Kunzie v. City of Olivette

• Decision Date: 28 February 2006
• Docket Number: No. SC 87022.,SC 87022.
• Citation: 184 S.W.3d 570
• Parties: Gene R. KUNZIE, Appellant, v. CITY OF OLIVETTE, Respondent.
• Court: Missouri Supreme Court

184 S.W.3d 570

Gene R. KUNZIE, Appellant, v. CITY OF OLIVETTE, Respondent.

No. SC 87022.

Supreme Court of Missouri, En Banc.

February 28, 2006.

Donald K. Murano, St. Charles, MO, for Appellant.

William B. Jones, James N. Foster, Jr., Corey L. Franklin, St. Louis, MO, for Respondent.

John M. Hessel, St. Louis, MO, for Amicus Curiae.

MICHAEL A. WOLFF, Chief Justice.

Gene Kunzie was an at-will employee of the City of Olivette for 23 years until his firing in August 2003. During his employment, Kunzie held various positions including, at the time of his firing, director of public works and building commissioner. Kunzie filed suit against the city. His third amended petition¹ sets forth three counts:

(1) a whistle blower claim of retaliatory discharge;

(2) wrongful termination in violation of public policy for Kunzie's reporting violations of various municipal codes, policies, and state laws; and

(3) breach of contract as to Kunzie's retirement benefits, work-related benefits, and severance rights.

The city filed a motion to dismiss, asserting that the court lacked subject matter jurisdiction because Kunzie failed to exhaust administrative remedies and that Kunzie's petition failed to state a claim upon which relief can be granted because the claims are barred by sovereign immunity.

The circuit court sustained the city's motion without explanation. After an opinion by the Court of Appeals, Eastern District, this Court granted transfer. Mo. Const. art. V, sec. 10. The judgment is reversed, and the case is remanded.

DISCUSSION

Since the circuit court did not specify the grounds for dismissal, this Court reviews the grounds asserted by the city for upholding the court's judgment. Farm Bureau Town and Country Ins. Co. of Missouri v. Angoff, 909 S.W.2d 348, 351 (Mo. banc 1995).

Exhaustion of Administrative Remedies

The city's motion to dismiss asserts that Kunzie failed to exhaust his administrative remedies prior to filing suit in the circuit court. "Failure to exhaust administrative remedies requires that a party seek all available remedies at the administrative level before applying to the courts for relief." Green v. City of St. Louis, 870 S.W.2d 794, 796 (Mo. banc 1994). "The rule requiring exhaustion of administrative remedies is one of subject matter jurisdiction." Green, 870 S.W.2d at 796. Questions of circuit court jurisdiction are solely issues of law and are reviewed independently. McCoy v. Caldwell County, 145 S.W.3d 427, 428 (Mo. banc 2004).

Under Missouri's administrative procedure act any person who has exhausted all administrative remedies and is aggrieved by a final decision in a "contested case" is entitled to judicial review by a circuit court of proper venue. Sections 536.100 and 536.110.² A "contested case" is "a proceeding before an agency in which legal rights, duties or privileges of specific parties are required by law to be determined after hearing." Section 536.010(2).³ The "law" that may require a hearing "includes any ordinance, statute, or constitutional provision that mandates a hearing." McCoy, 145 S.W.3d at 428.

In this case, the city's municipal code, numbers 20.510, 20.511 and 20.494, created a personnel appeals board to review certain employment decisions. The board serves as an "advisory body to hear and make written recommendation to the City Manager" regarding appeals from city employees of the discharge, suspension, discipline, or other penalizing actions of the city manager. Code No. 20.511. The "written recommendations" are to be provided to the city council. Id. City code number 20.494(c) prescribes the procedures to be used for an appeal of a negative employment decision. It also provides that the board's recommendations shall be filed with the city manager and further that "[w]ithin five days of receipt of the recommendations of the Board, the City Manager shall make his decision which shall be final." Code No. 20.494(c).

McCoy controls this issue. In McCoy, the circuit court dismissed the petition, finding that the previous proceeding before the hearing board was not a contested case under the administrative procedure act, section 536.100. 145 S.W.3d at 428. The county sheriff in McCoy fired two deputy sheriffs following the procedures in section 57.275. Id. Those procedures provided for written notice of the grounds for dismissal, a hearing upon request before an appointed board, and required the board to make a written report of the facts determined at the hearing. Id. Despite these procedures, the statute granted the sheriff "the final decision-making authority." Id. Thus, regardless of the written recommendations of the hearing board, the sheriff could still "terminate the deputies even in the face of findings that wholly support the deputy's continued employment." Id. at 429. Such a hearing, this Court held, was not one in which "legal rights, duties or privileges [were] to be determined" and was, therefore, not a contested case. Id.

As in McCoy, the hearing procedures here do not determine a city employee's legal rights, duties, or privileges. The board is merely advisory. Likewise, after receiving the board's recommendations, the city manager is vested with the ultimate decision making authority. As in McCoy, the city manager's decision is not subject to any "gauge or criteria," and the city manager can fire a city employee despite contrary recommendation findings.

This is not a contested case to which the administrative procedure act's exhaustion requirement applies. Dismissal of Kunzie's petition cannot be upheld on this basis.

Sovereign Immunity

The city's motion to dismiss also asserts that Kunzie's petition fails to state a claim upon which relief can be granted because the claims are barred by sovereign immunity.

Because the question of the city's immunity may depend on the classification of claims as either tort or contract, the nature of the claims should be examined. In counts one and two, Kunzie alleges: (1) a whistleblower claim of retaliation for Kunzie refusing to perform illegal acts or acts violating public policy and (2) wrongful termination in violation of public policy for Kunzie's reporting of law and ordinance violations. These counts are predicated upon the public policy exception to the at-will employment doctrine. Although wrongful discharge in this context might be based on a contractual relationship, Kunzie has chosen to proceed in tort. As is, this Court will treat this only as a tort claim. There is no reason to consider whether an at-will employee's wrongful discharge claim against a municipality should be treated as a breach of contract action. Cf. Skinner v. Maritz, Inc., 253 F.3d 337 (8th Cir.2001). Count three sets forth a breach of contract claim for retirement benefits, sick pay, and other miscellaneous entitlements.

The City's Immunity as Applied to Tort Claims

Municipality immunity is an oft-confused area of law. "Under the common law, only the State and its entities were entitled to complete sovereign immunity from all tort liability." Junior College Dist. of St. Louis v. City of St. Louis, 149 S.W.3d 442, 447 (Mo. banc 2004). "Municipal corporations traditionally have had immunity however, for those actions they undertake as a part of the municipality's governmental functions—actions benefiting the general public." Junior College, 149 S.W.3d at 447; State ex rel. Trimble v. Ryan, 745 S.W.2d 672, 673-74 (Mo. banc 1988). Municipalities have no immunity for torts while performing proprietary functions — actions benefiting or profiting the municipality in its corporate capacity. Junior College, 149 S.W.3d at 447.

This Court has held that termination of a city employee is a governmental function. State ex rel. Gallagher v. Kansas City, 319 Mo. 705, 7 S.W.2d 357 (banc 1928). See also Feuchter v. City of St. Louis, 357 Mo. 616, 210 S.W.2d 21, 25 (1948), and Nichols v. City of Kirksville, 68 F.3d 245, 247 (8th Cir.1995) (citing Gallagher, 7 S.W.2d at 361).

Kunzie has provided no sound reason to deviate from Gallagher. Personnel decisions and the internal administration of operating a municipal department are governmental. As such, the city is protected by governmental immunity unless some exception applies. In this case, the only applicable exception would be the municipality's procurement of liability insurance. Section 537.610.1 allows political subdivisions of the state to purchase liability insurance for tort claims and waives sovereign immunity "only to the maximum amount of and only for the purposes covered by such policy of insurance" or self-insurance plan....