Wieder v. Skala

• Decision Date: 22 December 1992
• Citation: 609 N.E.2d 105,80 N.Y.2d 628,593 N.Y.S.2d 752
• Parties: , 609 N.E.2d 105, 61 USLW 2393, 8 IER Cases 132 Howard L. WIEDER, Appellant, v. Murray L. SKALA et al., Respondents, et al., Defendant.
• Court: New York Court of Appeals Court of Appeals

Page 752

593 N.Y.S.2d 752

80 N.Y.2d 628, 609 N.E.2d 105, 61

USLW 2393, 8 IER Cases 132

Howard L. WIEDER, Appellant, v. Murray L. SKALA et al., Respondents, et al., Defendant.

Court of Appeals of New York.

Dec. 22, 1992.

David C. Vladeck and Alan B. Morrison, Washington, DC, of the District of Columbia Bar, admitted pro hac vice, and Vladeck, Waldman, Elias & Engelhard, P.C., New York City (Judith P. Vladeck and Ellen A. Harnick, of counsel), for appellant.

Feder, Kaszovitz, Isaacson, Weber & Skala, New York City (Gabriel Kaszovitz, Murray L. Skala, Jay D. Lukowski and Bruce Robins, of counsel), for respondents.

Leonard Gross, New York City, for Leonard Gross and others, amici curiae.

Daniel J. Capra, New York City, for The Committee on Professional Responsibility of the Ass'n of the Bar of the City of New York, amicus curiae.

OPINION OF THE COURT

HANCOCK, Judge.

Plaintiff, a member of the Bar, has sued his former employer, a law firm. He claims he was wrongfully discharged as an associate because of his insistence that the firm comply with the governing disciplinary rules by reporting professional misconduct allegedly committed by another associate. The question presented is whether plaintiff has stated a claim for relief either for breach of contract or for the tort of wrongful discharge in violation of this State's public policy. The lower courts have dismissed both causes of action on motion as legally insufficient under CPLR 3211(a)(7) on the strength of New York's employment-at-will doctrine. For reasons which follow, we modify the order and reinstate plaintiff's cause of action for breach of contract.

I.

In the complaint, which must be accepted as true on a dismissal motion under CPLR 3211(a)(7), plaintiff alleges that he was a commercial litigation attorney associated with defendant law firm from June 16, 1986 until March 18, 1988. In early 1987, plaintiff requested that the law firm represent him in the purchase of a condominium apartment. The firm agreed and assigned a fellow associate (L.L.) "to do 'everything that needs to be done' ". For several months, L.L. neglected plaintiff's real estate transaction and, to conceal his neglect, made several "false and fraudulent material misrepresentations". In September 1987, when plaintiff learned of L.L.'s neglect and false statements, he advised two of the firm's senior partners. They conceded that the firm was aware "that [L.L.] was a pathological liar and that [L.L.] had previously lied to [members of the firm] regarding the status of other pending legal matters". When plaintiff confronted L.L., he acknowledged that he had lied about the real estate transaction and later admitted in writing that he had committed "several acts of legal malpractice and fraud and deceit upon plaintiff and several other clients of the firm".

The complaint further alleges that, after plaintiff asked the firm partners to report L.L.'s misconduct to the Appellate Division Disciplinary Committee as required under DR 1-103(A) of the Code of Professional Responsibility, ¹ they declined to act. Later, in an effort to dissuade plaintiff from making the report himself, the partners told him that they would reimburse his losses. Plaintiff nonetheless met with the Committee "to discuss the entire matter". He withdrew his complaint, however, "because the [f]irm had indicated that it would fire plaintiff if he reported [L.L.'s] misconduct". Ultimately, in December 1987--as a result of plaintiff's insistence--the firm made a report concerning L.L.'s "numerous misrepresentations and [acts of] malpractice against clients of the [f]irm and acts of forgery of checks drawn on the [f]irm's account". Thereafter, two partners "continuously berated plaintiff for having caused them to report [the] misconduct". The firm nevertheless continued to employ plaintiff "because he was in charge of handling the most important litigation in the [f]irm". Plaintiff was fired in March 1988, a few days after he filed motion papers in that important case.

Plaintiff asserts that defendants wrongfully discharged him as a result of his insistence that L.L.'s misconduct be reported as required by DR 1-103(A). In his fourth cause of action, he alleges that the firm's termination constituted a breach of the employment relationship. In the fifth cause of action, he claims that his discharge was in violation of public policy and constituted a tort for which he seeks compensatory and punitive damages.

Defendants moved to dismiss the fourth and fifth causes of action as legally insufficient pursuant to CPLR 3211(a)(7). Supreme Court granted defendants' motion because his employment relationship was at will, holding:

"since [the] 'Whistleblowers Law' [Labor Law § 740] is not applicable to the facts of this case, and plaintiff has not pleaded facts to come within the exception set forth in Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458, 457 N.Y.S.2d 193, 443 N.E.2d 441 (1982), the rules governing the causes of action for wrongful discharge are those set forth in Murphy [v. American Home Prods. Corp., 58 N.Y.2d 293, 461 N.Y.S.2d 232, 448 N.E.2d 86) ]. Accordingly, since under the facts pleaded herein, the law firm had the right to terminate plaintiff, the fourth and fifth causes of action are dismissed."

The Appellate Division affirmed, 167 A.D.2d 265, 562 N.Y.S.2d 930. It also concluded that plaintiff failed to state a cause of action because, as an at-will employee, the firm could terminate him without cause. This Court granted leave to appeal.

II.

We discuss first whether, notwithstanding our firmly established employment-at-will doctrine, plaintiff has stated a legal claim for breach of contract in the fourth cause of action. The answer requires a review of the three cases in which that doctrine is fully explained.

The employment-at-will doctrine is a judicially created common-law rule "that where an employment is for an indefinite term it is presumed to be a hiring at will which may be freely terminated by either party at any time for any reason or even for no reason" (Murphy v. American Home Prods. Corp., 58 N.Y.2d 293, 300, 461 N.Y.S.2d 232, 448 N.E.2d 86, supra [citing Martin v. New York Life Ins. Co., 148 N.Y. 117, 42 N.E. 416]. In Murphy, this Court dismissed the claim of an employee who alleged he had been discharged in bad faith in retaliation for his disclosure of accounting improprieties. In so doing, we expressly declined to follow other jurisdictions in adopting the tort-based abusive discharge cause of action for imposing "liability on employers where employees have been discharged for disclosing illegal activities on the part of their employers", being of the view "that such a significant change in our law is best left to the Legislature" (id., 58 N.Y.2d at 301, 461 N.Y.S.2d 232, 448 N.E.2d 86).

With respect to the contract cause of action asserted in Murphy, the Court held that plaintiff had not shown evidence of any express agreement limiting the employer's unfettered right to fire the employee. For this reason, the Court distinguished Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458, 457 N.Y.S.2d 193, 443 N.E.2d 441, supra, where such an express limitation had been found in language in the employer's personnel handbook. Finally, in Murphy, the Court rejected the argument that plaintiff's discharge for disclosing improprieties violated a legally implied obligation in the employment contract requiring the employer to deal fairly and in good faith with the employee, explaining:

"No New York case upholding any such broad proposition is cited to us by plaintiff (or identified by our dissenting colleague), and we know of none. New York does recognize that in appropriate circumstances an obligation of good faith and fair dealing on the part of a party to a contract may be implied and, if implied will be enforced (e.g., Wood v. Duff-Gordon, 222 N.Y. 88 ; Pernet v. Peabody Eng. Corp., 20 A.D.2d 781 . In such instances the implied obligation is in aid and furtherance of other terms of the agreement of the parties. No obligation can be implied, however, which would be inconsistent with other terms of the contractual relationship. Thus, in the case now before us, plaintiff's employment was at will, a relationship in which the law accords the employer an unfettered right to terminate the employment at any time. In the context of such an employment it would be incongruous to say that an inference may be drawn that the employer impliedly agreed to a provision which would be destructive of his right of termination" (id., 58 N.Y.2d at 304-305, 461 N.Y.S.2d 232, 448 N.E.2d 86 [emphasis added].

Four years after Murphy, the Court decided Sabetay v. Sterling Drug, 69 N.Y.2d 329, 514 N.Y.S.2d 209, 506 N.E.2d 919. There, the Court dismissed the complaint of an employee who claimed he was fired for "blowing the whistle" and refusing to engage in improper and unethical activities. As in Murphy, the Court found no basis for an express limitation on the employer's right to discharge an at-will employee and, adhering to Murphy as a precedent, declined to base any such limitation on an implied-in-law obligation of dealing fairly and in good faith with its employee.

Not surprisingly, defendants' position here with respect to plaintiff's breach of contract cause of action is simple and direct, i.e., that: (1) as in Murphy and Sabetay, plaintiff has shown no factual basis for an express limitation on the right to terminate of the type upheld in Weiner; and (2) Murphy and Sabetay rule out any basis for contractual relief under an obligation implied-in-law. We agree that plaintiff's complaint does not contain allegations that could come within the Weiner exception for express contractual limitations (see, Weiner v. McGraw-Hill, Inc., supra, 57 N.Y.2d at 465, 457 N.Y.S.2d 193, 443 N.E.2d 441). As to an implied-in-law duty, however, a different analysis and other considerations pertain.

In arguing that the law...