Jo Ann Mudlitz v. Mutual Service Ins. ( 1996 )

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No. 95-1135
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Jo Ann Mudlitz, *
*
Appellant, *
*
v. * Appeal from the United States
* District Court for the District
Mutual Service Insurance * of Minnesota.
Companies dba MSI Insurance, *
*
Appellee. *
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Submitted: October 18, 1995
Filed: January 31, 1996
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Before BOWMAN, FLOYD R. GIBSON, and BRIGHT, Circuit Judges.
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BRIGHT, Circuit Judge.
Jo Ann Mudlitz brought this diversity suit in the district
court1 against her former employer, Mutual Service Insurance
Companies (MSI) for breach of contract, breach of covenant of good
faith and fair dealing and misrepresentation. The district court
granted MSI's motion for summary judgment, and Mudlitz appeals. We
affirm the district court's grant of summary judgment.
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The Honorable James M. Rosenbaum, United States District
Judge for the District of Minnesota.
I. BACKGROUND
Mudlitz, a senior insurance underwriter, began working for MSI
on October 7, 1991 as an at-will employee. Mudlitz received a copy
of the MSI employee handbook, which provided:
You may resign your employment at any time. For any
reason or for no reason. And the company reserves the
same right to terminate the . . . employment of any
employee under the same conditions.
Employee Handbook, Addendum at 2. Less than a year after her
employment began, Mudlitz's supervisor gave her a memorandum titled
"Performance Warning," dated August 12, 1992. This memorandum
detailed a variety of problems, including Mudlitz's alleged
negative attitude and resistance to authority. The memorandum
provided that Mudlitz's continued employment at MSI was dependent
on her attaining eight expectations, including "show[ing] positive
attitude and behavior[.]" Addendum at 10. The memorandum
concluded:
Your behaviors are actions of serious resistance to
authority. We will review your behavior and performance
[sic] again in thirty days. If your current behavior and
performance continue in this unacceptable manner, this
will be grounds for termination at that time. If your
behavior and performance deteriorates or if improvement
in your attitude is not demonstrated within the next
thirty day period, your employment relationship with MSI
may be terminated prior to the end of the thirty day
performance period.
If your behavior and performance improves during that
time but at any time slips back, there will be grounds
for termination without additional notice.
I would like to emphasize to you that this is a
confidential matter and must not be discussed with
anyone. This is in keeping with your best interests.
Failure to do so will be grounds for immediate dismissal.
Performance Warning (emphasis in original). Addendum at 11.
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Mudlitz met with her supervisors on Thursday, August 13, 1992
to discuss the Performance Warning and continued to work through
the next day. Mudlitz then suffered an undiagnosed illness and did
not return to work until Monday, August 24, 1992. At that time she
was given a memorandum dated August 19, 1992, which stated:
Jody, during the past week I have had the opportunity to
speak individually with each person in the Group
Underwriting Department. As I explained in our meeting
of Thursday, August 13, 1992, I had learned of a possible
personnel problem in the Department. The allegation was
that a person or persons within the . . . Department were
documenting every negative move made by your Manager,
Betty House, with the expressed purpose of getting her
fired and disgracing her. The allegation further stated
that certain documentation items were, in fact,
fabricated to further the cause.
[The memorandum details five acts of alleged misconduct
by Mudlitz.]
Your actions are considered to be gross misconduct and
result in your immediate involuntary termination of
employment with Mutual Service Life Insurance Company.
Termination Notice, Addendum at 76-77.
Mudlitz brought this diversity suit in the district court,
contending that the Performance Warning reformed her employment-at-
will contract to a terminable-for-cause only contract and created
a covenant of good faith and fair dealing, and that MSI breached
the employment contract and covenant by terminating her employment
without cause. Mudlitz also alleged that the Performance Warning,
with the Termination Notice, gave rise to a claim for damages based
on misrepresentation by the employer.
Following discovery, the district court granted MSI's summary
judgment motion against Mudlitz on her claims of breach of
contract, breach of covenant of good faith and fair dealing and
misrepresentation. On appeal, Mudlitz argues that the grant of
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summary judgment was improper because questions of material fact
exist for all of her claims.
II. DISCUSSION.
A grant of summary judgment is reviewed de novo. Tindle v.
Caudell, 56 F.3d 966, 969 (8th Cir. 1995). Summary judgment is
proper if, taking all facts and reasonable inferences from facts in
the light most favorable to the non-moving party, there is no
genuine issue of material fact, and the movant is entitled to
judgment as a matter of law. Id.; see also Fed. R. Civ. P. 56(c).
The non-moving party may not rest upon mere denials or allegations
in the pleadings, but must set forth specific facts sufficient to
raise a genuine issue for trial. Tindle, 56 F.3d at 969 (citing
Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986)). Because
jurisdiction in this case is based on diversity of citizenship,
Minnesota substantive law applies, see, e.g., Farr v. Farm Bureau
Ins. Co. of Nebraska, 61 F.3d 677, 679 (8th Cir. 1995).
A. Breach of Contract.
Under the general rule of employment contract law in
Minnesota, Mudlitz served as an at-will employee and could be
terminated at any time with or without cause. See Cederstrand v.
Lutheran Brotherhood, 117 N.W.2d 213, 221 (Minn. 1962); but see
Hunt v. IBM Mid America Employees Federal Credit Union, 384 N.W.2d
853, 856 n.7 (Minn. 1986) (describing exceptions to at-will
doctrine). Mudlitz contends, however, that MSI reformed her
employment-at-will contract into a terminable-for-cause only
contract by warning her that she would be terminated in thirty days
if she did not improve her behavior.
In making this argument, Mudlitz relies on Minnesota decisions
holding that provisions in employee handbooks can modify
employment-at-will contracts and require cause for termination.
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See Feges v. Perkins Restaurants, Inc., 483 N.W.2d 701 (Minn.
1992); Lewis v. Equitable Life Assur. Soc., 389 N.W.2d 876 (Minn.
1986); Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn.
1983). The Pine River court noted that an employee handbook
provision
if in form an offer, and if accepted by the employee, may
create a binding unilateral contract. The offer must be
definite in form and must be communicated to the offeree.
Whether a proposal is meant to be an offer for a
unilateral contract is determined by the outward
manifestations of the parties, not by their subjective
intentions.
333 N.W.2d at 626.
Although the MSI Employee Handbook explicitly created an
employment-at-will contract, Mudlitz nevertheless argues that this
court should expand the principle of Pine River and construe a
disciplinary notice such as the one here as creating a contract
modifying the at-will arrangement. Mudlitz cites no Minnesota
decision indicating that an explicit employment-at-will contract
contained in an employee handbook can be reformed to a terminable-
for-cause agreement as the result of the issuance of a disciplinary
warning to one employee, while other similar employees are
terminable "at-will." Nothing in the language or circumstances of
the Performance Warning here reasonably creates an inference that
MSI was offering Mudlitz a contract which provided her with greater
rights than she had under the Employee Handbook. We agree with the
district court that:
it is wholly irrational to assume that a notice given
under [these] circumstances, where an employee is being
disciplined and warned that [her] job is about to be
terminated, would somehow ripen into an assured contract
of a progressive discipline over that 30-day period. It
beggars the imagination.
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Summary Judgment Transcript, Addendum at 5. The Pine River court
admonished that "[n]ot every utterance of an employer is binding.
It remains true that the employer's prerogative to make
independent, good faith judgments about employees is important in
our free enterprise system." Pine River, 333 N.W.2d at 630
(quotations omitted).
The Performance Warning could not, as a matter of fact or law,
have modified Mudlitz's employment-at-will contract, and MSI did
not breach that contract when, as Mudlitz alleges, it terminated
her employment without cause. The district court did not err in
ordering summary judgment for Mudlitz's breach of contract claim.
B. Covenant of Good Faith and Fair Dealing.
Mudlitz argues that the Performance Warning created a covenant
of good faith and fair dealing between MSI and herself, and that
MSI breached that covenant by dismissing her without cause. In
Poff v. Western Nat. Mut. Ins. Co., 13 F.3d 1189 (8th Cir. 1994),
this court noted that "the Minnesota Supreme Court has squarely
held that there is no implied covenant of good faith and fair
dealing in Minnesota employment contracts." Id. at 1191 (analyzing
Hunt v. IBM Mid America Employees Federal Credit Union, 384 N.W.2d
853, 858-59 (Minn. 1986)). To create an express covenant of good
faith and fair dealing, "there must be specific and definite terms
that meet the contractual requirements of an enforceable unilateral
offer. . . . [T]he same specificity required to modify the at-will
relationship is also required to create an express covenant of good
faith and fair dealing." Id.As noted above, the Performance Warning did not reform
Mudlitz's employment contract to require cause for termination, and
MSI did not promise to act in good faith towards Mudlitz. Because
the Performance Warning did not expressly create a covenant of good
faith and fair dealing, and because a covenant of good faith and
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fair dealing may not be inferred, the district court properly
granted summary judgment for this claim.
C. Misrepresentation.
Mudlitz claims that MSI either intentionally, recklessly or
negligently made untrue statements about her performance and
opportunity to continue her employment in the Performance Warning
and Termination Notice, and she seeks damages for
misrepresentation.
Reliance and damages are necessary elements for a prima facie
case of misrepresentation. See Hanks v. Hubbard Broadcasting,
Inc., 493 N.W.2d 302, 308 (Minn.App. 1992) (listing elements).
Mudlitz does not describe how she relied on the alleged
misrepresentations made by MSI, or what damages she suffered.
Mudlitz merely asserts that she "justifiably and actually relied on
the representations made by MSI," and "suffered damages as a result
of her reliance on the representations made by MSI." Appellant's
Brief at 26. While Mudlitz continued working after receiving the
Performance Warning, this alone is legally insufficient to act as
reliance. See Hanks, 493 N.W.2d at 309 ("We recognize that where
an at-will employee merely continues to work and does not claim to
have turned down any offers of employment based upon an employer's
representations, no reliance will be found"). Mudlitz's assertions
of damages are purely conclusory, and she alleges no facts upon
which a finding of damages could be based.
Assuming, as we must, that Mudlitz is correct and all of the
factual statements in the Performance Warning and Termination
Notice are false, she has failed to supply the necessary elements
of reliance and damages for her prima facie case. Mudlitz has not
met her burden under Fed. R. Civ. P. 56(e), and the district court
properly entered summary judgment on her claim for the tort of
misrepresentation.
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III. CONCLUSION
We affirm the judgment of the district court.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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