Cleary v. American Airlines, Inc.

• Decision Date: 29 October 1980
• Court: California Court of Appeals Court of Appeals
• Parties: , 115 L.R.R.M. (BNA) 3030, 110 Lab.Cas. P 55,998, 1 IER Cases 122 Lawrence M. CLEARY, Plaintiff and Appellant, v. AMERICAN AIRLINES, INC., et al., Defendants and Respondents. Civ. 57920.

Page 722

168 Cal.Rptr. 722

111 Cal.App.3d 443, 115 L.R.R.M. (BNA) 3030,

110 Lab.Cas. P 55,998, 1 IER Cases 122

Lawrence M. CLEARY, Plaintiff and Appellant, v. AMERICAN AIRLINES, INC., et al., Defendants and Respondents.

Civ. 57920.

Court of Appeal, Second District, Division 1, California.

Oct. 29, 1980.

Rudolph Pacht, Los Angeles, for plaintiff and appellant.

Overton, Lyman & Prince and George Christensen and Mark H. Van Brussel, Los Angeles, for defendants and respondents.

JEFFERSON, Acting Presiding Justice. ^*

By a fifth amended complaint, plaintiff Lawrence M. Cleary sought both compensatory and punitive damages from his former employer, defendant American Airlines, Inc. One cause of action was for a breach of an oral contract-the wrongful discharge from employment. He also charged both his employer and certain named employees of the airline ¹ with the torts of wrongful interference with business relationship and wrongful inducement of breach of contract. Defendants demurred to this fifth amended complaint. The trial court sustained the demurrers without leave to amend and entered a judgment of dismissal pursuant to Code of Civil Procedure section 581, subdivision 3. Plaintiff has taken a timely appeal from the judgment.

At issue on this appeal are the circumstances, if any, under which a long-term employee such as plaintiff, hired pursuant to an oral contract of employment for an unspecified term, may recover damages from his employer on a theory of wrongful discharge. We are also required to consider whether there is any liability on the part of certain of plaintiff's fellow employees for their conduct as participants in the events which led to plaintiff's termination.

We begin by taking notice of the fact that, recently, in Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 164 Cal.Rptr. 839, 610 [111 Cal.App.3d 447] P.2d 1330, our high court clarified some aspects of the rule that a wrongful discharge of an employee constitutes a recognized cause of action. In addition, we point out preliminarily that the instant appeal is governed by the rule that "(b)ecause this appeal arises from a judgment entered after the sustaining of a general demurrer, we must, under established principles, assume the truth of all properly pleaded material allegations of the complaint in evaluating the validity of the trial court's action." (Tameny, supra, 27 Cal.3d 167, 170, 164 Cal.Rptr. 839, 610 P.2d 1330.)

As indicated previously, two causes of action are set forth in the fifth amended complaint. The first cause is directed against plaintiff's former employer, defendant American Airlines, seeking compensatory damages for breach of contract. Plaintiff alleges that he entered into an oral contract with defendant employer on December 8, 1958, pursuant to which he became a permanent employee of the airline. The terms of employment, it is alleged, included defendant employer's Regulation 135-4, ² which expressed the employer's policy and procedure with respect to employee grievances and discharge. Plaintiff further alleges, in the context of the contract cause of action, a breach of an implied-in-law covenant of good faith and fair dealing by the employer-a covenant contained in the contract which insures that neither contracting party will do anything which would injure the right of the other to receive the benefits of the contract. It is alleged that from 1958 to 1976, an 18-year period, plaintiff worked for defendant employer as a payroll clerk, a ramp agent, and, from 1961 forward, as an airport operations agent.

Plaintiff alleges that the contractual breach occurred on December 23, 1976, through American Airlines "wrongfully and without just cause suspending plaintiff" from his employment, and, "without fair, complete or honest investigation charging plaintiff falsely and without just cause, with theft, leaving his work area ... without authorization and threatening a fellow employee with bodily harm, all in violation of (American Airline's) Regulations." Plaintiff further sets forth in his pleading that he was terminated by American Airlines "wrongfully and without just cause" on December 30, 1976, for "allegedly committing said violations of said Regulations but actually for plaintiff's union organizing activities"; and that "(t)hereafter defendant American Airlines failed to afford plaintiff, as required by said Regulations, a fair, impartial and objective hearing of his protest of said suspension and discharge, a fair, impartial and objective determination of his appeal and a fair, impartial and objective review by a Review Board of the decision of the Hearing Officer on plaintiff's said protest of said suspension and discharge."

It is alleged by plaintiff that, at the time of his termination, his salary was $22,000 per year, and that he had acquired, pursuant to the employment contract, certain retirement and pension benefits, and the right to continue to earn such benefits to age 65, the right to borrow from, save in and receive dividends from the credit union, to enjoy seniority status and certain other unspecified rights. It is further pleaded that plaintiff has attempted, without success, to find other employment in the airline industry since his discharge by American Airlines.

The second cause of action sounds in tort, alleging a wrongful interference with business relationship and a wrongful inducement to breach the employment contract. Along with American Airlines, certain employees of American Airlines are named defendants. These employees and American Airlines, according to plaintiff, engaged in a conspiracy to cause his discharge. Plaintiff here seeks not only compensatory damages but punitive damages as well.

I The Common Law Rule With Respect to Employment Contracts for an Unspecified Term

In California, the long-established common law rule applicable to employment contracts for an unspecified term is embodied in Labor Code section 2922, which provides: "An employment, having no specified term, may be terminated at the will of either party on notice to the other. Employment for a specified term means an employment for a period greater than one month." (As amended by Stats.1971, ch. 1580, § 1, p. 3186; Stats.1971, ch. 1607, § 2, p. 3459.)

The absolute power conferred by Labor Code section 2922 on an employer to discharge the at-will employee without cause is founded on the contractual concept of mutuality of obligation. The reasoning is that, since an employee may terminate the employment relationship when he wishes to do so, the employer also is entitled to terminate the relationship at his pleasure. However, when viewed in the context of present-day economic reality and the joint, reasonable expectations of employers and their employees, the "freedom" bestowed by the rule of law on the employee may indeed be fictional. As the case law interpreting Labor Code section 2922 demonstrates, the rule applied in its purest form easily leads to harsh results for the employee. ³

A typical statement of the absolute principle is contained in the case of Marin v. Jacuzzi (1964) 224 Cal.App.2d 549, 553, 36 Cal.Rptr. 880, where the court declared that "(a) contract for permanent employment is interpreted as a contract for an indefinite period and in the absence of statutory provisions or public policy considerations (citations) is terminable at the will of either party (citation) for any reason whatsoever (citation)." Marin goes on to emphasize that "the presence of ill will or improper motive" does not affect the power of the employer to terminate. (See also 1 Witkin, Summary of California Law (8th ed. 1973) § 196, pp. 789-790; Ruinello v. Murray (1951) 36 Cal.2d 687, 227 P.2d 251; Swaffield v. Universal Ecsco Corp. (1969) 271 Cal.App.2d 147, 167, 76 Cal.Rptr. 680.) Defendants herein rely upon the numerous expressions of this principle found in California decisional law as justification for the dismissal of plaintiff's action by the trial court.

There are some qualifications attendant upon the common law rule, however. Witkin points out that "(a) contract for 'permanent employment' calls for the following distinction: (a) If it is supported by some independent consideration, it is not terminable at will, but (b) if the only consideration for the alleged agreement of personal employment is the services to be rendered thereunder, the contract is terminable by either party at any time. (Citations.) If not terminable at will, it is construed as an agreement for employment for a reasonable period. Upon termination without cause, the employee may recover damages for what the court finds to be such a 'reasonable period.' " (1 Witkin, supra, § 197, pp. 790-791.) (Emphasis in original.) But only a few California courts have utilized the "independent consideration" qualification as justification for imposing liability on an employer for wrongful discharge. The cases of Ferreyra v. E. & J. Gallo Winery (1964) 231 Cal.App.2d 426, 41 Cal.Rptr. 819 (with a dissenting opinion) and Becket v. Welton Becket & Associates (1974) 39 Cal.App.3d 815, 114 Cal.Rptr. 531, serve as illustrations of reluctance despite unusually persuasive factual situations.

A comprehensive updated statement of the common law rule may be found in Patterson v. Philco Corp. (1967) 252 Cal.App.2d 63, 65, 60 Cal.Rptr. 110: "The mere fact that a contract is terminable at will does not give the employer the absolute right to terminate it in all cases. The employer may be subject to damages for terminating the contract at will when such termination would be a violation of (a) public policy (citation), (b) a statute (citations), or (c) when the employee was engaged contractually to serve so long as he performed to the satisfaction of the employer (citation)." In our view, the Patterson summary more accurately defines the present state of the law.

II Public Policy Considerations

While, as defendants point out, our Legislature, despite...