DeRose v. Putnam Management Co., Inc.

• Decision Date: 12 August 1986
• Citation: 398 Mass. 205,496 N.E.2d 428
• Parties: , 105 Lab.Cas. P 55,659, 1 IER Cases 1672 Salvatore DeROSE v. PUTNAM MANAGEMENT COMPANY, INC.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 428

496 N.E.2d 428

398 Mass. 205, 105 Lab.Cas. P 55,659,

1 IER Cases 1672

Salvatore DeROSE v. PUTNAM MANAGEMENT COMPANY, INC.

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued April 9, 1986.

Decided Aug. 12, 1986.

Harvey Schwartz (Robert A. Griffith, Boston, with him), for plaintiff.

Timothy P. O'Neill, Dorchester (Jayne Conroy, Newton, with him), for defendant.

Lynn A. Girton & Marjorie Heins, Boston, for Civil Liberties Union of Mass. & others, amici curiae, submitted a brief.

ABRAMS, Justice.

The plaintiff, Salvatore DeRose, a former at-will employee of the defendant, Putnam Management Company, Inc., brought an action on a theory of breach of contract for wrongful discharge. The gravamen of the complaint is that the defendant wrongfully discharged the plaintiff in reprisal for the plaintiff's testimony at the criminal trial of another employee for the theft of some securities. The question presented is whether an employee at-will may resort to the courts for a remedy if the employee at-will is dismissed in violation of public policy in circumstances in which the employer does not deprive the plaintiff of any bonuses, wages, or commissions. The judge concluded that such an employee would have a remedy if he were terminated in violation of public policy. The judge determined that there was sufficient evidence to have a jury consider whether the discharge violated public policy. The jury returned a verdict of $9,000 for breach of contract. The plaintiff appeals, claiming the damages are inadequate. The defendant cross-appeals, alleging that an employee at-will who did not suffer any financial loss could not recover damages. We granted the plaintiff's application for direct appellate review. We affirm.

We summarize the evidence. At the time he was terminated, the plaintiff had been employed by the defendant for fourteen years as an at-will employee. At the time the plaintiff was terminated, he was the manager and assistant vice president in charge of computer operations, having received several promotions since his initial hiring in 1964.

In the late summer of 1977, the Federal Bureau of Investigation (F.B.I.) notified the defendant that $26,000,000 worth of stolen Putnam securities had been discovered in Pittsburgh. A team of F.B.I. agents moved into the company building and set up an operational base to investigate the theft. The defendant specifically directed all of its employees to cooperate fully with the F.B.I. The plaintiff did cooperate with the F.B.I.

Suspicion focused on a former employee, one Matthew McGrath, who had been fired on July 25, 1977. The plaintiff had been McGrath's direct supervisor. During 1977, the plaintiff's supervisor, Anton Thiel, Jr., was critical of various aspects of McGrath's personality and performance. Thiel frequently complained to the plaintiff about McGrath. In June, 1977, Thiel told the plaintiff that McGrath would be terminated for falsifying initialled corrections on the daily computer fund pricing sheets. Thiel instructed the plaintiff not to notify McGrath of Thiel's decision to fire him (McGrath) until McGrath returned from his vacation. Thiel wanted to ensure sufficient time so that the locks to the building and the computer room could be changed, a normal procedure when an employee was terminated. After the locks had been changed, but before McGrath returned from vacation, the plaintiff notified McGrath of his (McGrath's) discharge. Three days after McGrath was fired, Thiel told the plaintiff that McGrath had gained access to the building on the previous evening with the suspected assistance of another employee, William Trainor. When confronted by Thiel in the plaintiff's presence, Trainor admitted that he had let McGrath into the reception area but denied that McGrath had gone elsewhere in the building.

During the F.B.I. investigation, the plaintiff talked with Thiel several times about McGrath's possible culpability. Thiel asked the plaintiff to see if he could find out any information from McGrath about the stolen securities. The plaintiff met with McGrath for that purpose but was unable to elicit any incriminating information from McGrath.

In June, 1978, a jury convicted McGrath of stealing the securities. The plaintiff testified at that trial. Prior to his testifying, the plaintiff was told by Thiel: "You are going to be testifying, you better implicate him [McGrath] because you know he is guilty." The plaintiff responded that he "didn't know any such thing." Nothing further was said. In his testimony, the plaintiff did not implicate McGrath.

After the trial, the defendant's senior officers ordered transcripts of the plaintiff's testimony as well as Trainor's testimony. Trainor told the jurors that, at the plaintiff's suggestion, he lied to Thiel about McGrath's unauthorized entry into the building. The plaintiff testified that he did not tell Trainor to lie to Thiel.

On September 27, 1978, Thiel fired the plaintiff based on three charges: "(1) poor management--failure to fire McGrath prior to the security certificates having been turned up missing; (2) informing Matthew McGrath that he was fired before he was ordered to do so; and (3) counselling an operator, William Trainor, to tell a lie." The plaintiff filed suit in Superior Court on October 17, 1979, alleging the defendant wrongfully terminated his employment because he did not inculpate McGrath at trial. The plaintiff alleged that as a result of the defendant's actions, he was unable to obtain employment and that his reputation in the computer industry had been destroyed. ¹

1. The defendant's motions for a directed verdict and for judgment notwithstanding the verdict. Relying on our prior cases, the defendant contends in effect that only in the case of overreaching for financial gain by an employer can an at-will employee recover from the employer. Because the plaintiff was paid all monies due him, the defendant asserts that his motion for directed verdict or judgment notwithstanding the verdict should have been allowed. See Gram v. Liberty Mut. Ins. Co., 391 Mass. 333, 334, 461 N.E.2d 796 (1984) (Gram II ); Kravetz v. Merchants Distribs., Inc., 387 Mass. 457, 463, 440 N.E.2d 1278 (1982); Maddaloni v. Western Mass. Bus Lines, Inc., 386 Mass. 877, 884 n. 7, 438 N.E.2d 351 (1982); Cort v. Bristol-Myers Co., 385 Mass. 300, 431 N.E.2d 908 (1982); Gram v. Liberty Mut. Ins. Co., 384 Mass. 659, 429 N.E.2d 21 (1981) (Gram I ); Fortune v. National Cash Register Co., 373 Mass. 96, 364 N.E.2d 1251 (1977).

The plaintiff asks that we adopt an exception to the at-will rule by holding that an at-will employee who is terminated in violation of public policy may resort to the courts for a remedy. The judge ruled that there should be a remedy if an at-will employee is terminated in violation of public policy. He also concluded that "it would violate public policy if [the employee] were asked ... to give evidence implicating a person and then was fired because [the employee] did not give such evidence."

The seminal case on termination in violation of public policy is Petermann v. International Bhd. of Teamsters, Local 396, 174 Cal.App.2d 184, 188-189, 344 P.2d 25 (1959). In Petermann, the employer ordered an at-will employee to testify falsely at a legislative hearing and then fired the employee when he refused to commit perjury. The court held that the employer's conduct violated the State's public policy of encouraging truthful testimony and therefore was an abuse of the employer's contractual rights. Subsequent to Petermann, most courts which have considered the issue have permitted at-will employees to recover for wrongful terminations in violation of public policy. See, e.g., Novosel v. Nationwide Ins. Co., 721 F.2d 894, 898-899 (3d Cir.1983); Perks v. Firestone Tire & Rubber Co., 611 F.2d 1363, 1366 (3d Cir.1979); Wagenseller v. Scottsdale Memorial Hosp., 147 Ariz. 370, 385, 710 P.2d 1025 (1985); Tameny v. Atlantic Richfield Co., 27 Cal.3d 167, 178, 164 Cal.Rptr. 839, 610 P.2d 1330 (1980); Glenn v. Clearman's Golden Cock Inn, Inc., 192 Cal.App.2d 793, 797, 13 Cal.Rptr. 769 (1961); Sheets v. Teddy's Frosted Food, Inc., 179 Conn. 471, 476, 427 A.2d 385 (1980); Parnar v. Americana Hotels, Inc., 65 Hawaii 370, 380, 652 P.2d 625 (1982); Palmateer v. International Harvester Co., 85 Ill.2d 124, 132-133, 52 Ill.Dec. 13, 421 N.E.2d 876 (1981); Kelsay v. Motorola, Inc., 74 Ill.2d 172, 181, 23 Ill.Dec. 559, 384 N.E.2d 353 (1979); Frampton v. Central Ind. Gas Co., 260 Ind. 249, 253, 297 N.E.2d 425 (1973); Adler v. American Standard Corp., 291 Md. 31, 47, 432 A.2d 464 (1981); Suchodolski v. Michigan Consol. Gas Co., 412 Mich. 692, 695, 316 N.W.2d 710 (1982); Sventko v. Kroger Co., 69 Mich.App. 644, 647, 245 N.W.2d 151 (1976); Cloutier v. Great Atl. & Pac. Tea Co., 121 N.H. 915, 922-923, 436 A.2d 1140 (1981); Pierce v. Ortho Pharmaceutical Corp., 84 N.J. 58, 72, 417 A.2d 505 (1980); O'Sullivan v. Mallon, 160 N.J.Super. 416, 418, 390 A.2d 149 (1978); Sides v. Duke Hosp., 74 N.C.App. 331, 339, 328 S.E.2d 818 (1985); Brown v. Transcon Lines, 284 Or. 597, 612, 588 P.2d 1087 (1978); Nees v. Hocks, 272 Or. 210, 219, 536 P.2d 512 (1975); Reuther v. Fowler & Williams, Inc., 255 Pa.Super. 28, 31, 386 A.2d 119 (1978); Ludwick v. This Minute of Carolina, Inc., 287 S.C. 219, 224-225, 337 S.E.2d 213 (1985); Sabine Pilot Serv., Inc. v. Hauck, 687 S.W.2d 733, 735 (Tex.1985); Harless v. First Nat'l Bank, 162 W.Va. 116, 124, 246 S.E.2d 270 (1978); Brockmeyer v. Dun & Bradstreet, 113 Wis.2d 561, 572-573, 335 N.W.2d 834 (1983). Contra Hinrick's v. Transvilaire Hosp., 352 So.2d 1180 (Ala.1977); DeMarco v. Publix Super Mkts., Inc., 384 So.2d 1253 (Fla.1980); Murphy v. American Home Prods. Corp., 58 N.Y.2d 293, 461 N.Y.S.2d 232, 448 N.E.2d 86 (1983). See generally Blades, Employment at Will vs. Individual Freedom: On Limiting the Abusive Exercise of Employer Power, 67 Colum.L.Rev. 1404 (1967). ² We too...