IN THE; SUPREME C0UF.T OF' THE STATE OF MONTANA

FRANK K. NILES, Plaintiff and Appellant,-vsCARL WEISSMAN & SONS, INC., a Montana Corp., Defendant and Respondent.

APPEAL FROM: DistrictCourtof the Eighteenth Judicial District, In and for the County of Gallatin, The Honorable Joseph Gary, Judge presiding. COUNSEL OF RECORD: For Appellant: J. David Penwell, Rnzernan, Montana For Respondent: Jack La. Jlewis, Great Falls

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Submitted on Briefs: Dec. 1, 1989 Decided: February 6, 1990

Filed:Justice John C. Sheehy delivered the Opinion of the Court.

In this case, we determine that a final decision from an administrative agency that an employee is not entitled to unemployment compensation is not res judicataas to the employee's separate action inDistrict Court for wrongful dischargeand breach of the covenant of good faith and fairdealing. In soholding,we distinguishNasi v. StateDepartment of Highways (Mont. 1988), 753 P.2d 327. Frank K. Niles appeals from a summary judgment in District Court, Eighteenth Judicial District, Gallatin County, dismissing Nilest complaint against Carl Weissman & Sons, Inc. for alleged wrongful discharge and breach of the covenant of good faith and fair dealing. We reverse. On May 11, 1987,Niles, a truck driver employed by Weissman,

was ordered to haul a two-axle flatbed trailer from Livingston to Bozeman

# . Weissman's employees had previously loaded a railroad locomotive motor or engine on the trailer,weighing approximately 38 tons. Inthe opinion ofNiles, the flatbed truckwas loaded far beyond its capacity, and in fact, the trailerhad been damaged by Weissmanwhen the loadwasplaced on the trailer. Niles hauled the load as far as the truck stop on the west edge of Livingston and refused to drive the load any farther, believing that to do so would endanger not only his life, but the lives of others in hauling the trailer over the Bozeman Pass to Weissman's yard in 2Bozeman

# . Niles contended inDistrict Courtthat his supervisortoldhim that he was to haul the load and specifically told him if he refused he would be terminated from his position. The supervisor denies in District Court that "he specifically told" Niles that if he refused to haul an unsafe load he would be fired. In any event, Niles refused to haul the load and returned to Bozeman in the tractor driven by another employee of Weissman. It also appears that another employee of Weissman, Sam Dickenson, determined that the load was unsafe. The load was transferred to another larger trailer which was later transported to its original destination in Bozeman. The District Court found as unrefuted that plaintiff filed a claim for unemployment benefits after ending his employment with defendant. A Department of Labor deputy denied Niles benefits on the groundshe had "voluntarily leftt1 his employment and that the separation was not attributable to Weissman. Niles appealed the deputy's decision to an appeals referee who affirmed thedenial of the claim. Plaintiff next appealed to the Board of Labor Appeals, which reversed the decision of the Appeals Referee and held that plaintiffwasentitled tounemployment benefits. Weissmanappealed the BLA reversal to the District Court and upon stipulation of the parties, the District Court ordered the cause remanded to the BLA for furtherconsideration. On remand,theBLA reversed its earlier decision and denied plaintiff's claim for benefits. Niles then appealed to the ~istrict Court but failed to brief his petition,and the District Court affirmed the BLA1sdecision to deny Niles1 claim. On October 14, 1987, during the course of the administrative procedure, Niles filed his complaint in District Court alleging wrongful termination. 

### his actionmoved along a trackparallel to the administrativeproceedings. Subsequently, in the wrongful termination action, Weissman filed a motion for summary judgment. Weissman based its summary judgment motion upon the Department and District Court's determination that Niles voluntarily quit his employment and upon the contention that this determination was res judicata as to NilesI claim for wrongful termination. April the District Court granted Weissmanlsmotion for summary judgment holding that the BLA acted in a judicial capacity and provided plaintiff with a fully contested casehearing whichwas judicially reviewed, and therefore res judicata applied. It is from this order of summary judgment that Niles appeals. The ~istrict Court fully realized the far-reaching effect of its summary judgment. It stated: This Court realizes this holding leaves plaintiff and otherpotential claimantson thehorns of a dilemma: If they fully pursue their administrative remedy for unemployment benefits, theymay foregothe remedy in the courts; if they choose to go through the courts system, they may be barred by failure to exhaust their administrative remedies. The court is hesitant to relinquish the determination of what constitutes llwrongful terminationl1atcommon lawtoanadministrative agency when that determination does not require any "expertand specialized knowledge.'I SeegenerallyNader v. Alleqhenv Airlines (1976), 426 U.S. 290, 48 L.E.2d 643, 96 S.Ct. 1978. However, this point awaits clarificationby the Montana Supreme Court.The fulcrum onwhich the ~istrict Court relied in determining

res judicata was that the administrative proceedings involved a fully contested case hearing which complied with the standards of procedural and substantive due process that attends judicial proceedings, where the parties have full opportunity to litigate the issues. The District Court pointed out that at each administrative level,Nileshad counselpresent,submitted evidence inhis own behalf,waspermitted cross examination and was allowed to argue the lawof the case. Intheadministrativeprocess,Niles lost at each stage of the administrative proceedings, except for the single decision of the BLA, which the BLA subsequently reversed. There is indeed a dilemma here, as the District Court indicated, affecting not only Niles, but every employee in this State who may be similarly situated. There are two Montana cases which bear directlyon theproblemwhich faciallyare inconsistent, but which, on analysis, can be reconciled. They are ~asi v. State Department of Highways, above cited, a decision from this Court, and Fetherstonv. ASARCO, Inc. 

### (D.Mont. 1986), 635 F.Supp. 1443,

a federal district court case. First let us understand res judicata as it is applied in Montana. There are four criteria: (1) the parties must be the same; (2) the subject matter must be the same; (3) the issues must be the same; (4) the relationship among the parties, the subject matter and the issues must be the same. Brault v. Smith (1984), 209 Mont. 21, 26, 679 P.2d 236, 239; Fox v. 7L Bar Ranch 5Company (1982), 198 Mont. 201, 645 P.2d 929. In Nasi, this Court had before it an appeal from a summary judgment granted in ~istrict Court on grounds of res judicata as to Nasitswrongful discharge action. ~asi claimed he was fired. The Highway Department claimed he voluntarily quit. The facts in ~asi roughly parallel the facts in Niles' case. Nasi filed a grievance with the Board of Personnel Appeals. The BPA preliminary hearing examiner decided that Nasi had quit or walked off the job. Nasi rejected thepreliminary decision. Five days thereafter, Nasi filed a separate tort action in District Court alleging wrongful discharge and bad faith. The Highway Department filed motion to dismiss on several grounds, including

res judicata. The District Court stayed further proceedingsuntil the BPA made a final determination on the grievance. On October 11, 1984, the BPA formal hearing examiner held that Nasi had voluntarily terminated his employment. On February 5, 1985, the BPA adopted the examiner's recommended order as the final order, in effect concluding that Nasi had not been aggrieved by the Department. On March 5, 1985,Nasi filed a petition for judicial review of the BPA order. On August 15, 1986, the District Court affirmed the BPA final order. Nasi did not appeal the judicial review. Inthemeantime, in thetort action,theDistrict Court lifted its stay. The Highway Department filed a motion for summary judgment which was granted by the District Court against Nasi on grounds that the matter was res judicata. The District Courtrelied on the BPA finding that Nasi had quit which the District Court determined to be dispositive in the District Court case. The other sideof the coin is found in Fetherston. Fetherston

was a managerial employee of ASARCO, and thus not subject to the union contract. Against ASARCO1srules, Fetherston drove his new wife through the plant area while off duty. Another ASARCO employee observed the violation and reported it to the plant management. Fetherston was suspended four days without pay. Later, followinga Christmasparty, Fetherston was in abar in East Helena where he observed the employee who had reported him. Fetherston struck him in the face. Thirty-eight days later, plaintiff was terminated by ASARCO. He applied for unemployment benefits through theMontana Department of Labor. ASARCO opposed his applicationon thegrounds thathehad been fired forviolating

a known company rule. The Department of Labor determined that Fetherston was not entitled to benefits because of his violation of the rule. After the Department of Labor had acted, Fetherstonmet with theASARCOmanagement aboutpossible reinstatement. Themanagement indicated that he would notbe reinstatedbut thatASARCO would no longer oppose his application for unemployment benefits. Fetherston returned to the Department of Labor to redetermine its denial of his benefits. The Department reversed itself stating that Fetherston's actions which resulted in his discharge did not

occur on the employer's property, did not directly affect the employer's business and so Fetherston was not disqualified fromreceiving unemployment insurance. ASARCO did not appeal from the administrative determination,and it became final. Fetherston brought action in the federal district court for his alleged wrongful termination from employment. At the pretrial conference before the federal district court, Fetherston moved in limine,among othermotions, forpartial summary judgment

on the grounds that ASARCO had failed to appeal the Department of Labor's determinationand soASARCO was collaterally estopped from raising additional reasons for his dischargeand from relitigating the issue of plaintiff's misconduct. The federaldistrict courtdeterminedthat collateralestoppel is applicable to foreclose relitigation of issues not only in a judicial proceedings, (citing Aetna Life and Casualty Insurance Companyv. Johnson (1984), 207Mont. 409, 673 P.2d 1277),but also issuespreviously determined at an agency level (citing Paramount Transport Systemsv. Chauffeurs, etc. Local 150 (9th Cir. 1971), 436 F.2d 1064.) The federal district court determined that the factors invoking collateralestoppel are: (1) the administrative proceedings must comply with judicial standardsof substantiveand procedural due process; (2) administrative findings must concern issues material to the subsequent litigation;and (3) the agency decision must be supported by substantial evidence on the administrative record as a whole. Thus in Fetherston,we have the situation where the employee, having successfully shown his right to unemployment benefits at the agency level, contended that the employer was collaterallybarred from relitigating the same issues. The federal district court,however, determined that the issues were not the same. It said:



# . Here, defendant did not oppose plaintiff's application for redetermination, nor is there any evidence that a formal hearing was ever held. Generally, Montana unemployment compensation procedures are very informal,oftenhandled by themere completion of forms or over the telephone. The full panoply of issues which arises in a wrongful discharge suit is not within the realm of the Department of Labor's consideration of eligibility for unemployment benefits. The statutory scheme for unemployment insurance contemplates a general rule thatbenefitswill be awarded, with only a few specifically designated exceptions or disqualifications. Section 39-51-2301, et seq. MCA. The particular disqualification involved in Mr. Fetherston's case was misconduct. The issueofASARCO1sgood faith,or lack thereof, in discharging plaintiff, was not involved. Had ASARCO foreseen that its failure tooppose plaintiff's application for redetermination would somehow serve to foreclose its opportunitytodefend thewrongful termination action, it surely would not have chosen a passive course of action in the administrative proceedings. The doctrine of collateral estoppel cannot apply to bar litigation where the agency& finding is not a ''necessarydetermination of an issue1'nor ''essential to the judgment1'

(citing a case). In this case, the administrativeterminationwasmerely to allow plaintiff to collect unemployment benefits from the State of Montana. No decision was rendered, nor evidence presented, regarding existenceorbreach of the implied covenant of good faith and fair dealing, and ASARCO was not defending any such charges on an attempt to avoid paying damages out of its own pocket.

In view of the foregoing factors, the three elements of the Paramount Transport test arenot satisfied and thus collateral estoppel principles cannot be invoked. First, the administrative proceedings involved in this case do not comply with the standards of procedural and substantiativedueprocessthat attend a judicial proceeding, nor is this Court willing to impose such a requirement on a formal proceeding before a state agency deluged with unemployment requests. Second, the Department of Labor made no findings of factpertaining tomaterial issues before the Court,and no such findingswerenecessary for its ultimate determination of plaintiff's application. Based upon these factors, the Court is of the opinion that collateral estoppel is inapplicable.

Now, let us look again at Nasi, and the holding of this Court that the agency determination barred Nasilsclaim for wrongful discharge. The compelling difference between Nasi and Fetherston is that inNasi,a specific statutegranted the Board of Personnel Appeals jurisdiction to determine Highway Department personnel grievances based upon work conditions, supervision, or the result of an administrativeaction. section 2-18-1001,MCA. The BPA,by statute,had full jurisdiction to determineall the issuesrelating to the termination of Nasi. In thecase ofNiles,however, the legal situation isthe same

as in Fetherston. The jurisdiction of the Department of Labor is confined to "claims filed for benefits,'' 5 39-51-2406, MCA. The employee Niles is in the same position as the employer ASARCO in Fetherston. The issue of Weissmanlsgood faith, or possible lack thereof, was not and could not be determined by the Department of Labor in disqualifying Niles for unemployment insurancebenefits.When it is considered, therefore, from the viewpoint of res judicata, or from collateral estoppel, Niles' action forwrongful discharge andbreach of the covenant ofgood faithand fairdealing is not barred because of the agency determination. The issues determined before the agency, and to be determined before the District Court are not the same. We leave aside without discussion whether the administrative proceedings in this case complied with judicial standards of substantiveand procedural dueprocess. Itappears from the record that there were telephonic hearings which may not have afforded Niles the full right of cross-examination. It is unnecessary for us to determine this issue,however, because we hold otherwise in this case thatneitherres judicatanor collateral estoppelapplies since the legal issues decided by the agency are not the same as the legal issues facing the District Court in Niles' case. Under Rule 56, M.R.Civ.P., a summary judgment may not be granted unless there is no genuine issue of material fact remaining. Bills v. Hannah, Inc. (Mont. 1988), 749 P.2d 1076. Because there are further issues of fact to be determined in District Court,we reverse the summary judgment.We Concur: __.- 

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Chief Justice