McCluney v. Jos. Schlitz Brewing Co.

• Decision Date: 20 May 1981
• Docket Number: No. 80-1383,80-1383
• Citation: 649 F.2d 578
• Parties: 107 L.R.R.M. (BNA) 2759, 92 Lab.Cas. P 55,299 Forrest McCLUNEY, Appellee, v. JOS. SCHLITZ BREWING CO., Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 578

649 F.2d 578

107 L.R.R.M. (BNA) 2759, 92 Lab.Cas. P 55,299

Forrest McCLUNEY, Appellee, v. JOS. SCHLITZ BREWING CO., Appellant.

No. 80-1383.

United States Court of Appeals,

Eighth Circuit.

Submitted Jan. 14, 1981.

Decided May 20, 1981.

Linde, Thomson, Fairchild, Langworthy & Kohn, Robert G. Oberlander (argued), J. Michael Vaughan, Kansas City, Mo., for appellee.

Gage & Tucker, Paul Scott Kelly Jr. (argued), James L. Moeller, Kansas City, Mo., for appellant.

Before GIBSON, Senior Circuit Judge, and HEANEY and ARNOLD, Circuit Judges.

HEANEY, Circuit Judge.

The Jos. Schlitz Brewing Company appeals from a judgment pursuant to a jury verdict finding Schlitz liable for breach of an employment contract (Count I), and willful and malicious violation of the Missouri service letter statute, Mo.Ann.Stat. § 290.140 (Count II). We affirm as to Count I and reverse as to Count II.

I

In 1955, Forrest McCluney was a vice president for the Geo. Muehlbach Brewing Company in Kansas City, Missouri. Schlitz purchased Muehlbach in 1956 and hired McCluney as the industrial relations manager for its Kansas City plant; in 1962, Schlitz promoted McCluney to plant manager.

In 1970, Schlitz offered McCluney the position of plant manager at its Winston-Salem plant. That plant was considerably larger than the Kansas City plant. The promotion afforded him greater responsibility and promised a significant challenge. After weighing the competing benefits and burdens of accepting Schlitz's offer, he decided to accept it. Accordingly, he moved to North Carolina and started his new job. McCluney retained it for nearly five years.

In May, 1975, the executive vice president of Schlitz, Gene Peters, offered McCluney another promotion, the position of vice president of plant operations at Schlitz's corporate headquarters in Milwaukee, Wisconsin. This promotion promised McCluney even greater responsibilities, including overseeing corporate staff responsible for plant operations. A substantial salary increase was also part of the offer. McCluney accepted the offer for the challenge it presented and for the opportunity it offered to implement his management ideas. He moved to Wisconsin to begin his new job.

Once in Wisconsin, McCluney sought the transfer of his secretary, Lois Rinne, from Winston-Salem to Milwaukee. The company refused to transfer her, citing its formal management policy as the reason for the denial. McCluney asked Peters to make an exception in Ms. Rinne's case and push through the transfer. This request was also denied. McCluney persisted with his request, arguing to Peters that Schlitz's management policy was on shaky ground from a legal standpoint as it had a discriminatory impact on women employees. He told Peters that if an exception was not made for Ms. Rinne, there would "come a parting of the ways." Peters replied that if McCluney persisted, Schlitz would have to demand his resignation. This confrontation took place on Friday, August 22, 1975. The next Monday, Peters asked McCluney if he had changed his mind. McCluney stated that he had not and Peters responded by asking for his resignation. McCluney retorted: "Oh no. When I resign, I will pick the time, and when you fire me, you will pick the time." Peters then instructed McCluney to clean out his desk. A replacement was subsequently named. ¹

Although Schlitz requested a letter of resignation from McCluney, he refused to tender one, reasoning in part that he would lose his severance pay if he did. Later that day, Schlitz issued a press release that stated McCluney had resigned. That release appeared in the Schlitz Management Bulletin and was reported in the Wall Street Journal, the Milwaukee Sentinel and the Twin City Sentinel (Winston-Salem). Three days after McCluney's termination, Schlitz sent McCluney a letter and enclosed a check as "final salary payment * * * following your resignation * * *." McCluney returned the check, denying that he had resigned.

A few months later, McCluney requested a service letter from Schlitz in the form provided for under Mo.Ann.Stat. § 290.140 (Vernon). Schlitz responded that McCluney had resigned. Thereafter, McCluney filed suit in the Circuit Court of Jackson County, Missouri, alleging breach of contract, violation of the Missouri service letter statute and libel. Schlitz removed the case to federal court. The libel claim was dismissed on Schlitz's motion for partial summary judgment, and no appeal was taken from that dismissal. McCluney's other claims were tried to a jury.

The basis of McCluney's service letter claim was that Schlitz's response was false and, therefore, actionable under Missouri law. The jury determined that Schlitz had, in fact, violated the Missouri service letter statute. It assessed nominal damages at $1.00 and punitive damages at $400,000. The basis of McCluney's contract claim for severance pay was a company directive issued by Schlitz's director of personnel, Robert Creviston. Creviston's Memorandum was sent to each of the brewery industrial relations managers. Under the Creviston Memorandum, McCluney was entitled to six months severance pay for a total of $32,500. McCluney asserted that the Creviston Memorandum merely put into writing what had been the Company's long standing practice, and that the Memorandum itself had been distributed to himself and people other than the brewery industrial relations managers. The jury determined that Schlitz had, in fact, breached its agreement to provide severance pay, and awarded McCluney $32,500.

II

The United States Constitution limits the power of a forum state to apply its substantive law to factual and legal situations with which it has little or no contact. The constitutional bases for the limitation are found in the Due Process Clause, Allstate Ins. Co. v. Hague, -- U.S. --, 101 S.Ct. 633, 637-638 & n.10, 66 L.Ed.2d 521 (1981); Clay v. Sun Ins. Office, Ltd., 377 U.S. 179, 180-181, 84 S.Ct. 1197, 1198, 12 L.Ed.2d 229 (1964); Home Insurance Co. v. Dick, 281 U.S. 397, 407-410, 50 S.Ct. 338, 341-312, 74 L.Ed. 926 (1930), and the Full Faith and Credit Clause. ² Allstate Ins. Co v. Hague, supra, 101 S.Ct. at 637-638 & n.10; Clay v. Sun Ins. Office, Ltd., supra, 377 U.S. at 180-181, 84 S.Ct. 1197-1198; John Hancock Mutual Life Ins. Co. v. Yates, 299 U.S. 178, 181-183, 57 S.Ct. 129, 131-132, 81 L.Ed. 106 (1936); Aetna Life Ins. Co. v. Dunken, 266 U.S. 389, 393, 45 S.Ct. 129, 130, 69 L.Ed. 342 (1924).

Until recently, it was unclear whether the due process limitation upon a state's extraterritorial application of law mirrored the due process analysis for determining the limits of a state court's judicial jurisdiction. The concepts are closely linked, and commentators have suggested that essentially the same principle should be applied with reference to both situations. See Martin, Personal Jurisdiction and Choice of Law, 78 Mich.L.Rev. 872, 872-873 (1980); Reese, Legislative Jurisdiction, 78 Colum.L.Rev. 1587, 1591 (1978); Reese, Limitations on the Extraterritorial Application of Law, 4 Dalhousie L.J. 589, 593 (1978). It seems that the question has been answered by the Supreme Court in Allstate Ins. Co. v. Hague, supra. In Hague, the Court stated that

for a State's substantive law to be selected in a constitutionally permissible manner, that State must have a significant contact or significant aggregation of contacts, creating state interest, such that choice of its law is neither arbitrary nor fundamentally unfair.

101 S.Ct. at 640.

Hague is consistent with the Court's earlier legislative jurisdiction cases and its more recent decisions in the area of judicial jurisdiction. ³ The basic rule is the state whose law is chosen to control a case must have a substantial factual contact with the parties or the transaction giving rise to the litigation. Without sufficient contacts, the state has no legitimate interest in the outcome of the litigation. See Allstate Ins. Co. v. Hague, supra, 101 S.Ct. at 640; Clay v. Sun Ins. Office, Ltd., supra, 377 U.S. at 181-183, 84 S.Ct. 1198-1199; Richards v. United States, 369 U.S. 1, 15, 82 S.Ct. 585, 594, 7 L.Ed.2d 492 (1962); Home Ins. Co. v. Dick, supra, 281 U.S. at 407-408, 50 S.Ct. 341. See also R. Leflar, American Conflicts Law § 58 at 112 (1977).

The Court's decisions can be explained on the basis of the contacts in each case. In Yates and Dick, the Court ruled that the states involved had only an insignificant contact with the parties or the cause of action and, therefore, application of the states' laws was unconstitutional. Dick says nominal residence alone is not enough. Yates says post-occurrence change of residence to the forum state alone is not enough. See Allstate Ins. Co. v. Hague, supra, 101 S.Ct. at 639. On the other hand, the Supreme Court has found sufficient contacts to permit the extraterritorial application of the law of the forum state in a number of instances.

(1) When an employment contract was executed in California for work to be performed outstate and the employer, who was doing business in California, agreed to transport the worker outstate and bring him back again when the work was finished, California law was properly applied to a suit arising out of the employment relationship. See Alaska Packers Ass'n v. Industrial Acc. Comm'n, 294 U.S. 532, 55 S.Ct. 518, 79 L.Ed. 1044 (1935).

(2) When a District of Columbia company employed a D.C. resident to work in Virginia for a time certain, and when the employee commuted from his home to work and was classified by the company as an employee who performed electrical construction work in the District and its surrounding areas, the law of the District was properly applied to a dispute arising out of an accident that occurred in Virginia. See Cardillo v. Liberty Mutual Ins. Co., 330 U.S. 469, 67 S.Ct. 391, 91 L.Ed. 1028 (1947).

(3) When an insurance policy that was issued in Illinois guaranteeing nationwide coverage was coupled with...