### No. 80-281 IN THE SUPREME COURT OF THE STATE OF MONTANA 1981

LEO 

### K. REITER, Plaintiff and Appellant,

-vsYELLOWSTONE COUNTY, MONTANA, et al., Defendantsand 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:

ForAppellant: 

### Boschert & 

### Boschert, Billings,Montana

For Respondents: McNamer, Thompson & 

### Cashmore, Billings, Montana

Submitted on Briefs: December 

### 17, 1980 Decided:

### b~r~y -,

## 4198%

Filed:

,

## 1281

, 

### --Mr. Chief Justice Frank I. Haswell delivered the Opinion of the Court.

Leo Reiter initiated thisaction in the District Court seeking reinstatement and back pay asa result of respondents1 failureto hold a hearing prior to the termination of his employment. Respondents1 motion for summary judgment was granted

on the ground that Reiterwas not entitled to a pretermination hearing asa matter of law. From this summary judgment, Reiter appeals. Atthe 

### time of hisdischarge on September 22, 1978, Reiter had been employed for nearly 18years as a custodian atthe Yellowstone County Courthouse, and had attained the position of night supervisor. Following a disagreement with custodian Harry Evans over work tobe performed, Reiter terminated Evans' employment. Shortlythereafter, Reiter was informed by his supervisor, Paul King, that hisown employment was terminated. Atan 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 todiscuss the situation, the county 

### commissioners repeatedlypromised that a hearing would be held. Subsequently, Reiter received a written list of reasons forhisdischarge, 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 asa custodian but not

asa supervisor. Reiter refused the offer, apparentlybecause the proposed contract was demeaning in tone. No hearing was held, and Reiterlsdischarge became final. Evans replaced Reiteras night supervisor. In view of the remedy requested, it is essentialto note that the position of night supervisorwas subsequentlyabolished. Reiterlsemployment was not covered by any writtencontract

### or collectivebargaining agreement 

### or ordinance. Based

on the longevity of his service and the fact thathe 

### was a permanent employee, Reiter 

### claims that he had a property interest in hiscontinued employment and that therefore, he 

### was entitled 

### to procedural due process prior to hisdismissal. Ingranting 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 atthe willof eitherparty was controlling and that Reiter had no constitutionalright 

### to 

### a hearing. We find the issues raised by thisappeal 

### are: 1)Was the appellantdenied hisdue process rightswhen he



### was discharged without 

### a priorhearing to determine if therewas just cause forthe termination? 2)Was the appellant entitled 

### to a pretermination hearing by virtue of the promise made by the commissioners thathe would be given a hearing? I. DUE PROCESS Appellant argues thathe was entitled 

### to procedural due process prior to his termination. He 

### relies primarily on the following language from Perryv. 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 hisposition 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 tojob tenure." AS llcircumstanceslland "other relevant facts" he points tohis longevity of service, his supervisoryposition, hisretirement and insurance benefits, and the fact thathe waspromised a hearing. He 

### asserts that these factors gave him a "legitimate claim of entitlement to continued employment" which is entitled 

### todue 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 rightby virtue ofan implied covenant of good faith. Inorder 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" interestwhich fallswithin 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), 170Mont. 5, 549 P.2d 809. If appellant can


### cross thisthreshold, the analysisproceeds to the second question, 

### i.e., what specific procedures 

### are due in thiscase. In the leading case of Roth, a nontenured teacher claimed that a violation of hisdue process rightsoccurred when he 

### was denied an opportunity to be heard in regard to hisdismissal at the end of his initialone-year contract with the university. A statuteprovided for the acquisition of tenure afterfour years of year-to-year employment. After acquiring tenure the teacher would be entitled by statute to continued employment during good behavior and satisfactoryperformance, with discharge allowed only forcause. The Court found thatRoth had shown no "liberty" interestentitled to protection, sinceno stigma had been imposed

on his "good name, reputation, honor 

### or integrity." Nor did Roth have a "property" interest, for: 

### "[tlohave a property interest in a benefit, a person clearlymust have 

### more than an abstract need ordesire 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

asstate 

### lawor rules orunderstandingsbetween the employer and hisemployees. The termsof Roth's appointment were contained in the statute and in his contract, inwhich there

### was no support forhisclaim 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 

### oran unwritten policy concerning job security for county employees. The evidence shows thatReiter went to the county commissioners afterhis supervisor dismissed him, and that initiallythe 

### commissioners promised him a hearing but 

### later decided he 

### was not entitled to a hearing. The commissioners, having final authority incounty personnel 

### matters, then approved of Reiter's discharge. Although Reiter may have been treated unfairly, he seeks to stretchthe due process clause beyond its limitsby asserting the existence of a protected property interestbased upon longevity of service, inview of section 39-2-503, MCA. That statute provides: "An employment having no specified 

### term may be terminated at the willof eitherparty on notice 

### to the other

# . . .I1 The United StatesSupreme Court has recentlyrejected a claim similar toReiter's inBishop v. Wood (1976), 426 U.S. 341, 96 S.Ct. 2074, 48 L.Ed.2d 684. A policeman who had become a permanent employee afterpassing the probationary stage claimed he 

### was entitled to a pretermination hearing by virtue of a city ordinance providing thatpermanent employees could be discharged forunsatisfactory performance, negligence, inefficiency 

### or unfitness. The Court, recognizing that a property interestcould be created by ordinance orby implied contract, stated that in either 

### case the legitimacy of the claim ultimatelymust be decided by reference to state 

### law. Based on state 

### law the Court found that the policeman held hisjob at the willand pleasure of the city. Further, the policeman had no "liberty" interest, for

even assuming hisdischarge was unjustified it is not a significantdeprivation when one's dischargemerelymakes one less attractive to other employees. It is clear from the above-discussed cases thatproperty interests 

### are created and defined by state 

### law. The Montana statute

### creates no property interest inemployment if there 

### is no specified 

### term. Appellant seeks to circumvent the statutethrough a theory of implied contract and implied covenant of good faithand fairdealing. In effect hisargument 

### is thatdue to hislongevity of service he had an implied contract of employment, that in the implied contract there was an implied covenant of good faith, and thathisdischarge 

### was inbad faith. Appellant does not claim a breach of contract, but rather argues that the implied covenant of good faithconstituted a property interest entitlinghim to due process. There is some basis for implying covenants of good faith incontracts. 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), 373Mass. 96, 364 N.E.2d 1251. Allof 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 thismdification of the "at-will" rule, the New Hampshire federal court in Foley applied it in denying the employer's motion forjudgment on the pleadings. The Foley 

### case involved an employee of 40 years servicewho 

### was unjustly discharged. The federal districtcourt stated that longevity of servicemight 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 

### lawof the state in which it 

### was sitting. In Massachusetts, the discharge of an employee who had served for 25years was found to be a breach of the implied covenant of good faithbecause the employer was attempting to avoid payment of a substantial commission. In none of these cases was there a procedural due process issue. The doctrineof good faithand fairdealing in contracts has been narrowly applied in

### cases where unconscionable conduct

on an employer's part must be deterred. The doctrinehas 

### alsobeen 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 forwrongful discharge, although the employee had seven years of service, because there

### was no violation of public policy. Appellant's argument on implied contractscannot successfullycircumvent the Montana statutewhich clearlydenies his 

### claim 

### of entitlement to continued employment. Even though appellantmay have had an implied contract with the county by virtue of his longevity of service, 

### it would be a contradiction in

### terms to say thathe 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 fillthe gap left by the parties by defining the relationship as an "at-will" employment. While the rule may wellbe outdated, it 

### is uniquely

a province of the legislature to change it. Further, assuming arguendo that appellanthad an implied contractwith an implied covenant of good faith, the employer did not act in bad faithbecause its conduct was statutorily permissible. Reiter 

### was not employed on 

### a "discharge forcause only" basis, according 

### to the statute. In summary, 

### we hold that appellant was not denied hisprocedural due process rightswhen he 

### was discharged without a hearing because section 39-2-503, MCA, negates hisclaim of a property interestprotected by the United Statesand Montana Constitutions. 11. ENFORCEABLE PROMISE, WAIVER AND ESTOPPEL The record indicates that ata meeting with the commissioners on September 18, 1979, Reiter 

### was repeatedlypromised

a hearing. The commissioner refused to discussthe reasons for hisdischarge, stating that a hearing would be scheduled. Sub-sequently, on October 23, 1978, 

### Reiter received a 

### letter from the deputy county attorney, which stated inpart: 

### "

# ..

# .our studieshave indicated that you are not entitled to 

### a grievance hearing, and thereforenone willbe scheduled

# ."
The effectof the 

### letterwas 

### to deny Reiter the opportunity to refute the charges made againsthim in the list of reasons for hisdischarge. The issue is whether Reiter 

### was entitled to a hearing by virtue of the commissioners1promise 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 asan 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 statuteprovides that

an employment without a specified length may be terminated atthe willof the employer, i.e. thatno 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 ata later date, could not modify thatpart of the contract without independent considerationunless consented to by both parties inwriting. Section 28-1-1601, MCA. Did the promise operate as a waiver of the countylsright 

### to fireReiter 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), 170Mont. 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 timethey promised the hearing. If theydid not know of their right 

### to fireReiter without a hearing, they could not have voluntarilyand intentionallywaived thatright.A waiver can 

### also arise by conduct, inwhich case it 

### is called an "implied waiver." Thisdoctrine requires 

### a detrimental relianceby the party who is led by the conduct 

### to believe a waiver has occurred. See Stanolind Oil & Gas Co. v. Guertzgen (9thCir. 1939), 100F.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 relianceby the innocent party upon the representations of the otherparty. In thiscase, 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 Reitertsdeposition it is apparent thathe did not refuse the demotion as a result of the promise of a hearing. Rather he refused the demotion because the proposed contractsrequired him 

### to acknowledge thathisbehavior 

### was unsatisfactory and he felt these contracts

### were demeaning. Therefore, since there is no evidence of a detrimental change inposition due to the promise, the doctrines of equitable estoppel and implied waiver do not apply SinceReiter has no due process right to a hearing and the commissioners promise 

### was unenforceable, the respondent's motion for summary judgment 

### was properlygranted. The order of the District Court entering summary judgment infavor of the respondents is hereby affirmed.

Chief JusticeThis cause 

### was submitted fordecisionprior 

### to January 5, 1981.

Mr. JusticeDaniel J. Shea 

### will filea written dissent 

### later.Mr. JusticeJohn 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 theperson or property of another or infringing upon any of his rights." Developing in the law around the United States are remedies for employees who serveunder the "at-will" statute and rule. The more equitable and just rule, inmy opinion, is that an implied contract exists between the employer and the employee which gives additional consideration to an employee of some eighteenyears of continuous employment, as in thiscase. Foley v. Community OilCompany, 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 theNew 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 riseto 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.