Mourad v. Automobile Club Ins. Ass'n

• Decision Date: 08 January 1991
• Docket Number: Docket No. 109985
• Citation: 465 N.W.2d 395,186 Mich.App. 715
• Parties: Roger MOURAD, Plaintiff-Appellee and Cross-Appellant, v. AUTOMOBILE CLUB INSURANCE ASSOCIATION, Leonard Bach and Clifford Benson, Defendants-Appellants and Cross-Appellees, and Robert Janks, Defendant. 186 Mich.App. 715, 465 N.W.2d 395, 59 U.S.L.W. 2495, 121 Lab.Cas. P 56,861, 6 Indiv.Empl.Rts.Cas. (BNA) 193
• Court: Court of Appeal of Michigan — District of US

Page 395

465 N.W.2d 395

Roger MOURAD, Plaintiff-Appellee and Cross-Appellant, v. AUTOMOBILE CLUB INSURANCE ASSOCIATION, Leonard Bach and Clifford Benson, Defendants-Appellants and Cross-Appellees and Robert Janks, Defendant.

Docket No. 109985.

186 Mich.App. 715, 465 N.W.2d 395, 59 U.S.L.W. 2495,

121 Lab.Cas. P 56,861,

6 Indiv.Empl.Rts.Cas. (BNA) 193

Court of Appeals of Michigan.

Submitted April 11, 1990, at Detroit.

Decided Jan. 8, 1991, at 9:35 a.m.

Released for Publication Feb. 11, 1991.

Weinstein, Gordon & Hoffman, P.C. (by William J. Weinstein and Joel L. Hoffman), Southfield, for plaintiff-appellee and cross-appellant.

Dykema Gossett (by Donald S. Young, Kathleen McCree Lewis, and Suzanne Sahakian), Detroit, for defendants-appellants and cross-appellees.

Before HOLBROOK, McDONALD and JANSEN, JJ.

JANSEN, Judge.

Defendants appeal as of right from a March 3, 1988, Wayne Circuit Court jury verdict in the amount of $1,773,000 for breach of an employment contract, demotion without cause, constructive discharge, retaliatory demotion, intentional infliction of emotional distress, and conspiracy. Plaintiff cross appeals the trial court's refusal to enter an additional $500,000 in exemplary damages which the jury had awarded on a special verdict form for intentional infliction of emotional distress. We hold that plaintiff, an attorney, can maintain a cause of action against defendant, Automobile Club Insurance Association (Auto Club), his former client and employer, for breach of a just-cause contract. However, we reverse the jury verdict regarding the claims of retaliatory demotion, intentional infliction of emotional distress, and conspiracy. We therefore affirm in part and reverse in part.

In 1980, plaintiff was named legal area manager and in that capacity headed Auto Club's in-house legal department from August 1980 until March 1983 when he was demoted to an executive attorney position. Auto Club's legal department represents the insurance association in first-party cases and represents policyholders in third-party cases. The legal department attorneys supervise outside counsel and provide legal counsel and advice to Auto Club's claims staff regarding nonlitigation matters.

As legal area manager, plaintiff served as the attorney who advised management regarding the implementation of Auto Club's policies within the department. Specifically, plaintiff formulated budget requests and administered the legal department within the budget approved by Auto Club. Plaintiff also supervised the attorney staff in its representation of insureds in pending litigation. Specifically, plaintiff gave settlement authority in certain cases, dealt with personnel problems and questions from attorneys and staff, evaluated executive attorneys, and reviewed senior attorneys' evaluations of associate attorneys. Plaintiff described his function as a "managing lawyer." As legal area manager he did not directly handle individual third-party cases.

It appears that plaintiff was an excellent lawyer. However, Thomas Bowman, Auto Club's claims director and plaintiff's direct supervisor, concluded that plaintiff was unable to implement Auto Club's policies and did not have the "administrative talents" necessary to effectively implement cost-containment measures in the legal department. In September 1982, Bowman assigned defendant Leonard Bach, who is not a lawyer, but who had twenty years of claims experience, to oversee the legal department. On March 16, 1983, plaintiff was removed as legal area manager and demoted to executive attorney. Plaintiff lost his use of a company car and approximately $700 in annual salary.

Following his demotion, plaintiff was an executive attorney who handled first-party catastrophic claims. On March 16, 1984, plaintiff resigned his employment with Auto Club and opened a sole practice. On July 11, 1984, plaintiff filed a complaint alleging breach of a just-cause contract, retaliatory demotion and constructive discharge, intentional infliction of emotional distress, and conspiracy to commit the tort of retaliatory demotion or intentional infliction of emotional distress. Plaintiff claimed that his demotion was the result of his refusal to comply with alleged unethical and illegal orders from the individual defendants who were not attorneys. Plaintiff further claimed that had he complied with such orders and instructions he would have violated the Code of Professional Responsibility and Canons.

On March 3, 1988, the jury returned its verdict. As compensatory damages, the jury awarded $1,250,000 as past, present, and future loss of wages and employment benefits for the breach of contract claim and $23,000 as past, present, and future loss of wages and employment benefits for the retaliatory demotion claim. For retaliatory demotion, the jury added $500,000 as compensatory damages for mental anguish. The jury also awarded $500,000 as exemplary damages for intentional infliction of emotional distress. Following an April 15, 1988, hearing, the court entered a judgment on the jury verdict, less the exemplary damages for intentional infliction of emotional distress, which the court found inconsistent, duplicative and punitive.

Defendants argue that plaintiff cannot sustain a cause of action for wrongful termination, because plaintiff was defendants' attorney. Specifically, defendants allege that a just-cause contract as established in Toussaint v. Blue Cross & Blue Shield of Michigan, 408 Mich. 579, 292 N.W.2d 880 (1980), reh. den. 409 Mich. 1101 (1980), cannot exist under these circumstances. We disagree. The issue before us is whether plaintiff can maintain an action for wrongful termination of a just-cause employment contract. In Toussaint, supra, our Supreme Court held that an employer's statements of company policy and procedure that an employee will be terminated only for cause can give rise to an enforceable contract right. The existence of a just-cause contract and whether defendants' actions constituted a breach of that contract is a question for the jury to determine. Stoken v. J.E.T. Electronics & Technology, Inc., 174 Mich.App. 457, 464, 436 N.W.2d 389 (1988); Struble v. Lacks Industries, Inc., 157 Mich.App. 169, 175, 403 N.W.2d 71 (1986).

Initially, we note that the jury did not err in finding that there was a just-cause contract and that defendants, by demoting plaintiff for his failure to comply with policy decisions which plaintiff claimed would have violated the Code of Professional Conduct, breached that contract. In a special jury form, the jury found that defendants' policy manual and pamphlets had in fact created a contract to terminate for just cause. The jury also found that defendants did not have just cause to demote plaintiff and that defendants constructively discharged plaintiff by making the conditions of plaintiff's work so intolerable that plaintiff felt compelled to leave. We are unpersuaded by defendants' argument that the trial court erred in failing to direct a verdict for defendants on the constructive discharge claim.

A constructive discharge occurs when an employer deliberately makes an employee's working conditions so intolerable that the employee is forced into an involuntary resignation or, stated differently, when working conditions become so difficult or unpleasant that a reasonable person in the employee's shoes would feel compelled to resign. Fischhaber v. General Motors Corp., 174 Mich.App. 450, 454-455, 436 N.W.2d 386 (1988).

In reviewing a trial court's ruling on a motion for a directed verdict or judgment notwithstanding the verdict, the testimony and all legitimate inferences that may be drawn from that testimony are viewed in the light most favorable to the plaintiff. Matras v. Amoco Oil Co., 424 Mich. 675, 681, 385 N.W.2d 586 (1986). If reasonable jurors could honestly reach different conclusions, the motion should be denied, and the case should be decided by the jury, because no court under such circumstances has authority to substitute its judgment for that of the jury. Id.; Feaheny v. Caldwell, 175 Mich.App. 291, 299-300, 437 N.W.2d 358 (1989). We hold that the trial court did not err in refusing to grant defendants' motion for a directed verdict. Evidence presented at trial indicated that plaintiff was demoted from the highest position in the legal staff to a lesser position with the resultant loss of authority and various benefits. Evidence indicated that plaintiff was essentially isolated from the operation of the law department. Further, after plaintiff's demotion, plaintiff alleged that defendants continued to make unethical requests and demands concerning plaintiff's representation of insureds. Under these facts, we find that a reasonable juror could find that plaintiff was constructively discharged.

Defendants claim that plaintiff's cause of action should be precluded by the general rule that a client has a right to discharge his attorney at any time, with or without cause. See comments to MRPC 1.16, formerly DR 2-110; Brown v. Brown, How NP 94, 95 (Wayne CC, 1876). We disagree. In support of their position, defendants cite Herbster v. North American Co., 150 Ill.App.3d 21, 103 Ill.Dec. 322, 501 N.E.2d 343 (1986), and Willy v. Coastal Corp., 647 F.Supp. 116 (S.D.Tex.1986), rev'd on other grounds 855 F.2d 1160 (C.A.5 1988).

In Herbster, the plaintiff brought suit for retaliatory discharge against his employer, North American Company, stemming from the plaintiff's refusal to destroy or remove inculpatory documents requested in lawsuits pending in federal court. The plaintiff was North American's chief legal officer and vice-president in charge of the legal department under an employment-at-will contract. In Illinois the tort of retaliatory discharge is an exception to the general rule that an employee at will has no recourse for discharge. The tort requires that the employer discharge the employee in retaliation for the employee's...