No. 80-281 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1981 

LEO K. REITER, 

Plaintiff and Appellant, 

-vsYELLOWSTONE COUNTY, MONTANA, et al., 

Defendants and Respondents. 

Appeal from: District Court of the Thirteenth Judicial District, 

In and for the County of Yellowstone, The Honorable 

Robert H. Wilson, Judge presiding. 

Counsel of Record: 

For Appellant : 

Boschert & Boschert, Billings, Montana 

For Respondents: 

McNamer, Thompson & Cashmore, Billings, Montana 

Submitted on Briefs: December 17, 1980 

Decided: b~r~y -, 4 198% 

Filed: , 1281 , -- 
Mr. Chief Justice Frank I. Haswell delivered the Opinion of the 

Court. 

Leo Reiter initiated this action in the District Court 

seeking reinstatement and back pay as a result of respondents1 

failure to hold a hearing prior to the termination of his 

employment. Respondents1 motion for summary judgment was granted 

on the ground that Reiter was not entitled to a pretermination 

hearing as a matter of law. From this summary judgment, Reiter 

appeals. 

At the time of his discharge on September 22, 1978, Reiter 

had been employed for nearly 18 years as a custodian at the 

Yellowstone County Courthouse, and had attained the position of 

night supervisor. Following a disagreement with custodian Harry 

Evans over work to be performed, Reiter terminated Evans' 

employment. Shortly thereafter, Reiter was informed by his 

supervisor, Paul King, that his own employment was terminated. 

At an informal meeting with the county commissioners on 

September 18, 1978, Reiter was informed he would be suspended 

until a hearing was held to determine the facts. In response to 

Reiter's attempts to discuss the situation, the county commissioners repeatedly promised that a hearing would be held. 

Subsequently, Reiter received a written list of reasons 

for his discharge, including the unauthorized firing of Evans, 

leaving the building during working hours, and letting the men 

off early. Appellant contests the validity of the reasons. The 

commissioners offered to reinstate Reiter as a custodian but not 

as a supervisor. Reiter refused the offer, apparently because the 

proposed contract was demeaning in tone. No hearing was held, 

and Reiterls discharge became final. Evans replaced Reiter as 

night supervisor. In view of the remedy requested, it is essential to note that the position of night supervisor was subsequently abolished. 

Reiterls employment was not covered by any written 
contract or collective bargaining agreement or ordinance. Based 

on the longevity of his service and the fact that he was a permanent employee, Reiter claims that he had a property interest in 

his continued employment and that therefore, he was entitled to 

procedural due process prior to his dismissal. 

In granting respondents' motion for summary judgment, the 

District Court found that section 39-2-503, MCA, providing that 

an employment with no specified term may be terminated at the 

will of either party was controlling and that Reiter had no 

constitutional right to a hearing. 

We find the issues raised by this appeal are: 

1) Was the appellant denied his due process rights when he 

was discharged without a prior hearing to determine if there was 

just cause for the termination? 

2) Was the appellant entitled to a pretermination hearing 

by virtue of the promise made by the commissioners that he would 

be given a hearing? 

I. DUE PROCESS 

Appellant argues that he was entitled to procedural due 

process prior to his termination. He relies primarily on the 

following language from Perry v. Sindermann (1972), 408 U.S. 593, 

602, 92 S.Ct. 2694, 2700, 33 L.Ed.2d 570: 

"A teacher, like the respondent, who has held 

his position for a number of years, might be 

able to show from the circumstances of this 

service--and from other relevant facts--that he 

has a legitimate claim of entitlement to job 

tenure." 

AS llcircumstancesll and "other relevant facts" he points to his 

longevity of service, his supervisory position, his retirement 

and insurance benefits, and the fact that he was promised a 

hearing. He asserts that these factors gave him a "legitimate 

claim of entitlement to continued employment" which is entitled 

to due process protection according to Perry and Board of Regents 

v. Roth (1972), 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548. 

Appellant also argues he possessed a property right by virtue of 
an implied covenant of good faith. 

In order to determine whether due process requirements 

have been violated in this case, it must be decided whether 

appellant had either a "libertyw or a "property" interest which 

falls within the protection of the Fourteenth Amendment to the 

United States Constitution and Article 11, Section 17, of the 

Montana Constitution. Board of Regents v. Roth, supra; Schend 

v. Thorson (1976), 170 Mont. 5, 549 P.2d 809. If appellant can 

cross this threshold, the analysis proceeds to the second 

question, i.e., what specific procedures are due in this case. 

In the leading case of Roth, a nontenured teacher claimed 

that a violation of his due process rights occurred when he was 

denied an opportunity to be heard in regard to his dismissal at 

the end of his initial one-year contract with the university. A 

statute provided for the acquisition of tenure after four years 

of year-to-year employment. After acquiring tenure the teacher 

would be entitled by statute to continued employment during good 

behavior and satisfactory performance, with discharge allowed 

only for cause. The Court found that Roth had shown no "liberty" 

interest entitled to protection, since no stigma had been imposed 

on his "good name, reputation, honor or integrity." Nor did Roth 

have a "property" interest, for: 

" [tlo have a property interest in a benefit, a 

person clearly must have more than an abstract 

need or desire for it. He must have more than a 

unilateral expectation of it. He must, instead, 

have a legitimate claim of entitlement to it." 

Board of Regents v. Roth, 408 U.S. 564, 577, 92 

S.Ct. 2701, 2709, 33 L.Ed.2d 548. 

The employee must be able to point to an independent source such 

as state law or rules or understandings between the employer and 

his employees. The terms of Roth's appointment were contained in 

the statute and in his contract, in which there was no support 

for his claim of entitlement to continued employment. 

The evidence in the instant case, even when viewed in the 

light most favorable to appellant, does not show a tradition or 
an unwritten policy concerning job security for county employees. 

The evidence shows that Reiter went to the county commissioners 

after his supervisor dismissed him, and that initially the commissioners promised him a hearing but later decided he was not 

entitled to a hearing. The commissioners, having final authority 

in county personnel matters, then approved of Reiter's discharge. 

Although Reiter may have been treated unfairly, he seeks to 

stretch the due process clause beyond its limits by asserting the 

existence of a protected property interest based upon longevity 

of service, in view of section 39-2-503, MCA. That statute 

provides : 

"An employment having no specified term may be 

terminated at the will of either party on notice 

to the other . . .I1 

The United States Supreme Court has recently rejected a 

claim similar to Reiter's in Bishop v. Wood (1976), 426 U.S. 341, 

96 S.Ct. 2074, 48 L.Ed.2d 684. A policeman who had become a 

permanent employee after passing the probationary stage claimed 

he was entitled to a pretermination hearing by virtue of a city 

ord inance providing that permanent employees could be discharged 

for unsatisfactory performance, negligence, inefficiency or 

unfitness. The Court, recognizing that a property interest could 

be created by ordinance or by implied contract, stated that in 

either case the legitimacy of the claim ultimately must be 

decided by reference to state law. Based on state law the Court 

found that the policeman held his job at the will and pleasure of 

the city. Further, the policeman had no "liberty" interest, for 

even assuming his discharge was unjustified it is not a significant deprivation when one's discharge merely makes one less 

attractive to other employees. 

It is clear from the above-discussed cases that property 

interests are created and defined by state law. The Montana 

statute creates no property interest in employment if there is no 

specified term. Appellant seeks to circumvent the statute 
through a theory of implied contract and implied covenant of good 

faith and fair dealing. In effect his argument is that due to 

his longevity of service he had an implied contract of 

employment, that in the implied contract there was an implied 

covenant of good faith, and that his discharge was in bad faith. 

Appellant does not claim a breach of contract, but rather argues 

that the implied covenant of good faith constituted a property 

interest entitling him to due process. 

There is some basis for implying covenants of good faith 

in contracts. See section 28-1-201, MCA; Foley v. Community Oil 

Co., Inc., (D.C.N.H. 1974), 64 F.R.D. 561; Monge v. Beebe Rubber 

Co. (N.H. 1974), 316 A. 2d 549; Fortune v. National Cash Register 

(1977), 373 Mass. 96, 364 N.E.2d 1251. All of these cases were 

breach of contract actions and none involved a statute. In Monue 

the court discussed the common-law rule of at-will employment 

contracts, noting that it was harsh and outdated, then modified 

the rule by holding that termination motivated by bad faith or 

retaliation constituted a breach of contract. After this mdif ication of the "at-will" rule, the New Hampshire federal court in 

Foley applied it in denying the employer's motion for judgment on 

the pleadings. The Foley case involved an employee of 40 years 

service who was unjustly discharged. The federal district court 

stated that longevity of service might give rise to an implied 

contract right, but the court was no longer bound by the strict 

common-law "at-will" rule according to the law of the state in 

which it was sitting. In Massachusetts, the discharge of an 

employee who had served for 25 years was found to be a breach of 

the implied covenant of good faith because the employer was 

attempting to avoid payment of a substantial commission. In none 

of these cases was there a procedural due process issue. 

The doctrine of good faith and fair dealing in contracts 

has been narrowly applied in cases where unconscionable conduct 

on an employer's part must be deterred. The doctrine has also 
been used extensively in insurance law to protect the insured. 

See First Security Bank of Bozeman v. Goddard (1979X - Mont . - I 

593 P.2d 1040, 36 St.Rep. 854. In Kenneally v. Orgain (1980), 

Mont . , 606 P.2d 127, 37 St.Rep. 154, we rejected a claim in 

tort for wrongful discharge, although the employee had seven 

years of service, because there was no violation of public policy. 

Appellant's argument on implied contracts cannot successfully circumvent the Montana statute which clearly denies his 

claim of entitlement to continued employment. Even though 

appellant may have had an implied contract with the county by 

virtue of his longevity of service, it would be a contradiction 

in terms to say that he had an "implied specified" period of 

employment. A specified term is one which the parties expressed, 

and there was no expression here concerning the length of the 

employment. Section 39-2-503, MCA, operates to fill the gap left 

by the parties by defining the relationship as an "at-will" 

employment. While the rule may well be outdated, it is uniquely 

a province of the legislature to change it. 

Further, assuming arguendo that appellant had an implied 

contract with an implied covenant of good faith, the employer did 

not act in bad faith because its conduct was statutorily 

permissible. Reiter was not employed on a "discharge for cause 

only" basis, according to the statute. 

In summary, we hold that appellant was not denied his procedural due process rights when he was discharged without a 

hearing because section 39-2-503, MCA, negates his claim of a 

property interest protected by the United States and Montana 

Constitutions. 

11. ENFORCEABLE PROMISE, WAIVER AND ESTOPPEL 

The record indicates that at a meeting with the commissioners on September 18, 1979, Reiter was repeatedly promised 

a hearing. The commissioner refused to discuss the reasons for 

his discharge, stating that a hearing would be scheduled. Sub- 
sequently, on October 23, 1978, Reiter received a letter from the 

deputy county attorney, which stated in part: 

" . . . our studies have indicated that you are 

not entitled to a grievance hearing, and therefore none will be scheduled ." 

The effect of the letter was to deny Reiter the opportunity to 

refute the charges made against him in the list of reasons for 

his discharge. The issue is whether Reiter was entitled to a 

hearing by virtue of the commissioners1 promise to hold a 

hearing. 

The promise to hold a hearing was not supported by any 

independent consideration. Therefore, it was not an enforceable 

promise under contract law, independent of the employment 

contract. Nor could the promise be enforceable as an implied 

term of Reiterls implied contract of employment, assuming he had 

such a contract. When Reiter was employed, the predecessor to 

section 39-2-503, MCA, was in effect. That statute provides that 

an employment without a specified length may be terminated at the 

will of the employer, i.e. that no reason or good cause need be 

shown. This statute was in effect a part of the employment 

contract between the county and Reiter. A promise to hold a 

hearing, given at a later date, could not modify that part of the 

contract without independent consideration unless consented to by 

both parties in writing. Section 28-1-1601, MCA. 

Did the promise operate as a waiver of the countyls right 

to fire Reiter without a hearing? A waiver is defined as the 

intentional and voluntary relinquishment of a known right, claim 

or privilege. Farmer's Elevator Co. of Reserve v. Anderson 

(1976), 170 Mont. 175, 552 P.2d 63. The record indicates that 

the commissioners were not even aware that Reiter was not 

entitled to a hearing at the time they promised the hearing. If 

they did not know of their right to fire Reiter without a 

hearing, they could not have voluntarily and intentionally waived 

that right. 
A waiver can also arise by conduct, in which case it is 

called an "implied waiver." This doctrine requires a detrimental 

reliance by the party who is led by the conduct to believe a 

waiver has occurred. See Stanolind Oil & Gas Co. v. Guertzgen 

(9th Cir. 1939), 100 F.2d 299; Blackls Law Dictionary, p. 1752. 

Thus the doctrine of "implied waiver" is akin to estoppel. 

The elements of estoppel are set forth in section 

26-1-601, MCA. Essential to the doctrine is the detrimental 

reliance by the innocent party upon the representations of the 

other party. In this case, the record shows no evidence of 

reliance by Reiter. Reiter was promised a hearing and also 

offered a reinstatement as a janitor rather than a supervisor. 

From Reiterts deposition it is apparent that he did not refuse 

the demotion as a result of the promise of a hearing. Rather he 

ref used the demotion because the proposed contracts required him 

to acknowledge that his behavior was unsatisfactory and he felt 

these contracts were demeaning. Therefore, since there is no 

evidence of a detrimental change in position due to the promise, 

the doctrines of equitable estoppel and implied waiver do not 

apply 

Since Reiter has no due process right to a hearing and the 

commissioners promise was unenforceable, the respondent's motion 

for summary judgment was properly granted. 

The order of the District Court entering summary judgment 

in favor of the respondents is hereby affirmed. 

Chief Justice 
This cause was submitted for decision prior to January 

5, 1981. 

Mr. Justice Daniel J. Shea will file a written dissent later. 
Mr. Justice John Conway Harrison dissenting: 

I must dissent with the opinion of the Court on the 

basis of the provisions of section 28-1-201, MCA. This 

provision in our law, in my opinion, can be looked to in 

fact situations such as this as a statute to protect 

persons, such the petitioner in this case, who have a long 

period of public employment. Section 28-1-201 provides: 

"General duty of care. Every person is 

bound, without contract, to abstain from 

injuring the person or property of another or 

infringing upon any of his rights." 

Developing in the law around the United States are 

remedies for employees who serve under the "at-will" statute 

and rule. The more equitable and just rule, in my opinion, 

is that an implied contract exists between the employer and 

the employee which gives additional consideration to an 

employee of some eighteen years of continuous employment, as 

in this case. Foley v. Community Oil Company, Inc. (D. N.H. 

1974), 64 F.R.D. 561; Monge v. Beebe Rubber Co. (N.H. 

1974), 316 A.2d 549; Fortune v. National Cash Register Co. 

(1977), 373 Mass. 96, 364 N.E.2d 1251. 

In Monge the court reviewed the common-law rule of 

"at-will" employment contracts. The Monge court noted that 

the rule was harsh and outdated, and then modified the rule 

by holding that a determination motivated by bad faith or 

retaliation constituted a breach of contract. It was a 

modified "at-will" rule that the New Hampshire Federal Court 

applied to deny an employer's motion for a judgment on the 

pleadings. 

In Foley, when an employee of forty years of service 

was unjustly discharged, the Federal District Court stated 

that the longevity of service should give rise to an implied 
contract right but that the court was no longer bound by the 

strict common-law "at-will" rule according to New Hampshire 

law. 

The next case, the Massachusetts case of Fortune v. 

National Cash Register Co., supra, involved an employee who 

was discharged after working for the company some twentyfive years. The Court found that there was a breach of an 

implied contract of good faith because the employer was 

attempting to avoid payment of a substantial commission. 

While it has not been established that a public 

employee with longevity has a constitutional right to a 

continued position, I believe the rule established is that 

one is entitled to a hearing before he is summarily 

discharged, as appellant was in this case. I would hold 

that the summary dismissal of appellant violated a due 

process right. Slochower v. Board of Education (1956), 350 

U.S. 551, 76 S.Ct. 637, 100 L.Ed. 672. 

For the above reasons, I would return the matter to 

the District Court and require that a full hearing be given 

to appellant in this matter.