Boynton v. TRW, Inc.

• Decision Date: 06 October 1988
• Docket Number: No. 83-1773,83-1773
• Citation: 858 F.2d 1178
• Parties: 112 Lab.Cas. P 56,079, 16 Fed.R.Serv.3d 52, 3 Indiv.Empl.Rts.Cas. 1350 Richard S. BOYNTON, Plaintiff-Appellee, v. TRW, INC., Defendant-Appellant. . Re
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1178

858 F.2d 1178

112 Lab.Cas. P 56,079, 16 Fed.R.Serv.3d 52,

3 Indiv.Empl.Rts.Cas. 1350

Richard S. BOYNTON, Plaintiff-Appellee, v. TRW, INC., Defendant-Appellant.

No. 83-1773.

United States Court of Appeals Sixth Circuit.

Reargued Nov. 12, 1986.

Decided Oct. 6, 1988.

Virginia F. Metz, argued, David B. Calzone, Butzel, Long, Gust, Klein, Van Zile, Detroit, Mich., for defendant-appellant.

Weinstein, Kroll, Gordon, Southfield, Mich., Richard F. Burns, argued, for plaintiff-appellee.

Beth M. Rivers, Donnelly, Huizenga, Wahl & Hagan, Detroit, Mich., for amicus curiae.

Before ENGEL, Chief Judge ^*, LIVELY, KEITH, MERRITT, KENNEDY, MARTIN, JONES, KRUPANSKY, WELLFORD, MILBURN, GUY, NELSON, RYAN, BOGGS and NORRIS, Circuit Judges.

RYAN, Circuit Judge.

This wrongful discharge diversity action raises a significant question concerning the scope of Toussaint v. Blue Cross and Blue Shield of Michigan, 408 Mich. 579, 292 N.W.2d 880 (1980), a case in which Michigan's Supreme Court narrowed the traditional common law employment-at-will doctrine by holding "that an employer's expressed agreement to terminate only for cause, or statements of company policy and procedure to that effect, can give rise to rights enforceable in contract." Toussaint, 408 Mich. at 610, 292 N.W.2d 880. Richard Boynton, a former TRW salesman, was terminated by TRW in 1980 when his sales position was eliminated as a result of adverse economic conditions in the automobile industry. The specific issue raised by TRW in this appeal is whether the discharge of an employee retained under a "just cause employment contract," concededly motivated solely by an economically mandated reduction in force, is subject to judicial review under the just cause analysis of Toussaint and its progeny. We conclude that Michigan's courts have never held the Toussaint doctrine of just cause applicable to layoffs arising out of an economically mandated reduction in force. Consequently, we hold that the district court erred in denying TRW's motion for a judgment notwithstanding the verdict.

We note at the outset that Boynton originally filed this action in district court in June of 1981. A jury trial was held and a judgment ultimately entered in favor of Boynton in September of 1983. TRW appealed and a divided panel of this court held "that the trial judge correctly submitted to the jury ... [the issue of] whether the economic conditions reflected in the evidence constituted 'just cause' for termination." Boynton v. TRW, Inc., No. 83-1773, slip op. at 14 (January 17, 1986). However, the panel unanimously concluded that the district court erred in excluding evidence concerning Boynton's failure to mitigate his damages, and the case was remanded for new trial.

A majority of this court subsequently voted to vacate the initial panel's decision and to grant TRW's petition for a rehearing en banc because the case involved an issue of exceptional importance and first impression under Michigan law. ¹ See Fed.R.App.P. 35. The court heard arguments in the case in November of 1986, but reserved its decision pending the Michigan Supreme Court's resolution on certification of a potentially dispositive issue in a related case still pending before this court, Bankey v. Storer Broadcasting Co., No. 84-1296. Since the Michigan Court has yet to resolve the issue it accepted for certification in Bankey, this court feels it can no longer delay resolution of the issues raised in this case. Accordingly, we must comply with our duty to decide the case in light of the policies enunciated in the decisions of Michigan courts. Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

I.

Plaintiff-appellee Richard Boynton enjoyed a long and varied career as a salesman from 1945 until 1972. During this period, Boynton was employed by defendant-appellant TRW, Inc. on two separate occasions, the last extending from 1961 through 1969. In 1969, Boynton left TRW to work for Elastic Stop Nut. In September of 1972, Elastic Stop Nut reduced its sales force and Boynton was laid off. Boynton began work for a Dayton, Ohio company in October of 1972. Shortly thereafter, in November of 1972, Richard Bengston, a TRW sales manager, contacted Boynton to see if he was interested in returning to TRW. Bengston arranged to interview Boynton in Dayton for a position as a field representative in TRW's Chicago office. As the majority opinion by the panel which originally heard this case notes, the alleged representations made by Bengston to Boynton at the time of the 1972 interview, along with certain alleged termination practices and customs of TRW upon which Boynton claims to have relied during his ensuing employment with TRW, are the critical factual elements of this case. See Boynton, slip op. at 2-3.

Boynton testified that he accepted re-employment with TRW in reliance upon Bengston's statement that "he felt that if I [Boynton] did my usual job, that I would have a job until retirement." Boynton also claims to have relied upon Bengston's statement that "the philosophy of the company [TRW] had not changed" since Boynton last left TRW's employ in 1969. Boynton testified that it was his "understanding" that "the policy as far as I am concerned was that whoever had seniority was the last to be laid off."

After accepting a position with TRW, Boynton moved from Dayton to Chicago where he served from 1973 until 1977. In 1977, Boynton accepted a transfer to a sales position in TRW's Detroit office. In Detroit, Boynton's duties included soliciting sales from Chrysler, American Motors, and International Harvester. As the previous panel's majority opinion concluded, "Boynton performed in a very satisfactory manner, and at no time in this litigation did TRW challenge the quality of his performance." Boynton, slip op. at 3.

In 1980, TRW concluded that it was necessary to eliminate one of the four sales positions in its Detroit office due to adverse economic conditions in the automobile industry. On June 6, 1980, Boynton was laid off by TRW. Two of the three salesmen retained by TRW had less seniority than Boynton. TRW claimed that Boynton was selected for termination simply because Boynton's Chrysler and American Motors accounts were, relatively speaking, of the least importance to TRW. Richard Maloney, Boynton's supervisor, testified that in 1979 TRW had roughly an $11 million account with General Motors and a $10 million account with Ford, but only a $700,000 account with Chrysler and a $400,000 account with American Motors. Boynton personally testified that his gross sales had dropped from $2,300,000 in 1978 to "about $1,800,000" in 1979 and by "another 25%" in the first half of 1980. Boynton's position was not filled after his layoff.

In June of 1981, Boynton filed the present action claiming that Bengston's 1972 oral statements and TRW's pre-1979 unwritten policies created an implied employment contract under which Boynton could only be discharged for "just cause." Boynton further claimed that TRW's policies required it to base its decisions regarding layoffs solely upon seniority. As the previous panel's majority concluded, Boynton raised "no challenge as to the sincerity of TRW's motive in making this decision [the decision to lay off Boynton] and [made] no assertions that the reasons advanced by TRW in selecting him for termination were pretextual for any discriminatory intent, or in any way motivated by malice or bad faith." ² Boynton, slip op. at 3. Rather, Boynton argued that "there was no necessity to lay anyone off," let alone a salesman with his seniority, and that the issue of whether the adverse economic conditions alleged by TRW constituted "just cause" was an issue of fact for the jury.

TRW conceded that Bengston's November 1972 statements created an implied employment contract, but argued that the Toussaint doctrine of just cause was not applicable to discharges or layoffs resulting solely from adverse economic conditions. TRW also denied Boynton's claim that it was TRW's policy to lay off employees solely according to seniority. The district court denied TRW's motions for a directed verdict. The court submitted the issue of "whether economic conditions, under the circumstances in this case, was [sic ] a good cause for discharging plaintiff" to the jury. The jury returned a verdict for Boynton in the amount of $143,000. This appeal followed.

II.

Our initial inquiry concerns the applicability of the Toussaint doctrine of just cause terminations to layoffs motivated solely by a reduction in force resulting from adverse economic circumstances. In Toussaint, the Michigan Supreme Court limited the traditional common law view of oral employment contracts and employment contracts for an indefinite period or term. The traditional view held such contracts terminable at will. See, e.g., Wiskotoni v. Michigan National Bank-West, 716 F.2d 378, 384 (6th Cir.1983). Toussaint held "that an employer's expressed agreement to terminate only for cause, or statements of company policy and procedure to that effect, can give rise to rights enforceable in contract." Toussaint, 408 Mich. at 610, 292 N.W.2d 880. The Michigan court reasoned:

While an employer need not establish personnel policies or practices, where an employer chooses to establish such policies and practices and makes them known to its employees, the employment relationship is presumably enhanced. The employer secures an orderly, cooperative and loyal work force, and the employee the peace of mind associated with job security and the conviction that he will be treated fairly. No pre-employment negotiations need take place and the parties' minds need not meet on the subject; nor does it matter that the employee knows nothing of the particulars of the employer's policies and practices or that the employer may change them unilaterally. It is enough that the employer chooses, presumably in its own interest, to create an environment...