Stedillie v. American Colloid Co., s. 91-2654

• Decision Date: 25 June 1992
• Docket Number: Nos. 91-2654,91-2658,s. 91-2654
• Citation: 967 F.2d 274
• Parties: 122 Lab.Cas. P 57,000 Ivan STEDILLIE, Appellant, v. AMERICAN COLLOID COMPANY, a Delaware Corporation, Appellee. Monte TALKINGTON, Appellant, v. AMERICAN COLLOID COMPANY, a Delaware Corporation, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 274

967 F.2d 274

122 Lab.Cas. P 57,000

Ivan STEDILLIE, Appellant, v. AMERICAN COLLOID COMPANY, a Delaware Corporation, Appellee.

Monte TALKINGTON, Appellant, v. AMERICAN COLLOID COMPANY, a Delaware Corporation, Appellee.

Nos. 91-2654, 91-2658.

United States Court of Appeals,

Eighth Circuit.

Submitted Feb. 27, 1992.

Decided June 25, 1992.

Robert L. Morris, II, Belle Fourche, S.D., argued (Terrence R. Quinn, on the brief), for appellants.

Thomas E. Simmons, Rapid City, S.D., argued (Mark F. Marshall, Rapid City, S.D Before McMILLIAN, FAGG and WOLLMAN, Circuit Judges.

and Robert E. Arroyo, Chicago, Ill., on the brief), for appellee.

McMILLIAN, Circuit Judge.

Monte Talkington and Ivan Stedillie appeal from final orders entered in the United States District Court ¹ for the District of South Dakota granting summary judgment in favor of their former employer, American Colloid Co. Talkington v. American Colloid Co., 767 F.Supp. 1495 (D.S.D.1991) (Talkington ); Stedillie v. American Colloid Co., 767 F.Supp. 1502 (D.S.D.1991) (Stedillie ). The cases were consolidated for appeal. For reversal, appellants argue that the district court erred in holding that (1) the employee handbook did not create a just cause termination employment contract, (2) the secrecy agreements did not constitute "additional consideration" to create a just cause termination employment contract, and (3) promises made to appellants did not constitute promissory estoppel. For the reasons discussed below, we affirm the orders of the district court.

BACKGROUND FACTS

Talkington began working for American Colloid in the spring of 1972 ² and Stedillie began working for American Colloid in October, 1973. Each was hired for a probationary period of 90 days, after which each became a "permanent employee." This probationary period and their status as permanent employees was outlined in the employee handbook which both Stedillie and Talkington received. This handbook also included a section entitled "Termination of Employment" which stated:

Employees wishing to terminate their services should give a minimum of two weeks' notice to their supervisor in order to leave in good standing.

If you are dismissed, a full explanation for the reasons, given to you by your supervisor, will be provided.

The Personnel Department conducts exit interviews with all terminating employees.

Stedillie received various job promotions and, in 1981, when he was promoted to safety coordinator/quality assurance, American Colloid required him to sign a secrecy agreement. Talkington also received promotions and, in 1975, when he was promoted to a lab supervisor position, he was required to sign a similar secrecy agreement. These agreements provided that all inventions were property of the company and that

for a period of three (3) years after the termination of his employment he will not engage in the development, manufacture or sale of bentonite or other products then being developed, manufactured or sold by Company, either directly or indirectly, as principal, agent, employee or consultant for any firm or corporation in any counties or states in which Company may now or hereafter during his employment engage in business....

Appellants were discharged on March 4, 1985. Neither was told the reasons for his discharge and neither received an exit interview.

On February 26, 1991, appellants filed complaints against American Colloid in federal district court alleging breach of contract, breach of an implied covenant of good faith and fair dealing, promissory estoppel, negligence, and wrongful termination. American Colloid filed motions to dismiss or, alternatively, for judgment on the pleadings in each case. The district court entered orders in each case converting

                these motions into motions for summary judgment.   Following briefing and a hearing, the district court granted American Colloid's motions for summary judgment in each case.   These consolidated appeals followed
                

DISCUSSION

We review a grant of summary judgment de novo. The question before the district court, and this court on appeal, is whether the record, when viewed in the light most favorable to the non-moving party, shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986).

Employee Handbook Creating a Just Cause Termination Contract

Both parties agree that the employee handbook was an employment contract. South Dakota law provides that employment having no specific term may be terminated at the will of either party. S.D.Codified Laws Ann. § 60-4-4 (1978); Petersen v. Sioux Valley Hosp. Ass'n, 486 N.W.2d 516, 520 (S.D.1992); Butterfield v. Citibank of S.D., 437 N.W.2d 857, 859 (S.D.1989) (Butterfield ). The South Dakota Supreme Court has recognized "a narrow, contract-based exception to the employment at will doctrine ... where an employer specifically agrees in an employee handbook to discharge employees, 'for cause only.' " Butterfield, 437 N.W.2d at 859, citing Osterkamp v. Alkota Mfg., Inc., 332 N.W.2d 275 (S.D.1983) (Osterkamp ). Osterkamp was the first South Dakota case to recognize this narrow exception. Osterkamp provided two possible ways that the language in an employee handbook could create a just cause termination contract:

First, such an agreement may be found where the handbook explicitly provides, in the same or comparable language, that discharge can occur "for cause only." Second, a "for cause only" agreement may be implied where the handbook contains a detailed list of exclusive grounds for employee discipline or discharge and, a mandatory and specific procedure which the employer agrees to follow prior to any employee's termination.

Butterfield, 437 N.W.2d at 859 (citations omitted); see Cutter v. Lincoln Nat'l Life Ins. Co., 794 F.2d 352, 355-56 (8th Cir.1986) (Cutter ) (applying South Dakota law, the language of employee handbook insufficient to create a "for cause only" termination agreement).

In Osterkamp, the South Dakota Supreme Court found the employee handbook sufficient to create a just cause termination contract. 332 N.W.2d at 277. The employee handbook contained a list of twenty-eight rules which would result in discipline, id. at 276, and a section which detailed the "corrective discipline" approach of the company and explained the "four notice" procedure which would be used for discipline and discharge, id. at 277.

Appellants argue that the employee handbook meets the second part of the Osterkamp test; they contend that "for cause only" termination may be inferred from the language of the handbook. Appellants argue that three different sections, in combination, create a just cause termination contract. First, the handbook provides for a ninety day probationary period during which an employee can be terminated for "any reason." The handbook then states that "[a]t the completion of the probationary period, you will become a permanent employee." The language stating that an employee can be terminated for any reason only applies to the ninety day probation period. There is no such language concerning a permanent employee. Therefore appellants argue that a permanent employee can only be fired for cause.

Second, appellants highlight a portion of the employee handbook which they argue implied that an employee can only be terminated for misconduct:

Of course, it is impossible to list every possible type of misconduct which may result in a disciplinary action. If you will act as a reasonable, law-abiding citizen, and do your job well, you will get along well and enjoy your membership in the family of American Colloid's employees.

Finally, appellants argue that the language on termination quoted above creates a procedure that American Colloid must follow to terminate an employee. Together, these three provisions, according to appellants, create a just cause termination contract.

In support of their position, appellants point to cases decided under Wyoming law. In Leithead v. American Colloid Co., 721 P.2d 1059 (Wyo.1986), the Wyoming Supreme Court analyzed the same employee handbook in dispute in the present case. The Wyoming Supreme Court examined the contrast in language between the ninety day probationary period and an employee's status as a "permanent employee" and concluded that "the handbooks strongly imply that a permanent employee is one that can be discharged only for cause." Id. at 1063. The Wyoming Supreme Court then examined the list of misconduct which would result in discharge and the section on "Termination of Employment" and concluded that "both the specific terms and the general tenor of the handbooks gave [the employee] an enforceable right to be discharged only for cause." Id.; see Durtsche v. American Colloid Co., 958 F.2d 1007 (10th Cir.1992) (applying Wyoming law to a slightly different American Colloid handbook).

American Colloid argues that the employee handbook, while a contract, does not alter the presumed employment-at-will status of appellants because the Osterkamp test was not met. American Colloid argues that the employee handbook did not explicitly provide that employees would only be terminated for cause. Nor was the second Osterkamp exception met, according to American Colloid, because the handbook does not contain a detailed list of the exclusive grounds for employee discipline.

We agree with American Colloid and the district court. Nothing in the employee handbook altered the presumption of employment-at-will in South Dakota. We must analyze this case using the Osterkamp test as reaffirmed in Butterfield. First, the handbook contains no specific language which explicitly provides that discharge can occur "for cause only." Additionally,...