Stiles v. American General Life Ins. Co., 3:96-3241-19.

Citation994 F.Supp. 712
Decision Date03 March 1998
Docket NumberNo. 3:96-3241-19.,3:96-3241-19.
PartiesC. Kenneth STILES, Plaintiff, v. AMERICAN GENERAL LIFE INSURANCE COMPANY, Defendant.
CourtUnited States District Courts. 4th Circuit. United States District Court of South Carolina

Herbert W. Louthian, Louthian and Louthian, Columbia, SC, for Plaintiff.

Scott Timothy Justice, Janis Wilson Johnson, Haynsworth, Baldwin, Johnson & Greaves, P.A., of Columbia, SC, for Defendant.

TO THE HONORABLE CHIEF JUSTICE AND ASSOCIATE JUSTICES OF THE SUPREME COURT OF SOUTH CAROLINA:

CERTIFICATION OF QUESTION OF LAW PURSUANT TO S.C.A.C.R. 228

SHEDD, District Judge.

Pursuant to Rule 228 of the South Carolina Appellate Court Rules, the undersigned United States District Judge respectfully certifies the following question of law to the Supreme Court of South Carolina:

May an employee who is employed under an employment contract which provides that either party may terminate the agreement "for any reason" with 30-days' notice — i.e., an at-will contract with a notice provision — maintain a tort action for wrongful discharge in violation of public policy under Ludwick v. This Minute of Carolina, Inc., 287 S.C. 219, 337 S.E.2d 213 (1985)?

The answer to this question, which is potentially dispositive of this action, does not appear to be directly controlled by any precedent of the Supreme Court of South Carolina.

I. NATURE OF THE CONTROVERSY

In 1985, plaintiff signed two employment agreements with defendant: the "Flexi-Master Contract" and the "General Agent Contract." Both of these agreements, which became effective on January 1, 1986, contained termination provisions which, inter alia, allowed either party to terminate "for any reason" by giving 30-days' written notice to the other party. On October 14, 1993, defendant informed plaintiff that it was terminating these agreements effective November 14, 1993.

Plaintiff thereafter brought this action asserting causes of action for breach of contract and wrongful discharge in violation of public policy based on defendant's termination of the agreements. Following completion of pretrial discovery, defendant moved for summary judgment on both causes of action. See Fed.R.Civ.P. 56. In a separate order, the Court granted the motion as to the breach of contract claim.1 The Court reserved ruling on the motion as to the wrongful discharge claim in order to certify the question of law set forth above.

Plaintiff's wrongful discharge claim, which he has brought pursuant to Ludwick v. This Minute of Carolina, Inc., 287 S.C. 219, 337 S.E.2d 213 (1985) and its progeny, is based on his allegation that defendant terminated the agreements in a retaliatory manner because he had protested and reported what he contends to be an illegal practice by defendant. Defendant denies this contention, both as to the alleged retaliatory motivation of the termination and the alleged illegality of its practice, and asserts instead that it terminated the agreements for proper reasons. For the purpose of this Order only — except as the proposed certified question bears on the issue — the Court assumes that plaintiff has properly stated a claim for wrongful discharge under Ludwick. See particularly Garner v. Morrison Knudsen Corp., 318 S.C. 223, 456 S.E.2d 907 (1995) (declining to decide whether a retaliatory discharge for reporting and testifying about radioactive contamination and unsafe working conditions at a nuclear facility is actionable under Ludwick).2

II. THE WRONGFUL DISCHARGE CLAIM INVOLVES A CONTROLLING QUESTION OF LAW WHICH IS UNSETTLED

Under South Carolina law "[t]he employer-employee relationship is contractual," White v. Roche Biomedical Labs., Inc., 807 F.Supp. 1212, 1220 (D.S.C.1992) (citations omitted), aff'd by unpublished opinion, 998 F.2d 1011, 1993 WL 243709 (4th Cir. 1993), and as a general matter, "`[a]n employment contract may be either for a stated term or at will.'" Young, 333 S.E.2d at 568 (citation omitted).3 A contract for a stated term of employment "`may only be terminated before the end of the term by just cause,'" id. (citation omitted), and the termination of a contract for a stated term without just cause gives rise to a cause of action for breach of contract.4 See Shivers v. John H. Harland Company, 310 S.C. 217, 423 S.E.2d 105, 107 (1992).5 However, a contract for at-will employment may, with certain exceptions, be terminated "at any time, ... `for any reason or for no reason at all,' with or without cause ... [and] [t]he termination of employment at will does not normally give rise to a cause of action for breach of contract." White, 807 F.Supp. at 1215 (citations omitted).

As noted, the agreements in this case contain a 30-day notice provision which may be triggered "for any reason." In Shivers, the state supreme court discussed the nature of a notice provision in an employment contract:

Under South Carolina law, an employment contract containing a notice provision is a contract for a definite term. An employment contract containing a notice provision does not provide for a specific termination date, but is continually in force until notice is given. Once notice is given, the employment contract assumes a definite term, this being the last day of the notice period.

423 S.E.2d at 107 (citations omitted). The Shivers court further explained that once the notice provision is triggered, the employer may terminate the employee only for just cause. Id. at 108. The notice provision in an employment contract thus provides the employee with "`a continual right to employment'" until the specified period of time has elapsed after notice was given unless there exists just cause for an earlier termination. Young, 333 S.E.2d at 568 (citation omitted). An employer who discharges an employee without just cause in contravention of the notice provision is subject to an action for breach of contract in which the employer may recover damages equal to the amount of wages that he would have been paid over the specified notice period. Shivers, 423 S.E.2d at 107-08.

In this case, the parties expressly contracted that either party may terminate the agreements "for any reason"i.e., at will — with thirty-days' notice to the other party. "Thus, the employment relationship between the parties was an at-will relationship with a 30 day notice requirement for termination." Moshtaghi v. The Citadel, 314 S.C. 316, 443 S.E.2d 915, 919 (1994).6 Defendant therefore had the right to terminate the agreements at will, but absent just cause for his termination, plaintiff had the right to retain his employment for a period of thirty days after defendant notified him of its decision to terminate. The Court has previously concluded as a matter of law that defendant did not breach the agreements by terminating plaintiff. In light of that ruling, plaintiff's sole remaining potential remedy arises under Ludwick.

Ludwick involved a claim by an at-will employee that her employer terminated her employment because she refused its instruction not to comply with a lawful subpoena. The state supreme court set forth the sole issue presented in that case as being "whether South Carolina shall recognize a cause of action for discharge of an at-will employee, where the discharge constitutes a violation of public policy." 337 S.E.2d at 214. The supreme court, after reviewing the doctrine of employment at will somewhat critically, answered this question in the affirmative:

The doctrine of termination at will remains the law of this state. However, today we recognize an exception.

Where the retaliatory discharge of an at-will employee constitutes violation of a clear mandate of public policy, a cause of action in tort for wrongful discharge arises.

...

We hold that the public policy exception is invoked where an employer requires an at-will employee, as a condition of retaining employment, to violate the law. To hold otherwise would sanction defiance of the legal process legislated by the General Assembly.

In a nation of laws the mere encouragement that one violate the law is unsavory the threat of retaliation for refusing to do so is intolerable and impermissible.

Id. at 216.

Since 1985, the state supreme court has considered and addressed the Ludwick doctrine in four published opinions,7 and the state court of appeals has likewise done so in four additional published opinions.8 Except for Moshtaghi, in each of those cases, as in Ludwick, the courts were presented with a Ludwick claim involving an at-will employment contract. There is no published South Carolina authority which holds that Ludwick is applicable in a case involving an employee who has a fixed-term employment contract.9 Because the agreements in this case contain both an at-will component and a fixed-term component, the Court is presented with the novel issue of whether Ludwick is applicable.10 As the Court explains below, compelling arguments exist on both sides of this issue.

The Supreme Court of South Carolina considers the state to be "progressive" with respect to protection of employees. See Small v. Springs Indus., Inc., 292 S.C. 481, 357 S.E.2d 452, 455 (1987). In light of the Ludwick court's admonition that the threat of retaliation for an employee's refusal to violate the law is "intolerable," 337 S.E.2d at 216, a strong argument can be made in favor of the extension of Ludwick to all employees. As plaintiff states: "To hold otherwise would allow employers to avoid liability for a public policy tort simply by giving an otherwise at-will employee a written contract requiring a notice period, even a one (1) hour period, before termination. Such a result would clearly contravene the intent behind recognition of this tort." Plaintiff's Feb. 6, 1998 Brief, at 2. However, despite the obvious force of this argument, the issue is not so easily resolved.

Unquestionably, one purpose underlying Ludwick is the vindication of the state's interest in its public policy by the prohibition of employment terminations...

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