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Supreme Court of Arkansas
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No. 87-172
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294 Ark. 239, 743
S.W.2d 380, 1988.AR.0042776< http://www.versuslaw.com>
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January 19, 1988
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STERLING DRUG, INC.
V.
CHARLES G. OXFORD
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SYLLABUS BY THE COURT
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1. TORTS - TORT OF OUTRAGE DEFINED. - 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, 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.
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2. TORTS - OUTRAGE - CONDUCT DID NOT RISE TO SUFFICIENT LEVEL TO
SUPPORT A VERDICT FOR OUTRAGE. - Where appellant suspected that appellee
had reported appellant to the GSA for pricing violations, and entered on
an eighteen-month campaign to force appellee to resign even though agents
of appellant knew that appellee was under pressure because of a recent
divorce, appellant's conduct did not rise to a sufficient level to support
a verdict for outrage; 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.
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3. CONTRACTS - EMPLOYMENT AT WILL - TERMINATION WITHOUT |
[294 Ark Page 240] CAUSE
AT WILL - RELIANCE ON PERSONNEL MANUAL OR EMPLOYMENT AGREEMENT. - When an
employee's contract of employment is for an indefinite term, either party
may terminate the relationship without cause or at will, but where an
at-will employee 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.
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4. CONTRACTS - EMPLOYMENT AT WILL - PUBLIC POLICY EXCEPTION TO GENERAL
RULE. - An at-will employee has a cause of action for wrongful discharge
if he or she is fired in violation of a well-established public policy of
the state; this is a limited exception to the employment-at-will doctrine,
and it is not meant to protect merely private or proprietary
interests.
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5. CONTRACTS - EMPLOYMENT AT WILL - PUBLIC POLICY DISCHARGE ACTION
SOUNDS IN CONTRACT. - Since a public policy discharge action is
essentially predicated on the breach of an implied provision that an
employer will not discharge an employee for an act done in the public
interest, a contract cause of action is most appropriate.
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6. TORTS - OUTRAGE - BREACH OF EMPLOYMENT CONTRACT. - If an employer's
conduct in breaching a contract of employment is sufficiently egregious or
extreme, the employee can still claim tort damages in a cause of action
for outrage.
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7. STATE - PUBLIC POLICY FOUND IN CONSTITUTIONS AND STATUTES. - The
public policy of a state is found in its constitution and
statutes.
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8. STATE - PUBLIC POLICY FAVORING CITIZEN INFORMANTS. - Ark. Code Ann.
5-53-112 (1987) illustrates that there is an established public policy
favoring citizen informants or crime fighters.
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9. CONTRACT - EMPLOYMENT AT WILL - CONSTRUCTIVE DISCHARGE. - A
constructive discharge exists when an employer intentionally renders an
employee's working conditions intolerable and thus forces him to resign,
but it exists only when a reasonable person would have resigned under the
same or similar circumstances.
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10. CONTRACT - CONSTRUCTIVE DISCHARGE - SUFFICIENT EVIDENCE. - There
was sufficient evidence that appellant engaged in a continuous campaign to
force appellee's resignation because it believed he had reported appellant
to the GSA for pricing violations and that a reasonable person would have
resigned under the same or similar circumstances, to support a jury
verdict for wrongful discharge.
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11. VERDICT & FINDINGS - GENERAL VERDICT - ONE ISSUE IMPROPERLY
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[294 Ark Page 241]
SUBMITTED - JUDGMENT NOT AFFIRMED. - Where the jury
used a general verdict form, the appellate court could not ascertain if
the verdict was based on the claim of outrage, which was improperly
submitted to the jury, or wrongful discharge or both, so it reversed and
remanded for further proceedings on the wrongful discharge
claim.
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12. DAMAGES - EMPLOYMENT AT WILL - WRONGFUL DISCHARGE - MEASURE OF
DAMAGES. - The sum of lost wages from termination until the day of trial
less the sum of any wages that the employee actually earned or could have
earned with reasonable diligence is the general measure of damages in a
public policy wrongful discharge action; the employee can also recover for
any other tangible employment benefit lost as a result of the termination,
but future damages are not recoverable.
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13. DAMAGES - EMPLOYMENT AT WILL - WRONGFUL DISCHARGE - DAMAGES NOT
REDUCED BY INCOME EARNED FROM SALE OF REAL ESTATE. - Since the amount of
damages to which appellee is entitled is reduced only by the sum he
actually earned or could have earned in other employment, and since the
income he earned from the sale of real estate holdings was not earnings or
wages from other employment, the trial court did not err in refusing to
allow appellant's economic expert to testify as to the income appellee
earned from the sale of real estate holdings.
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14. EVIDENCE - REVIEW OF DECISION THAT THE PROBATIVE VALUE WAS NOT
SUBSTANTIALLY OUTWEIGHED BY DANGER OF UNFAIR PREJUDICE. - Absent an abuse
of discretion, the appellate court will not reverse a trial court's ruling
that the probative value of evidence is not substantially outweighed by
the danger of unfair prejudice.
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15. EVIDENCE - PROBATIVE VALUE NOT SUBSTANTIALLY OUTWEIGHED BY DANGER
OF UNFAIR PREJUDICE. - The evidence of the audit and settlement was
relevant in that it corroborated the testimony of appellee that he was
forced to resign for reporting appellant to the federal government for
pricing violations in appellant's contract with the GSA, and the probative
value of the evidence was not substantially outweighed by the danger of
unfair prejudice under Ark. R. Evid. 403.
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16. APPEAL & ERROR - ABSTRACT - WHEN REIMBURSEMENT AUTHORIZED. -
Ark. Sup. Ct. R. 9(e)(1) authorizes reimbursement to an appellee only
where there has been a clear-cut and demonstrable failure by the appellant
to properly abstract matters for a full consideration of the issues raised
on appeal.
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17. APPEAL & ERROR - COMPLETE CONDENSATION OF THE RECORD -
APPELLEES MOTION FOR COSTS AND ATTORNEY FEES DENIED. - |
[294 Ark Page 242] Since
appellant's abstract was not defective but rather a complete 300-page
condensation of the record, the appellate court denied appellee's motion
for costs and attorney fees.
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Appeal from Garland Circuit Court; Walter G. Wright, Judge; reversed
and remanded.
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Barber, McCaskill, Amsler, Jones & Hale, P.A., by: M. Stephen
Bingham, for appellant.
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Ronald G. Naramore, Bryan Reis, and Q. Byrum Hurst, for
appellee.
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The opinion of the court was delivered by: Jack Holt, Jr., Chief
Justice.
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This is an outrage and wrongful discharge action. Jurisdiction is
pursuant to Ark. Sup. Ct. R. 29(1)(o).
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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 $201,700.000 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.
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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 |
[294 Ark Page 243]
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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.
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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.
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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.
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I. OUTRAGE
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[1] 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 |
[294 Ark Page 244]
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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.
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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.
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In Hess v. Treece, 286 Ark. 434, 693 S.W.2d 792 (1985), cert. denied,
475 U.S. 1036, 106 S.Ct. 1245 (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.
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[2] 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.
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[294 Ark Page 245]
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Tandy, supra. We must reverse the trial court judgment as to the
outrage cause of action.
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II. WRONGFUL DISCHARGE
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[3] 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).
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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:
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[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.
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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
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[294 Ark Page 246]
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herself for a job is in effect being asked to become a
prostitute."
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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.
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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.
International Brotherhood of Teamsters, 174 Cal.App.2d 184, 344 P.2d 25
(1959) (refusing to commit perjury); Tameny v. Atlantic Richfield Co., 27
Cal.3d 167, 610 P.2d 1330, 164 Cal.Rptr. 839 (1980) (refusing to engage in
a scheme to fix retail gasoline prices); Wagenseller v. Scottsdale
Memorial Hosp., 147 Ariz. 370, 710 P.2d 1025 (1985) (refusing to commit an
act which might violate indecent exposure laws); Sabine Pilot Service,
Inc. v. Hauck, 687 S.W.2d 733 (Tex. 1985) (refusing to pump bilges into
coastal waters). Courts have also allowed actions for employees discharged
for exercising a statutory right. Frampton v. Central Indiana Gas Co., 260
Ind. 249, 297 N.E.2d 425 (1973) (filing a workers' compensation claim);
Midgett v. Sackett-Chicago, Inc., 105 Ill.2d 143, 473 N.E.2d 1280 (1984),
cert. denied, 472 U.S. 1032 (1985) (filing a workers' compensation claim);
Cleary v. American Airlines, Inc., 111 Cal.App.3d 443, 168 Cal.Rptr. 722
(1980) (engaging in union activities). Other jurisdictions have held that
an at-will employee may not be fired for complying with a statutory duty.
Ludwick v. This Minute of Carolina, Inc., 287 S.C. 219, 337 S.E.2d 213
(1985) (obeying subpoena requiring appearance at a hearing); Reuther v.
Fowler & Williams, Inc., 255 Pa. Super. 28, 386 A.2d 119 (1978)
(serving jury duty); Nees v. Hocks, 272 Or. 210, 536 P.2d 512 (1975)
(serving jury |
[294 Ark Page 247]
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duty).
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The Supreme Court of New Hampshire in Monge v. Beebe Rubber Co., 114
N.H. 130, 316 A.2d 549 (1974), created an expansive exception to the
employment-at-will doctrine by holding that an employer wrongfully
discharged an employee when it fired her for refusing to "go out" with her
foreman. The court stated, "[A] termination by the employer of a contract
of employment at will which is motivated by bad faith or malice or based
on retaliation is not in the best interests of the economic system or the
public good and constitutes a breach of the employment contract." The
court later construed Monge to apply "only to a situation where an
employee is discharged because he performed an act that public policy
would encourage, or refused to do that which public policy would condemn."
Howard v. Dorr Woolen Co., 120 N.H. 295, 414 A.2d 1273
(1980).
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In Fortune v. National Cash Register Co., 373 Mass. 96, 364 N.E.2d
1251 (1977), an employer fired a salesman because it wanted to avoid
paying him certain sales bonuses. The Supreme Judicial Court of
Massachusetts held the employer liable for wrongful discharge. Following
New Hampshire's lead in Monge, the court implied a covenant of good faith
and fair dealing into every employment contract.
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| [52] |
A few courts have permitted a cause of action for at-will employees
discharged for protesting their employer's violation of state or federal
law. In Sheets v. Teddy's Frosted Foods, Inc., 179 Conn. 471, 427 A.2d 385
(1980), the Supreme Court of Connecticut held that an employee stated a
cause of action for wrongful discharge when he alleged that he had been
fired for insisting that the employer comply with state food labeling and
licensing laws. In Harless v. First National Bank in Fairmont, 162 W. Va.
116, 246 S.E.2d 270 (1978), the Supreme Court of Appeals of West Virginia
held that the employee's complaint stated a cause of action for wrongful
discharge where the employer fired the employee for attempting to induce
the employer to comply with state and federal consumer credit and
protection laws.
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A very small number of jurisdictions have allowed a wrongful discharge
claim where an employer terminated an at-will employee for reporting or
threatening to report violations of state or federal law to the
authorities. In Garibaldi v. Lucky Food |
[294 Ark Page 248]
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Stores, Inc., 726 F.2d 1367 (9th Cir. 1984), cert. denied, 471 U.S.
1099 (1985), an employee alleged that he had been fired for reporting a
shipment of adulterated milk to health authorities after his supervisors
ordered him to deliver it. The court found that "whistle blowing" to
protect the health and safety of the citizens of California was exactly
the type of conduct that the Supreme Court of California protected in
Tameny, supra. The Court of Appeals of Oregon in McQuary v. Bel Air
Convalescent Home, Inc., 69 Or. App. 107, 684 P.2d 21, cert. denied, 688
P.2d 845 (Or. 1984), held that a nursing supervisor stated a cause of
action for wrongful discharge when she asserted that she had been
terminated for threatening to report patient abuse to state
authorities.
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| [55] |
In Palmateer v. International Harvester Co., 85 Ill.2d 124, 421 N.E.2d
876 (1981), the Supreme Court of Illinois held that an employee stated a
cause of action for retaliatory discharge where the employer allegedly
fired him because he offered to testify and gather evidence against
another employee suspected of criminal activities. The court, noting a
precise definition of the term "public policy," surveyed cases from other
states and found that where a matter strikes at the heart of a citizen's
social rights, duties, and responsibilities, a cause of action for
wrongful discharge has been allowed. The court stated, "There is no public
policy more basic, nothing more implicit in the concept of ordered liberty
than the enforcement of a State's criminal code. . . . Public policy
favors the exposure of crime, and the cooperation of citizens possessing
knowledge `thereof is essential to effective implementation of that
policy.
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| [56] |
In Wagner v. City of Globe, 150 Ariz. 82, 722 P.2d 250 (1986), a
probationary police officer was allegedly discharged for informing the
local magistrate that a prisoner was being held illegally in the city
jail. The Supreme Court of Arizona held that if the officer's assertions
were true, he had stated a valid cause of action for wrongful termination
in violation of an important public policy of the state. The court found
that "whistle blowing" to expose illegal or unsafe conduct should be
encouraged and protected when it serves the public good.
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[4] We are now squarely faced with the decision of whether or not to
recognize the public policy exception to the employment-at-will |
[294 Ark Page 249]
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doctrine. Following our lead in Counce, supra, we acknowledge that an
employer should not have an absolute and unfettered right to terminate an
employee for an act done for the good of the public. Therefore, we hold
that an at-will employee has a cause of action for wrongful discharge if
he or she is fired in violation of a well-established public policy of the
state. This is a limited exception to the employment-at-will doctrine. It
is not meant to protect merely private or proprietary interests. Wagner,
supra.
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In making this exception, we must resolve the question of whether a
public policy exception case sounds in contract, tort, or both. The
overwhelming majority of these actions have sounded in tort. Palmateer,
supra; Wagner, supra. Petermann, supra, is one of the few public policy
exception contract cases (California now recognizes a tort cause of
action. Tameny, supra.). Cases implying a covenant of good faith and fair
dealing generally have been contract actions. Fortune, supra; contra Gates
v. Life of Montana Ins. Co., 205 Mont. 304, 668 P.2d 213 (1983). New
Jersey recognizes that both theories are appropriate in public policy
wrongful discharge actions. Pierce v. Ortho Pharmaceutical Corp., 84 N. J.
58, 417 A.2d 505 (1980).
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| [60] |
[5, 6] Only one state, Wisconsin, has made a deliberate decision to
adhere to an exclusive contract view. Brockmeyer v. Dun & Bradstreet,
113 Wis.2d 561, 335 N.W.2d 834 (1983). We find this decision to be
pragmatic and well reasoned. Since a public policy discharge action is
essentially predicated on the breach of an implied provision that an
employer will not discharge an employee for an act done in the public
interest, a contract cause of action is most appropriate. Id. The
exclusive contract approach strikes a fair balance in that it provides
employees with protection from employer retaliation, while at the same
time limiting recovery to contract remedies. If an employer's conduct in
breaching a contract of employment is sufficiently egregious or extreme,
the employee can still claim tort damages on a cause of action for
outrage. For these reasons, we adopt the exclusive contract
approach.
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| [61] |
[7, 8] It is generally recognized that the public policy of a state is
found in its constitution and statutes. Kirksey v. City of Fort Smith, 227
Ark. 630, 300 S.W.2d 257 (1957). Ark. Code |
[294 Ark Page 250]
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| [62] |
Ann. 5-53-112 (1987) provides:
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| [63] |
(1) A person commits the offense of retaliation against a witness,
informant, or juror if he harms or threatens to harm another by any
unlawful act in retaliation for anything lawfully done in the capacity of
witness, informant, or juror.
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| [64] |
(2) Retaliation against witnesses, informants, or jurors is a class A
misdemeanor.
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| [65] |
Ark. Code Ann. 5-53-112 illustrates that there is an established
public policy favoring citizen informants or crime fighters. In order to
further the public good, citizens of the state should be encouraged to
report illegal activity. We find that the public policy of the state is
contravened if an employer discharges an employee for reporting a
violation of state or federal law.
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| [66] |
In a 1984 settlement agreement, the United States contended that
Sterling had submitted false and incomplete pricing data and other
pertinent information during the negotiation of GSA contracts. It alleged
that this conduct was a violation of the False Claims Act, 31 U.S.C. §
3729-31 (1983). Pursuant to this agreement, Sterling paid $1,075,000.00 to
the federal government.
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| [67] |
[9, 10] A constructive discharge exists when an employer intentionally
renders an employee's working conditions intolerable and thus forces him
to resign. Harris v. Wal-Mart, 658 F. Supp. 62 (E.D. Ark. 1987). It exists
only when a reasonable person would have resigned under the same or
similar circumstances. Id. There is sufficient evidence that Sterling
engaged in a continuous campaign to force Oxford's resignation because it
believed he had reported Sterling to the GSA for pricing violations and
that a reasonable person would have resigned under the same or similar
circumstances. We find that a jury verdict for wrongful discharge is
supported by substantial evidence.
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| [68] |
[11] In making its determination, the jury utilized a general verdict
form. We cannot ascertain if it based its verdict for Oxford on the claim
of outrage or wrongful discharge or both. Since the issue of outrage was
improperly submitted to the jury, we cannot affirm the judgment of the
trial court. See Elk Corp. |
[294 Ark Page 251]
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| [69] |
of Ark. v. Jackson, 291 Ark. 448, 725 S.W.2d 829 (1987); Carrigan v.
Nichols, 148 Ark. 336, 230 S.W. 9 (1921). Accordingly, we reverse and
remand for further proceedings on the wrongful discharge
claim.
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| [70] |
III. ISSUES ON REMAND
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| [71] |
Since this case will be remanded, we will address other issues that
Sterling has raised and issues that are likely to arise on retrial. In
remanding to the trial court, it is necessary we resolve what the measure
of damages will be in a public policy exception action.
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| [72] |
When an employee for a fixed term is wrongfully discharged, the
measure of damages is computed according to when the case is tried. If the
trial occurs before the expiration of the contract term, the employee is
entitled to recover lost wages up until the day of trial. Seaman Stores v.
Porter, 180 Ark. 860, 23 S.W.2d 249 (1930). If it occurs after the
expiration of the term, the measure of damages is the amount of agreed
wages for the term. Id. Under both calculations, the damage award is
reduced by the sum of wages the employee actually earned or could have
earned with reasonable diligence in other employment during the contract
term. Id.; see also Western Grove School Dist. v. Strain, 288 Ark. 507,
707 S.W.2d 306 (1986).
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| [73] |
[12] In comparison, it is inherently difficult to fix damages for the
wrongful discharge of an employee who is employed for an indefinite term
since the duration of the contract is uncertain. A number of courts have
awarded future damages for the breach of an employment contract not having
a fixed term. Kerr v. Gibson's Products Co. of Bozeman, 226 Mont. 69, 733
P.2d 1292 (1987). These courts commonly base prospective awards on various
factors such as the number of years that the employee has been working for
the company, the average seniority at the company, and number of years the
employee intends to stay with the company. Panhandle Eastern Pipe Line Co.
v. Smith, 637 P.2d 1020 (Wyo. 1981). This approach is too speculative and
uncertain. We conclude that the sum of lost wages from termination until
the day of trial less the sum of any wages that the employee actually
earned or could have earned with reasonable diligence is the general
measure of damages in a public policy wrongful |
[294 Ark Page 252]
|
| [74] |
discharge action. In addition, an employee can recover for any other
tangible employment benefit lost as a result of the termination. Future
damages are not recoverable.
|
| [75] |
[13] Sterling argues that the trial court erred in refusing to allow
its economic expert to testify as to the income Oxford earned from the
sale of real estate holdings for the purpose of mitigating damages. In
1984 and 1985, the two years subsequent to Oxford's termination, he sold
the balance of the real estate holdings that he had acquired during his
employment with Sterling. The amount of damages to which Oxford is
entitled is reduced only by the sum he actually earned or could have
earned in other employment. Seaman, supra. Since the income he earned from
the sale of his real estate holdings was not earnings or wages from other
employment, the trial court did not err.
|
| [76] |
[14, 15] Sterling also contends that the trial court erred in denying
its motion in limine which sought to exclude evidence of the federal
government audit and negotiated settlement concerning the pricing
violations. In the absence of an abuse of discretion, we will not reverse
a trial court's ruling that the probative value of evidence is not
substantially outweighed by the danger of unfair prejudice. Kelley v.
Wiggins, 291 Ark. 280, 724 S.W.2d 443 (1987); Evans v. Wilson, 279 Ark.
224, 650 S.W.2d 569 (1983). The evidence of the audit and settlement was
relevant in that it corroborated the testimony of Oxford that he was
forced to resign for reporting Sterling to the federal government for
pricing violations in Sterling's contract with the GSA. The probative
value of the evidence was not substantially outweighed by the danger of
unfair prejudice under Ark. R. Evid. 403. The trial court properly
admitted the evidence.
|
| [77] |
IV. MOTION FOR COSTS AND ATTORNEY FEES
|
| [78] |
Oxford has filed a motion on appeal for costs and attorney fees
alleging that the deficiency of Sterling's abstract necessitated the
filing of a supplemental abstract. Sterling has moved to strike Oxford's
supplemental abstract arguing that Oxford overly emphasized or selectively
highlighted excerpts of the transcript in an improper manner. Ark. Sup.
Ct. R. 9(e)(1) provides in pertinent part as follows: |
[294 Ark Page 253]
|
| [79] |
If the appellee considers the appellant's abstract to be defective, he
may, in his printed brief, call the deficiencies to the court's attention
and, at his option, may submit a supplemental abstract. When the case is
considered on its merits the court may impose or withhold costs to
compensate either party for the other party's non-compliance with this
Rule.
|
| [80] |
[16, 17] Rule 9(e)(1) authorizes reimbursement to an appellee only
where there has been a clear-cut and demonstrable failure by the appellant
to properly abstract matters essential to a full consideration of the
issues raised on appeal. Arkota Industries, Inc. v. Naekel, 274 Ark. 173,
623 S.W.2d 194 (1981). Sterling's abstract is a complete 300 page
condensation of the record. It is not defective but rather in compliance
with Rule 9(e)(1). Therefore, we deny Oxford's motion for costs and
attorney fees.
|
| [81] |
Oxford's supplemental abstract consists primarily of passages which
Sterling had previously condensed in its abstract. Although these passages
are not necessary for a full consideration of the issues on appeal, they
are not prejudicial or improper. We deny the motion to
strike.
|
| [82] |
Reversed and remanded.
|
| [83] |
HICKMAN and HAYS, JJ., would reverse and dismiss.
|
| [84] |
PURTLE, J., dissents.
|
| [85] |
JOHN I. PURTLE, Justice, dissenting. The majority opinion is well
written and well reasoned, with a few minor exceptions. First, the result
is wrong; I think this case should be affirmed. The evidence fully
supports both outrage and wrongful discharge. There is substantial
evidence to support the verdict on either action. The opinion says one
thing but does another.
|
| [86] |
There was evidence before the jury that the appellee had exercised his
right and duty as a citizen to inform the government that the appellant
was cheating in its business with the government. The appellant paid a
million dollars to the government as a result of its conduct being
reported. Although the appellee denied being the one who reported the
appellant's illegal conduct, he was nevertheless singled out for
outrageous treatment under the belief |
[294 Ark Page 254]
|
| [87] |
that he was the one who reported the fraud to the government. It seems
to me that this is exactly the situation we had in mind when we first
recognized the tort of outrage in M.B.M. Co. Inc. v. Counce, 268 Ark. 269,
596 S.W.2d 681 (1980). Moreover, Ark. Code Ann. 5-53-112 (1987) makes it
illegal for any person to retaliate against an informant by harming or
threatening to harm him or another by any unlawful act in retaliation for
anything lawfully done by the informant.
|
| [88] |
The allegations and proof demonstrated that the appellant violated the
law in at least two respects. There is no suggestion that the appellee's
alleged conduct was illegal. Whistle blowers are usually right but they
also usually get the bad end of the deal, as in this case.
|
| [89] |
Every person has the duty to conform his conduct to the local and
national laws. Any good citizen having knowledge that a corporation is
cheating the government has a duty to report such conduct. By reversing
the judgment on the tort of outrage this court is in effect punishing the
appellee for the alleged performance of his duty as a citizen. There is no
need to point out additional evidence of the appellant's conduct which
constituted the tort of outrage because such facts are stated adequately
in the majority opinion.
|
| [90] |
Certainly the conduct complained of in this case went well beyond the
conduct found to be actionable in Hess v. Treece, 286 Ark. 434, 693 S.W.2d
792 (1985), where there was no evidence whatsoever that Hess violated any
law. Apparently the majority finds some sort of distinction between the
conduct of Hess, lasting two years, and the conduct of the present
appellant, lasting only eighteen months. I have found nothing in any
decision to indicate that the duration of the conduct is required to last
for any particular length of time. It is the outrageous conduct itself
which gives rise to the cause of action. The duration is a matter to be
considered in awarding damages.
|
| [91] |
I agree with the statement quoted by the majority that "[A]
termination by the employer of a contract of employment at will which is
motivated by bad faith or malice or based on retaliation is not in the
best interests of the economic system or the public good and constitutes a
breach of the employment contract." However, I cannot agree with limiting
the recovery in public policy Page 254-A wrongful discharge actions to
contract damages. The majority admits only one other state holds such a
view.
|
| [92] |
To limit the recovery of damages for wrongful discharge to backpay is
almost beyond belief. Employers exposed to no more liability than this
will feel free to retaliate and discriminate at will without fear of
penalty for their wilful and intentional conduct. On the other hand an
unemployed individual, without prospect for a job, will scarcely be
noticed by the system. The conduct by the employer in this case caused the
appellee embarrassment, humiliation, physical and mental problems, and
severe financial losses. None of these elements of damage are recoverable
under the majority decision. Recovery limited to back wages is woefully
inadequate to compensate for the damages resulting from wrongful
discharge.
|
| [93] |
The opinion itself demonstrates the inherent difficulties in limiting
damages for wrongful discharge to loss of wages and "other intangible
employment benefits." The cost of winning a suit limited to this recovery
effectively denies most employees any relief. The majority states all the
reasons this judgment should be affirmed and then turns right around and
reverses it.
|
| [94] |
It makes no difference whether the appellee was, in fact, the person
who reported the appellant to the government. There was no justification
for the humiliation and wrongful discharge of the appellee. Such conduct
by the appellant should not be condoned by this court under any
theory.
|
| [95] |
JOHN I. PURTLE, Justice, dissenting. I agree with the petitioner and
amicus curiae that we should reconsider our opinion in this case and grant
rehearing. Several independent attorneys, the Arkansas Trial Lawyers
Association, and the Page 254-B AFL-CIO have joined in this impressive
brief filed in support of the petition for rehearing. Their arguments are
very persuasive.
|
| [96] |
The outstanding characteristic of the opinion in this case is that it
clearly requires employees to suffer considerably more outrageous conduct
by employers than is required of nonemployees. This is a distinction not
previously made by any court so far as I can determine. It is a result
argued by no one and sought by no one.
|
| [97] |
I agree with petitioner that this court erroneously substituted its
own view of the facts for that of the jury. The evidence presented to the
jury concerning the employer's conduct toward this petitioner showed that
the employer:
|
| [98] |
1. communicated the false message to other employees that the
appellant blew the whistle on their overcharges to the government causing
the company to pay over $1,000,000 in penalties or fines;
|
| [99] |
2. demoted him from highest paid sales position to that of a beginning
salesman and transferred him to an especially created sales area in
Texas;
|
| [100] |
3. wrote a letter to him setting up his termination (This typed letter
had been used to get rid of others);
|
| [101] |
4. repeatedly and falsely accused him of misconduct when they knew he
was under severe stress;
|
| [102] |
5. refused to issue stock he had earned;
|
| [103] |
6. sent him on many false sales leads;
|
| [104] |
7. made unauthorized deductions from his salary or
commission;
|
| [105] |
8. threatened to sue him;
|
| [106] |
9. placed him under surveillance by other employers;
|
| [107] |
10. continued this type of conduct for eighteen months;
and
|
| [108] |
11. admitted its conduct was intended as "harassment."
|
| [109] |
That's only eleven of the overt acts directed at the appellant. Page
254-C What course of action short of physical violence could be more
outrageous? Obviously the appellee desired to inflict this humiliation and
embarrassment upon the petitioner in order to get even with him because
they thought he was a "whistle blower."
|
| [110] |
The tort of outrage was described by this court in Growth Properties
v. Cannon, 282 Ark. 472, 669 S.W.2d 447 (1984), where we
stated:
|
| [111] |
[T]he essence of the tort of outrage is the injury to the plaintiff's
emotional well-being because of outrageous treatment by the defendant. If
the conduct is sufficiently flagrant to give rise to tort, then the injury
the law seeks to redress is the anguish itself and it need not rest,
parasitically, on more demonstrative loss or injury. . . . [T]he argument
confuses the intent to cause suffering with the intent to do an act from
which suffering can be expected to result. The former may be maliciously
intended while the latter may be merely the result of conscious
indifference to the consequences. But even the latter, if sufficiently
wanton, will sustain the award.
|
| [112] |
These words defining the tort of outrage describe well the activities
of the employer in this case. In fact, the acts of the appellant in this
case go beyond the wrongful acts in every case where we have recognized
this tort.
|
| [113] |
"Wrongful discharge" by its very terms is a "tort." If based upon
contract the suit would be for damages for breach of contract or for
specific performance. Every charge in the complaint and every pleading and
the judgment in this case relate to a tort. As if by "plain error" this
court reached back into the past, pulling out an archaic ruling from the
only jurisdiction so holding, to declare for the first time ever that this
"tort" is a "contract". I agree with petitioner that: "For this court to
adopt an exclusive contract remedy for wrongful discharge and then make
the measure of damages back pay [up until] trial would not merely put
Arkansas in a distinct minority but would, in fact, make it by far the
most regressive state in protecting workers and the public welfare." Page
254-D
|
| [114] |
We should reconsider our opinion and grant a rehearing in order that
our laws and decisions relating to the tort of outrage and the
employment-at-will doctrine remain intact. It is not necessary to overrule
any precedent or construe any statute to reach the just and fair result of
granting rehearing. |
[294 Ark Page 255]
|
