Newman v. Emerson Radio Corp.

Citation48 Cal.3d 973,258 Cal.Rptr. 592,772 P.2d 1059
Decision Date25 May 1989
Docket NumberNo. S009325,S009325
CourtUnited States State Supreme Court (California)
Parties, 772 P.2d 1059, 57 USLW 2707, 116 Lab.Cas. P 56,391, 4 IER Cases 609 Robert NEWMAN, Plaintiff and Appellant, v. EMERSON RADIO CORPORATION, Defendant and Respondent. L.A. 32284.

Stuart F. Lichterman, Beverly Hills, Charlotte E. Costan, Burbank, and Lichterman & Traister, Beverly Hills, for plaintiff and appellant.

Sklar & Coben, Daniel M. Sklar, Los Angeles, Farnsworth, Saperstein & Seligman Guy T. Saperstein, Brad Seligman, Oakland, Elaine B. Feingold, San Francisco, Dale Brodsky, William Quackenbush, Richard D. Aldrich, Westlake Village, Harry R. Levine, Joseph Posner, Encino, Joan Graff, San Francisco, Ian Herzog, Santa Monica, Leonard Sacks, Encino, Gary Gwilliam, Oakland, Robert Steinberg, Sanford Gage, Beverly Hills, Roland Wrinkle, North Hollywood, Douglas Devries, Sacramento, Bruce Broillett, Los Angeles, and Evan Marshall, Corona, as amici curiae on behalf of plaintiff and appellant.

Welter & Greene, Arak, Welter, Snipper & Greene and Richard J. Greene, Los Angeles, for defendant and respondent.

Proskauer, Rose, Goetz & Mendelsohn, Jeffrey A. Berman, Steven G. Drapkin, Scott J. Witlin, Paul, Hastings, Janofsky & Walker, Paul Grossman, Jennifer A. Glazer, Orrick, Herrington & Sutcliffe, Ralph H. Baxter, Jr., San Francisco, Donald L. Cornwell, Margaret G. Lodise, Pettit & Martin, Linda Auerbach Allderdice, Thomas H. Petrides, Los Angeles, Mary C. St. John, North Hollywood, Michael J. Breining, Sacramento, Horvitz & Levy, Ellis J. Horvitz, Daniel J. Gonzalez, S. Thomas Todd, Encino, Latham & Watkins, Max L. Gillam, Milton A. Miller, Reba W. Thomas, Gibson, Dunn & Crutcher, David A. Cathcart, David W. Burcham, Gary M. Roberts, Dennis A. Gladwell, J. Kevin Lilly, Timothy Y. Wong, Los Angeles, Ray R. Goldie, Rancho Mirage, and James E. Chaddock, La Habra, as amici curiae on behalf of defendant and respondent.

LUCAS, Chief Justice.

In Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 254 Cal.Rptr. 211, 765 P.2d 373, we held that in the context of an alleged wrongful discharge from employment (i) a plaintiff may seek tort damages based on a claim that he was discharged in violation of a fundamental public policy, (ii) the statute of frauds does not bar contract relief based on breach of an oral or implied-in-fact contract not to terminate an employee except for good cause, and (iii) an employee may not obtain tort relief for breach of the implied covenant of good faith and fair dealing in an employment contract; the covenant is a contract term and relief for its violation accordingly is limited to contract damages.

We did not in Foley address the retroactive application of our opinion, leaving that issue for a later case in which it could be addressed specifically by the parties. (47 Cal.3d at p. 700, fn. 43, 254 Cal.Rptr. 211, 765 P.2d 373.) Pursuant to our order under California Rules of Court, rule 29.2, the parties in this case have briefed that subject 1 and we turn now to resolution of that remaining concern. We shall conclude that the opinion is fully retroactive, applying to all cases not yet final as of January 30, 1989, the date our decision in Foley became final.

Plaintiff focuses on our holding limiting the damages for breach of the covenant of good faith and fair dealing to contract remedies. He asserts our conclusion represented an unforeseeable new rule of law and that the policies underlying our decision support its solely prospective application. We will conclude in accordance with the general rules relating to retroactive application of judicial decisions that our opinion should be applied retroactively. There are no compelling policy reasons that persuade us we should depart from our usual approach in tort cases.


Plaintiff filed an action alleging that he had been hired by defendant on September 3, 1972, and discharged on May 11, 1982, without good cause. In his complaint, plaintiff asserted that, during the course of his employment, the parties orally agreed that plaintiff's employment would continue until some act occurred which gave rise to good or just cause for his termination. Moreover, in the event of such cause, plaintiff would be notified thereof and given an opportunity to rectify or eliminate it. This oral agreement was manifested by plaintiff's longevity of service, defendant's stated policies regarding termination procedures, and defendant's actions toward and communications with plaintiff regarding his employment status and its continuation. In his first cause of action, plaintiff asserted that despite this agreement, defendant discharged him, allegedly without good cause and arbitrarily and in breach of the implied contract. In his second cause of action, plaintiff asserted that the termination "contravened some fundamental public policy." The remaining cause of action alleged that the discharge violated the implied covenant of good faith and fair dealing, entitling plaintiff to tort damages. 2

On the eve of trial, the court heard defendant's motion in limine to exclude plaintiff's evidence, citing Newfield v. Insurance Co. of the West (1984) 156 Cal.App.3d 440, 203 Cal.Rptr. 9 and Santa Monica Hospital v. Superior Court (1985) 204 Cal.App.3d 28, 218 Cal.Rptr. 543, review granted (1986) 222 Cal.Rptr. 224, 711 P.2d 520. The Court of Appeal for the Second Appellate District held in both Santa Monica Hospital and Newfield that the plaintiffs' actions based on oral contracts of employment were barred by the statute of frauds. During argument on the in limine motion in this case, the parties stipulated to the following facts: (1) plaintiff's employment with the company began in September 1972 and was terminated on May 11, 1982; (2) during his employment, plaintiff received seven pay raises of which three were merit increases; (3) plaintiff's last position was probationary; (4) plaintiff "received substantial pay in a pension profit sharing and stock option benefit plan"; (5) plaintiff was given no notice of dissatisfaction with his work before he was terminated; and (6) the company policy was not to give notice of dissatisfaction before termination and plaintiff himself had discharged employees without giving them prior notice. The trial court stated that it found the Santa Monica Hospital case "entirely dispositive," granted the motion, and entered judgment dismissing plaintiff's case.

Thereafter, the Court of Appeal, reviewing the individual causes of action in a different order than that of the complaint and using as its standard for review whether the allegations of the complaint, even if true, failed to state a cause of action (see 6 Witkin, Cal.Procedure (3d ed. 1985) Proceedings Without Trial, § 272, pp. 571-572), affirmed in part and reversed in part. As to plaintiff's cause of action alleging discharge in breach of public policy (Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 164 Cal.Rptr. 839, 610 P.2d 1330), the court noted that the language of the complaint was conclusory and, as such, did not give sufficient notice to defendant of the nature of the policy supposedly violated. Nonetheless, the court concluded plaintiff should be given an opportunity to amend his complaint in this regard, and so ordered.

Discussing plaintiff's claim for tort relief based on breach of the implied covenant of good faith and fair dealing, the court briefly quoted from Cleary v. American Airlines, Inc. (1980) 111 Cal.App.3d 443, 456, 168 Cal.Rptr. 722 as follows: "the longevity of the employee's service, together with the expressed policy of the employer, operate as a form of estoppel, precluding any discharge of such an employee by the employer without good cause." Referring to the stipulation entered into by the parties, the court concluded that because the position from which plaintiff had been discharged was probationary and there was no company policy about giving notice of dissatisfaction before discharge, plaintiff failed to state a cause of action based on the implied covenant of good faith and fair dealing entitling him to the remedy sought. 3 Finally, after concluding plaintiff had alleged some of the factors supporting a finding of an implied promise not to terminate except for good cause (Pugh v. See's Candies, Inc., supra, 116 Cal.App.3d 311, 171 Cal.Rptr. 917), the Court of Appeal nonetheless held plaintiff's action was barred by the statute of frauds.

Plaintiff petitioned for review, asserting that the Court of Appeal erred in affirming dismissal of his cause of action seeking tort relief for breach of an implied contract to discharge only for good cause. As noted, we requested the parties to address Foley 's effect on each of plaintiff's causes of action.


The general rule that judicial decisions are given retroactive effect is basic in our legal tradition. We recently reiterated in Evangelatos v. Superior Court (1988) 44 Cal.3d 1188, 1207, 246 Cal.Rptr. 629, 753 P.2d 585, Justice (now Chief Justice) Rehnquist's observation that "[t]he principle that statutes operate only prospectively, while judicial decisions operate retrospectively, is familiar to every law student." (United States v. Security Industrial Bank (1982) 459 U.S. 70, 79, 103 S.Ct. 407, 413, 74 L.Ed.2d 235.) This rule of retroactivity, however, has not been an absolute one. In fact, at times, language regarding the potential for exceptions to the rule has threatened--at least semantically, although not necessarily in application--to overwhelm the rule itself. This case is an appropriate vehicle for us 4 to reexamine and reaffirm the basic principles regarding retroactivity in the tort context. As we shall explain, virtually all of this court's previous ground-breaking tort decisions have been applied retroactively, even when such decisions represented a clear change in the law. Exceptions have been rare and we will find no reason to add to...

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