Blanton v. Housing Authority , 1990 Okla. LEXIS 45 ( 1990 )

DOOLIN, Justice.

This is an appeal by the Housing Authority of the City of Norman, hereinafter “Authority”, from the District Court of Cleveland County, Oklahoma. Duane H. Blan-ton, hereinafter “Blanton”, brought suit against the Authority for an alleged wrongful discharge from employment. Judgment was entered for Blanton following a jury verdict in his favor. Blanton was awarded $75,000.00 in actual damages and $44,449.00 for attorney fees. The Authority appeals from this judgment.

The function of the Authority is to set policy with respect to the public housing under its jurisdiction. Blanton was hired as the executive director in September of 1981, to administer this policy. He fulfilled this function by performing certain duties, which included hiring and supervising employees, overseeing the operations of Authority projects and reporting the business of the Authority to its Board of Commissioners, hereinafter “Board”.

On March 18, 1985, the Board voted to fire Blanton. Blanton alleges his dismissal was without notice and due to malice and ill-will on the part of certain members of the Board. Blanton claims the Authority had agreed that his employment would continue as long as his performance was satisfactory, and that both parties foresaw a long and continuing relationship. Blanton contends the agreement gave him a significant property interest in continued employment and therefore his wrongful termination deprived him of vested property rights without due process of law. In his second cause of action Blanton alleges the firing breached a covenant of good faith and fair dealing implied by law in his contract of employment. A third cause of action against one of the commissioners for defamation was dismissed before trial.

On appeal, the Authority argues it was error for the trial court to overrule its motions at the close of all evidence and to instruct the jury on the issue of good faith and fair dealing. The Authority’s specific arguments are threefold: First, the Authority contends that Blanton possessed no interest in continued employment. Second, it contends that because Blanton did not assert a liberty interest issue in either the petition or pre-trial statement, the court should not have considered the issue. Finally, the Authority argues the evidence is insufficient to support the finding of a breach of the implied covenant of good faith and fair dealing. The Authority further alleges the damages awarded to Blan-ton for future earnings were contrary to law and the award of attorney fees to Blanton was erroneous.

I.

The requirements of procedural due process apply only to the deprivation of interests encompassed by the Fourteenth Amendment’s protection of life, liberty and property.¹ When protected rights are implicated, the right to some kind of prior hearing is paramount.² However, the range of interests protected by procedural due process is not infinite.³ Property rights are not created by the Constitution, but by independent sources, such as state laws, which also define their dimensions.⁴ The commissioners themselves have a three-year property right in their positions pursuant to 63 O.S.1981, § 1058(A).⁵ However, while 63 O.S.1981, § 1058(D) allows the Authority to employ an executive director, there is no statute which grants a property interest to the executive director.⁶

The commissioners can only be removed for cause and are entitled to a post-termination hearing under 63 O.A.1981, § 1060.⁷ Blanton claims he is entitled to the same treatment. At trial Blanton relied on Cleveland Board of Education v. Loudermill⁸ which says once a state has conferred an expected interest in an employee through its civil service system, then such an employee can only be fired for cause, and is entitled to due process.⁹ Blanton argues because he was told that his employment would continue for as long as his work was satisfactory, a contract was created which implied he could only be fired for just cause and because of this he was entitled to due process.

The Authority claims to have had just cause to fire Blanton, but argues that such an assertion does not act as an admission that they could not fire him without just cause. The Authority further denies the existence of a "just cause only” term in Blanton’s employment contract.

The Tenth Circuit Court of Appeals addressed this issue in Asbill v. Housing Authority of the Choctaw Nation.¹⁰ The court held that if a policy restricts the reasons for discharge of an employee to just cause shown, then the employee has a right to employment until such cause is shown.¹¹ Blanton attempted to prove there was such a policy from the language of his employment agreement stating he was to continue as directed so long as his work was satisfactory. This contention must fail.

The Asbill court held that unless the employee could prove substantive restrictions on the employing authority’s power to discharge her, the employment must be considered to have been terminable at will.¹² Blanton simply has not offered sufficient evidence of a substantive restriction on the Authority’s power to discharge him. The only evidence offered by Blanton is his statement about the discussions between him and Board at the time he was hired. Blanton’s argument centers around his testimony under direct examination at trial, wherein he states, “as long as my work was satisfactory, why, I would hope to retire from that position.” Blanton went on to say that the Board expressed agreement with that view. However, we feel it is clear that discussions which may have occurred at Blanton’s interview, without more, cannot be viewed as creating a substantive restriction on the Authority’s power to dismiss him.

Absent evidence of a substantive restriction on the Board’s power to dismiss Blan-ton or any statute conferring upon him a property right in continued employment, we hold Blanton’s employment contract was terminable at will. As a result, Blan-ton possessed no constitutionally protected property interest in continued employment and it was error for the trial court to submit the claim to the jury.

II.

The Authority’s second proposition of error is that the jury was erroneously instructed on a liberty interest issue which was not asserted in Blanton’s petition or pre-trial statement. The Authority contends that property and liberty interests are separate rights which must be pled individually. Because Blanton pled only a deprivation of a property interest, the Authority argues it was without notice to defend the liberty interest issue and it was wrong for the trial court to instruct the jury on the issue under the “umbrella of due process”.

The Authority cites the Oklahoma Pleading Code, at 12 O.S.1984, § 2015(B) which governs the procedure to be used when issues are brought up at trial for the first time, and states in pertinent part:

If evidence is objected to at trial on the ground that it is not within the issues made by the pleadings or pre-trial conference order, the court may allow the pleadings or the pre-trial conference order to be amended and shall do so freely when the presentation of the merits of the action will be served thereby....

Blanton did not seek to amend his petition or pre-trial statement, but instead argued to the trial court that each interest need not be pled specifically because life, liberty and property interests are included when an allegation of a violation of due process is made. We must agree with this conclusion. Here, the petition filed by Blanton alleges facts which, if proven, would be sufficient to show a violation of his constitutionally protected liberty interest.

The Due Process Clause of the Fourteenth Amendment prevents any state from depriving any person of life, liberty and property without “due process” of law.¹³ The clause is not capable of technical conception, and cannot be transformed into a fixed formula for strict application by the courts.¹⁴ The interests protected interrelate to form one concept whose definition varies with every situation. Therefore, a plaintiff who pleads a due process violation is not required to plead, individually, the specific protections of life, liberty or property afforded by the due process clause.

The question now becomes what is the nature of such a violation and what kind and degree of evidence is necessary to withstand a motion for directed verdict.

This Court, like the Supreme Court of the United States, recognizes that an employee has a legitimate interest to seek other employment without being unfairly deprived of the liberty to do so.¹⁵ Such an unfair infringement of an employee’s liberty interest occurs when the circumstances of his or her discharge result in the publication of information which is false and stigmatizing, and which has the effect of curtailing the employee’s future freedom of choice or action.¹⁶

Having found Blanton’s pleadings were sufficient to allow the introduction of evidence as to the alleged deprivation of his liberty interest in seeking future employment we must now decide whether that evidence supported the trial court’s decision to overrule the Authority’s motion for a directed verdict on this issue.

A motion for directed verdict is an end-of-trial functional equivalent of a demurrer to the evidence.¹⁷ In ruling on a motion for directed verdict the trial court must search the pleadings for facts admitted as well as the evidence for facts proved to determine whether the evidence is sufficient to entitle the plaintiff to the relief asked.¹⁸ The motion for directed verdict should be sustained unless it reasonably appears that plaintiff’s injury was caused by some wrongful act of defendant in violation of a legal duty owing to plaintiff.¹⁹

In Asbill, supra, the 10th Circuit Court of Appeals clearly defined the kind of acts necessary to cause injury to a terminated employee’s liberty interest in seeking future employment. To violate its duty not to unjustly impair the employee’s liberty interest a discharging employer must not publish information which is false and stigmatizing.²⁰ The court went on to say:

The Supreme Court has indicated that for statements to be stigmatizing they must rise to such a serious level as to place the employee’s good name, reputation, honor, or integrity at stake. Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 2707 [33 L.Ed.2d 548] (1971). As an example, the Court has noted that a charge of dishonesty or immorality would be stigmatizing. Id. Such charges attach like a “badge of infamy” to an employee — how can they be satisfactorily explained or justified to future employers? Thompson’s statements, on the other hand, do not directly attack the character or integrity of Asbill. Rather, they indicate that Asbill disagreed with him on the question of his authority. Considering the circumstances, Asbill could explain this disagreement to future employers in a much more satisfactory manner than a statement denigrating her morality, credibility or integrity. It is true that the very need for explanation may make Asbill less desirable to some employers, but the Supreme Court has indicated that circumstances which make an employee “somewhat less attractive” to employers would hardly establish the kind of “foreclosure of opportunities amounting to a deprivation of liberty.” Id. at 574 note 13, 92 S.Ct. at 2707 note 13.

The record here shows the published statements about Blanton’s firing were that he disregarded the Board’s authority, that he permitted an unauthorized employee to sign checks, that he taped telephone conversations with Board members and then played them for the amusement of his staff, and that he made purchases on behalf of the Authority from a company owned by his brother and that those purchases “could look bad to the public.” One story cited a Board member as saying “Blanton was not accused of illegal actions or incompetency, but commissioners thought he used poor judgment.” The only one of these allegations refuted by Blanton was that he played the tape recorded conversations for other than business reasons.

After careful review of the record at trial and considering the nature of the published statements about why Blanton was fired, we conclude that the evidence presented by him was not, in light of Roth, supra, sufficient to entitle him to the relief asked. The evidence did not reasonably support the allegation that the delay in Blanton’s reemployment was caused by false and stigmatizing information published by Board members. The trial court, therefore, erred in overruling the Authority’s motion for directed verdict on the liberty interest cause of action.

III.

Blanton contends that even in at-will employment contracts, an employer may not fire an employee except for good cause shown. He claims that termination without cause constitutes a breach of the implied covenant of good faith and fair dealing. This argument must fail. In Burk v. K-Mart Corp.,²¹ we held that assuming that a covenant of good faith and fair dealing is implicit in every at-will employment relation, the covenant does not operate to forbid employment severance except for good cause.²²

Blanton relies on Hall v. Farmers Insurance Exchange,²³ to show he is entitled to damages for breach of the implied covenant of good faith and fair dealing. This reliance is misplaced. Hall is limited to its facts and is clearly distinguishable from the case at hand. In Hall, this Court held that a principal may not resort to the termination-at-will clause of an agency agreement for the purpose of depriving its agent of the “fruits of his labors.”²⁴ In that case Hall was an insurance agent who asked for damages for the reasonable amount of renewal commission he reasonably expected to receive in the future. The court specifically noted: “he [Hall] did not seek, nor was he awarded compensation based on any speculation as to new insurance policies he might have sold.”²⁵ This statement clearly shows the difference between Hall and the instant case. In Hall, the agent sought to recover the true fruits of his labor, commissions owed to him based on his pre-termination employment. Blanton is clearly seeking to recover for future, unearned income. Therefore, the holding in Hall is not applicable to this case and we will not extend such a remedy to the case where one seeks to recover future, unearned income.

In so holding, we join the general view taken by the courts which have considered the question of whether a duty to terminate for good cause should be implied in every at-will contract.²⁶ This view is that no such duty should be imposed on at-will employers. As in Burk, we decline to impose upon employers the duty not to terminate an at-will employee in bad faith.²⁷ Therefore, it was error for the trial court to submit Blanton’s claim for breach of the implied covenant of good faith and fair dealing to the jury.

We conclude that Blanton had no property right in continued employment, that he had no cause of action for bad-faith discharge, and that the evidence presented was insufficient to entitle him to relief for the deprivation of his liberty interest in seeking future employment. We must conclude, therefore, that there was no issue properly before the jury which could support a verdict in Blanton’s favor.

The judgment of the trial court is therefore REVERSED, and judgment entered for appellant, Housing Authority of the City of Norman.

HARGRAVE, C.J., and HODGES, LAVENDER, and SIMMS, JJ., concur. OPALA, V.C.J., concurs in judgment. ALMA WILSON, KAUGER and SUMMERS, JJ., concur in part, dissent in part.

1 . Board, of Regents v. Roth, 408 U.S. 564, 569, 92 S.Ct. 2701, 2705, 33 L.Ed.2d 548, 556 (1972).

2 . Id.; Boddie v. Connecticut, 401 U.S. 371, 379, 91 S.Ct. 780, 787, 28 L.Ed.2d 113, 120 (1971).

3 . Roth, 408 U.S. at 570, 92 S.Ct. at 2705, 33 L.Ed.2d at 557.

4 . Id.

5 . 63 O.S.1981, § 1058(A) provides in part: "... five persons shall be appointed as commissioners of the authority ... The term of office of each commissioner shall be for three (3) years

6 . 63 O.S.1981, § 1058(D) provides in part: "... An authority may employ an executive director, legal and technical experts and such other officers ... as it may require, and shall determine their qualifications, duties and compensation

7 . 63 O.S.1981, § 1060 provides in part: "For inefficiency, neglect of duty or misconduct [other reasons given] ... a commissioner of an authority may be removed ... but a commissioner shall be removed only after a hearing and after he shall have been given a copy of the charges at least ten (10) days prior to the hearing and had an opportunity to be heard ...".

8 . 470 U.S. 532, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985).

9 . Id. at 543, 105 S.Ct. at 1493, 84 L.Ed.2d at 503.

10 . 726 F.2d 1499 (10th Cir.1984).

11 . Asbill, at 1502.

12 . Id.

13 . U.S. Const, amend. XIV, § 1.

14 . Joint Anti-Fascist Refugee Comm. v. McGrath, 341 U.S. 123, 162, 71 S.Ct. 624, 643, 95 L.Ed. 817, 849 (1951).

15 .Bishop v. Wood, 426 U.S. 341, 96 S.Ct. 2074, 48 L.Ed.2d 684 (1976); Codd v. Velger, 429 U.S. 624, 97 S.Ct. 882, 51 L.Ed.2d 92 (1977); and see Asbill v. Housing Authority of the Choctaw Nation, Note 10 supra.

16 . Asbill, supra, 1503.

17 . Right Way Cleaners v. Knappenberger, 90 Okl. 277, 217 P. 399 (1923).

18 . Wiruth v. Hillcrest Memorial Hosp., 201 Okl. 607, 207 P.2d 782 (1949).

19 . Atchison Topeka and Santa Fe Ry. Co. v. Phillips, 158 Okl. 141, 12 P.2d 908 (1932).

20 . Asbill, at 1503.

21 . 770 P.2d 24 (Okl.1988).

22 . Id. at 27, citing language in Hinson v. Cameron, 742 P.2d 549 (Okl.1987).

23 . 713 P.2d 1027 (Okl.1985).

24 . Id. at 1030.

25 . Id. at 1031.

26 . See Pugh v. See's Candies, Inc., 116 Cal. App.3d 311, 171 Cal Rptr. 917 (1981); Fortune v. National Cash Register Co., 373 Mass. 96, 364 N.E.2d 1251, 1257 (1977); Brockmeyer v. Dun & Bradstreet, 113 Wis.2d 561, 335 N.W.2d 834 (1983).

27 . See also, Hinson, supra, Note 24, at 554.