Kolda v. City of Yankton, Corp.

• Decision Date: 06 August 2014
• Docket Number: 26746.,Nos. 26683,s. 26683
• Citation: 2014 S.D. 60,852 N.W.2d 425
• Parties: Eric D. KOLDA, Plaintiff and Appellant, v. CITY OF YANKTON, a municipal corporation and the Yankton Police Department, Defendants and Appellees.
• Court: South Dakota Supreme Court

852 N.W.2d 425

2014 S.D. 60

Eric D. KOLDA, Plaintiff and Appellant,

v.CITY OF YANKTON, a municipal corporation and the Yankton Police Department, Defendants and Appellees.

Nos. 26683, 26746.

Supreme Court of South Dakota.

Considered on Briefs April 28, 2014.

Decided Aug. 6, 2014.

Timothy R. Whalen, Lake Andes, South Dakota, Attorney for plaintiff and appellant.

Lisa Hansen Marso, Jason R. Sutton, Boyce, Greenfield, Pashby & Welk, LLP, Sioux Falls, South Dakota, Attorneys for defendants and appellees.

ZINTER, Justice.

[¶ 1.] The City of Yankton (the City) terminated Eric Kolda, a police officer, for violating police department policies. Kolda was notified of his termination by letter. Kolda appealed to the city manager. Following an evidentiary hearing, the city manager found cause for the disciplinary action and upheld the termination. Kolda then sued in circuit court, claiming wrongful discharge. On separate motions for summary judgment, the circuit court ruled that Kolda could only be terminated for cause with notice and the City failed to provide pre-termination notice. A jury found cause for the termination, precluding Kolda's claim for damages arising after the notice and evidentiary hearing. However, the circuit court awarded Kolda procedural due process damages for lost wages that accrued between the time of his summary termination and the post-termination evidentiary hearing. Kolda appeals the jury verdict finding just cause for the termination; and the City—by notice of review—appeals the judgment awarding procedural due process damages. We reverse and remand for the circuit court to vacate the award of damages because Kolda failed to exhaust his administrative remedies.

Facts and Procedural History

[¶ 2.] In 1998, Eric Kolda was hired as a jailer by the City, a city-manager form of government. In 1999, he was promoted to a police officer position. Kolda's position was the lowest level in the chain of command at the Yankton Police Department.

[¶ 3.] In 2004, Kolda was suspended for twenty-eight days for violating several police department policies. On January 15, 2009, he was terminated for a new violation of department policies. Kolda's 2009 termination is the subject of this appeal.

[¶ 4.] The termination occurred as a result of events that started in the spring of 2007. At that time, when both were off duty, a fellow officer told Kolda that the fellow officer had stolen a chainsaw. Department policy required Kolda to report the theft. However, Kolda did not do so. Later in 2007, Kolda's fellow officer applied for a job with the Nebraska State Patrol, which required a polygraph test. The officer told Kolda that he did not get the job because he admitted stealing the chainsaw. Kolda still did not report the theft.

[¶ 5.] Kolda eventually reported the theft in November 2008, which triggered an investigation of Kolda's fellow officer by the Division of Criminal Investigation. In January 2009, following the investigation, four of Kolda's superiors met and recommended that Kolda be terminated for his failure to timely report the theft. It was noted during this meeting that Kolda's failure to report the theft violated many of the same policies he violated in 2004.

[¶ 6.] Kolda was terminated on January 15, 2009, by delivery of a termination letter. The letter was prepared and signed by the chief of police. The letter indicated that Kolda had a right to appeal his termination to the city manager, who was also the City's grievance officer. Kolda appealed, and an evidentiary hearing was held on January 29, 2009. At the conclusion of the hearing, the city manager upheld Kolda's termination for cause. Kolda did not appeal to the Department of Labor and Regulation. Instead, Kolda sued in circuit court, alleging wrongful discharge.

[¶ 7.] The City moved for summary judgment. It argued, in part, that Kolda's claim was barred as a matter of law because he failed to exhaust his administrative remedies. The City also argued that SDCL 9–10–9 and SDCL 9–10–13 granted the city manager absolute power to remove Kolda, making him an at-will employee subject to termination without notice and opportunity to be heard. Circuit Judge Glen W. Eng denied the motion.

[¶ 8.] Judge Eng ruled that Kolda was not an at-will employee. Judge Eng first found that Kolda was not subject to the unrestricted removal power of the city manager because Kolda was not employed in the “administrative service of the municipality[.]” SeeSDCL 9–10–13 (granting the city manager the “power to appoint and remove all officers and employees in the administrative service of the municipality”). Judge Eng then found that Kolda was not an at-will employee because the City had adopted an employee handbook that only allowed termination for cause. See Hollander v. Douglas Cnty., 2000 S.D. 159, ¶ 14, 620 N.W.2d 181, 185 (describing the narrow exception to South Dakota's general at-will status for employees “when an employer's discharge policy provides that termination will occur only for cause”). Because Kolda could only be terminated for cause, Judge Eng concluded that Kolda “had a property interest sufficient to trigger due process protections.” See id. ¶ 16 (“Because [the employee] could only be terminated for cause, he had a property interest sufficient to trigger due process protections.”). Judge Eng finally concluded that Kolda's procedural due process rights were violated when the City failed to provide pre-termination notice and an opportunity to be heard. See id. ¶ 17 (quoting Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 542, 105 S.Ct. 1487, 1493, 84 L.Ed.2d 494 (1985)) (“[W]e must ask whether [the employee] had notice and an opportunity to be heard, ‘before he was deprived of any significant property interest.’ ”). Judge Eng did not address the City's other arguments because he concluded that “[t]he remaining issues, even if ruled upon in the City's favor, would not entitle the City to judgment as a matter of law in light of the court's finding of a due process violation.”

[¶ 9.] Following additional motions, Kolda moved for summary judgment. The circuit court, Circuit Judge Steven R. Jensen then presiding, granted Kolda's motion in part. Like Judge Eng, Judge Jensen ruled that Kolda was not an at-will employee, and therefore, he had a protected property interest in his continued employment that triggered procedural due process protection. Judge Jensen further ruled that the City failed to provide pre-termination due process when it summarily terminated Kolda's employment by the January 15 letter. However, Judge Jensen ruled that the January 29 evidentiary hearing provided Kolda with due process. Therefore, Judge Jensen ruled that, as a matter of law, Kolda was only entitled to claim procedural due process damages that accrued between his January 15 termination and his January 29 hearing. Judge Jensen ruled that Kolda's claim to post-January 29 damages depended on whether there was cause for the termination, and that was a question of fact for a jury.

[¶ 10.] A jury trial was held to determine whether cause existed to terminate Kolda. During and after trial, the City moved for a judgment as a matter of law. The City again argued that Kolda's claim was barred because he was an at-will employee who was subject to termination without notice and cause, and he failed to exhaust his administrative remedies. The circuit court denied the City's motions. The jury found that cause existed to terminate Kolda's employment, and his wrongful discharge claim was denied. However, the circuit court ruled that Kolda was entitled to procedural due process damages that accrued between his January 15 summary termination and his January 29 post-termination hearing. The court awarded $2,097.93 for wages lost during that period, plus prejudgment interest.

Decision

[¶ 11.] Because the City's motions for judgment as a matter of law are dispositive of all claims, we address the City's notice of review appealing the circuitcourt's denial of those motions.¹ The City first contends that Kolda was barred from recovering any damages because SDCL 9–10–9 granted the city manager absolute power to remove police officers, making Kolda an at-will employee. The City points out that at-will employees generally have no protected property interest in continued employment and therefore no right to due process protections. See Hollander, 2000 S.D. 159, ¶ 12, 620 N.W.2d at 185 (citing Loudermill, 470 U.S. at 538, 105 S.Ct. at 1491) (explaining that whether due process must be given “depends in large part on the presence of a property right in continued employment”).

[¶ 12.] “[I]t is within the exclusive province of the [L]egislature to determine terms under which employment may be terminated.” Finck v. City of Tea, 443 N.W.2d 632, 634 (S.D.1989). By enacting SDCL 60–4–4, the Legislature “has created ‘employment at will’ in this state.” ²Finck, 443 N.W.2d at 634 (citations omitted). Finck v. City of Tea recognized that the Legislature had not departed from SDCL 60–4–4's at-will status for appointed officers in aldermanic-governed municipalities. See id. at 635. We explained that SDCL 9–14–13 gave “the mayor ‘full and absolute power to remove appointed officers[,]’ ” and, in aldermanic-governed municipalities, the Legislature had not limited that power.³Id. at 634–35 (citations omitted). However, Finck did not address the effect of a municipality's personnel policy manual on a mayor's statutory removal power. We addressed that issue in Patterson v. Linn, 2001 S.D. 135, 636 N.W.2d 467.

[¶ 13.] Patterson rejected an appointed officer's claim that a municipality's personnel policy—which outlined legal procedures that had to be followed before discharging employees—limited the mayor's statutory removal power. See id. ¶¶ 8, 11. We explained that “[c]ity policies, like city ordinances, must stay within ‘reasonably strict’ adherence to their statutory ambit.” Id. ¶ 9 (quoting ...