Fenwick v. State

Decision Date05 April 2016
Docket NumberNo. DA 15–0252.,DA 15–0252.
Citation369 P.3d 1011,2016 MT 80,383 Mont. 151
CourtMontana Supreme Court

For Appellant: Palmer A. Hoovestal, Hoovestal Law Firm, PLLC; Helena, Montana, for Appellant.

For Appellees: Trevor L. Uffelman, Attorney at Law; Curt Drake, Patricia H. Klanke, Drake Law Firm; Helena, Montana.

Justice JIM RICE delivered the Opinion of the Court.

¶ 1 Julia Fenwick (Fenwick) appeals from an order entered by the First Judicial District Court, Lewis and Clark County, granting summary judgment to the State of Montana, Department of Military Affairs and Emergency Services Division (Department), on several of her claims related to the severance of her employment with the Department.

¶ 2 We address the following issues, and affirm:

1. Did the District Court err by holding the Severance Agreement was lawful?
2. Did the District Court err by holding that Fenwick did not enter the Severance Agreement under duress, undue influence, menace, fraud, or mistake?
3. Did the District Court err by holding the undisputed facts establish the Department's consideration for the Severance Agreement did not fail?
4. Did the District Court err by dismissing Fenwick's constitutional claims?
5. As argued by the Department, did the District Court err by denying summary judgment to the Department on Fenwick's claims for Intentional Interference with a Business Relationship and Breach of the Covenant of Good Faith and Fair Dealing?

¶ 3 In April 2011, Fenwick and the Department executed a voluntary severance agreement (Severance Agreement) wherein the Department agreed to lay off Fenwick, as opposed to terminating her for cause, in exchange for Fenwick releasing any claims she had against the Department.

¶ 4 As consideration for Fenwick's release of claims, the Severance Agreement obligated the Department to do several things. First, the Department agreed to eliminate Fenwick's position, the Office of Homeland Security Grants Manager, pursuant to the Reduction in Force Policy (RIF Policy) set forth in the Montana Operations Manual.1 Second, the Department agreed to allow Fenwick to participate in the job registry for two years following the lay-off date. And third, the Department agreed to provide Fenwick with neutral employment recommendations. The Department also provided Fenwick other benefits, including three months' pay plus $3,500, healthcare, and access to training.

¶ 5 As consideration for the Department laying off Fenwick instead of discharging her, Fenwick was obligated to waive all claims known or unknown that she may have against the Department and waive all benefits under the RIF Policy that were not specifically mentioned by the Severance Agreement.

¶ 6 After execution of the Severance Agreement, for which both parties were represented by counsel, the Department eliminated the position of Office of Homeland Security Grants Manager. Seven months later, the Department created a new position, the Disaster and Emergency Services Grants Program Manager. Fenwick applied for this position through the job registry, but was not hired for the position.

¶ 7 Fenwick thereafter started an independent consulting business and contracted with Butte–Silver Bow County to provide grants administration services. The Department allegedly contacted Butte–Silver Bow County officials and stated that Fenwick should not be permitted to contact Department coordinators in the course of her work for the County. At no time did the Department receive a request for an employment recommendation from any person or organization.

¶ 8 Fenwick filed this action, alleging the Severance Agreement should be rescinded because (1) it was unlawful under a provision in the RIF Policy that barred the use of a reduction-in-force layoff in lieu of termination; (2) the Department's consideration failed because it had not actually eliminated her position; (3) the Department's consideration failed because it did not give her preferential treatment pursuant to the RIF Policy when considering her application for the Disaster and Emergency Services Grants Program Manager position; and (4) the Department's consideration failed because the Department's communications with Butte–Silver Bow County constituted negative employment recommendations. In addition, Fenwick alleged wrongful discharge, intentional interference with a business relationship, breach of the covenant of good faith and fair dealing, and constitutional tort claims. The District Court dismissed Fenwick's constitutional tort claims, holding the claims were not recognized as valid causes of action under Montana law or were otherwise not well pleaded.

¶ 9 The parties filed cross-motions on summary judgment. The District Court held as a matter of law that the Severance Agreement could not be rescinded because (1) the Severance Agreement was not unlawful because the RIF Policy was not law; (2) the Department's consideration did not fail because it had eliminated Fenwick's position; (3) the Department's consideration did not fail because the Severance Agreement expressly stated Fenwick would not be given preferential treatment when applying to jobs through the job registry; and (4) the Department's consideration did not fail because its communications with Butte–Silver Bow County, while actionable, did not constitute an employment recommendation. The District Court further held that genuine issues of material fact precluded summary judgment on Fenwick's claims for intentional interference with a business relationship and the breach of the covenant of good faith and fair dealing, and that they would be tried.

¶ 10 Fenwick requested certification of the District Court's judgment and dismissal orders as final for purposes of appeal pursuant to M.R. Civ. P. 54(b). The District Court considered the factors set out in Weinstein v. University of Montana, 271 Mont. 435, 898 P.2d 101 (1995), and granted certification. This Court entered an order determining the certification order complied with the Montana Rules of Appellate Procedure and that the appeal may proceed.


¶ 11 The construction and interpretation of a contract is a question of law that is reviewed for correctness. Schwend v. Schwend, 1999 MT 194, ¶ 36, 295 Mont. 384, 983 P.2d 988.

¶ 12 An order on summary judgment is reviewed de novo, applying the same criteria as the district court. Lorang v. Fortis Ins. Co., 2008 MT 252, ¶ 36, 345 Mont. 12, 192 P.3d 186. Under M.R. Civ. P. 56(c), summary judgment is appropriate where there is a complete absence of genuine issues of material fact, and the moving party is entitled to judgment as a matter of law. Lorang, ¶ 37. All reasonable inferences from the evidence are drawn in favor of the non-moving party. Redies v. Attys. Liab. Prot. Soc'y, 2007 MT 9, ¶ 26, 335 Mont. 233, 150 P.3d 930.

¶ 13 A district court's ruling on a motion to dismiss under M.R. Civ. P. 12(b)(6) is reviewed de novo. Meagher v. Butte–Silver Bow City–County, 2007 MT 129, ¶ 13, 337 Mont. 339, 160 P.3d 552. A motion to dismiss under Rule 12(b)(6) has the effect of admitting all well-pleaded allegations in the complaint. Meagher, ¶ 13. In considering the motion, the complaint is construed in the light most favorable to the plaintiff, and all allegations of fact contained therein are taken as true. Meagher, ¶ 13.


¶ 14 1. Did the District Court err by holding the Severance Agreement was lawful?

¶ 15 Fenwick argues the Severance Agreement was unlawful because it violated a provision of the RIF Policy. The Department argues a violation of the RIF Policy does not render the Severance Agreement unlawful because the RIF Policy is not law. We agree with the Department.

¶ 16 An illegal contract or contract provision will not be enforced. Mont. Petroleum Tank Release Comp. Bd. v. Crumleys, Inc., 2008 MT 2, ¶ 56, 341 Mont. 33, 174 P.3d 948. A contract is unlawful if it is "(1) contrary to an express provision of law; (2) contrary to the policy of express law, though not expressly prohibited; or (3) otherwise contrary to good morals." Section 28–2–701, MCA.

¶ 17 The Montana Administrative Procedure Act defines a "rule" as "each agency regulation, standard, or statement of general applicability that implements, interprets, or prescribes law or policy or describes the organization, procedures, or practice requirements of an agency. The term includes the amendment or repeal of a prior rule." Section 2–4–102(11)(a), MCA. Excluded from MAPA's definition of "rule" are "statements concerning only the internal management of an agency or state government and not affecting private rights or procedures available to the public...." Section 2–4–102(11)(b)(i), MCA.

¶ 18 Prior to 2010, an administrative rule provided "Lay-off shall not be used as an alternative to discharging an employee for cause or disciplinary purposes." ARM 2.21.5007(15) (1982). In March 2010—prior to the actions giving rise to this proceeding—the Department of Administration formally repealed ARM 2.21.5007, believing ARM 2.21.5007 was not appropriately considered a rule because it addressed "statements concerning only the internal management of an agency" and was therefore excluded from the definition of "rule" under § 2–4–102(11)(b)(i), MCA. MAR Notice No. 2–21–417; 2010 Mont. Admin. Reg. at 254. Included in the proposal to repeal ARM 2.21.5007 was a statement that such a policy was more appropriately included in the Montana Operations Manual. MAR Notice No. 2–21–417; 2010 Mont. Admin. Reg. at 254.

¶ 19 Fenwick argues the RIF Policy is an express law because the RIF Policy constituted an "amendment or repeal of a prior rule." Essentially, Fenwick's stance is that the Department of Administration's statement—that the RIF Policy was more appropriately included in the...

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