No. 89-341
IN THE SUPREME COURT OF THE STATE OF MONTANA
OLIVE M. HELTBORG, as Personal Representative
of the Estate of Otto Christian Heltborg,
Plaintiff and Respondent,
MODERN MACHINERY, f/k/a ALLIED EQUIPMENT,
f/k/a INDUSTRIAL EQUIPMENT,
Defendant and Appellant.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Diane G. Barz, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
James D. Walen; Keefer, Roybal, Hanson, Staey &
Walen, Billings, Montana
Ronald B. MacDonald, argued; Datsopoulos, MacDonald
& Lind, Missoula, Montana
William T. Murphy, Washington Corporations,
Missoula, Montana
For Respondent:
Donald W. Molloy, argued; Anderson, Edwards &
Molloy, Billings, Montana
Submitted: April 12, 1990
Decided: July 1 0 , 1 9 9 0
Filed:
Justice Fred J. Weber delivered the Opinion of the Court.
This appeal arises from a verdict following a jury trial in
the Thirteenth Judicial District, Yellowstone County, Montana.
The jury returned a verdict for plaintiff, finding that defendant
had violated the covenant of good faith and fair dealing in its
discharge of Mr. Heltborg. Defendant appeals. We reverse and
remand.
The issues are:
1. Did the District Court err in allowing plaintiff's expert
witness to render legal conclusions as to the existence and
breach of an implied covenant, and as to whether defendant was
negligent?
2. Did the District Court err in instructing the jury on
the issue of negligence, and in submitting a special verdict form
which instructed the jury to consider whether Modern had
negligently breached the covenant of good faith and fair dealing?
3. Did the District Court err in excluding Heltborg's
written statement to the Social Security Administration that he
was incapable of fulfilling the physical and mental requirements
of his job?
4. Did the District Court err in denying defendant's motion
for a judgment notwithstanding the verdict?
Modern Machinery (Modern) is a heavy equipment dealer based
in Missoula, Montana, and is a subsidiary of Washington
Corporation. In the late 1970's the Modern stores began
experiencing financial difficulties. These economic problems
continued for a period of approximately eight years, resulting in
losses to the company in excess of twelve million dollars.
During this time several of Modern's stores were closed,
including the stores in Phoenix and Tucson, Arizona, Gillette,
Wyoming, and Kalispell, Montana.
In 1986 the manager of the Billings, Montana store was
informed that he must attempt to make the store profitable. The
Billings store had reduced its employees by half in 1981, yet it
had lost in excess of $100,000 for each of the years 1983 through
1985. Trial testimony established that in 1986 the store again
lost over $100,000 from ongoing operations, and was essentially
insolvent or bankrupt for the year 1986.
Mr. Chris Heltborg was employed in the Billings store as a
service manager. He originally began working for Modern as a
mechanic, but was promoted to service manager. When the business
was healthy Mr. Heltborg had supervised up to eighteen mechanics.
By 1986 Mr. Heltborg was supervising only three mechanics. Mr.
Heltborg had some physical disabilities,.includingdiabetes, and
congestive heart failure. He had also suffered a stroke in 1985.
On April 30, 1986, Mr. Heltborg's employment with Modern was
terminated. At 9:00 a.m., Mr. Heltborg and another long-term
employee, Darrell Imhoff, were called into the office of Jerry
Gibson, the store manager. Mr. Gibson simply informed them that
they were terminated. Mr. Heltborg received no prior notice of
this and no severance pay. At the time of the termination, Mr.
Heltborg had been employed by Modern for twenty-two years.
Modern did not rehire anyone to fill Mr. Heltborgts
position. Mr. Gibson testified that a mechanic, Paddy Gwin, who
had been employed by Modern for twenty-seven years, became the
Itworking foreman.I* Mr. Gwin and two other employees assumed Mr.
Heltborgtswork.
Four months after his termination, Mr. Heltborg and his wife
were asphyxiated in their home due to a defective fireplace door.
Mrs. Heltborg survived. Mr. Heltborg died after being
hospitalized. Mrs. Heltborg, as representative of her husband's
estate, brought suit against Modern, alleging breach of the
implied covenant of good faith and fair dealing, negligence in
the termination decision, and wrongful discharge. Upon Mr.
Heltborg's termination, insurance coverage, including
hospitalization insurance and $50,000 of life insurance coverage,
had ended. Thus Mrs. Heltborg requested damages for lost wages,
medical bills, and for the terminated life insurance coverage.
The District Court dismissed the wrongful discharge claim on
Modern's motion for summary judgment. The remaining claims were
tried before a jury, which returned a verdict for plaintiff on
the breach of the implied covenant of good faith and fair
dealing. The jury awarded damages in the amount of $170,608.
Following trial, Modern moved for judgment notwithstanding the
verdict, and for a new trial. Both motions were denied. Modern
appeals.
Did the District Court err allowing plaintiff's expert
witness to render legal conclusions as to the existence and
breach of an implied covenant, and as to whether defendant was
negligent?
At trial, plaintiff presented an expert witness, Mr. Alan
Brown, an expert in employment relations, to testify that
defendant was negligent in its reduction in force, that the
reduction in force was not legitimate, and that defendant
breached an implied covenant of good faith and fair dealing.
On direct examination, plaintiff's counsel established Mr.
Brown's training and qualifications and knowledge of the facts
surrounding Mr. Heltborg's termination. Mr. Brown's testimony
stated commonly accepted methods of conducting a legitimate
reduction in force and commonly accepted methods of terminating
an employee. Counsel then elicited the following testimony from
Mr. Brown:
Q. Now, I would like to summarize, Mr.
Brown. Given the facts and the testimony that you
have reviewed in this case, is it your opinion
that Modern Machinery conducted a legitimate
reduction in force when it fired two high paid
long-time employees?
A. It is my opinion that they did not have a
legitimate reduction in force.
Q. Based on your investigation and reading,
as well as your education and experience, do you
have an opinion as to whether or not Modern
Machinery had sufficient reliable facts upon which
they could reasonably reach the decision to
terminate Chris Heltborg?
A. I have an opinion.
Q. What is it?
That they did not.
Q. Assuming that there was, in fact, an
implied obligation of good faith and fair dealing
between the Defendant and Chris Heltborg, do you
have an opinion as to whether or not Modern
Machinery complied with that obligation?
A. I have an opinion.
What is it?
A. They did not.
Q. Do you have an opinion as to whether or
not Modern Machinery violated the standard of care
of a reasonably prudent employer and what they
would follow regarding a legitimate right of the
employee of 22 years service?
A. Yes, I have an opinion.
Q. What is that?
A. They didn't exercise reasonable care.
Q. Was Modern Machinery, in your opinion,
negligent in the manner in which they terminated
Chris Heltborg?
A. Yes. My opinion is they were.
Q. Do you have an opinion as to whether or
not the breach of these obligations was the cause
of the loss of Chris Heltborg's employment and his
associated benefits of employment, including
insurance?
A. Yes. It is my feeling that this is a
direct cause of his loss of these benefits.
MR. MOLLOY: Your Honor, I have no more
questions.
Similar responses were elicited from Mr. Brown at other
intervals in his testimony. Defendant contends that this
testimony invaded the province of the jury, in effect
instructing the jury how to decide the case. Defendant also
contends this testimony exceeds the scope of expert
testimony previously approved by this Court.
In our analysis of this issue we begin by noting rele-
vant Montana Rules of Evidence, which provide:
Rule 702. Testimony by experts.
If scientific, technical, or other
specialized knowledge will assist the trier of
fact to understand the evidence or to determine a
fact in issue, a witness qualified as an expert by
knowledge, skill, experience, training, or
education may testify thereto in the form of an
opinion or otherwise.
Rule 704. Opinions on ultimate issue.
Testimony in the form of an opinion or infer-
ence otherwise admissible is not objectionable
because it embraces an ultimate issue to be
decided by the trier of fact.
The Commission Comments to Rule 704, M.R.Evid., state that
"the Commission intends this rule to follow the existing
Montana practice of not allowing the witness to give a legal
conclusion or to apply the law to the facts in his answer."
Montana's Rule 704 is identical to Federal Rule 704.
The Advisory Committee Note to the federal rule states:
Advisory Cornmitteels Note
The basic approach to opinions, lay and ex-
pert, in these rules is to admit them when helpful
to the trier of fact. In order to render this
approach fully effective and to allay any doubt on
the subject, the so-called flultimateissuev1rule
is specifically abolished by the instant rule.
The abolition of the ultimate issue rule does
not lower the bars so as to admit all opinions.
testimony by an expert witness in regard to whether certain
false statements would have Itthe capacity to influencell a
loan officer. In reversing this ruling the appellate court
concluded that this constituted an opinion on a factual
issue rather than the legal question of whether statements
were material, and was therefore admissible. Lueben, 812
F.2d at 184.
We adopt the above-quoted reasoning of the Fifth
Circuit on this issue, although we recognize that on
rehearing the Fifth Circuit vacated this portion of the
opinion by concluding that the materiality of the false
statements was a legal question for the court to decide.
Lueben, 816 F.2d at 1033.
This distinction between testimony which constitutes a
legal conclusion and that which is a factual conclusion has
been decisive in court decisions ruling on the scope of
expert testimony. See e.s., Specht v. Jensen (10th Cir.
1988), 853 F.2d 805, cert denied, - U.S. -, 109 S.Ct.
792, 102 L.Ed.2d 783 (1989) (opinion by expert attorney on
whether defendants1 conduct involved a "searchu within the
meaning of the Fourth Amendment was a legal conclusion and
should not have been allowed); Owen v. Kerr-McGee Corp.
(5th Cir. 1983), 698 F.2d 236 (opinion by expert as to legal
cause of accident was properly disallowed); Marx & Co., Inc.
v. Diners1 Club, Inc. (2nd Cir. 1977), 550 F.2d 505, cert
denied, 434 U.S. 861, 98 S.Ct. 188, 54 L.Ed.2d 134 (1977)
(trial court erred in allowing attorney expert to give legal
opinion construing contract terms at issue).
Clearly an expert may testify to an ultimate issue of
fact and we have previously so held. See, e.s., Scofield v.
Estate of Wood (1984), 211 Mont. 59, 683 P.2d 1300 (court
properly allowed highway patrolman to testify as to cause of
accident); Wollaston v. Burlington Northern, Inc. (1980),
188 Mont. 192, 612 P.2d 1277 (court properly allowed highway
patrolman to testify as to cause of accident); State v.
Petko (1978), 177 Mont. 229, 581 P.2d 425 (court properly
allowed expert to testify that substance was marijuana even
though this was an ultimate factual issue). We emphasize,
however, that there is a distinction between testimony on
the ultimate factual issue, and testimony on the ultimate
legal issue.
To clarify, had Modern provided its employees with a
handbook or policy requiring advance notice before a
termination, and requiring severance pay, an expert could
testify to factual issues of whether the employer followed
its own policies. Nonetheless, the expert could not follow
this testimony with a legal conclusion on whether the
employer violated the covenant of good faith and fair
dealing.
This Court limited the scope of expert testimony in
Hart-Anderson v. Hauck (1988), 230 Mont. 63, 748 P.2d 937,
decided in January 1988, which was over a year before the
Under Rules 701 and 702, opinions must be helpful
to the trier of fact, and Rule 403 provides for
exclusion of evidence which wastes time. These
provisions afford ample assurances against the
admission of opinions which would merely tell the
jury what result to reach, somewhat in the manner
of the oath-helpers of an earlier day. They also
stand ready to exclude opinions phrased in terms
of inadequately explored legal criteria. Thus the
question, #'Did T have capacity to make a will?"
would be excluded, while the question, "Did T have
sufficient mental capacity to know the nature and
extent of his property and the natural objects of
his bounty and to formulate a rational scheme of
distribution?" would be allowed. McCormick § 12.
Rules of Evidence (1972), 56 F.R.D. 183, 284-5.
The Fifth Circuit in U.S. v. Lueben (5th Cir. 1987),
812 F.2d 179, aff'd on rehearinq, 816 F.2d 1032 (1987),
recently explained this illustration as follows:
The two questions quoted above illustrate the
major surviving exception to the rule that expert
opinions on an ultimate issue are admissible: an
expert may not express an opinion on a conclusion
of law. This court used this exception to uphold
the exclusion of the expert testimony in the two
cases relied upon by the district court in exclud-
ing the expert testimony in this case. In
Matthews v Ashland Chemicals, Inc., this court
.
stated that the expert's answer to the
hypothetical question posed in that case would
simply tell the jury what result to reach and
would allow the expert to voice a legal conclusion
as to the proximate cause of the injuries suffered
by the plaintiff in that case. See 770 F.2d at
1311. Similarly, in Owen 5 Kerr-McGee Corp.,
this court upheld the exclusion of expert
testimony as to the legal cause of an accident.
See 698 F.2d at 240.
Lueben, 812 F.2d at 184.
Lueben was accused of making materially false
statements to a savings and loan institution, in violation
of 18 U.S.C. § 1001 and 1014. The trial court disallowed
present case went to trial. In Hart-Anderson a Billings
attorney testified that defendant was 100% negligent, and
that plaintiff was not negligent. He further testified that
the insurance agents had violated three specific subsections
of the Unfair Claims Settlement Practices Act in their
handling of plaintiffvs claim. On appeal the plaintiff
challenged the propriety of the testimony. The Hart-
Anderson analysis quoted approvingly from Marx, as follows:
[Sluch testimony lvamounts no more than an
to
expression of the [witnesst] general belief
as to how the case should be decided."
McCormick on Evidence, S 12 at 26-27. The
admission of such testimony would give the
appearance that the court was shifting to
witnesses the responsibility to decide the
case. McCormick on Evidence, 12 at 27. It
is for the jury to evaluate the facts in the
light of the applicable rules of law, and it
is therefore erroneous for a witness to state
his opinion on the law of the forum.
(Citation omitted.)
The court further cautioned that,
[W]e must be especially careful not to allow
trials before juries to become battles of
paid advocates posing as experts on the
respective sides concerning matters of
domestic law.
Hart-Anderson, 748 P.2d at 942-43.
This Court reversed and remanded, concluding that the
repeated legal conclusions simply instructed the jury how to
decide the case and were highly prejudicial. The present
case is directly comparable to Hart-Anderson. In the
present case, just as in Hart-Anderson, there was an
extended series of questions on the basic legal issues to be
determined by the jury.
The testimony by Mr. Alan Brown constituted a legal
conclusion on the precise issue presented to the jury, that
is, whether defendant had breached the covenant of good
faith and fair dealing. Moreover, he was allowed to state
his opinion that defendant was negligent in carrying out its
reduction in force and that such reduction was not
legitimate; that defendant violated the standard of care of
a reasonably prudent employer; that defendant was negligent
in its termination of Heltborg; and that breach of these
obligations was a direct cause of Mr. Heltborg's loss of
benefits. Mr. Brown's testimony was extensive, and he
repeatedly stated legal conclusions which amounted to
instructing the jury on how to decide the case.
We recently addressed the scope of expert opinion in
Mahan v. Farmer's Union Central Exchange, Inc. (Mont. 1989),
768 P.2d 850, 46 St. Rep. 96. Mahan involved charges of age
discrimination and breach of the implied covenant of good
faith and fair dealing. Mr. Mahan was discharged from
Farmers Union Central Exchange, Inc. when he was sixty years
old. The expert witness in Mahan, the same Alan Brown as in
the present case, was allowed to testify as to whether the
company complied with or violated its own policies, in
accord with our previous decisions of Crenshaw v. Bozeman
Deaconess Hospital (1984), 213 Mont. 488, 693 P.2d 487, and
Flanigan v. Prudential Federal Savings & Loan (1986), 221
Mont. 419, 720 P.2d 257.
However, in Mahan we also discussed the propriety of
expert testimony by an expert statistician. In remanding
the case, we stated:
In any event, we affirm the position of the Dis-
trict Court that on retrial the statisticians may
testify that their statistical tests show or do
not show at terns of discrimination based on aqe,
but may Aot testify to the ultimate conclusion
that aqe discrimination in his termination was or
was not exercised against Wayne Mahan in this
case. The jury should be the final arbiter of
that issue. Rule 704, M.R.Evid. (Emphasis
supplied.)
Mahan, 768 P.2d at 857.
We hold that in the present case the trial court
committed reversible error in allowing Mr. Brown to state
legal conclusions on the very issues to be decided by the
jury. We thus reverse and remand to District Court for new
trial.
Appellant raises other alleged errors which we will
address for the court s guidance on retrial.
Did the District Court err in instructing the jury on
the issue of negligence, and in submitting a special verdict
form which instructed the jury to consider whether Modern
had negligently breached the covenant of good faith and fair
dealing?
At trial and on appeal Modern has raised issues
involving the application of a negligence theory to an
employment termination. As previously noted, plaintiff's
complaint alleged breach of the covenant good faith and
fair dealing in Count I, negligence in Count 11, and
wrongful discharge in Count 111.
Under Count 11, plaintiff's complaint alleged that
Modern was negligent in failing to exercise ordinary and
reasonable care in investigating the need to terminate Mr.
Heltborg. In its answer, Modern asserted the affirmative
defense to this allegation that it had employed a legitimate
reduction in force as a result of economic conditions.
Modern moved for summary judgment on all three counts
listed in the complaint. its brief in support of summary
judgment, Modern contended that negligence in the employment
context is only actionable in conjunction with a breach of
the covenant. Moreover, the pretrial order listed as an
issue of law whether Montana recognizes a separate and
distinct tort of negligence as opposed to negligently
violating the covenant of good faith and fair dealing.
At trial Modern objected to the following jury
instructions which were given by the court:
Instruction No. 18:
When the legal duty to act in good faith exists in the
employment relationship, as it does in this case, then
there is a duty imposed upon the employer to exercise
reasonable care in carrying out decisions concerning
employment. This means that there is a duty on the
part of the employer to use reasonable care under the
circumstances in carrying out its business decision-
making.
Instruction No. 19:
A reduction in force can constitute a just cause for
termination of employment. However, you are instructed
that the employer's right to reduce its personnel does
not excuse its obligation to act fairly and in good
faith or to use ordinary and reasonable care in the
process and manner of termination of employment.
Modern offered the following instructions, which were refused:
Instruction No. 28:
An employer who acts in good faith on an honest but
mistaken belief that the discharge of an employee was
warranted by a legitimate business reason has not
committed a breach of the covenant of good faith and
fair dealing.
Instruction No. 26:
In determining whether Modern . . . negligently
terminated . .
. employment, you are not to consider
whether Modern Machinery made a correct decision or a
good management decision. Modern Machinery has the
absolute authority to make managerial decisions
relating to the termination of employees to maintain
the economic vitality of its company, regardless if
those managerial decisions are good decisions or poor
decisions.
Modern contends that the given instructions militate against
previously stated policies that an employer must have "wide
latitude in deciding whom it will employtgl Gates v. Life of
Montana (1982), 196 Mont. 178, 184, 638 P.2d 1063, 1067, and that
an employer may engage in Illegitimate reductions in force
necessary to maintain the economic vitality of the company,"
Flanisan, 720 P.2d at 261. Modern contends that there is no duty
to use reasonable care in the process and manner of termination.
Additionally, Modern contends that imposing a duty of reasonable
care upon Modern in its decision making suffers from the lack of
any definable standard of care.
Modern contends that an employer should not be liable for
negligence in making business decisions, including reduction in
force decisions. It contends this would be an extension of
negligence liability in the employment context. It contends this
Court has previously affirmed a finding of negligence by an
employer in only two instances: 1) where the employer violates
its own written termination policies, as in Flanisan, and 2)
where an employer fails to investigate allegations of misconduct
before terminating an employee for cause, as in Crenshaw.
This Court first allowed a negligence cause of action in an
employment termination case in Crenshaw. In Crenshaw we
concluded that the trial court did not err in giving a jury
instruction defining negligence. Crenshaw involved allegations
that the employer was negligent in not following its own employee
handbook policies, and in not properly investigating charges
against the employee. These failures were in conjunction with
several acts by the employer which were characterized as acts of
Itbad faith," such as making false charges against the employee
and notifying the local job service of such charges. Crenshaw
was later cited for the proposition that negligence forms a
proper basis for recovery in an employee termination case. See
Flanisan, 720 P.2d at 263; Rupnow v. City of Polson (1988), 234
Mont. 66, 72, 761 P.2d 802, 806; Prout v. Sears, Roebuck & Co.
(Mont. 1989), 772 P.2d 288, 291, 46 St.Rep. 257, 261.
In Flanisan, the allegations of negligence were joined
with allegations of age discrimination, and ulterior motives on
the part of the employer in firing the employee. In both
Crenshaw and Flanisan the alleged negligence was in conjunction
with allegations properly forming a basis for a breach of the
covenant. The negligence issues were not essential in either
Crenshaw or Flanisan.
In Gates I this Court stated:
These cases emphasize the necessity of balancing the
interests of the employer in controlling his work force
with the interests of the employee in job security. In
adopting the doctrine of good faith in employment
contracts the courts did not seek to infringe upon the
interests of the employer, but recognized that:
'. . .
I an employer is entitled to be
motivated by and to serve its own legitimate
business interests; that an employer must
have wide latitude in deciding whom it will
employ in the face of the uncertainties of
the business world; and that an employer
needs flexibility in the face of changing
circumstance^.^^ (Citation omitted.)
Gates, 638 P.2d at 1066-67.
In Flanisan we stated that a long-term employee's
expectation of continued employment "does not foreclose an
employer from engaging in legitimate reductions in force
necessary to maintain the economic vitality of the company."
Flaniqan, 720 P.2d at 261.
In the present case, the instructions given allowed the jury
to decide the legitimacy of a reduction in force and whether it
was carried out in a negligent manner. We agree with Modern that
these instructions placed the jury in the middle of general
management decisions, in effect eviscerating the concept of
employer latitude in decision-making.
Moreover, in the present case the expert was allowed to
compare Modern's reduction in force to that of other employers in
general. The jury was then given the authority to review the
adequacy of the employer's management decisions under a broad
undefined "reasonable care1# standard. This type of decision
cannot properly be scrutinized in hindsight for its legitimacy.
Neither should negligence be based on the procedures of other
employers. There is no justification for giving a jury the
authority to review whether reasonable care was utilized in a
reduction in force based on economic conditions.
In Kerr v. Gibson's Prod. Co. of Bozeman (1987), 226 Mont.
69, 733 P.2d 1292, this Court affirmed the review of a discharge
during a reduction in force; however, the holding in Kerr was
premised upon a breach of the covenant, not negligence in the
reduction in force. In Kerr the employer had violated employee
handbook policies in its termination procedures and in rehiring.
Additionally, in Kerr, after discharging several employees, the
employer then refilled the positions with lower paid employees.
We affirmed the determination that this breached the covenant of
good faith and fair dealing. The present case is distinguishable
from Kerr to the extent that the present case is premised upon
negligence of the employer in implementing a reduction in force.
The present case is further distinguishable in that it is
undisputed that the Billings Modern store had sustained large
losses for several years. Modern made the decision to discharge
two long term and highly paid employees based on economics and
workloads. The present case does not involve handbook
violations; neither was Mr. Heltborglsposition refilled.
This Court has recognized that an employer has a duty not to
breach the covenant of good faith and fair dealing once the
covenant has arisen in the employment relationship. Gates. This
duty has been stated as a duty not to discharge for an improper
reason, Crenshaw, 693 P.2d at 492. The breach of this duty
considers the intentional conduct of an employer. We have not
imposed upon the employer a duty to use reasonable care in
decision-making, based upon a theory of negligence.
We conclude that the employer is not under a duty to use
reasonable care in decision-making. Therefore, in the present
case, the management decision to implement a reduction in force
for economic reasons is not susceptible to a negligence analysis
by a jury. We conclude that Jury Instruction Nos. 18 and 19 were
incorrect and should not be used on retrial.
On appeal Modern also objects to the special verdict form
which directed the jury to consider if Modern had negligently
breached the covenant of good faith and fair dealing. The
special verdict form submitted to the jury was as follows:
QUESTION NO. 1
Has the Plaintiff proved, by a preponderance
of the evidence, that the Defendant breached the
covenant of good faith and fair dealing?
ANSWER : YES X
PUESTION NO. 2
Has the Plaintiff proved by a preponderance
of the evidence that the Defendant negligently
breached the covenant of good faith and fair
dealing?
ANSWER : YES X
If your answers to Questions No. 1 and No. 1
are llNolt to the bottom of the Verdict Form,
go
date and sign it and ask to be returned to Court.
If your answer to either Question No. 1 and
No. 2, or both is "Yesw go to Question No. 3.
QUESTION NO. 3
What damages, if any, do you find were caused
to the Plaintiff?
AMOUNT :
Modern contends that it was error to submit to the jury
the issue of whether Modern negligently breached the
covenant of good faith and fair dealing. It contends that a
cause of action only arises where the covenant is willfully
breached. Although defendant did not object to this verdict
form at trial, we address this issue for retrial.
We conclude that in general a breach of the covenant of
good faith and fair dealing does not involve negligent
conduct, but intentional conduct. This holding accords with
prior Montana cases involving a breach of the covenant of
good faith and fair dealing in employment. See Gates
(evidence indicated employer failed to follow its own
termination policies); Crenshaw (evidence indicated employer
acted in bad faith in discharging employee); Flanasan
(evidence indicated employer may have had ulterior motive
for discharge of employee); and Kerr (evidence indicated
employer had ulterior motive in discharging employee). It
also accords with the holdings of other jurisdictions in
cases involving a breach of the covenant in an employment
relationship. See Pugh v. Seens candies, Inc. (Cal.App.3d
1988), 250 Cal.Rptr. 195, 213 ("Even an honest, though
mistaken, belief that the employer for legitimate business
reasons had good cause for the discharge would negate bad
faithnn). Although previous Montana employment termination
cases have discussed employer negligence, no case has
allowed a neslisent breach of the covenant.
We conclude that the verdict form improperly commingled
the concepts of negligence and a breach of the covenant of
good faith and fair dealing and should not be used on
retrial.
I11
Did the District Court err in excluding Heltborg's
written statement to the Social Security Administration that
he was incapable of fulfilling the physical and mental
requirements of his job?
Mr. Heltborg applied for Social Security disability
benefits after his termination. These benefits were denied.
In his appeal to the Social Security Administration, Mr.
Heltborg wrote a letter explaining his physical
disabilities. A relevant portion of the letter stated:
Although the men at the shop would help me with my
21
work, it was becoming more apparent that my dis-
ability was making it impossible to fulfill the
physical and mental requirements of my job as
Service Manager. Finally, the Managers of Modern
Machinery realized that this was the case and I
was dismissed from my job of 22 years. I feel
that it would be impossible for me to go to work
as either a mechanic or Service Manager as I would
be unable to perform the job duties and there
would be no way that I could be helped with my
insulin reactions if I were working for other
companies.
Defendants attempted to have this document admitted at
trial; however, the court granted the plaintiff's motion in
limine, excluding the document.
Defendant contends that Mr. Heltborg's ability to per-
form physical labor was a major issue at trial since plain-
tiff contended Mr. Heltborg should have been offered the
option of taking a mechanic's job. Defendant contends that
this document was relevant to defendant's assertion that Mr.
Heltborg's physical condition prevented him from working as
a mechanic.
To be admissible at trial, evidence must be relevant,
as defined in Rule 401, M.R.Evid. At trial plaintiff
elicited testimony from Mr. Alan Brown and Mrs. Heltborg
that Modern should have offered Mr. Heltborg work as a
mechanic both before and after termination. Plaintiff
presented this same allegation to the jury through its
examination of defense witnesses. The admissions by Mr.
Heltborg in his letter were certainly relevant to rebut this
theory.
The letter was also competent evidence. Although the
letter had definite hearsay qualities (i.e., the statements
by Mr. Heltborg were out of court statements and were
offered for the truth of the matter asserted. Rule 801(c),
M.R.Evid.), the statements were admissions of a party oppo-
nent and therefore fall within Rule 801(d)(2), M.R.Evid., an
exclusion to the hearsay rule. See McCormick on Evidence 5
263 (3rd Ed. 1984) ; 4 Wigmore, Evidence 5 1048 (Chadbourn
Rev. 1972) ("The statements made out of court by a party
opponent are universally deemed admissible, when offered
against him.") ; Kekua v. Kaiser Found. Hosp. (Haw. 1979),
601 P.2d 364, 370 (explaining the difference between an
admission of party opponent which is excluded from the
hearsay rule and a statement against interest which is an
exception to the rules).
We conclude that this letter was properly admissible
under the evidentiary rules.
Did the District Court err in denying defendant's
motion for a judgment notwithstanding the verdict?
Following trial, Modern moved for judgment
notwithstanding the verdict on the issues of breach of the
covenant and negligence. This motion was denied. On
appeal, defendant contends the motion should have been
granted, urging there was no evidence to support allegations
that the covenant had been breached. Modern also urges that
a cause of action for negligence in an employment
termination should not be extended to general management
decisions in a reduction in force, nor should the manner in
which an employee is discharged provide a basis for a
negligence cause of action.
Although we agree that in general negligence does not
afford a cause of action in a suit involving employment
termination, we conclude that there existed issues of fact
in regard to whether the covenant of good faith and fair
dealing was breached, which were properly submitted for jury
determination. We affirm the District Court's denial of the
motion for judgment notwithstanding the verdict.
Reversed and remanded.
We Concur:
chief'Justice
sitting for ~ustic6Diane Barz
Justice John C. Sheehy, dissenting:
This widow, Olive M. Heltborg, now shares the all-too-often
experience of plaintiffs whose money damages verdicts are
consistently (or better yet, inconsistently) reversed by the
majority of this Court: It is like rowing a boat upwind among the
ice floes on a wintry afternoon. The judicial climate here is not
just frosty, it is freezing.
Take this case. Please.
This lawsuit is not about wrongful discharge from employment.
Early in the game, the District Court removed wrongful discharge
as an issue by granting summary judgment in favor of the defendant.
There has been no appeal from that decision of the District Court.
Yet here the majority confuse this case in their opinion as one
for wrongful discharge.
The majority opinion overall has these principal effects,
all deleterious to formerly accepted principles of law:
(1) Limiting actions for breach of the implied covenant of
good faith and fair dealing to intentional breaches, thus
eliminating any causes of action for negligent breaches.
(2) Delimiting the scope of expert testimony.
(3) Confusing the latitude of employers to make business
decisions with concepts relating to the covenant of good faith and
fair dealing.
(4) Preventing punitive damages even for intentional breaches
of the covenant.
I.
Neqliqence and the Covenant of Good Faith and Fair Dealinq
The majority do not recognize or seem to know that the source
of the implied covenant of good faith and fair dealing in contract
relationships is not in the contract terms, but is implied by law.
The fundamental error of the majority is their belief that the
implied covenant was bargained for by the parties. In this, the
majority ggadoptgg the errant reasoning of the California Supreme
Court in Foley v. Interactive Data Corporation (Cal. 1988), 765
P.2d 373, and ignore, as did the California Supreme Court, the
lucid explanation of the source of the implied covenant furnished
by Justice Kaufman in his dissent:
In attempting to emphasize its contractual origins, the
majority characterized the covenant of good faith and
fair dealing as a I1contract term . .
. aimed at making
effective the agreement I s promises1I . . That
characterization is simply incorrect under the decisions
of this Court and the authorities on which they rely.
It is true that the law implies in every contract a duty
of good faith and fair dealing. .
. The duty to deal
fairly and in good faith with the other party to a
contract however I1is a duty imposed by law, not one
arisins from the terms of the contract itself. In other
words this duty of dealing fairly and in good faith is
nonconsensual in origin rather than c o n ~ e n s u a l ~ ~. .
.
While the nature of the obligations imposed by this duty
is dependent upon the nature and purpose of the contract
and the expectations of the parties, these obligations
are not consensual, not agreed to in the contract; they
are imposed by law and thus reflect a normative value of
society as a whole . .
. The interest which the duty of
good faith is designed to preserve and protect is
essentially not the parties1 interest in having their
promises performed, but societvlsinterest in protecting
its members from harm on account of nonconsensual conduct
. . . (Emphasis in original; citations omitted.)
Foley, 765 P.2d at 412, 413.
When viewed from this context, the duty of good faith and fair
dealing implied in contractual relationships is no different from
the duty imposed by or found in law in any other relationship. A
breach not only harms the party directly involved, but the harm
accrues to society as a whole, and affects its stability and peace.
The covenant is based on considerations of justice and fair play,
applicable to all societal relationships. The covenant rises in
contract cases not because the parties agreed to it, but because
society as a whole imposes the covenant as a duty, a breach of
which is not a breach of contract, but a wrongful act properly
treated as a tort, since the wrong inflicts damages on the party
wronged and the public fabric as a whole.
In Nicholson v. United Pacific Insurance Company (1985), 219
Mont. 32, 41-42, 710 P.2d 1342, 1348, we described the covenant:
. . . the nature and extent of an implied covenant of
good faith and fair dealing is measured in a particular
contract by the justifiable expectations of the parties.
Where one party acts arbitrarily, capriciously or
unreasonably, that conduct exceeds the justifiable
expectations of the second party. The second party then
should be compensated for damages resulting from the
other's culpable conduct.
Note that in Nicholson, this Court said that the implied
covenant would be breached by a party acting "arbitrarily,
capriciously, or unreasonablv." When a party acts arbitrarily or
capriciously, he is probably acting intentionally. If he is acting
unreasonably, he may be acting intentionally, but he may be also
acting negligently. It is the public policy of this State that a
person acting negligently is also responsible for his acts or
omissions if others are harmed thereby. Witness the statute:
27-1-701. Liability for neqliqence as well as willful
acts.
Except as otherwise provided by law, everyone is
responsible not only for the results of his willful acts
but also for an injury occasioned to another by his want
of ordinary care or skill in the management of his
property or person except so far as the latter has
willfully or by want of ordinary care brought the injury
upon himself.
No matter how the majority may try to slice it otherwise, it
was firmly established in our cases that a negligent breach of the
duty of good faith and fair dealing was actionable in this State.
In Crenshaw v. Bozeman Deaconess Hospital (1984), 213 Mont. 488,
693 P.2d 487, 493, this Court (Harrison, J.) stated:
In light of the foregoing, we find the Hospital s conduct
showed a "want of attention to the nature or probable
consequence of the act or omission1' and that their
conduct fell below the "standard established by law for
the protection of others against unreasonable risk."
(Citing authority.) The allegation of negligence was
clearly established in respondent's complaint. We hold
the trial court committed no error in issuing the
instructions to the jury.
In Flanigan v. Prudential Federal Savings and Loan Association
(1986), 221 Mont. 419, 720 P.2d 257, 263, this Court (Morrison, J.)
said:
Negligence has been recognized by this Court to be a
proper basis for recovery in wrongful termination cases.
Negligence was approved by this Court in Crenshaw v.
Bozeman Deaconess Hospital (Mont. 1984), 693 P.2d 487,
493, 41 St.Rep. 2251, 2259, . . .
A reasonable belief in job security as a ground for
application of the duty of good faith and fair dealing was
acknowledged in Kerr v. Gibson's Products Company of Bozeman
(1987), 226 Mont. 69, 733 P.2d 1292, 1295 (Turnage, C.J.) where we
said:
The covenant of good faith and fair dealing is implied
when objective manifestations by the employer give rise
to the employee's reasonable belief that he or she has
job security and will be treated fairly. (Citing
authority.)
Gibson's repeatedly acknowledged respondent's work as
satisfactory through promotions and pay increases. It
was reasonable for respondent to believe that she had job
security and would be treated fairly.
Generally, we can anticipate that most breaches of the duty
of good faith and fair dealing will be intentional on the part of
the employer. Since it is the policy of the law under our
Constitution of Montana (Art. 11, Sec. 16) to afford a speedy legal
remedy for every injury of person, property or character, no sound
legal reason can be advanced, and the majority advance none, why
negligent breaches of the duty, which can be just as damaging to
the wronged party as an intentional breach, should not find a
remedy in our courts.
We turn now to the specifics of this case, and our first
observation is that the recitation of facts in the majority opinion
slant toward the employer. his occurs because of the belief of
the majority that this case involves an attack by Heltborg on the
right of the employer to engage in a reduction in force. Nothing
of the kind. Heltborg did not contest the right of Modern
Machinery to reduce its work force. Rather, he contended that in
reducing its work force it acted arbitrarily, negligently and
unfairly and thus breached the duty of good faith and fair dealing
in the employment contract.
On appeal from a jury verdict, the evidence in the case is
viewed in the light most favorable to the prevailing party, and,
if the evidence conflicts, credibility of the witnesses and the
weighing of the evidence are in the province of the jury and not
the Supreme Court. Kukuchka v. Ziemet (1985), 219 Mont. 155, 710
P.2d 1361. This Court reviews evidence in the light most favorable
to the party that won in the District Court, because of the
presumption on appeal that the determination of the trial court is
correct. Kyriss v. State (1985), 218 Mont. 162, 707 P.2d 5.
From the viewpoint of the successful claimant, the facts are
better stated thusly: Otto Heltborg worked continuously for Modern
Machinery, or its predecessors, for over 22 years. In a brief
and shocking meeting, on April 30, 1988, he was summarily fired,
without notice, and without any opportunity to continue in his job.
At the time he was a Service Manager, a position that was essential
to the continued operation of Modern Machinery. The man who fired
him admitted this and also admitted that Heltborgls job remained
the same after he was fired. It was just Otto Heltborg and his
salary that were eliminated. The company carried "key man"
insurance on his life.
Heltborg was the highest paid salaried employee of Modern
Machinery when he was fired. The decision to fire him was based
on his salary. His job was taken over by by people who were being
paid less. After Heltborg was fired, his successor employee spent
95 percent of his 8 hour shift for over 2 % years doing the job that
Heltborg had previously done. Two other employees also took some
of the responsibility Heltborg had, after he was fired. Within
weeks after Heltborg was fired, Modern Machinery hired additional
employees, turned a profit in that year, and paid its president a
handsome bonus.
Modern Machinery presented a hard-nosed defense to justify the
the termination of Heltborg. It established through its witnesses
and in cross-examination of others that Modern Machinery was losing
$175,000 a year; that no state law requires that notice be given
to the employees before they are discharged; that it was not bad
faith not to give a long-time employee severance pay; and that
Heltborg was an at-will employee.
The District Court discerned the issues of this case early in
the proceedings. In denying Modern Machinery's motion for a
summary judgment on the breach of covenant count, she said:
In this case there is a question of material fact,
regarding the legitimacy of the reduction in force, that
must be resolved by a jury. While defendant argues that
defense of economic necessity entitles it to summary
judgment as a matter of law, plaintiff argues that the
economic necessity and reduction in force defense is not
legitimate because plaintiff's husband's job duties
continued, but were performed by remaining employees.
Plaintiff argues that there was not a reduction in force,
but a reduction in salary, and that her husband was fired
because he was one of the highest paid employees, not
because of lack of work.
It was on that stance that the issues went to the jury. The
District Court instructed the jury that the law does not require
an employer to adopt or maintain a particular set of personnel
policies and procedures, and that there was no rule of law that
requires an employer to give preference to longevity, give notice
or pay in lieu of notice or severance pay, give employees a right
to displace another employee at the time of discharge, give
employees any right to be rehired, or require the employer to find
other employment forthe discharged employee within its own company
or elsewhere. On the other hand, the District Court instructed the
jury that in this case a duty of good faith and fair dealing had
arisen during his employment and existed at the time of his
termination. It stated, however, that the covenant of good faith
and fair dealing in a long-term relationship did not foreclose the
employer from engaging in legitimate reductions in force necessary
to maintain the economic vitality of the company, and that in
determining whether or not Modern Machinery violated the duty of
good faith and fair dealing, the jury had to balance the interest
of the defendant in controlling its work force with the interest
of the plaintiff in job security. The District Court told the jury
that an employer is entitled to be motivated by and to serve its
own legitimate business interest, and had to be given discretion
in determining whom it would employ and retain in employment.
The District Court then instructed that under the implied
obligation of good faith and fair dealing, the nature and extent
of the obligation depend on the reasonable expectations of the
employee based on the employer's actions. As triers of fact, the
jury was told that they had to determine whether the defendant had
shown a fair and honest reason for termination, taking into account
all of the facts and circumstances in reaching their decision. The
court then told the jury that when the legal duty to act in good
faith in employment relationships exists, a duty was imposed upon
the employer to exercise reasonable care in carrying out decisions
concerning employment. The District Court said that this meant
that there was a duty on the part of the employer to use reasonable
care under the circumstances in carrying out its business decision-
making. In this particular, the court relied on Flaniqan, 720 P.2d
at 263.
The court also instructed the jury that the employer's right
to reduce its personnel did not excuse its obligation to act fairly
and in good faith in the process and manner of termination of
employment.
It is clear that the instructions given to the jury by the
District Court were proper, and were based upon express decisions
from this Court. The majority of this Court have found no error
in the instructions given, nor could they. Rather, the majority
accomplishes a reversal here by jerking out from established law
the concept of negligence, in a retrofit of law pertaining to a
breach of the covenant.
Particularly, the District Court avoided the problem raised
in Hobbs v. Pacific Hide and Fur Depot (1989), 236 Mont. 503, 771
P.2d 1 2 5 , where this Court reversed because the instructions Ifdid
not tell the jury that the implied covenant is measured in a
particular contract by the justifiable expectations of the
parties.I1 Of course, the District Court could not have anticipated
the about-face taken by the majority in this case.
In denying the post-trial motion of Modern Machinery for
judgment notwithstanding the verdict, the District Court pointed
out that the arguments made for that motion were the same as for
the summary judgment motion and said:
These factual issues precluded summary judgment and had
to be decided by a jury. The jury heard the evidence and
found in favor of plaintiff. Obviously, the jury did not
believe that defendant had a fair and honest reason to
discharge Otto Heltborg or that the reduction in force
was legitimate or that the manner in which it was carried
out was fair.
The jury's verdict was supported by evidence put on by
plaintiff that defendant selected the most highly paid
employee in the shop for discharge, that his job
continued to be done, that his job was essential to the
continued economic viability of the company, and that his
job was done by a lesser paid employee.
In a way, it is too bad that Heltborg's widow utilized
negligent breach as well as purposeful breach in pressing her claim
in the District Court, for the evidence points as strongly to an
intentional breach as it does to a negligent breach. The overturn
in this case was unforeseeable in early 1989, and the District
Court had little expectation that in submitting negligence issues
to the jury based on our decided cases, she was making an
application for reversal.
Opinion Testimony and Ultimate Issues
The rules for the admission of opinion testimony by lay
witnesses and by experts were loosened by the adoption of Rule 701-
705, Federal Rules of Evidence, and their counterpart found in the
Montana Rules of Evidence.
One of the reasons given for the loosening of the Rules as
provided in those sections is that the same results could be
obtained by posing hypothetical questions to the expert witness,
but that method was cumbersome.
The majority stumble in their dissertation on the expert
opinion evidence in this case because they do not discern that the
questions propounded to the expert were as much ultimate issues of
fact as ultimate issues of law. The majority do not dig beneath
the ultimate issues of fact to report to the reader the testimony
of witness Brown underlying the eventual questions which are set
out in the majority opinion and which are really no more than
inferences of fact drawn from factual statements earlier testified
to by the witness.
The majority opinion has severely delimited the field of
opinion testimony formerly permissible by experts. For example,
what if in a future case, the lawyer proposes to the highway
patrolman: Mr. Patrolman, What in your opinion was the cause of
this accident? The cause of an accident may be an ultimate issue
of fact, or it may be an ultimate conclusion of law. Under the
majority opinion, if the question has the earmarks of an ultimate
conclusion of law, the expert cannot testify. Yet clearly, in
Montana, under cases all cited by the majority in their opinion,
a highway patrolman may give his opinion as to the cause of an
accident.
Two of the Rules must be read together to understand their
impact and application:
Rule 702. Testimony by Experts. If scientific,
technical, or other specialized knowledge will assist the
trier of fact to understand the evidence or to determine
a fact in issue, a witness qualified as an expert by
knowledge, skill, experience, training, or education may
testify thereto in the form of an opinion or otherwise.
Rule 704. Opinion on Ultimate Issue. Testimony in the
form of an opinion or inference otherwise admissible is
not objectionable because it embraces an ultimate issue
to be decided by the trier of fact.
The true test that should be applied by this Court or any
other court in determining the admissibility of opinion evidence
by experts is whether that testimony will be helpful to the jury
to understand the evidence in determining a fact in issue. If it
is so helpful it is admissible.
The rules on opinion evidence by experts are especially
applicable to litigation involving issues not ordinarily explored
or known to the layman, the average trier of fact or jury. The
application of the duty of good faith and fair dealing in the
termination of long-term employees is not commonly known or
understood. It is a field in which opinion evidence is
particularly necessary. In such cases the courts allow the
district court's wide latitude in determining the propriety of the
introduction of expert testimony. For example in First National
State Bank of New Jersey v. Reliance Electric Company (3rd Cir.
1981), 668 F.2d 725, the court approved testimony by an expert on
the Uniform Commercial Code, who testified to trade usage which
showed that the plaintiff had failed to take an assignment in good
faith, thereby negating his claim as a holder in due course.
Whether the plaintiff was a holder in due course was the ultimate
issue of fact to be decided by the jury, but it is also an issue
of law. Nevertheless the circuit court held that the purpose of
the testimony was to aid the jury in its understanding of banking
customs and affirmed.
In Brandt v. French (10th Cir. 1981), 638 F.2d 209, the court
held that it was permissible for experts to suggest the inferences
to be drawn from specialized knowledge of the facts, especially
where the weight and credit to be given to the expert testimony was
given to the jury through the courtls instruction. In Young v.
Illinois Central Gulf Railroad Company (5th Cir. 1980) , 618 F. 2d
332, where the expert would have testified, following a film
demonstration, to the dangerous condition of the railroad crossing
in question, the court held that the evidence should have been
admitted for the purpose for which it was offered, to demonstrate
an ultimate issue in the case.
In Bieghler v. Kleppe (9th Cir. 1980), 633 F.2d 531, the Ninth
circuit Court reversed a summary judgment where the plaintiff had
offered an affidavit affirmatively showing the expert's
qualifications as an expert in accident reconstruction, the study
he had undertaken to form his opinion which was more than a bare
conclusion that the defendants had been negligent, and that their
negligence had caused the accident. What the majority opinion
misses in our case, and does not report to the reader, is the
underlying testimony which shows that Brown's testimony was more
than barely legal conclusions.
The majority cite Owen v. Kerr-McGee Corporation (5th Cir.
1983), 698 F.2d 236. There the circuit court held that a question
directed to the expert as to the "cause of the accident,'' without
basis, was asking for a legal conclusion. However in the same
case, the court approved a question in which the expert was allowed
to testify as to whether defendants were following "safe
practicesIn itself a legal conclusion, but also an issue of fact.
The decision in Owen v. Kerr-McGee Corporation points up what
I regard as a silly syllogism posed by McCormick (cited by the
majority at page 7 of the slip opinion). McCormick states that the
question "Did T have capacity to make a will?" would be excluded,
while the question, "Did T have sufficient mental capacity to know
the nature and extent of his property and the natural objects of
his bounty and to formulate a rational scheme of di~tribution?~~,
would be allowed. It seems obvious to me that the first question
would directly assist the trier of fact while the second question
would only confuse the average member of a jury. Indeed, Dean
Ladd, in his article, also cited by the majority, in a wry comment
on the McCormick posers, opined that very probably a jury could
discern the difference even on the first question and as triers of
fact would give whatever weight the testimony was entitled to
receive. Ladd, Expert Testimony 5 Vanderbilt Law Review 414, 424,
(1952).
With that background, let us examine the questions posed to
the expert Brown which the majority find offensive, by looking at
the underlying testimony. Whether Modern Machinery conducted a
leqitimate reduction in force in firing Heltborg was an issue of
fact. Brown testified, as the majority opinion reflects, his
opinion that they did not have "a legitimate reduction in force.@I
Underlying that opinion, however, was a substantial basis of
factual testimony based on his expertise:
Q. Now, I was going to ask you if you could tell the
Jury what those commonly used methods are for conducting
a legitimate reduction in force?
(Objection overruled.)
Q. Do you remember my question?
38
A. Repeat it, please.
Q. I don't know if I can. I want you to tell the Jury,
if you would, what the commonly used methods are to
conduct a legitimate reduction in force based upon your
education, training, and experience in this field.
A. All right. I guess I have to preface my remarks with
a statement that says before you make a reduction in
force a well-managed company has looked at all other
options they have available to them.
(objection overruled.)
Q. I will ask you to assume that a company has
considered other options, and they have reached a
decision that there is no other reasonable or viable
option to continue in business, and the only choice is
to conduct a reduction in force. So, assume that is the
fact.
A. Okay.
Q. And assume that has already been done. Now, what are
the steps that are commonly followed?
A. Okay. The first thing that companies normally do
when they reach, they feel the only option they have
available is to reduce the number of employees they have,
is to look at the on-going functions that they are still
going to perform as a company. Companies may have
decided that they are going to eliminate a product line,
eliminate a particular service, they are going to
eliminate making a particular product, if they are in the
manufacturing business. Or, they may be faced with a
situation where their business is slow and they are going
to try to continue to do everything they were doing
before but they don't have full-time jobs performing
these various functions.
Q. What is the purpose of looking at the function
that is going to continue after the reduction as far as
that actually relates to the plant to reduce the force?
A. Well, before you can plan appropriately on who
should be eliminated from your organization, you first
have to know what your organization is going to do, what
kind of business you are going to be in, and what the
functions you are going to perform are going to be. You
don't want to get rid of the only people that can
satisfactorily perform functions for you based on some
other criteria. You need to know and have a plan what
your business is going to be after the reduction in
force.
Q. After considering function which remains, what would
the next step that is commonly used be?
A. Then you look at the people that you have in your
organization. And you determine what position that
person is in and is that position soins to be there after
the reduction in force. So you can identify the people
whose jobs are going to be affected by your planned
change in your business by your reduction in force.
Q. If the job remains, how does that affect the employee
who is actually doing the job?
A. Well, if the job remains, obviously the employee that
is doing the job would remain.
Q. The next commonly accepted step would be what?
A. Okay. Now you have identified the people that are
affected by the reduction in force. These are the people
whose jobs don't exist any more and that you don't have
a place for performing the same types of functions they
have done prior to your reduction in force. So once you
have identified these people, then you have to determine
what to do with those people. And the generally accepted
practice is to attempt to place those employees elsewhere
in your organization, put them in some job that they have
the skill and the ability to perform, assuming that they
are one of your senior employees. You try to take care
of your senior employees utilizing their skills they
already possess or that they can develop with a minimum
amount of training and allow them to take somebody else s
job in your organization so that ultimately a junior
person in your organization wherever possible is a person
who is ultimately displaced.
Q. Is there another step after you go through that until
you get to the displacement?
A. Where, there is probably a step that you take
concurrent with all of this, or, at least, most
organizations do. And that is to look for people who
want to volunteer to leave your organization. You know,
you may need to get rid of ten people in your
organization, and you may have 15 people that would
dearly love to go if they got some kind of an incentive
togo. ...
Q. You get volunteers as opposed to the person who was
involuntarily asked to leave?
A. That is correct.
Q. Now, assume that you get through all of these steps,
and that all of them have occurred, and you still, you
don't have any volunteers, assuming that that has been
offered as an option, and there is no severance package.
What about the person who is left and who you have to
say: '1 am sorry, but your job is no longer available.
'
We have decided after a review that you have to be
terminated. Are there commonly accepted ways of dealing
with that employee and the situation that he is in? A.
Yes, there are.
Q. What are those things?
A. The first thing, of course, is to give that employee
as much notice as possible so that the employee has an
opportunity to try to plan and control his life. . . .
Because, after all, if you selected the person in the
first place, you have invested time, effort, and money
in his training. And, presumably, he has been a good
employee and you don't want to just throw him out or lose
him if you have some place in your organization where he
can be productive and held your--
Q. Does that include subsidiaries in terms of looking
for available work?
A. Absolutely.
Q. Do you have an opinion in this case as to whether or
not Modern Machinery was negligent in carrying out the
so-called reduction in force that involved Chris Heltborg
and one other long-time employee?
A. Yes, I have an opinion.
Q. What is your opinion?
(objection overruled)
A. My opinion is that they were, in fact, negligent.
Q. And what is the basis of that opinion?
A. Well, I find no evidence that they looked for any
other alternatives. I find no evidence other than to
have a curtailment, I find no evidence that they
analyzed their work force, their on-going job functions
to determine what, if in fact, they were going to have
to do, whose jobs actually remained after the reduction
in force. I find no evidence that indicates that they
made any, gave any consideration to seniority, longevity.
The onlv consideration that I find they qave is to who
was paid the most. (Emphasis added.)
For each question that was asked of the witness Brown that is
set out in the majority opinion, we could pull from the record the
underlying testimony that would demonstrate, as demonstrated
foregoing, that this witness gave detailed, explicit bases for his
opinions and that each of those questions related to an opinion on
an issue of fact.
Now I pose to the reader if it is not true that in the
discussion of witness Brown underlying his testimony, he was
stating elements of fact relating to commonly accepted practices
in reductions in force, and proper methods of treating employees
who were entitled to the benefit of the obligation of good faith
and fair dealing. There was enough in the record to give the jury
a basis for determining his credibility, and the weight to be given
his evidence, and his opinion on the ultimate issue would be
weighed by the jury in the light of the underlying testimony.
Witness Brown testified to the recognized procedures that an
employer should follow before terminating a long-term employee
entitled to the protection of the implied duty placed on employers
for good faith and fair dealing in the termination. Whether or
not the employer conformed to those recognized procedures and
exercised good faith and fair dealing was always a factual
question, and the opinion testimony of Brown reflected no more than
ultimate inferences based on his underlying testimony of facts.
The expert should always be permitted to draw inferences for
which the jury would not be competent to draw especially when the
prejudicial impact of the opinion testimony did not outweigh its
probative value to the trier of fact. United States v. Milton (5th
Cir. 1977), 555 F.2d 1198. Rule 704 expressly permits testimony
in the form of "an opinion or inference.'I
Brown's testimony as an expert met the true test for expert
testimony set out in McGuire v. Nelson (1975), 167 Mont. 188, 200,
The true test would seem to be whether the subject is
sufficiently complex so as to be susceptible to opinion
evidence, and whether the witness is properly qualified
to give his opinion. Here, there is no doubt that the
relationship of the suspension system of the front wheel
of a CT200 99 C.C. Honda trail bike to its tire size
would not be common knowledge to members of the jury, but
a question of mechanical engineering. Also, there is no
doubt that Prussing is well qualified to testify on the
matter. In view of the fact that the jury can either
reject or accept the expert witness' opinion or give
limited weight to it, we fail to see how the admission
of the evidence here could constitute a usurpation of the
jury's function.
The jury after all is the final arbiter, even of the expert's
opinion. That facet of this case has been lost to the majority.
Latitude for Business Decisions versus the Duty of Good Faith
and Fair Dealinq
We have pointed out above, without setting forth the
instructions in full, that the District Court carefully instructed
the jury on the essentials pertaining to the covenant of good faith
and fair dealing in employment cases based upon the prior decisions
of this Court.
The majority opinion is rife with statements in retroflexion
of the principles announced by this Court in earlier cases. We
find such sentences as "We agree with Modern that these
instructions placed the jury in the middle of general management
decisions, in effect eviscerating the concept of employer latitude
in decision-making." (Slip op. at 17, 18.) Again, "There is no
justification for giving a jury the authority to review whether
reasonable care was utilized in a reduction in force based on
economic condition^.^^ (Slip op. at 18.) Then there is the
improbable statement that "We conclude that the employer is not
under a duty to use reasonable care in decision-making. (Slip op.
How far the majority bend backwards in the majority opinion
from our earlier positions of law on this subject is demonstrated
in this paragraph from Dare v. Montana Petroleum Marketing Company
(Weber, J.) (1984), 212 Mont. 274, 282, 687 P.2d 1015, 1020:
Whether a covenant of good faith dealing is implied in
a particular case depends upon objective manifestations
by the employer giving rise to the employee's reasonable
belief that he or she has job security and will be
treated fairly. Gates, 638 P.2d at 1067, 39 St.Rep. at
20. The presence of such facts indicates that the term
of employment has gone beyond the indefinite period
contemplated in the at will employment statute, 5 39-2-
503, MCA, and is founded upon some more secure and
objective basis. In such cases, the implied covenant
protects the investment of the employee who in good faith
accepts and maintains employment reasonably believing
their job is secure so long as they perform their duties
satisfactorily. Such an employee is protected from bad
faith or unfair treatment by the employer to which the
employee may be subject due to the inherent inequality
of bargaining power present in many employment
relationships. The implied covenant seeks to strike a
balance between the interests of the employer in
controllins the work force and the interests of the
employee in iob security. Gates, 638 P.2d at 1066-67,
39 St.Rep. at 20.
In Kerr v. Gibson's Products Company of Bozeman (1987), 226
Mont. 69, 733 P.2d 1292, this Court permitted the review of a
discharge during a reduction in force. There, the evidence
indicated that the employer had an ulterior motive in discharging
the employee. In this case, the jury found, as the District Court
noted when it denied the post-trial motion, that the motive of
Modern Machinery in discharging Heltborg was not legitimately for
a reduction in force but to get rid of a highly paid, long-term
employee. Under the concepts of fairness and justice that are the
rock-based foundation of the covenant of good faith and fair
dealing, an employer forced to reduce its work force because of
economic conditions is not thereby absolved of the duty of good
faith. Perhaps it is increased, because when forced lay-offs
occur, the reduction should take place in accordance with the
procedures outlined by Mr. Brown: proper notice, possible
severance pay, assignments to other positions in the company or
affiliated companies (Modern Machinery is one of many
subsidiaries), or severance pay. Here, Modern Machinery failed
completely to consider any of these options. It cold-bloodedly
terminated a 22-year employee without so much as a thank-you. To
say that the jury decision in this case eviscerated the latitude
of the employer in decision-making is empty rhetoric; what has been
disemboweled here are fairly established concepts of the duty of
good faith and fair dealing on an employer forced to a reduction
in force.
The majority opinion is a return to the outmoded theory that
a long-term employment may be terminated without cause. We
condemned that in Nye v. Department of Livestock (1982), 196 Mont.
222, 228, 639 P.2d 498, 502, saying:
[Tlhe tort of wrongful discharge may apply to an at-will
employment situation. In fact, the theory of wrongful
discharge has developed in response to the harshness of
the application of the at-will doctrine, under which an
employment may be terminated without cause . . . The
determination of whether the cause of action arises rests
upon whether an unfair or unjustified termination was in
violation of public policy. (Citing authority.)
It was in Dare, above cited, that we moved away from requiring
a finding of public policy, instead stating that implication of the
covenant depended upon existence of "objective manifestations by
the employer giving rise to the employee's reasonable belief that
he or she has job security and will be treated fairly.I1 Dare, 687
Not only had Modern Machinery acquired key-man insurance on
Heltborg as an employee, but six months prior to his summary
discharge, he had turned down an employment opportunity with
another concern because he felt his employment at Modern Machinery
was more secure. Modern Machinery's previous treatment of him and
their attitude toward him gave rise as objective manifestations to
his feeling of job security.
IV.
Elimination of Punitive Damaqes for Intentional Breaches of the
Covenant
The majority opinion now holds that the breach of the implied
covenant of good faith and fair dealing in employment cases is not
a tort, but a breach of contract. This has an unanticipated side
effect, serendipitous for employers that now even intentional
breaches will not merit punitive damages.
Remedies for the breach of the implied covenant of good faith
and fair dealing in employment cases now seem to have been
statutorily subsumed in the Wrongful Discharge From Employment Act,
5 39-2-901, et seq., MCA. At least it can be said for the Act that
the remedies provided by the legislature for wrongful discharge are
more generous than are those of the majority of this Court, since
the Act includes punitive damages. Section 39-2-905, MCA.
Conclusion
I dissent from the majority opinion in all particulars and
would affirm the judgment of the District Court.
/
Justice
I concur in the f o r e g o i n g d i s s e n t of J u s t i c e J o h n C. Sheehy.
/
Justice
Justice John Conway Harrison joins in the foregoing dissent
of Justice John C. Sheehy.