NO. 91-492
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
JAMES D. KING,
Plaintiff and Appellant,
SPECIAL RESOURCE MANAGEMENT, INC.,
ENTECH, INC., and THE MONTANA
POWER COMPANY,
Defendants and Respondents.
APPEAL FROM: District Court of the Second Judicial District,
In and for the County of Butte/Silver Bow,
The Honorable Ted L. Mizner, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Stephen C. Pohl, Bozeman, Montana (argued); Charles
P. Bowen, Bozeman, Montana
For Respondent:
Patrick T. Fleming (argued), Robert T. OILeary,
Montana Power Company, Butte, Montana
Submitted: September 4, 1992
Justice Fred J. Weber delivered the Opinion of the Court.
Plaintiff, James D, King, brought an action for wrongful
discharge from employment based on the implied covenant of good
faith and fair dealing against defendants Special Resource
Management, Inc., Entech, Inc., and Montana Power Company in the
Second Judicial District Court, Silver Bow County, Montana. The
case was tried before a jury. After the close of the evidence, the
District Court dismissedthe action against defendants Entech, Inc.
and Montana Power Company. The jury found in favor of defendant
Special Resource Management, Inc. Plaintiff appeals. We reverse
the jury verdict in favor of Special Resource Management, Inc. and
affirm the judgments in favor of Montana Power Company and Entech,
Inc.
The issues are restated as follows:
1. Did the District Court conunit reversible error by granting
eight peremptory challenges to the defendants Montana Power Company
and its two subsidiary corporations based on a diversity of
interests between defendants?
2. Did the District Court commit reversible error by granting
defendants1 motion in limine prohibiting some expert testimony, and
by refusing to allow plaintiff's personnel expert to present
opinion testimony without further foundation?
3. Is King entitled to a new trial against Entech, Inc. and
Montana Power Company?
James D. King (King) initially began working for Montana Power
Company (MPC) in June of 1980 as a Cost and Schedule Engineer for
1
the Colstrip 3 and 4 projects, and later became a Cost and Schedule
Supervisor. Prior to his employment with MPC, Mr. ~ i n g
worked as
a Construction Accountant on a large power plant construction
project in Michigan, a position which required him to perform
project-related accounting functions. When the Colstrip project
neared completion, Mr. King transferred to Special Resource
Management, Inc. (SRM) as a supervisor of ~ccounting and
Administration, He worked in that capacity from March 31, 1986,
until his termination effective July 17, 1987, as part of a
reduction in force at SRM. Mr. King's claim relating to that
termination arose prior to the enactment of the Wrongful Discharge
From Employment Act and, therefore, proceeded as a claim for breach
of the implied covenant of good faith and fair dealing.
SRM is a wholly-owned subsidiary of Entech, Inc., which is a
wholly-owned subsidiary of the Montana Power Company (MPC). Over
Mr. King's objection, the District Court granted eight peremptory
challenges to these three defendants, based on a diversity of
interests between SRM and the other two defendants, MPC and Entech.
During the trial, the District Court directed verdicts for MPC
and Entech. The jury found that defendant SRM did not breach the
implied covenant of good faith and fair dealing. Mr. King moved
for a new trial after the court entered judgment in favor of all
defendants. The District Court denied this motion. King appeals
the judgment entered by the District Court against all three
defendants. Of the three defendants, only SRM filed a respondent's
brief. After King noted this in his reply brief, MPC and Entech
filed a supplemental brief claiming that King had no legal basis
for asserting a right to a new trial a g a i n s t them.
Did the District Court commit reversible error by granting
eight peremptory challenges to the defendants Montana Power Company
and its two subsidiary corporations based on a diversity of
interests?
Mr. King contends that the three co-defendants should not have
been allowed more than four peremptory challenges unless they could
demonstrate lvhostilityll
between themselves. He argues that the
interests of MPC and Entech were not hostile to those of SRM and
that the District Court incorrectly based the decision to grant
additional peremptory challenges on a determination of I1diversityl1
rather than nhostility.n King further contends that this
constitutes reversible error and, therefore, a new trial must be
granted. The defendants contend that there was indeed hostility
between them and that the District Court correctly allowed them
eight peremptory challenges. Alternatively, SRM argues that even
if the defendants were not hostile, Montana law requires King to
demonstrate prejudice in order to procure a new trial and King
cannot show that he was prejudiced. We will first address the
question of prejudice.
The side with the greater number of peremptory challenges
clearly has a tactical advantage created by its ability to
eliminate potentially unfavorable jurors without cause. Section
25-7-224(1), MCA, provides that I1[e]ach party is entitled to four
peremptory challenges . . . ." The words "each party" have been
interpreted to mean "each side," unless the co-defendants are
hostile to one another. Leary v. Kelly Pipe Co. (1976), 169 Mont.
511, 515, 549 P.2d 813, 816. In Leary, this Court stated that a
party who claims that he was prejudiced by a grant of extra
peremptory challenges to his opponents who in fact are not hostile
must also show that he was prejudiced by that action. Leary, 549
P.2d at 816. This Court adopted a three-part test for prejudice in
such circumstances: (1) the party must have exhausted his
peremptory challenges, (2) he must have suffered material injury
from that action by the court, and (3) as a result of that action,
one or more objectionable jurors sat on the case. Leary, 549 P.2d
at 816.
Later, in Hunsaker v. Bozeman Deaconess Found. (1978), 179
Mont. 305, 588 P.2d 493, we discussed the difficulty of proving
prejudice when our attention is focused on juror conduct. Because
difficulties encountered during appellate review had become
magnified by the usual procedures used by most trial courts at the
time we decided Hunsaker, we offered therein our suggestions for
procedural changes which would enable the trial courts to make
informed decisions based on thorough briefings by the parties,
thereby making it possible to review the accuracy of the ruling &
the time it was made. We stated:
The District Courts should seriously consider the
use of the pretrial conference as the best procedure to
be used in resolving questions such as the number of
peremptory challenges to be allowed each side. If for
some rare reason the District Court holds no pretrial
conference, the question of peremptory challenges should
be raised by appropriate written motion filed before the
commencement of jury selection, and it should set forth
all facts and references tending to support his claim of
hostility. In any case, the opposing party or parties
should be given adequate time to respond to the claims of
hostility.
The trial court should, as a bare minimum, rule on
the peremptory challenge issue before the questioning of
jurors begins. To afford a basis for review, it should
expressly set forth in the record the reasons for its
ruling and the facts on which it relies in making its
decision.
Hunsaker, 588 P.2d at 501.
This procedure eliminates the need for us to review the entire
record using a hindsight approach to determine whether the parties
were in fact "hostile" during the course of the trial. Thus, our
review excludes materials beyond the point at which the ruling was
made, including proof of actual prejudice, and we examine only the
information available to the district court prior to its ruling.
Although we encouraged district courts to use these procedures
in Hunsaker, the record therein did not include sufficient
information to allow this Court to review the basis and rationale
for the district court's ruling; therefore, we decided that case
using the Learv three-prong test. Hunsaker, 588 P.2d at 500. This
Court's decisions after Hunsaker have applied the Learv test for
prejudice only where the record was insufficient for review. See,
e q ,Gee v. Egbert (1984), 209 Mont. 1, 679 P.2d 1194; and Adams
..
v. Cheney (1983), 203 Mont. 187, 661 P.2d 434. When the District
Court followed the recommended pretrial procedures or the record
was otherwise adequate to determine whether the District Court
properly considered appropriate factors, we have focused our review
on pretrial information that was available at the time of the
court's ruling on the number of peremptory challenges. See
Williams v. Rigler (1988), 234 Mont. 161, 761 P.2d 833: and Lauman
v. Lee (1981), 192 Mont. 84, 626 P.2d 830.
The Learv test requires adversely affected parties to show
they were actually prejudiced by a grant of additional peremptory
challenges to the opposing party. This places an almost impossible
burden on the objecting party. Moreover, when we focus our review
on the actual conduct of a juror, we ignore the correctness of the
trial court's decision and that decision becomes virtually
unreviewable. Hunsaker, 588 P.2d at 499. As noted by Justice Shea
in that opinion, "our attention is focused on the conduct of the
jury, which in most cases we are in no position to determine."
It is the policy of the law to look with disfavor on any
attempt to invade the jury's internal decisionmaking processes in
order to impeach verdicts, except in rare circumstances. Blades v.
DaFoe (Colo. 1985), 704 P.2d 317, 322 (citing Kentucky Farm Bureau
Mut. Ins. Co. v. Cook (Ky. 1979), 590 S.W.2d 875). In Kentucky
Farm Bureau, the court stated:
It may be that peremptory challenges should be
abolished in civil cases and only challenges for cause
allowed. We are informed this is the present English
practice. As long as they are retained as part of the
trial process, however, we believe that their proper
allocation between litigants is a substantial right which
so pervades the process that its erroneous application
requires reversal as a matter of law if the issue is
properly preserved by the adversely affected litigant.
Kentuckv Farm Bureau Mut. Ins., 590 S.W. 2d at 877. See also,
Thompson v. Presbyterian Hosp., Inc. (Okla. 1982), 652 P.2d 260
(grant of additional peremptory challenges in absence of "serious
disputevf is prejudicial as a matter of law). While these
jurisdictions are by no means the only ones which find prejudice as
a matter of law fox improper allocation of peremptory challenges,
some courts require that actual prejudice be shown before a new
trial is granted. See, emu., Electric S e r v . Co. of Duluth v.
Lakehead Elec. Co, (Minn. 1971), 189 N.W.2d 489.
If we require a showing of prejudice as in Learv, w e cannot
evaluate the effect of an improper grant of peremptory challenges
without invading the internal processes of a jury. We also should
not disregard the advantages bestowed upon one side by having
additional peremptory challenges granted to them. We previously
modified L e a r ~ to the extent that prejudice need not be
demonstrated when a trial court follows the guidelines set forth in
Hunsaker. See Williams, 761 P.2d 833. We now expressly overrule
Learv v. Kellv Pipe Co. to the extent it requires a showing of
prejudice to reverse a jury verdict for an incorrect grant of
peremptory challenges to one side.
Having concluded that Learv is an improper standard, we now
restate the rule to be applied in the future: Additional
peremptory challenges are granted to multiple parties on one side
only if they are hostile to one another. The trial court
determines hostility prior to the beginning of voir dire and bases
its decision only on the facts presented to it before its ruling.
Whether or not the pretrial procedures were followed prior to the
determinatian of hostility, if an appellate review determines that
peremptory challenges were improperly granted, prejudice is
presumed as a matter of law.
The parties seeking additional peremptory challenges must
request them prior to trial. In the rare instance when the
District Court holds no pretrial conference, the question of
peremptory challenges should be raised by appropriate written
motion filed prior to voir dire, setting forth all facts and
references tending to support its claim of hostility. The trial
court should rule on the peremptory challenge issue before voir
dire begins. If a pretrial order is used, the District Court is
required to include its decision on the number of peremptory
challenges in the pretrial order. See Rule 5(c), Unif. Dist. Court
Rules. To afford a basis for review, the trial court should
expressly set forth in the record the reasons for its ruling and
the facts on which it relied in making its decision.
The district courts have no discretion in granting additional
peremptory challenges. Multiple parties on one side are either
hostile or they are not hostile. A trial court correctly grants
additional peremptory challenges to one side only if there are
multiple defendants or plaintiffs who are "hostile" to one another.
It is clear that we must look to the factual record to determine
whether there is a stated rationale for the District court's
decision and a sound basis for the grant or refusal of additional
peremptory challenges.
Our standard of review for a district court's conclusions of
law is whether they correctly apply the proper law. Steer, Inc. v.
Dept. of Revenue (1990), 2 4 5 Mont. 470, 8 0 3 P.2d 601. The record
in this case indicates that the District Court heard arguments from
both sides and reviewed the law before ruling on the matter prior
to jury questioning. The transcript provides:
THE COURT: . - . In the meantime, the Court has had a
chance to look at some of the law with regard to the
preemptory [sic] challenges, and I'm not sure that the
record is complete. I'd like to make a complete record,
and the plaintiff's Counsel argue their position again.
The Court has looked at the Hunsaker case, and also
the Adams vs. Cheney case, and I would like to follow the
guidelines of those cases if we can. ...
The Court has considered the various positions of
the parties and it's a difficult case when you don't know
what exactly the proof is going to be; but the Court
thinks that there is a diversity of interest between
Montana Power and Entech as opposed to SRM, and the issue
was raised I believe in the motion for summary judgment
and the facts in support in that motion. The Court
denied the motion, but found that there was [sic] genuine
issues in that case as to the motion for summary
judgment, which I think also goes to the positions that
may be taken during the course of the trial.
And the Court will find a diversity sufficient to
allow the extra preemptory [sic] challenges ....
The District Court allowed extra peremptory challenges to the
co-defendants in this case based on a "diversity of interests."
SRM contends that Kudrna v. Comet Corp. (1977), 175 Mont. 29, 572
P.2d 183, articulated a rule which allows additional peremptory
challenges in three distinct situations: (1) where the interests of
multiple parties are "diverse;" (2) where the defenses of the
multiple parties are ltdifferent;ll (3) where the defenses of the
or
multiple parties are "ho~tile.~~ language is excerpted from a
This
direct quote from an A.L.R. annotation set forth in Kudrna.
Kudrna, 572 P.2d at 186-87. A careful reading of Kudrna
distinguishes the law in Montana:
In a recent decision, Leary v. Kelly Pipe Co., 169
Mont. 511, 549 P.2d 813, 816, (1976), this Court stated:
"* * * Mullerv stands for the proposition that under
our jury challenge statute * * * the words 'each partyt
in reference to the permitted four peremptory challenges
means leach sidet unless the positions of the codefendants
are hostile to each other. The opinion suggests that
hostility between nominal defendants may be shown 'by
pleading, representation, or evidence.'"
Kudrna, 572 P.2d at 186.
This Court has consistently held that co-defendants are
entitled to excess peremptory challenges only where their positions
are "hostile" to each other. See ~illiams,761 P.2d 833; Gee, 679
P.2d 1194; Lauman, 626 P.2d 830; Hunsaker, 588 P.2d 493; Learv, 549
P.2d 813; and Mullery v. Great Northern Ry Co. (1915), 50 Mont.
408, 148 p. 323. Our most recent case involving a grant of
additional peremptory challenges to one side reiterates the correct
and relevant law:
For this Court to uphold an uneven grant of peremptory
challenges, we must be convinced that the District Court
concluded from the pleadings, representations, or
evidence that hostility existed and that the court set
forth the reasons for its ruling.
Williams, 761 P.2d at 835 (citing Hunsaker v. Bozeman Deaconess
Foundation (1978), 179 Mont. 305, 313, 588 P.2d 493, 499). T h e
District Court here incorrectly applied the law. The interests of
multiple parties on one side must be "hostile" to one another.
Although the District Court based its decision on "diversity," we
will examine the record to ascertain whether the defendants were
indeed "hostile" based on the information available to the court at
the time of its ruling on peremptory challenges.
SRM contends that hostility did exist between defendants
because MPC and Entech took the position that any obligations that
arose as a result of King's employment relationship were the
obligations of S 3 only. They denied that King was their employee
F4
and that they played any part in his termination. Although SRM
maintains that MPC and Entech were hostile to SRM, it admits that
SRM was not hostile to MPC and Entech. SRM further argues that the
same two attorneys could ethically represent all defendants, even
with hostile interests present. King argues that all three
defendants Igenjoy a familial relationship and an identity of
interest which cannot be denied."
Hostile is defined as: "having the character of an enemy;
standing in the relation of an enemy. Feeling or displaying enmity
or antagonism such as a hostile witness." Black's Law Dictionary
879 (6th ed. 1990). In all prior cases in which this Court has
addressed tghostility,tl co-defendants were unrelated individuals
the
or corporations accused of separate and distinct wrongful acts,
neither of which is the case here. We noted in Hunsaker that no
specific test for "hostility" has been articulated.
This Court has never set forth any rules as to what co-
defendants must present to the trial court to prove they
are uhostilewto each other. The closest we have come is
we have indicated in Mullerv and that lfhostility*a
can be shown by the "pleadings, representations, or
evidence."
Hunsaker, 588 P.2d at 499.
Although we have not pronounced a test for the facts
constituting "hostility," our prior decisions are most helpful. In
Kudrna, we found hostile interests where there was no identity of
interest, separate acts of negligence were charged, each party
presented a separate defense and each defendant blamed the other's
negligence as the cause of the collision. Kudrna, 572 P.2d at 187.
This Court said, "These defendants had interests and defenses
antaaonistic in fact. The District Court recognized this hostility
and properly allowed each defendant four peremptory challenges."
Kudrna, 572 P.2d at 187 (emphasis supplied). In Mullery, this
Court found no hostility where defendants filed a joint answer with
common defenses, they were represented by the same attorneys, and
no conflict of interest or any issue of any sort was disclosed by
pleading, representation, or evidence. Mullerv, 148 P. at 326. In
Williams, there was hostility where the claims against co-
defendants were involuntarily consolidated and one set of
defendant's claimed they would assert an indemnification claim
against the other. Williams, 761 P.2d at 835. In Hunsaker, the
following factors were relevant: (1) the defense theories of the
hospital and physicians meshed although they had separate
representation, (2) the co-defendants did not blame one another or
assert negligence on the part of the other, (3) jury instructions
were synchronized and neither objected to any of the other's
offered instructions. The Court noted that each defendant had its
own interests to protect in that each could have suffered an
adverse jury verdict, but there was no showing that their interests
were hostile to each other. Hunsaker, 588 P.2d 500-01.
Whether hostility is present is best addressed on a case by
case basis. In this case, King's complaint asserted identical
claims against all three defendants. Each defendant filed
identical answers to King's complaint. These were signed by the
same MPC staff attorney, Patrick T. Fleming, an employee of MPC.
No cross-claims or claims for indemnification were filed by any
individual co-defendant and no allegations were made that either of
the other co-defendants were responsible for King's termination.
Throughout the pretrial process, defendants filed consolidated
motions and briefs. They consolidated their responses to discovery
and their list of witnesses, exhibits and contentions in the
pretrial order. All three defendants were represented by the same
two MPC attorneys, who asserted their common representation and
vigorously defended SRM's actions. All three defendants acted in
concert, with no hostility exhibited by their efforts to prevent a
verdict against SRM. Their consolidated position was that there
was no breach of the covenant of good faith and fair dealing, but
if the court found one, it was SRM's breach and not that of MPC and
Entech.
Applying the above rule in the present case, it is clear that
we need only consider the pleadings, representations and evidence
presented to the District Court at the time it made its ruling. We
conclude that although the three co-defendants asserted allied
positions with diversified financial interests, their differences
do not reach the level of hostility required for a grant of four
additional peremptory challenges.
We hold that the grant of additional peremptory challenges to
allied co-defendants constitutes reversible error under the
circumstances of this case where no hostility was demonstrated
between the co-defendants prior to voir dire.
11.
id the District Court commit reversible error by granting
defendants' motion in limine prohibiting some expert testimony, and
by refusing to allow plaintiff's personnel expert to present
opinion testimony without further foundation?
Mr. King contends that the District Court made numerous errors
which resulted in inappropriately restricting the opinion testimony
of his expert, Alan Brown. Because our decision to reverse the
District Court based upon an improper grant of peremptory
challenges will result in a new trial, there is no reason to
address this issue at this time.
111.
Is King entitled to a new trial against Entech, Inc. and
Montana Power Company?
At the close of the evidence during the trial, the District
Court directed verdicts for Entech and MPC because SRM had failed
to present evidence sufficient to pierce SRM's corporate veil. SRM
was the only defendant to file a respondent's brief in this appeal.
On the cover of its Appeal Brief, SRM removed the names of the
other defendants from the caption, believing that King had no right
to a new trial against them because King did not assert that the
District Court erred by granting MPC and Entech directed verdicts.
MPC and Entech responded to King's Reply Brief which argues that a
new trial will be granted as to all defendants if the District
Court's decision is reversed on the issues raised. They filed a
Supplemental Reply Brief which raised the issue whether King has
any legal basis for asserting a right to a new trial against Entech
and MPC.
MPC and Entech contend that King cannot have a new trial
against either of them because King did not assert that the
District Court erred in granting MPC and Entech directed verdicts.
We disagree. King's Notice of Appeal preserves his right to appeal
the directed verdicts against MPC and Entech because he has
appealed the judgment entered by the District Court (the directed
verdicts) against both MPC and Entech.
The District Court concluded that the corporate veil could not
be pierced and granted directed verdicts for MPC and Entech. We
will not reverse this conclusion unless it is an incorrect
interpretation of the law. Steer. Inc., 803 P.2d 601. After
reviewing the record, we conclude that the District Court did not
err by directing these verdicts as King failed to present evidence
to support piercing SRM's corporate veil.
Nonetheless, King claims that all three defendants have an
interest in the outcome of these proceedings because the effect of
a reversal is to make the judgment "void as if never rendered." He
contends that when a new trial is granted the parties are all
returned to the position they occupied before the trial and,
therefore, he will be entitled to a new trial against all three
defendants if the ~istrictCourt's judgment is reversed.
King contends that the holding of OIBrien v. Great Northern
R.R. Co. (1966), 148 Mont. 429, 421 P.2d 710, applies to this case.
In OIBrien,we said that to reverse a judgment makes it void as if
never rendered and returns the parties to the position they
occupied before the trial if a new trial is granted. OtBrien, 421
P.2d at 716. This case is distinguishable from the facts in
OIBrien and the cases it relied on because multiple defendants are
involved who were granted relief based on different rules of law.
MPC and Entech were released by directed verdicts while SRM was
relieved from liability by the jurytsverdict.
Section 25-11-102, MCA, provides:
Grounds for new trial. The former verdict or other
decision may be vacated and a new trial granted on the
application of the party aggrieved for any of the
following causes materially affecting the substantial
rights of such party:
(I) irregularity in the proceedings of the court,
jury, or adverse party or any order of the court or abuse
of discretion by which either party was prevented from
having a fair trial ...
Section 25-11-102(1), MCA.
The justification for allowing King a new trial in this case
is based solely upon an irregularity in jury selection. That
justification does not apply to MPC and Entech because the District
Court granted directed verdicts to them both at the close of the
evidence and prior to the verdict of the jury. We are reversing
the jury verdict releasing SRM from liability because the
composition of the jury resulting from the District Courtls
incorrect grant of excess peremptory challenges to non-hostile
defendants may have materially affected King's rights. That
rationale does not apply to MPC and Entech because the issue of
their liability did not reach the jury. We conclude that King is
not entitled to relitigate the issues against MPC and Entech.
We hold that King is not entitled to a new trial against
Entech, Inc. and Montana Power Company.
The judgment in favor of Special Resource Management, Inc. is
reversed and King is granted a new trial in accordance with this
opinion. The judgments favoring Montana Power Company and Entech,
Inc. are affirmed.
M J f o r ~usticeKarla M. Gray