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Court of Appeal, First District, Division 1, California.

Delores HOLLINGTON et al., Plaintiffs and Appellants, v. METROPOLITAN LIFE INSURANCE COMPANY et al., Defendants and Respondents.

No. A041566.

Decided: January 23, 1990

Madeleine Tress, San Francisco, for plaintiffs and appellants. O'Connor, Cohn, Dillon & Barr, Janet L. Grove, Keith S. Omsberg and Joel Lamp, San Francisco, for defendants and respondents.

Plaintiffs Delores and Oliver Hollington appeal from the summary judgment granted to defendants Metropolitan Life Insurance Company and Douglas Grant in this wrongful termination action.


This appeal arises against the following procedural/factual background synthesized from the voluminous record below:

Plaintiff Delores Hollington had been employed by defendant Metropolitan Life Insurance Company for 15 years.   At the time of her termination, plaintiff was a senior claims approver in the group health claims department, having recently been promoted to that position.

On March 19, 1985, plaintiff loudly reprimanded a junior claims approver, Yvonne Faimann, in front of other workers for answering a persistently ringing telephone because the senior claims approvers appeared to be otherwise occupied.   Thereafter, Faimann complained to the group supervisor, Precilla Williams, about plaintiff's behavior.

Williams later spoke to plaintiff privately about the incident advising plaintiff to be especially nice to White people if she wanted to get ahead in the company.  (Both plaintiff and Williams are Black.)   Plaintiff became very angry, stormed into Faimann's work cubicle, shouting “I ought to beat your ass, bitch,” and other obscenities.   Plaintiff also seized Faimann's chair and swiveled it around in order to have Faimann facing her.   The violent maneuver forced Faimann's left leg into contact with her desk resulting in a large bruise to her left thigh area.   Numerous co-workers witnessed the incident.   Plaintiff, hysterical and in tears, then went home saying she wanted to quit her job.

The next day, plaintiff met with Williams and the divisional manager, Douglas Grant, to discuss the incident.   Grant later talked to a number of percipient employees and asked some of them for written statements.   Another meeting was held to provide plaintiff an opportunity to explain her version of the altercation.

After further investigation, including consultation with his superiors and the company personnel department, Grant recommended that plaintiff be terminated.   Grant's recommendation was premised on his conclusion that plaintiff was guilty of “serious misconduct” by reason of her physical assault on a co-worker.

On March 27, 1985, the personnel officer, Jim Jensen, informed Hollington that she was terminated.

Defendant's Metropolitan Management Guide provides a detailed framework for a progressive discipline policy (covering warnings, increasing penalties and documentation), including a provision that “[e]xcept in unusual cases, principally those involving serious misconduct, termination should NOT be considered unless the employee has previously received a final warning.”

Plaintiff and her husband, Oliver Hollington, thereafter filed suit for wrongful termination, alleging causes of action for breach of contract, breach of the covenant of good faith and fair dealing, defamation,1 negligence, intentional and negligent infliction of emotional distress and loss of marital community.   After consideration of extensive documentary evidence produced by the parties, the trial court granted defendant's motion for summary judgment on all counts.

Plaintiff contends that summary judgment is improper in light of a number of disputed factual issues surrounding her termination.   In particular, plaintiff points to conflicting evidence whether she actually touched Faimann and needed to be physically restrained, and whether the company conducted a thorough investigation including interviews of all employees who observed the incident.   Hollington insists Grant exaggerated the seriousness of the incident in recommending termination to the exclusion of less drastic alternative measures authorized under the management guide's encouragement of more flexible disciplinary guidelines for long-term employees such as plaintiff.

Plaintiff further argues that the presence of mitigating circumstances—her inexperience at a new position, lack of relevant training and burdensome overtime—should have been considered warranting imposition of a lesser sanction of demotion, transfer or medical counselling, as required by company policy.2


Standard of Review

 A motion for summary judgment “shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”  (Code Civ.Proc., § 437c, subd. (c).)  “Summary judgment is appropriate only if no material fact issue exists or where the record establishes as a matter of law that a case of action asserted against a party cannot prevail.  [Citation.]”  (Wilkerson v. Wells Fargo Bank (1989) 212 Cal.App.3d 1217, 1224, 261 Cal.Rptr. 185.)   The function of the trial court in ruling on a motion for summary judgment is to decide whether such issues of fact exist and not to decide the merits of the issues themselves.  (See Brejcha v. Wilson Machinery, Inc. (1984) 160 Cal.App.3d 630, 633, 206 Cal.Rptr. 688.)

 Moreover, a motion for summary judgment is addressed to the sound discretion of the trial court.  (Leo F. Piazza Paving Co. v. Foundation Constructors, Inc. (1981) 128 Cal.App.3d 583, 589, 177 Cal.Rptr. 268.)   As defendant correctly points out, the trial court's grant of summary judgment is presumed correct, and the burden is on the plaintiffs to demonstrate error.   However, on review of a summary judgment, we give no special deference to the trial court's legal rulings and conclusions;  a grant of summary judgment raises only questions of law subject to our independent review on appeal.  (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064, 225 Cal.Rptr. 203.)


Wrongful Termination Claims

Plaintiff's primary contention on appeal centers on the claimed existence of triable issues concerning the nature of plaintiff's conduct and the interpretation and application of the written management guide.

As noted, the guide states, inter alia, that “[e]xcept in unusual cases, principally those involving serious misconduct, termination should NOT be considered unless the employee has previously received a final warning.”   In granting summary judgment, the trial court concluded in part that factual disputes about what actually happened in the confrontation were “not material as to the defendant's right to terminate this employee.”   Defendant strongly argues that in view of plaintiff's admission that she pushed Faimann's chair, this conclusion should be upheld and that the claimed factual disputes are not determinative.

The parties agree that plaintiff had either an express or implied employment contract which could be terminated only for good cause, and that defendant's management guide contained certain personnel policies that were a part of that contract.   However, the parties sharply disagree whether plaintiff's conduct constituted “serious misconduct.”   The issue thus posited for review is whether that pivotal inquiry is one of law amenable to summary adjudication.

The question of who is ultimately empowered to decide “serious misconduct” in the context of an employment relationship is but a step removed from the parallel question of deciding “good cause,” a concept engendering no little difficulty.   Division Three of this court dealt with a slightly different version of this problem in reviewing a defense jury verdict rendered in Pugh v. See's Candies, Inc. (1988) 203 Cal.App.3d 743, 250 Cal.Rptr. 195 [Pugh II ].   Quoting extensively from a Michigan case, Toussaint v. Blue Cross & Blue Shield of Mich. (1980) 408 Mich. 579 [292 N.W.2d 880, 895], this court explained:  “ ‘Where the employer claims that the employee was discharged for specific misconduct—intoxication, dishonesty, insubordination—and the employee claims that he [or she] did not commit the misconduct alleged, the question is one of fact for the jury:  did the employee do what the employer said he [or she] did?’ ”  “ ‘․ A promise to terminate employment for cause only would be illusory if the employer were permitted to be the sole judge and final arbiter of the propriety of the discharge․’ ”


“As the Toussaint court acknowledged, however, the role of the jury is more difficult to resolve where the employee is discharged for stated reasons, but the employee contends that those reasons do not amount to good cause.  ‘If the jury is permitted to decide whether there was good cause for discharge, there is the danger that it will substitute its judgment for the employer's.   If the jurors would not have fired the employee for doing what he [or she] admittedly did, or they find he [or she] did, the employer may be held liable in damages although the employee was discharged in good faith and the employer's decision was not unreasonable.’  [Citation.]”  (Pugh II, supra, 203 Cal.App.3d at p. 767, 250 Cal.Rptr. 195.)

The Pugh II court then went on to approve a jury instruction (related to a contract theory) providing that “ ‘[a] just cause or good cause for termination ․ means a fair and honest cause or reason regulated by the good faith of the employer.’  [The jury] was cautioned to exercise care so as not to interfere with the legitimate exercise of the employer's managerial discretion․  Its effect is to charge the jury with the duty to ‘balance the employer's interest in operating [its] business efficiently and profitably with the interest of the employee in maintaining his [or her] employment ․,’ giving substantial weight to managerial discretion.  (Crosier v. United Parcel Service, Inc. (1983) 150 Cal.App.3d 1132, 1139 [198 Cal.Rptr. 361].)   Under this instruction, the employer's good faith dissatisfaction alone is not sufficient to constitute good cause to discharge the employee in breach of the contract․”  (Pugh II, supra, 203 Cal.App.3d at p. 769, 250 Cal.Rptr. 195.)

A more recent case from the Second District is in accord:  “The argument [employer's good faith belief that good cause existed bars plaintiff's claims] fails for the further reason that in contract law the belief of the breaching party does not determine whether a breach of the contract has occurred.   Obviously, a defaulting borrower's good faith belief he or she has repaid a loan is not a defense to a lender's claim for payment.   Similarly, an employer's subjective belief it possessed good cause does not dispose of a wrongfully discharged employee's claim for breach of contract.   Such employee is entitled to recover for breach of contract notwithstanding the employer's state of mind.”  (Wilkerson v. Wells Fargo Bank, supra, 212 Cal.App.3d at p. 1230, 261 Cal.Rptr. 185;  see also Walker v. Northern San Diego County Hospital Dist. (1982) 135 Cal.App.3d 896, 185 Cal.Rptr. 617, where the court implied good cause to fire is question of fact.)

 Defendant asserts that the question of what constitutes serious misconduct falls within the contours of the business judgment rule, whereby an employer is given considerable autonomy in determining when the interests of its business require that an employee be dismissed, and “the reasonableness of the employer's dissatisfaction should seldom be a question for the jury.”  (Coats v. General Motors Corp. (1934) 3 Cal.App.2d 340, 347, 39 P.2d 838;  cf. Rulon–Miller v. International Business Machines Corp. (1984) 162 Cal.App.3d 241, 253, 208 Cal.Rptr. 524, disapproved on another point in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 254 Cal.Rptr. 211, 765 P.2d 373 [implicitly approving jury instruction reflecting employer's good faith but mistaken belief that a legitimate business interest required an employee's termination];  see also Burton v. Security Pacific Nat. Bank (1988) 197 Cal.App.3d 972, 243 Cal.Rptr. 277 [question of breach of implied covenant of good faith and fair dealing properly resolved on summary judgment where employer made a good faith determination of misconduct];  Clutterham v. Coachmen Industries, Inc. (1985) 169 Cal.App.3d 1223, 215 Cal.Rptr. 795 [managerial discretion to terminate];  Crosier v. United Parcel Service, Inc. (1983) 150 Cal.App.3d 1132, 198 Cal.Rptr. 361, disapproved on another point in Foley v. Interactive Data Corp., supra, 47 Cal.3d 654, 254 Cal.Rptr. 211, 765 P.2d 373 [employer needs ample latitude in disciplining its personnel].)

We think the better view is that espoused in Pugh II and Wilkerson.   If we consider the minimum facts established in the parties' moving papers, clearly plaintiff shouted abusive, threatening obscenities at Faimann and intentionally spun her chair around, causing Faimann to sustain a bruise.   Defendant asserts this amounted to serious misconduct, justifying its action under the management guide to immediately terminate plaintiff.   Yet, in considering the salient parts of the guide presented below, we discern a detailed, multi-layer, progressive disciplinary scheme with special emphasis placed on providing beneficial guidance and more lenient treatment for defendant's long-term employees.

The management guide states in relevant part that “[t]ermination or salary reduction and/or demotion is recommended when all other efforts to effect the necessary improvement fail”;  that it is a company policy “[t]o counsel employees who fail to meet these standards [of performance, attendance and conduct] and to develop a constructive program to correct deficiencies.”   In addition, the “Disciplinary Interview Guidelines” provide that an employee with 10 years or more of service should be given three progressive discipline interviews if there are persistent problems, with the comment that “[s]alary reduction and/or demotion should be considered before termination of employment,” and that any indication of physical or emotional problem is to be referred to the medical and counselling services.

However, an examination of the guide fails to disclose any definition or explanation of the critical phrase, “serious misconduct,” which sanctions immediate termination.   Plaintiff was a 15–year, recently promoted employee, who apparently had never before experienced any disciplinary problems.   The question whether her conduct constituted “serious misconduct” justifying summary termination to the exclusion of available remedial actions presents a classic question of fact which could not be resolved through a process of summary adjudication of her breach of contract action.

 In short, while an employer possesses a broad latitude in its managerial decisions concerning its personnel, it does not include the right to make any arbitrary or unreasonable decision to terminate an employee where the contract requires “serious misconduct,” an otherwise undefined class of specific misconduct.

 As to plaintiff's cause of action for “wrongful discharge” sounding in tort, Foley v. Interactive Data Corp., supra, 47 Cal.3d 654, 669, 254 Cal.Rptr. 211, 765 P.2d 373,3 makes clear that such a claim is viable only where disparagement of a basic public policy is alleged affecting a duty inuring to the benefit of the public at large rather than to a particular employer or employee.   No such allegations appear.

 Moreover, under the holding in Foley, plaintiff's cause of action for breach of the covenant of good faith and fair dealing is limited to contract damages only.  (Id., at pp. 684, 693, 254 Cal.Rptr. 211, 765 P.2d 373.)   Thus, plaintiff's allegations and prayer seeking punitive and other tort damages must be stricken from this count.

 The factual question remains, however, whether plaintiff incurred contract damages arising from defendant's alleged failure to follow the contractually prescribed policies and procedures.  (See also Gray v. Superior Court (1986) 181 Cal.App.3d 813, 821, 226 Cal.Rptr. 570, disapproved on another point in Foley v. Interactive Data Corp., supra, 47 Cal.3d 654, 254 Cal.Rptr. 211, 765 P.2d 373 [violation of personnel policies as a breach of the covenant of good faith and fair dealing is a factual question];  Kerr v. Rose (1990) 216 Cal.App.3d 1551, 265 Cal.Rptr. 597 [breach of personnel policies dealing with termination and recall is a factual question].)   We conclude that summary judgment on this cause of action was erroneously granted.


The judgment is reversed as to plaintiffs' first cause of action (breach of contract) and third cause of action (breach of good faith covenant);  in all other respects, the judgment is affirmed.   Each of the parties shall bear its respective costs on appeal.


1.   This claim has been abandoned on appeal.

2.   Since plaintiff does not seriously pursue her original claim of pretextual firing, we do not discuss it.

3.   Foley is fully retroactive and applies to all cases not then final.  (Newman v. Emerson Radio Corp. (1989) 48 Cal.3d 973, 976, 258 Cal.Rptr. 592, 772 P.2d 1059.)

FOOTNOTE.   See footnote *, ante.

RACANELLI, Presiding Justice.

NEWSOM and HOLMDAHL, JJ., concur.

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