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BLITZ v. FLUOR ENTERPRISES INC

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Court of Appeal, Fourth District, Division 3, California.

Robert BLITZ, Plaintiff and Appellant, v. FLUOR ENTERPRISES, INC., Defendant and Respondent.

No. G031651.

Decided: January 26, 2004

Barnes, Crosby, Fitzgerald & Zeman and William M. Crosby, Irvine, for Plaintiff and Appellant. Cooksey, Toolen, Gage, Duffy & Woog, Patrick J. Duffy, Costa Mesa, and Timothy D. Otte, for Defendant and Respondent.

OPINION

Robert Blitz appeals from a summary judgment entered against him on his lawsuit asserting claims for fraud, violation of Labor Code section 970, and negligent misrepresentation, against Fluor Enterprises, Inc., his former employer.   Blitz had alleged that Fluor induced him to leave a long-term relationship with another employer and move cross-country by promising him long-term rather than project-based employment, then revoked that offer and required him to sign an “at-will” employment agreement after he had already resigned his prior position based on the company's promise.   The trial court granted the summary judgment motion after concluding that each of his claims was barred by the parol evidence rule.

We reverse.   None of the cases applying the parol evidence rule to thwart a fraud claim involve circumstances in which the allegedly defrauded party relied upon the misrepresentation to his detriment prior to being presented with the contrary written agreement.   This is a critical distinction, as recognized by the Supreme Court in Tenzer v. Superscope (1985) 39 Cal.3d 18, 216 Cal.Rptr. 130, 702 P.2d 212, a case which addresses the closely analogous Statute of Frauds context and informs our decision.   Thus, even assuming the parol evidence rule would apply in this situation, we conclude there was sufficient evidence to create a triable issue of fact as to whether Fluor should be estopped from relying upon either the rule or the “at-will” provision.

* * *

The facts in this case are almost entirely undisputed and we take them largely from Fluor's motion for summary judgment.1  In June of 1999, Blitz had been employed in a financial position at Raytheon in New Jersey for 12 years.   He was contacted by Doug Cheppo, a member of Fluor's management team, about a job opportunity on a “high priority” project in California.   When Cheppo first contacted Blitz, he believed the project would last two to three years and then require a continuing maintenance group.

However, Blitz was reluctant to leave a long-term, stable employment situation and relocate his family for a project-based employment opportunity.   He therefore informed Cheppo he would be interested only in permanent, rather than project-based employment.   Cheppo understood that a “long-term career opportunity was important [to Blitz], ․ and if-if-if it was clear that he wouldn't have a long-term opportunity, ․ he would have had serious reservations which may or may not have worked out [with] him joining the company.”   Cheppo told Blitz that such a long-term opportunity could be made available only if he met with another member of Fluor's management, Ron Albright, and Albright approved it.

Blitz traveled to California to interview, and he met with four people, including Cheppo and Albright.   Cheppo later told Blitz that Albright had approved his employment on a long-term, rather than project-specific, basis.   Thus, Cheppo “assured [Blitz] that we would have a suitable financial management position commensurate with his salary level following his ․ project assignment.”   Cheppo never mentioned to Blitz that his employment was to be terminable “at will.”   Blitz then orally accepted the offer, and, because Cheppo was pressuring him to start as soon as possible, he tendered his resignation to Raytheon the next day, giving two-weeks notice.

However, as alleged in Blitz's complaint, but ignored in Fluor's motion, it was not until after Blitz orally committed to employment with Fluor, and had resigned his position at Raytheon, that Fluor presented him with a three-page, single-spaced, written employment agreement which specified, among other things, that his employment was to be “at will.”   Blitz protested the at-will provision, and asked that it be modified to reflect the promise of long-term employment.   That request was refused, although Cheppo assured Blitz that the provision would not be enforced.

Blitz, having already resigned his position with Raytheon, and feeling he had little choice, signed the agreement and commenced work at Fluor.   Approximately two years later, as the work on his project was winding down, Blitz was informed he was being “rolled off” the project.   He was encouraged to look for employment outside of Fluor, because it appeared there were no available positions within Fluor appropriate for his skills and experience level.   Blitz subsequently met with several other persons within Fluor, including Albright, to discuss the possibility of continuing employment.   Albright told Blitz that “we need good people ․ I can't imagine that there wouldn't be something within Fluor for you․” Albright requested a copy of Blitz's resume to distribute to others who might have an opportunity for Blitz.   However, Blitz was ultimately informed that “no one had offered anything up, and therefore my termination would be X [date].”

Blitz subsequently filed this lawsuit, alleging causes of action for fraud and negligent misrepresentation, and a claim based upon violation of Labor Code section 970, which prohibits the use of fraudulent or misleading statements to induce workers to relocate for employment.2  Among other things, Blitz specifically alleged that Fluor should be estopped from relying upon the “at will” provision of his employment agreement, due to Blitz's detrimental reliance on Fluor's prior representations.

Fluor moved for summary judgment.   Although Blitz had sued for fraud, rather than breach of contract, Fluor's primary contention was that Blitz's employment agreement specified he was an at-will employee, and thus he could not enforce any implied agreement contradicting that provision.   As to the fraud claim, Fluor admitted, as an undisputed fact, that prior to Blitz's execution of the written employment agreement, he “was told he would have long term employment with Fluor,” but argued it made no representations which were “knowingly false.”   Fluor also argued Blitz's reliance upon such a representation was unreasonable as a matter of law, to the extent it conflicted with the “at will” provision of his employment agreement.

In his opposition to the motion, Blitz argued that triable issues of fact existed as to the enforceability of the “at will” provision because he was not asked to sign it until after he had detrimentally relied upon Fluor's promise of long-term employment by resigning his position at Raytheon.   Similarly, he countered the contention that his reliance had been unreasonable by distinguishing the cases relied upon by Fluor and pointing out that his reliance, i.e., the resignation of his prior position, occurred prior to any mention of the “at will” provision.   He argued that estoppel should be applied to prevent the injustice which would occur if Fluor were allowed to induce him to resign his prior position with false promises, and then require him to sign a different agreement only after he had done so.

Fluor raised the parol evidence rule as a specific defense to a fraud claim for the first time in its reply brief.   It cited Bank of America Etc. v. Pendergrass (1935) 4 Cal.2d 258, 48 P.2d 659 (Pendergrass), and cases following Pendergrass, for the proposition that the fraud exception to the parol evidence rule does not apply to an alleged false promise which directly contradicts a term of the parties' agreement.   The court granted summary judgment on the basis that Blitz's claims were barred by the parol evidence rule.

The parol evidence rule is contained in Code of Civil Procedure section 1856, subdivision (a), which provides:  “Terms set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement.”   However, that basic rule is subject to some exceptions, including the so-called “fraud” exception contained in subdivision (g) of the same statute:  “This section does not exclude other evidence of the circumstances under which the agreement was made or to which it relates, as defined in Section 1860, or to explain an extrinsic ambiguity or otherwise interpret the terms of the agreement, or to establish illegality or fraud.”  (Ibid.;  Italics added.)

Although the fraud exception to the parol evidence rule is broadly stated in the statute, the Supreme Court concluded in Pendergrass, supra, 4 Cal.2d 258, 48 P.2d 659, that it should be more narrowly construed.   In that case, the parties entered into a promissory note that contained an express provision making it payable on demand, and plaintiff sued when defendants refused its demand.   In an attempt to defeat the claim, defendants alleged that plaintiff fraudulently induced them into executing the note by promising, contemporaneously with the execution of the note, that it would not demand payment for a year.   The court rejected that claim, explaining that, as a practical matter, allowing a party to prevail upon such a claim would destroy the parol evidence rule:  “It is reasoning in a circle, to argue that fraud is made out, when it is shown by oral testimony that the obligee contemporaneously with the execution of a bond, promised not to enforce it.   Such a principle would nullify the rule:  for conceding that such an agreement is proved, or any other contradicting the written instrument, the party seeking to enforce the written agreement according to its terms, would always be guilty of fraud.”   (Id. at p. 263, 48 P.2d 659, quoting Towner v. Lucas' Exr., 54 Va. (13 Gratt.) 705, 716.)

However, the court also quoted, with approval, the language of Lindemann v. Coryell (1922) 59 Cal.App. 788, 792, 212 P. 47, which explained why it was fair to exclude that situation from the fraud exception to the parol evidence rule:  “This doctrine, however, has been held to have no place for application ‘when the statements relate to rights depending upon contracts yet to be made, to which the person complaining is a party, as under such circumstances he has it in his power to guard in advance against any and all consequences of a subsequent change of conduct by the person with whom he is dealing ․” (Pendergrass, supra, 4 Cal.2d 258, 264, 48 P.2d 659, italics added.)   Thus the Pendergrass rule is based upon the assumption that the parties had the ability, as they did in that case, to protect themselves from the alleged fraud at the time they entered into their agreement, by insisting that the agreement accurately reflect the promises made.   If that could not be accomplished, the dissatisfied party could simply walk away without incurring any legal detriment-disappointed, perhaps, but not defrauded.

Subsequent cases have identified the Pendergrass rule as one applicable specifically to cases of misrepresentations made to induce the execution of a contract.  (Simmons v. Cal. Institute of Technology (1949) 34 Cal.2d 264, 274, 209 P.2d 581 [“ ‘where the execution of a contract has been induced by a promise made without any intention of performing it, this constitutes such fraud in obtaining the contract that it may be declared null and void’ but ‘a distinction must be made between ․ a parol promise ․, which by its very nature is superseded by the final writing, inconsistent with it, and a promise made with no intention of performing the same, not inconsistent with the writing, but which was the inducing cause thereof’ ”] (Italics added;  quoting Cobbs v. Cobbs (1942) 53 Cal.App.2d 780, 783, 785, 128 P.2d 373;  Abbot v. Stevens (1955) 133 Cal.App.2d 242, 247, 284 P.2d 159;  Newmark v. H And H Products Mfg. Co. (1954) 128 Cal.App.2d 35, 37, 274 P.2d 702, [“Parol evidence of fraud to establish the invalidity of a written instrument induced by a promise made without any intention of performing it is only permissible in the case of a promise to do some additional act which was not covered by the terms of the contract and such evidence is not admissible in the case of a promise directly at variance with the terms of the written instrument”].)

In fact, Slivinsky v. Watkins-Johnson Co. (1990) 221 Cal.App.3d 799, 270 Cal.Rptr. 585, the case cited by the court as the basis for its parol evidence ruling (and initially cited by Fluor to support its contention that Blitz's reliance was unreasonable), presents a classic claim of fraud in the inducement which would be barred by the Pendergrass rule.   In that case, the plaintiff specifically acknowledged, as part of her initial written job application, that “I understand that employment by Watkins-Johnson Company is conditional upon ․ execution of an Employee Agreement․ I further understand that if I become employed by Watkins-Johnson Company, there will be no agreement expressed or implied, between the company and me for any specific period of employment, nor for continuing or long term employment.”  (Id. at p. 802, 270 Cal.Rptr. 585.)   Plaintiff did not actually accept an employment offer until five months after she signed the application acknowledging that her employment would be, in essence, at will.   She alleged no promises made to her prior to the application, and no reliance on any later promise other than her subsequent acceptance of the position.   Thus, her fraud claim was based upon the assertion she accepted the employment in reliance upon oral representations inconsistent with the document she had previously signed.   That is the exact type of claim addressed, and precluded, by Pendergrass.

The other cases cited by Fluor also address claims of misrepresentations which were superseded by contractual terms, with no allegation of reliance other than the decision to enter the agreement containing the contrary terms.   (Alling v. Universal Manufacturing Corp. (1992) 5 Cal.App.4th 1412, 7 Cal.Rptr.2d 718 [plaintiff corporation could not establish fraud based upon financial projections contained in pre-agreement “business plan” when those provisions were expressly contradicted in agreement actually signed by plaintiff];  Cobbs v. Cobbs, supra, 53 Cal.App.2d 780, 781, 128 P.2d 373 [plaintiff husband could not establish fraud in the inducement of an agreement to pay wife monthly support “during the term of her natural life” on the ground that wife had promised to relieve him of the obligation if she ever remarried].)

The third case relied upon by Fluor, and characterized by it as “similar” to this, is Anderson v. Savin Corp. (1988) 206 Cal.App.3d 356, 254 Cal.Rptr. 627.   In our view, however, the case hurts-rather than helps-Fluor.   The case is distinguishable, and the court expressly acknowledges that if the circumstances were closer to those presented in this case, the outcome might be different.   In Anderson, plaintiff was employed by defendant as a copier salesman.   He signed an employment agreement providing that he was employed for a period of one year, renewable for additional one-year terms, but terminable “by either party in its discretion at any time on 5-days' notice․” (Id. at p. 363, 254 Cal.Rptr. 627.)   The court concluded that such a contract precluded any implied agreement that Anderson would be terminated only for good cause.   But the court also stated that Anderson might have been able to state a claim if he could demonstrate he was in an unusually vulnerable position when he signed the agreement:  “Anderson could have gone elsewhere to secure employment;  he was not bound to accept Savin's terms at the risk of always being jobless.   The employment contract clearly involved a profit motive for Anderson and, to the extent enforceable, ordinarily would provide for adequate damages in the event of a breach.   In light of the express at-will conditions, Anderson could not reasonably assume that Savin would continue to employ him indefinitely except for good cause.   For that reason, neither was he vulnerable nor did Savin have reason to anticipate any vulnerability.”  (Id. at p. 365, 254 Cal.Rptr. 627.)

 In our case, of course, Blitz alleged precisely the sort of vulnerability alluded to in Anderson.   At the time he was first presented with his employment agreement, he had already quit his long-term employment based upon Fluor's prior representations.   There was no evidence he had been pursuing any other job opportunities which might be available for him to choose instead of Fluor's, and, assuming he needed a paycheck (his insistence on long-term employment suggests he did), he had little choice but to sign.

If this case were merely based upon Cheppo's additional assurance, at the time Blitz signed the agreement, that the at-will provision would not be enforced, then we would have little trouble-and frankly no qualms-about applying Pendergrass to bar the fraud claim.   But it is not.   Here, Blitz's reliance was the resignation of his former employment, rather than the subsequent execution of the written agreement, and thus this case appears to fall outside the fraud in the inducement rule announced in Pendergrass and applied in the numerous cases following it.3

Instead, we look to Tenzer v. Superscope, Inc., supra, 39 Cal.3d 18, 216 Cal.Rptr. 130, 702 P.2d 212, a more recent Supreme Court decision.   In that case, a corporate director brought an action against the corporation based on its oral agreement to pay him a finder's fee for finding a buyer of corporation real estate.   The corporation asserted that the agreement was unenforceable based on the provision in the statute of frauds requiring an agreement authorizing or employing an agent, broker, or any other person to find a purchaser or seller of real estate for compensation or a commission to be in writing.   The Supreme Court reversed the judgment in favor of defendant, concluding that it could be estopped from relying upon the statute of frauds to prevent enforcement of an oral agreement, if the opposing party had relied upon the oral representation and the result would otherwise be unjust.   Among other things, the court expressly rejected the prior rule that a fraud claim could never be based upon an oral representation which was rendered unenforceable by the statute of frauds.   Instead it concluded the “better rule” is found in “Comment (c) to section 530 of the Restatement Second of the Law of Torts [which] states that a misrepresentation of one's intention is actionable even ‘when the agreement is oral and made unenforceable by the statute of frauds, or when it is unprovable and so unenforceable under the parol evidence rule.’ ”   (Id. at p. 29, 216 Cal.Rptr. 130, 702 P.2d 212, italics added.)

We do not mean to suggest that Tenzer v. Superscope, Inc., supra, 39 Cal.3d 18, 216 Cal.Rptr. 130, 702 P.2d 212, overrules Pendergrass.   In fact, at least two courts have concluded that the apparent endorsement of the Restatement comment regarding the inapplicability of the parol evidence rule to fraud claims was insufficient to overcome the Supreme Court's earlier contrary conclusion in Pendergrass.   As explained in Continental Airlines, Inc. v. McDonnell Douglas Corp. (1989) 216 Cal.App.3d 388, 421, 264 Cal.Rptr. 779, “[T]he eminent Bernard E. Witkin opined in his treatise on evidence (2 Witkin, Cal. Evidence (3d ed.1986) § 1000, pp. 946-947) that the [parol evidence] rule may be questioned today where a party seeks fraud damages, rather than merely attempting to avoid or nullify the main agreement.   Mr. Witkin expressed that view because in 1985 [in Tenzer v. Superscope, Inc., supra, 39 Cal.3d 18, 216 Cal.Rptr. 130, 702 P.2d 212] the California Supreme Court reversed the long-standing and analogous rule that a tort action for damages could not be based on a false promise where the promise itself was unenforceable under the statute of frauds.”   The court went on to note, however, that while the Pendergrass rule “may be subject to criticism, and even questioned, it is still the law and we are bound by it.”  (Continental Airlines, Inc., supra, 216 Cal.App.3d at pp. 420-421, 264 Cal.Rptr. 779, fn. omitted;  accord, Wang v. Massey Chevrolet (2002) 97 Cal.App.4th 856, 872-873, 118 Cal.Rptr.2d 770.)

 However, what distinguishes this case from those is exactly what distinguished Tenzer v. Superscope, Inc., supra, i.e., reliance.   Just as with the statute of frauds, a party can be estopped from relying upon the parol evidence rule.  (Conley v. Matthes (1997) 56 Cal.App.4th 1453, 1466, 66 Cal.Rptr.2d 518[“[B]y accepting the benefits of the modification, Conley is estopped from arguing it is barred by the parol evidence rule”];  Wagner v. Glendale Adventist Medical Center (1989) 216 Cal.App.3d 1379, 1388, 265 Cal.Rptr. 412)

In this case, there is sufficient evidence to demonstrate a triable issue of fact concerning estoppel.   According to Blitz, Fluor had committed to “creating another position for [him] if one was not available” when his project duties were finished.4  He would never have accepted Fluor's offer if it did not include a promise of long-term, rather than project-based, employment.   Cheppo's own testimony acknowledged he understood Blitz would not accept an offer from Fluor if it did not include a promise of long-term employment.   Thus, by promising Blitz a long-term position, Fluor obtained a benefit it would likely not have obtained otherwise, i.e., Blitz's services on its “high priority” project.   Fluor would thus be unjustly enriched if it were allowed to retain that benefit with no repercussions.   By the same token, Blitz detrimentally relied upon Fluor's promise when he resigned his prior long-term employment.

The judgment is reversed and the case is remanded.   Blitz is to recover his costs on appeal.

FOOTNOTES

1.   The facts included here are taken from Fluor's motion, its separate statement, and the evidence offered in support thereof.   However, Fluor does not expressly admit that all the facts are true.   Instead, Fluor characterizes some as merely Blitz's factual “claims.”   By reproducing them here, we do not mean to endorse them as true.   Instead, we are simply recognizing, as Fluor implicitly did, that it cannot prevail on summary judgment by merely contradicting Blitz's factual contentions.   Instead, its motion was based upon the theory that even if those factual claims were correct, he could not prevail, as a matter of law, on the causes of action stated.   That having been said, however, we note that Fluor does unequivocally admit, as an undisputed fact, that “[i]n June 1999 prior to signing the written employment contract, Blitz was told he would have long term employment with Fluor.”

2.   Labor Code section 970 provides:  “No person, or agent or officer thereof, directly or indirectly, shall influence, persuade, or engage any person to change from one place to another in this State or from any place outside to any place within the State, or from any place within the State to any place outside, for the purpose of working in any branch of labor, through or by means of knowingly false representations, whether spoken, written, or advertised in printed form, concerning either:  [¶] (a) The kind, character, or existence of such work:  [¶] (b) The length of time such work will last, or the compensation therefor;  [¶] (c) The sanitary or housing conditions relating to or surrounding the work;  [¶] (d) The existence or nonexistence of any strike, lockout, or other labor dispute affecting it and pending between the proposed employer and the persons then or last engaged in the performance of the labor for which the employee is sought.”

3.   And it is that act of reliance which would also determine the measure of his damages.   See Lazar v. Superior Court (1996) 12 Cal.4th 631, 49 Cal.Rptr.2d 377, 909 P.2d 981, which explains the damages available to plaintiff in this type of case:  “[A]s to his fraud claim Lazar may properly seek damages for the costs of uprooting his family, expenses incurred in relocation, and the loss of security and income associated with his former employment in New York. On the facts as pled, however, Lazar must rely on his contract claim for recovery of any loss of income allegedly caused by wrongful termination of his employment with Rykoff.”   (Id. at pp. 648-649, 49 Cal.Rptr.2d 377, 909 P.2d 981.)

4.   In our view, the promise of long-term, or permanent employment, as opposed to a project specific position, would include the obligation to make reasonable efforts to arrange another position for Blitz within the company when his duties in connection with the initial project began to wind down.   And in fact, that is essentially how Cheppo characterized the promise:  He “assured [Blitz] that we would have a suitable financial management position commensurate with his salary level following his ․ project assignment.”   That promise could not be fulfilled by treating Blitz just like any applicant off the street, i.e., merely allowing Blitz to apply for any suitable position within the company which just happened to be available.   If that were all that was required, it would be tantamount to merely a promise not to black ball Blitz when the initial project ended-not much of an enticement.

BEDSWORTH, J.

WE CONCUR:  SILLS, P.J., and IKOLA, J.

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