Sterling Drug, Inc. v. Oxford, 87-172

Decision Date19 January 1988
Docket NumberNo. 87-172,87-172
Citation743 S.W.2d 380,294 Ark. 239
Parties, 3 IER Cases 1060 STERLING DRUG, INC., Appellant, v. Charles G. OXFORD, Appellee.
CourtArkansas Supreme Court

M. Stephen Bingham, Little Rock, for appellant.

Ronald G. Naramore, Bryan Reis, Q. Byrum Hurst, Jr., Hot Springs, for appellee.

HOLT, Chief Justice.

This is an outrage and wrongful discharge action. Jurisdiction is pursuant to Ark.Sup.Ct.R. 29(1)(o ).

From 1963 until October 31, 1983, the appellee, Charles G. Oxford ("Oxford"), was employed under a contract for an indefinite term by what is now the National Laboratories Division of Lehn and Fink Industrial Products Division, Inc., a division of the appellant, Sterling Drug, Inc. ("Sterling"). In 1984 Oxford filed suit against Sterling alleging that through acts of its agents, Sterling had engaged in a systematic campaign from January of 1982 until August of 1983 designed to force Oxford's resignation because it believed that he had reported Sterling to the General Services Administration ("GSA") for submitting false information during GSA contract negotiations. The jury received instructions on both wrongful discharge in violation of the public policy of the state and outrage. It returned a general verdict in favor of Oxford for compensatory damages in the amount of $201,700.00 and punitive damages in the amount of $150,000.00. The circuit court denied Sterling's motion for judgment notwithstanding the verdict or, in the alternative, for a new trial. We reverse the judgment of the trial court and remand for further proceedings on the wrongful discharge claim.

Don Dunston ("Dunston"), a former Sterling employee and Oxford's supervisor, testified at trial that Ray Mitchell, president of Lehn and Fink Industrial Products Division, Inc., stated in October of 1981 that he believed Oxford had reported Sterling to the GSA for pricing violations. As a result of these violations, Sterling paid $1,075,000.00 to the federal government in a 1984 settlement. It was in October of 1981 that Sterling advised Oxford that his position, manager of contract sales, would be eliminated as of January 1, 1982, due to a company reorganization. In February of 1982, Oxford accepted a position as district sales manager, the lowest position in the National Laboratories Division hierarchy, for an area in east Texas.

Dunston also testified that he wrote an "EEO" letter to Oxford on January 29, 1982, at the request of Bill Milliron ("Milliron"), a former Industrial Products Division executive. An "EEO" letter is a nickname for a letter used to set an employee up for termination. Dunston recalled that he had told Milliron it was not the time to deal with Oxford in this manner because he was under severe pressure due to a recent divorce. The letter carefully detailed various day to day responsibilities for Oxford, one of which was conducting floor care demonstrations five nights a week after business hours. Dunston later criticized Oxford repeatedly about his job performance in these assigned responsibilities. Dunston acknowledged that his actions followed the company procedure outlined by Milliron to document an employee termination and that he had written an "EEO" letter only twice before, one to another regional manager and one to a district manager. Both men resigned under pressure.

At trial, Oxford denied that he had reported Sterling to the GSA. Oxford also testified that Dunston reprimanded him for acts he had not done and that he was not given the stock he had won in a company sales contest. Additionally, he stated that because of his employment conditions, he left his territory in August of 1983 without receiving prior approval from Sterling. Oxford did not return to work, and Sterling discharged him on October 31, 1983.

I. OUTRAGE

Sterling argues that there is no substantial evidence in the record to support a jury verdict for outrage. One is subject to liability for outrage if he or she willfully or wantonly causes severe emotional distress to another by extreme and outrageous conduct. M.B.M. Co., Inc. v. Counce, 268 Ark. 269, 596 S.W.2d 681 (1980). In Counce we stated, "By extreme and outrageous conduct, we mean conduct that is so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in civilized society." The employer in Counce discharged an employee supposedly because her services were no longer needed. After her termination, the employer told the employee that she would have to take a polygraph test in connection with a money shortage at the store before the company would release her last paycheck. Even though she passed the test, the employer deducted $36.00 from her paycheck as her share of the missing money. We found that there was a material issue of fact as to whether the employer's conduct was extreme and outrageous.

In Tandy Corp. v. Bone, 283 Ark. 399, 678 S.W.2d 312 (1984), an employer interrogated an employee, whom it suspected of theft, at thirty minute intervals for most of a day, denied him valium when he was under obvious stress, and threatened him with arrest. In holding there was substantial evidence to support the jury verdict for outrage, we placed special emphasis on the fact that even though the employer knew of the employee's lower than normal emotional stamina, it refused to permit him to take his medication during the interrogation.

In Hess v. Treece, 286 Ark. 434, 693 S.W.2d 792 (1985), cert. denied, 475 U.S. 1036, 106 S.Ct. 1245, 89 L.Ed.2d 354 (1986), Treece, a police officer, sued Hess, the Little Rock City Director, for outrage. Hess, who was angry with Treece over a personal matter, conducted surveillance of Treece, communicated to other individuals that he would have Treece fired at any cost, and apparently made false reports concerning Treece's employment conduct. Basing our decision in part on the fact that Hess' actions continued over a two year time span, we found there was substantial evidence to support the jury verdict for outrage.

Sterling's conduct continued over an eighteen month period. In addition, there is ample evidence that agents of Sterling knew that Oxford was under severe pressure because of a recent divorce. Nevertheless, Sterling's conduct did not rise to a sufficient level to support a verdict for outrage. It was not "so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in civilized society." Counce, supra. The recognition of the tort of outrage does not open the doors of the courts to every slight insult or indignity one must endure in life. Tandy, supra. We must reverse the trial court judgment as to the outrage cause of action.

II. WRONGFUL DISCHARGE

Sterling contends that the trial court erred in instructing the jury as to wrongful discharge in violation of the public policy of the state since there is no such cause of action in Arkansas. We have repeatedly held that when an employee's contract of employment is for an indefinite term, either party may terminate the relationship without cause or at will. Griffin v. Erickson, 277 Ark. 433, 642 S.W.2d 308 (1982). We recently modified the employment-at-will doctrine to provide that where an at-will employee (one employed for an indefinite term) relies on a personnel manual or employment agreement that expressly states that he or she cannot be discharged except for cause, the employee may not be arbitrarily discharged in violation of such a provision. Gladden v. Ark. Children's Hosp., 292 Ark. 130, 728 S.W.2d 501 (1987).

In Scholtes v. Signal Delivery Service, Inc., 548 F.Supp. 487 (W.D.Ark.1982), Judge H. Franklin Waters assessed the state of Arkansas law concerning the employment-at-will doctrine. He stated:

[W]e have no hesitancy in concluding that Arkansas law would recognize at least four exceptions to the at-will doctrine, excluding implied contracts and estoppel. These are: (1) cases in which the employee is discharged for refusing to violate a criminal statute; (2) cases in which the employee is discharged for exercising a statutory right; (3) cases in which the employee is discharged for complying with a statutory duty; and (4) cases in which employees are discharged in violation of the general public policy of the state.

In Lucas v. Brown & Root, Inc., 736 F.2d 1202 (8th Cir.1984), the employer allegedly fired an at-will employee because she would not "sleep" with her foreman. The court held that the employee's complaint stated a cause of action for wrongful discharge in violation of the public policy of Arkansas. The court found that if the allegations were true, the public policy of the state was contravened because "[a] woman invited to trade herself for a job is in effect being asked to become a prostitute."

In Counce, supra, we acknowledged that we might recognize an exception to the at-will doctrine if an employee is "discharged for exercising a statutory right, or for performing a duty required of her by law or that the reason for the discharge was in violation of some other well established public policy." In Jackson v. Kinark Corp., 282 Ark. 548, 669 S.W.2d 898 (1984), we noted the judicial trend of other states in softening the at-will rule either by finding an express or implied agreement for a specified period of employment or by imposing a duty on an employer not to discharge an employee arbitrarily or in bad faith but did not find it necessary to explore the issue.

An increasing number of other state courts have granted an exception to the employment-at-will doctrine for employees who have been discharged in contravention of the public policy of the state. Some jurisdictions have permitted wrongful discharge actions where an employer terminated an employee for refusing to violate a specific statute. Petermann v....

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