McIlravy v. Kerr-McGee Corp., KERR-M

• Decision Date: 23 January 1996
• Docket Number: No. 94-8080,KERR-M,94-8080
• Citation: 74 F.3d 1017
• Parties: 131 Lab.Cas. P 58,083 LeRoy McILRAVY, Allen Lee Mahoney, Richard E. Massman, and Robert H. Gray, Plaintiffs-Appellants, v.cGEE CORPORATION, Defendant, and Kerr-McGee Coal Corporation, a Delaware corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1017

74 F.3d 1017

131 Lab.Cas. P 58,083

LeRoy McILRAVY, Allen Lee Mahoney, Richard E. Massman, and Robert H. Gray, Plaintiffs-Appellants, v. KERR-McGEE CORPORATION, Defendant and Kerr-McGee Coal Corporation, a Delaware corporation Defendant-Appellee.

No. 94-8080.

United States Court of Appeals Tenth Circuit.

Jan. 23, 1996.

Stephen H. Kline of Kline & Jenkins, Cheyenne, Wyoming (Kenneth E. Barker of Quinn, Eiesland, Day & Barker, Belle Fourche, South Dakota, with him on the briefs) for Plaintiffs-Appellants.

Carolyn Gregg Hill (Shelia D. Tims with her on the brief) of Andrews, Davis, Legg, Bixler, Milsten & Price, Oklahoma City, Oklahoma, for Defendant-Appellee.

Before TACHA and SETH, Circuit Judges, and BROWN, District Judge. ^*

WESLEY E. BROWN, District Judge.

The plaintiffs are four individuals who contend their employment was wrongfully terminated by defendant Kerr-McGee Coal Corporation. Based on diversity jurisdiction, plaintiffs' amended complaint asserted three causes of action under Wyoming law: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; and (3) promissory estoppel. The district court granted Kerr-McGee Coal's motion for summary judgment as to the first two claims, while the promissory estoppel claim was submitted to a jury. The jury returned a verdict in favor of Kerr-McGee Coal and the district court entered judgment accordingly. On appeal, plaintiffs contend that the district court committed error with respect to all three claims. We affirm.

Breach of Contract Claim.

Each of the plaintiffs began his employment with Kerr-McGee Coal between 1976 and 1978 at the Jacobs Ranch Mine south of Gillette, Wyoming. By 1992, each plaintiff had advanced to a first-level supervisory position. In March of 1992, plaintiffs were terminated as part of "Streamline Phase II," a plan by Kerr-McGee Coal to reduce its workforce at the Jacobs Ranch Mine. The plaintiffs, along with other individuals, were selected for termination based upon job performance rankings compiled by the company. Plaintiffs were at the bottom of the rankings for supervisors in their respective departments. The company retained some supervisors who had less seniority than the plaintiffs but who had better performance rankings.

During plaintiffs' tenure at the Jacobs Ranch Mine, Kerr-McGee Coal had issued a series of employee handbooks, including 1976, 1977, 1980, 1985 and 1988 editions. There is no dispute that plaintiffs received these handbooks. Plaintiffs' primary contention is that the initial handbook they were issued--either the 1976 or 1977 edition--contained language promising that they would be terminated only for "cause." Moreover, although plaintiffs concede that the handbooks informed them that there could be a reduction in force by the company, they contend the handbooks promised that any layoffs would be made in order of seniority. Plaintiffs argue that Kerr-McGee Coal breached these promises. As to Kerr-McGee Coal's 1985 and 1988 handbooks, each of which contained a disclaimer stating that the handbook was not an employment contract, plaintiffs contend these were invalid attempts by the company to "unilaterally modify" their existing contractual rights without any supporting consideration.

In ruling on the motion for summary judgment, the district court only found it necessary to address the effect of the 1976 and 1977 handbooks. ¹ The court found nothing in these handbooks to alter the presumption under Wyoming law that an employee serves at the will of the employer. The handbooks' references to employees becoming "permanent," the court said, were not sufficient to alter plaintiffs' status. Accordingly, the court granted the defendant's motion for summary judgment on the grounds that plaintiffs were "at-will" employees who could be fired at any time, with or without cause.

We review a district court's granting of summary judgment de novo and apply the same legal standard used by the district court. Hatfield v. Board of County Commissioners for Converse County, 52 F.3d 858, 862 (10th Cir.1995). Under Fed.R.Civ.P. 56(c), summary judgment is appropriate only if the record, viewed in the light most favorable to the non-moving party, reveals no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id. (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970)). The substantive law of Wyoming governs the plaintiffs' claims in this diversity action. See Budd v. American Excess Ins. Co., 928 F.2d 344, 346 (10th Cir.1991).

We conclude that a genuine issue of material fact exists as to whether Kerr-McGee Coal's 1976 and 1977 handbooks implied that employees would not be dismissed in the absence of "cause." It is true that the general presumption under Wyoming law is that employees serve at the will of their employers. Sanchez v. Life Care Ctrs. of Am., Inc., 855 P.2d 1256, 1257 (Wyo.1993). And, as the district court recognized, a promise of "permanent" employment by itself is not sufficient to alter the at-will presumption. Wilder v. Cody Country Chamber of Commerce, 868 P.2d 211, 218 (Wyo.1994). An employee handbook may alter the presumption, however, if its terms reasonably create an expectation on the part of an employee that the company will not discharge him without cause. See Mobil Coal Producing, Inc. v. Parks, 704 P.2d 702, 707 (Wyo.1985).

The 1976 and 1977 handbooks contained more than just a representation that employees were considered "permanent." Upon beginning employment, the plaintiffs were given a lengthy orientation session during which the handbook, referred to by company representatives as the employees' "bible," was covered in detail. The handbook itself stated that it "will acquaint you with certain Company practices and benefits, and your responsibilities as a Kerr-McGee employee," and when questions about such matters arise "the spirit and intent behind these statements will serve as the basis for solutions." The handbooks informed employees that they would become "permanent" after completing a ninety-day "probationary period." They explained that a permanent employee is one who after successfully completing the probationary period "is expected to remain in the employment of the Company indefinitely." Cf. Leithead v. American Colloid Co., 721 P.2d 1059, 1063 (Wyo.1986) (Distinction between probationary and permanent employee, with an explanation that a probationary employee may be discharged at any time during the probationary period, was sufficient to imply that a permanent employee could only be discharged for cause.) The handbooks explained that "an employee's seniority will broken and employment terminated" for any of eight specific reasons, including "discharge." In a section entitled "Conduct on the Job," the handbook listed eleven "Examples of Misconduct Which Generally Result in Discharge for A Single Violation" and twelve "Examples of Misconduct Which Generally Result in Disciplinary Action Less than Discharge for a Single Violation." An introductory paragraph to these examples stated that "[t]he company may also apply disciplinary action up to and including discharge for other valid reasons." Cf. Leithead, 721 P.2d at 1063 ("By listing misconduct that could result in discharge, the handbooks imply that cause is required.") The examples of misconduct were followed by a systematic procedure for disciplinary actions against employees including a "first notice," for which an employee was warned that an additional violation would result in three days off without pay; a "second notice," for which an employee was assessed three days off without pay and warned that an additional violation would result in discharge; and a "third notice," for which an employee would be discharged. See Sanchez, 855 P.2d at 1259 ("Detailing stages of progressive discipline results in a further implication that cause is required to discharge.") Nowhere in the 1976 and 1977 handbooks was it made clear that the company was not bound by the procedures in the handbook or that despite the general application of such policies the company intended to retain the absolute right to discharge employees at any time with or without cause. Taken as a whole, the 1976 and 1977 handbooks are sufficiently ambiguous that they could be said to have reasonably created expectations on the part of the plaintiffs that the company had promised not to discharge employees absent "cause" for the dismissal.

Although we disagree with the district court on this point, we nevertheless conclude that Kerr-McGee Coal was entitled to summary judgment on the breach of contract claim. We may affirm for reasons other than those relied upon by the district court, as long as those reasons are supported by the record. Swoboda v. Dubach, 992 F.2d 286, 291 (10th Cir.1993). Even if a "for cause" standard was generally implied by the 1976 and 1977 handbooks (or the 1980 book ²), the books also put employees on notice that they were subject to layoffs and termination if there was a reduction in force by the company. Plaintiffs conceded this in the district court, but argued that the company breached a promise to select those affected by a reduction in force on the basis of seniority. We conclude that no genuine issue of material fact exists as to whether Kerr-McGee Coal breached a promise by selecting plaintiffs for termination.

Because a genuine factual issue exists as to whether the 1976 and 1977 handbooks created an employment contract, we assume for purposes of summary judgment that such a contract was created. See Hatfield, 52 F.3d at 862 (Record is viewed in the light most favorable to the party opposing summary judgment.) The issue then becomes what effect, if any, subsequent changes in the handbooks had with respect to that contract. Two changes after the 1977 edition are potentially significant. The first involves...