Gregory Kern Vs. Palmer College Of Chiropractic, Robert Percuoco, Guy Riekeman, And Kevin Mccarthy, Individually

IN THE SUPREME COURT OF IOWA
No. 06–1054
Filed November 21, 2008
GREGORY KERN,
Appellant,
vs.
PALMER COLLEGE OF CHIROPRACTIC,
ROBERT PERCUOCO, GUY RIEKEMAN,
and KEVIN MCCARTHY, Individually,
Appellees.
Appeal from the Iowa District Court for Scott County, James E.
Kelley, Judge.
A discharged employee challenges summary judgment in favor of
the employer on a wrongful termination claim and the employer’s agents
on intentional-interference-with-contract claims. AFFIRMED IN PART;
REVERSED IN PART; AND REMANDED.
Jennie L. Clausen of Cartee & Clausen Law Firm, P.C., Davenport,
for appellant.
Robert D. Lambert of Bittner, Lambert & Werner, Davenport, for
appellees Palmer College of Chiropractic and Robert Percuoco.
Brendan T. Quann and Joshua P. Weidemann of O’Connor &
Thomas, P.C., Dubuque, for appellee Guy Riekeman.
Earl A. Payson of Earl A. Payson, P.C., Davenport, for appellee
Kevin McCarthy.
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HECHT, Justice.
In this case, a discharged employee sued his former employer for
breach of an employment contract, and sued three of the employer’s
agents for tortious interference with that contract. The district court
concluded the termination was, as a matter of law, for cause and granted
summary judgment to all of the defendants. We conclude the district
court erred in granting summary judgment to the employer and one of
the three individual defendants.
I. Factual and Procedural Background.
A reasonable fact-finder viewing the summary judgment record in
the light most favorable to the plaintiff, Dr. Gregory Kern, could find the
following facts. Kern was employed as an assistant professor by Palmer
College of Chiropractic. A written contract established the term of his
employment from October 1, 1995, to September 30, 2000. The parties
fully incorporated, as an “integral and binding part” of the contract, the
1988 Palmer College Faculty Handbook, which stated the terms and
conditions of employment for all Palmer College faculty members.
The faculty handbook declared the responsibilities of Palmer
faculty members, detailed the internal procedural protections available to
any aggrieved faculty member, and prescribed the grounds for
termination of faculty members’ employment. Section 6.61 of the
handbook addressed the grounds for termination:
Dismissal from appointment may be effected by the
College for the following causes:
1. Conduct seriously prejudicial to the College
through conviction of an infraction of law or
through moral turpitude.
2. Willful failure to perform the duties of the
position to which the faculty member is assigned
3
or willful performance of duty below accepted
standards.
3. Breach of College regulations adversely affecting
the College.
During a faculty meeting attended by Kern on November 30, 1999,
Dr. Donald Gran, Kern’s immediate supervisor, requested all faculty
members draft twenty-five questions suitable for inclusion in the
national chiropractic board examination. Gran described the proper
formatting for the questions, which were to be returned to Gran in an
electronic format. The task of writing such questions was not foreign to
the Palmer faculty, but in previous years Kern and several other
professors had routinely submitted proposed questions in handwritten
form. Gran also requested all faculty members under his supervision,
including Kern, draft and submit to him a statement of professional goals
for the year 2000. An email from Gran to faculty members provided a
model of the format to guide them in developing appropriate goals.1 In
February 2000, Gran reminded the faculty that the proposed national
board questions were due in electronic form by March 30.
On March 22, 2000, Gran’s secretary, Sharon Boyle, sent an email
reminder to several faculty members, including Kern, who had not
delivered to Gran their statements of professional goals. The email set a
new deadline of March 31 for completion of the task, and reiterated the
four criteria for appropriate goals:
1. List at least one primary goal you will achieve by
December 2000 relating to your classroom teaching,
research/scholarship, and service to the college.
1The summary judgment record is unclear whether Kern actually received this
and other messages during the spring of 2000 because of problems with the College’s
email system.
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2. For the goals listed, indicate the anticipated
administrative and/or collegial support necessary to
accomplish the goal.
3. For the goals listed, describe the tangible end product
which signifies the goal has been accomplished.
4. For the goals listed, describe the anticipated timeline
for any major milestones in accomplishing your goals.
Gran sent additional emails on March 28 and 29 reminding faculty
members who had not submitted goals that he expected completion of
the task “without fail” on March 31. Kern submitted hand-written
national board exam questions and a single goal to Gran sometime
between April 1 and April 4. Kern articulated his goal as follows:
1. My primary goal to be achieved by December 2000 is
to restore all departments campus wide. These goals
carry through to teaching, research/scholarship, and
especially service to the college.
2. Anticipated administrative help in this goal is very
minimal, anticipated collegial support, i.e. faculty is
going to have to be huge.
3. The tangible end product to this goal is clearly better
communication, better morale, and much better
quality for the students & faculty.
4. My anticipated timeline for this goal is: however long it
takes.
(Emphasis in original.) Kern’s reference in the statement to the
“restoration of all departments” adverted to a decision by Palmer’s
administration to shift from a departmental curriculum to a “year-based”
curriculum in mid-to-late 1999. Kern was dissatisfied with the
reorganization of the curriculum and believed it would negatively affect
Palmer students. He had openly expressed his doubts about the
suitability of the new organizational structure in questions posed to
Dr. Guy Riekeman, the president of the college, during a meeting of
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Palmer’s faculty senate in the spring of 2000. Dr. Riekeman responded
that anyone who disagreed with the reorganization could choose to leave.
Kern perceived a negative response from Palmer’s administrators
after that meeting of the faculty senate. One of Kern’s patients was an
acquaintance of Dr. Robert Percuoco, Palmer’s Dean of Academic
Affairs.2 The patient carried a message to Kern for Percuoco, advising
Kern to “watch his back” and informing Kern that his days at Palmer
were numbered because Percuoco would “see him fired.”3
Soon thereafter, Gran, who was supervised by Percuoco,
confronted Kern and placed a record in his personnel file warning against
excessive use of sick days. Kern was alarmed by this action as he had
used fewer sick days than the faculty handbook authorized for that year.
Gran also took issue with the substance of Kern’s stated goal, and
returned to Kern his proposed national board questions because they
were not properly formatted. In an April 7 email requesting that Kern re-
submit the questions electronically that day, Gran advised Kern to
contact Sharon Boyle for assistance with the formatting if assistance was
needed. Kern testified at his deposition that he accepted the offer of
assistance and turned his questions into Boyle for formatting on more
2Faculty members were permitted to engage in the practice of chiropractic
during the term of their employment with Palmer.
3Iowa Rule of Civil Procedure 1.981(5) provides “supporting and opposing
affidavits shall be made on personal knowledge, shall set forth such facts as would be
admissible in evidence, and shall show affirmatively that the affiant is competent to
testify to the matters stated therein.” The record contains no affidavit or sworn
testimony from the patient-declarant as to her alleged conversations with Percuoco.
The only evidence of Percuoco’s statements in the summary judgment record is Kern’s
double hearsay account of them. Although the admissibility of these hearsay
statements at trial is subject to question, Percuoco did not contend in the district court,
and does not contend on appeal, that the statements should be disregarded under rule
1.981(5). On the contrary, he conceded during the hearing on the summary judgment
that the district court should consider the statements attributed to Percuoco in the light
most favorable to Kern. We therefore consider them part of the summary judgment
record on appeal as well.
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than one occasion after receiving notice of the electronic format
requirement. On April 10, Gran sent a memorandum of reprimand to
Kern stating properly formatted exam questions had not been received.
Kern viewed Gran’s responses as harassment because he knew other
professors who were not computer-literate had submitted proposed
questions in handwriting and were accommodated with secretarial
assistance, and those professors were not reprimanded.
On April 13, 2000, Kern met with Gran and Dr. Kevin McCarthy,
the Vice President of Academic Affairs for Palmer College. McCarthy
angrily confronted Kern about the substance of Kern’s goal to return to
the former curriculum structure. Kern felt physically threatened by
McCarthy’s demeanor during the meeting. Although various email
messages sent to Kern after the meeting suggest McCarthy and Gran
expected Kern would prepare a new statement of goals, Kern asserted in
his deposition testimony that McCarthy expressly told him during the
meeting a new statement of goals would not be required.
Kern did not submit a new statement of goals after the April 13
meeting. After several subsequent email messages from college
administrators to Kern inquiring about the status of his proposed exam
questions and his goals, McCarthy sent a written ultimatum to Kern
directing him to submit both to Gran by noon on June 14, 2000, or
suffer dismissal. McCarthy sent copies of this ultimatum to Riekeman,
Percuoco, and Gran.
On June 14, a few minutes before the noon deadline, Kern
submitted to Gran a handwritten group of proposed national board exam
questions and a note. The message on the note reminded Gran that
Kern had previously submitted his statement of goals, and offered to
provide Gran another copy if Gran had misplaced it. On June 19,
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McCarthy sent Kern a letter dismissing him from employment for “willful
failure to perform the duties of the position to which the faculty member
is assigned and/or willful performance of duty below accepted
standards.”
Kern appealed his dismissal to the faculty judiciary committee as
authorized in the faculty handbook. A grievance hearing was held on
August 29, 2000, before the committee consisting of eight members.
Following the hearing during which both Kern and McCarthy testified,
the faculty judiciary committee issued its recommendation to Riekeman
on September 1, 2000. Addressing only the college’s claim that Kern’s
discharge was justified by his failure to timely submit satisfactory
professional goals in a proper format, the committee found that the
“totality of evidence presented during the hearing, in the opinion of the
committee, did not provide clear and convincing basis to justify the
rationale indicated in the letter of dismissal. . . .” The committee
therefore found meritorious Kern’s appeal of the grievance and
recommended his dismissal from the faculty be rescinded. President
Riekeman disagreed with the committee’s recommendation, and issued a
written decision on October 9, in which he found Kern’s employment was
properly terminated for violation of section 6.6 of the Faculty Handbook.
Kern subsequently filed this action alleging breach of contract by
Palmer College and intentional interference with contractual relations by
Percuoco, Riekeman, and McCarthy. All of the defendants moved for
summary judgment. Palmer’s motion asserted Kern had failed to raise a
genuine issue of material fact on his breach-of-contract claim. The
motions of the other defendants contended generally that Kern had failed
to generate a fact question in support of his allegation that the
defendants wrongfully interfered with his employment contract. The
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court granted Palmer’s motion for summary judgment, finding as a
matter of law Palmer had not breached the employment contract. The
court also granted summary judgment in favor of Reikeman, McCarthy,
and Percuoco, concluding as a matter of law Kern had failed to engender
a fact question on his claim that one or more of the individual defendants
caused Palmer to breach the contract.
II. Scope of Review.
We review a district court’s summary judgment ruling for errors at
law. Kelly v. Iowa Mut. Ins. Co., 620 N.W.2d 637, 641 (Iowa 2000). A
party is entitled to summary judgment when the record shows no
genuine issue of material fact and that the moving party is entitled to a
judgment as a matter of law. Iowa R. Civ. P. 1.981(3). The court views
the record in the light most favorable to the nonmoving party. Smidt v.
Porter, 695 N.W.2d 9, 14 (Iowa 2005) (citation omitted). “In deciding
whether there is a genuine issue of material fact, the court . . . afford[s]
the nonmoving party every legitimate inference the record will bear.” Id.
III. Discussion.
A. Summary Judgment in Favor of Palmer College. To
prevail in his claim for breach of contract against Palmer, Kern must
prove:
(1) the existence of a contract; (2) the terms and conditions
of the contract; (3) that [he] has performed all the terms and
conditions required under the contract; (4) the defendant’s
breach of the contract in some particular way; and (5) that
plaintiff has suffered damages as a result of the breach.
Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224
(Iowa 1998) (citing Iowa-Illinois Gas & Elec. Co. v. Black & Veatch, 497
N.W.2d 821, 825 (Iowa 1993)). The fighting issues in this case at the
summary judgment stage relate to the third and fourth elements of the
9
cause of action: the allegations of performance by Kern and breach by
Palmer.
When engaging in the construction of contracts we look to the
parties’ intent, as indicated by the terms of the contract. Iowa R. App. P.
6.14(6)(n). The question of whether the plaintiff has proved a breach of
contract is for the judicial fact-finder. See Davenport Bank & Trust Co. v.
State Cent. Bank, 485 N.W.2d 476, 480 (Iowa 1992) (“The existence and
terms of a contract and whether the contract was breached are ordinarily
questions for the jury.”).
The parties in this case concur that Kern’s employment contract is
a “for cause” contract.4 Generally an employee under such an agreement
may be terminated for reasons that relate to “performance of his or her
job and the impact of that performance on an employer’s ability to attain
its reasonable goals.” Lockhart v. Cedar Rapids Comm. Sch. Dist., 577
N.W.2d 845, 847 n.1 (Iowa 1998) (citing Briggs v. Bd. of Dirs., 282
N.W.2d 740, 743 (Iowa 1979)). “Cause” does not include “reasons which
are arbitrary, unfair, or generated out of some petty vendetta.” Id.
Rather than agreeing to a general “for cause” termination term, the
parties to this contract included a specific enumeration of what would
constitute a valid termination “for cause.” The contract provided Kern
could be terminated for “[w]illful failure to perform the duties of the
position to which [he] [wa]s assigned or willful performance of duty below
accepted standards.”5 Summary judgment in favor of Palmer is
4Courts variously refer to “for cause” contracts as “just cause,” “for cause,” “good
cause,” or “proper cause” contracts. We consider these appellations interchangeable.
See Lockhart v. Cedar Rapids Comm. Sch. Dist., 577 N.W.2d 845, 846–47 (Iowa 1998).
5As noted above, the contract also defined “good cause” to include “conduct
seriously prejudicial to the College through conviction of an infraction of law or through
moral turpitude” and “breach of College regulations adversely affecting the College.” As
these alternative definitions of “good cause” were not relied on by Palmer as a
10
inappropriate, then, if there is a genuine issue of material fact regarding
whether Kern’s conduct amounted to a “willful failure to perform” his
duties as an assistant professor, or whether his performance of those
duties fell “below accepted standards.”
In this case, Palmer concluded cause existed for the termination of
Kern’s employment. Palmer contends, and the district court concluded,
judicial review of the employer’s finding of cause for termination should
be constrained by deference for the employer’s decision. Kern responds
that employers have no legitimate claim to such deference because
judicial fact-finders are perfectly capable of making factual
determinations as to whether the parties’ contractual formulation of
causes for termination has been breached, much as they are trusted to
sort out whether a failure of performance has occurred in other contract
litigation.
A majority of courts addressing the standard by which
performance of employment contracts is judged view employment
contracts as fundamentally different from other contracts, and
consequently grant employers great deference in making “cause”
termination decisions. See, e.g., Braun v. Alaska Commercial Fishing &
Agric. Bank, 816 P.2d 140, 142 (Alaska 1991); Cotran v. Rollins Hudig
Hall Int'l, Inc., 948 P.2d 412, 420–22 (Cal. 1998); Towson Univ. v. Conte,
862 A.2d 941, 950–51 (Md. 2004); Southwest Gas Corp. v. Vargas, 901
P.2d 693, 701 (Nev. 1995); Kestenbaum v. Pennzoil Co., 766 P.2d 280,
287 (N.M. 1988); Thompson v. Associated Potato Growers, 610 N.W.2d
53, 59–60 (N.D. 2000); Simpson v. W. Graphics Corp., 643 P.2d 1276,
1279 (Or. 1982); Baldwin v. Sisters of Providence in Wash., Inc., 769 P.2d
justification for the termination of Kern’s employment, we do not discuss them further
in this opinion.
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298, 304 (Wash. 1989). In Towson University, for example, the court
concluded “the practical considerations of running a business
overwhelmingly favor a legal presumption that an employer retain the
fact-finding prerogative underlying the decision to terminate
employment.” 862 A.2d at 953. In jurisdictions following this rule of
deference to employers’ termination decisions, the judicial fact-finder’s
role is not to determine whether the facts underlying the employer’s
“cause” determination were actually true, or to conduct de novo review of
whether the facts found by the employer amounted to “cause” for
termination under the terms of the contract. Instead, the judicial fact-
finder determines only whether the cause claimed by the employer for
termination was “a fair and honest cause or reason, regulated by good
faith on the part of the party exercising the power,” based on facts
“supported by substantial evidence and reasonably believed by the
employer to be true,” and “not for any arbitrary, capricious, or illegal
reason.” Baldwin, 769 P.2d at 304. This approach is generally described
as judicial review for “objective reasonableness.” Towson Univ., 862 A.2d
at 954. To avoid summary judgment under the objective reasonableness
standard, a plaintiff who challenges an employer’s determination of
cause for a discharge must show the employer had no reasonable
grounds to believe sufficient cause existed to justify the termination.
Kestenbaum, 766 P.2d at 287.
The Michigan Supreme Court has adopted a different rule that
provides greater protection to employees who have secured “for cause”
terms in their employment contracts. In Toussaint v. Blue Cross & Blue
Shield of Michigan, 292 N.W.2d 880 (Mich. 1980), the Michigan Supreme
Court held the question of whether “cause” for termination actually
existed was for the fact-finder to decide. 292 N.W.2d at 895 (“[W]here an
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employer has agreed to discharge an employee for cause only, its
declaration that the employee was discharged for unsatisfactory work is
subject to judicial review. The jury as trier of facts decides whether the
employee was, in fact, discharged for unsatisfactory work.”). The
Toussaint court expressly rejected the narrower role of the judicial fact-
finder prevailing in the jurisdictions that review the reasonableness of an
employer’s termination decision:
[W]e have considered and rejected the alternative of
instructing the jury that it may not find a breach if it finds
the employer’s decision to discharge the employee was not
unreasonable under the circumstances.
Such an instruction would transform a good-cause
contract into a satisfaction contract. The employer may
discharge under a satisfaction contract as long as he is in
good faith dissatisfied with the employee’s performance or
behavior. The instruction under consideration would permit
the employer to discharge as long as his dissatisfaction
(cause) is not unreasonable. The difference is minute.
Where the employee has secured a promise not to be
discharged except for cause, he has contracted for more than
the employer’s promise to act in good faith or to not be
unreasonable. An instruction which permits the jury to
review only for reasonableness inadequately enforces that
promise.
Id. at 896. The court also rejected the employer’s argument that
“enforcing contracts requiring cause for discharge will lead to employee
incompetence and inefficiency,” noting employers (1) are not required to
enter “for cause” contracts, and (2) are permitted to contract for
standards of job performance. Id. at 896–97.
We conclude the Touissant rule should be applied under the
circumstances of this case. Our decision is strongly influenced by the
fact that Palmer and Kern defined the concept of “good cause” in their
employment agreement. The contract language thus established a
standard that is sufficiently definite to allow a fact-finder to determine
13
whether Palmer had “good cause” to support the termination of Kern’s
employment. We believe the existence of the specific contractual
standard diminishes the force of Palmer’s assertions that it should have
the right to determine what is or is not “good cause,” and that no fact-
finder should be permitted to substitute its judgment for the employer’s
on that question. Where, as here, the parties have adopted a specific
standard for the determination of “good cause,” we believe the Touissant
rule strikes an appropriate balance between the employer’s strong
interest in making employment decisions, and the employee’s substantial
interest in the employment security and stability offered by contracts
which may not be terminated at will, but only for specified “good cause.”
Notwithstanding the policy arguments advanced by courts according
deference to the employer’s prerogative, we conclude employment
contracts like the one at issue in this case providing specific definitions
of “good cause” are not so different from other contracts as to justify a
legal construct favoring the employer’s interests over those of
employees.6
Palmer contended, and the district court determined, that the
application of the objective reasonableness standard would be most
appropriate in this case because (1) Kern was given an opportunity for a
hearing before the faculty senate to challenge the termination, and (2)
the contract reflects the parties’ intent to maintain the employer’s
prerogative to make employment decisions with only circumscribed
judicial review. We disagree. The parties did not expressly contract as to
the prospect of judicial review of breach-of-contract claims and the
hearing before the faculty judiciary committee was not an apparent
6We leave for another day the decision of whether the Towson rule granting
greater deference to the employer’s determination of “good cause” should apply where
the employment contract fails to define the standard to be applied by the fact-finder.
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substitute for judicial review. The faculty senate’s decision on the merits
of Kern’s grievance carried no force because Palmer’s administration was
not bound under the contract to give it any weight. As it constituted only
a recommendation to Riekeman, the hearing process provided only
illusory security to Kern. Under the circumstances, we reject the notion
that the parties viewed the review by the faculty judiciary committee as a
legitimate substitute for the standard of judicial review which is the norm
in other contract litigation. Accordingly, the hearing process and
Riekeman’s review of McCarthy’s decision do not support Palmer’s claim
that an “objective reasonableness” standard of judicial review is
appropriate in this case.
Having concluded the district court erred in applying the “objective
reasonableness” standard in ruling on Palmer’s motion for summary
judgment we next consider whether the evidence in the record is
sufficient to sustain the summary judgment in favor of Palmer under the
Toussaint rule. We conclude it is not.
The evidence presented by Palmer suggests despite several
requests that he do so, Kern willfully failed to submit properly formatted
national board questions. Kern testified after his proposed questions
were returned to him, he re-submitted them directly to Palmer’s
secretarial staff for conversion to electronic format, but the handwritten
questions were again returned to Kern. Kern offered testimony in the
summary judgment record tending to prove he knew other faculty
members had submitted their proposed questions in handwritten form,
received secretarial assistance for formatting, and were not disciplined
for doing so. On this record, Kern has engendered a fact question as to
whether he willfully failed to perform his duty to submit proposed
15
national board questions, or willfully performed that duty below accepted
standards.
We also conclude a fact question exists as to whether Kern willfully
failed to comply with his duty to submit goals. At the summary
judgment stage we must credit Kern’s testimony that McCarthy told him
during the April 13 meeting he need not submit a new goal. Although
this claim is disputed by Palmer, we believe a fact question exists as to
whether McCarthy gave such assurance to Kern. Assuming, as we must
at the summary judgment stage, such assurance was given by McCarthy,
we conclude a genuine issue of material fact exists as to whether Kern’s
failure to submit a new goal constituted a willful failure to perform his
duty.
Other evidence in the summary judgment record supports our
determination that a fact question exists on the questions of whether
Kern willfully failed to perform his duties or willfully performed his duties
below accepted standards. The faculty judiciary committee determined
Kern’s alleged misconduct did not rise to the level of an offense that
would support termination under the faculty handbook. Additionally,
Dr. Glenn Sorgenfrey, a Palmer faculty member, opined in an affidavit
that other faculty members would not be fired for conduct such as
Kern’s. It is of course not the court’s role at the summary judgment
stage to weigh such evidence against the countervailing evidence in the
record. When viewed in the light most favorable to Kern, the faculty
judiciary committee’s non-binding determination and Dr. Sorgenfrey’s
affidavit offer some factual support for Kern’s claim he did not willfully
fail to perform his duties or willfully perform his duties below accepted
standards. Accordingly, we reverse the summary judgment on Kern’s
contract claim against Palmer.
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B. Liability of Defendants Riekeman, McCarthy, and
Percuoco. As we have already noted, the district court granted
summary judgment in favor of Riekeman, McCarthy, and Percuoco after
concluding, as a matter of law, Palmer established the absence of a fact
question as to whether Palmer breached its employment contract with
Kern. The court reasoned that because, as a matter of law, Palmer
committed no breach of Kern’s employment contract, the individual
defendants could have no liability for tortiously causing Palmer to breach
that contract. Having concluded the district court erred in granting
summary judgment in favor of Palmer, we next consider whether the
summary judgment record can sustain the summary judgment in favor
of the individual defendants.
At the summary judgment stage, we must determine whether the
record includes evidence from which a rational jury could find intentional
and improper interference. Green v. Racing Ass’n of Cent. Iowa, 713
N.W.2d 234, 243 (Iowa 2006). Although the district court did not
determine whether any of the individual defendants’ alleged actions were
improper, we may affirm the summary judgment ruling on a proper
ground urged below but not relied upon by the district court. DeVoss v.
State, 648 N.W.2d 56, 62 (Iowa 2002).
To recover for intentional interference with an existing contract, a
plaintiff must show:
(1) plaintiff had a contract with a third-party; (2) defendant
knew of the contract; (3) defendant intentionally and
improperly interfered with the contract; (4) the interference
caused the third-party not to perform, or made performance
more burdensome or expensive; and (5) damage to the
plaintiff resulted.
Green, 713 N.W.2d at 243 (quotations omitted). There is no dispute that
Riekeman and McCarthy knew of Kern’s contract and that they
17
intentionally caused Palmer to breach the contract. The controversy in
this case centers on whether the defendants’ alleged intentional
interference with Kern’s contract was “improper.” We look to the
following factors in deciding whether the defendants’ conduct was
improper:
“(a) the nature of the actor’s conduct, (b) the actor’s motive,
(c) the interests of the other with which the actor’s conduct
interferes, (d) the interests sought to be advanced by the
actor, (e) the social interests in protecting the freedom of
action of the actor and the contractual interests of the other,
(f) the proximity or remoteness of the actor’s conduct to the
interference and (g) the relations between the parties.”
Hunter v. Bd. of Trs. of Broadlawns Med. Ctr., 481 N.W.2d 510, 518 (Iowa
1992) (quoting Restatement (Second) of Torts § 767 (1981)). The
determination of whether the individual defendants’ actions in relation to
Kern’s employment were improper turns primarily on the nature of their
conduct, their motives, and a balancing of the respective interests of the
parties.
1. Defendant Riekeman. Riekeman’s role as Palmer’s President
was to make the final decision as to whether Kern’s employment should
be terminated. Riekeman reviewed McCarthy’s decision to terminate
Kern’s employment, considered the faculty judiciary committee’s
recommendation against termination, and made the final decision for the
institution he was hired to lead. These actions by Riekeman fall
comfortably within the range of usual and customary conduct expected
of an employer’s chief executive officer under the circumstances of this
case.
Kern claims, however, that summary judgment was improper in
this case because Riekeman’s termination decision was motivated by
improper personal animus and therefore constituted improper
18
interference. Kern supports this claim by reference to a statement made
by Riekeman during a meeting with faculty members. When Kern
challenged the wisdom of the revised curriculum during that meeting,
Riekeman bluntly stated that anyone who opposed the reorganized
curriculum could leave. Kern claims this statement evidenced
Riekeman’s motivation to rid the faculty of an employee who opposed
Palmer’s new curriculum structure. Although Riekeman’s statement,
when viewed in the light most favorable to Kern, suggests Riekeman
exhibited on that occasion a rather authoritarian management style, it
fails, as a matter of law, to raise a genuine issue of fact on the question
of whether Riekeman’s decision to terminate Kern’s employment was a
product of an improper motive. Even if we assume at this summary
judgment stage Riekeman’s sole motive in terminating Kern’s
employment was to eliminate from the faculty one who had openly and
consistently opposed the Palmer administration’s curriculum choices,
such a motive does not rise to the level of impropriety sufficient to
support Kern’s intentional tort claim under the circumstances presented
here. A manager’s motivation to maintain the employment of employees
who further the employer’s organizational objectives, and to terminate
the employment of employees who inflexibly oppose those objectives, is
not improper. The motive of a business manager who terminates the
employment of an employee in the latter category solely for the purpose
of advancing the employer’s legitimate business objectives is not
motivated by an improper purpose. Green, 713 N.W.2d at 245 (stating
that “[i]f the sole motive is a legitimate purpose derived from the law,
then any interference is not improper as a matter of law”). Kern has
failed to proffer, and the record does not disclose, any personal, non-
19
business-related motivation for Riekeman’s actions that could reasonably
be viewed as improper.
Kern’s interest in continued employment is, of course, substantial,
as is Riekeman’s interest in carrying out the business functions of
Palmer’s President. Having carefully considered the social interest in
protecting Riekeman’s ability to execute Palmer’s management objectives
and Kern’s contract interest in continued employment, Riekeman’s direct
personal involvement in the termination of Kern’s employment, and the
relations between the parties, we conclude the district court did not err
in granting summary judgment in favor of Riekeman. Finding no
evidence in the record tending to prove Riekeman’s conduct or motive
were improper, we conclude Kern has failed to generate a fact question
as to whether Riekeman improperly interfered with Kern’s contract. We
therefore affirm the summary judgment in favor of defendant Riekeman.
2. Defendant McCarthy. We next consider whether the district
court erred in granting summary judgment in favor of defendant
McCarthy, Palmer’s Vice President of Academic Affairs. Like Riekeman,
McCarthy had managerial responsibility over Kern and was intimately
involved in the termination of Kern’s employment. McCarthy contends a
reasonable fact-finder could only conclude his conduct fell within the
range of proper managerial conduct when he decided to effect the
termination of the employment of an employee who repeatedly refused to
comply with simple requests and clear directives. We disagree. Viewing
the evidence in the light most favorable to Kern, we believe a fact-finder
could determine McCarthy represented to Kern during the April 13
meeting that Kern need not submit new goals, and Kern relied upon this
representation in failing to submit new goals. Contrary to his alleged
representations at the April 13 meeting, however, McCarthy fired Kern in
20
part because he failed to submit new goals after that meeting. Accepting
this version of the facts as true as we must at the summary judgment
stage, we conclude a reasonable fact-finder could determine McCarthy
fraudulently induced Kern to engage in a course of conduct which would
eventually result in the termination of his employment contract.
Interference achieved through conduct that is dishonest, fraudulent,
malicious, or otherwise wrongful will support a finding that the
interference is improper. See Restatement (Second) of Torts § 766 cmts.
j, r, s. We conclude Kern has raised a genuine issue of fact as to whether
McCarthy’s conduct was dishonest, clearly outside the bounds of proper
managerial conduct, and therefore “improper” under section 767.
Kern further asserts the summary judgment record, when viewed
in the light most favorable to him, includes evidence tending to prove
McCarthy had an improper motive for his conduct. Characterizing
McCarthy’s anger during the April 13 meeting as sufficient to put him in
fear of an act of physical aggression, Kern contends a reasonable fact-
finder could determine McCarthy’s alleged misrepresentation and his
decision to terminate Kern’s employment were motivated by personal
animus and therefore “improper” under section 767. “Satisfying one’s
spite or ill will is not an adequate basis to justify an interference and
keep it from being improper.” Id. § 766 cmt. r; see also id. § 767 cmt. d
(“A motive to injure another or to vent one’s ill will on him serves no
socially useful purpose.”). And as we have noted, the termination of an
employee’s employment for “reasons which are arbitrary, unfair, or
generated out of some petty vendetta” advances no legitimate goal of a
corporation. Lockhart, 577 N.W.2d at 847 n.1. We conclude Kern has
produced minimally sufficient evidence that McCarthy improperly
21
interfered with Kern’s contract so as to preclude summary judgment on
this claim.
3. Defendant Percuoco. We next consider whether the district
court erred in granting summary judgment in favor of defendant
Percuoco, Palmer’s Dean of Academic Affairs. Unlike defendants
Riekeman and McCarthy, Percuoco does not contend he is shielded from
liability because his conduct and motive in connection with Kern’s
termination were proper. Percuoco instead contends Kern has produced
insufficient evidence to support a claim that Percuoco’s conduct played a
causative role in Kern’s termination.
It is Kern’s burden to prove Percuoco intentionally and improperly
interfered with the contract. Restatement (Second) Torts § 766 cmt. o
(noting question of whether the defendant’s conduct caused a breach of
contract is a question of fact). Viewed in the light most favorable to Kern,
the record shows Percuoco vaguely proclaimed to members of his church
congregation several months before Kern was terminated that he was
“battling evil at Palmer.” Percuoco asked his fellow parishioners to pray
for strength that he might “do acts he found distasteful.” He also told a
fellow parishioner that Dr. Kern “better watch his step because
troublemakers g[e]t their just rewards,” stated that Kern’s days were
numbered at Palmer, and vowed to “see [Kern] fired.”
While this evidence certainly evidences Percuoco’s motivation to
cause the termination of Kern’s employment, and could be reasonably
understood as evidence of Percuoco’s personal animus toward Kern,
these statements alone cannot suffice to generate a genuine issue of fact
on Kern’s intentional interference claim. The record is devoid of evidence
of any conduct by Percuoco in furtherance of any improper motive
leading to Kern’s termination. Kern presented no evidence tending to
22
prove Percuoco communicated to Riekeman or McCarthy his desire to see
Kern fired, or that Percuoco otherwise influenced or attempted to
influence McCarthy or Riekeman to cause Kern’s termination. In the
absence of evidence tending to prove Percuoco engaged in some conduct
calculated to effect Kern’s discharge, we must conclude the district court
correctly granted summary judgment in Percuoco’s favor.
IV. Conclusion.
Having found genuine issues of fact remain for trial on Kern’s
contract claim, we reverse the summary judgment in favor of Palmer. We
affirm the district court’s grant of summary judgment in favor of
defendants Riekeman and Percuoco. We reverse the summary judgment
granted in favor of defendant McCarthy, and remand for further
proceedings consistent with this opinion.
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.
All justices concur except Cady, Wiggins, and Appel, JJ., who
specially concur separately, and Baker, J., who takes no part.
23
#06–1054, Kern v. Palmer Coll.
CADY, Justice (special concurrence).
I concur in the result reached by the majority because I agree a
jury question is presented in this wrongful termination lawsuit to
warrant a trial. I disagree, however, with the minority rule adopted by
the majority to govern the resolution of the trial.
I believe the majority incorrectly adopted the Touissant rule by
failing to engage in a proper construction of the employment contract.
The majority does not consider the intent of the parties as evidenced by
the context surrounding the contract, but, instead, essentially decides
the legal effect of the contract as a matter of policy. As a result, the
majority misconstrues the jury question engendered by the contract
entered into by the parties. The approach taken by the majority will
allow the jury in wrongful-termination lawsuits involving specific or good-
cause employment contracts to revisit an employer’s decision to
terminate the employee and to make that decision anew based on the
jury’s own assessment of the surrounding facts and circumstances. I
believe this approach risks ignoring the intent of employers and
employees, unduly interferes with the decision-making that takes place
within the broader environment of the management of a business, and
will ultimately drive specific-cause or good-cause termination provisions
from employee handbooks and cause employers to return to the world of
at-will employment. The approach taken by the majority is a turn in the
wrong direction for employees and employers and, in particular, strips
employers of an aspect of discretion essential to the operation of a
business.
A brief review of the claim is necessary to clearly identify the
important issue at stake in this case. The college provided its faculty
24
with a handbook that identified the grounds for termination of
employment, including “willful failure to perform [assigned] duties” or
“willful performance of duty below accepted standards.” Kern was
discharged by his employer under these grounds and brought a
wrongful-termination action based on breach of contract. This lawsuit
presented the issue of whether Kern’s performance qualifies as grounds
for termination as described in the handbook. Kern claimed the conduct
relied upon by the college to terminate him did not amount to the
grounds for termination identified in the handbook. The college, on the
other hand, claimed it was reasonably justified in determining the
specified grounds for termination exist. In concluding the lawsuit
presented a jury question, the majority has determined the jury should
decide at trial if the grounds for termination exist.
Unlike the majority, I would not conclude the jury should decide at
trial if Kern’s conduct, as shown by the evidence presented by the parties
at trial, constitutes the grounds for termination. I believe the jury should
decide the facts of the case, but the question of fact it should decide is
whether the employer was reasonable in deciding the employee’s conduct
amounted to the grounds of termination. This important distinction is
necessary to effectuate the intent of employers and employees. I find it
inconceivable that any reasonable employee or employer would expect a
jury to decide the ultimate fact of whether cause existed, independent of
the judgment and authority first exercised by the employer.
Ultimately, the question of whether the employer contracted away
the authority to decide when cause exists to another arbiter must be
derived from our construction of the contract at issue. Of course, the
language of the handbook does not provide any specific guidance.
Nevertheless, in construing contracts, we seek to carry out the intent of
25
the parties. Iowa R. App. P. 6.14(n) (“In the construction of written
contracts, the cardinal principle is that the intent of the parties must
control; and except in cases of ambiguity, this is determined by what the
contract itself says.”).
In considering what the parties to this employment relationship
intended, it is important to recognize that the specific-termination clause
clearly required the employer to the make the decision, along with
myriad other business decisions employers must make from day to day.
There is no indication the parties believed the employer would make the
specific-cause decision under standards different from the hundreds of
other decisions made by an employer in the course of operating the
business.
Additionally, the dramatic difference between the two standards at
issue supports an intention that a reasonable-employer standard be
used. Business decisions—such as the decision to hire or fire an
employee—are made in the real world. Towson Univ. v. Conte, 862 A.2d
941, 953 (Md. 2004). As such, these decisions commonly rely on
hearsay, past conduct, personal credibility, “and other facts the judicial
process ignores.” Id. By giving the jury the task of deciding whether
specific cause exists in this case, the Touissant rule effectively forecloses
employers from relying on these common sources. Nothing about the
decision to enter into a specific-cause employment contract suggests the
parties intended the employer would be required to make the decision
without these common sources of information. By adopting the
Touissant standard, the majority has effectively concluded that is exactly
what the parties intended. See Waters v. Churchill, 511 U.S. 661, 667,
114 S. Ct. 1878, 1889, 128 L. Ed. 2d 686, 700 (1994) (choosing the
26
majority standard in a wrongful-termination case with First Amendment
implications).
The majority relies on the parties’ definition of “good cause” in the
employment agreement—establishing a standard a judicial fact finder
can reference to determine whether good cause existed—to conclude we
should adopt the Touissant standard in order to appropriately “balance”
the parties’ interests. This argument ignores the reality that a definition
of good cause and who decides whether good cause exists, as defined, are
distinct questions. Additionally, when the issue is viewed as one of
contract construction instead of as a question of policy, it is clear the
parties’ definition of good cause militates against application of the
Touissant standard here. Where good cause is defined in the
employment contract, the employee is protected against the caprice of
the employer by that definiteness. It simply does not follow that, where
the contract gives greater protection to the employee in the first instance,
the parties also intended the employee receive the additional protection
of allowing the jury to decide anew whether good cause existed.
I otherwise concur with the majority’s disposition of the claims
against the individual defendants.
27
#02/06–1054, Kern v. Palmer Coll.
WIGGINS, Justice (special concurrence).
I join in the majority opinion and concur with the views expressed
by Justice Appel in his special concurrence.
28
#06–1054, Kern v. Palmer Coll.
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 cases 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,
29
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
30
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
31
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.
32
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, 292 N.W.2d 880, 896 (Mich. 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., 438 N.W.2d
494, 497 (Neb. 1989); Witkowski v. Thomas J. Lipton, Inc., 643 A.2d 546,
553–54 (N.J. 1994); Sowards v. Norbar, Inc., 605 N.E.2d 468, 473 (Ohio
Ct. App. 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. Corps., 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, 901 P.2d 693, 695 (Nev. 1995);
Simpson v. W. Graphics Corp., 643 P.2d 1276, 1277 (Or. 1982); Baldwin
v. Sisters of Providence in Washington, Inc., 769 P.2d 298, 299 (Wash.
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.
33
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
34
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.