NO. 91-492 IN THE SUPREME COURT OF THE STATE OF MONTANA 1992

JAMES D. KING, Plaintiff and Appellant,

SPECIAL RESOURCE MANAGEMENT, INC., ENTECH, INC., and THE MONTANA POWER COMPANY, Defendants and Respondents.

APPEAL FROM: District Court of the Second Judicial District, In and 

### for the County of Butte/Silver Bow, The Honorable Ted L. Mizner, Judgepresiding.

COUNSEL OF RECORD: ForAppellant: Stephen C. Pohl,Bozeman,Montana (argued);Charles P. Bowen, Bozeman,Montana For Respondent: Patrick T. Fleming (argued), Robert T. OILeary, Montana Power Company, Butte, Montana

Submitted: September 4, 1992Justice Fred J. Weber delivered the Opinion of the Court. Plaintiff, James D, King, brought an action for wrongful discharge from employment based on the implied covenant of good faith and fair dealing against defendants Special Resource Management, Inc., Entech, Inc., and Montana Power Company in the Second Judicial District Court, Silver Bow County, Montana. The

casewas tried before a jury. After the close of the evidence,the DistrictCourtdismissedtheaction against defendantsEntech, Inc. and Montana Power Company. The jury found in favor of defendant Special Resource Management, Inc. Plaintiff appeals. We reverse the juryverdict in favor of SpecialResource Management, Inc. and affirm the judgments in favor of Montana Power Company and Entech, Inc. The issues are restated as follows: 1. Did theDistrictCourtconunit reversible errorby 

### granting eightperemptory challengestothedefendants Montana PowerCompany and its two subsidiary corporations based on a diversity of interests between defendants? 2. 

### Did 

### theDistrict Court commitreversible errorby granting defendants1motion in limineprohibiting someexperttestimony,and by refusing to allow plaintiff's personnel expert to present opinion testimony without further foundation? 3. Is King entitled to a new trial against Entech, Inc. and Montana Power Company? JamesD. King (King)initiallybegan working for Montana Power Company (MPC) in 

### June of 1980 

### as a Cost and Schedule Engineer for 1the Colstrip 3 and 4projects, and later became a Cost and Schedule Supervisor. Prior to his employment with MPC, Mr. ~ing worked as a Construction Accountant on 

### a large power plant construction project in Michigan, a position which required him to perform project-related accounting functions. When the Colstrip project neared completion, Mr. King transferred to Special Resource Management, Inc. (SRM) as a supervisor of ~ccounting and Administration, He worked in that capacity from March 31, 1986, until his termination effective July 17, 1987, as part of a reduction 

### in force at SRM. 

### Mr. King's claim relating to that termination aroseprior to the enactment of theWrongful Discharge From EmploymentAct and,therefore,proceeded as 

### a claim 

### forbreach of the implied covenant of good faith and fair dealing. SRM is a wholly-owned subsidiary of Entech, Inc., which 

### is a wholly-owned subsidiary of the Montana Power Company (MPC). Over Mr. King's objection, the District Court granted eight peremptory challenges to these three defendants, based on a diversity of interests between SRM and the other twodefendants,MPC and Entech. Duringthe trial, theDistrict Court directedverdicts 

### forMPC and Entech. The jury found that defendant SRM did not breach the implied covenant of good faith and fair dealing. Mr. King moved for a new trial after the court entered judgment in favor of all defendants. The District Court denied this motion. King appeals the judgment entered by the District Court against all three defendants. Of thethreedefendants, only SRM filed a respondent's brief. After King noted this in his reply brief, MPC and Entechfiled a supplemental brief claiming that King had no legal basis for asserting a right to a new trial against them.

Did the District Court commit reversible error by granting eight peremptory challengesto thedefendants Montana PowerCompany and its two subsidiary corporations based on a diversity of interests? Mr. King contendsthat the threeco-defendants should not have been allowed more than four peremptory challenges unless they could demonstrate lvhostilityll between themselves. He argues that the interests of MPC and Entech were not hostile to those of SRM and that the District Court incorrectly based the decision to grant additionalperemptory challenges on a determination of I1diversityl1 rather than nhostility.n King further contends that this constitutes reversible error and, therefore, a new trial must be granted. The defendants contend that there was indeed hostility between them and that the District Court correctly allowed them eight peremptory challenges. Alternatively, SRM argues that even if the defendantswere not hostile, Montana law requires King to demonstrate prejudice in order to procure a new trial and King cannot show that he was prejudiced. We will first address the 

### question of 

### prejudice. The side with the greater number of peremptory challenges clearly has a tactical advantage created by its ability to eliminate potentially unfavorable jurors without cause. Section 25-7-224(1), MCA, provides that I1[e]achparty is entitled to fourperemptory challenges

# . . . ." The words "eachparty" have been interpreted to mean "each side," unless the co-defendants are hostile to one another. Leary v. Kelly Pipe Co. (1976), 169 Mont. 511, 515, 549 P.2d 813, 816. In Leary, this Court stated that a party who claims that he was prejudiced by a grant of extra peremptory challenges to his opponents who in fact are not hostile must also show that he was prejudiced by that action. Leary, 549 P.2d at 816. This Court adopted a three-part test for prejudice in such circumstances: (1) the party must have exhausted his peremptory challenges, (2) he must have suffered material injury from that actionby the court,and (3)as a result of that action,

one or more objectionable jurors sat on the case. Leary, 549 P.2d at 816. Later, in Hunsaker v. Bozeman Deaconess Found. (1978), 179 Mont. 305, 588 P.2d 493, we discussed the difficulty of proving prejudicewhen our attention is focused on juror conduct. Because difficulties encountered during appellate review had become magnified by theusual proceduresused by most trial courts at the time we decided Hunsaker, we offered therein our suggestions for procedural changes which would enable the trial courts to make informed decisions based on thorough briefings by the parties, therebymaking it possible to reviewthe accuracy of the ruling & the time it was made. We stated: The District Courts should seriously consider the use of the pretrial conference as the best procedure to be used in resolving questions such as the number of peremptory challenges to be allowed each side. If for some rare reason the District Court holds no pretrial conference, the questionof peremptory challenges shouldbe raisedby appropriate written motion filedbefore the commencement of jury selection,and it should set forth all factsand references tending to supporthis claim of hostility. 

### In any case, the opposing party or parties shouldbe given adequate time to respond to the claimsof hostility. The trial court should,as a bare minimum, rule on theperemptory challenge issue before thequestioning of jurors begins. To afford a basis for review, it should expressly set forth in the record the reasons for its ruling and the facts on which it relies in making its decision. Hunsaker, 588 P.2d at 501. Thisprocedure eliminatestheneed forus to review the entire record using a hindsight approachto determinewhether theparties

were in fact "hostile" during the course of the trial. Thus, our review excludes materials beyond thepoint at which the rulingwas made, includingproof of actual prejudice, and we examine only the information available to the district courtprior to its ruling. Althoughwe encourageddistrictcourtstouse theseprocedures in Hunsaker, the record therein did not include sufficient information to allow this Court to review the basis and rationale for the district court's ruling; therefore, we decided that case using the Learv three-prong test. Hunsaker, 588 P.2d at 500. This Court's decisions after Hunsaker have applied the Learv test for prejudice onlywhere the recordwas insufficient for review. See,

e.q.,Gee v. Egbert (1984), 209 Mont. 1, 679 P.2d 1194; and Adams

v. Cheney (1983), 203 Mont. 187, 661 P.2d 434. When the District Court followed the recommended pretrial procedures or the record was otherwise adequate to determine whether the District Court properly considered appropriate factors, we have focusedour review on pretrial information that was available at the time of thecourt's ruling on the number of peremptory challenges. See Williams v. Rigler (1988), 234Mont. 161, 761 P.2d 833: and Lauman

v. Lee (1981), 192 Mont. 84, 626 P.2d 830. The Learv test requires adversely affected parties to show they were actuallyprejudiced by a grant of additional peremptory challengesto the opposingparty. Thisplaces analmost impossible burden on the objectingparty. Moreover,when we focus our review

on the actual conduct of a juror,we ignore the correctnessof the trial court's decision and that decision becomes virtually unreviewable. Hunsaker, 588 P.2d at 499. As notedby Justice Shea in that opinion, "our attention is focused on the conduct of the jury,which inmost caseswe are inno position to determine." It is the policy of the law to look with disfavor on any attempt to invade the jury's internal decisionmaking processes in order to impeachverdicts,except inrare circumstances. Blades v. DaFoe (Colo. 1985),704 P.2d 317, 322 (citing Kentucky Farm Bureau Mut. Ins. Co. v. Cook (Ky. 1979), 590 S.W.2d 875). In Kentucky Farm Bureau, the court stated: It may be that peremptory challenges should be abolished in civil cases and only challenges for cause allowed. We are informed this is the present English practice. As long as they are retained as part of the trial process, however, we believe that their proper allocation between litigantsisa substantialrightwhich so pervades the process that its erroneous application requires reversal as a matter of law if the issue is properly preserved by the adversely affected litigant. Kentuckv Farm Bureau Mut. Ins., 590 S.W.2d at 877. See also, Thompson v. Presbyterian Hosp., Inc. (Okla. 1982), 652 P.2d 260

(grant of additional peremptory challenges in absence of "seriousdisputevfis prejudicial as 

### a matter of law). While these jurisdictions are by no means the only oneswhich findprejudice as

a matter 

### of law fox improper allocation of peremptory challenges,

some courts require 

### that actual prejudice be shown before a new trial is granted. 

### See, emu.,Electric Serv. Co. of Duluth v. Lakehead Elec. Co, (Minn. 1971), 189 N.W.2d 489. If 

### we require a showing of prejudice as in Learv, we cannot evaluate the effect of an impropergrant of peremptory challenges without invading the internalprocesses of a jury. We also should not disregard the advantages bestowed upon one side by having additional peremptory challenges granted to them. We previously modified Lear~to the extent that prejudice need not be demonstrated when a trial court followsthe guidelinesset forth in Hunsaker. See Williams, 761 P.2d 833. We now expressly overrule Learv v. Kellv Pipe Co. to the extent it requires a showing of prejudice to reverse a jury verdict for an incorrect grant of peremptory challenges to one side. Having concluded that Learv is an improper standard, we now restate the rule to be applied in the future: Additional peremptory challenges are granted to multiple parties on one side only if they are hostile to one another. The trial court determines hostilityprior to the beginning of voir dire and bases its decision only on the factspresented to it before its ruling. Whether or not the pretrial procedures were followed prior to the determinatianof hostility, 

### if anappellatereviewdetermines that peremptory challenges were improperly granted, prejudice ispresumed as a matter of law. The parties seeking additional peremptory challenges must request them prior to trial. In the rare instance when the District Court holds no pretrial conference, the question of peremptory challenges should be raised by appropriate written motion filed prior to voir dire, setting forth all facts and references tending to support its claim of hostility. The trial court should rule on the peremptory challenge issue before voir dire begins. If a pretrial order is used, the District Court is required to include its decision on the number of peremptory challenges in thepretrial order. SeeRule 5(c), Unif. Dist. Court Rules. To afford a basis for review, the trial court should expressly set forth in the record the reasons for its ruling and the facts on which it relied in making its decision. The district courts have no discretion in granting additional peremptory challenges. Multiple parties on one side are either hostile or they are not hostile. A trial court correctly grants additional peremptory challenges to one side only if there are multipledefendantsor plaintiffs who are "hostile"to one another. It is clear that we must look to the factual record to determine whether there is a stated rationale for the District court's decision and a sound basis for the grant or refusal of additional peremptory challenges. Our standard of review for a district court's conclusions of law iswhether they correctlyapply theproper law. Steer, Inc. v. Dept. of Revenue (1990), 245 Mont. 470, 803 P.2d 601. The recordinthiscase indicatesthat theDistrict Court heard arguments from both sides and reviewed the law before ruling on thematter prior to jury questioning. The transcript provides:

THE COURT: 

## .

# - . In the meantime, the Court has had a chance to look at some of the law with regard to the preemptory [sic] challenges, and I'm not sure that the record is complete. I'd like tomake a complete record, and the plaintiff's Counsel argue their position again. The Courthas looked at the Hunsaker case,and also theAdamsvs. Cheney case,and Iwould like to followthe guidelines of those cases if we can. 

# .. .

The Court has considered the various positions of theparties and it's adifficult casewhenyoudon'tknow what exactly the proof is going to be; but the Court thinks that there is a diversity of interest between Montana Powerand Entechas opposed to SRM,and the issue was raised Ibelieve in the motion for summary judgment and the facts in support in that motion. The Court denied the motion,but foundthat therewas [sic]genuine issues in that case as to the motion for summary judgment,which I think also goes to thepositions that may be taken during the course of the trial. And the Court will find a diversity sufficient to allow the extra preemptory [sic] challenges 

# . .. . The District Court allowed extra peremptory challenges to the co-defendants in this case based on a "diversity of interests." SRM contends that Kudrna v. Comet Corp. (1977),175 Mont. 29, 572 P.2d 183, articulated a rule which allows additional peremptory challenges inthreedistinct situations: (1) where the interests of multiple parties are "diverse;" (2) where the defenses of the multiple parties are ltdifferent;ll or (3)where the defenses of the multiple parties are "ho~tile.~~ This language is excerpted from a direct quote from an 

### A.L.R. annotation set forth in Kudrna.Kudrna, 572 P.2d at 186-87. A careful reading of Kudrna distinguishes the law in Montana: In a recent decision, Leary v. Kelly Pipe Co., 169 Mont. 511, 549 P.2d 813, 816, (1976), this Court stated: 

## "***Mullerv stands fortheproposition that under our jury challenge statute

## * * 

## * the words 'eachpartyt in reference to thepermitted fourperemptory challenges means leach sidetunless the positions of the codefendants are hostile to each other. The opinion suggests that hostility between nominal defendants may be shown 'by pleading, representation, or evidence.'" Kudrna, 572 P.2d at 186. This Court has consistently held that co-defendants are entitledto excessperemptory challengesonlywhere theirpositions are "hostile" to each other. See~illiams, 761 P.2d 833;Gee, 679 P.2d 1194; Lauman, 626P.2d 830;Hunsaker, 588 P.2d 493;Learv, 549 P.2d 813; and Mullery v. Great Northern Ry Co. (1915), 50 Mont. 408, 148 p. 323. Our most recent case involving a grant of additionalperemptory challengesto one side reiterates the correct and relevant law: For this Court to uphold an uneven grant of peremptory challenges,wemust be convincedthat the District Court concluded from the pleadings, representations, or evidence that hostility existed and that the court set forth the reasons for its ruling. Williams, 761 P.2d at 835 (citing Hunsaker v. Bozeman Deaconess Foundation (1978),179 Mont. 305, 313, 588 P.2d 493, 499). T h e District Courthere incorrectly applied the law. The interests of multiple parties on one side must be "hostile" to one another. Although the District Court based its decision on "diversity,"we will examine the record to ascertain whether the defendants wereindeed "hostile"based on the information available to the courtat the time of its ruling on peremptory challenges. SRM contends that hostility did exist between defendants because MPC and Entech took the position that any obligations that

arose as a result of King's employment relationship were the obligations of SF34 only. They denied that King was their employee and that they played any part in his termination. Although SRM maintains that MPC and Entech were hostile to SRM, it admits that SRMwas not hostile toMPC and Entech. SRM further argues that the

same two attorneys could ethically represent all defendants, even with hostile interests present. King argues that all three defendants Igenjoya familial relationship and an identity of interestwhich cannot be denied." Hostile is defined as: "having the character of an enemy; standing inthe relation of an enemy. Feeling or displaying enmity or antagonism such as a hostile witness." Black's Law Dictionary 879 (6th ed. 1990). In all prior cases in which this Court has addressed tghostility,tl theco-defendants were unrelated individuals

or corporations accused of separate and distinct wrongful acts, neither of which is the case here. We noted in Hunsaker that no specific test for "hostility"has been articulated. This Court has never set forth any rules as to what codefendantsmust present to the trial court toprove they are uhostilewto each other. The closestwe have come is we have indicated inMullerv and that lfhostility*a can be shown by the "pleadings, representations, or evidence." Hunsaker, 588 P.2d at 499. Although we have not pronounced a test for the factsconstituting "hostility,"ourprior decisionsaremost helpful. In Kudrna, we found hostile interests where there was no identity of interest, separate acts of negligence were charged, each party presented a separatedefense and eachdefendant blamed the other's negligence as the causeof the collision. Kudrna, 572 

### P.2d at 187. This Court said, "These defendants had interests and defenses antaaonistic in fact. The DistrictCourt recognizedthishostility and properly allowed each defendant four peremptory challenges." Kudrna, 572 P.2d at 187 (emphasis supplied). In Mullery, this Court foundnohostilitywhere defendants filed a jointanswerwith

common defenses, they were representedby the same attorneys, and

no conflict of interest or any issue of any sortwas disclosed by pleading,representation,or evidence. Mullerv, 148 P. at 326. In Williams, there was hostility where the claims against codefendants were involuntarily consolidated and one set of defendant's claimed they would assert an indemnification claim against the other. Williams, 761 P.2d at 835. In Hunsaker, the following factors were relevant: (1) the defense theories of the hospital and physicians meshed although they had separate representation, (2)the co-defendantsdid not blame one another or assert negligence on the part of the other, (3) jury instructions were synchronized and neither objected to any of the other's offered instructions. The Court noted that each defendanthad its own interests to protect in that each could have suffered an adverse juryverdict,but therewas no showingthat their interests

were hostile to each other. Hunsaker, 588 P.2d 500-01.Whether hostility is present is best addressed on a case by

case basis. In this case, King's complaint asserted identical claims against all three defendants. Each defendant filed identical answers to King's complaint. These were signed by the

same MPC staff attorney, Patrick T. Fleming, an employee of MPC. No cross-claims or claims for indemnification were filed by any individual co-defendantand noallegationswere made that eitherof the other co-defendants were responsible for King's termination. Throughout the pretrial process, defendants filed consolidated motions andbriefs. They consolidatedtheir responsestodiscovery and their list of witnesses, exhibits and contentions in the pretrial order. All three defendantswere represented by the same two MPC attorneys, who asserted their common representation and vigorously defended SRM's actions. All three defendants acted in concert,with no hostility exhibitedby their efforts toprevent a verdict against SRM. Their consolidated position was that there

was no breach of the covenant of good faith and fair dealing, but if the court found one, it was SRM's breach and not that of MPC and Entech. Applying the above rule in the present case, it is clear that

we need only consider the pleadings, representations and evidence presented to the District Court at the time it made its ruling. We conclude that although the three co-defendants asserted allied positions with diversified financial interests,their differences do not reach the level of hostility required for a grant of four additional peremptory challenges.We hold that the grant of additional peremptory challengesto allied co-defendants constitutes reversible error under the circumstances of this case where no hostility was demonstrated between the co-defendants prior to voir dire. 11. 

### id the District Court commit reversible error by granting defendants' motion in limineprohibiting some experttestimony,and by refusing to allow plaintiff's personnel expert to present opinion testimony without further foundation? Mr. King contends that theDistrict Courtmade numerous errors which resulted in inappropriately restrictingtheopinion testimony of his expert, Alan Brown. Because our decision to reverse the District Court based upon an improper grant of peremptory challenges will result in a new trial, there is no reason to address this issue at this time. 111. Is King entitled to a new trial against Entech, Inc. and Montana Power Company? At the close of the evidence during the trial, the District Court directed verdicts for Entech and MPC because SRM had failed topresent evidence sufficientto pierce SRM'scorporateveil. SRM

was the onlydefendant to filea respondent's brief inthisappeal. On the cover of its Appeal Brief, SRM removed the names of the other defendants fromthe caption,believing thatKing had no right to a new trial against them because King did not assert that the District Court erred by granting MPC and Entech directedverdicts.MPC and Entech responded to King's Reply Brief which argues that a

new trial will be granted as to all defendants if the District Court's decision is reversed on the issues raised. They filed a Supplemental Reply Brief which raised the issue whether King has any legal basis for asserting a right to a new trial against Entech and MPC. MPC and Entech contend that King cannot have a new trial against either of them because King did not assert that the District Court erred in grantingMPC and Entech directed verdicts. We disagree. King's Notice ofAppeal preserves his right to appeal the directed verdicts against MPC and Entech because 

### he has appealed the judgment entered by the District Court (thedirected verdicts) against both MPC and Entech. TheDistrictCourt concluded that thecorporate veil couldnot be pierced and granted directed verdicts for MPC and Entech. We will not reverse this conclusion unless it is an incorrect interpretation of the law. Steer. Inc., 803 P.2d 601. After reviewing the record,we conclude that the District Court did not

err by directing these verdicts as King failed topresent evidence to supportpiercing SRM's corporate veil. Nonetheless, King claims that all three defendants have an interest in the outcome of theseproceedings because the effect of

a reversal is to make the judgment "void as if never rendered." He contends that when a new trial is granted the parties are all returned to the position they occupied before the trial and, therefore, he will be entitled to a new trial against all threedefendants if the ~istrict Court's judgment is reversed. King contends that the holding of OIBrienv. Great Northern R.R. Co. (1966), 148Mont. 429, 421 P.2d 710,applies to this case. InOIBrien,we said that to reverse a judgmentmakes itvoid as if

never rendered and returns the parties to the position they occupied before the trial 

### if a new trial is granted. OtBrien,421 P.2d at 716. This case is distinguishable from the facts in OIBrienand the cases it relied on because multiple defendants are involvedwho were granted relief based on different rules of law. MPC and Entech were released by directed verdicts while SRM 

### was relieved from liability by the jurytsverdict. Section 25-11-102, MCA, provides: Grounds for 

### new trial. The former verdict or other decisionmay be vacated and 

### a new trial granted on the application of the party aggrieved for any of the following causes materially affecting the substantial rights of such party: (I) irregularity 

### in the proceedings of the court, 

### jury,or adverseparty or any order of the court or abuse of discretion by which either party was prevented from having a fair trial 

# . . . Section 25-11-102(1), MCA. The justification for allowing King a new trial in this case is based solely 

### upon an irregularity 

### in jury selection. 

### That justificationdoesnot apply toMPC and Entechbecause theDistrict Court granted directed verdicts to them both at the close of the evidence and prior to the verdict of 

### the jury. We are reversing the jury verdict releasing SRM from liability because the composition of the 

### jury resulting from the District Courtls incorrect grant of excess peremptory challenges to non-hostiledefendants may have materially affected King's rights. That rationale does not apply to MPC and Entech because the issue of their liability did not reach the jury. We conclude that King is not entitled to relitigate the issues against MPC and Entech. We hold that King is not entitled to a new trial against Entech, Inc. and Montana Power Company. The judgment in favor of Special Resource Management, Inc. is reversed and King is granted a new trial in accordance with this opinion. The judgments favoringMontana Power Company and Entech, Inc. are affirmed.

MJfor ~ustice Karla M. Gray