CORL v. HURON CASTINGS, INC.
Case Details
- Citation
- 450 Mich. 620
- Judge(s)
- Brickley, C.J., and Mallett and Weaver, JJ., concurred with Riley, J.; Levin, J., concurred with Cavanagh, J.
- Procedural Posture — the stage the case had reached
- appeal
- State
- Michigan
Related Laws
No specific laws identified for this ruling.
Claim Types
Outcome
Michigan Supreme Court reversed the Court of Appeals and held that unemployment compensation benefits must be deducted from a wrongful discharge damages award under contract law principles, not the collateral source rule from tort law.
Excerpt
CORL v HURON CASTINGS, INC Docket No. 98054. Argued October 10, 1995 (Calendar No. 1). Decided March 1, 1996. William L. Corl brought a wrongful discharge action in the Huron Circuit Court against Huron Castings, Inc. The parties stipulated the amount of damages, reflecting a reduction for unemployment compensation benefits received, and that if the plaintiff prevailed the trial judge would determine whether the award could be enhanced by the amount of the benefits. The court, M. Richard Knoblock, J., found that the plaintiff was wrongfully discharged in violation of Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich 579 (1980), entered judgment following a jury verdict for the plaintiff, and, on the basis of Pennington v Whiting Tubular Products, Inc, 370 Mich 590 (1963), added the unemployment compensation benefits as stipulated. The Court of Appeals, Shepherd, P.J., and McDonald and Neff, JJ., affirmed in an unpublished memorandum opinion (Docket No. 140650). The defendant appeals. In án opinion by Justice Riley, joined by Chief Justice Brickley, and Justices Mallett and Weaver, the Supreme Court held: The collateral source rule is a tort law concept and does not apply in cases of common-law contract. In accordance with accepted principles of contract law, the plaintiff’s damage award must be reduced by the amount of unemployment compensation received. 1. The collateral source rule is a concept of tort law, providing that recovery of damages from a tortfeasor is not to be reduced by a plaintiff’s receipt of compensation for injuries from other sources. In this case, however, the plaintiff’s cause of action does not arise in ,tort; rather, it is a wrongful discharge action sounding in and governed by principles of common-law contract. Thus, the collateral source rule does not apply. 2. The Worker’s Disability Compensation Act compensates for wage loss. MCL 418.358; MSA 17.237(358) prevents duplication of worker’s compensation awards and unemployment compensation benefits and, thus, undermines the relevant language of Pennington. Pennington involved a breach of a collective bargaining agreement; therefore, its reliance on a tort action for personal injuries is misplaced. The language in Pennington supporting the deduction of unemployment compensation benefits is dicta. 3. The Legislature has developed a complex formula for the funding of unemployment compensation benefits. An employer’s liability to pay unemployment compensation arises, in part, in proportion to the amount its former employees receive in unemployment compensation benefits. In this manner an employer is ultimately responsible for its employees’ unemployment compensation claims. The extension of the collateral source rule to the area of contract law would serve no public policy goals. Reversed and remanded. Justice Cavanagh, joined by Justice Levin, dissenting, stated that the doctrine of legislative acquiescence is well established as a wisely self-imposed limitation of the appellate process. It is grounded in the court’s duty to ascertain and give effect to the legislative intent and the presumption that, when revising or amending a statute, the Legislature is aware of previous interpretations of that statute by the appellate judiciary. Failure to revise provisions previously construed by the appellate judiciary compels the assumption that the Legislature was content with such construction. The conclusion of the Supreme Court in Pennington regarding the propriety of deducting unemployment benefits from ultimate damage awards was stated with the intent that it be heeded by the trial court on remand. The Legislature’s conscious failure to express any disagreement with Pennington in its numerous revisions of the Employment Security Act gives rise to a paradigmatic situation for application of the legislative acquiescence doctrine. The judgment of the Court of Appeals in this case should be affirmed. The remedy for breach of contract is to place the nonbreaching party in as good a position as if the contract had been fully performed. However, not all contracts are fungible for purposes of this remedy. The majority mistakenly believes that payment of wages is the sole consideration an employee receives from an employer under an employment contract. The purpose of the Employment Security Act is to combat the economic insecurity due to unemployment that manifests itself in terms of lost wages and other possible incidents of a layoff that may affect a worker at an earlier or later time. The Legislature knowingly chose not to require the setoff mandated by the majority. Recouping wages alone does not put an employee in as good a position as if the employment contract had been fully performed. Justice Boyle, dissenting, stated that the Legislature’s failure to provide for setoff of unemployment benefits requires application of the collateral source rule. The issue in this case cannot be resolved by rote application of the distinction between contract and tort. Fundamentally, Toussaint is a fault-based doctrine, and its legitimate-expectations prong is an equitable principle not based on traditional contract analysis. Likewise, principles not grounded in traditional contract law have been associated with its implied-contract prong. Toussaint changed the common law, holding that personnel policies and practices could create a just-cause employment contract, even when no preemployment negotiations take place and there is no mutual assent on the subject of job security. It imposes a duty on employers to adhere to stated company policies and goals, and entitles plaintiffs to pursue a cause of action when employers breach this duty. Toussaint’,s sole ratio decidendi is that, in some circumstances, termination at will is unfair. Thus, rejection of the collateral source rule in this context cannot rest on a semantic distinction between fault-based causes of action and Toussaint claims. Because no consideration is given to collateral losses, manifestly no consideration need be given to collateral benefits that employees may have received. Allowing a setoff of the entire amount of unemployment benefits received by the plaintiff in this case is an overcredit. Michigan employers do not pay into the unemployment benefits fund dollar for dollar what the employee takes out. Although in some sense paid for by the employer in the form of a tax, the unemployment benefits are not paid by the employer to the plaintiff, but, rather, are paid by the state out of state funds. To judicially approve a full deduction to the employer would be to grant more credit than is due and to preclude reimbursement of the fund. The nature of the claim does not dictate offset by the judiciary, and the Legislature’s failure to do so indicates that it does not disapprove of Pennington. Berkley, Mengel & Vining, P.C. (by Christopher E. Mengel and Guy C. Vining), for the plaintiff. Braun, Kendrick, Finkbeiner (by John A. Decker and Scott C. Strattard) for the defendant. Riley, J. In this action for breach of employment contract, plaintiff employee was wrongfully discharged in violation of Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich 579; 292 NW2d 880 (1980). We are asked to decide whether plaintiff’s unemployment compensation benefits should be deducted from his breach of contract damage award. In accordance with accepted principles of contract law, we hold that plaintiff’s unemployment compensation benefits must be deducted from his subsequent damage award. Moreover, we conclude that this result best effectuates the intent of the Legislature by preventing the duplication of an employee’s wage loss replacement. The judgment of the Court of Appeals is reversed, and the case is remanded to the trial court for entry of an award consistent with this opinion. i Plaintiff William Corl was employed by defendant Huron Castings in July 1981. He remained an employee until he was terminated in May 1988. After his termination, he filed a wrongful discharge claim pursuant to Toussaint, supra. Before trial, the parties stipulated that plaintiff’s damages were $16,500. This figure reflected a $6,200 deduction for unemployment compensation benefits plaintiff had already received. The parties also agreed that, in the event the jury returned a verdict in favor of plaintiff, the trial judge would determine whether the award could be enhanced by $6,200. The case was tried before Judge Knoblock in the Huron Circuit Court. The jury returned a verdict for plaintiff, and, as stipulated, a judgment for $16,500 was entered. Plaintiff then petitioned the court to enhance the award by $6,200. Plaintiff argued that the unemployment compensation benefits were a collateral source and should be added to the contract damage award. On the basis of Pennington v Whiting Tubular Products, Inc, 370 Mich 590; 122 NW2d 692 (1963), the trial judge agreed and added the unemployment compensation benefits to the judgment. The judge conceded that the result was illogical, but felt obligated to follow Pennington. Defendant appealed, and the Court of Appeals affirmed in an unpublished memorandum opinion, explaining that although defendant’s argument had some merit, it was likewise constrained to follow Pennington. Defendant filed an application for leave to appeal. We granted leave and now reverse the opinion of the Court of Appeals. n We are required to assess plaintiff’s damages in this wrongful discharge action. Plaintiff pleaded and proved his case on the basis of Toussaint. In Toussaint, supra at 610, this Court stated: "We hold only that an employer’s express agreement to terminate only for cause, or statements of company policy and procedure to that effect, can give rise to rights enforceable in contract.” (Emphasis added.) The remedy for breach of contract is to place the nonbreaching party in as good a position as if the contract had been fully performed. Accordingly, the goal in contract law is not to punish the breaching party, but to make the nonbreaching party whole. A Cognizant of these principles, we evaluate plaintiff’s assertion that the collateral source rule allows full recovery from defendant notwithstanding the unemployment compensation benefits he received. The collateral source rule is a concept of tort law which provides "that the recovery of damages from a tortfeasor is not reduced by the plaintiff’s receipt of money in compensation for his injuries from other sources.” Tebo v Havlik, 418 Mich 350, 366; 343 NW2d 181 (1984) (emphasis added). In a unanimous decision by this Court in Ferrett v General Motors Corp, 438 Mich 235; 475 NW2d 243 (1991), we reaffirmed Toussaint, supra, holding that the plaintiff’s cause of action was not in tort. In Ferrett, supra at 239, the defendant brought an action for breach of contract and negligent evaluation after he was terminated for "excessive absenteeism.” We declined "to recognize an action in tort for negligent evaluation,” stating that an action could "be maintained, if at all, only for breach of a contractual obligation to evaluate.” Id. at 242. Of importance to the present case, we then announced the underlying theory for refusal to recognize a claim in tort: "We have simply the violation of a promise to perform the agreement. The only duty, other than that voluntarily assumed in the contract to which the defendant was subject, was his duty to perform his promise in a careful and skillful manner without risk of harm to others, the violation of which is not alleged. What we are left with is defendant’s failure to complete his contracted-for performance. This is not a duty imposed by the law upon all, the violation of which gives rise to a tort action, but a duty arising out of the intentions of the parties themselves and owed only to those speciñc individuals to whom the promise runs. A tort action will not lie.” [Emphasis added.] [Id. at 243, citing Hart v Ludwig, 347 Mich 559, 565-566; 79 NW2d 895 (1956).] Similarly, in the present case, we are confronted with an employer who impliedly contracted to terminate his employee for just cause. The jury held that defendant failed to fulfill his duty. This duty, however, was not imposed upon "all,” but only upon plaintiff, who impliedly contracted with defendant. Therefore, we conclude that defendant’s liability does not arise in tort. In order for plaintiff to prevail, we must extend the collateral source rule to principles of contract law. Significantly, however, plaintiff does not cite (nor have we been able to find) a single case involving breach of contract implementing the collateral source rule. Further, plaintiff’s request is in direct conflict with the fundamental precept that the remedy for breach of contract focuses on making the nonbreaching party whole. Consequently, cases relied on by plaintiff, such as Motts v Michigan Cab Co, 274 Mich 437; 264 NW 855 (1936), involving tort liability, have no application whatsoever to this case. Thus, in the face of this Court’s reluctance to extend tort remedies to cases pleaded and proven in contract, we elect to continue to distinguish between tort and contract remedies. B The present case is also distinguishable from the federal cases on which plaintiif relies. In NLRB v Gullett Gin Co, 340 US 361; 71 S Ct 337; 95 L Ed 337 (1951), the United States Supreme Court refused to deduct unemployment compensation benefits from a breach of employment contract damage award. Gullett involved employees who were discharged in violation of the Labor Management Relations Act. Cognizant of its limited power to review, the Court upheld the National Labor Relations Board’s refusal to deduct unemployment compensation benefits from the award. The nlra requires that upon a finding of unfair labor practice, the nlrb must " 'take such affirmative action including reinstatement of employees with or without back pay, as will effectuate the policies of this Act Gullett, supra at 362. In Gullett, supra at 364, the Court explained that allowing the employee to collect unemployment compensation from the State of Louisiana "may reasonably be considered to effectuate the policies of the Act.” Gullett is distinguishable because it involved employees who were discriminatorily discharged. Thus, the Court merely held that it was within the nlrb’s discretion to allow the discharged employees to collect unemployment compensation because it would effectuate the policies of that specific act. The goals of and the policies surrounding the nlra distinguish Gullett from the present case. In fact, upon finding an unfair labor practice, the board was obligated to "issue a cease and desist order requiring the guilty party 'to take such affirmative action including reinstatement of employees with or without back pay, as will effectuate the policies of [the] Act ....’” Id. at 362 (emphasis added). However, here we address a case of wrongful discharge that gives rise to an action for breach of contract only. As such, we are unable to attribute "guilt” to one of the parties in the same manner as in Gullett. We are persuaded that Gullett is more accurately analyzed in conjunction with United Protective Workers of America v Ford Motor Co, 223 F2d 49 (CA 7, 1955). In Ford, the United States Court of Appeals for the Seventh Circuit held that Ford Motor Company improperly required an employee to retire. The trial judge reduced the employee’s damages by the amount of social security and annuity payments he received between the period in which he was wrongfully retired and the date on which he was required to retire. The court distinguished Gullett, stating that it did not require a deduction of unemployment compensation benefits: The cases speak only of the National Labor Relations Board’s power to award back pay under the Act without deductions of any amounts other than for wages or earnings received during the period. They are not decisive as to the propriety of deductions which should be made in determining the amount of damages in a common law action for damages for the breach of an employment contract. [Ford, supra at 53.] The court correctly narrowed the focus of its decision to the proper amount of damages for breach of contract. The court noted that if the employee had not been improperly required to retire, he would not have received the social security or annuity payments, and, therefore, if they were not deducted, the employee would receive "more than he would have if the contract had not been breached.” Id. Perhaps more persuasive, the case was distinguished from an action sounding in tort that would be subject to the collateral source rule. In this regard the court held: We have been unable to find a single case in which this rule has been carried over to contract damages. In the absence of any binding precedent to the contrary we prefer to follow here the ordinary contract measure of damages rather than the rule in tort cases. [Id. at 54.] Similarly, the present case is governed by principles of common-law contract. Toussaint, supra. Thus, in contrast to Gullett, plaintiff’s claim is not governed by statute. hi Plaintiff, relying on Pennington, supra, argues that unemployment compensation benefits may not be deducted from a contract damage award. For this reason, a careful reevaluation of the applicability and underlying integrity of Pennington is necessary. We cautiously review this Court’s decision in Pennington mindful of stare decisis principles: The rule of stare decisis establishes uniformity, certainty, and stability in the law, but it was never intended to perpetuate error or to prevent the consideration of rules of law to be applied to the ever-changing business, economic, and political life of a community. Only in the rare case when it is clearly apparent that an error has been made, or changing considerations result in injustice by the application of an outmoded rule, should we deviate from following the established rule. [Parker v Port Huron Hosp, 361 Mich 1, 10; 105 NW2d 1 (1960).][] In Pennington, employees of a manufacturing company brought an action for breach of an employment contract. Whiting Tubular Products went out of business and was offered for sale. Two newly organized companies purchased Whiting, transferred Whiting’s machinery to a new plant, and began operations shortly after Whiting shut down its operations. The employees alleged that the two newly formed entities were organized in order to take over the business of Whiting, and that both companies were wholly controlled by Whiting who acted as a sales representative. The plaintiffs alleged that the reorganization was executed so that Whiting could avoid its obligations under its employment contracts. The primary issue on appeal involved the sufficiency of proof with regard to each claim. However, the Court further held, in what may be characterized as dicta, that it was error for the trial judge to instruct the jury that payments received by the employee under the Employment Security Act, MCL 421.1 et seq.; MSA 17.501 et seq., must be deducted from a damage award for breach of employment contract: We conclude . . . that the trial judge was in error in his direction to the jury. The purpose of the employment security act as set forth by the legislature in section 2 thereof indicates the object sought to be attained was the promotion of the public good and general welfare of the people of the State. There is nothing in the act to suggest that the payment of unemployment compensation is to be construed as in lieu of wages. [Id. at 600-601. Citations omitted.] This language in Pennington was premised on the fact that the Legislature gave no indication whether unemployment compensation replaced wage loss. However, the Legislature has subsequently manifested its intent to construe unemployment compensation as redress for wage loss. In 1980, the Legislature enacted MCL 418.358; MSA 17.237(358), which requires a worker’s compens
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