v e n a n t o f good f a i t h , t h e e m p l o y e r d i d n o t a c t i n bad f a i t h b e c a u s e i t s c o n d u c t was s t a t u t o r i l y p e r m i s s i b l e . " 627 P.2d a t 849-850, 38 St.Rep. a t 690. I n o t h e r words, u n d e r s e c t i o n 39-2-503, an employer o r MCA, e m p l o y e e c o u l d t e r m i n a t e employment f o r any o r a l l r e a s o n s , prov i d e d t h e r e a s o n s o r manner of t e r m i n a t i o n d i d n o t v i o l a t e p u b l i c See K e n e a l l y v. Orgain ( 1 9 8 0 ) , policy. 1 2 7 , 37 S t . R e p . , Mont. 6 0 6 P.2d 154. I n t h e p r i o r d i s c u s s i o n of t h i s c a s e , t h i s Court determined t h a t a c o v e n a n t of good f a i t h and f a i r d e a l i n g was i m p l i e d i n t h e parties' oral, employment c o n t r a c t . t h e e m p l o y e r ' s p r o m u l g a t i o n of h o l d i n g was book, at-will, The b a s i s f o r t h i s an employees' two y e a r s a f t e r G a t e s b e g a n employment. hand- The handbook p r o - W stated e v i d e d c e r t a i n g u i d e l i n e s f o r t e r m i n a t i o n of e m p l o y e e s . t h a t G a t e s had a c a u s e of a c t i o n b e c a u s e " i f t h e e m p l o y e r f a i l e d t o f o l l o w i t s own p o l i c i e s , t h e p e a c e of mind of i t s e m p l o y e e s is shattered St.Rep. an a t 20. process is injustice W e (1) w h e t h e r fact: the and t h e n found done." 638 P.2d a t 1067, two g e n u i n e i s s u e s of 39 material respondent f a i l e d t o afford appellant Gates required; and ( 2 ) whether the respondent thereby b r e a c h e d t h e c o v e n a n t of good f a i t h and f a i r d e a l i n g . The C o u r t had guidelines in a l s o decided the employer in the prior handbook decision t h a t the regarding notice t e r m i n a t i o n , were n o t e n f o r c e a b l e a s c o n t r a c t r i g h t s . prior to W further e determined t h a t a p p e l l a n t ' s claim i n t o r t f o r wrongful d i s c h a r g e was p r o p e r l y d i s m i s s e d b e c a u s e i t was n o t s u p p o r t e d by any showi n g of a v i o l a t i o n of p u b l i c p o l i c y . The m a j o r i t y ---- Monte c i t e s Lipinski ---- , 655 P.2d v. T i t l e I n s u r a n c e Co. 970, 39 St.Rep. 2283, (1982), for the a s s e s s m e n t of p u n i t i v e damages i n bad f a i t h c a s e s . I n s u r a n c e c a s e s u p h o l d i n g a b r e a c h of t h e i m p l i e d c o v e n a n t of good f a i t h and f a i r d e a l i n g d i d n o t e v o l v e u n d e r t h e same cons i d e r a t i o n s a s c a s e s d i s c u s s i n g a b r e a c h of t h e i m p l i e d c o v e n a n t i n employment c o n t r a c t s . to whether oppression, the abused I n t h e i n s u r a n c e c a s e s , t h e c o u r t s look insurance its duty company, to act with i n good malice, faith. fraud The or "bad f a i t h " employment c a s e s m a i n t a i n a h i g h e r standard c o u r t s g e n e r a l l y look p u b l i c p o l i c y on t h e part of the for a v i o l a t i o n of employer. See discussion ( 1 9 8 0 ) , 84 N . J . P h a r m a c e u t i c a l Corp. in in that the Pierce 5 8 , 417 A.2d v. Orth 5 0 5 , 1 2 ALR4th 5 2 0 , and A n n o t . 1 2 ALR4th 5 4 4 , ( 1 9 8 2 ) . Most courts recognizing a cause of action based on a d i s c h a r g e t h a t o f f e n d s p u b l i c p o l i c y have grounded t h a t a c t i o n i n t o r t , w h i l e o n l y a few have r e l i e d on a n i m p l i e d c o n t r a c t t h e o r y of recovery. Compare Tameny v . A t l a n t i c R i c h f i e l d Co. ( 1 9 8 0 ) , 27 C a l . 3 d 1 6 7 , 610 P.2d 1 3 3 0 , 1 6 4 C a l . R p t r . action for because wrongful he discharge refused ( 1 9 7 5 ) , 272 Or. to 210, because a n employee Kelsay v. commit 536 when a P.2d (1978), employee criminal 512 was d i s m i s s e d Motorola 839, ( r e c o g n i z i n g a t o r t act); serving 111.2d terminated Nees (recognizing a for 74 was Hooks tort jury 172, v. 364 action d u t y ) ; and N.E.2d 353 ( r e c o g n i z i n g a t o r t a c t i o n when employee was d i s m i s s e d f o r f i l i n g a workers' compensation R e g i s t e r Co. a contract claim); with ( 1 9 7 7 ) , 3 7 3 Mass. action when 96, Fortune v. National Cash 3 6 4 N.E.2d terminated employee 1251 ( r e c o g n i z i n g in order not to r e c e i v e e a r n e d b o n u s e s o r c o m m i s s i o n s ) ; and Monge v. Beebe Rubber Co. (1974), 114 130, N.H. 316 A.2d 549 (recognizing contract a c t i o n and l i m i t i n g damages t o t h o s e f o r b r e a c h of c o n t r a c t when employee t e r m i n a t e d list, complete for refusal see S m i t h v. C i r . 1 9 8 1 ) , 6 5 3 F.2d to d a t e foreman). A t l a s Off-Shore For a more Boat S e r v i c e (5th 1 0 5 7 , 1 0 6 1 N.9. I n t h e p r i o r d e c i s i o n , t h i s C o u r t r e l i e d on F o r t u n e and Monge in recognizing that appellant has a cause of action i m p l i e d c o v e n a n t of good f a i t h and f a i r d e a l i n g . a n d Monqe their Damages contract. t h e New grounded were limited Moreover, to decisions those allowed only an Both Fortune not for tort breach law. of t h e d e c i s i o n i n Monqe was l a t e r l i m i t e d by - H a m p s h i r e Supreme Court mination violated public policy. ( 1 9 8 0 ) , 1 2 0 N.H. i n contract, under to situations where the ter- S e e Howard v. D o r r Woolen Co. 2 9 5 , 414 A.2d 1 2 7 3 . By a l l o w i n g p u n i t i v e damages i n t h i s c a s e , t h e m a j o r i t y h a s i d e n t i f i e d , and a p p r o v e d , an i n d e p e n d e n t t o r t of bad f a i t h i n a t w i l l employment c o n t r a c t s . All other jurisdictions do so o n l y when t h e t e r m i n a t i o n v i o l a t e s p u b l i c p o l i c y . I note further October 1 9 , 1979. that the termination in question occurred The R e i t e r d e c i s i o n , s u p r a , a c k n o w l e d g i n g t h a t " t h e e m p l o y e r d i d n o t a c t i n bad f a i t h b e c a u s e i t s c o n d u c t was s t a t u t o r i l y permissible," decision, supra, was citing Percival v. F.Supp. was d a t e d May 4 , dated General January 30, Motors Corp. 1981. 1980, The K e n e a l l y and t h i s Court, 1322, s t a t e d : Mo. (E.D. 1975), 400 "Thus, t h a t c o u r t n o t e d , c o r r e c t l y , t h a t a d i s c h a r g e by an e m p l o y e r i n a c o n t r a c t t e r minable a t w i l l does not give rise t o a claim f o r wrongful discharge i n t h e o r d i n a r y sense, t h o u g h t h e f i r i n g o r t h e t e r m i n a t i o n may h a v e I t i s o n l y when a p u b l i c been u n j u s t i f i e d . p o l i c y has been v i o l a t e d i n c o n n e c t i o n w i t h t h e w r o n g f u l d i s c h a r g e t h a t t h e c a u s e of 6 0 6 P.2d a t 1 2 9 , 37 S t . R e p . action arises." a t 157. I n v i e w of t h e f a c t t h a t t h e t e r m i n a t i o n i n q u e s t i o n o c c u r r e d l o n g b e f o r e t h e a b o v e two d e c i s i o n s of t h i s C o u r t , I would e x p e c t t h i s C o u r t t o a p p l y t h e law a s s t a t e d i n t h o s e d e c i s i o n s t o t h i s case. The G a t e s d e c i s i o n , s u p r a , w h e r e i n t h e d o c t r i n e of i m p l i e d c o v e n a n t of good f a i t h was f i r s t a p p r o v e d , was d a t e d J a n u a r y 5 , 1982. I do not object to the application of this doctrine r e t r o a c t i v e l y f o r t h e d e t e r m i n a t i o n of c o m p e n s a t o r y damages, b u t I d o n o t a g r e e t h a t it s h o u l d be t h e b a s i s of I note, with approval, memorandum of p u n i t i v e damages. t h e c i t a t i o n by t h e t r i a l September 28, 1 9 8 2 , of Nees v. judge Hooks, in his supra. In t h a t c a s e a n employee was d i s c h a r g e d f o r m i s s i n g work t o a t t e n d j u r y d u t y , a c l e a r v i o l a t i o n of p u b l i c p o l i c y . The O r e g o n c o u r t a l l o w e d c o m p e n s a t o r y damages, b u t would n o t a l l o w t h e a w a r d i n g of p u n i t i v e damages. The O r e g o n c o u r t s t a t e d a s f o l l o w s : "There is one f a c t o r , however, which is p r e s e n t i n t h i s c a s e which h a s n o t b e e n p r e s e n t i n p a s t c a s e s approving t h e submission o f t h e p u n i t i v e damage i s s u e t o t h e j u r y . In o u r p a s t c a s e s , t h e d e f e n d a n t knew h i s c o n d u c t was r e g a r d e d a s c u l p a b l e and would g i v e r i s e t o a c a u s e of a c t i o n b e c a u s e of p a s t j u d i c i a l decisions or legislation. For example: An a u t o m o b i l e d e a l e r t u r n i n g back t h e odometer t o d e c e i v e t h e p u r c h a s e r , L e w i s v . Worldwide I m p o r t s , 238 O r . 5 8 0 , 395 P.2d 9 2 2 ( 1 9 6 4 ) ; a f i n a n c e company c o n v e r t i n g a n a u t o m o b i l e by w r o n g f u l r e p o s s e s s i o n , P e l t o n v. Gen. Motors A c c e p t . C o r p . , 1 3 9 O r . 1 9 8 , 7 P.2d 2 6 3 , 9 P.2d 1 2 8 ( 1 9 3 2 ) ; and a d r u n k e n d r i v e r c o l l i d i n g w i t h a n o t h e r c a r , H a r r e l l v . A m e s , 265 O r . 1 8 3 , 508 P.2d 2 1 1 ( 1 9 7 3 ) . "Until the t r i a l c o u r t ' s ruling i n t h i s case a n d o u r a f f i r m a n c e t h e r e was no j u d i c i a l d e c i s i o n t h a t a n e m p l o y e r was l i a b l e i f h e d i s c h a r g e d a n employee because s h e s e r v e d j u r y duty. A s we e a r l i e r s t a t e d , t h e g e n e r a l r u l e known t o e m p l o y e r s and l a w y e r s a l i k e i s t h a t a b s e n t c o n t r a c t o r s t a t u t e , an employer c a n d i s c h a r g e a n e m p l o y e e f o r any r e a s o n w i t h o u t incurring l i a b i l i t y . " I f w e h e l d t h a t p u n i t i v e damages c o u l d be a w a r d e d i n t h e p r e s e n t c a s e , w e would be p e r m i t t i n g t h e j u r y t o p u n i s h d e f e n d a n t s f o r cond u c t which t h e y c o u l d n o t h a v e d e t e r m i n e d be£ orehand was even actionable. The a s s e s s m e n t of p u n i t i v e damages h a s some of t h e same f u n c t i o n s a s t h e s a n c t i o n s of c r i m i n a l law. The s a n c t i o n s of t h e c r i m i n a l law c a n n o t c o n s t i t u t i o n a l l y be imposed when t h e c r i m i n a l i t y of t h e c o n d u c t is n o t c a p a b l e of b e i n g known b e f o r e h a n d . " 272 O r . 210, 536 P.2d a t 516-17. . . . I there would h o l d t h a t p u n i t i v e damages a r e n o t a l l o w a b l e w h e r e has b e e n no showing that the termination of an a t - w i l l employee v i o l a t e d p u b l i c p o l i c y , u n t i l such t i m e a s t h e l e g i s l a t u r e r e p e a l s o r amends s e c t i o n 39-2-503, I MCA. c o n c u r i n t h e f o r e g o i n g d i s s e n t of M r . J u s t i c e G u l b r a n d s o n : Mr. Justice Fred J. Weber dissents as follows: I join in the dissent of Justice Gulbrandson. In addition I dissent as follows: With regard to the covenant of good faith, the majority opinion holds in part: "Breach of the covenant to deal fairly is, simply stated, breach of a legal duty to deal fairly. Breach of the duty owed to deal fairly in the employment relationship is a tort for which punitive damages can be recovered if defendant's conduct is sufficiently culpable." I am unable to understand how the majority has arrived at that conclusion. The majority refers to section 27-1-221, MCA, which in pertinent part states: not "In any action for a breach of an obligation arising from contract the jury may give damages for the sake of example and by way of punishing the defendant." (Emphasis added.) ... ... The basic question here is whether there is a breach of an obligation not arising from contract. In our original opinion, Gates v. Life of Montana Ins. Co. (1982), Mont . , 638 P.2d 1063 at 1067, we stated the key holding: "We hold that a covenant of good faith and fair dealing was implied in the employment contract of the appellant." In reaching that conclusion, we pointed out that a general principle of good faith and fair dealing has been recognized under the Uniform Commercial Code recognized in insurance contracts. recent decisions in other and also has been We also pointed out that jurisdictions support the proposition that a covenant of good faith and fair dealing is implied in employment contracts. Since we then concluded that in the Gates case a covenant of good faith and fair dealing was implied in the employment contract, it seems clear that such a covenant becomes a part of the employment contract as if it were set forth in writing. An implied covenant can be breached just as a covenant expressly stated in the contract can be breached. The present case is an action for breach of the covenant of good faith and fair dealing, arising - - contract from which from the that covenant is implied. Comparing the contractual covenant of good faith and fair dealing with the punitive damages section, it seems clear that breach of such a contractual obligation does not justify an award of punitive damages under the express terms of the statute. The majority holds that the code section exempts only breach of contract actions from its provisions. Essentially, that is the nature of the present claim for relief. The present holding has original holding in Gates. little relationship to our There we held that a covenant of good faith and fair dealing was implied in the employment contract. We remanded the cause to determine if the employee had been given due process and, if so, whether a breach of the covenant of good faith and fair dealing resulted. If I understand the majority, we now disregard the contractual relationship and its implied covenant, and hold that there is does not a duty to deal fairly, which apparently - - arise from the contract itself, and the breach of such duty is a tort for which punitive damages can be recovered. While I agree that it may be reasonable to amend section 27-1-221, MCA, to allow punitive damages for breach of an obligation arising from contract, we have traveled a long way to arrive at a conclusion which should have been left to the legislature.
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