Scholtes v. Signal Delivery Service, Inc., Civ. No. 82-2048.

Citation548 F. Supp. 487
Decision Date21 September 1982
Docket NumberCiv. No. 82-2048.
PartiesEdward Paul SCHOLTES, Plaintiff, v. SIGNAL DELIVERY SERVICE, INC., Jim Johnson and Chet Dickey, Defendants.
CourtUnited States District Courts. 8th Circuit. Western District of Arkansas

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Robert S. Blatt and Stephen M. Sharum, Fort Smith, Ark., for plaintiff.

Blair Arnold, Thompson & Arnold, Batesville, Ark., Audrey P. Forrest and William W. Allport, Beachwood, Ohio, for defendants.

MEMORANDUM OPINION

H. FRANKLIN WATERS, Chief Judge.

Introduction

This action arises under 28 U.S.C. § 1332, based upon complete diversity of citizenship. On February 16, 1982, plaintiff, Edward Paul Scholtes, instituted this action against his former employer, Signal Delivery Service, Inc. (hereinafter "Signal"), and two of his former superiors, Jim Johnson and Chet Dickey.

Plaintiff contends that Signal entered into an oral employment contract with him, whereby plaintiff was to be employed indefinitely, except for good cause. Signal discharged plaintiff on or about April 25, 1980, allegedly without just cause.

Plaintiff further asserts that, contrary to Signal's best interests, defendants Johnson and Dickey, plaintiff's superiors, consciously made performance of his employment contract increasingly difficult and maliciously induced Signal to terminate plaintiff.

Finally, plaintiff contends that defendants Johnson and Dickey gave false and misleading information to prospective employers of plaintiff.

Defendants denied these allegations arguing basically that plaintiff's employment was terminable at will and that any communications to prospective employers would have been privileged.

On June 4, 1982, defendants moved for summary judgment, contending that there is no genuine issue of material fact and that under Arkansas law, defendants are entitled to judgment as a matter of law. Plaintiff has timely responded and the issues are ripe for resolution.

Discussion

As noted, defendants advance two arguments: (1) That the employment of plaintiff was, as a matter of Arkansas law, terminable at will, and therefore no cause of action could arise upon plaintiff's termination, and (2) That defendants, Johnson and Dickey, as agents of Signal, cannot be held liable for interfering with plaintiff's contractual relations with Signal and any communications they may have made to third parties would necessarily have been privileged.

These arguments will be examined in turn.

I. The Terminability of Plaintiff's Employment.

Defendants argue that under a contract of employment which designates no definite term or specific duration the employment contract is terminable at the will of either the plaintiff or employer. Miller v. Mo-Pac Transportation Co., 225 Ark. 475, 283 S.W.2d 158 (1955). Therefore any discharge, whether it be with or without cause cannot constitute a breach of contract. Tinnon v. Missouri Pac. R. Co., 167 F.Supp. 675, aff'd 282 F.2d 773 (8th Cir. 1960).

Thus, defendants conclude, Arkansas law requires consideration from the employee in addition to and apart from the services of employment, or requires a bilateral contract in which both parties agree to a specific period of employment, before an employment contract will not be considered terminable at will.

In essence, defendants assert that a unilateral contract of employment is always terminable at will regardless of its terms, absent additional consideration other than the employment itself.

We note that the bilateral/unilateral distinction has fallen into disfavor in recent years. Comment f to Section l of the Restatement (Second) of Contracts, states:

Comment F. Section 12 of the original Restatement defined unilateral and bilateral contracts. It has not been carried forward because of doubt as to the utility of the distinction, often treated as fundamental, between the two types. As defined in the original Restatement, "unilateral contract" included three quite different types of transaction: (1) the promise which does not contemplate a bargain, such as the promise under seal to make a gift, (2) certain option contracts, such as the option under seal (see §§ 25, 45), and (3) the bargain completed on one side, such as the loan which is to be repaid. This grouping of unlike transactions was productive of confusion.
Moreover, as to bargains, the distinction tends to suggest, erroneously, that the obligation to repay a loan is somehow different if the actual delivery of the money was preceded by an advance commitment from the obligation resulting from a simultaneous loan and commitment. It also causes confusion in cases where performance is complete on one side except for an incidental or collateral promise, as where an offer to buy goods is accepted by shipment and a warranty is implied. Finally, the effect of the distinction has been to exaggerate the importance of the type of bargain in which one party begins performance without making any commitment, as in the classic class-room case of the promise to pay a reward for climbing a flagpole.

The traditional distinction between a unilateral contract and a bilateral contract is that, in the former, the offer or promise of one party does not become binding or enforceable until there is performance by the other party, whereas, in the latter, it is not performance which makes the contract binding, but rather the giving of a promise by one party for the promise of the other party. See generally 17 C.J.S., "Contracts", § 8, pp. 577-80.

Under modern contract law, where an offerer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree begins the invited performance. Restatement (Second) of Contracts, Section 45. In most cases the beginning of performance carries with it an express or implied promise to complete performance. Comment d to Section 45, Rest.2d Contracts. Further, where the offer does not contemplate or invite a promise by the offeree, the beginning of performance nevertheless completes the manifestation of mutual assent and furnishes consideration for an option contract. Id.

Whether Arkansas law recognizes this precise terminology or not, the same result is reached under Arkansas law by way of the "implied" contract. A contract implied in fact does not describe a legal relationship different from that created by express contract. Steed v. Busby, 268 Ark. 1, 593 S.W.2d 34 (1980). The parties' course of conduct can establish the existence and terms of such a contract. Id. Course of conduct can demonstrate a "meeting of the minds" sufficient to imply mutual promises. Rice v. McKinley, 267 Ark. 659, 590 S.W.2d 305 (Ark.App.1979).

As noted in Abbott v. Ark. Util. Co., 165 F.2d 339 (8th Cir. 1948), there is nothing in Arkansas law indicating that where there are mutual promises, the promise to perform services would not uphold the validity of the contract of employment. Abbott does indicate that where the contract is unilateral, however, independent consideration may be required. In Abbott the trial court granted appellee's motion to dismiss upon the theory that independent consideration was a sine qua non of an enforceable term employment contract. The Eighth Circuit, reviewing applicable Arkansas precedents, could find no support for the trial court's holding, and reversed Judge Lemley as being "clearly erroneous."

Thus, independent consideration is not required for an enforceable term employment contract based upon mutual promises.

Furthermore, estoppel has always been recognized as a substitute for consideration. Bethell v. Bethell, 268 Ark. 409, 597 S.W.2d 576 (1980). This is true whether it be promissory estoppel or estoppel in pais. McEntire v. McEntire's Estate, 267 Ark. 169, 590 S.W.2d 241 (1979). This doctrine prevents a party who has failed to act from claiming a right to the detriment of his adversary when the latter is entitled to rely on the words or actions of the former and has in fact so relied to his detriment. Ferguson v. Unionmutual Stock Life Ins. Co. of America, 501 F.Supp. 247 (E.D.Ark.1980).

Thus, where estoppel is present, the classification of the employment agreement as "unilateral" or "bilateral" is irrelevant.

Therefore, plaintiff is entitled to show that the acts, declarations or promises of agents or employees of Signal, or their failure to act or speak under circumstances where they should do so, in willful disregard of plaintiff, induced or misled him into conduct or forebearance which he would not have undergone but for the misleading influence. This could be shown by establishing that plaintiff "passed up" other favorable employment opportunities, for example, relocated at their instance, or reasonably incurred certain expenses in reasonable reliance upon his continued employment with Signal. Plaintiff is entitled to show that Signal induced him to change his position for the worse or led him to forego a legal right which he possessed. Estoppel arises to prevent injustice to one who has in good faith relied upon action, representations or conduct of another to his detriment. Collier v. Brent, 266 Ark. 1008, 589 S.W.2d 198 (Ark.App.1979); Hester v. Chambers, 264 Ark. 941, 576 S.W.2d 195 (1979).

Defendants argue that, in any event, there was "good cause" for plaintiff's discharge. Plaintiff asserts that defendants Johnson and Dickey purposely made his performance difficult or burdensome.

As stated by this Court in Inv. Thrift Corp. v. Hunt, 387 F.Supp. 517 (W.D. Ark.1974), aff'd 511 F.2d 1161 (8th Cir. 1974):

It is well settled ... that neither party to an executory contract may take any action as relating to the contract that will in any way hinder or delay performance. In Peter Kiewit Son' Co. v. Summit Constr. Co., 422 F.2d 242 (8th Cir. 1969), Judge Gibson of our Eighth Circuit stated the rule as follows:
It is hornbook law that an implied provision of every contract is that
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