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: District Court of 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 Fall s , Montana 

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 judicata as to the employee's 

separate action in District Court for wrongful discharge and breach 

of the covenant of good faith and fair dealing. In so holding, we 

distinguish Nasi v. State Department 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. In the opinion of Niles, the flatbed truck was loaded far 

beyond its capacity, and in fact, the trailer had been damaged by 

Weissman when the load was placed 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 

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Bozeman . 

Niles contended in District Court that his supervisor told him 

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 grounds he 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 the denial of 

the claim. Plaintiff next appealed to the Board of Labor Appeals, 

which reversed the decision of the Appeals Referee and held that 

plaintiff was entitled to unemployment benefits. Weissman appealed 

the BLA reversal to the District Court and upon stipulation of the 

parties, the District Court ordered the cause remanded to the BLA 

for further consideration. On remand, the BLA 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 BLA1s decision 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 action moved along a track parallel to 

the administrative proceedings. 

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 

Niles I claim for wrongful termination. April the 

District Court granted Weissmanls motion for summary judgment 

holding that the BLA acted in a judicial capacity and provided 

plaintiff with a fully contested case hearing which was 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 

other potential claimants on the horns of a dilemma: If 

they fully pursue their administrative remedy for 

unemployment benefits, they may forego the 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 terminationl1 at common law to an administrative 

agency when that determination does not require any 

"expert and specialized knowledge. 'I See generally Nader 

v. Alleqhenv Airlines (1976), 426 U.S. 290, 48 L.E.2d 

643, 96 S.Ct. 1978. However, this point awaits 

clarification by the Montana Supreme Court. 
The fulcrum on which 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, Niles had counsel present, submitted evidence 

in his own behalf, was permitted cross examination and was allowed 

to argue the law of the case. In the administrative process, 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 directly on the problem which facially are inconsistent, 

but which, on analysis, can be reconciled. They are ~asi v. State 

Department of Highways, above cited, a decision from this Court, 

and Fetherston v. 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 

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Company (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 Nasits wrongful 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 the preliminary 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 proceedings until 

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. 

In the meantime, in the tort action, the District 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 Court 
relied on the BPA finding that Nasi had quit which the District 

Court determined to be dispositive in the District Court case. 

The other side of the coin is found in Fetherston. Fetherston 

was a managerial employee of ASARCO, and thus not subject to the 

union contract. Against ASARCO1s rules, 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, following a Christmas party, Fetherston was in a bar 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 the Montana Department of Labor. ASARCO opposed 

his application on the grounds that he had been fired for violating 

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, Fetherston met with 

the ASARCO management about possible reinstatement. The management 

indicated that he would not be reinstated but that ASARCO 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 from 
receiving 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 other motions, for partial summary judgment 

on the grounds that ASARCO had failed to appeal the Department of 

Labor's determination and so ASARCO was collaterally estopped from 

raising additional reasons for his discharge and from relitigating 

the issue of plaintiff's misconduct. 

The federal district court determined that collateral estoppel 

is applicable to foreclose relitigation of issues not only in a 

judicial proceedings, (citing Aetna Life and Casualty Insurance 

Company v. Johnson (1984), 207 Mont. 409, 673 P.2d 1277), but also 

issues previously determined at an agency level (citing Paramount 

Transport Systems v. Chauffeurs, etc. Local 150 (9th Cir. 1971), 

436 F.2d 1064.) The federal district court determined that the 

factors invoking collateral estoppel are: (1) the administrative 

proceedings must comply with judicial standards of substantive and 

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 collaterally 
barred 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, often handled by the mere 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 that benefits will 

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 

issue of ASARCO1s good faith, or lack thereof, 

in discharging plaintiff, was not involved. 

Had ASARCO foreseen that its failure to oppose 

plaintiff's application for redetermination 

would somehow serve to foreclose its 

opportunity to defend the wrongful 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 ''necessary determination of 

an issue1' nor ''essential to the judgment1' 

(citing a case). In this case, the 

administrative termination was merely to allow 

plaintiff to collect unemployment benefits 

from the State of Montana. No decision was 

rendered, nor evidence presented, regarding 

existence or breach 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 are 
not 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 substantiative due process that 

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 

fact pertaining to material issues before the 

Court, and no such findings were necessary 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 Nasils claim for wrongful 

discharge. The compelling difference between Nasi and Fetherston 

is that in Nasi, a specific statute granted the Board of Personnel 

Appeals jurisdiction to determine Highway Department personnel 

grievances based upon work conditions, supervision, or the result 

of an administrative action. section 2-18-1001, MCA. The BPA, by 

statute, had full jurisdiction to determine all the issues relating 

to the termination of Nasi. 

In the case of Niles, however, the legal situation is the 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 Weissmanls good faith, or possible lack 

thereof, was not and could not be determined by the Department of 

Labor in disqualifying Niles for unemployment insurance benefits. 
When it is considered, therefore, from the viewpoint of res 

judicata, or from collateral estoppel, Niles' action for wrongful 

discharge and breach of the covenant of good faith and fair dealing 

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 

substantive and procedural due process. It appears 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 that neither res judicata nor collateral estoppel applies 

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: __.- 

4 

Chief Justice