MORTON v. SPECTRUM FABRICS CORPORATION (1987)

Appellant, Sue W. Morton, appeals from the judgment of the trial court which granted defendants', Spectrum Fabric Corporation (Spectrum) and Michael Lenvin (Lenvin), motion for directed verdict as to appellant's cause of action for breach of an implied covenant of good faith and fair dealing.

The Standard for Review

“ ‘A ․ directed verdict may be granted “only when, disregarding conflicting evidence and giving to plaintiff's evidence all the value to which it is legally entitled, herein indulging in every legitimate inference which may be drawn from that evidence, the result is a determination that there is no evidence of sufficient substantiality to support a verdict in favor of the plaintiff if such a verdict were given.”  [Citations.]  Unless it can be said as a matter of law, that, when so considered, no other reasonable conclusion is legally deducible from the evidence, and that any other holding would be so lacking in evidentiary support that a reviewing court would be impelled to reverse it upon appeal, or the trial court to set it aside as a matter of law, the trial court is not justified in taking the case from the jury.   [Citation.]  ․ the function of the trial court on a motion for a directed verdict is analogous to ․ that of a reviewing court in determining, on appeal, whether there is evidence in the record of sufficient substance to support a verdict.   Although the trial court may weigh the evidence and judge of the credibility of the witnesses on a motion for a new trial, it may not do so on a motion for a directed verdict.’  (216 Cal. at pp. 400–401 [14 P.2d 768].)  We have adhered consistently to the rules just set forth and have repeatedly reversed judgments entered on directed verdicts where the resisting party produced sufficient evidence to support a jury verdict in his favor.”   (Dailey v. Los Angeles Unified Sch. Dist. (1970) 2 Cal.3d 741, 745, 87 Cal.Rptr. 376, 470 P.2d 360;  quoting from Estate of Lances (1932) 216 Cal. 397, 14 P.2d 768.)

FACTS

Spectrum is in the business of converting fabrics from basic plain fabrics to printed fabrics.   The printed fabrics are then sold to manufacturers which use these fabrics in the construction of their own products.   During the years 1978 to 1982, Spectrum had offices in New York City and North Carolina, and also had a plant and warehouse in North Carolina.   Nationwide, it had a work force of about 100 people with a sales force of about 12 to 14.   The sales personnel were scattered throughout the country.   The Los Angeles office was located in the Furniture Mart Building.

Spectrum's owner and president was Herbert (Hy) Albert.   Bart Heinz, who was based in North Carolina was the vice president in charge of the upholstery division.   Among his duties was having authority over the Los Angeles office.   Mr. Heinz' counter part in the decorative division was Joe Giaconne.   Sales people in the Los Angeles office reported to both Heinz and Giaconne depending upon which products they were selling.   Lenvin joined Spectrum in 1975, became Western Sales Manager in 1981, and left in 1983.

Appellant was hired by Spectrum in 1978 as a secretary/customer service person in its Los Angeles office.   Within a year she was selling “seconds” over the phone and sometimes making personal calls to those customers who were located in the same building.   Her initial salary was $9,600 a year but within the next three years she had advanced to $16,500 a year.   Realizing she could not make much more money unless she worked in outside sales, she began asking about obtaining an outside sales position.   She was told by Lenvin she would be allowed to interview for a sales position should one become available.   Lenvin also told her that he would have her on the road and in sales by January 1982.   At one point she went out and bought a new car because Lenvin told her her older car was too small to carry all of the samples she would be required to carry once she was in sales.   Prior to this time, her only sales experience had been as a theatrical agent.   In fact, her two immediate jobs prior to coming to Spectrum had been as an employee of a driving school and as a bartender.   She had left the driving school to go to work for Spectrum because she had not been given a raise she had been promised.

In December 1981, a sales position became available and Spectrum began to look for capable, qualified and experienced sales people to fill the position.   Word was then spread throughout the industry.   Appellant was never informed of the opening or that interviews were being held.   When she did find out, she approached Lenvin and asked what was going on.   Lenvin answered that she “would be taken care of.”   Interviews were held at a hotel in Los Angeles for those applicants interested in filling the position.   Appellant was not granted an interview.   Ultimately Joseph Maria who had eight years of prior experience and had been working for Spectrum's direct competitor was hired.   Maria worked only for a period of six months before leaving Spectrum.   During that period of time he earned about $13,000.

In January 1982, appellant wrote a letter to Mr. Heinz in which she asked for an immediate raise to $1800 per month.   She stated that if she did not get it, Spectrum could consider the letter to be her two weeks notice.   She also objected to not being given the opportunity to interview for the sales position even though it was well known she was interested in sales.   Mr. Heinz replied he was sorry she felt “so put out” over the fact that she had not been considered for the position, but Spectrum would not honor her demand for an immediate 20 percent raise because it violated company policy.   Appellant then left her employment with Spectrum and obtained a new job where she received a starting salary of $20,000 per year.

Thereafter, appellant filed suit against Spectrum and Lenvin seeking damages for (1) deceit;  (2) breach of covenant of good faith and fair dealing;  and (3) employment discrimination.   Additionally, her husband sought damages for loss of consortium.

Just prior to trial, appellant dismissed her employment discrimination count and trial proceeded on the remaining two counts.   After the jury was instructed, but prior to deliberations, a motion for directed verdict was granted on appellant's cause of action for breach of the implied covenant of good faith and fair dealing.   A similar motion as to the fraud count was denied.   The jury returned a verdict with a finding that defendant ¹ had made a promise as to a material matter, and that at the time the promise was made, the defendant intended to perform it.

The appeal is from the judgment entered in favor of defendants and against appellants.²

The Granting Of A Directed Verdict Was Proper

Labor Code section 2922 provides that employment for an unspecified term is at will:  it may be terminated by either party for any reason whether good or bad.  (Cleary v. American Airlines, Inc. (1980) 111 Cal.App.3d 443, 448, 168 Cal.Rptr. 722.)   Needless to say, such a rule occasionally produced harsh results which appeared to be unjust, particularly in cases where there had been a long term employer-employee relationship.   This in turn has led to the development of a body of law that limits the employer's right to terminate an employee under unjust conditions.  (See Cleary v. American Airlines, supra, 111 Cal.App.3d 443, 168 Cal.Rptr. 722;  Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 164 Cal.Rptr. 839, 610 P.2d 1330; Pugh v. See's Candies, Inc. (1981) 116 Cal.App.3d 311, 171 Cal.Rptr. 917.)   Three separate theories have been used to justify these “wrongful termination” cases:  (1) a violation of public policy;  (2) violation of an implied covenant of good faith and fair dealing;  and (3) an implied in fact promise to retain the employer unless good cause is shown for termination.  (See Shapiro v. Wells Fargo Realty Advisors (1984) 152 Cal.App.3d 467, 475–476, 199 Cal.Rptr. 613.)

Appellant's position is that she comes within the coverage of this line of cases and therefore she is entitled to recover for a breach of the implied covenant of good faith and fair dealing.   However, she cites no cases, and this court has not found any cases in which a court of this state has allowed damages to be sought for an alleged wrong that occurred during the employment relationship which the employee thereafter voluntarily terminated.   In each reported case in which an employee has been allowed to sue, there has been a termination of employment under such circumstances as to indicate that the employee was being treated in a fundamentally unfair manner by the employer.

Thus in Cleary v. American Airlines, Inc., supra, 111 Cal.App.3d 443, 168 Cal.Rptr. 722, the defendant corporation terminated the employee after more than 18 years and refused to follow the very grievance procedure it had set up.   The employee was allowed to sue for wrongful discharge.   In Pugh v. See's Candies Inc., supra, 116 Cal.App.3d 311, 171 Cal.Rptr. 917, the company terminated the employment of the plaintiff after plaintiff had worked for the company for more than 31 years and had risen from dishwasher to vice president of the corporation.   The corporation also had a policy of not terminating administrative personnel except for good cause.   Additionally, plaintiff was never told why he was being dismissed, and there had never been criticism of plaintiff's work.   In such a case, termination without cause and without any explanation violated the covenant of good faith and fair dealing, and plaintiff was entitled to sue for damages.

In enforcing the covenant of good faith and fair dealing, the courts have not merely taken into account the length of employment, but they have also taken into account the actions of the defendant employer.   In Khanna v. Microdata Corp. (1985) 170 Cal.App.3d 250, 215 Cal.Rptr. 860, the employee was hired away from a rival corporation with promises as to certain commissions he would be able to collect.   When the defendant company reneged on the promise, the employee was forced to sue. When he sued, the defendant corporation fired him.   The court held that the defendant corporation's actions entitled the employee to sue for the damages caused by the defendant's apparent attempt to punish him for his assertion of his legal rights.

Likewise, in Rulon-Miller v. International Business Machines Corp. (1984) 162 Cal.App.3d 241, 208 Cal.Rptr. 524, the employee had worked for IBM for 12 years and had risen from receptionist to manager.   Even though her record was outstanding, she was fired for having a conflict of interest in that she was dating a manager of an IBM rival.   However, that fact was well known and in fact the rival was an ex-IBM employee who was still playing on the IBM softball team.   Moreover, IBM's written policy on conflicts of interest and privacy clearly showed that the employee was not violating IBM's own policy. Nevertheless, IBM attempted to bully her into making a decision to quit or be fired. When she did not decide quickly enough, she was fired.   In affirming the award, the court stated the evidence was more than sufficient for a jury to conclude the alleged conflict of interest was merely a pretext for her firing which had been tortious, without probable cause and in bad faith.

However, even longevity of employment does not guarantee that an employee may not be fired as long as the firing is for good cause.   Thus, in Crosier v. United Parcel Service, Inc. (1983) 150 Cal.App.3d 1132, 198 Cal.Rptr. 361, the employee was fired after 25 years after it was found he had lied about having a romantic relationship with a person under his supervision.   In that case, the employee had been warned about United Parcel's policy against cohabitation.   Moreover, the court recognized that United Parcel had a valid interest in avoiding the appearance of favoritism, possible claims of sexual harassment and employee dissension that can be created by romantic interests between management personnel and the people they supervise.

Finally, it is also clear that termination by itself does not state a cause of action for wrongful termination unless the employee can show a recognized exception to Labor Code section 2922.  (Shapiro v. Wells Fargo Realty Advisors, supra, 152 Cal.App.3d 467, 199 Cal.Rptr. 613.)

Here, appellant is asking us to extend a concept that was created to prevent employees from being terminated under extreme circumstances and for improper reasons to a nontermination situation where the employee is employed for a short time and thereafter voluntarily leaves his or her employment.   In essence, she alleges that the tort under which she sues is “a violation of good faith and fair dealing,” not “wrongful termination when there had been a violation of good faith and fair dealing.”   Even though this may be the case when there is a written contract (see Seaman's Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 768–769, 206 Cal.Rptr. 354, 686 P.2d 1158), we do not feel that we may properly extend that concept to this case where the employee was neither terminated nor demoted and thereafter voluntarily left her employment.   Accordingly, the trial court correctly granted the motion for directed verdict.

Other Issues

Appellant also alleges that certain evidentiary rulings that go to the issue of damages were wrongfully decided.   However, since appellant voluntarily dismissed one count, the jury found against her on a second count, and we have ruled that the granting of a directed verdict was proper as to the third count, the alleged errors are moot.

The judgment is affirmed.

FOOTNOTES

FOOTNOTE.  

1.   At trial all defendants were represented by one attorney, and the trial was conducted as if Spectrum was the sole defendant.

2.   Appellant and her husband purport to appeal from the judgment.   However, only one cause of action by appellant is discussed in her brief, and there is no mention in it of appellant's husband's cause of action.   We therefore treat husband's appeal as abandoned.

MUNOZ, Associate Justice.* FN* Assigned by the Chairperson of the Judicial Council.

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