Southwest Forest Industries, Inc. v. Sutton, 86-1183

• Decision Date: 10 February 1989
• Docket Number: No. 86-1183,86-1183
• Citation: 868 F.2d 352
• Parties: 130 L.R.R.M. (BNA) 2600, 4 Indiv.Empl.Rts.Cas. 160 SOUTHWEST FOREST INDUSTRIES, INC., Defendant-Appellant, v. John L. SUTTON, Plaintiff-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 352

868 F.2d 352

130 L.R.R.M. (BNA) 2600, 4 Indiv.Empl.Rts.Cas. 160

SOUTHWEST FOREST INDUSTRIES, INC., Defendant-Appellant, v. John L. SUTTON, Plaintiff-Appellee.

No. 86-1183.

United States Court of Appeals Tenth Circuit.

Feb. 10, 1989.

Rehearing Denied Oct. 26, 1989.

Williams R. McKibbon, Jr. (Charles L. House, Gilbert P. Bourk III and Douglas C. Beach, with him on the briefs), of Haynsworth, Baldwin, Miles, Johnson, Greaves and Edwards, Greenville, S.C. for defendant-appellant.

David W. Hauber (Kenneth J. Reilly and Elinor P. Schroeder, with him on the briefs), of Boddington & Brown, Kansas City, Kan., for plaintiff-appellee.

Before McKAY, SEYMOUR, and BALDOCK, Circuit Judges.

SEYMOUR, Circuit Judge.

Plaintiff, John L. Sutton, a former employee of defendant Southwest Forest Industries (Southwest), brought this diversity action for damages, alleging retaliatory discharge for filing worker's compensation claims. After a jury verdict for Sutton, the district court, 643 F.Supp. 662, denied Southwest's motion for judgment notwithstanding the verdict and Southwest appealed. While this appeal was pending, the Kansas Supreme Court issued several decisions addressing whether an employee covered by a collective bargaining agreement could bring a tort action for retaliatory discharge. Among other issues, Southwest asks us to hold that the latest Kansas decision, which reversed prior decisions on which Southwest relied, should not be applied retroactively in this appeal. We conclude instead that the most recent Kansas decision on this issue should be applied retroactively here. We are not persuaded by Southwest's other contentions, and we therefore affirm.

I.

Sutton was employed by Southwest from September 1978 until July 1982. He initially brought this action in Kansas state court, claiming that Southwest discharged him in retaliation for having filed worker's compensation claims. The action was subsequently removed to the United States District Court for the District of Kansas and a jury trial was held in October 1985. At the time of trial, only the Kansas Court of Appeals had ruled on the existence of an action in tort for retaliatory discharge. See Murphy v. City of Topeka--Shawnee County Department of Labor Services, 6 Kan.App. 2d 488, 630 P.2d 186 (1981). The court held there that Kansas law permits an employee to bring a cause of action in tort for a termination based on the filing of worker's compensation claims. Id. 630 P.2d at 193. The plaintiff in Murphy was an employee-at-will. Id. 630 P.2d at 190. Southwest argued unsuccessfully to the district court that Murphy was inapplicable to the present case because Sutton was covered by a collective bargaining agreement.

The jury returned a verdict for Sutton, awarding him $250,000 in actual damages and $1,000,000 in punitive damages. Southwest appealed the judgment to this court in January 1986. During the pendency of this appeal, the Kansas Supreme Court issued decisions supporting Southwest's argument that a tort action for retaliatory discharge was not available to employees covered by collective bargaining agreements. See Cox v. United Technologies, Essex Group, Inc., 240 Kan. 95, 727 P.2d 456, 459 (1986); Smith v. United Technologies, Essex Group, Inc., 240 Kan. 562, 731 P.2d 871, 880 (1987). Southwest filed a motion for summary reversal of the district court judgment, urging that the Cox and Smith decisions governed the present appeal. In response, Sutton argued that the application of those cases by this court would violate his constitutional rights. This court rejected these constitutional claims and granted Southwest's motion for summary reversal on February 12, 1987, remanding the action to the district court with instructions to dismiss. Pursuant to this court's mandate, the district court dismissed the action on February 23, 1987.

Sutton timely filed a petition for rehearing with suggestion for rehearing en banc with this court, again claiming that application of Cox and Smith would violate his constitutional rights. While this petition for en banc review was pending, the Kansas Supreme Court agreed to review similar constitutional challenges to its Cox and Smith decisions in an unrelated case. See Armstrong v. Goldblatt Tool Co., 242 Kan. 164, 747 P.2d 119 (1987). We granted Sutton's petition to stay further proceedings in this action until the Kansas Supreme Court addressed the constitutional challenges to Cox and Smith raised in Armstrong.

In Armstrong, decided on December 11, 1987, the Kansas Supreme Court rejected the plaintiff's claims that application of Cox and Smith violated her constitutional rights. Id. 747 P.2d at 123-25. The court reiterated its previous holding that while a tort action for retaliatory discharge was available to employees-at-will, it was not available to employees covered by collective bargaining agreements. Id. 747 P.2d at 122. On the basis of the Armstrong decision, Southwest filed a motion to dissolve the stay of these proceedings, which we granted on January 22, 1988. That same day, the Kansas Supreme Court denied a motion for rehearing in Armstrong. On February 22, 1988, we denied Sutton's petition for rehearing and rehearing en banc.

Thirty-two days later, the Kansas Supreme Court reversed the position it had taken in the Cox, Smith, and Armstrong decisions. On March 25, 1988, the Kansas court held in Coleman v. Safeway Stores, Inc., 242 Kan. 804, 752 P.2d 645, 646 (1988), that a tort action for retaliatory discharge is available to employees covered by collective bargaining agreements. Based upon the change in Kansas law announced in Coleman, Sutton filed a motion to recall the mandate and reinstate the appeal. We granted that motion.

The primary issue before us now is whether to apply Coleman retroactively in this appeal. In addition, Southwest raises issues concerning the conduct of the trial and the type and amount of damages awarded.

II.

As a court sitting in diversity, we must apply a state supreme court's most recent statement of state law. Robinson v. Volkswagen of America, Inc., 803 F.2d 572, 574 (10th Cir.1986). Coleman is the most recent statement by the Kansas Supreme Court concerning that state's law on the existence of a tort action for retaliatory discharge. Our task therefore is to predict whether the Kansas Supreme Court would apply Coleman retroactively. See Daitom, Inc. v. Pennwalt Corp., 741 F.2d 1569, 1574 (10th Cir.1984).

The Kansas Supreme Court provided no obvious indication in Coleman whether it intended that decision to be applied retroactively. Because Coleman does not expressly require retroactive application beyond that case, we must examine Kansas law for further guidance. The leading Kansas decision holds that retroactive application of an overruling decision is neither required nor prohibited as a matter of constitutional law. Vaughn v. Murray, 214 Kan. 456, 521 P.2d 262, 269 (1974). In Vaughn, the Kansas Supreme Court cited with approval certain factors used by courts in determining whether to apply such a decision retroactively. These factors include: "(1) Justifiable reliance on the earlier law; (2) The nature and purpose of the overruling decision; (3) Res judicata; (4) Vested rights, if any, which may have accrued by reason of the earlier law; and (5) The effect retroactive application may have on the administration of justice in the courts." Id.

Applying these factors to the present appeal, we conclude that none of them preclude a retroactive application of Coleman. Southwest argues that a tort action for retaliatory discharge did not become available to employees subject to a collective bargaining agreement until the date of the Coleman decision, and thus Coleman should be restricted to prospective application. Southwest essentially claims that it justifiably relied on the law existing at the time it discharged Sutton. We are not persuaded.

Southwest's argument presumes that a tort action for retaliatory discharge did not exist at the time of Sutton's discharge. We disagree with this presumption, because we read Murphy's discussion of the public policy rationale underlying such causes of action as sufficiently broad to have provided Southwest with notice of a potential claim when it discharged Sutton over a year after Murphy was decided. Our view is supported by Coleman's reliance on the public policy rationale set forth in Murphy. In finding that this rationale should not be restricted to employees-at-will, the Kansas Supreme Court noted that "[a]lthough the employee in Murphy was an at-will employee, the primary emphasis of the opinion was on the strong public policy of Kansas underlying the Worker's Compensation Act, applicable to all workers injured on the job." Coleman, 752 P.2d at 649. Moreover, Southwest could not have relied on the holdings of Cox, Smith, and Armstrong, because these decisions were not announced until over one year after judgment was entered against it by the district court. Finally, the Cox line of decisions never sanctioned an employer's retaliatory discharge of an employee for filing worker's compensation claims. Cf. Ebert v. Ebert, 232 Kan. 502, 656 P.2d 766, 768 (1983) (Kansas decision overruling interspousal immunity doctrine only added possible civil liability in damages, and did not create criminal culpability for batteries committed upon a spouse, which were always unlawful).

Southwest also asserts that collective bargaining agreements have long provided covered employees with remedies protecting them from retaliatory discharge, and that these remedies adequately protected the public policy concerns identified by Coleman in cases pending at the time of Coleman's issuance. This argument ignores the Kansas Supreme Court's reasons for overruling its previous decisions in Cox, Smith, and Armstrong. The court found it a "disturbing proposition" that an employee subject to a collective bargaining agreement must...