Folsom v. Montana Public Employees' Ass'n

JUSTICE SANDEFUR,

specially concurring.

¶68 I obviously concur in all aspects of the Court’s Opinion as far as it goes. Because I believe the issue is squarely before us by necessary implication from the District Court’s ruling and the parties’ cross-arguments on Issues 1 and 6, it is incumbent on us to reach and resolve Issue 5 rather than merely kick the can down the road without guidance on remand to the District Court and the litigating parties. Therefore, pursuant to § 3-2-204(3), MCA (in reversing and remanding this “court must pass upon and determine all the questions of law involved in the case presented upon such appeal and necessary to the final determination of the case”) (emphasis added), I would further *335reach and resolve Issue 5 as follows.

¶69 Though we have not previously had occasion to consider whether Foust’s per se ban on punitive damages comports with Montana law and public policy, the New Mexico Supreme Court has considered whether to apply the rule of Foust to New Mexico common law DFR claims based on a state Public Employees Bargaining Act (NMPEBA) similar to MPECBA. Akins v. U.S.W., Local 187, 237 P.3d 744 (N.M. 2010). In Akins, a city motor vehicle shop worker, who was the lone African-American member of the public employees union local, asserted a state common law DFR claim against the union after union officials refused his repeated requests to file a grievance to stop racial slurs and discrimination directed at him by largely Hispanic coworkers and supervisors. Akins, 237 P.3d at 746. After the New Mexico Court of Appeals affirmed a jury verdict awarding $1,661 in compensatory damages and $30,000 in punitive damages, the New Mexico Supreme Court considered the union’s assertion that, based on Foust’s compelling public policy considerations, New Mexico should adopt a similar “per se ban on punitive damages” on its state common law DFR claims. Akins, 237 P.3d at 747. After careful consideration of a wide range of federal and state public policy concerns, the New Mexico Court ultimately affirmed the ruling of its intermediate Court of Appeals and rejected adoption of the rule of Foust as contrary to New Mexico law and public policy. Akins, 237 P.3d at 747-54.

¶70 The New Mexico Supreme Court acknowledged without dispute the U.S. Supreme Court’s “assessment of national needs” and the policy and purpose of federal labor laws to protect and maintain the vitality of private sector labor unions. Akins, 237 P.3d at 749. As to the U.S. Supreme Court’s particular concern that “windfall recoveries against labor unions could deplete union treasuries and impair the effectiveness of unions as collective bargaining agents,” the New Mexico Court observed that:

nothing ... indicates that such fears are presently warranted in New Mexico’s public sector. Despite Foust’s holding in the DFR context, unions... are currently subject to punitive damages under a variety of federal laws, such as the Labor Management Reporting and Disclosure Act (LMRDA) and 42 U.S.C. § 1981 (2006). See 29 U.S.C. §§ 411(a)(4), 412 (2006) (right to sue and civil action/jurisdiction provisions of the LMRDA); Int’l Bhd. of Boilermakers v. Braswell, 388 F.2d 193, 200 (5th Cir. 1968) (punitive damages available under LMRDA); Woods, 925 F.2d at 1204 (“Under § 1981, the common law rule is that punitive *336damages may be awarded in appropriate cases.”). Unions have also, up to now, been subject to punitive damages for breach of the state duty of fair representation. Thus, to adopt a per se ban here would be to depart from the status quo. Despite the potential for exposure to punitive damages from several angles, the Union cannot point to a single example where runaway punitive damages awards substantially debilitated a labor union in New Mexico.

Akins, 237 P.3d at 750 (emphasis original). The New Mexico Court further noted that the compelling public policy concern “for the vitality of unions as collective bargaining agents” of workers is already reflected in a higher standard of DFR liability which “shields” unions from liability “for merely negligent” conduct “at no small cost” to the subordinated interests of individual union members. Akins, 237 P.3d at 749. “To now go further and shield even the most egregious conduct from punitive damages, would ... undermine the interests of both Unions and their members.” Akins, 237 P.3d at 749.

¶71 Contrasting federal policy to state policy, the New Mexico Court observed that “Foust was developing an area of interstitial federal common law to effectuate distinct congressional goals set forth in federal statutes governing unions in the private sector.” Akins, 237 P.3d at 749 (citing Foust, 442 U.S. at 47-48, 99 S. Ct. at 2125-26 and Woods, 925 F.2d at 1203). The Court acknowledged that New Mexico DFR claims further a similar state policy as enacted in NMPEBA, but noted that the primary purpose of federal and state common law DFR claims is to provide individual workers an effective remedy for enforcement of collective bargaining rights not otherwise provided by statute. Akins, 237 P.3d at 749. To that end, the New Mexico Court agreed with the concurrence in Foust that recognition of a common law enforcement remedy for that purpose should avail the enforcing party of “the full panoply of tools traditionally” available at common law “to do justice between the parties,” including punitive damages. Akins, 237 P.3d at 749 (citing Foust, 442 U.S. at 53, 99 S. Ct. at 2128 (Blackmun, J., concurring)). The New Mexico Court concluded that existing procedural, substantive, and constitutional due process protections are more than adequate to protect unions, like other tortfeasors, from excessive punitive damages awards. Akins, 237 P.3d at 752-54.

¶72 Turning to other provisions of state law, the New Mexico Court noted that punitive damages serve the important state public policy of punishing reprehensible conduct and deterring similar conduct in the *337future. Akins, 237 P.3d at 749-50. The court noted that those policy objectives are of particular critical import “where unions appropriately enjoy broad discretionary authority and the employee has little recourse outside of the grievance process.” Akins, 237 P.3d at 749-50. The New Mexico Court thus concluded that “punitive damages are the best means of deterring” egregious union misconduct in the DFR context where “compensatory damages may be de minimis or difficult to quantify.” Akins, 237 P.3d at 750.

¶73 Ultimately, the Court noted that “New Mexico law reflects a preference for holding individuals and institutions accountable for their actions regardless of status.” Akins, 237 P.3d at 751. “[W]e are aware of no New Mexico common-law cause of action in tort where we have [declared] that punitive damages are unavailable as a matter of law.” Akins, 237 P.3d at 752. “Absent a more compelling policy consideration than that presented by the Union, we make no exception for DFR claims.” Akins, 237 P.3d at 752. The New Mexico Court instead adhered “to the general common law principle in New Mexico that punitive damages should be available as long as the wrongdoer’s conduct is willful, wanton, malicious, reckless, fraudulent, or in bad faith.” Akins, 237 P.3d at 752. Because “the Legislature is capable of making exceptions to general tort principles when public policy so counsels,” the Court deferred “to the Legislature for such a drastic departure” from existing state law and public policy, if so inclined. Akins, 237 P.3d at 751.

¶74 I find Akins' reasoning even more compelling under Montana law and public policy considerations. By following the federal model and consistent with the public policy of MPECBA to provide for the continued vitality of public employees’ unions, we, too, have adopted a higher standard of liability that shields public employees’ unions from liability for merely negligent conduct, thus subordinating the interests of individual workers to those of the union collective. However, on balance with MPECBA’s important public policy of facilitating effective collective bargaining in the public sector, Montana statutory and common law embodies an equally important policy of holding individuals and entities accountable for their tortious conduct regardless of status. To that end, punitive damages are available in Montana “for the sake of example and for the purpose of punishing” defendants who engage in “actual fraud” or “actual malice,” as narrowly defined. Sections 27-1-220(1) and -221(1), MCA.

¶75 The Legislature has mandated that punitive damages are available as a supplemental tort remedy “[ejxcept as otherwise *338expressly provided by statute.” Section 27-1-220(1), MCA (emphasis added). While this Court is certainly free to fashion the contours of Montana DFR claims absent contrary statutory provision, see Miller v. Fallon County, 222 Mont. 214, 217-18, 721 P.2d 342, 344 (1986) (judicial discretion to determine or revise common law as necessary “to prevent great injustice” or conform common law to “changing needs of society”); accord, Brookins v. Mote, 2012 MT 283, ¶ 57, 367 Mont. 193, 292 P.3d 347; § 1-1-108, MCA (common law is “the law and rule of decision” except where in conflict with statute), our adoption of a per se Montana common law rule barring punitive damages as a supplemental remedy on a DFR claim would contravene the unqualified mandate of § 27-1-220(1), MCA, that punitive damages are an available supplemental tort remedy except as otherwise expressly provided by statute.

¶76 As in Akins, the assertion that punitive damages exposure will weaken unions is no more valid in regard to unions than to other benevolent entities subject to punitive damages liability. Punitive damages awards are subject to federal due process limitations and various procedural and substantive protections and limitations provided by §§ 27-1-220 and -221, MCA. Since 1985, Montana has had an even higher standard of punitive damages liability than the common law standard articulated in Akins. Punitive damages are available under Montana law only upon proof of “actual fraud” or “actual malice” by “clear and convincing evidence.” Section 27-1-221(1), (5), and (6), MCA. In contrast to the nine elements of common law fraud under Montana law, “actual fraud” means:

(1) knowingly making a false representation to another who has “a right to rely on the representation” and suffers injury as a result of reliance thereon; or
(2) causing injury to another by “conceal[ing] a material fact with the purpose of depriving the [other] of property or legal rights” or otherwise causing injury to the other.

Section 27-1-221(3) and (4), MCA. Contrary to the District Court’s apparent conflation of “actual fraud” and common law fraud in this case, common law fraud, tortious bad faith, or other unlawful or arbitrarily discriminatory conduct subsumed as a matter of law in the elements of a tortious DFR claim do not necessarily equate as a matter of law with “actual fraud” or “actual malice,” as defined by § 27-1-221(2) through (4), MCA. The question of whether facts constituting common law fraud, tortious bad faith, or other unlawful or arbitrarily *339discriminatory conduct by a mere preponderance of the evidence1 in the DFR context may also constitute “actual fraud” or “actual malice” by clear and convincing evidence, pursuant to § 27-1-221(3) and (4), MCA, is a question of fact for separate determination by the finder of fact upon proper instruction under the circumstances of each case.2 ¶77 As in Akins, I am aware of no case in which this Court has exempted a particular class of tortfeasor from punitive damages liability by judicial fiat. Whether punitive damages should be available as a supplemental remedy on a Montana common law DFR claim is a question of pure public policy upon which the Legislature has unequivocally spoken in its exclusive domain. See, § 27-1-220(1), MCA. For these reasons, I would reach Issue 5 and hold that Foust’s per se bar of punitive damages on federal common law DFR claims is not consistent with existing Montana law and public policy. Thus, I would hold that MPEA is not exempt as a matter of law from punitive damages under §§ 27-1-220 and -221, MCA, on Folsom’s Montana DFR claim.

JUSTICE WHEAT joins in the special concurring Opinion of JUSTICE SANDEFUR.

See § 26-1-403(1), MCA (general civil burden of proof).

Note further that Restatement (Second) of Torts § 909 (1979) limits a principal’s vicarious liability for punitive damages by requiring proof that the principal, apart from the agent, is directly culpable under the applicable standard of punitive damages liability. See similarly, Campen v. Stone, 635 P.2d 1121, 1123-26 (Wyo. 1981). While this Court has yet to squarely reconcile it with § 27-1-221(1), MCA, we have applied Restatement § 909 where assumed by the parties to be consistent with Montana law. Cartwright v. Equitable Life Ins., 276 Mont. 1, 30-33, 914 P.2d 976, 994-96 (1996).