MOURAD v. AUTOMOBILE CLUB INSURANCE ASSOCIATION
Case Details
- Citation
- 186 Mich. App. 715
- Judge(s)
- Before: Holbrook, Jr., P.J. and McDonald and Jansen, JJ.
- Procedural Posture — the stage the case had reached
- jury verdict
- State
- Michigan
Related Laws
No specific laws identified for this ruling.
Claim Types
Outcome
Court affirmed the jury's finding of breach of a just-cause employment contract and constructive discharge, but reversed awards for retaliatory demotion and intentional infliction of emotional distress as duplicative or not recoverable in an employment contract context. Plaintiff recovered $1,250,000 in compensatory damages for breach of contract.
Excerpt
MOURAD v AUTOMOBILE CLUB INSURANCE ASSOCIATION Docket No. 109985. Submitted April 11, 1990, at Detroit. Decided January 8, 1991, at 9:35 a.m. Roger Mourad, after he was demoted from head of the legal department to executive attorney, brought an action in the Wayne Circuit Court against the Automobile Club Insurance Association, his former employer, and three of its employees, alleging breach of an employment contract providing for termination for just cause only, retaliatory demotion and constructive discharge, intentional infliction of emotional distress, and conspiracy. The court, Henry J. Szymanski, J., entered judgment consistent with a jury verdict awarding the plaintiff compensatory damages for breach of contract and retaliatory demotion and exemplary damages for retaliatory demotion, but overturned an award of exemplary damages for intentional infliction of emotional distress. The defendants appealed. The plaintiff cross appealed. The Court of Appeals held: The plaintiff can maintain a cause of action against Auto Club for breach of a contract providing termination for just cause only as a result of retaliatory demotion and constructive discharge. However, because the cause of action for retaliatory demotion and constructive discharge merges with the breach of contract claim, that award must be set aside. Damages for intentional infliction of emotional distress are not recoverable in an action for breach of an employment contract. 1. The jury did not err in finding that there was a contract providing termination of employment for just cause only and that the defendants breached the contract when they constructively discharged the plaintiff by demoting him for his failure to take action which he claimed would have violated the Code _of Professional Responsibility. Accordingly, the trial court did not err in denying the defendants’ motion for a directed verdict regarding the claim of constructive discharge. References Am Jur 2d, Damages § 118; Master and Servant §§ 44, 62, 63. See the Index to Annotations under Attorney or Assistance of Attorney; Discharge from Employment or Office; Emotional Injury. 2. The plaintiffs breach of contract claim is not precluded by the general rule that an attorney’s client has a right to discharge an attorney at any time, with or without cause. The plaintiffs relationship with the defendants was more than merely that of attorney and client. 3. The plaintiff cannot properly recover damages for breach of contract and retaliatory demotion and discharge because each cause of action is an alternative type of wrongful discharge. Thus, the award of damages for retaliatory demotion must be vacated. 4. The trial court erred in instructing the jury with regard to the availability and adequacy of defendants’ internal appeal procedures upon the plaintiffs demotion inasmuch as the defendants did not assert that the plaintiff was precluded from maintaining his action because an internal appeal procedure was available. The error, however, does not require reversal because the verdict was consistent with substantial justice. 5. Damages for intentional infliction of emotional distress are not recoverable in an action for breach of an employment contract. The trial court erred in submitting the claim of intentional infliction of emotional distress to the jury, but properly refused to grant judgment with regard to the jury’s award of exemplary damages for intentional infliction of emotional distress. 6. The trial judge, an Auto Club policyholder, did not abuse his discretion in failing to disqualify himself as an interested party. The defendants failed to show actual bias sufficient for disqualification. The trial judge’s comments and questions at trial were not improper or prejudicial, nor did they deny the defendants a fair and impartial trial. Affirmed in part, reversed in part, and remanded. 1. Master and Servant — Attorney and Client — Wrongful Discharge. An action for wrongful discharge by an in-house attorney against an insurer-employer, claiming breach of a just-cause employment contract was not barred by the general rule that an attorney’s client has a right to discharge an attorney at any time, with or without cause, where the attorney, aside from serving as counsel for the insurer, also served as counsel for the insurer’s policyholders and as administrator for the insurer. 2. Master and Servant — Termination of Employment — Wrongful Discharge. A jury, having found a breach of a just-cause contract of employment, cannot rely on the same factual basis to award additional damages for a claim of retaliatory demotion and retaliatory constructive discharge. 3. Damages — Emotional Distress — Breach of Employment Contracts. Damages for infliction of emotional distress are not recoverable in an action for breach of an employment contract. Weinstein, Gordon & Hoffman, P.C. (by William J. Weinstein and Joel L. Hoffman), for the plaintiff. Dykema Gossett (by Donald S. Young, Kathleen McCree Lewis, and Suzanne Sahakian), for the defendants. Before: Holbrook, Jr., P.J. and McDonald and Jansen, JJ. Jansen, J. Defendants appeal as of right from a March 3, 1988, Wayne Circuit Court jury verdict in the amount of $1,773,000 for breach of an employment contract, demotion without cause, constructive discharge, retaliatory demotion, intentional infliction of emotional distress, and conspiracy. Plaintiff cross appeals the trial court’s refusal to enter an additional $500,000 in exemplary damages which the jury had awarded on a special verdict form for intentional infliction of emotional distress. We hold that plaintiff, an attorney, can maintain a cause of action against defendant, Automobile Club Insurance Association (Auto Club), his former client and employer, for breach of a just-cause contract. However, we reverse the jury verdict regarding the claims of retaliatory demotion, intentional infliction of emotional distress, and conspiracy. We therefore affirm in part and reverse in part. In 1980, plaintiff was named legal area manager and in that capacity headed Auto Club’s in-house legal department from August 1980 until March 1983 when he was demoted to an executive attorney position. Auto Club’s legal department represents the insurance association in first-party cases and represents policyholders in third-party cases. The legal department attorneys supervise outside counsel and provide legal counsel and advice to Auto Club’s claims staff regarding nonlitigation matters. As legal area manager, plaintiff served as the attorney who advised management regarding the implementation of Auto Club’s policies within the department. Specifically, plaintiff formulated budget requests and administered the legal department within the budget approved by Auto Club. Plaintiff also supervised the attorney staff in its representation of insureds in pending litigation. Specifically, plaintiff gave settlement authority in certain cases, dealt with personnel problems and questions from attorneys and staff, evaluated executive attorneys, and reviewed senior attorneys’ evaluations of associate attorneys. Plaintiff described his function as a "managing lawyer.” As legal area manager he did not directly handle individual third-party cases. It appears that plaintiff was an excellent lawyer. However, Thomas Bowman, Auto Club’s claims director and plaintiff’s direct supervisor, concluded that plaintiff was unable to implement Auto Club’s policies and did not have the "administrative talents” necessary to effectively implement cost-containment measures in the legal department. In September 1982, Bowman assigned defendant Leonard Bach, who is not a lawyer, but who had twenty years of claims experience, to oversee the legal department. On March 16, 1983, plaintiff was removed as legal area manager and demoted to executive attorney. Plaintiff lost his use of a company car and approximately $700 in annual salary. Following his demotion, plaintiff was an executive attorney who handled first-party catastrophic claims. On March 16, 1984, plaintiff resigned his employment with Auto Club and opened a sole practice. On July 11, 1984, plaintiff filed a complaint alleging breach of a just-cause contract, retaliatory demotion and constructive discharge, intentional infliction of emotional distress, and conspiracy to commit the tort of retaliatory demotion or intentional infliction of emotional distress. Plaintiff claimed that his demotion was the result of his refusal to comply with alleged unethical and illegal orders from the individual defendants who were not attorneys. Plaintiff further claimed that had he complied with such orders and instructions he would have violated the Code of Professional Responsibility and Canons. On March 3, 1988, the jury returned its verdict. As compensatory damages, the jury awarded $1,250,000 as past, present, and future loss of wages and employment benefits for the breach of contract claim and $23,000 as past, present, and future loss of wages and employment benefits for the retaliatory demotion claim. For retaliatory demotion, the jury added $500,000 as compensatory damages for mental anguish. The jury also awarded $500,000 as exemplary damages for intentional infliction of emotional distress. Following an April 15, 1988, hearing, the court entered a judgment on the jury verdict, less the exemplary damages for intentional infliction of emotional distress, which the court found inconsistent, duplicative and punitive. Defendants argue that plaintiff cannot sustain a cause of action for wrongful termination, because plaintiff was defendants’ attorney. Specifically, defendants allege that a just-cause contract as established in Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich 579; 292 NW2d 880 (1980), reh den 409 Mich 1101 (1980), cannot exist under these circumstances. We disagree. The issue before us is whether plaintiff can maintain an action for wrongful termination of a just-cause employment contract. In Toussaint, supra, our Supreme Court held that an employer’s statements of company policy and procedure that an employee will be terminated only for cause can give rise to an enforceable contract right. The existence of a just-cause contract and whether defendants’ actions constituted a breach of that contract is a question for the jury to determine. Stoken v J E T Electronics & Technology, Inc, 174 Mich App 457, 464; 436 NW2d 389 (1988); Struble v Lacks Industries, Inc, 157 Mich App 169, 175; 403 NW2d 71 (1986). Initially, we note that the jury did not err in finding that there was a just-cause contract and that defendants, by demoting plaintiff for his failure to comply with policy decisions which plaintiff claimed would have violated the code of professional conduct, breached that contract. In a special jury form, the jury found that defendants’ policy manual and pamphlets had in fact created a contract to terminate for just cause. The jury also found that defendants did not have just cause to demote plaintiff and that defendants constructively discharged plaintiff by making the conditions of plaintiff’s work so intolerable that plaintiff felt compelled to leave. We are unpersuaded by defendants’ argument that the trial court erred in failing to direct a verdict for defendants on the constructive discharge claim. A constructive discharge occurs when an employer deliberately makes an employee’s working conditions so intolerable that the employee is forced into an involuntary resignation or, stated differently, when working conditions become so difficult or unpleasant that a reasonable person in the employee’s shoes would feel compelled to resign. Fischhaber v General Motors Corp, 174 Mich App 450, 454-455; 436 NW2d 386 (1988). In reviewing a trial court’s ruling on a motion for a directed verdict or judgment notwithstanding the verdict, the testimony and all legitimate inferences that may be drawn from that testimony are viewed in the light most favorable to the plaintiff. Matras v Amoco Oil Co, 424 Mich 675, 681; 385 NW2d 586 (1986). If reasonable jurors could honestly reach different conclusions, the motion should be denied, and the case should be decided by the jury, because no court under such circumstances has authority to substitute its judgment for that of the jury. Id.; Feaheny v Caldwell, 175 Mich App 291, 299-300; 437 NW2d 358 (1989). We hold that the trial court did not err in refusing to grant defendants’ motion for a directed verdict. Evidence presented at trial indicated that plaintiff was demoted from the highest position in the legal staff to a lesser position with the resultant loss of authority and various benefits. Evidence indicated that plaintiff was essentially isolated from the operation of the law department. Further, after plaintiff’s demotion, plaintiff alleged that defendants continued to make unethical requests and demands concerning plaintiff’s representation of insureds. Under these facts, we find that a reasonable juror could find that plaintiff was constructively discharged. Defendants claim that plaintiff’s cause of action should be precluded by the general rule that a client has a right to discharge his attorney at any time, with or without cause. See comments to MRPC 1.16, formerly DR 2-110; Brown v Brown, How NP 94, 95 (Wayne CC, 1876). We disagree. In support of their position, defendants cite Herbster v North American Co, 150 Ill App 3d 21; 103 Ill Dec 322; 501 NE2d 343 (1986), and Willy v Coastal Corp, 647 F Supp 116 (SD Tex, 1986), rev’d on other grounds 855 F2d 1160 (CA 5, 1988). In Herbster, the plaintiff brought suit for retaliatory discharge against his employer, North American Company, stemming from the plaintiff’s refusal to destroy or remove inculpatory documents requested in lawsuits pending in federal court. The plaintiff was North American’s chief legal officer and vice-president in charge of the legal department under an employment-at-will contract. In Illinois the tort of retaliatory discharge is an exception to the general rule that an employee at will has no recourse for discharge. The tort requires that the employer discharge the employee in retaliation for the employee’s activities and that the discharge be in contravention of clearly mandated public policy. The Illinois court granted summary judgment for North American on the basis of the attorney-client relationship. The Illinois Court of Appeals affirmed, refusing to extend the tort of retaliatory discharge to cases involving general in-house counsel. The Illinois Court of Appeals noted that the right to terminate is a necessary aspect of the attorney-client relationship and a preventive measure against the evils created by any friction or distress between an attorney and his client. Likewise, in Willy, the federal district court held that an in-house attorney is required to withdraw from employment when a client elects to terminate the attorney-client relationship. In that case, the court granted the defendant’s motion to dismiss a cause of action for wrongful termination from the plaintiffs employment as in-house counsel. The plaintiff alleged that he was fired because he required the defendant to comply with environmental laws. The Willy court held that the public policy exception, which creates a cause of action for retaliatory discharge in the context of an employment-at-will contract, does not apply to the termination of in-house attorneys. The Willy court noted that the ethical canons and the disciplinary rules set forth the standards for attorneys to follow and that they require an attorney presented with ethical conflicts to withdraw from representation. Thus, the Willy Court declined to extend the retaliatory discharge claim to include the wrongful termination of in-house attorneys. However, the appeals court of New Jersey, in Parker v M & T Chemicals, Inc, 236 NJ Super 451; 566 A2d 215 (1989), held that the New Jersey Whistleblower’s Act compels an employer to pay damages to an employee-attorney who is wrongfully discharged or mistreated for any reason which is violative of law, fraudulent, criminal, or incompatible with a clear mandate of New Jersey public policy concerning public health, safety, or welfare. Id. at 220. Thus, Parker held that the attorney-client relationship was not a bar to recovery on the basis of a retaliatory discharge claim. We distinguish the Willy, Herbster, and Parker opinions. These cases dealt with the question whether the state will recognize a public policy exception to the typical employment-at-will contract. In the present case, the jury found a just-cause contract and a breach of that contract. The determination of the existence of a public policy exception to an employment-at-will contract, as discussed in Willy, Herbster, and Parker, is a different inquiry from the establishment of a breach of a just-cause contract. The present case involves the creation of contractual rights by the parties, not the imposition of restrictions on employment termination on the basis of public policy grounds. Further, we decline to adopt a complete bar to suits brought by an attorney for wrongful termination and breach of a just-cause contract on the basis of the attorney-client relationship. The general rule that a client has the right to discharge his attorney at any time, with or without cause, does not affect the present action for breach of contractual rights. Although at the time of plaintiffs demotion and constructive discharge DR 2-110 required that an attorney withdraw from employment if he knows or if it is obvious that his continued employment will result in a violation of a disciplinary rule, the present case does not simply involve an attorney-client relationship between plaintiff and Auto Club. In many ways, plaintiff, in his relationship as supervisor of the legal staff and subsequently as supervisor over lawsuits involving catastrophic injury, was an attorney for the insureds. As such, he had a duty of loyalty and zealous representation to the insured client alone. American Employers’ Ins Co v Medical Protective Co, 165 Mich App 657, 660; 419 NW2d 447 (1988). In this role, plaintiffs "sole loyalty and duty is owed to the client alone.” Atlanta Int’l Ins Co v Bell, 181 Mich App 272, 274; 448 NW2d 804 (1989). The Bell Court summarized: [T]he fact remains that an insurance defense attorney represents the insured and not the insurance company. The only attorney-client relationship which exists is between the attorney and the insured client. Indeed, whenever the interests of the insured and the insurance company differ, the attorney’s ethical obligation is to pursue the interests of the insured client the attorney is representing and not the interests of the insurance company who pays the bill. . . . Indeed, the insurance company’s relationship is, in reality, with its insured; that is, the insurance company is obligated to pay the attorney fee incurred by its insured in defending litigation covered by an applicable insurance policy. The fact that an insurance company may directly pay the attorney fee rather than merely reimbursing its insured does not affect the nature of the attorney-client relationship nor does it change the fact that the attorney represents the insured client and only owes a duty to that insured client. [Bell, supra at 274-275, citation omitted.] However, it should also be noted that in some respects plaintiffs relationship with Auto Club was as counsel for Auto Club. Auto Club’s legal department represented Auto Club in first-party cases, i.e., where a policyholder sues Auto Club, seeking benefits under an insurance contract. Plaintiff also acted as in-house counsel who advised management on the operation of the legal department in supervising attorneys who represented various policyholders in separate actions. Finally, we note that plaintiff was also a supervisor acting in an administrative role. In this sense, plaintiff did not
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