Lucero v. Bd. of Regents of the Univ. of N.M.

• Decision Date: 20 April 2012
• Docket Number: No. 30,535.,30,535.
• Parties: Arnold LUCERO, Plaintiff–Appellee, v. BOARD OF REGENTS OF the UNIVERSITY OF NEW MEXICO, University of New Mexico Health Sciences Center, Defendants–Appellants.
• Court: Court of Appeals of New Mexico

278 P.3d 1043

280 Ed. Law Rep. 1085

2012 -NMCA- 055

Arnold LUCERO, Plaintiff–Appellee,

v.BOARD OF REGENTS OF the UNIVERSITY OF NEW MEXICO, University of New Mexico Health Sciences Center, Defendants–Appellants.

No. 30,535.

Court of Appeals of New Mexico.

March 1, 2012.

Certiorari Denied, April 20, 2012, No. 33,549.

Law Offices of Michael E. Mozes, P.C., Michael E. Mozes, Albuquerque, NM, for Appellee.

Sheehan & Sheehan, P.A., Quentin Smith, Albuquerque, NM, for Appellants.

OPINION

WECHSLER, Judge.

{1} Defendants University of New Mexico Board of Regents and University of New Mexico Health Sciences Center (UNMHSC) appeal after a bench trial resulted in a verdict in favor of Plaintiff Arnold Lucero. Defendants argue that the district court erred in denying its motion for summary judgment on Plaintiff's breach of contract claim because Plaintiff did not exhaust the grievance procedures contained in UNMHSC's human resources policies and procedures manual (the employee handbook). We hold that Plaintiff must substantially comply with the mandatory internal grievance procedures contained in the employee handbook before filing suit for breach of contract based on an alleged failure of Defendants to follow the employee handbook. Accordingly, we reverse the district court's denial of Defendants' motion for summary judgment.

BACKGROUND

{2} Defendants employed Plaintiff beginning in 2003 as an assistant director of environmental services, a management position. UNMHSC's employee handbook governed Plaintiff's employment. The employee handbook contains a two-step grievance process for “those questions, issues or concerns which are not resolved through informal discussions with successive levels of supervisors.” Step one of the grievance process requires the employee to submit the grievance. Section 6.1.1 of the handbook states that “[i]f a manager/supervisor is unable to reach an understanding with an immediate supervisor through informal discussions, he/she may submit a grievance in writing to the immediate supervisor or Administrator within ten (10) work days of the occurrence of knowledge of the event causing the grievance.”

{3} On March 23, 2005, Defendants issued Plaintiff a notice of decision to suspend, imposing a thirty-day suspension. On March 31, 2005, Plaintiff's attorney sent a letter to Melissa Chavez, a senior employee relations specialist for Defendants, advising her that Plaintiff intended to submit a grievance by April 6, 2005. However, Plaintiff did not submit a grievance, and Plaintiff's attorney sent Chavez a letter on April 12, 2005, acknowledging missing the ten-day deadline to file a grievance.

{4} On September 9, 2005, Defendants issued Plaintiff a notice to terminate. Plaintiff did not submit a grievance and testified that he could not remember why he did not file a grievance challenging the termination. More than seven months after the termination, on April 4, 2006, Plaintiff filed a complaint in district court, alleging a breach of express and implied contracts of employment for the suspension and termination. On February 27, 2007, Plaintiff filed an amended complaint consisting of three claims: (1) breach of implied contract, (2) breach of express contract, and (3) wrongful termination. All three claims allege that UNMHSC's employee handbook created a contract and that Defendants breached the contract by failing to abide by the employee handbook's policies and procedures governing workplace performance, disciplinary action, a harassment-free workplace, employer-employee relations, progressive discipline, and by disciplining Plaintiff without just cause. The employee handbook contains all of the contractual provisions and employment policies that Plaintiff alleges Defendants breached.

{5} Defendants filed a motion for summary judgment, arguing that Plaintiff's claims were barred because he failed to exhaust the employee handbook's internal grievance procedures. Plaintiff filed a response admitting all material facts in Defendants' motion, but he argued that the grievance procedures are not mandatory and he therefore was not required to exhaust the procedures. The district court issued an order granting in part and denying in part Defendants' motion. The district court granted the motion to the extent that Plaintiff based his claims on an alleged failure of Defendants to follow grievance procedures but denied the motion as to the remaining claims. The district court also denied Defendants' motion to reconsider the issue. In denying the motion to reconsider, the district court stated that “Defendant[s'] grievance scheme is ambiguous, and by its own terms does not require Plaintiff to exhaust Defendant[s'] grievance procedure prior to filing suit in court.” The district court stated that it “is of great significance to this court that within ... Defendant[s'] grievance procedure both ‘may’ and ‘shall’ are used. The section of the procedure that sets out the steps to be taken by an employee if he disagrees with the contemplated disciplinary action, uses ‘may’ when discussing the employee's actions. Thus, the court will presume that the use of the term ‘may’ was purposeful, and that exhaustion of ... Defendant[s'] grievance procedure is not a condition precedent to Plaintiff filing suit in this court.”

{6} Subsequently, the district court held a four-day bench trial commencing December 8, 2009. On May 17, 2010, the district court entered a final judgment in Plaintiff's favor, concluding that the employee handbook created an implied contract that Defendants violated by suspending and terminating Plaintiff without just cause and without appropriate progressive discipline.

{7} On appeal, Defendants argue that the district court erred in not granting its motion for summary judgment. Particularly, Defendants argue that (1) an employee cannot pursue a breach of contract claim based on policies in an employee handbook without first exhausting the grievance procedures in the employee handbook, and (2) the use of permissive language in the employee handbook's grievance procedures did not allow Plaintiff to bypass the grievance process and file a breach of contract claim.

STANDARD OF REVIEW

{8} Defendants' arguments in this appeal present an issue of law arising out of undisputed facts. Accordingly, we apply a de novo standard of review. See Barreras v. State Corr. Dep't, 2003–NMCA–027, ¶ 5, 133 N.M. 313, 62 P.3d 770.

EXHAUSTION OF REMEDIES

{9} New Mexico courts recognize the doctrine of exhaustion of administrative remedies. “Under the exhaustion of administrative remedies doctrine, where relief is available from an administrative agency, the plaintiff is ordinarily required to pursue that avenue of redress before proceeding to the courts; and until that recourse is exhausted, suit is premature and must be dismissed.” Smith v. City of Santa Fe, 2007–NMSC–055, ¶ 26, 142 N.M. 786, 171 P.3d 300 (alteration, internal quotation marks, and citation omitted). The exhaustion doctrine rests on the principle that the interests of justice are served by allowing an agency with particular expertise to resolve issues before a claim is brought to court. Headen v. D'Antonio, 2011–NMCA–058, ¶ 13, 149 N.M. 667, 253 P.3d 957.

{10} Related to the exhaustion of administrative remedies doctrine, our Supreme Court has held that an employee must exhaust grievance procedures in an employee handbook or manual before filing claims against the employer for breach of contract or civil rights violations based on the policies governing employment. In Francis v. Mem'l Gen. Hosp., 104 N.M. 698, 698–99, 726 P.2d 852, 852–53 (1986), a registered nurse sued his employing hospital for breach of contract, due process violations, and wrongful discharge after he voluntarily terminated his employment. The employer had suspended the plaintiff for two days for refusing to comply with hospital policy. Id. Pursuant to the hospital's employee manual, the plaintiff submitted a grievance, and the hospital scheduled a fact-finding hearing. Id. After the hospital informed the plaintiff, as provided in the employee manual, that his attorney could not attend the hearing, the plaintiff refused to proceed any further with the grievance and voluntarily terminated his employment. Id. Our Supreme Court held that the plaintiff was “estopped from asserting that he suffered a deprivation of either a contractual expectation or a constitutionally protected entitlement” because he failed to exhaust the grievance procedures in the employee manual. Id. at 700, 726 P.2d at 854. The Court reasoned that when an implied contract, in this case an employment manual, creates rights, the rights are “limited by the terms of the [employment manual] that gave them birth.” Id.

{11} Similarly, in McDowell v. Napolitano, 119 N.M. 696, 699, 895 P.2d 218, 221 (1995), the plaintiff, a university professor, sued his employer for breach of contract and civil rights violations after being denied tenure. The defendants argued that the district court did not have jurisdiction over the case because the plaintiff failed to exhaust administrative remedies contained in the faculty handbook. Id. at 700, 895 P.2d at 222. Our Supreme Court framed the issue as whether the plaintiff “substantially discharged his own contractual obligations so as to be able to complain of a breach by his employer.” Id. at 701, 895 P.2d at 223. The Court held that, because the plaintiff substantially complied with the terms of his employment contract by “properly follow[ing] the appeals process outlined in the Faculty Handbook [and pursuing] the appeals process to the highest authority within the University,” the exhaustion doctrine did not bar litigation of the plaintiff's case. Id.

{12} From Francis and McDowell, we glean the general rule that an employee must substantially comply with mandatory internal grievance procedures contained in an employee manual or handbook before filing suit for breach of...