Breach of Contract Cases

FEYZ v MERCY MEMORIAL HOSPITAL Docket No. 128059. Argued May 2, 2006 (Calendar No. 5). Decided July 24, 2006. Bruce B. Feyz, M.D., brought an action in the Monroe Circuit Court against Mercy Memorial Hospital, a private hospital, and members of its staff, seeking injunctive relief and damages relating to his placement on indefinite probation by the defendants. The plaintiffs complaint included civil rights, contract, and tort claims. The court, Joseph A. Costello, Jr., J., granted summary disposition for the defendants, citing the doctrine of judicial nonintervention in the staffing decisions of private hospitals, as well as statutory immunity arising from the peer review committee referral of the plaintiff for psychological evaluation. The plaintiff appealed. The Court of Appeals, Sawyer and Smolenski, JJ. (Murray, PJ., concurring in part and dissenting in part), affirmed in part, reversed in part, and remanded the matter to the trial court for further proceedings. 264 Mich App 699 (2005). The Court of Appeals concluded that peer review immunity does not apply to statutory civil rights claims, that an alleged civil rights violation was not within the scope of peer review, and that an alleged civil rights violation was “a malicious act.” The Court also held that the nonintervention doctrine did not prevent the plaintiff from pursuing his civil rights claims, nor did the doctrine generally preclude the plaintiffs contract and tort claims. Finally, the Court held that a private hospital’s staffing decisions are subject to the same level of judicial review as would apply to the actions of any other private entity. The Supreme Court granted the defendants’ application for leave to appeal. 474 Mich 957 (2005). In an opinion by Justice Young, joined by Chief Justice Taylor and Justices Corrigan and Markman, the Supreme Court held-. 1. The doctrine of judicial nonintervention cannot supplement or supplant the statutory immunify granted by the Legislature through the peer review immunity statute. There is no basis to justify the application of a nonintervention doctrine to general staffing decisions of a private hospital. 2. The statutorily prescribed scope of judicial review over the peer review process is narrow. The Legislature codified limited judicial review of the peer review process, permitting judicial review only when peer review participants act with malice. 3. Malice, for purposes of MCL 331.531(4), can be established when a person supplying information or data to a peer review entity does so with knowledge of its falsity or with reckless disregard of its truth or falsity. A review entity is not immune from liability if it acts with knowledge of the falsity, or with reckless disregard of the truth or falsity, of information or data that it communicates or upon which it acts. 4. A hospital is not a protected review entity under the peer review immunity statute. The immunity granted by the peer review immunity statute extends only to the communications made, and the participants who make them, in the peer review process, as well as to the communicative acts taken by a statutorily protected peer review entity acting within its scope, not to the hospital that makes the ultimate decision on staffing credential questions. Justice Cavanagh, joined by Justices Weaver and Kelly, concurring in part and dissenting in part, agreed that no justification exists in this state for recognizing the judicial nonintervention doctrine and that the doctrine should not be applied to a private hospital’s general staffing decisions, but dissented from the majority’s definition of “malice” as used in MCL 331.531. “Malice” should not be defined under the principles of “actual malice” used in defamation law. Rather, the term should be defined to mean the “intent, without justification or excuse, to commit a wrongful act” or “reckless disregard of the law or of a person’s legal rights.” To define the term otherwise ignores the statutory language. The trial court should be directed on remand to apply the appropriate legal definition of “malice.” Court of Appeals judgment vacated; case remanded to the trial court for further proceedings. 1. Hospitals — Staffing Decisions — Judicial Nonintervention Doctrine. The doctrine of judicial nonintervention, which suggests that the staffing decisions of a private hospital are generally beyond the scope of judicial review, is inconsistent with the statutory peer review process established by MCL 331.531 and is repudiated. 2. Hospitals — Peer Review Immunity — Exceptions — Malice. Malice, for purposes of the statutory hospital peer review process, exists when a person supplying information or data to a peer review entity does so with knowledge of its falsity or with reckless disregard of its truth or falsity; a peer review entity is not immune from liability if it acts with knowledge of the falsity, or with reckless disregard of the truth or falsity, of the information or data that it communicates or upon which it acts (MCL 331.531[4]). 3. Hospitals — Peer Review Immunity — Peer Review Entities. A hospital is not a protected review entity under the peer review immunity statute; the immunity granted by the peer review immunity statute extends only to the communications made, and the participants who make them, in the peer review process, as well as to the communicative acts taken by a statutorily protected peer review entity acting within its scope, not to the hospital that makes the ultimate decision on staffing credential questions. Jeffrey L. Herron for the plaintiff. Kitch Drutchas Wagner Valitutti & Sherbrook (by Susan Healy Zitterman and Karen B. Berkery) for the defendants. Amici Curiae: Clark Hill PLC (by Robert L. Weyhing and Paul C. Smith) for Michigan Osteopathic Association. Kerr, Russell and Weber, PLC (by Joanne Geha Swanson and Daniel J. Schulte), for Michigan State Medical Society. Michael A. Cox, Attorney General, Thomas L. Casey, Solicitor General, and Ron D. Robinson, Assistant Attorney General, for the Michigan Civil Rights Commission and the Michigan Department of Civil Rights. Hall, Render, Killian, Heath & Lyman, PLLC (by Michael J. Philbrick), for Michigan Health & Hospital Association. YOUNG, J. Plaintiff is a physician with staff privileges at defendant Mercy Memorial Hospital. This lawsuit arises from an internecine dispute over nursing orders for patient intake at the defendant hospital. Plaintiffs insistence on requiring the nursing staff to use his special standing orders instead of defendant hospital’s standing orders eventually led to a conflict with defendant hospital and a peer review of plaintiffs professional practices as well as disciplinary action. Plaintiffs challenge of the peer review conducted by some of the defendants and the resulting disciplinary action taken against him requires that we consider the scope of immunity provided for peer review. In order to promote effective patient care in hospitals, the Legislature enacted MCL 331.531, commonly referred to as Michigan’s peer review immunity statute. The purpose of statutory peer review immunity is to foster the free exchange of information in investigations of hospital practices and practitioners, and thereby reduce patient mortality and improve patient care within hospitals. The Legislature obviously intended to protect peer review participants from liability for participation in this communicative and evaluative process. In order to create an environment in which such candid explorations of the quality of hospital patient care can occur, among other protections, the Legislature prohibited the discovery of communications made within the peer review process and granted immunity from liability to all who participate in peer review without “malice.” The primary question posed in this appeal is the scope of judicial review of peer review permitted under MCL 331.531. A secondary question is whether the judicially created “doctrine of nonintervention” — a doctrine suggesting that staffing decisions of private hospitals are generally beyond the scope of judicial review — is compatible with the peer review immunity statute. Finally, we must also construe the undefined peer review statutory term “malice.” Because the peer review immunity statute establishes qualified immunity from liability for peer review communication and participants who provide such communications, we conclude that there is no justification for recognizing the nonintervention doctrine that the lower courts in this state have applied in considering claims arising from peer review. We therefore hold that this doctrine cannot supplement or supplant the statutory immunity granted by our Legislature. Furthermore, there is no basis, statutory or otherwise, to justify the application of a nonintervention doctrine to general staffing decisions of a private hospital. We also hold that, consistent with the objects of the peer review immunity statute, malice should be defined as set forth by the Court of Appeals in Veldhuis v Allan. Thus, we hold that malice can be established when a “person supplying information or data [to a peer review entity] does so with knowledge of its falsity or with reckless disregard of its truth or falsity. Similarly, a review entity is not immune from liability if it acts with knowledge of the falsity, or with reckless disregard of the truth or falsity, of information or data which it communicates or upon which it acts.” Accordingly, we vacate the judgment of the Court of Appeals and remand this case to the Monroe Circuit Court for further proceedings consistent with this opinion. FACTS AND PROCEDURAL HISTORY Plaintiff is a physician with staff privileges at defendant Mercy Memorial Hospital. Plaintiff was dissatisfied with defendant hospital’s standard nursing policy requiring nurses to document patients’ prescribed medications and dosages by either copying the label on their prescription containers or copying a list of medications carried by patients. As a consequence, plaintiff created his own specialized orders directing the nursing staff to obtain very specific information from plaintiffs incoming patients about their prescription drug use. Plaintiffs orders directed the nursing staff, as part of the admissions process for his patients, to assume a far more aggressive investigative role regarding patient medication. Defendants disapproved plaintiffs standing orders, and instructed the nursing staff to ignore them. In several cases where the nurses disregarded plaintiffs special orders and followed defendant hospital’s nursing directives, plaintiff prepared “incident reports” referring such cases to peer review committees for investigation of “potential medical errors.” Further, plaintiff began making notations in patient records that his disregarded orders were intended to “[p]revent serious medication errors in the past.” Defendants initiated peer review proceedings against plaintiff based on plaintiffs failure to complete medical records and his insistence that the nursing staff follow his standing orders rather than comply with hospital policy. An ad hoc investigatory committee reviewed plaintiffs conduct and released its findings to the executive committee of defendant medical staff. Relying on the ad hoc committee’s report, the executive committee referred plaintiff to the Health Professionals Recovery Program (HPRP) for a psychiatric examination. Plaintiff was placed on temporary probation. Plaintiff alleges that he ceased writing his standard orders because, in compromise, defendant hospital gave plaintiff use of the pharmacy consult service to implement plaintiffs special orders. It appears that plaintiffs orders regarding patient medication overburdened the staff of the pharmacy consult service, so the hospital eventually discontinued this arrangement. Thereafter, plaintiff resumed placing his specialized orders in patients’ medical charts. As a consequence, defendants took further action and placed plaintiff on indefinite probation. Plaintiff continues to practice medicine and retains privileges at defendant hospital, but is restricted from using defendant hospital’s pharmacy consult service or insisting on compliance with his special orders. Plaintiff filed a complaint alleging violations of the Persons with Disabilities Civil Rights Act, the Americans with Disabilities Act, the Rehabilitation Act of 1973,* and 42 USC 1983 and 1985; invasion of privacy; breach of fiduciary and public duties; and breach of contract. The trial court granted summary disposition to defendants, concluding that all of defendants’ actions arose out of the peer review process and therefore defendants were immune from liability under MCL 331.531. The court, as an alternative basis for granting summary disposition, relied on the doctrine of judicial nonintervention, which provides that courts will not review private hospitals’ staffing decisions. The Court of Appeals, in a split decision, partially reversed the trial court’s award of summary disposition in favor of defendants, concluding that peer review immunity did not apply to statutory civil rights claims. The majority concluded that an alleged civil rights violation was not within the scope of peer review and that an alleged civil rights violation was “a malicious act.” Furthermore, the majority held that the nonintervention doctrine did not prevent plaintiff from pursuing his civil rights claims, nor did the doctrine generally preclude plaintiffs contract and tort claims. The majority held that the doctrine stands for the limited proposition that a private hospital’s staffing decisions are not subject to constitutional due process challenges. The majority concluded that the nonintervention doctrine did not create any greater insulation from judicial scrutiny than that enjoyed by any other private entity. In other words, the majority held that a private hospital’s staffing decisions are subject to the same level of judicial review as would apply to the actions of any other private entity. The Court of Appeals dissent agreed that an unlawful act of discrimination constituted malice, but disagreed that an unlawful discriminatory act was per se outside the scope of a peer review committee. The dissent would have affirmed the trial court’s dismissal of plaintiffs tort and contract counts. The dissent also concluded that the majority improperly limited the scope of the nonintervention doctrine. The dissent opined that the nonintervention doctrine precluded judicial review of contract and contract-related tort claims arising from hospital staffing decisions with regard to all defendants. This Court granted defendants’ application for leave to appeal. STANDARD OF REVIEW The trial court granted defendants summary disposition under MCR 2.116(C)(8). A trial court’s grant of summary disposition is reviewed de novo. A motion for summary disposition brought pursuant to MCR 2.116(C)(8) tests the legal sufficiency of the complaint on the allegations of the pleadings alone. When a challenge to a complaint is made, the motion tests whether the complaint states a claim as a matter of law, and the motion should be granted if no factual development could possibly justify recovery. Questions of statutory interpretation, such as the proper construction of the peer review immunity statute, are reviewed de novo. Our role is to give effect to the intent of the Legislature, as expressed by the language of the statute. We apply clear and unambiguous statutes as written, under the assumption that the Legislature intended the meaning of the words it has used in the statute. In defining statutory words, we must consider the “plain meaning of the critical word or phrase as well as ‘its placement and purpose in the statutory scheme.’ ” While words are construed according to their plain and ordinary meaning, words that have acquired a peculiar and appropriate meaning in the law are construed according to that peculiar and appropriate meaning. ANALYSIS In Michigan, the Legislature has commanded hospitals to establish peer review committees to review “professional practices” in order to “redue[e] morbidity and mortality and improv[e] the care provided in the hospital for patients.” That review must “include the quality and necessity of the care provided and the preventability of complications and deaths occurring in the hospital.” In turn, hospitals use peer review evaluations when making staffing decisions. A. THE JUDICIAL NONINTERVENTION DOCTRINE AND THE SCOPE OF JUDICIAL REVIEW OF PEER REVIEW The judicial nonintervention doctrine is a judicially created common-law doctrine providing that courts will not intervene in a private hospital’s staffing decisions. The concerns that gave rise to this doctrine are twofold. The doctrine is premised, in part, on the distinction between public and private hospitals. While public hospitals are state actors impheating adherence to constitutional requirements, such as affording due process to physicians, private hospitals are not similarly constrained because they are not state actors. Therefore, it was posited that a private hospital’s staffing decisions merit less judicial scrutiny. The doctrine is also founded on the belief that courts are ill-equipped to review hospital staffing decisions because courts lack the specialized knowledge and skills required to adjudicate hospital staffing disputes. The judicial nonintervention doctrine, therefore, is a prudential doctrine not grounded in statutoiy or constitutional provisions that courts have invoked to resist adjudicating claims involving hospital staffing decisions and the decision-making process. In Shulman v Washington Hosp Ctr, a seminal case describing the doctrine, the United States District Court for the District of Columbia explained its foundational premises as follows: Judicial tribunals are not equipped to review the action of hospital authorities in selecting or refusing to appoint members of medical staffs, declining to renew appointments previously made, or excluding physicians or surgeons from hospital facilities. The authorities of a hospital necessarily and naturally endeavor to their utmost to serve in the best possible manner the sick and the afflicted who knock at their door. Not all professional men, be they physicians, lawyers, or members of other professions, are of identical ability, competence, or experience, or of equal reliability, character, and standards of ethics. The mere fact that a person is admitted or licensed to practice his profession does not justify any inference beyond the conclusion that he has met the minimum requirements and possesses the minimum qualifications for that purpose. Necessarily hospitals endeavor to secure the most competent and experienced staff for their patients. Without regard to the absence of any legal liability, the hospital in admitting a physician or surgeon to its facilities extends a moral imprimatur to him in the eyes of the public. Moreover not all professional men have a personality that enables them to work in harmony with others, and to inspire confidence in their fellows and in patients. These factors are of importance and here, too, there is room for selection. In matters such as these the courts are not in a position to substitute their judgment for that of professional groups. Relying on Shulman, the Michigan Court of Appeals adopted the doctrine of judicial nonintervention in Hoffman v Garden City Hosp. The plaintiff in Hoffman sued a private hospital for denying him staff privileges, claiming, in part, that the hospital’s decision to deny privileges was “arbitrary, capricious and unreasonable... ,” The defendant prevailed in the trial court on its motion for summary disposition. On appeal, the plaintiff urged the Court of Appeals to adopt the position that a private hospital holds a fiduciary duty to make its staffing decisions reasonably and for the pu

Ronald A. York vs. Zurich Scudder Investments, Inc. No. 05-P-976. Suffolk. March 3, 2006. June 26, 2006. Present: Greenberg, Duffly, & Katzmann, JJ. Contract, Employment, Performance and breach, Implied covenant of good faith and fair dealing, Misrepresentation. Employment, Termination. Damages, Quantum meruit. In the circumstances of a civil action brought in Superior Court by an at-will employee, seeking recovery of incentive compensation that his former employer had denied him after his termination during a cost-cutting initiative, the judge did not err in granting summary judgment in favor of the employer on the employee’s claims of breach of contract, breach of the implied covenant of good faith and fair dealing, misrepresentation, and quantum meruit, where the employee admitted facts that established that he had no reasonable expectation of proving any of his claims or any right to recover posttermination increments of incentive compensation. [614-620] Civil action commenced in the Superior Court Department on October 11, 2001. The case was heard by Nancy Staffier Holtz, J., on a motion for summary judgment. Richard C. Van Nostrand for the plaintiff. Scott A. Roberts for the defendant. Katzmann, J. Ronald A. York, who was an at-will employee of Zurich Scudder Investments, Inc., and its predecessors in interest (Scudder), filed suit in Superior Court seeking recovery of incentive compensation he claims was improperly denied him after Scudder terminated him. He alleged counts of breach of contract, breach of the implied covenant of good faith and fair dealing, misrepresentation, and quantum meruit. The judge allowed Scudder’s motion for summary judgment on all counts without written opinion, and York appeals. We affirm. Background. York’s claims center on incentive compensation that he argues Scudder should have continued to pay him even after he was terminated in 2000. We summarize the facts in the light most favorable to York. See Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120 (1991). However, we note at the outset that where the facts conflict, we consider the statements made by York during his deposition, and not the assertions in his affidavit made two months later. See Morrell v. Precise Engr., Inc., 36 Mass. App. Ct. 935, 937 (1994), quoting from O’Brien v. Analog Devices, Inc., 34 Mass. App. Ct. 905, 906 (1993) (“a party cannot create a disputed issue of fact by the expedient of contradicting by affidavit statements previously made under oath at a deposition”). When York began his employment with Scudder in 1990 as a nonsales employee, he was not eligible for the sales incentive compensation program that is at the heart of this lawsuit. However, in 1994, York was recruited to become a sales representative, responsible for selling group retirement plans managed by Scudder. At that point, a manager named Mark Cassidy informed York that as a sales representative his salary would remain the same, but he would receive additional sales incentive compensation. The amount of the incentive compensation, according to Cassidy, would depend on the account value of each client York recruited over a period of years. Specifically, York was told that he would receive a certain percentage of the account value in the first year the account resided with Scudder, and a lesser percentage for each of the following three years of the account. York understood that the sales incentive payments would be made quarterly and would only commence if and when a client actually transferred funds to Scudder. York also understood that sales incentive compensation would cease during a payout period if the client withdrew the funds from Scudder, as clients were entitled to do at any time. Cassidy did not discuss with York the existence of any written Scudder policy that would govern his sales incentive compensation arrangement. Nevertheless, at the time of his discussion with Cassidy, there had been a written incentive compensation plan in existence for two years (the 1992 plan) that was substantially similar to the arrangement described to York by Cassidy. York acknowledges that he learned of the 1992 plan at some point and accepted that it governed his incentive compensation from 1994 through at least 1999. The 1992 plan did not provide that an employee would forfeit earned but unpaid incentive compensation if his employment was terminated during the payout period. The 1992 plan also did not require that sales representatives perform any further work with a particular client after the sale in order to receive incentive compensation. In January, 1998, Scudder issued a new employee handbook that covered a broad array of topics and was published on Scudder’s intranet. As part of its content on employment termination, the handbook stated: “In every separation, the formal employer-employee relationship ceases as of the separation date. The privileges and rights associated with employment end as of the separation date, including all forms of compensation, commissions, benefits, vacations, and leaves of absence.” Scudder also issued other policies on various topics from time to time on its intranet. Although York never discussed the handbook and policies with anyone, he did know that they were available, and he recognized that he was subject to them, at least where they did not conflict with his oral negotiations with Cassidy. On January 1, 1999, Scudder issued a new incentive compensation plan for sales representatives. Under this plan, sales representatives would only be paid the incentive compensation for three instead of four years, but additional assets would be included in calculating incentive compensation. In addition, Scudder issued a new incentive compensation plan for senior sales representatives, also effective as of January 1, 1999, that was substantially identical in relevant respects to the plan for sales representatives. (We refer to both plans collectively as the 1999 plan.) The 1999 plan stated the following: “Participants who terminate employment with [Scudder] for all other reasons (e.g., voluntary termination, involuntary termination with or without cause, etc.) prior to the payment of incentive awards, forfeit all rights to the payment of any and/or all awards under this Plan.” From 1994 to 1999, York secured a number of new accounts and was paid in accordance with the 1992 plan. In October, 1999, York was promoted to senior sales representative and given a new territory. York did not dispute that his sales incentive compensation was subject to the 1999 plan after January, 1999. By late spring of 2000, however, York was told that Scudder managers were cutting costs, including employee compensation costs, and that there would be layoffs. On August 28, 2000, York was informed that his employment was being terminated as of September 15, 2000, because his position was being eliminated in a sales group restructuring, and because Scudder did not believe that there were enough business opportunities to justify his position. Between October, 1999 (when he assumed his new position), and August, 2000, York did not bring any funds under management to Scudder. During his deposition, York admitted that he did not believe that Scudder’s business decision was “improper” or that Scudder was not exercising “honest judgment” in terminating him. When Scudder terminated York, it also terminated thirty-five other employees, including three sales people, and it closed requisitions for fifty-nine open positions. After York was terminated, his former territory was divided between the Chicago representative and a more senior representative who previously shared the New England territory with York and whose territory geographically surrounded that of York. During his deposition, York acknowledged that he had no basis to state that Scudder’s reason for terminating him was to avoid paying him commissions after the date of his termination. Moreover, York did not contend that Scudder made false representations to him during his employment. Scudder contends that York was paid all the salary and incentive compensation that he was due through the date of his termination. York was told that he would not be receiving any further incentive payments after his employment ended, although Scudder would pay him a severance package as provided in the 1998 employee handbook. In accordance with Scudder’s separation policy applicable to involuntary terminations resulting from job restructuring, York received severance pay of $137,933.31, which included an enhanced severance benefit of $58,604.31. Subsequently, York brought suit in Superior Court, claiming that at the time of his termination, he was still owed incentive compensation of approximately $212,000 for sales made prior to 1999, and another $223,000 for sales made after January 1, 1999. York also claims that before he was terminated, he had received verbal commitments from four new clients that they would bring their assets to Scudder, and that he is owed incentive compensation for these clients as well. Discussion. “[A] party moving for summary judgment in a case in which the opposing party will have the burden of proof at trial is entitled to summary judgment if he demonstrates . . . that the party opposing the motion has no reasonable expectation of proving an essential element of that party’s case.” Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716 (1991). In his deposition and by his failure to controvert in relevant respects Scudder’s statement of undisputed facts, York has admitted facts that establish that he has no reasonable expectation of proving any of his claims or any right to recover posttermination increments of incentive compensation. York first contends that the judge erred in entering summary judgment on his breach of contract claim because she ignored a factual dispute whether his employment contract was defined by his oral agreement with Cassidy in 1994, at least with .regard to when his incentive compensation discontinued, or whether it included the documents Scudder issued between 1992 and 1999, as Scudder claims. Under York’s theory of the case, an oral employment contract was formed when he accepted the sales representative position on the terms offered by Cassidy, and any subsequent modification that conflicted with those terms did not apply to him unless he specifically agreed. However, York’s employment contract was at-will, and as such Scudder could modify its terms or “terminate!] [the employment] at any time for any reason or for no reason at all,” with limited exceptions, such as public policy considerations. Gram v. Liberty Mut. Ins. Co., 384 Mass. 659, 668 n.6 (1981). See, e.g., Smith v. Graham Refrigeration Prod. Co., 333 Mass. 181, 186 (1955); Kolodziej v. Smith, 412 Mass. 215, 221-222 (1992). That being the case, even if York’s original agreement in 1994 did not contain any provision discontinuing incentive compensation on termination, the documents Scudder issued in 1998 and 1999 modified the terms of the incentive compensation program to include termination provisions. Moreover, York’s deposition testimony and his responses to Scudder’s statement of undisputed facts both evince York’s awareness of Scudder’s modifications and his general acceptance of them. York merely claims that he believed that the modifications did not apply to him to the extent that they differed from his conversation with Cassidy. Since his was an at-will employment, York’s belief was incorrect. York’s breach of contract claim thus fails. York also argues that Scudder breached an implied covenant of good faith and fair dealing by terminating his employment so that it would not be required to pay him his additional incentive compensation. York relies largely on Gram v. Liberty Mut. Ins. Co., supra at 660 (Gram), which permitted an at-will employee who was not terminated in bad faith to recover “identifiable, reasonably anticipated future compensation, based on his past services, that he lost because of his discharge without [good] cause.” We think that York’s Gram claim must fail because, at the very least, he has established no reasonable expectation of proving that his termination was without good cause. See id. at 666-672 (court discussed concept of good cause in context of terminating at-will employee). Similar to Gram, in Fortune v. National Cash Register Co., 373 Mass. 96, 101 (1977), the Supreme Judicial Court, in the context of a bad faith termination, held that in certain limited circumstances, an at-will employment contract “contains an implied covenant of good faith and fair dealing.” The court recognized the legitimate business interests of an employer in controlling its workforce and for wide discretion, often subjective, to adapt to changing environments. Id. at 101-102. At the same time, an injustice arises when an employer terminates an employee in such a way that it violates the covenant of good faith and fair dealing. See id. at 102; Gram v. Liberty Mut. Ins. Co., supra at 660, 672. There are several principles that emerge to guide our analysis of good faith and fair dealing in order to place the instant appeal in context. First, where an at-will employee has been terminated in bad faith, such as where an employer has acted to deprive an employee of a commission due, or about to be due, and to benefit financially at the employee’s expense, the employee may recover compensation for work performed. Fortune v. National Cash Register Co., supra at 104-105. Second, where an at-will employee is discharged without good cause, but the employer has not acted in bad faith, the employer is liable under the obligation of fair dealing “for the loss of compensation that is so clearly related to an employee’s past service.” Gram v. Liberty Mut. Ins. Co., 384 Mass. at 672. Third, bad faith is not established where there is no evidence that an employer was motivated by improper reason, even though an employee’s termination may be “ ‘bad, unjust, and unkind’ . . ., contrary to [his] reasonable expectations, and the product of inadequate investigation.” Id. at 670, quoting from Richey v. American Auto Assn., 380 Mass. 835, 839 (1980). See Ayash v. Dana-Farber Cancer Inst., 443 Mass. 367, 385, cert. denied sub nom. Globe Newspaper Co. v. Ayash, 126 S. Ct. 397 (2005) (“There is no general duty on the part of an employer to act ‘nicely’ ”). The “absence of good cause itself or the mistaken belief that there is good cause [is not] conclusively demonstrative of bad faith.” Gram v. Liberty Mut. Ins. Co., 384 Mass. at 670. “[T]ermination in the absence of good cause does not establish bad faith, and it is only a factor in determining whether there was fair dealing.” Id. at 668. On the other hand, “good cause to discharge an employee would tend to negate the existence of bad faith in the decision to discharge an employee.” Ibid. Gram does not explicitly define good cause, as it was clear in that case that Gram was fired without such cause. Elsewhere, Massachusetts courts have consistently defined good cause (occasionally referred to as “just” or “due” cause) as the existence of either “(1) a reasonable basis for employer dissatisfaction with a new employee, entertained in good faith, for reasons such as lack of capacity or diligence, failure to conform to usual standards of conduct, or other culpable or inappropriate behavior, or (2) grounds for discharge reasonably related, in the employer’s honest judgment, to the needs of [its] business. Discharge for a ‘[good] cause’ is to be contrasted with discharge on unreasonable grounds or arbitrarily, capriciously, or in bad faith.” G & M Employment Serv., Inc. v. Commonwealth, 358 Mass. 430, 435 (1970), appeal dismissed sub nom. G & M Employment Serv., Inc. v. Department of Labor & Indus., 402 U.S. 968 (1971). See Klein v. President & Fellows of Harvard College, 25 Mass. App. Ct. 204, 208 (1987); Goldhor v. Hampshire College, 25 Mass. App. Ct. 716, 723 (1988). See also Losacco v. F.D. Rich Constr. Co., 992 F.2d 382, 384-385 (1st Cir.), cert. denied, 510 U.S. 923 (1993); Hammond v. T.J. Litle & Co., 82 F.3d 1166, 1176 (1st Cir. 1996). Honest judgment is assessed in the context of “the general principles that an employer is entitled to be motivated by and to serve its own legitimate business interests; that an employer must have wide latitude in deciding whom it will employ in the face of the uncertainties of the business world; and that an employer needs flexibility in the face of changing circumstances. We recognize the employer’s need for a large amount of control over its work force.” Fortune v. National Cash Register Co., 373 Mass. at 101-102. See Siles v. Travenol Labs., Inc., 13 Mass. App. Ct. 354, 359 (1982). It is uncontested that Scudder terminated York, along with thirty-five other employees, as part of a cost-cutting initiative. Further, York admits that he has no basis to say that Scudder’s decision to terminate him was not reasonably related to Scudder’s honest judgment of the needs of its business. Nonetheless, York claims that by acknowledging that it laid him off as part of a cost-cutting initiative, Scudder essentially confessed to firing him so that it could keep his incentive compensation, and therefore, a material factual issue exists for the jury. Cost-cutting, however, is a legitimate business reason on which to base a termination for cause. See, e.g., Karcz v. Luther Mfg. Co., 338 Mass. 313, 320 (1959) (“Discharges because of economic conditions on a nondiscriminatory basis must be regarded as for ‘just cause’ ”); Amoco Oil Co. v. Dickson, 378 Mass. 44, 47-48 (1979) (collecting cases); Losacco v. F.D. Rich Constr. Co., supra at 385 (“Appellant has directed us to, and we have found, no cases involving just cause which prohibit economically-motivated terminations”). Indeed, Fortune v. National Cash Register Co., 373 Mass. at 102, recognized the legitimacy of an employer’s business reasons for terminating employees. Scudder’s nondiscriminatory discharge of York, for cost-cutting reasons, falls within the definition of good cause. No doubt that whether a termination was for good cause commonly presents a fact question for the jury, see Goldhor v. Hampshire College, supra at 722; however, on this record, there would be no room for a jury to infer that York’s termination was not for grounds “reasonably related, in the employer’s honest judgment, to the needs of [its] business.” G & M Employment Serv., Inc. v. Commonwealth, supra at 435. Contrast Maddaloni v. Western Mass. Bus Lines, Inc., 386 Mass. 877, 882 (1982) (allowing recovery under Fortune and Gram where evidence permitted an inference that termination was not for the legitimate business reasons posited by the employer). Despite his claim, York, during his deposition, admitted that he has no basis to contend that Scudder terminated him for the purpose of depriving him of sales incentive compensation. Because there is no basis for a jury to infer that he was not fired for good cause, York has no reasonable expectation of successfully proving his claim under Gram, and summary judgment was properly allowed. Next, the judge properly granted summary judgment on York’s claim of misrepresentation. York states that he worked diligently to acquire clients, relying on Cassidy’s representation that he would receive incentive compensation for those clients. York, however, testified at his deposition that Scudder did not make false representations to him during his employment. Additionally, in his response to Scudder’s statement of undisputed facts, York “admitted] that he is unaware of particular statements made by Scudder or Zurich Scudder employees that such employees knew were false at the time they made them.” Bound by these admissions, York had no reasonable expectation of proving his misrepresentation claim. Finally, York’s quantum meruit claim was properly rejected. Both York

RANTA v EATON RAPIDS PUBLIC SCHOOLS BOARD OF EDUCATION Docket No. 258900. Submitted April 4, 2006, at Lansing. Decided June 6, 2006, at 9:15 a.m. Adriana Ranta and other unionized teachers filed a charge with the State Tenure Commission (STC) alleging that the decision of their employer, the Eaton Rapids Public Schools Board of Education, to cap its contribution to employees’ health insurance premiums constituted a demotion without just cause under the teacher tenure act (TTA), MCL 38.71 et seq. The hearing referee granted respondent’s motion for summary disposition on the ground that the dispute was one involving contract, not tenure, and the STC therefore lacked jurisdiction. The STC reversed and remanded, ruling that because the issue was whether petitioners had been demoted, the claim was governed by the TTA, which gave the STC jurisdiction over the case. The Court of Appeals denied respondent’s application for leave to appeal, and the Supreme Court remanded the case for consideration as on leave granted. 471 Mich 916 (2004). The Court of Appeals held: 1. The STC erred in determining that the cap on health insurance benefits constituted a demotion. Petitioners all received salary increases for the school year in question, and respondent paid slightly higher insurance premiums than it had the previous year. The failure to satisfy an employee’s reasonable expectation based on an employer’s prior actions does not constitute a demotion. 2. The STC erred in determining that it had subject-matter jurisdiction. Because the dispute involves the respondent’s unilateral implementation of a contract term relating to a mandatory subject of bargaining, it is a labor dispute governed by the Public Employment Relations Act, MCL 423.201 et seq., over which the Michigan Employment Relations Commission has exclusive jurisdiction. Reversed and remanded for entry of an order of dismissal. 1. Schools — Teachers — Labor Disputes — Public Employment Relations Act. Disputes involving unilateral implementation of a contract term relating to a mandatory subject of bargaining between a teachers’ union and a school district are governed by the Public Employment Relations Act, which gives the Michigan Employment Relations Commission exclusive jurisdiction over such disputes (MCL 423.201 et seq.). 2. Schools - Teachers - Labor Disputes - Teacher Tenure Act. The teacher tenure act was not intended to cover labor disputes between school districts and teachers (MCL 38.71 et seq.). White, Schneider, Young & Chiodini, PC. (by William F. Young), for the petitioner. Thrun Law Firm, P.C. (by Donald J. Bonato and Roy H. Henley), for the respondent. Amicus Curiae: Brad A. Banasik for the Michigan Association of School Boards. Before: KELLY, EJ., and JANSEN and TALBOT, JJ. PER CURIAM. This case is before us on remand from our Supreme Court, which, in lieu of granting leave to appeal, remanded it to us for consideration as on leave granted. Ranta v Eaton Rapids Public Schools Bd of Ed, 471 Mich 916 (2004). The Court has directed us “to pay particular attention to whether the State Tenure Commission [STC] had jurisdiction over this dispute. See, e.g., Farrimond v Bd of Ed of East Jordan, 138 Mich App 51[; 359 NW2d 245] (1984).” Id. We reverse and remand to the STC for entry of an order dismissing this case for lack of subject-matter jurisdiction. I. FACTS This dispute arises from a breakdown in collective bargaining negotiations between respondent and petitioners’ union representative, the Eaton Rapids Education Association (EREA). Petitioners are unionized teachers employed by respondent. Anticipating the expiration of their collective bargaining agreement, respondent and the EREA began negotiations on a successor agreement. An unresolved element of these negotiations concerned payment of health insurance premiums. According to the existing contract, which covered the 2002-2003 school year, respondent was obligated to pay teachers’ insurance premiums in full. On the issue of who would continue to bear this cost, the parties reached an impasse in negotiations, which respondent observed by resolution. Consequently, respondent unilaterally implemented its most recent bargaining proposal capping its obligation to pay health care premiums. Accordingly, if insurance premiums were to increase to exceed the capped amount, employees would bear the excess premium costs. For the school year 2003-2004, insurance premiums increased and exceeded the capped amount. Pursuant to the unilaterally implemented term, respondent paid the capped amount and deducted the remaining balance from each employee’s paycheck according to each employee’s elected health plan. The capped amount was a few cents more than the amount respondent had paid the previous year. Petitioners’ salaries were also greater in 2003-2004 than in 2002-2003. The EREA subsequently filed a charge with the Michigan Employment Relations Commission (MERC), alleging unfair labor practices under the Public Employment Relations Act (PERA), MCL 423.201 et seq. The MERC case was settled when a successor collective bargaining agreement was reached. As individuals, petitioners filed a charge with the STC asserting that respondent’s cap on its contribution to health insurance premiums constituted a reduction in wages for the 2003-2004 school year, and that wage reduction amounted to a demotion as that term is defined in the teacher tenure act (TTA), MCL 38.71 et seq. Petitioners further asserted that this demotion was without just cause. Respondent immediately sought summary disposition, arguing that petitioners were not demoted and that the STC lacked subject-matter jurisdiction because this was a labor dispute governed by PERA and subject to MERC’s jurisdiction. The hearing referee entered a decision and order granting respondent’s motion, stating that the dispute involves “a contract issue, rather than a tenure issue.” The hearing referee further stated, “The insurance to which appellants are entitled is a matter solely determined by the collective bargaining agreement and collective bargaining process.” The hearing referee also determined that petitioners were not demoted because their salary was not reduced. The full STC reversed, stating: The issue raised in this case is whether appellants have been improperly demoted. Such claims traditionally arise under the [TTA].... This Commission does not lack jurisdiction over appellants’ claim. It further ruled: The fact that a teacher’s salary is not reduced does not necessarily establish that the teacher has not been demoted. The total compensation package must be considered in determining whether there has been a reduction equivalent to three days’ compensation. Accordingly, the STC remanded the matter to the hearing referee for a determination whether the statutory monetary threshold for demotion had been met and, if so, whether there was just cause for petitioners’ demotion. This Court denied respondent’s application for leave to appeal. Ranta v Eaton Rapids Schools Bd of Ed, unpublished order of the Court of Appeals, entered July 19, 2004 (Docket No. 256108). We now consider this case on remand as on leave granted. II. analysis Respondent contends that the STC erred in determining that the cap on health insurance benefits could be characterized as a demotion and that it has subject-matter jurisdiction over this dispute. We agree. A. STANDARD OF REVIEW In reviewing the decisions of an administrative agency, a court may set aside that decision or order only if substantial rights of the petitioning appellant have been prejudiced “because the decision or order [was] ... [in] violation of... a statute ... [or]... [arbitrary, capricious or clearly an abuse or unwarranted exercise of discretion [or]... Effected by other substantial and material error of law”. MCL 24.306.... The reviewing court may not substitute its judgment for that of the agency in the absence of fraud or jurisdictional defect. An agency’s findings of fact are conclusive unless they are unsupported by substantial evidence. Regents of the University of Michigan v Employment Relations Comm, 389 Mich 96; 204 NW2d 218 (1973); Murphy v Oakland County Dep’t of Health, 95 Mich App 337; 290 NW2d 139 (1980). Where a case has been submitted for decision upon an agreed-upon statement of facts, that statement must be taken as conclusive. The only question for the reviewing court then is whether the judgment was supported by the stipulated facts. Kretzschmar v Rosasco, 250 Mich 9; 229 NW 446 (1930). [Farrimond, supra at 56.] B. PERA AND THE TTA Our Supreme Court has held that PERA is “the dominant law regulating public employee labor relations.” Rockwell v Crestwood School Dist Bd of Ed, 393 Mich 616, 629; 227 NW2d 736 (1975). PERA “imposes a duty of collective bargaining on public employers, unions, and their agents.” St Clair Intermediate School Dist v Intermediate Ed Ass’n/Mich Ed Ass’n, 458 Mich 540, 550; 581 NW2d 707 (1998). “Violations of § 10 of the PERA are deemed unfair labor practices under MCL 423.216 ... remediable by the [MERC].” St Clair, supra at 550. Section 16 of PERA vests MERC with exclusive jurisdiction over unfair labor practices. Id. Our Supreme Court held that the TTA, on the other hand, is designed to “maintain an adequate and competent teaching staff, free from political and personal arbitrary interference”; to promote “good order and the welfare of the State and of the school system by preventing removal of capable and experienced teachers at the personal whims of changing office holders”; and “to protect and improve State education by retaining in their positions teachers who are qualified and capable and who have demonstrated their fitness, and to prevent the dismissal of such teachers without just cause”. [Rockwell, supra at 632, quoting Rehberg v Ecorse School Dist No 11, 330 Mich 541, 545; 48 NW2d 142 (1951) (footnote omitted).] The STC is “vested with such powers as are necessary to carry out and enforce the provisions of [the TTA].” MCL 38.137. Our Supreme Court has warned that the concurrent exercise of jurisdiction by MERC and the STC “could result in competing claims and conflicting adjudications with untoward and costly delay.” Rockwell, supra at 631. In disputes between teachers and school boards similar to the dispute raised in this case, Michigan courts have addressed the applicability of and the interaction between PERA and the TTA. In Rockwell, a school board and a teachers’ union were involved in a prolonged labor dispute. Id. at 626. After two teachers’ strikes, the teachers were ordered by the board to report for work or submit letters of resignation; if neither occurred, their employment would be deemed terminated. Id. at 626-627. Approximately 40 teachers returned to work, one submitted a letter of resignation, and the nearly 200 remaining were deemed to have terminated their employment. Id. at 627. The teachers’ union, which had previously filed an unfair labor practice charge with MERC, sought hearings under PERA. Id. One issue before our Supreme Court concerned whether the PERA or the TTA procedures controlled. Id. at 624-625. In concluding that PERA controlled, the Court noted that it has consistently construed the PERA as the dominant law regulating public employee labor relations.... The teachers’ tenure act was not intended, either in contemplation or design, to cover labor disputes between school boards and their employees. The 1937 Legislature in enacting the teachers’ tenure act could not have anticipated collective bargaining or meant to provide for the resolution of labor relations disputes in public employment. This Court’s observation in Wayne County Civil Service Commission [v Bd of Supervisors, 384 Mich 363, 372; 184 NW2d 201 (1971)] is pertinent: “In [no] instance could collective bargaining by public employees have been in the minds of the people, or of the [1937] legislators. The thought of strikes by public employees was unheard of. The right of collective bargaining, applicable at the time to private employment, was then in comparative infancy and portended no suggestion that it eventually might enter the realm of public employment.” [Id. at 629-630.] The Court also noted that PERA allows discipline for collective strike action, while disciplinary action subject to STC jurisdiction concerns individual teachers, pointing out that “ [i]t should therefore be a rare ease where the line separating disputes subject to the jurisdiction of the [STC] from those subject to the jurisdiction of the MERC will be unclear.” Id. at 631. The Court further rejected the argument that due process required a hearing before the employer could terminate a teacher’s employment, id. at 633, despite the fact that the TTA requires a prior hearing. See MCL 38.104. The Court determined that the hearing provided in PERA satisfied due process requirements. Id. at 633-635. Several years later, our Supreme Court, in Detroit Bd of Ed v Parks, 417 Mich 268; 335 NW2d 641 (1983), addressed whether the TTA applied to a discharge that resulted from a tenured teacher’s failure to pay agency service fees. Pursuant to a collectively bargained contract, the board of education was required to discharge employees who failed to pay. Id. at 271-273. The Court first determined that section 10(1) (c) of PERA permitted such an agreement. Id. at 275-278. The Court then rejected the argument that the “reasonable and just cause” standard for discharge in the TTA could “coexist” with section 10(l)(c) of PERA. Id. at 280. The Court noted that “[w]hen there is a conflict between PERA and another statute, PERA prevails, diminishing the conflicting statute pro tanto.” Id. Also at issue was whether the board of education was required to follow the TTA procedures in discharging the teacher. Id. at 282. The Court noted that the TTA procedures did not necessarily conflict with PERA, which did not contain any procedure for discharging a teacher for failure to pay agency service fees. Id. Nonetheless, the procedural aspects of the TTA were “irrelevant to a discharge for failing to pay agency fees” and the PERA procedures for adjudicating unfair labor practices satisfied due process requirements. Id. at 282-283. Further, the Court noted that if an employer improperly discharges an employee for failure to pay agency fees, it commits an unfair labor practice and MERC has exclusive jurisdiction over unfair labor practices. Id. at 283. Farrimond, supra, presented this Court with a factual situation more similar to the facts in this case. In Farrimond, a tenured teacher filed a petition before the Teacher Tenure Commission alleging that she was “demoted” under the TTA when a collective bargaining contract required the school board to place her on a salary schedule, which caused her to receive a half-step raise instead of a full step raise. Id. at 53-55. The commission determined that the petitioner was not demoted and, therefore, it “had no subject matter jurisdiction over the dispute, which was more properly resolved through collective-bargaining procedures.” Id. at 56. Affirming the commission’s ruling, this Court stated: [S]everal Tenure Commission decisions had held that terms of collective-bargaining agreements must be considered when determining whether a demotion has occurred. Where a collective-bargaining agreement allowed deviation from the applicable step of the salary schedule, retention at one level of a teacher with observed deficiencies resulted in no “reduction in compensation”; hence there was no demotion. In keeping with this interpretation, the commission has refused to rule on matters which, even though they involved a reduction of pay, were actually labor disputes or differences of opinion in contract interpretation. Considering the historical precedent for the commission’s ruling that it did not have jurisdiction over what was, in the instant case, a labor dispute between appellant and appellee, we cannot say that the commission’s order was arbitraxy, capricious or an abuse or unwarranted exercise of its discretion. Nor can we say that its decision resulted from a misinterpretation of the statute. [Id. at 58-59 (citations omitted).] The Court held that where the collective bargaining agreement required all teachers to be placed at a step level applicable to his or her experience, the petitioner’s placement on the salary schedule involved a labor dispute and presented an issue of contract interpretation. Id. at 59-60. It further held that the petitioner’s remedy was “properly provided for by the grievance procedures included in the collective-bargaining agreement” or a civil suit. Id. at 61. C. APPLICATION TO THIS CASE 1. PROVISIONS RELIED ON BY THE PARTIES Respondent asserts that this dispute is governed by PERA, which obligates a public employer to bargain collectively and authorizes the employer to enter into collective bargaining agreements with its employees’ representatives. MCL 423.215(1) provides: A public employer shall bargain collectively with the representatives of its employees as defined in section 11 and is authorized to make and enter into collective bargaining agreements with such representatives. Except as otherwise provided in this section, for the purposes of this section, to bargain collectively is the performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment, or the negotiation of an agreement, or any question arising under the agreement, and the execution of a written contract, ordinance, or resolution incorporating any agreement reached if requested by either party, but this obligation does not compel either party to agree to a proposal or require the making of a concession. The “mandatory subjects of bargaining” include health insurance benefits. St Clair, supra at 551. After the parties have met in good faith and bargained over the mandatory subjects placed upon the bargaining table, they have satisfied their statutory duty. If the parties are not able to agree on the terms of a mandatory subject they are said to have reached an “impasse”. Under [PERA] when good faith bargaining has reached an impasse, the employer may take unilateral action on an issue if that action is consistent with the terms of its final offer to the union. [Detroit Police Officers Ass’n v Detroit, 391 Mich 44, 55-56; 214 NW2d 803 (1974).] Accordingly, respondent contends that this dispute, which arose from the unilaterally implemented contract term capping respondent’s payment of health insurance premiums, is a labor dispute, subject to PERA. Petitioners contend that because they are tenured teachers, the TTA applies and prohibits the discharge or demotion of a tenured teacher, except on reasonable and just cause. MCL 38.101. The TTA gives the STC jurisdiction to determine whether a discharge or demotion of a tenured teacher was done with such cause. MCL 38.104(5)(i), (m). According to MCL 38.74, [t]he word “demote” means to reduce compensation for a particular school year by more than an amount equivalent to 3 days’ compensation or to transfer to a position carrying a lower salary. Accordingly, petitioners contend that requiring them to pay a portion of their health insurance premiums resulted in a reduction in the compensation for the school year by more than an amount equivalent to three days’ compensation. 2. CAN RESPONDENT’S CAP ON ITS PAYMENT OF HEALTH INSURANCE PREMIUMS BE CONSIDERED A DEMOTION? Respondent’s cap on its payment of health insurance premiums did not result in petitioners being demoted as that term is used in the TTA. MCL 38.74. It is undisputed that, for the 2003-2004 school year, petitioners all received salary increases between approximately $2,000 and $2,500. It is further undisputed that respondent paid insurance

<p>Syllabus by the Court</p> <p>1. "A circuit court's entry of summary judgment is reviewed de novo." Syllabus Point 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994).</p> <p>2. "Determination of the proper coverage of an insurance contract when the facts are not in dispute is a question of law." Syllabus Point 1, Tennant v. Smallwood, 211 W.Va. 703, 568 S.E.2d 10 (2002).</p> <p>3. "The interpretation of an insurance contract, including the question of whether the contract is ambiguous, is a legal determination *348that, like a lower court's grant of summary judgement, shall be reviewed de novo on appeal." Syllabus Point 2, Riffe v. Home Finders Associates., Inc., 205 W.Va. 216, 517 S.E.2d 313 (1999).</p> <p>4. "`Language in an insurance policy should be given its plain, ordinary meaning.' Syl. Pt. 1, Soliva v. Shand, Morahan & Co., 176 W.Va. 430, 345 S.E.2d 33 (1986)." Syllabus Point 2, Russell v. State Automobile Mutual Insurance Co., 188 W.Va. 81, 422 S.E.2d 803 (1992).</p>