Folsom v. Mont. Pub. Employees' Ass'n, Inc.

• Decision Date: 22 August 2017
• Docket Number: DA 16-0394
• Citation: 388 Mont. 307,400 P.3d 706,2017 MT 204
• Parties: Jeffrey R. FOLSOM, Plaintiff, Appellee, and Cross-Appellant, v. MONTANA PUBLIC EMPLOYEES' ASSOCIATION, INC., a Montana non-profit Corporation, Defendant, Appellant and Cross-Appellee.
• Court: Montana Supreme Court

388 Mont. 307

400 P.3d 706

2017 MT 204

Jeffrey R. FOLSOM, Plaintiff, Appellee, and Cross-Appellant,

v.MONTANA PUBLIC EMPLOYEES' ASSOCIATION, INC., a Montana non-profit Corporation, Defendant, Appellant and Cross-Appellee.

DA 16-0394

Supreme Court of Montana.

Submitted on Briefs: March 8, 2017

Decided: August 22, 2017

For Appellant: James P. Molloy, Gallik, Bremer & Molloy, P.C., Bozeman, Montana

For Appellee: Kim T. Christopherson, Attorney at Law, Christopherson Law Office, P.C., Kalispell, Montana

Justice Dirk M. Sandefur delivered the Opinion of the Court.

¶1 Montana Public Employees' Association (MPEA) appeals judgments of the Montana Eleventh Judicial District Court, Flathead County: (1) decreeing that MPEA breached its duty of fair representation (DFR) to Jeffrey R. Folsom (Folsom) and engaged in related common law fraud; (2) awarding Folsom $47,550 in attorney fees as an element of compensatory damages on his DFR claim; and (3) awarding $50,000 in punitive damages on his related common law fraud claim. MPEA further appeals the court's denial of MPEA's subsequent M. R. Civ. P. 59(e) and 60(b)(6) motions for post-judgment relief. Folsom cross-appeals the District Court's denial of his request for compensatory lost wages on the DFR claim and his subsequent motion for post-judgment relief under M. R. Civ. P. 59(a)(2) and 60(b)(1) and § 25-11-102(3), MCA. We reverse the District Court's judgments and remand for further proceedings on Folsom's DFR claim.

ISSUES

¶2 We restate the issues on appeal as:

1. Is Folsom's common law fraud claim independently cognizable distinct from his DFR claim on the record in this case?

2. Did the District Court erroneously conclude that insufficient evidence of causation precluded Folsom's recovery of lost wages and benefits as compensatory damages on his DFR claim?

3. Did the District Court erroneously award attorney fees to Folsom as an element of compensatory damages on his DFR claim?

4. Are punitive damages recoverable absent a compensatory damages award on a predicate claim for relief?

5. Are punitive damages recoverable against a union predicated on a Montana DFR claim?

6. Did the District Court erroneously deny MPEA's motions for post-judgment relief under M. R. Civ. P. 59(e) and 60(b)(6) ?

FACTUAL AND PROCEDURAL BACKGROUND

¶3 Folsom was a non-probationary police officer employed by the City of Whitefish (City). In 2012, Folsom was one of many advocating that the Whitefish Police Protective Association (WPPA), a union of officers of the Whitefish Police Department, affiliate with MPEA. Following a contentious process that resulted in WPPA affiliating with MPEA, the City suspended Folsom on February 13, 2013, with notice of intent to terminate his employment for cause under the collective-bargaining agreement (CBA) between the City and MPEA.

¶4 At the time of the termination notice, MPEA was the exclusive bargaining agent for the WPPA under the CBA and the Montana Public Employees' Collective Bargaining Act.¹ The CBA provided a four-step employee grievance process. Either MPEA or the aggrieved employee could initiate Steps 1 and 2 of the process but only MPEA could initiate Steps 3 and 4. MPEA field representative Darcy Dahle timely initiated Steps 1 and 2 on Folsom's behalf.

¶5 After the City denied Folsom's grievance at Steps 1 and 2, Dahle attempted to initiate Step 3 of the process by correspondence to the City Manager dated April 2, 2013. The City Manager rejected the Step 3 grievance as untimely initiated beyond the ten-day deadline specified by the CBA.² On the condition that MPEA produce certain documentation, the City nonetheless offered to participate in the Step 3 process despite its assertion that it had no obligation to do so. Dahle refused the City's document request and proposed binding arbitration to resolve the Step 3 timeliness issue. Upon the City's rejection of the arbitration proposal, Dahle next proposed to resolve the issue by mediation through the Board of Personnel Appeals.³ Standing on its assertion that MPEA failed to timely initiate Step 3, the City refused and declared Folsom's grievance rights exhausted pursuant to the terms of the CBA.⁴

¶6 MPEA ultimately referred the matter for further action to in-house counsel, Carter Picotte, who was thereafter exclusively responsible for handling Folsom's grievance on behalf of MPEA. Picotte submitted a notice of appeal to the City Police Commission pursuant to CBA Step 4 and § 7-32-4155(1), MCA.⁵ In response, the City reasserted that Folsom and MPEA waived the police commission remedy under the terms of the CBA by failing to timely initiate CBA Step 3.

¶7 Over the next year, Picotte scheduled several meetings with Folsom to discuss the status and future course of his grievance but ultimately cancelled each meeting. Picotte nonetheless repeatedly assured Folsom that he was taking appropriate action to enforce his grievance rights. On or about October 25, 2013, Picotte specifically told Folsom that he had filed and would aggressively prosecute a district court action against the City to enforce Folsom's CBA grievance rights. Picotte contemporaneously made a similar representation to MPEA's executive director, Quint Nyman. On at least one occasion, Nyman directed Picotte to proceed on Folsom's grievance without delay.

¶8 However, at some point in mid-2014, Folsom discovered that, contrary to earlier representations, Picotte had taken no action on his behalf. Upon this discovery, Folsom retained separate counsel and, on August 6, 2014, filed a district court complaint asserting a wrongful discharge claim against the City and DFR and common law fraud claims against MPEA. In essence, the claims alleged that: (1) the City wrongfully terminated him in violation of the CBA; (2) MPEA breached its duty to fairly represent him; and (3) MPEA, through Picotte, fraudulently induced Folsom to effectively waive his grievance rights through inaction. As compensatory damages on his claims against the union, Folsom prayed for lost wages and benefits as well as attorney fees incurred in prosecuting the action. Folsom also prayed for punitive damages on the fraud claim. Upon learning of the complaint from an MPEA field representative, Nyman spoke with Picotte, who assured Nyman that he would be taking appropriate action in defense of MPEA and in furtherance of Folsom's grievance rights. Picotte made a similar representation to Nyman on at least one occasion thereafter.⁶

¶9 Upon service of the district court complaint, Picotte timely appeared and answered Folsom's claims against MPEA. On September 19, 2014, Folsom served comprehensive discovery requests on Picotte that included sixty-nine M. R. Civ. P. 36 (Rule 36 ) requests for admission of pertinent facts. Inexplicably, Picotte did not respond. Based on MPEA's Rule 36 deemed admissions by default and a supplemental affidavit showing, Folsom subsequently moved for M. R. Civ. P. 56 (Rule 56 ) summary judgment that MPEA was liable on his DFR and common law fraud claims. Folsom did not seek summary judgment on his wrongful discharge claim against the City or on the causation and damages elements of his claims against the union. The City separately moved for summary judgment on Folsom's wrongful discharge claim.

¶10 Without seeking relief from the Rule 36 deemed admissions, Picotte filed a response opposing Folsom's motion for summary judgment on the asserted grounds that: (1) the fraud claim failed to state a claim against MPEA; (2) MPEA's general pleading denials raised genuine issues of material fact precluding summary judgment; (3) as a non-party to the agreement, Folsom had no standing to enforce the CBA; and (4) Folsom failed to exhaust his contract grievance remedies, i.e. , CBA Step 4 (police commission appeal). Picotte attempted no responsive factual showing to preclude summary judgment and inexplicably failed to appear and represent MPEA at the summary judgment hearing on May 26, 2015.

¶11 On June 17, 2015, while the summary judgment ruling was still pending after hearing, Folsom entered into a settlement agreement with the City wherein he resigned his employment and released all claims against the City without compensation. The agreement included an express disclaimer of any City liability related to Folsom's claims. The agreement barred the City from "actively challeng[ing]" Folsom's claims against MPEA but recognized that City witnesses could "testify truthfully in any proceeding if called to testify." The District Court ultimately dismissed the City from the action with prejudice pursuant to the agreement.

¶12 On July 15, 2015, based on MPEA's Rule 36 deemed admissions, Folsom's supplemental affidavit showing, and no responsive factual showing from MPEA, the District Court granted summary judgment against MPEA on Folsom's DFR and common law fraud claims. On the DFR claim, the court decreed, inter alia , that the record facts showed that "MPEA arbitrarily ignored Folsom's grievance or processed it in a perfunctory manner," thereby effectively extinguishing his CBA grievance rights. Concluding that Picotte's misrepresentations to Folsom on or about October 25, 2013, regarding the fictitious district court action against the City constituted both common law fraud and actual fraud, as defined by § 27-1-221(3) and (4), MCA, the District Court further granted summary judgment that MPEA was liable for punitive damages on Folsom's common law fraud claim.

¶13 On September 1, 2015, the District Court conducted a post-summary judgment evidentiary hearing to determine compensatory damages on Folsom's DFR claim and punitive damages on the fraud claim. Appearing on MPEA's behalf, Picotte acknowledged that he had "made some misrepresentations of scheduling and that sort of thing to Mr. Folsom because I got busy and I didn't have the courage to tell him that I just hadn't gotten it done." However, Picotte asserted that his false statements caused "no real damages" because Folsom "won't have lost his job...