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The Honorable James M. Rosenbaum, United States District

Judge for the District of Minnesota.

___________

No. 95-1135

___________

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. *

___________

 Submitted: October 18, 1995

 Filed: January 31, 1996 ___________

Before BOWMAN, FLOYD R. GIBSON, and BRIGHT, Circuit Judges.

___________

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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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-atwill 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 terminablefor-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.