Fortune v. National Cash Register Co.

Decision Date20 July 1977
Citation364 N.E.2d 1251,373 Mass. 96
Parties, 115 L.R.R.M. (BNA) 4658
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court

David H. Locke, Wellesley, (A. Arnold Lundwall, Wellesley, with him), for plaintiff.

Andrew F. Lane, Boston, for defendant.

Before HENNESSEY, C. J., and KAPLAN, WILKINS, LIACOS and ABRAMS, JJ.

ABRAMS, Justice.

Orville E. Fortune (Fortune), a former salesman of The National Cash Register Company (NCR), brought a suit to recover certain commissions allegedly due as a result of a sale of cash registers to First National Stores Inc. (First National) in 1968. Counts 1 and 2 of Fortune's amended declaration claimed bonus payments under the parties' written contract of employment. The third count sought recovery in quantum meruit for the reasonable value of Fortune's services relating to the same sales transaction. Judgment on a jury verdict for Fortune was reversed by the APPEALS COURT, FORTUNE V. NATIONAL CASH REGISTER CO., --- MASS.APP. ---, 349 N.E.2D 350 (1976)A, and this court granted leave to obtain further appellate review. We affirm the judgment of the Superior Court. We hold, for the reasons stated herein, there was no error in submitting the issue of "bad faith" termination of an employment at will contract to the jury.

The issues before the court are raised by NCR's motion for directed verdicts. 1 Accordingly, we summarize the evidence most favorable to the plaintiff. H. P. Hood & Sons v. Ford Motor Co., --- Mass. ---, ---, b 345 N.E.2d 683 (1976).

Fortune was employed by NCR under a written "salesman's contract" which was terminable at will, without cause, by either party on written notice. The contract provided that Fortune would receive a weekly salary in a fixed amount plus a bonus for sales made within the "territory" (i. e., customer accounts or stores) assigned to him for "coverage or supervision," whether the sale was made by him or someone else. 2 The amount of the bonus was determined on the basis of "bonus credits," which were computed as a percentage of the price of products sold. Fortune would be paid a percentage of the applicable bonus credit as follows: (1) 75% if the territory was assigned to him at the date of the order, (2) 25% if the territory was assigned to him at the date of delivery and installation, or (3) 100% if the territory was assigned to him at both times. The contract further provided that the "bonus interest" would terminate if shipment of the order was not made within eighteen months from the date of the order unless (1) the territory was assigned to him for coverage at the date of delivery and installation, or (2) special engineering was required to fulfil the contract. In addition, NCR reserved the right to sell products in the salesman's territory without paying a bonus. However, this right could be exercised only on written notice.

In 1968, Fortune's territory included First National. This account had been part of his territory for the preceding six years; he had been successful in obtaining several orders from First National, including a million dollar order in 1963. Sometime in late 1967, or early 1968, NCR introduced a new model cash register, Class 5. Fortune corresponded with First National in an effort to sell the machine. He also helped to arrange for a demonstration of the Class 5 to executives of First National on October 4, 1968. NCR had a team of men also working on this sale.

On November 27, 1968, NCR's manager of chain and department stores, and the Boston branch manager, both part of NCR's team, wrote to First National regarding the Class 5. The letter covered a number of subjects, including price protection, trade-ins, and trade-in protection against obsolescence. While NCR normally offered price protection for only an eighteen-month term, apparently the size of the proposed order from First National caused NCR to extend its price protection terms for either a two-year or four-year period. On November 29, 1968, First National signed an order for 2,008 Class 5 machines to be delivered over a four-year period at a purchase price of approximately $5,000,000. Although Fortune did not participate in the negotiation of the terms of the order, 3 his name appeared on the order form in the space entitled "salesman credited." The amount of the bonus credit as shown on the order was $92,079.99.

On January 6, 1969, the first working day of the new year, Fortune found an envelope on his desk at work. It contained a termination notice addressed to his home dated December 2, 1968. Shortly after receiving the notice, Fortune spoke to the Boston branch manager with whom he was friendly. The manager told him, "You are through," but, after considering some of the details necessary for the smooth operation of the First National order, told him to "stay on," and to "(k)eep on doing what you are doing right now." Fortune remained with the company in a position entitled "sales support." 4 In this capacity, he coordinated and expedited delivery of the machines to First National under the November 29 order as well as servicing other accounts.

Commencing in May or June, Fortune began to receive some bonus commissions on the First National order. Having received only 75% of the applicable bonus due on the machines which had been delivered and installed, Fortune spoke with his manager about receiving the full amount of the commission. Fortune was told "to forget about it." Sixty-one years old at that time, and with a son in college, Fortune concluded that it "was a good idea to forget it for the time being."

NCR did pay a systems and installations person the remaining 25% of the bonus commissions due from the First National order although contrary to its usual policy of paying only salesmen a bonus. NCR, by its letter of November 27, 1968, had promised the services of a systems and installations person; the letter had claimed that the services of this person, Bernie Martin (Martin), would have a forecasted cost to NCR of over $45,000. As promised, NCR did transfer Martin to the First National account shortly after the order was placed.

Approximately eighteen months after receiving the termination notice, Fortune, who had worked for NCR for almost twenty-five years, was asked to retire. When he refused, he was fired in June of 1970. Fortune did not receive any bonus payments on machines which were delivered to First National after this date.

At the close of the plaintiff's case, the defendant moved for a directed verdict, arguing that there was no evidence of any breach of contract, and adding that the existence of a contract barred recovery under the quantum meruit count. Ruling that Fortune could recover if the termination and firing were in bad faith, the trial judge, without specifying on which count, submitted this issue to the jury. NCR then rested and, by agreement of counsel, the case was sent to the jury for special verdicts on two questions: 5

"1. Did the Defendant act in bad faith . . . when it decided to terminate the Plaintiff's contract as a salesman by letter dated December 2, 1968, delivered on January 6, 1969?

"2. Did the Defendant act in bad faith . . . when the Defendant let the Plaintiff go on June 5, 1970?"

The jury answered both questions affirmatively, and judgment entered in the sum of $45,649.62. 6

The central issue on appeal is whether this "bad faith" termination constituted a breach of the employment at will contract. Traditionally, an employment contract which is "at will" may be terminated by either side without reason. See Fenton v. Federal St. Bldg. Trust, 310 Mass. 609, 612, 39 N.E.2d 414 (1942); Mechanics Foundry & Mach. Co. v. Lynch, 236 Mass. 504, 505, 128 N.E. 877 (1920); Gebhard v. Royce Aluminum Corp., 296 F.2d 17, 18-19 (1st Cir. 1961); 9 S. Williston, Contracts § 1017 (3d ed. 1967); Restatement (Second) of Agency § 442 (1958). Although the employment at will rule has been almost uniformly criticised, see Blades, Employment at Will vs. Individual Freedom: On Limiting the Abusive Exercise of Employer Power, 67 Colum.L.Rev. 1404 (1967); Blumrosen, Workers' Rights Against Employers and Unions: Justice Francis A Judge for Our Season, 24 Rutgers L.Rev. 480 (1970), it has been widely followed.

The contract at issue is a classic terminable at will employment contract. It is clear that the contract itself reserved to the parties an explicit power to terminate the contract without cause on written notice. It is also clear that under the express terms of the contract Fortune has received all the bonus commissions to which he is entitled. Thus, NCR claims that it did not breach the contract, and that it has no further liability to Fortune. 7 According to a literal reading of the contract, NCR is correct.

However, Fortune argues that, in spite of the literal wording of the contract, he is entitled to a jury determination on NCR's motives in terminating his services under the contract and in finally discharging him. We agree. We hold that NCR's written contract contains an implied covenant of good faith and fair dealing, and a termination not made in good faith constitutes a breach of the contract.

We do not question the general principles that an employer is entitled to be motivated by and to serve its own legitimate business interests; that an employer must have wide latitude in deciding whom it will employ in the face of the uncertainties of the business world; and that an employer needs flexibility in the face of changing circumstances. We recognize the employer's need for a large amount of control over its work force. However, we believe that where, as here, commissions are to be paid for work performed by the employee, the employer's decision to terminate its at will employee should be made in good faith. NCR's right to make decisions in its own interest is not, in our view, unduly hampered by a...

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