Lanouette v. Ciba-Geigy Corp.

• Decision Date: 13 August 1990
• Docket Number: CIBA-GEIGY,No. F008571,F008571
• Citation: 272 Cal.Rptr. 428,1 Cal.App.4th 1317
• Court: California Court of Appeals Court of Appeals
• Parties: Previously published at 230 Cal.App.3d 889 230 Cal.App.3d 889, 1 Cal.App.4th 1317, 59 USLW 2147, 117 Lab.Cas. P 56,483, 5 IER Cases 993 Gene LANOUETTE, Plaintiff and Respondent, v.CORPORATION et al., Defendants and Appellants.

Page 428

272 Cal.Rptr. 428

Previously published at 230 Cal.App.3d 889

230 Cal.App.3d 889, 1 Cal.App.4th 1317, 59 USLW 2147,

117 Lab.Cas. P 56,483, 5 IER Cases 993

Gene LANOUETTE, Plaintiff and Respondent, v. CIBA-GEIGY CORPORATION et al., Defendants and Appellants.

No. F008571.

Court of Appeal, Fifth District, California.

Aug. 13, 1990.

Certified for Partial Publication ^*.

Review Granted Dec. 3, 1990.

Paul, Hastings, Janofsky & Walker, Andrew C. Peterson, Al Latham, Jr., and Paul W. Cane, Jr., Los Angeles, for defendants and appellants.

Irell & Manella, James N. Adler and Robert Barnes, Los Angeles, as amici curiae on behalf of defendants and appellants.

McCormick, Barstow, Sheppard, Wayte & Carruth, Stephen R. Cornwell and David H. Bent, Fresno, for plaintiff and respondent.

OPINION

FRANSON, Presiding Justice.

STATEMENT OF THE CASE

Ciba-Geigy Corporation, Steven Parker, Bruce Yergler and Joseph Prochaska (collectively appellants or Ciba-Geigy) appeal from the judgment entered on a jury verdict awarding $1.8 million dollars in compensatory and punitive damages to Gene Lanouette on his claims arising from an alleged breach of an employment contract. Specifically, the jury awarded Lanouette $100,000 for pain and suffering for tortious breach of the implied covenant of good faith and fair dealing, $100,000 for intentional infliction of emotional distress and $1 million in punitive damages, for total tort damages of $1.6 million. It also awarded $600,000 for breach of the termination-for-cause-only employment contract.

We hold as follows: (1) Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 254 Cal.Rptr. 211, 765 P.2d 373 (hereafter Foley ), bars all tort damages for breach of the implied covenant of good faith and fair dealing; hence, the judgment must be modified to delete the $100,000 award for such damages.

(2) In answer to a question of first impression, Foley does not bar tort damages for the intentional infliction of emotional distress. Further, such a claim is not preempted by the worker's compensation law where there is no injury causing disability or the need for medical treatment. Since there is substantial evidence to support the $100,000 compensatory damage award for this tort, we affirm the award.

(3) Because we cannot determine whether the $1 million punitive damage award was based on the permissible finding of intentional infliction of emotional distress or on the impermissible finding of a breach of the implied covenant of good faith and fair dealing, we reverse the punitive damage award and remand for a new trial on that issue.

(4) We affirm the $600,000 award for breach of the employment contract, holding among other things that the jury properly computed Lanouette's lost wages for the remainder of his working years.

STATEMENT OF FACTS

Viewing the record in the light most favorable to the judgment shows the following. Ciba-Geigy, one of the largest agricultural chemical companies in the country, manufactures and markets herbicides, fungicides and insecticides to be used on crops. Ciba-Geigy sells its products either directly to farmers or through contracts with distributors of farm products to sell through their retail outlets. Gene Lanouette was a sales representative for Ciba-Geigy.

Lanouette worked in the northern California district of the western region. Steven Parker was the northern California district manager and Lanouette's immediate supervisor. Joseph Prochaska was the regional manager, and Bruce Yergler was the assistant regional manager. Parker reported to Prochaska and Yergler. Oliver Adams had been Lanouette's district manager from the early 1970's until January 1982.

After Lanouette graduated from college in June 1966, he went to work for Ciba-Geigy as a sales representative assigned to the Bakersfield territory. He was transferred to the Fresno territory in March 1969. The Fresno territory included Fresno, Madera, San Benito and Monterey Counties. It was a significant area to Ciba-Geigy because Fresno is the most productive agricultural county in the United States, and many of Ciba-Geigy's key customers are headquartered in the territory.

Lanouette's responsibilities as a sales representative were to familiarize customers with Ciba-Geigy products and to persuade them to sell or use them. Lanouette was one of the better informed sales representatives in the district regarding product labels, uses and restrictions. Lanouette was also particularly skilled in conducting training sessions for other sales representatives and was considered a leader among sales representatives in the district.

During his 17 years with the company, Lanouette was promoted from a level I to a level V sales representative. Level V was introduced in 1978 or 1979 to recognize superior, long-term sales representatives. Lanouette's sales increased from approximately $500,000 during his first year in the Fresno territory to approximately $3,814,000 in 1982.

The Ciba-Geigy crop year ran from October 1 to September 30. The sales representatives were evaluated annually at the end of the crop year. Ciba-Geigy analyzed its representatives in five "key areas": contracted customer development, territory sales development, expense management, communications and personal contribution and development. The review process was very detailed. The evaluator commented on the representative's performance in each key area and rated it as "exceeds expectations," "meets expectations" or "below expectations." The representative was also given an overall rating. That rating scale ran from "1" to "5," with "1" for performance beyond expectations in all or almost all key result areas; "2" for performance noticeably exceeding expectations in most key result areas; "3" for performance meeting expectations; "4" for performance in an acceptable fashion in most key result areas but with significant deficiencies in one or more areas; and "5" for inadequate performance to meet the requirements of the job. Lanouette's average overall rating over the years was approximately "2." He never received a rating lower than "3" before 1983.

Lanouette conducted his business from an office in his home. Because of the nature of the work, his hours varied from 6 a.m. to 10 p.m., depending on what needed to be done and the time of year. In addition to his daily sales activities, Lanouette was involved in a substantial amount of customer entertainment.

Over the years, there was a noticeable increase in the volume of paperwork required of the sales representatives. Ciba-Geigy management needed regular input from the sales representatives in the field in order to plan, implement and evaluate effective marketing strategies.

Lanouette was required to make weekly written accomplishment reports; however, there were times when due to the press of other business he did not submit the reports in a timely fashion. He would combine several weeks' reports in one. Lanouette was criticized in his annual reviews over the years for failing to submit separate and timely reports. Even the years he was promoted or was rated "1," his superiors criticized his performance in the communication key result area. However, he was never told that failure to submit timely reports would have an effect on his job security. According to Adams, most sales representatives and district managers had trouble submitting the written reports in a timely fashion. Hank Stuit, a sales representative in the Sacramento area, testified he was rated as "below expectations" in the communications key area consistently between 1980 and 1985 because of his late reporting.

When Adams retired, Parker became Lanouette's district manager in March 1982. Parker gave Lanouette his 1982 annual evaluation on December 22, 1982. Parker rated Lanouette as "below expectations" in communication and "exceeds expectations" in personal contribution and development. In the other key areas, Lanouette met expectations. He was rated a "3" overall. In the written evaluation, Parker told Lanouette that doubling up on weekly accomplishment reports was not acceptable and that Lanouette needed to complete more key customer call reports. Parker never suggested that Lanouette's job was in jeopardy, however, or that he was a candidate for probation.

Lanouette missed three weeks of work in December while on the president's trip to Hawaii, which he combined with a family vacation. The president's trip was a sales bonus awarded to sales representatives who exceeded their sales goals. On January 16, 1983, Lanouette developed a problem with his neck which forced him to miss During the 1983-crop year, because of various factors, Ciba-Geigy anticipated decreased sales. On May 4, 1983, Parker sent a memo to the six northern California sales representatives stating the district had been asked to decrease its operating expenditures for the rest of 1983.

another six weeks of work. While he was convalescing at home, he researched and wrote material for a training manual and various technical memoranda, but he was unable to contact his customers. Lanouette was back in the field on a limited basis during the first two weeks of March and returned to work at full capacity in April 1983.

Lanouette first learned Parker was very dissatisfied with his work at his six-month review on May 6, 1983. Before he wrote Lanouette's evaluation, Parker noted that Lanouette was behind in his work, and the company had received some complaints about him from customers. Parker wrote a very negative evaluation. Lanouette was rated below expectations in all key result areas. His overall performance was rated "5," and he was placed on a three-month probation. The evaluation did not mention Lanouette's accomplishments for the period.

Despite his absences, Lanouette accomplished a number of things that year. He organized and implemented the four-week long Pajaro Dunes meetings which were praised as innovative and beneficial to...