Huey v. Honeywell, Inc.

Decision Date30 April 1996
Docket NumberNo. 94-15748,94-15748
Citation82 F.3d 327
Parties11 IER Cases 1098, 44 Fed. R. Evid. Serv. 122, 96 Cal. Daily Op. Serv. 2985, 96 Daily Journal D.A.R. 4978 John M. HUEY; Cheryl Huey, Plaintiffs-Appellants, v. HONEYWELL, INC., Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

David B. Earl, Jennings, Strouss & Salmon, Phoenix, Arizona, for plaintiffs-appellants.

Lonnie J. Williams, Jr., Snell & Wilmer, Phoenix, Arizona, for defendant-appellee.

Appeal from the United States District Court for the District of Arizona Robert C. Broomfield, District Judge, Presiding.

Before: FERGUSON and HAWKINS, Circuit Judges, and WM. FREMMING NIELSEN, District Judge. *

FERGUSON, Circuit Judge:

Plaintiffs, John M. Huey and Cheryl Huey, appeal the district court's grant of summary judgment for defendant, Honeywell Inc., with respect to plaintiffs' breach of employment contract and intentional infliction of emotional distress claims.

We have jurisdiction pursuant to 28 U.S.C. § 1291. We reverse the district court's grant of summary judgment on the breach of employment contract claim and affirm the district court's grant of summary judgment on the intentional infliction of emotional distress claim.

I. Standard of Review

A grant of summary judgment is reviewed de novo. Jesinger v. Nevada Fed. Credit Union, 24 F.3d 1127, 1130 (9th Cir.1994). We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Id. An appellate court reviews a district court's determination of state law de novo. Salve Regina College v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 1220-21, 113 L.Ed.2d 190 (1991).

II. Factual and Procedural Background

The facts of this case as presented to the district court, viewed in the light most favorable to the plaintiffs, are as follows. Honeywell hired John Huey in 1989 to work part-time in its Shipping and Receiving department. Huey became a full-time employee in January 1990. Since that time, he consistently received high job performance ratings and letters of recommendation from Honeywell in recognition of his outstanding job performance.

Honeywell's standards of employee conduct and disciplinary procedures for violations of those standards are set out in written policies and in the company's personnel manual. However, these written policies and the personnel manual are not distributed to Honeywell employees. Rather, Honeywell relies on its supervisors to inform its employees of the company's disciplinary procedures. This company practice is reflected in one of Honeywell's written policies which provides: "[a]ll Honeywell employees work under the direction of a supervisor.... The supervisor is also your link to management and is responsible for informing you about Company events and policies that may effect you or your work."

Honeywell's disciplinary procedures, relayed to Honeywell employees through their supervisors, provide that Honeywell will give all employees a series of verbal and written warnings, along with opportunities to be heard and to improve, before they are terminated. The disciplinary procedures further provide that: employees will be given the benefit of any doubts during the investigation of disciplinary charges; there must be documentation to support any termination for violation of a company policy; and discipline will be mitigated when an employee violates a company policy in reliance on a supervisor's representation of that policy.

One provision in the personnel manual which routinely is not relayed to Honeywell's employees by their supervisors is the following disclaimer: "Employment at Honeywell, Inc. is voluntarily entered into and employees are free to resign at any time. Similarly, Honeywell may terminate the employment relationship where it believes it is in the Company's best interests. The policy statements contained in this manual do not intend to negate this principle." Acting in accordance with company practice, Huey's supervisor, Ray Goodman did not communicate this disclaimer to Huey.

While the record before us does not indicate if Goodman specifically advised Huey of Honeywell's progressive discipline policy, it does show that the company so advised its supervisors and did so in a manner that constituted an announcement of policy that was sufficient for employees like Huey to rely upon.

Honeywell's hourly employees, such as Huey, were supposed to turn in time cards only if they worked more or less than forty hours per week. However, under what Huey's supervisor, Ray Goodman, called his "flextime" policy, employees in Goodman's department were instructed that they could work more than forty hours in one week, not submit a time card for overtime, and then work fewer than forty hours in a subsequent week to make up the difference. Goodman also allowed his employees to take time off work without reporting it if they made it up at a later date. Goodman's supervisors and the Human Resources representative for Goodman's department were aware of his flextime policy.

Huey was one of many Honeywell employees in the Shipping and Receiving department to utilize Goodman's flextime policy. In doing so, Huey never claimed or received payment for any hours which he did not actually work. In March 1991, two of Huey's co-workers informed Honeywell's personnel department that they suspected Huey of falsely reporting his time. In response, Honeywell's security division conducted an investigation of Shipping and Receiving. In the course of this investigation, the security division compared Huey's time entries with data collected at Honeywell's entrance and exit gates. The gates at Honeywell always record the time at which an employee enters, but only record the time at which an employee exits if the employee leaves after 6:00 p.m. on weekdays, or exits on the weekend.

The comparison of Huey's gate and time records revealed five inconsistencies. One inconsistency was due to Huey's attendance at a work-related seminar. The other four inconsistencies were due to Goodman's flextime policy. As a result of these discrepancies, Huey was suspended, pending further investigation. However, further investigation failed to include any discussions with Huey or Goodman. Rather than speaking with Huey, Honeywell hired a private investigation firm, Pinkerton, Inc., to investigate both Huey and Air Mobile Parts, a vendor for Honeywell's Shipping and Receiving department.

Pinkerton, in its investigation of Huey, engaged in the following activities: Pinkerton followed Huey on his way home from work; established surveillance points at Huey's home; videotaped Huey's activities; and at Honeywell's request, obtained personal information relating to Huey, his wife, and other members of Huey's family.

Huey was finally called in for an interview with Honeywell's management on April 4, 1991. Huey tried to explain that the discrepancies on his time card were due to Goodman's flextime policy, but he was told that the decision to terminate him had already been made. Huey was told at this meeting that he was officially terminated. No other employees in Huey's department were terminated or disciplined for utilizing Goodman's flextime policy.

Huey brought suit in Arizona state court against Honeywell for breach of employment contract. Honeywell subsequently removed the case to federal court on the basis of diversity jurisdiction. The Hueys then amended their complaint, adding claims for intentional infliction of emotional distress and loss of consortium. Honeywell, in its answers to Huey's two amended complaints admitted that Huey could only be terminated for cause. Honeywell subsequently filed an amended answer to Huey's Second Amended Complaint, in which it denied the allegation that Huey could only be terminated for cause.

Honeywell moved for summary judgment on all claims. The district court denied this motion with respect to Huey's breach of employment contract and loss of consortium claims. The court explained that Honeywell's admission in its initial answer to the Second Amended Complaint regarding Huey's status as a just cause employee precluded summary judgement. The court granted Honeywell's summary judgement motion with respect to the intentional infliction of emotional distress claim.

Honeywell moved for reconsideration of summary judgment on the breach of contract and loss of consortium claims. The court granted Honeywell's motion for reconsideration and Honeywell's motion for summary judgment on the remaining claims. The court concluded that Honeywell's withdrawn admission regarding Huey's status as a just cause employee was insufficient to establish that such a contract term existed.

Huey now appeals the district court's grant of summary judgment on the breach of employment contract and intentional infliction of emotional distress claims.

III. Breach of Employment Contract

Under Arizona state law, a contractual relationship between an employer and an employee with no specified duration is presumed to be "at-will" unless modified by the parties' representations or course of dealing. Wagner v. City of Globe, 150 Ariz. 82, 722 P.2d 250, 254 (1986). See also Wagenseller v. Scottsdale Memorial Hosp., 147 Ariz. 370, 710 P.2d 1025, 1036 (1985). Whether the parties intend to modify an at-will contract is a question of fact. Wagner, 722 P.2d at 254.

Three general exceptions to the at-will employment presumption have developed. First, the public policy exception to the at-will doctrine permits an at-will employee to recover for wrongful discharge upon a finding that the employer's conduct undermined an important public policy. Wagenseller, 710 P.2d at 1031. Second, an exception based on contract law allows an at-will employee to recover for wrongful discharge upon proof of an...

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