Tameny v. Atlantic Richfield Co.

• Decision Date: 02 June 1980
• Court: California Supreme Court
• Parties: , 610 P.2d 1330, 115 L.R.R.M. (BNA) 3119, 9 A.L.R.4th 314, 121 Lab.Cas. P 56,822, 1980-2 Trade Cases P 63,378, 1 IER Cases 102 Gordon TAMENY, Plaintiff and Appellant, v. ATLANTIC RICHFIELD COMPANY et al., Defendants and Respondents. L.A. 31100.

Page 839

164 Cal.Rptr. 839

27 Cal.3d 167, 610 P.2d 1330, 115 L.R.R.M. (BNA) 3119,

9 A.L.R.4th 314, 121 Lab.Cas. P 56,822,

1980-2 Trade Cases P 63,378, 1 IER Cases 102

Gordon TAMENY, Plaintiff and Appellant, v. ATLANTIC RICHFIELD COMPANY et al., Defendants and Respondents.

L.A. 31100.

Supreme Court of California.

June 2, 1980.

Rehearing Denied July 2, 1980.

Richard P. Carroll and James R. Carroll, Anaheim, for plaintiff and appellant.

Wylie Aitken, Santa Ana, Robert E. Cartwright, San Francisco, Edward I. Pollock, Los Angeles, Glen T. Bashore, Santa Ana, Stephen I. Zetterberg, Claremont, J. Nick DeMeo, Santa Rosa, Sanford M. Gage, Beverly Hills, Joseph Posner, Los Angeles, Laufer & Roberts, David Laufer, Encino, Edward A. Friend, San Francisco, John J. Hartford, San Jose, John R. Hillsman and McGuinn & Moore, San Francisco, as amici curiae on behalf of plaintiff and appellant.

Stephen D. Miller, Miller, Glassman & Browning and Jane D. Saltsman, Beverly Hills, for defendants and respondents.

TOBRINER, Justice.

Plaintiff Gordon Tameny instituted the present action against his former employer, Atlantic Richfield Company (Arco), ¹ alleging that Arco had discharged him after 15 years of service because he refused to participate in an illegal scheme to fix retail gasoline prices. Plaintiff sought recovery from Arco on a number of theories, contending, inter alia, that Arco's conduct in discharging him for refusing to commit a criminal act was tortious and subjected the employer to liability for compensatory and punitive damages under normal tort principles.

Arco demurred to the complaint, contending that plaintiff's allegations, even if true, did not state a cause of action in tort. Arco conceded that California authorities establish that an employee who has been fired for refusing to perform an illegal act may recover from his former employer for "wrongful discharge." Arco contended, however, that the employee's remedy in such cases sounds only in contract and not in tort. The trial court accepted Arco's argument and sustained a general demurrer to plaintiff's tort causes of action. Plaintiff now appeals from the ensuing judgment.

For the reasons discussed below, we have concluded that the trial court judgment must be reversed with respect to the issue of tort liability. As we shall explain, past cases do not sustain Arco's contention that an employee who has been discharged because of his refusal to commit an illegal act at his employer's behest can obtain redress only by an action for breach of contract. Rather, as we shall see, the relevant authorities both in California and throughout the country establish that when an employer's discharge of an employee violates fundamental principles of public policy, the discharged employee may maintain a tort action and recover damages traditionally available in such actions.

1. The facts and proceedings below.

Because this appeal arises from a judgment entered after the sustaining of a general demurrer, we must, under established principles, assume the truth of all properly pleaded material allegations of the complaint in evaluating the validity of the trial court's action. (See, e. g., Alcorn v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 496, 86 Cal.Rptr. 88, 468 P.2d 216; Serrano v. Priest (1971) 5 Cal.3d 584, 591, 96 Cal.Rptr. 601, 487 P.2d 1241.)

According to the complaint, plaintiff was hired by Arco as a relief clerk in 1960, received regular advancements, merit increases and commendatory evaluations in his initial years with the company, and, in 1966, was promoted to the position of retail sales representative, the position he held when discharged by Arco in 1975. His duties as a retail sales representative included among other matters the management of relations between Arco and the various independent service station dealers (franchisees) in his assigned territory of Bakersfield.

The complaint alleges that beginning in the early 1970s, Arco, Arco's district manager McDermott, and others engaged in a combination "for the purpose of reducing, controlling, stabilizing, fixing, and pegging the retail gasoline prices of Arco service station franchisees." According to the complaint, defendants' conduct in this regard violated express provisions of the Sherman Antitrust Act (15 U.S.C. § 1 et seq.), the Cartwright Act (Bus. & Prof.Code, § 16720 et seq.), and a specific consent decree which had been entered in a federal antitrust prosecution against Arco. ² The complaint further asserts that during the early 1970s, defendants increasingly pressured plaintiff to "threaten (and) cajole . . . the so-called 'independent' service station dealers in (his) territory to cut their gasoline prices to a point at or below a designated level specified by Arco." When plaintiff refused to yield to his employer's pressure to engage in such tactics, his supervisor told him that his discharge was imminent, and soon thereafter plaintiff was fired, effective March 25, 1975. Although at the time of the discharge Arco indicated in its personnel records that plaintiff was being fired for "incompetence" and for "unsatisfactory performance," the complaint alleges that "the sole reason" for plaintiff's discharge was his refusal to commit the "grossly illegal and unlawful acts which defendants tried to force him to perform." ³

On the basis of the foregoing allegations, plaintiff sought relief on five separate theories. The complaint alleged, in particular, three tort causes of action (wrongful discharge, breach of the implied covenant of good faith and fair dealing, and interference with contractual relations), an action for breach of contract, and an action for treble damages under the Cartwright Act. Defendants demurred to the complaint, and the trial court sustained the demurrer as to all counts except for the count alleging a breach of contract. ⁴ Thereafter, plaintiff voluntarily dismissed the contract count and the trial court then dismissed the entire action and entered judgment in favor of Arco. Plaintiff appeals from the adverse judgment. ⁵

2. An employee discharged for refusing to engage in illegal conduct at his employer's request may bring a tort action for wrongful discharge.

Under the traditional common law rule, codified in Labor Code section 2922, ⁶ an employment contract of indefinite duration is in general terminable at "the will" of either party. Over the past several decades, however, judicial authorities in California and throughout the United States have established the rule that under both common law and the statute an employer does not enjoy an absolute or totally unfettered right to discharge even an at-will employee. In a series of cases arising out of a variety of factual settings in which a discharge clearly violated an express statutory objective or undermined a firmly established principle of public policy, courts have recognized that an employer's traditional broad authority to discharge an at-will employee "may be limited by statute . . . or by considerations of public policy." (Petermann v. International Brotherhood of Teamsters (1959) 174 Cal.App.2d 184, 188, 344 P.2d 25, 27 (discharge for refusal to commit perjury); see, e. g., Glenn v. Clearman's Golden Cock Inn, Inc. (1961) 192 Cal.App.2d 793, 796-797, 13 Cal.Rptr. 769 (discharge because of union membership and activity); Wetherton v. Growers Farm Labor Assn. (1969) 275 Cal.App.2d 168, 174-175, 79 Cal.Rptr. 543 (same); Montalvo v. Zamora (1970) 7 Cal.App.3d 69, 86 Cal.Rptr. 401 (discharge for designation of non-union bargaining representative); Nees v. Hocks (1975) 272 Or. 210, 536 P.2d 512 (discharge for serving on jury); Frampton v. Central Indiana Gas Co. (1973) 260 Ind. 249, 297 N.E.2d 425 (discharge for filing worker's compensation claim); Harless v. First Nat. Bank in Fairmont (W.Va.1978) 246 S.E.2d 270 (discharge for reporting violations of consumer protection laws).) ⁷

Petermann v. International Brotherhood of Teamsters, supra, one of the seminal California decisions in this area, imposes a significant condition upon the employer's broad power of dismissal by nullifying the right to discharge because an employee refuses to perform an unlawful act. In Petermann, the plaintiff, who had been employed as a business agent by defendant union, brought a "wrongful discharge" action against the union alleging that he had been dismissed from his position because he had refused to follow his employer's instructions to testify falsely under oath before a legislative committee, and instead had given truthful testimony. Emphasizing that the employer's instructions amounted to a directive to commit perjury, a criminal offense, plaintiff maintained that the employer acted illegally in discharging him for refusing to follow such an order.

The Petermann court recognized that in the absence of contractual limitations an employer enjoys broad discretion to discharge an employee, but concluded that as a matter of "public policy and sound morality" the employer's conduct, as alleged in the complaint, could not be condoned. The court explained: "The commission of perjury is unlawful. (Pen.Code, § 118). . . . It would be obnoxious to the interests of the state and contrary to public policy and sound morality to allow an employer to discharge any employee, whether the employment be for a designated or unspecified duration, on the ground that the employee declined to commit perjury, an act specifically enjoined by statute. . . . The public policy of this state as reflected in the penal code sections referred to above would be seriously impaired if it were to be held that one could be discharged by reason of his refusal to commit perjury. To hold that one's continued employment could be made contingent upon his commission of a felonious act at the instance of his employer would be to encourage criminal conduct upon the part of both the employee and employer and serve to contaminate the honest...