RODIE v. MAX FACTOR CO (1989)

 Plaintiff Walter Rodie filed an action for wrongful termination and breach of the covenant of good faith and fair dealing ¹ after he was discharged from defendant Max Factor & Co.² following 31 years of employment.   Rodie appeals from an order granting summary judgment in favor of Max Factor.³

Rodie contends (1) the trial court erred in relying on the decision in Malmstrom v. Kaiser Aluminum & Chemical Corp. (1986) 187 Cal.App.3d 299, 231 Cal.Rptr. 820 to hold that an oral promise by Max Factor not to discharge Rodie was unenforceable, (2) Max Factor was barred from discharging Rodie by the doctrine of promissory estoppel, and (3) Max Factor acted in bad faith despite its assertion the discharge of Rodie was caused by a necessary reduction of its workforce.   For the reasons that follow we reverse the summary judgment.

FACTS

Rodie was hired by a Chicago subsidiary of Max Factor in 1952.   In 1972, Rodie signed a document entitled Employee Agreement which stated:  “The employment of Employee by Company shall continue only so long as shall be desired by both parties hereto.”

Rodie worked for Max Factor in California from 1974 to 1980, at which time he took a leave of absence for one year.   Upon his return, Rodie accepted a position in Utah as an area manager in the customer service department.

The declaration of Eugene Ploger, assistant controller for Max Factor, established that in 1982 he asked Rodie to return to California to be the operations manager for a new product line called Moisturessence.   Rodie replied he was interested but concerned “about losing his seniority and about his future job security” if this new product line failed.   Ploger spoke to John Phillips, the chief financial officer, who assured Ploger “that if Moisturessence closed” Rodie would be transferred to another position with Max Factor.   Phillips assured Ploger “that Mr. Rodie's job with Max Factor was not dependent on the success of Moisturessence.”   Ploger conveyed Phillips's assurances to Rodie and promised Rodie that if the Moisturessence line were eliminated, Rodie would be given another job with the company.   Ploger “specifically told him that his job future was not dependent on the success of Moisturessence.  [Ploger] wanted him to know that he was not going to be putting himself at risk by taking the position ․ at Moisturessence.”   Ploger knew “job security” was very important to Rodie and that Rodie “would not have agreed to leave Max Factor in Utah if his future was not secure.”   Rodie then accepted the position of operations manager for the new product line.

Although it was a financial success, the Moisturessence division soon was closed and, as part of the resulting “reorganization,” Rodie was discharged in 1983.   Max Factor asserts it “was undergoing severe financial difficulties” in 1982 and, in an attempt to reduce losses, initiated a program called “Overhead Valuation Analysis (‘OVA’).”   Rodie disputes these allegations and claims OVA was “merely a label for a list of names of persons targeted for termination.”

When Ploger learned of Rodie's termination, Ploger reminded Phillips of the latter's promise to find Rodie another job at Max Factor “if Moisturessence did not work out.”   Ploger “was very angry at Mr. Phillips for making the promise to Walter Rodie, and not backing it up,” but Phillips “did not do anything about Mr. Rodie's termination.”

DISCUSSION

ISTANDARD OF REVIEW

“ ‘The 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).)  In order to prevent the imposition of a summary judgment, the disputed facts must be ‘material,’ i.e., relate to a claim or defense in issue which could make a difference in the outcome.  [Citation.]  We recognize that summary judgment procedures are viewed as ‘drastic’ [citations];  however, the purpose of a summary judgment ‘is to expedite litigation by avoiding needless trials' [citation].”  (Burton v. Security Pacific Nat. Bank (1988) 197 Cal.App.3d 972, 976–977, 243 Cal.Rptr. 277.)

II

PLAINTIFF PRODUCED SUFFICIENT EVIDENCE TO PROCEED ON A CAUSE OF ACTION FOR BREACH OF AN ORAL PROMISE NOT TO DISCHARGE HIM IN THE EVENT THE NEW PRODUCT LINE WERE ELIMINATED

The trial court ruled that the decision in Malmstrom v. Kaiser Aluminum & Chemical Corp., supra, 187 Cal.App.3d 299, 231 Cal.Rptr. 820, was dispositive of the issue of breach of the alleged oral promise not to discharge Rodie.

The employee in Malmstrom signed a written agreement stating his employment would continue only as long “ ‘as shall be mutually agreeable to Employer and Employee.’ ”  (Id., at p. 309, 231 Cal.Rptr. 820.)   The court in Malmstrom first considered the employee's contention that, despite the written agreement, an implied agreement was created at the time the employee was hired that the employee would be discharged only for cause.   Relying on the parol evidence rule as codified in Civil Code section 1625 and Code of Civil Procedure section 1856 ⁴ (id., at 314, 231 Cal.Rptr. 820;  Marani v. Jackson (1986) 183 Cal.App.3d 695, 701, 228 Cal.Rptr. 518), the court found the written agreement was integrated and held “evidence of an implied agreement which contradicts the terms of the written agreement is not admissible.”  (Id., at p. 316, 231 Cal.Rptr. 820.)

The Malmstrom court next examined an alleged implied agreement arising from representations made by the employer several years later when the employee's job was relocated from California to Florida.   The employee, who was offered no other job in California, asserted his employer impliedly agreed that if he accepted the position in Florida he would not be discharged prior to his retirement.   One year later, the employee was discharged as part of a staff reduction necessitated by a decline in business.

The court held that the written agreement “precludes a contradictory implied promise” and noted that “[t]he only means by which the parties could enter a different agreement ․ would be a subsequent oral modification of the terms of the ․ agreement, a novation or an independent collateral agreement.”  (Id., at p. 317, 231 Cal.Rptr. 820.)   The court found no evidence of a novation because the parties did not intend to extinguish the prior written agreement.  (Id., at p. 318, 231 Cal.Rptr. 820.)   The court also ruled that there had not been an independent collateral agreement, because such an agreement cannot contradict the terms of a prior written contract.   (Ibid.)  The court then examined whether the parties orally had modified the contract pursuant to Civil Code section 1698.⁵  The court found lacking the new consideration required for an oral modification of a written contract, because the employee's job in California had been eliminated and for that reason the employee's acceptance of the Florida job caused him no detriment.

 Rodie contends the decision in Malmstrom is distinguishable because that case involved an integrated agreement and the present case does not.   In making this argument, Rodie erroneously focuses on that portion of Malmstrom which discusses application of the parol evidence rule.   The parol evidence rule, however, “precludes extrinsic evidence of prior or contemporaneous agreements that contradict, vary, or add to an integrated writing—it does not relate to future agreements and does not bar extrinsic evidence that proves that the parties subsequently modified their integrated writing.   [Citation.]”  (Beggerly v. Gbur (1980) 112 Cal.App.3d 180, 188, 169 Cal.Rptr. 166, emphasis in original.)   The parol evidence rule has no application in the present case because we are faced with an alleged promise made subsequent to execution of the written agreement and therefore governed by the requirements for modification of a written contract which are codified in Civil Code section 1698.  (Ibid.)

 Section 1698 provides that a “contract in writing may be modified by an oral agreement supported by new consideration.”   As correctly argued by Rodie, there is a triable issue of material fact whether the written employment agreement in the present case was modified by an oral agreement not to discharge Rodie in the event the Moisturessence line were eliminated.   A similar issue was addressed in Malmstrom, but in that case the appellate court concluded the alleged oral modification was unsupported by new consideration because the employee's position in California had been eliminated.   The court in Malmstrom reasoned that because the employee did not give up employment in California to move to Florida, his relocation was “ ‘only the same sort of detriment that ordinarily results to any employee who leaves one employment and goes elsewhere to accept another.’  [Citation.]”  (Malmstrom v. Kaiser Aluminum & Chemical Corp., supra, 187 Cal.App.3d 299, 318, 231 Cal.Rptr. 820.)   In the present case, Rodie presented evidence that he gave up secure employment in Utah to accept a newly created position in California and was concerned about his future in the event the new product line failed, and that his employer knew job security was very important to Rodie and knew Rodie “would not have agreed to leave Max Factor in Utah if his future was not secure.”   If believed by the trier of fact, this constitutes sufficient evidence of new consideration to establish an oral modification of the written agreement.

 The trial court relied on the holding in Malmstrom that “[a]n independent collateral agreement cannot contradict the terms of a prior written contract.  [Citations.]”  (Ibid.)   But the analysis in Malmstrom also demonstrates that a subsequent oral agreement that contradicts a written contract may nevertheless constitute a valid oral modification of the contract if supported by new consideration.

Because we conclude, for the reasons discussed above, that summary judgment should not have been granted, we need not address Rodie's additional contention that the doctrine of promissory estoppel foreclosed Max Factor from discharging Rodie.

III

PLAINTIFF PRESENTED SUFFICIENT EVIDENCE TO SUPPORT A CAUSE OF ACTION FOR BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING

 The viability of Rodie's cause of action for breach of the implied covenant of good faith and fair dealing depends upon whether the trier of fact determines the written agreement for at-will employment was modified by a subsequent oral agreement to transfer Rodie to another position in the event the Moisturessence line were eliminated.   In the absence of such an oral modification, the written employment agreement providing Rodie could be discharged for any reason would defeat a cause of action based on Rodie's allegation that he was discharged “without just cause.”  (Malmstrom v. Kaiser Aluminum & Chemical Corp., supra, 187 Cal.App.3d 299, 321, 231 Cal.Rptr. 820.)  “The covenant of good faith and fair dealing implied in every contract has been held in certain special cases to supply a requirement of good cause for termination where the contract itself is silent or ambiguous on that subject.  [Citations.]  No obligation can be implied, however, which would result in the obliteration of a right expressly given under a written contract.”  (Gerdlund v. Electronic Dispensers International (1987) 190 Cal.App.3d 263, 277, 235 Cal.Rptr. 279.)

 If a trier of fact were to find the contract had been modified to require that Rodie be transferred to another position in the event the Moisturessence line were eliminated, however, Max Factor's denial of the existence of this contract by discharging Rodie could constitute the tort of breach of the implied covenant of good faith and fair dealing.  (Malmstrom v. Kaiser Aluminum & Chemical Corp., supra, 187 Cal.App.3d 299, 321, 231 Cal.Rptr. 820.)

The recent opinion in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 700, 254 Cal.Rptr. 211, 765 P.2d 373, held “tort remedies are not available for breach of the implied covenant [of good faith and fair dealing] in an employment contract to employees who allege they have been discharged in violation of the covenant.”   Whether the decision in Foley applies retroactively or prospectively is an issue presently before the Supreme Court in Newman v. Emerson Radio Corp., L.A. 32284 (review granted Dec. 11, 1986).   The resolution of this issue, however, does not affect the outcome of the present case.

The court below based its ruling on a finding that the evidence submitted by Max Factor showing it had a valid business reason for discharging Rodie was uncontroverted.   But the validity of Max Factor's business reason for discharging Rodie is not the crucial issue.   If the written agreement was not modified, no reason for the discharge was necessary.   If the written agreement was modified, Max Factor was precluded under the oral modification from discharging Rodie based on the elimination of the Moisturessence line, even though that would have been a valid business reason, but still could discharge him for any other reason.   The issue is not whether Max Factor discharged Rodie for a valid business reason but whether the written agreement had been modified and, if so, whether Rodie was discharged for the reason (precluded by the subsequent oral agreement) that the Moisturessence line was eliminated.   Whether the written agreement had been orally modified and whether Rodie's discharge was the result of the elimination of the Moisturessence line were issues of disputed material fact, and summary judgment should not have been granted.

IV

THE TRIAL COURT CORRECTLY DECIDED THAT CALIFORNIA LAW GOVERNS THIS CASE

Max Factor asserts, as it did in the court below, that the law of Illinois should govern the present case because that was the state in which Rodie was hired by Max Factor and worked for 22 years, and in which the written employee agreement was executed.

“Questions of choice of law are determined in California ․ by the ‘governmental interest analysis' ․ [under which] the forum in a conflicts situation ‘must search to find the proper law to apply based upon the interests of the litigants and the involved states.’ ”  (Offshore Rental Co. v. Continental Oil Co. (1978) 22 Cal.3d 157, 161, 148 Cal.Rptr. 867, 583 P.2d 721, criticized on another ground in I.J. Weinrot & Son, Inc. v. Jackson (1985) 40 Cal.3d 327, 337, 220 Cal.Rptr. 103, 708 P.2d 682.)  “[T]he [mere] fact that two states are involved does not in itself indicate that there is a ‘conflict of laws' or ‘choice of laws' problem.”  (Id., at pp. 161–162, 148 Cal.Rptr. 867, 583 P.2d 721.)  “Although the two potentially concerned states have different laws, there is still no problem in choosing the applicable rule of law where only one of the states has an interest in having its law applied.   [Citation.]”  (Hurtado v. Superior Court (1974) 11 Cal.3d 574, 580, 114 Cal.Rptr. 106, 522 P.2d 666.)

 That Rodie's association with Max Factor began in Illinois, and the written employee agreement was executed there, has minimal relevance to this case because, as we have explained, Rodie's claim depends upon whether the alleged oral promise will be enforced.   This promise allegedly was made eight years after the written agreement was executed and at a time when Rodie was working in Utah.   The alleged promise was made by corporate officers of Max Factor who apparently were in California;  Rodie was thereby induced to accept a position in California, and later he was discharged in California.   Illinois has no interest in whether the oral promise is enforceable.   Accordingly, the trial court correctly decided that California law governs this case.

DISPOSITION

The summary judgment is reversed.   Appellant is to recover his costs on appeal.

FOOTNOTES

1.   A third cause of action for negligent infliction of emotional distress no longer is at issue.

2.   For ease of reference, we refer to all defendants collectively as Max Factor.

3.   Such an order is not appealable.   We treat the premature appeal, however, as an appeal from the subsequently entered judgment.   (Morales v. Coastside Scavenger Co. (1985) 167 Cal.App.3d 731, 733, fn. 1, 213 Cal.Rptr. 482.)

4.   Civil Code section 1625 provides:  “The execution of a contract in writing, whether the law requires it to be written or not, supersedes all the negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument.”Code of Civil Procedure section 1856, subdivision (a), 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.”

5.   Civil Code section 1698 provides, in part:  “(c) Unless the contract otherwise expressly provides, a contract in writing may be modified by an oral agreement supported by new consideration․  [¶] (d) Nothing in this section precludes in an appropriate case the application of rules of law concerning estoppel, oral novation and substitution of a new agreement, rescission of a written contract by an oral agreement, waiver of a provision of a written contract, or oral independent collateral contracts.”

GEORGE, Associate Justice.

McCLOSKY, Acting P.J., and GOERTZEN, J., concur.