Nordling v. Northern States Power Co.

• Decision Date: 27 December 1991
• Docket Number: CX-90-1500,Nos. C7-90-1499,s. C7-90-1499
• Parties: , 124 Lab.Cas. P 57,260, 7 Indiv.Empl.Rts.Cas. (BNA) 10 Gale K. NORDLING, petitioner, Appellant, v. NORTHERN STATES POWER COMPANY, et al., Respondents.
• Court: Minnesota Supreme Court

Page 498

478 N.W.2d 498

60 USLW 2406, 124 Lab.Cas. P 57,260,

7 Indiv.Empl.Rts.Cas. (BNA) 10

Gale K. NORDLING, petitioner, Appellant, v. NORTHERN STATES POWER COMPANY, et al., Respondents.

Nos. C7-90-1499, CX-90-1500.

Supreme Court of Minnesota.

Dec. 27, 1991.

Syllabus by the Court

1. An in-house attorney is not precluded by reason of his attorney-client relationship from bringing an action for wrongful discharge against his company employer.

2. Plaintiff-employee's claim for a retaliatory discharge was properly dismissed as a matter of law.

3. Plaintiff's claims for tortious contract interference are remanded for further consideration by the trial court in the light of this opinion.

James H. Kaster, Nichols, Kaster & Anderson, Minneapolis, for appellant.

Robert R. Reinhart, Melissa Raphan, Oppenheimer, Wolff & Donnelly, Minneapolis, for respondents.

Douglas A. Hedin, Andrea F. Rubenstein, Minneapolis, for amicus curiae MN Chapter National Employment Lawyers Ass'n.

Heard, considered, and decided by the court en banc.

SIMONETT, Justice.

In this case we decide that an employee who is in-house attorney for his corporate employer is not, by reason of the attorney-client relationship, precluded from making a claim against the employer for wrongful discharge. We conclude, also, that plaintiff's claim for tortious interference be returned to the trial court for further consideration.

Plaintiff-appellant Gale K. Nordling began working for defendant-respondent Northern States Power Company (NSP) in 1971 as an engineer. While working, he also attended law school with NSP's help and in 1975 became a duly licensed Minnesota attorney. For the next 12 years, Nordling was employed as an attorney in NSP's legal department. He worked primarily with the engineering departments, drafting contracts and handling negotiations for construction projects. His performance appears to have been exemplary and he consistently received above average performance ratings.

NSP's Employee Handbook, issued in 1984, contained a section on "Positive Discipline," a system intended to "gain commitment to change inappropriate behavior." There were three formal steps to the disciplinary procedure: an Oral Reminder; a Written Reminder; and a Decision Making Leave ("day off with pay for you to decide your commitment to the job"). The handbook went on to say: "Should the informal coaching and counseling and the three formal steps of Positive Discipline fail to bring about the appropriate behavior, an employee may be terminated." Another section of the handbook gave eight specific examples of conduct that could result in disciplinary action or discharge. Along with the handbook NSP apparently issued separate guidelines to the supervisors, which stated that the disciplinary procedures were a guide and "not to be interpreted as a written contract or guarantee of employment." Nordling contends he never received these guidelines.

In 1987 the smooth course of Nordling's employment changed. David McGannon became the new Vice-President of Law and, apparently to the surprise of others, promoted Gary Johnson to Director of Law. That spring, too, NSP was planning construction of a new power facility and, in connection with the project, hired an outside attorney as an advisor on security matters. McGannon told Nordling about a "plan," apparently recommended by the outside attorney, to have an investigation of the personal lifestyles of NSP employees at the new plant facility. What Nordling believed the plan to include is unclear; there was a suggestion that the investigation would include surveillance of employees on site and at home, and Nordling said he thought the plan had "the connotation of conducting illegal activities." At any rate, Nordling voiced his objections to McGannon and Johnson. He then reported the investigation plan to the general manager for the construction project, who, in turn, reported the plan to others higher up in the company, where the proposed plan was promptly killed.

In April 1987 McGannon began monitoring Nordling's personal phone calls. Next McGannon gave Nordling a memo instructing him to meet certain guidelines or he would be placed on Positive Discipline. Nordling immediately met with McGannon, claiming criticism of his conduct was unwarranted. At the end of the meeting, McGannon retracted the memo. In any event, McGannon apparently felt Nordling was resentful for not having received the promotion that went to Johnson. Also, McGannon noted that another attorney in the legal department, Jack S. Sjoholm, had reported disparaging comments made by Nordling. Nordling denies making the comments.

On November 30, 1987, McGannon summarily discharged Nordling without warning. None of the Positive Discipline steps had been applied. McGannon's reasons for the discharge were vague. He told Nordling that Nordling seemed unhappy, did not fit in the Law Department, and was unsocial. When Nordling then sought employment in NSP's engineering department, McGannon successfully opposed the move.

Nordling then commenced this lawsuit against his employer, NSP, and David McGannon. Later he commenced a second lawsuit against co-attorney Jack Sjoholm. Nordling alleged six claims: (1) breach of contractual rights under the employee handbook; (2) violation of the whistleblower statute; (3) implied-in-law covenant of good faith and fairness; (4) implied-in-fact covenant of good faith and fairness; (5) defamation; and (6) tortious interference with contract and prospective relations against McGannon and Sjoholm.

After extensive discovery, the trial court, on several summary judgment motions, dismissed on their merits the claims based on defamation, implied-in-law covenant breach, and the whistleblowing violation. This left intact the claims for breach of contract, implied-in-fact covenant breach, and tortious interference. At this point, NSP again moved for summary judgment on the remaining claims on the grounds that Nordling had been employed as an attorney by NSP and NSP, as the client, was free to terminate the attorney-client relationship at any time for any reason.

The trial court agreed the attorney-client relationship barred Nordling's claims and dismissed the lawsuits. On appeal, a divided court of appeals panel affirmed. Nordling v. Northern States Power Co., 465 N.W.2d 81 (Minn.App.1991). We granted Nordling's petition for further review.

The main issue is whether an attorney's status as in-house counsel alters the ordinary attorney-client relationship under which the client has the right to discharge its attorney at any time. We first take up this issue as it relates to the breach of contract claim and we then discuss plaintiff's other claims.

I.

The trial court has ruled there is a jury issue whether Nordling had a contractual right not to be discharged without compliance with the progressive disciplinary steps of the employee handbook. See Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn.1983). It appears there are fact issues whether Nordling was aware of contractual disclaimers given to the supervisors. Assuming a contractual breach might be established, the issue before us is whether Nordling's status as an in-house attorney negates and overrides the employer's contractual obligations under the handbook.

We start with two undeniable facts. First, Nordling is an employee, much like any other corporate employee at the executive level. He works for a private corporation. His employer controls the hours he works, the salary and benefits he receives, and the work to which he is assigned. Nordling is also an attorney, licensed to practice law in this state, and subject to the rules of professional conduct governing all lawyers. Nordling was hired by NSP as an attorney admitted to the bar to do legal work. Consequently, NSP is not only Nordling's employer, but his client.

The general rule, long established in this state, is that the client has the right to discharge its attorney with or without cause. Lawler v. Dunn, 145 Minn. 281, 284, 176 N.W. 989, 990 (1920). The discharged attorney is entitled to recover in only quantum meruit for services rendered to the time of discharge and is not entitled to breach of contract damages. 145 Minn. at 284, 176 N.W. at 990. This quantum meruit remedy, of course, is of no solace to discharged in-house counsel.

At the heart of the attorney-client relationship is the element of trust. If the relationship is to work, the client must confide in the attorney, trusting that the attorney will keep confidences and will ably perform. If the client loses this confidence, whether justifiably or not, the client must be able, without penalty, to end the relationship. The legal matter under consideration, it must be remembered, belongs to the client, not the attorney.

A client retains a lawyer to give sound advice even when that advice may not be what the client wants to hear. The knowledgeable client understands and, it is hoped, values in-house counsel's independence, this quality of personal autonomy which is inherent in any profession that is truly a profession, and which is uniquely essential to the legal profession. Yet the employer-client may argue (as NSP argues here) that it is impossible to trust and confide in inside counsel when that attorney, if discharged, may turn on the employer, disavow his professional obligations, and, while contesting his discharge, divulge company confidences.

The common law rule limiting a discharged lawyer to quantum meruit evolved at a time when lawyers tended to be private practitioners self-employed in a more or less general practice, usually practicing alone or in relatively small partnerships. This kind of law practice is changing; the prevalence of specialization, advertising, and increase in the salaried employment of lawyers, as well as many other factors, have all contributed to a concern by the bar with the meaning of professionalism in...