Watson v. Blankinship, 92-2181

• Decision Date: 01 April 1994
• Docket Number: No. 92-2181,92-2181
• Citation: 20 F.3d 383
• Parties: 128 Lab.Cas. P 57,712, 28 Fed.R.Serv.3d 996 William C. WATSON, Kelly Macias, and Rufugio Macias, Plaintiffs, Counter-Defendants, Appellees, v. Norman C. BLANKINSHIP, individually, and d/b/a Norman C. Blankinship Enterprises and Saddle Mt. Land & Cattle Company, Defendant, Counter-Claimant, Appellant, and Bill BYRD, individually, and Gene MORRISON, individually, Defendants, Counter-Claimants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 383

20 F.3d 383

128 Lab.Cas. P 57,712, 28 Fed.R.Serv.3d 996

William C. WATSON, Kelly Macias, and Rufugio Macias Plaintiffs, Counter-Defendants, Appellees, v. Norman C. BLANKINSHIP, individually, and d/b/a Norman C Blankinship Enterprises and Saddle Mt. Land &amp Cattle Company, Defendant Counter-Claimant, Appellant, and Bill BYRD, individually, and Gene MORRISON, individually, Defendants, Counter-Claimants.

No. 92-2181.

United States Court of Appeals, Tenth Circuit.

April 1, 1994.

Robert N. Singer of Singer, Smith & Williams, P.A., Albuquerque, NM, for defendant-appellant.

Erenio Gutierrez Jr., Albuquerque, NM, for plaintiffs-appellees.

Before SEYMOUR, Chief Judge, SETH, and LOGAN, Circuit Judges.

SETH, Circuit Judge.

Appellant challenges the subject matter jurisdiction for claims against him for breach of implied contract and breach of covenant of good faith and fair dealing, alleging the amount in controversy was not met. We find jurisdiction was proper. We agree with Appellant's challenge of the district court's failure to sever claims against a second defendant. Furthermore, we find the jury's verdict for Plaintiffs awarding damages for breach of implied contract was not supported by the evidence and is therefore REVERSED.

William Watson, Kelly Macias, and Rufugio Macias were employees of Saddle Mountain Land & Cattle Company, owned by Norman Blankinship. The main business of the ranch was to maintain fields used for feeding cattle. Watson served as manager of the operation and had hired his daughter Kelly and her husband Rufugio Macias to work on the ranch.

In the fall of 1989, Blankinship informed Plaintiffs that he was ceasing operations at the ranch and that they no longer had a job with him. Watson had worked and lived at the ranch for 13 years, Kelly Macias had worked for 8 years, and Rufugio Macias for 4 years. None of the Plaintiffs had signed a written contract, nor was there a policy manual in existence. Watson received a letter, dated October 18, 1989, confirming that the Plaintiffs would "remain on regular payroll at the same level until December 31, 1989." After Watson had received the letter, but before December 31, a newly hired employee of Blankinship, Bill Byrd, hit Watson on the mouth, incurring a doctor's bill of $99.00 but doing no permanent damage.

Watson retired in January 1990. Kelly Macias began working at another job in October 1990 and Rufugio Macias became employed in February 1990. Both of these jobs were at higher salaries, although a discrepancy exists as to the value of alleged "fringe benefits" lost when the Plaintiffs were fired.

Plaintiffs filed suit against Blankinship, Bill Byrd, and Gene Morrison in the United States District Court for the District of New Mexico claiming four causes of action. Plaintiffs sued Blankinship for breach of implied contract of employment and breach of covenant of good faith and fair dealing based on bad faith termination. The judge dismissed the breach of covenant claim during trial and did not allow the issue of punitive damages to go to the jury.

One cause of action was against Gene Morrison, another employee, and Bill Byrd for tortious interference with contractual rights. The district court judge dismissed the claim against Morrison prior to trial and dismissed the claim against Byrd during trial.

Finally, Watson individually sued Byrd for assault and battery and sued Blankinship on the basis of vicarious liability. The vicarious liability claim was dismissed by the district court prior to trial. The remaining assault and battery claim against Byrd went to trial with the other claims, but the jury returned a verdict for Byrd, thus granting no damages for the assault.

The breach of implied contract claim went to the jury, which returned a verdict in favor of the Plaintiffs, granting actual damages of $198,500 for Watson, $28,366.50 for Kelly Macias, and $23,159.50 for Rufugio Macias. After the trial, Blankinship moved for a judgment notwithstanding the verdict, which the court denied. However, the judge granted Blankinship's motion for remittitur and reduced the damages awarded to $132,706 for Watson, $11,000 for Kelly Macias, and $2,300 for Rufugio Macias. No issue relating to the remittitur has been raised in this appeal.

Prior to trial, Blankinship had sought to have the Plaintiffs' claims dismissed, arguing they did not meet the amount in controversy requirement for federal jurisdiction. The judge found that because Plaintiffs were seeking punitive damages, the claim could very possibly exceed $50,000, thus the amount in controversy requirement was met. Blankinship also sought a severance of Byrd's claims, which the court denied.

Blankinship appeals from the court's final order and argues four issues on appeal. First, whether Kelly Macias' and Rufugio Macias' claims properly met the amount in controversy requirement for subject matter jurisdiction under 28 U.S.C. Sec. 1332. Second, whether Watson's claim against Byrd for assault and battery was improperly joined with the claims against Blankinship. Third, whether sufficient evidence existed to create a cause of action on an implied contract of employment. Fourth, whether the court erred in refusing to give a jury instruction on consideration for an implied contract.

Amount in Controversy

When federal subject matter jurisdiction is challenged based on the amount in controversy requirement, the plaintiffs must show that it does not appear to a legal certainty that they cannot recover at least $50,000. See St. Paul Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 590, 82 L.Ed. 845; Gibson v. Jeffers, 478 F.2d 216, 220 (10th Cir.). Plaintiffs must have a good faith belief that the amount in controversy is met. Gibson, 478 F.2d at 220. Every separate and distinct claim must individually meet the amount in controversy. See Lonnquist v. J.C. Penney Co., 421 F.2d 597, 599 (10th Cir.). We review de novo a trial court's ruling concerning jurisdictional questions. FDIC v. Oaklawn Apts., 959 F.2d 170, 173 (10th Cir.).

Claims of Rufugio and Kelly Macias

Blankinship argues that Kelly Macias' and Rufugio Macias' actual damages for the alleged breach of implied contract of employment did not approach the required $50,000 amount in controversy. The trial court agreed with this in its Memorandum and Order filed September 23, 1991, and Kelly and Rufugio Macias do not seem to contest this on appeal. Thus the issue of whether Kelly and Rufugio Macias met the amount in controversy requirement hinges on whether the allegation that they were entitled to punitive damages was made in good faith. See Bell v. Preferred Life Assurance Society, 320 U.S. 238, 64 S.Ct. 5, 88 L.Ed. 15 (punitive and actual damages can be aggregated to meet amount in controversy requirement).

According to Blankinship, Kelly Macias and Rufugio Macias acted in bad faith in filing their claims in federal court on both legal and factual grounds. First, Blankinship contends that New Mexico does not recognize a claim for breach of covenant of good faith and fair dealing; therefore, legally, Appellees could not have filed this claim in good faith. Second, the facts alleged by Appellees do not show bad faith termination or that Blankinship acted fraudulently, thus, there is no basis for punitive damages and the amount in controversy was not met.

These two Appellees claim that New Mexico recognizes a cause of action for breach of covenant of good faith and fair dealing, which is recognized as both a contract cause of action and a tort equivalent to wrongful discharge. Furthermore, punitive damages are available for bad faith actions such as a breach of the implied contract and a breach of the covenant of good faith and fair dealing. Appellees Kelly and Rufugio Macias argue that the totality of the circumstances surrounding their employment and the means of termination in addition to the allegations of crop fraud demonstrate Blankinship's bad faith in terminating their employment.

The district court correctly ruled that as a matter of law, these two Appellees can bring the breach of covenant claim in both contract and tort. Although New Mexico does not recognize a cause of action for breach of covenant of good faith and fair dealing in an at-will employment relationship, Melnick v. State Farm Mutual Automobile Ins. Co., 106 N.M. 726, 749 P.2d 1105, these Appellees are claiming this was an implied contract of employment, not at-will; therefore, the breach of covenant claim is based in contract, flowing from the alleged employment contract. A breach of implied covenant of good faith and fair dealing can also be brought in tort as it is equivalent to the tort of wrongful discharge. Salazar v. Furr's, Inc., 629 F.Supp. 1403, 1409 (N.M.). Pleading the breach of implied contract action together with an alternative claim of breach of covenant of good faith and fair dealing in tort and contract was proper. New Mexico law permits punitive damages in contract cases if malicious or wanton conduct, such as an absence of good faith, or the public interest is at issue. See Romero v. Mervyn's, 109 N.M. 249, 784 P.2d 992, 998, 1001; Boudar v. E.G. & G., Inc., 106 N.M. 279, 742 P.2d 491, 495. Furthermore, punitive damages are available in tort, as well as contract, where bad faith is shown. Boudar, 742 P.2d at 495. Such allegations are asserted by these two Appellees who argue that the courts should foster good employment relationships and not allow people to misuse federal funds through fraud. As the district court stated, "Plaintiffs' allegation of a conspiracy to defraud the government is a serious one." Aplt.App. at 62. Since we determined that these Appellees could legally assert both the breach of contract and the breach of covenant claims with a request for punitive damages, we must now decide whether they proved their good faith.

Claims of the Maciases and Good Faith

Based on the pleadings, affidavits,...