Pugh v. See's Candies, Inc.

• Decision Date: 10 August 1988
• Docket Number: No. A021348,A021348
• Citation: 250 Cal.Rptr. 195,203 Cal.App.3d 743
• Court: California Court of Appeals Court of Appeals
• Parties: , 115 Lab.Cas. P 56,272, 3 IER Cases 945 Wayne K. PUGH, Plaintiff and Appellant, v. SEE'S CANDIES, INC., et al., Defendants and Respondents.

Page 195

250 Cal.Rptr. 195

203 Cal.App.3d 743, 115 Lab.Cas. P 56,272, 3 IER Cases 945

Wayne K. PUGH, Plaintiff and Appellant, v. SEE'S CANDIES, INC., et al., Defendants and Respondents.

No. A021348.

Court of Appeal, First District, Division 3, California.

Aug. 10, 1988.

Review Denied Nov. 10, 1988.

Joseph P. Stretch, Law Offices of Joseph P. Stretch, Richard P. Hill, Niesar, Moody, Hill, Kregstein & Hamilton, San Francisco, for plaintiff and appellant.

Joseph Posner, Inc. Los Angeles, John C. Shaffer, Jr., Palo Alto, Kaye Rochlin, Leroy S. Walker, Los Angeles, for amici curiae on behalf of plaintiff and appellant.

Donald F. Farbstein, Farbstein & Brown, San Mateo, Law Offices of Phillip J. Smith, Law Offices of Smith, Wright, Peterson & Chapla, Healdsburg, for defendants and respondents.

Michael J. Breining, Sacramento, Sheppard, Mullin, Richter & Hampton, David S. Bradshaw, Tracy Thompson, Barbara C. Stikker, San Francisco, for amici curiae on behalf of defendants and respondents.

BARRY-DEAL, Associate Justice.

Following retrial of his action for wrongful discharge, appellant, an at-will employee, again appeals from the judgment entered after the jury returned a general defense verdict for See's and the union ¹ and after the court denied appellant's motion for a new trial. In the first appeal, a judgment for defendants was reversed by this court in a published opinion, Pugh v. See's Candies, Inc. (1981) 116 Cal.App.3d 311, 171 Cal.Rptr. 917 (hereafter Pugh I ), holding that the trial court erroneously granted defendants' motion for nonsuit. ²

Appellant now contends that the court committed prejudicial error in its evidentiary rulings and in instructing the jury in the second trial, in which he urged both contract and tort theories to support recovery for wrongful discharge. We find no reversible error and affirm the judgment.

I. The First Trial

Appellant, after 32 years of employment with See's, occupied a managerial position as a corporate officer and member of the board of directors of the subsidiary corporation when he was summarily discharged without prior notice. (Pugh I, supra, 116 Cal.App.3d at pp. 315-319, 171 Cal.Rptr. 917.) Asserting that his involuntary termination was a breach of contract and against public policy, appellant filed an action against his former employer for wrongful discharge and joined as a defendant the union, which he alleged had conspired with the employer in the wrongful conduct; he sought compensatory and punitive damages. (Id., at pp. 315, 322, 171 Cal.Rptr. 917.)

The trial court granted defendants' motion for nonsuit at the close of appellant's case-in-chief. In reversing, the Pugh I court viewed appellant's evidence in the light most favorable to appellant, as it must in reviewing a nonsuit, and determined, without reaching the merits of the action, that appellant had established a prima facie case of wrongful discharge based on the employer's breach of an implied-in-fact contractual promise not to dismiss him except for good cause. (Pugh I, supra, 116 Cal.App.3d at pp. 327, 329, 171 Cal.Rptr. 917.) Evidence of the union's participation in inducing breach of contract, though not "weighty," was held sufficient to withstand nonsuit. (Id., at pp. 330-331, 171 Cal.Rptr. 917.)

Before reaching this conclusion, Justice Grodin, writing for the Pugh I court, reviewed the legal history of the employment relationship and the erosion of the employer's absolute right to discharge an employee, which has been curtailed by the Legislature in a variety of ways. ³ (Pugh I, supra, 116 Cal.App.3d at pp. 319-322, 171 Cal.Rptr. 917.) Collective bargaining agreements, covering a relatively small percentage of the work force, protect union employees from discharge without "just cause." Public employees are protected by civil service rules and due process. All employees are statutorily protected from discharge for a variety of reasons, including union activity, discrimination, and political affiliation. Although the Legislature has not adopted statutes providing more generalized protection for at-will employees against unjust dismissal, two limitations on the employer's absolute right to discharge have developed judicially, "one of them based upon public policy and the other upon traditional contract doctrine." ( Id., at p. 322, 171 Cal.Rptr. 917.)

The Pugh I court first considered the public policy limitations on employee discharges articulated in Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 172, 164 Cal.Rptr. 839, 610 P.2d 1330, in which an at-will employee with 15 years of service sued his employer for wrongful discharge when he was fired for refusal to participate in an illegal price-fixing scheme in violation of the antitrust laws. Tameny held that such a discharge in violation of a statute or fundamental public policy would support a tort action against the employer. In Pugh I the court rejected appellant's contention that the evidence tended to show he was terminated because he refused to participate in negotiations for an illegal union contract and held that the evidence was insufficient to establish a prima facie case for retaliatory discharge under Tameny. (Pugh I, supra, 116 Cal.App.3d at pp. 322-324, 171 Cal.Rptr. 917.) Therefore, the nonsuit on this cause of action was an adjudication on the merits under Code of Civil Procedure section 581c (now section 581c, subd. (c), as amended in 1980), and this action could not be urged on remand. (See American Broadcasting Companies, Inc. v. Walter Reade-Sterling, Inc. (1974) 43 Cal.App.3d 401, 406, 117 Cal.Rptr. 617; 7 Witkin, Cal.Procedure (3d ed. 1985) Trial, § 422, p. 422.)

The Pugh I court then turned its attention to the contract limitations on the employer's absolute right to discharge an at-will employee. It considered a "related doctrinal development" of an action based on breach of the covenant of good faith and fair dealing espoused in Cleary v. American Airlines, Inc. (1980) 111 Cal.App.3d 443, 168 Cal.Rptr. 722, ⁴ and concluded, correctly we think, that the result in Cleary was "equally explicable in traditional contract terms: the employer's conduct gave rise to an implied promise that it would not act arbitrarily in dealing with its employees." ( Pugh I, supra, 116 Cal.App.3d at p. 329, 171 Cal.Rptr. 917.) Although the Cleary court held that the employer's breach of the covenant of good faith and fair dealing would support an employee's action in either tort or contract ( Cleary, supra, 111 Cal.App.3d at p. 456, 168 Cal.Rptr. 722), it did not delineate the elements of a tort action nor discuss the rationale for allowing a tort remedy. Because the Pugh I court found it unnecessary to consider such an action, it did not negate a tort theory for appellant's use on remand. ( Pugh I, supra, 116 Cal.App.3d at p. 329, 171 Cal.Rptr. 917; see also Hentzel v. Singer Co. (1982) 138 Cal.App.3d 290, 304, 188 Cal.Rptr. 159 [where Justice Grodin, writing for the court, again found it unnecessary to decide whether complaint stated cause of action for breach of the covenant].) Therefore, appellant was not foreclosed by Code of Civil Procedure section 581c (prior adjudication on the merits) from advancing this theory on retrial. (See 7 Witkin, Cal.Procedure, Trial, supra, § 422, p. 422.)

Then, for retrial, the Pugh I court spelled out a basic contract theory for a cause of action for breach of an implied-in-fact employment contract containing the employer's promise not to discharge an at-will employee without good cause. In doing so, it relied on expanded contract theories to dispose of several limitations in long-established contract and statutory law. (See Rohwer, Terminable-At-Will Employment: New Theories for Job Security (1984) 15 Pacific L.J. 759, 768-770 (hereafter New Theories ).)

The court acknowledged the common law rule, based on the concept of mutuality and codified in Labor Code section 2922, that employment for an unspecified term may be terminated at the will of either party on notice to the other. It held, however, that the statute creates only a presumption that an employment is terminable at will. This presumption is subject to contrary evidence, which may take the form of an express or implied agreement that "the employment relationship will continue indefinitely, pending the occurrence of some event such as the employer's dissatisfaction with the employee's services or the existence of some 'cause' for termination." (Pugh I, supra, 116 Cal.App.3d at pp. 324-325, 171 Cal.Rptr. 917, fn. omitted, emphasis added.)

The court reasoned that there is no requirement of mutuality of obligation if the requirement of consideration is met. ( Pugh I, supra, 116 Cal.App.3d at p. 325, 171 Cal.Rptr. 917.) The theory that an employer's promise for continued employment is terminable at will unless supported by an independent consideration other than services rendered or to be rendered is contrary to the general contract principle that courts should not inquire into adequacy of consideration. The " 'independent consideration' " requirement at most serves an evidentiary function, that is, it is more likely that the parties intended a continuing relationship with limitations on the employer's right to discharge when the employee has given some benefit to the employer or suffered some detriment, other than providing services. (Id., at pp. 325-326, 171 Cal.Rptr. 917.) Thus, employment contracts " '... are terminable only for good cause if either of two conditions exist: (1) the contract was supported by consideration independent of the services to be performed by the employee ...; or (2) the parties agreed, expressly or impliedly, that the employee could be terminated only for good cause.' [Citations.]" ( Id., at p. 326, 171 Cal.Rptr. 917, emphasis added by the Pugh I court; see also Hillsman v. Sutter Community Hospitals (1984) 153 Cal.App.3d 743, 751-753, 200 Cal.Rptr. 605.)

The Pugh I court stated that a...