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No. 99-239 IN THE SUPREME COURT OF THE STATE OF MONTANA 1999 MT 329 [56 St.Rep. 1313] 297 Mont. 357 990 P.2d 1251 WADE H. McKAY, SR., Petitioner and Appellant,

v. BOARD OF LABOR APPEALS, MONTANA STATE DEPARTMENT OF LABOR AND INDUSTRY,

Respondent and Respondent. APPEAL FROM: District Court of the Ninth Judicial District, In and for the County of Teton, The Honorable Marc G. Buyske, Judge presiding. COUNSEL OF RECORD: For Appellant: William D. Jacobsen, Thompson, Jacobsen & Potts, P.C.; Great Falls, Montana For Respondent:

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__________________________________________ Clerk Justice Terry N. Trieweiler delivered the opinion of the Court. ¶ The Petitioner, Wade H. McKay, Sr., petitioned the District Court for the Ninth Judicial District in Teton County for judicial review of the Department of Labor and Industry's denial of his unemployment insurance benefits and for permission to submit new evidence. The District Court held that there was substantial evidence to support the findings of fact of the Board of Labor Appeals and that the new evidence McKay offered was immaterial. The District Court denied McKay's petition. McKay appeals from the decision of the District Court. We reverse the judgment of the District Court. ¶ The issue on appeal is: ¶ Did the District Court err when it affirmed the Board of Labor Appeals' conclusion that Petitioner was disqualified for unemployment benefits for misconduct? FACTUAL BACKGROUND ¶ Wade McKay, Sr. was a city police officer in Choteau, Montana for 13 years. On October

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¶ On May 18, 1998, McKay filed an unemployment insurance claim with the Department of Labor and Industry. In response to McKay's claim, the City of Choteau (Choteau) stated: "[h]e was found guilty of misdemeanor assault in a trial by jury. He also was given a copy of our policy and procedure manual in 1992 and he did violate our policy manual by being convicted of a

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No other evidence of misconduct was offered by the chief of police. Nor was McKay's actual conduct on the night in question ever discussed at the hearing. The Appeals Referee concluded that McKay was ineligible to receive benefits. ¶ On August 5, 1998, McKay appealed to the Department of Labor and Industry Board of Labor Appeals (the Board). The Board held a hearing, to which Choteau did not send a representative. The Board upheld the decision of the Appeals Referee. ¶ On October 14, 1998, McKay filed a petition in District Court asking the court to review the Board of Labor Appeals decision.

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¶ On November 6, 1998, a jury trial de novo was held in McKay's appeal from his city court assault conviction and the jury found that McKay was not guilty. McKay then sought the District Court's permission to submit his acquittal, as new evidence, in his appeal from the Board's decision to affirm the denial of his unemployment insurance benefits. The District Court appears in its decision, to have taken judicial notice of acquittal, but concluded that it was immaterial. ¶ On March 25, 1999, the District Court dismissed McKay's petition for review. McKay then filed this appeal. STANDARD OF REVIEW ¶ A district court's review of a decision of the Board of Labor Appeals is not governed by the Montana Administrative Procedure Act. Schneeman v. State, Dept. of Labor & Ind. (1993), 257 Mont. 254, 257, 848 P.2d 504, 506 (citing City of Billings v. State Bd. of Labor Appeals (1983), 204 Mont. 38, 663 P.2d 1167). The correct standard of review in the instant case is set forth at § 39_51_2410(5) and (6), MCA, which provide: (5) In any judicial proceeding under 39_51_2406 through 39_51_2410, the findings of the board as to the facts, if supported by evidence and in the absence of fraud, shall be conclusive and the jurisdiction of said court shall be confined to questions of law . . . .

(6) An appeal may be taken from the decision of the district court to the supreme court of Montana in the same manner, but not inconsistent with the provisions of this chapter, as is provided in civil cases. We have stated that: "'[s]upported by the evidence' means supported by substantial evidence, which is 'something more than a scintilla of evidence, but may be less than a

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Potter, 258 Mont. at 479, 853 P.2d at 1209 (citations omitted). ¶ In both Connolly v. Montana Board of Labor Appeals (1987), 226 Mont. 201, 734 P.2d 1211, and Stine v. Western Federal Savings Bank (1994), 266 Mont. 83, 87, 879 P.2d 53, 56, this Court held that the determination of "misconduct" in the context of an application for unemployment benefits "was a factual question, properly left to the appeal's referee and the Board of Labor Appeals." Connolly, 734 P.2d at 1215. In Hafner v. Montana Department of Labor and Industry (1996), 280 Mont. 95, 99, 929 P.2d 233, 236, we overruled Connolly and Stine, and held: Having reviewed [whether the determination of misconduct is one of law or fact] in the present case, we reverse Connolly and Stine to the extent that they hold that "misconduct" is a question of fact and, for the reasons stated below, hold that the question of whether conduct rises to the level of "misconduct" is a question of law which this Court reviews for correctness.

Hafner, 280 Mont. at 99, 929 P.2d at 236.

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ISSUE 1 ¶ Did the District Court err when it affirmed the Board of Labor Appeals' conclusion that Petitioner was disqualified for unemployment benefit for misconduct? ¶ The legislature enacted the "Unemployment Insurance Law," found at § 39-51-101, et seq., MCA, because economic insecurity due to unemployment is a serious menace to the health, morals, and welfare of Montana's citizens. Section 39-51-102, MCA. The Law creates an unemployment insurance fund. Section 39-51-201(12), MCA. The purpose of the fund is to pay benefits to individuals who become unemployed and are eligible. Section 39-51-2103, MCA. An individual who engages in misconduct may be disqualified for benefits. Section § 39-51-2303, MCA. The Department has defined "misconduct" by administrative rule: (1) Misconduct as used in 39-51-2303, MCA, includes, but is not limited to, the following conduct by a claimant:

(a) willful or wanton disregard of the rights, title, and interests of a fellow employee or the employer;

(b) deliberate violations or disregard of standards of behavior which the employer has the right to expect of an employee;

(c) carelessness or negligence that causes or would likely cause serious bodily harm to the employer or fellow employee; or

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(d) carelessness or negligence of such degree or recurrence to show an intentional or substantial disregard of the employer's interest.

Rule 24.11.460(1), A.R.M. In Hafner, we held that pursuant to A.R.M. 24.11.460 and .461, that violation of a reasonable company rule that the employee knew, or should have known about, is considered misconduct because the act signifies a willful and wanton disregard of the rights, title, and interest of the employer or a fellow employee. Hafner, 280 Mont. at 100, 929 P.2d at 236. ¶ McKay contends that Choteau discharged him based solely on the fact that he was convicted of assault in city court. He asserts that since he was acquitted of assault, the Department no longer had any factual basis to conclude that he engaged in misconduct, and, therefore, had no basis to deny him unemployment insurance benefits. ¶ The Board responds that pursuant to our holding in Smith v. Roosevelt County (1990), 242 Mont. 27, 788 P.2d 895, McKay's mere violation of law may constitute a violation of Choteau's personnel policy even absent a criminal conviction. Our decision in Smith, however, is factually distinguishable. ¶ In Smith, a deputy sheriff allegedly beat an intoxicated prisoner. The sheriff discharged Smith for a number of reasons, including beating the prisoner. The Federal Bureau of Investigation indicted Smith for mistreatment of a prisoner. He was subsequently acquitted. Smith then filed an action alleging that his discharge was unjustified. Smith moved for summary judgment. He argued

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Numerous questions of fact remained to be resolved by the jury. The jury needed to determine whether a preponderance of the evidence showed that Smith assaulted a prisoner in his care in violation of Sec. 45_5_204, MCA, mistreatment of prisoners, and whether such a violation of law constituted gross inefficiency. The District Court did not err in leaving these factual determinations to the jury.

Smith, 242 Mont. at 32, 788 P.2d at 898. In essence, we held that Smith's acquittal did not conclusively prove that his employer's allegations were false. His employer was still permitted to introduce evidence that Smith was discharged for cause. ¶ This case is distinct from Smith. In Smith, we affirmed the District Court's denial of Smith's motion for summary judgment, and allowed the jury to determine the facts. In this case, the Department has already held an evidentiary hearing and made findings regarding the cause for McKay's denial of benefits following that hearing. McKay's employer testified at the hearing that McKay was terminated because of his conviction-not because of any other misconduct.

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¶ The Department concluded that McKay engaged in misconduct based on the fact that he was convicted in city court. The only fact that Choteau alleged to support the conclusion that McKay engaged in misconduct was his criminal conviction. There was no other evidence of his conduct offered. The City Attorney's affidavit in support of Choteau's complaint against McKay for assault, was not admitted into the administrative record and would not have been substantial evidence in any event, since it was merely hearsay. Although the affidavit in support of the District Court charge of official misconduct was admitted without objection by McKay (who appeared pro se and was advised that the rules of evidence did not apply) that charge was dismissed for lack of probable cause. Furthermore, the affidavit was never discussed at the hearing and the referee gave no indication that it formed any basis for his decision-probably because the chief of police testified that it was not the basis for the city's decision. McKay was subsequently acquitted of assault on appeal in District Court. Therefore, the only factual predicate for a conclusion of misconduct no longer existed. ¶ The problem with the dissent is that it ignores the point of the majority opinion, which is that the only relevant finding is by agreement of the parties no longer a fact. ¶ The dissent contends that the appeals referee found that McKay was involved in an off-duty altercation, that the police department's policy prohibits involvement in a criminal offense, and that the manual requires city police officers to regulate their personal affairs so as not to bring discredit on the police department, and that substantial evidence supported those findings when made. That may be true. However, as previously pointed out in this opinion, there is no firsthand evidence in

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The dissent points out that the only question is whether McKay's conduct meets the legal standard of misconduct which is a willful and wanton disregard of the employer's interests or deliberate disregard of standards of behavior the employer has the right to expect of an employee. However, the aforementioned testimony cannot meet that standard because it in no way describes McKay's conduct. Furthermore, McKay's employer at no time indicated that McKay's conduct met that standard except for his conviction. ¶ Finally, the dissent concludes that "McKay was 'involved in' the criminal offense of assault, notwithstanding the district court jury's failure to convict him of that offense under the stringent

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/S/ TERRY N. TRIEWEILER
We concur:

/S/ J. A. TURNAGE /S/ JAMES C. NELSON /S/ JIM REGNIER /S/ W. WILLIAM LEAPHART

Justice Karla M. Gray, dissenting.

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¶ I respectfully dissent from the Court's opinion. ¶ The Court correctly cites to § 39-51-2410(5), MCA, for the standard of review applicable to both the District Court and this Court in reviewing the Board's decision. Specifically, § 39-51-2410(5), MCA, provides that the Board's findings of fact are conclusive if supported by evidence and in the absence of fraud. In such an event, the only questions before the District Court and this Court are questions of law. Section 39-51-2410(5), MCA. In this case, I would affirm the District Court's conclusion that the pertinent findings of the Appeals Referee and the Board were supported by substantial evidence and that McKay's conduct during the altercation met the applicable definition of "misconduct." ¶ The Appeals Referee made a number of findings, including that McKay had been convicted of assault in city court. I agree with the Court that subsequent events--namely, McKay's acquittal of that charge in district court--rendered the "conviction" finding relatively irrelevant. That was not, however, the only finding--or the only relevant finding--made by the Appeals Referee. ¶ The Appeals Referee also found that the Choteau Police Department's policy and procedures manual prohibits involvement in--as well as commission of--a criminal offense, and that the same manual requires city police officers to regulate their personal affairs so as not to bring discredit to the police department. The manual was admitted at the hearing before the Appeals Referee, its contents are not disputed and, therefore, substantial evidence supports those findings. ¶ Finally, but importantly, the Appeals Referee found that McKay was involved in an off-duty altercation. The evidence of record regarding McKay's conduct--the Choteau City Attorney's sworn affidavit--was admitted on motion of McKay himself, and describes McKay's conduct as

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follows: On October 3, 1997 at approximately 4:00-4:30 p.m., WADE H. McKAY, SR., hereinafter named McKAY, a Choteau City Police Officer not on duty and in civilian clothes entered the Antler Bar in Choteau, Montana. He remained in said bar drinking alcoholic beverages. Thereafter at approximately 2:00 a.m. McKAY left said bar walking south on Main Street and then west on 2nd Street because he observed a group of individuals behind the Wagon Wheel Bar. McKAY approached said individuals and then asked Bill Hodgskiss who he was and upon being informed he then asked Bill Hodgskiss how old he was and Hodgskiss replied he was 17 years old. Thereafter the Defendant told Bill Hodgskiss to get his ass home because it was past curfew. Bill Hodgskiss replied that he was there to pick up his brother, Ben Hodgskiss, and cousin, Levi Hodgskiss, as they were of legal age and had been drinking in the bar and therefore they chose not to drive their vehicles. However McKAY insisted Bill Hodgskiss leave the scene immediately. After loud exchanges, Toby Naylor, age 22, approached McKAY and told him that Bill Hodgskiss was there to pick up his brother and cousin. McKAY then turned around and placed a bottle of beer and go cup on a vehicle. Then with a great amount of force, but with an open palm, McKAY pushed Toby Naylor in the chest causing him to fall backwards to the ground on his back and right side and skidded approximately 10 feet after hitting the ground from McKAY's blow to the chest.

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In my view, the affidavit constitutes substantial evidence in support of the Appeals Referee's finding that McKay was involved in an altercation. ¶ On this record, I would conclude that substantial evidence supports the Appeals Referee's findings. As a result, and since no question of fraud is raised, the findings are conclusive. See § 39-51-2410(5), MCA. ¶ The only remaining question, then, is whether McKay's conduct meets the legal standard of misconduct, which is willful or wanton disregard of the employer's interests or deliberate disregard of standards of behavior the employer has the right to expect of an employee. See Rule 24.11.460(1), A.R.M. The Appeals Referee, the Board and the District Court concluded that the conduct at issue was misconduct under that definition, and I agree. McKay was "involved in" the criminal offense of assault, notwithstanding the district court jury's failure to convict him of that offense under the stringent beyond a reasonable doubt standard. Moreover, it can hardly be disputed that McKay's conduct failed to meet the manual's requirement that police officers regulate their personal affairs so as not to bring discredit on the police department. In my view, McKay's conduct was conduct in willful or wanton disregard of the interests of his employer and conduct which deliberately disregarded standards of behavior the police department had the right to expect--and, pursuant to the manual, did expect--from its officers.

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¶ I would affirm the District Court and I dissent from the Court's failure to do so.

/S/ KARLA M. GRAY

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