I N THE; S U P R E M E C0UF.T OF' T H E S T A T E O F MONTANA
FRANK K . NILES,
P l a i n t i f f and A p p e l l a n t ,
-vs-
CARL WEISSMAN & S O N S , INC.,
a Montana Corp.,
Defendant and Respondent.
A P P E A L FROM: D i s t r i c t C o u r t of t h e E i g h t e e n t h J u d i c i a l D i s t r i c t ,
I n and f o r t h e C o u n t y o f G a l l a t i n ,
The H o n o r a b l e J o s e p h G a r y , Judge p r e s i d i n g .
C O U N S E L O F RECORD:
For A p p e l l a n t :
J. D a v i d P e n w e l l , Rnzernan, M o n t a n a
For R e s p o n d e n t :
Jack L a . J l e w i s , G r e a t F a l l s , M o n t a n a
S u b m i t t e d on B r i e f s : Dec. 1, 1 9 8 9
Decided: February 6 , 1 9 9 0
Filed:
Justice John C. Sheehy delivered the Opinion of the Court.
In this case, we determine that a final decision from an
administrative agency that an employee is not entitled to
unemployment compensation is not res judicata as to the employee's
separate action in District Court for wrongful discharge and breach
of the covenant of good faith and fair dealing. In so holding, we
distinguish Nasi v. State Department of Highways (Mont. 1988), 753
P.2d 327.
Frank K. Niles appeals from a summary judgment in District
Court, Eighteenth Judicial District, Gallatin County, dismissing
Nilest complaint against Carl Weissman & Sons, Inc. for alleged
wrongful discharge and breach of the covenant of good faith and
fair dealing. We reverse.
On May 11, 1987, Niles, a truck driver employed by Weissman,
was ordered to haul a two-axle flatbed trailer from Livingston to
Bozeman .
Weissman's employees had previously loaded a railroad
locomotive motor or engine on the trailer, weighing approximately
38 tons. In the opinion of Niles, the flatbed truck was loaded far
beyond its capacity, and in fact, the trailer had been damaged by
Weissman when the load was placed on the trailer. Niles hauled the
load as far as the truck stop on the west edge of Livingston and
refused to drive the load any farther, believing that to do so
would endanger not only his life, but the lives of others in
hauling the trailer over the Bozeman Pass to Weissman's yard in
2
Bozeman .
Niles contended in District Court that his supervisor told him
that he was to haul the load and specifically told him if he
refused he would be terminated from his position. The supervisor
denies in District Court that "he specifically told" Niles that if
he refused to haul an unsafe load he would be fired. In any
event, Niles refused to haul the load and returned to Bozeman in
the tractor driven by another employee of Weissman.
It also appears that another employee of Weissman, Sam
Dickenson, determined that the load was unsafe. The load was
transferred to another larger trailer which was later transported
to its original destination in Bozeman.
The District Court found as unrefuted that plaintiff filed a
claim for unemployment benefits after ending his employment with
defendant. A Department of Labor deputy denied Niles benefits on
the grounds he had "voluntarily leftt1his employment and that the
separation was not attributable to Weissman. Niles appealed the
deputy's decision to an appeals referee who affirmed the denial of
the claim. Plaintiff next appealed to the Board of Labor Appeals,
which reversed the decision of the Appeals Referee and held that
plaintiff was entitled to unemployment benefits. Weissman appealed
the BLA reversal to the District Court and upon stipulation of the
parties, the District Court ordered the cause remanded to the BLA
for further consideration. On remand, the BLA reversed its earlier
decision and denied plaintiff's claim for benefits. Niles then
appealed to the ~istrictCourt but failed to brief his petition,
and the District Court affirmed the BLA1s decision to deny Niles1
claim.
On October 14, 1987, during the course of the administrative
procedure, Niles filed his complaint in District Court alleging
wrongful termination. his action moved along a track parallel to
the administrative proceedings.
Subsequently, in the wrongful termination action, Weissman
filed a motion for summary judgment. Weissman based its summary
judgment motion upon the Department and District Court's
determination that Niles voluntarily quit his employment and upon
the contention that this determination was res judicata as to
Niles I claim for wrongful termination. April the
District Court granted Weissmanls motion for summary judgment
holding that the BLA acted in a judicial capacity and provided
plaintiff with a fully contested case hearing which was judicially
reviewed, and therefore res judicata applied. It is from this
order of summary judgment that Niles appeals.
The ~istrictCourt fully realized the far-reaching effect of
its summary judgment. It stated:
This Court realizes this holding leaves plaintiff and
other potential claimants on the horns of a dilemma: If
they fully pursue their administrative remedy for
unemployment benefits, they may forego the remedy in the
courts; if they choose to go through the courts system,
they may be barred by failure to exhaust their
administrative remedies. The court is hesitant to
relinquish the determination of what constitutes
llwrongfulterminationl1 at common law to an administrative
agency when that determination does not require any
"expert and specialized knowledge.'I See generally Nader
v. Alleqhenv Airlines (1976), 426 U.S. 290, 48 L.E.2d
643, 96 S.Ct. 1978. However, this point awaits
clarification by the Montana Supreme Court.
The fulcrum on which the ~istrictCourt relied in determining
res judicata was that the administrative proceedings involved a
fully contested case hearing which complied with the standards of
procedural and substantive due process that attends judicial
proceedings, where the parties have full opportunity to litigate
the issues. The District Court pointed out that at each
administrative level, Niles had counsel present, submitted evidence
in his own behalf, was permitted cross examination and was allowed
to argue the law of the case. In the administrative process, Niles
lost at each stage of the administrative proceedings, except for
the single decision of the BLA, which the BLA subsequently
reversed.
There is indeed a dilemma here, as the District Court
indicated, affecting not only Niles, but every employee in this
State who may be similarly situated. There are two Montana cases
which bear directly on the problem which facially are inconsistent,
but which, on analysis, can be reconciled. They are ~ a s i State
v.
Department of Highways, above cited, a decision from this Court,
and Fetherston v. ASARCO, Inc. (D. Mont. 1986), 635 F.Supp. 1443,
a federal district court case.
First let us understand res judicata as it is applied in
Montana. There are four criteria: (1) the parties must be the
same; (2) the subject matter must be the same; (3) the issues
must be the same; (4) the relationship among the parties, the
subject matter and the issues must be the same. Brault v. Smith
(1984), 209 Mont. 21, 26, 679 P.2d 236, 239; Fox v. 7L Bar Ranch
5
Company (1982), 198 Mont. 201, 645 P.2d 929.
In Nasi, this Court had before it an appeal from a summary
judgment granted in ~istrictCourt on grounds of res judicata as
to Nasits wrongful discharge action. ~asiclaimed he was fired.
The Highway Department claimed he voluntarily quit.
The facts in ~ a s i
roughly parallel the facts in Niles' case.
Nasi filed a grievance with the Board of Personnel Appeals. The
BPA preliminary hearing examiner decided that Nasi had quit or
walked off the job. Nasi rejected the preliminary decision. Five
days thereafter, Nasi filed a separate tort action in District
Court alleging wrongful discharge and bad faith. The Highway
Department filed motion to dismiss on several grounds, including
res judicata. The District Court stayed further proceedings until
the BPA made a final determination on the grievance. On October
11, 1984, the BPA formal hearing examiner held that Nasi had
voluntarily terminated his employment. On February 5, 1985, the
BPA adopted the examiner's recommended order as the final order,
in effect concluding that Nasi had not been aggrieved by the
Department. On March 5, 1985, Nasi filed a petition for judicial
review of the BPA order. On August 15, 1986, the District Court
affirmed the BPA final order. Nasi did not appeal the judicial
review.
In the meantime, in the tort action, the District Court lifted
its stay. The Highway Department filed a motion for summary
judgment which was granted by the District Court against Nasi on
grounds that the matter was res judicata. The District Court
relied on the BPA finding that Nasi had quit which the District
Court determined to be dispositive in the District Court case.
The other side of the coin is found in Fetherston. Fetherston
was a managerial employee of ASARCO, and thus not subject to the
union contract. Against ASARCO1s rules, Fetherston drove his new
wife through the plant area while off duty. Another ASARCO
employee observed the violation and reported it to the plant
management. Fetherston was suspended four days without pay.
Later, following a Christmas party, Fetherston was in a bar in East
Helena where he observed the employee who had reported him.
Fetherston struck him in the face. Thirty-eight days later,
plaintiff was terminated by ASARCO. He applied for unemployment
benefits through the Montana Department of Labor. ASARCO opposed
his application on the grounds that he had been fired for violating
a known company rule. The Department of Labor determined that
Fetherston was not entitled to benefits because of his violation
of the rule.
After the Department of Labor had acted, Fetherston met with
the ASARCO management about possible reinstatement. The management
indicated that he would not be reinstated but that ASARCO would no
longer oppose his application for unemployment benefits.
Fetherston returned to the Department of Labor to redetermine its
denial of his benefits. The Department reversed itself stating
that Fetherston's actions which resulted in his discharge did not
occur on the employer's property, did not directly affect the
employer's business and so Fetherston was not disqualified from
receiving unemployment insurance. ASARCO did not appeal from the
administrative determination, and it became final.
Fetherston brought action in the federal district court for
his alleged wrongful termination from employment. At the pre-
trial conference before the federal district court, Fetherston
moved in limine, among other motions, for partial summary judgment
on the grounds that ASARCO had failed to appeal the Department of
Labor's determination and so ASARCO was collaterally estopped from
raising additional reasons for his discharge and from relitigating
the issue of plaintiff's misconduct.
The federal district court determined that collateral estoppel
is applicable to foreclose relitigation of issues not only in a
judicial proceedings, (citing Aetna Life and Casualty Insurance
Company v. Johnson (1984), 207 Mont. 409, 673 P.2d 1277), but also
issues previously determined at an agency level (citing Paramount
Transport Systems v. Chauffeurs, etc. Local 150 (9th Cir. 1971),
436 F.2d 1064.) The federal district court determined that the
factors invoking collateral estoppel are: (1) the administrative
proceedings must comply with judicial standards of substantive and
procedural due process; (2) administrative findings must concern
issues material to the subsequent litigation; and (3) the agency
decision must be supported by substantial evidence on the
administrative record as a whole.
Thus in Fetherston, we have the situation where the employee,
having successfully shown his right to unemployment benefits at
the agency level, contended that the employer was collaterally
barred from relitigating the same issues. The federal district
court, however, determined that the issues were not the same. It
said:
. Here, defendant did not oppose
plaintiff's application for redetermination,
nor is there any evidence that a formal
hearing was ever held. Generally, Montana
unemployment compensation procedures are very
informal, often handled by the mere completion
of forms or over the telephone. The full
panoply of issues which arises in a wrongful
discharge suit is not within the realm of the
Department of Labor's consideration of
eligibility for unemployment benefits. The
statutory scheme for unemployment insurance
contemplates a general rule that benefits will
be awarded, with only a few specifically
designated exceptions or disqualifications.
Section 39-51-2301, et seq. MCA.
The particular disqualification involved in
Mr. Fetherston's case was misconduct. The
issue of ASARCO1s good faith, or lack thereof,
in discharging plaintiff, was not involved.
Had ASARCO foreseen that its failure to oppose
plaintiff's application for redetermination
would somehow serve to foreclose its
opportunity to defend the wrongful termination
action, it surely would not have chosen a
passive course of action in the administrative
proceedings.
The doctrine of collateral estoppel cannot
apply to bar litigation where the agency&
finding is not a ''necessary determination of
an issue1' nor ''essential to the judgment1'
(citing a case). In this case, the
administrative termination was merely to allow
plaintiff to collect unemployment benefits
from the State of Montana. No decision was
rendered, nor evidence presented, regarding
existence or breach of the implied covenant of
good faith and fair dealing, and ASARCO was
not defending any such charges on an attempt
to avoid paying damages out of its own pocket.
In view of the foregoing factors, the three
elements of the Paramount Transport test are
not satisfied and thus collateral estoppel
principles cannot be invoked. First, the
administrative proceedings involved in this
case do not comply with the standards of
procedural and substantiative due process that
attend a judicial proceeding, nor is this
Court willing to impose such a requirement on
a formal proceeding before a state agency
deluged with unemployment requests. Second,
the Department of Labor made no findings of
fact pertaining to material issues before the
Court, and no such findings were necessary for
its ultimate determination of plaintiff's
application. Based upon these factors, the
Court is of the opinion that collateral
estoppel is inapplicable.
Now, let us look again at Nasi, and the holding of this Court
that the agency determination barred Nasils claim for wrongful
discharge. The compelling difference between Nasi and Fetherston
is that in Nasi, a specific statute granted the Board of Personnel
Appeals jurisdiction to determine Highway Department personnel
grievances based upon work conditions, supervision, or the result
of an administrative action. section 2-18-1001, MCA. The BPA, by
statute, had full jurisdiction to determine all the issues relating
to the termination of Nasi.
In the case of Niles, however, the legal situation is the same
as in Fetherston. The jurisdiction of the Department of Labor is
confined to "claims filed for benefits,'' 5 39-51-2406, MCA. The
employee Niles is in the same position as the employer ASARCO in
Fetherston. The issue of Weissmanls good faith, or possible lack
thereof, was not and could not be determined by the Department of
Labor in disqualifying Niles for unemployment insurance benefits.
When it is considered, therefore, from the viewpoint of res
judicata, or from collateral estoppel, Niles' action for wrongful
discharge and breach of the covenant of good faith and fair dealing
is not barred because of the agency determination. The issues
determined before the agency, and to be determined before the
District Court are not the same.
We leave aside without discussion whether the administrative
proceedings in this case complied with judicial standards of
substantive and procedural due process. It appears from the record
that there were telephonic hearings which may not have afforded
Niles the full right of cross-examination. It is unnecessary for
us to determine this issue, however, because we hold otherwise in
this case that neither res judicata nor collateral estoppel applies
since the legal issues decided by the agency are not the same as
the legal issues facing the District Court in Niles' case.
Under Rule 56, M.R.Civ.P., a summary judgment may not be
granted unless there is no genuine issue of material fact
remaining. Bills v. Hannah, Inc. (Mont. 1988), 749 P.2d 1076.
Because there are further issues of fact to be determined in
District Court, we reverse the summary judgment.
We Concur: __.-
4Chief Justice