Kern v. Palmer College of Chiropractic , 2008 Iowa Sup. LEXIS 156 ( 2008 )

APPEL, Justice

(special concurrence).

I concur with the thrust of the majority opinion in this case. I respectfully write separately to put the issues raised in this case in a fuller context.

This case presents a simple contractual dispute. Since time immemorial, the law of contracts provides that parties are entitled to bargain freely and that their agreements will be enforced in a court of law. Subject to narrow exceptions, such as eases where contractual terms violate fundamental public policy or are unconscionable, courts do not modify the terms of the contract or use judicial creativity to supply terms that are absent from the written agreement. Courts generally enforce contracts as written, plain and simple.

In this way, the parties themselves are allowed to structure their legal relationships as they see fit, not as the court might wish. Those with a philosophical bent will recognize the notion of individual liberty which inheres in our contract law. Our contract law is designed to empower parties, not discipline them, and to promote transparency and individual choice, not impose the social policy preferences of judges.

In this case, the contract agreed upon by the parties does not simply provide that Kern could be terminated for “just cause,” an admittedly amorphous term, but instead establishes detailed and demanding standards for termination. The contract also simply does not contain any language stating or even implying that termination decisions made by the employer are subject to some kind of deferential review when an employee claims that the contract has been breached. If the words of a contract are to have any meaning, such silence is a barrier, and not a springboard, for insertion by a court of new, unstated contractual terms.

Indeed, if anything were to be implied from the language that the parties did choose to include, it would be that the parties agreed that the burden on Palmer in terminating a faculty member was heavy and that any such decision was not to be cloaked with some kind of broad deference.

Of course, any employer may seek to include in its contract with an employee language that any employer decision related to termination is valid if it is “objectively reasonable.” It is undisputed, however, that no such term appears in this contract. In my view, that is the end of the matter. The contract should be enforced as any other contract, with fact finding made by the court or jury.

Any approach to this case that would imply deference to an employer’s decision to terminate an employee invents a round term that the parties chose not to include and seeks to force it into a square contract. It also proposes to do too much. Because the rule of law announced in this case has general applicability, an approach which implies deference to the employer’s termination decision would create by judicial fiat a framework where employer terminations, much like the actions of a state government agency under the Iowa Administrative Procedures Act, are subject to only limited judicial review.

I regard this approach as an act of social engineering. The unstated premise of the implied employer deference approach is that, as a matter of social policy, employers are entitled to a wide berth in making decisions whether or not to retain employees. A further unstated premise is that if the parties do not choose to embrace this premise in their contract, the court should ensure that the parties do so through the addition of an extraneous contractual term, even though the parties established detailed and specific termination provisions and chose not to incorporate employer deference in it.

The implied employer-deference position is rich in irony. This court has steadfastly refused to imply a duty of good faith and fair dealing in employment relationships. Phipps v. IASD Health Servs. Corp., 558 N.W.2d 198, 204 (Iowa 1997); French v. Foods, Inc., 495 N.W.2d 768, 771 (Iowa 1993); Fogel v. Trustees of Iowa Coll., 446 N.W.2d 451, 456-57 (Iowa 1989). The theory of these cases is that if the parties desire to impose such a duty, it must be specifically provided in contractual terms by the parties themselves, not by judicial implication. In this case, however, the implied-employer-deference approach would create what amounts to a cousin of the doctrine of good faith and fair dealing that protects the employer, even though there are no contractual terms that remotely support such an implication. Thus, the duty of good faith cannot be used as a sword by a potential plaintiff, but its cousin — implied employer deference to reasonable decisions made by the employer — may be used as a shield by an employer. This would be an unbalanced legal development.

It is, of course, highly debatable whether the implied deference to employer termination decisions is the best social policy, particularly in light of an employee’s interest in job security in our modern society. Indeed, if judicial thumbs are to be placed on the scale of justice in employment disputes, an argument could be made that, like insurance contracts, the thumb should be placed on the side of the employee, not the employer. In many employment situations, the employer has disproportionate bargaining power. In these cases, the argument could be made that employment contracts should be construed against the employer because of the realities of the modern workplace.

I also find it difficult to accept that it is somehow in the employee’s interest that the employer be given greater leeway in making termination decisions beyond the express provisions of the contract, thus decreasing the employee’s job security. It is inconceivable to me that a prospective teacher joining the faculty at Palmer intended that such an unexpressed term of deference to an employer’s termination decision would be implied into the contract for his or her own good.

In my view, instead of implying some kind of employer deference, our judicial thumbs should remain hooked through our belt loops as we impartially review employment cases. Employment relationships are rich and varied and simply defy convenient categorization. Rather than imposing some grand view tending to favor employers or employees, I believe the best course is to adopt a neutral policy toward the interpretation of employment contracts and simply enforce them by their agreed upon terms.

In addition, if we were to accept the implied-employer-deference approach, one would wonder what type of contracts would be next in line for special rules. In the end, instead of a unified theory of contracts, we could end up with a hefty compendium of special contract rules requiring lawyers to make Justinian distinctions that impede private choice, undermine the stability of contracts, and burden clients and their lawyers. Legal developments in the last hundred years have moved in exactly the opposite direction as artificial doctrinal distinctions have fallen by the wayside in favor of more generally applicable legal reasoning.

Moreover, the views expressed here are not reserved for contractual purists intoxicated by normative legal theory. Many courts have accepted the views expressed in this and the majority opinion. The leading case, of course, is Toussaint v. Blue Cross & Blue Shield of Michigan, 408 Mich. 579, 292 N.W.2d 880, 896 (1980). Courts in Nebraska, New Jersey, Ohio, South Dakota, and Vermont have also responded to the principles expressed here and in Toussaint, some of them with considerable enthusiasm. See Stiles v. Skylark Meats, Inc., 231 Neb. 863, 438 N.W.2d 494, 497 (1989); Witkowski v. Thomas J. Lipton, Inc., 136 N.J. 385, 643 A.2d 546, 553-54 (1994); Sowards v. Norbar, Inc., 78 Ohio App.3d 545, 605 N.E.2d 468, 473 (1992); Vetter v. Cam Wal Elec. Co-op., Inc., 711 N.W.2d 612, 618-19 (S.D.2006); Raymond v. Int'l Bus. Mach. Corp., 954 F.Supp. 744, 751 (D.Vt.1997).

In addition, many of the cases that give employers deference in termination decisions involve situations where the parties have only stated that termination may occur for “just cause” or similar vague phraseology. Sw. Gas Corp. v. Vargas, 111 Nev. 1064, 901 P.2d 693, 695 (1995); Simpson v. W. Graphics Corp., 293 Or. 96, 643 P.2d 1276, 1277 (1982); Baldwin v. Sisters of Providence in Washington, Inc., 112 Wash.2d 127, 769 P.2d 298, 299 (1989). It may be argued, I suppose, that the phrase “just cause” standing alone might be interpreted to include within its scope any reasonable and legitimate business reason. There is simply no reason to believe, however, that many of these courts would extend their judicial creativity to express contracts where the parties have agreed upon specific and detailed termination provisions in a written contract. To adopt the notion of implied employer deference in this case attacks Toussaint and its progeny not at its weakest position, but at its strongest point.

More importantly, however, the cases of this court support my view. In many cases in many contexts, we have repeatedly and in strong terms refused to supply terms that the parties for whatever reason chose not to include. In Smith v. Stowell, 256 Iowa 165, 172, 125 N.W.2d 795, 799 (1964), this court declared in stentorian terms,

[T]he court may not rewrite the contract for the purpose of accomplishing that which, in its opinion, may appear proper, or, on general principles of abstract justice, or under the rule of liberal construction, make for the parties a contract which they did not make for themselves, or make for them a better contract than they chose, or saw fit, to make for themselves....

More recently, in Thomas v. Progressive Casualty Insurance Co., 749 N.W.2d 678, 681-82 (Iowa 2008), we again firmly laid down the gauntlet against contractual heretics, reaffirming that courts have no province to rewrite insurance contracts.

And that’s not all. Even where parties expressly agree to indefinite terms to be determined in the future, we refuse to assist the parties by providing judicial resolution. Air Host Cedar Rapids, Inc. v. Cedar Rapids Airport Comm’n, 464 N.W.2d 450, 453 (Iowa 1990). Air Host rightly insists that the parties themselves must be accountable for their own contractual terms.

Further, this court cited Toussaint favorably in Hunter v. Board of Trustees of Broadlawns Medical Center, 481 N.W.2d 510, 516 (Iowa 1992). In Hunter, we noted that a jury was always entitled to determine the true reason for a discharge. There is no mention in Hunter of some kind of shroud of objective reasonableness that limited the power of the jury to make factual determinations.

The majority opinion has got it right. In Iowa, parties to an employment contract are generally free to negotiate their own terms. If an employer wishes to protect its freedom of action in termination decisions, it can seek to negotiate whatever terms it deems desirable. Where the employer, however, expressly agrees to a contract that establishes with specificity the reasons for potential dismissal, but does not expressly provide broad discretion in making dismissal decisions, the law requires a court to do its duty and simply enforce the contract according to its terms. The implied-employer-deference approach would require us to depart from well-established contract principles, impose what amounts to a reverse doctrine of good faith and fair dealing, and empower this court to sit as some kind of omniscient commerce commission to feather into private contracts terms that a transient majority of the court believe are desirable. The court wisely has declined to follow this path.