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,
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
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,
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 N.W.2d 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 N.W.2d 389 (1988); Struble v Lacks Industries, Inc, 157 Mich.App. 169, 175; 403 N.W.2d 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
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 N.W.2d 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 N.W.2d 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 N.W.2d 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.
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
However, the appeals court of New Jersey, in Parker v M & T Chemicals, Inc, 236 N.J.Super. 451; 566 A.2d 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
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 plaintiff's demotion and constructive discharge DR 2110 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 N.W.2d 447 (1988). In this role, plaintiff's "sole loyalty and duty is owed to the client alone." Atlanta Int'l Ins Co v Bell, 181 Mich.App. 272, 274; 448 N.W.2d 804 (1989). The Bell Court summarized:
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 have an attorney-client relationship, but was hired to administer the office. Plaintiff's role as administrator was evidenced by the fact that after plaintiff's demotion he was replaced by a nonlawyer. Clearly, plaintiff's relationship with defendants was more than merely one of attorney-client.
Under these circumstances, we hold that under
In regard to plaintiff's claim for recovery under the theory of retaliatory demotion, we hold that this cause of action is an alternative theory of recovery from a breach of a just-cause contract and, therefore, cannot be sustained as an independent claim for recovery. Both causes of action arose from the same facts: plaintiff's demotion and constructive termination. The trial court instructed that the damage award for breach of a just-cause contract for the demotion and constructive discharge was to include lost wages, loss of employment, and loss of benefits, including the use of an automobile. It is clear that the trial court's damage instruction on breach of contract included the damages resulting from defendant's actions in demoting and constructively discharging plaintiff. A cause of action for retaliatory discharge is a recognized exception to the general employment-at-will contract and is based on the principle that some grounds for discharging an employee are so contrary to public policy as to be actionable. Suchodolski v Michigan Consolidated Gas Co, 412 Mich. 692, 694-695; 316 N.W.2d 710 (1982). The jury,
We are further persuaded that plaintiff cannot recover under both a breach of contract claim and a retaliatory discharge claim because both claims sound in contract. An action for wrongful discharge is one mainly ex contractu. An action claiming retaliatory discharge is an action asserting a specific type of wrongful discharge. Lopus v L & L Shop-Rite Inc, 171 Mich.App. 486, 491; 430 N.W.2d 757 (1988), citing Watassek v Dep't of Mental Health, 143 Mich.App. 556, 564-565; 372 N.W.2d 617 (1985). Contra Goins v Ford Motor Co, 131 Mich.App. 185; 347 N.W.2d 184 (1983). Since the causes of action assert different types of wrongful discharge, they should be pled in the alternative. We hold that the jury verdict regarding the breach of contract prevents a finding of a retaliatory discharge. Thus, we vacate the $523,000 jury verdict for the retaliatory demotion claim. In so holding, we decline to address the issue whether an employee can bring a retaliatory discharge claim against his employer for failing to take action which is violative of the attorneys' code of professional conduct.
We also are persuaded that the claim of retaliatory
Under the retaliatory discharge claim, defendants also allege that the trial court erred in entering a judgment of joint and several liability of the individual defendants on the basis of the jury's finding of a civil conspiracy. The joint and several liability of the individual defendants was limited to $23,000 for compensatory damages for retaliatory demotion and $500,000 for exemplary damages stemming from the retaliatory demotion. Because we vacate the jury verdict regarding the retaliatory demotion claim, we also vacate the judgment of joint and several liability.
Defendants also allege that the trial court erred in instructing the jury concerning the importance of defendants' failure to provide adequate methods of internal appeal procedures. The trial court instructed the jury:
We hold that the trial court erred in instructing the jury on this issue. Both the Vander Toorn and Khalifa decisions addressed the question whether a plaintiff can be precluded from pursuing a circuit court action when the plaintiff's claim was fully heard and decided according to the contract procedures for internal appeal accepted upon employment. However, these cases require that the internal review mechanisms comply with a due process right of fairness before their use can preclude future lawsuits. In the present case, defendants are not arguing that plaintiff was precluded from maintaining the present suit because he utilized the internal appeal procedure. Rather, plaintiff is asserting an additional right to an impartial review under his contract. While plaintiff's employment contract may create a contractual right to an impartial review, the trial court's focus should be on the existence of a just-cause contract and whether just cause to terminate existed. The jury cannot find that the plaintiff's employment was terminated for just cause, and yet award wrongful discharge damages because plaintiff was not afforded proper review procedures. We hold that the trial court erred in focusing plaintiff's breach of a just-cause contract action on the availability and propriety of an internal review process.
However, we conclude that the instructional
Defendants also claim that the trial court erred in submitting the charge of intentional infliction of emotional distress to the jury, while plaintiff in his cross appeal alleges that the trial court erred in refusing to enter the judgment for intentional infliction of emotional distress because it was duplicative of the $500,000 awarded for mental anguish under the retaliatory discharge theory. We
Finally, defendants allege that the trial judge was biased and that he erred in failing to disqualify himself from the case, and that he made improper and prejudicial comments and questions during trial. First, we hold that the trial judge did not abuse his discretion in denying disqualification. An actual showing of prejudice is required before a trial judge will be disqualified. Wayne Co Jail Inmates v Wayne Co Chief Executive Officer, 178 Mich.App. 634; 444 N.W.2d 549 (1989). A judge is disqualified where he cannot impartially hear a case because he is an interested party. MCR 2.003(B)(1). An interest sufficient to disqualify a judge must be such an interest in the subject matter that he will be directly affected through pecuniary or property gain or loss. Detroit Bd of Ed v Getz, 321 Mich. 676, 678; 33 N.W.2d 113 (1948). We hold that defendants have failed to show that the trial judge was actually biased and that the fact that the trial judge was a policyholder of
Further, we disagree with defendants' allegation that the trial court made improper and prejudicial comments and questions. After reviewing the lower court record, we conclude that the court's participation at trial did not deny defendants a fair and impartial trial by unduly influencing the jury. King v Taylor Chrysler-Plymouth, Inc, 184 Mich.App. 204, 216; 457 N.W.2d 42 (1990). Moreover, the trial court instructed the jury that the jury was the sole judge of the facts. Thus, defendants were not denied a fair trial.
In sum, we hold that plaintiff can maintain an action for breach of a just-cause contract on the basis of retaliatory demotion and constructive discharge stemming from his refusal to take action which would have violated the code of professional conduct. However, since the cause of action for retaliatory demotion and constructive discharge merged with the breach of contract claim, we set aside the jury verdict regarding these amounts and decline to address whether defendant can maintain a cause of action for retaliatory discharge from an employment-at-will contract. Further, we dismiss the jury award for intentional infliction of emotional distress and conspiracy. Finally, we hold that defendants were not denied a fair trial because of the trial judge's questions and comments and that the trial judge did not err in failing to disqualify himself.
Affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.