NO. 84-437 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1989 

F. CLIFFORD HOBBS, 

Plaintiff and Appellant, 

-vsPACIFIC HIDE AND FUR DEPOT, a Montana 

corporation, 

Defendant and Respondent. 

APPEAL FROM: District Court of the Eighth Judicial District, 

In and for the County of Cascade, 

The Honorable Joel G. Roth, Judge presiding. 

COUNSEL OF RECORD: 

For -: 

Charles R. Johnson; Marra, Wenz, Johnson & Hopkins, 

Great Falls, Montana 

J. Marquis Eastwood, Stephen D. Bell; Dorsey & Whitney, 

Minneapolis, Minnesota 

For Hesponnent: %f alu 

Tom L. Lewis; Regnier, Lewis & Roland, Great Falls, 

Montana 

Kenneth R. Olson; Rai-z & Olson, Great Falls, Montana 

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Submitted.: May 12, 1988 

Decided: March 31, 1989 e 
Mr. Justice John C. Sheehy delivered the Opinion of the 

Court. 

F. Clifford Hohbs sued Pacific Hide and Fur Depot for 

his claimed wrongful discharge from employment in the 

District Court, Eighth Judicial District, Cascade County. 

His theories of recovery, which were submitted to the jury, 

included actual fraud, constructive fraud, hreach of the 

implied covenant of good faith and fair dealing, and 

negligent misrepresentation. The jury verdict found against 

Hobbs on all of the theories of recovery, and, judgment 

having been rendered thereon in favor of the defendant, Hobhs 

appealed from the judgment to this Court. We reverse and 

remand for new trial as to the claim for breach of an implied 

covenant of good faith and fair dealing, and affirm as to all 

other claims for relief. The reasons follow. 

Pacific Hide and Fur Depot is a Montana corporation that 

recycles scrap iron, copper, brass and aluminum, buys and 

sells cattle and game hides, fur, and sells steel, farm 

products and hardware. It has corporate offices in Great 

Falls, Montana, and 32 operating branches in the states of 

Montana, Wyoming, Idaho, Washington and Oregon. Its 

president at the time of the discharge of Hobbs was Joe 

Thiebes, Jr., who died on May 1, 1982, two years before 

trial. Pacific had 450 employees in 1981. In 1983, Pacific 

reduced its work force to 350 employees. 

Clifford Hobbs began his employment with Pacific in 

December, 1978. At that time, he had been employed in the 

retail steel industry for approximately 15 years. He had met 

Roqer Palmer, Pacific's Billings branch manager and 

apparently came in the fall of 1978 to Great Falls for an 
employment interview. Hobbs claims that Palmer represented 

to him that he would have a bright future and job securitv 

with Pacific as long as he competently performed his job. He 

claims he was promised substantial salary, stock in the 

company, annual bonuses, and opportunity for advancement. He 

claims that these promises induced him to leave his 

employment with Wisconsin Steel, to move his family from 

Denver to Great Falls and to accept the position of director 

of corporate purchasing for Pacific. 

Hobbs maintains that Palmer made other promises which 

need not be enumerated here except to say that Hobbs claims 

he was painted a glowing future. 

After Hobbs went to work for Pacific, substantial 

friction developed between Palmer and Hobbs. Nonetheless, on 

August 14, 1980, he was promoted and given additional 

responsibility as manager of Branch 1 Steel in Great Falls. 

Although he was now holding two management jobs, as director 

of corporate purchasing, and as manager of Branch 1 Steel, 

Hobbs contended that his compensation was substantially below 

other branch managers. He also contends he never received a 

promised substantial increase in his bonus. 

Under his employment, Hobbs was required to report to 

Palmer, although other employees at the same management level 

reported directly to the president or vice president of 

Pacific. Palmer continued to be disruptive, and on one 

occasion, increased the price of a contract by two percent 

over a firm price that Hohbs had negotiated. This action 

resulted in the discipline of Palmer, and his removal as 

superior of Hobbs, after which Roger Palmer told Cliff Hobbs 

that Palmer was "going to get him." 

A few months later, however, the executive vice 

president placed Roger Palmer back over the purchasing 

department and required Hobbs to report directly to Palmer. 
By April 15, 1981, the executive vice president and Palmer 

determined that Hobbs would handle only purchasing, and he 

would again report to Roger Palmer. Other managers reported 

having trouble with Palmer. 

Hobbs was terminated from his employment on September 

15, 1981, without prior notice. The decision to terminate 

Hobbs was made after a meeting between Thiebes, Vosburg, the 

executive vice president, and Palmer on September 15, 1981. 

At the same time, Thiebes circulated a letter to the other 

managers stating that Hobbs had not worked out as manager of 

Branch 1, although he had done an excellent job in 

purchasing. The letter stated it was a "subject lesson" to 

all managers, and went on to state that the conflicts between 

Palmer and Hobbs "should now be resolved." 

Hobbs maintains that during the trial it was 

demonstrated that the problems at Branch 1, a drop in sales, 

low margin on sales, and a write-off of bad debts were not 

Hobbs ' fault. No other management level official was 

terminated. Hobbs also claims that other managers, before 

and after his termination, had worse records, but were not 

fired. 

Roger Pal-mer was terminated from the company in May, 

1982, apparently because of unresolved intra-company 

conflicts with other managers. 

Other pertinent facts will appear under the issues to 

which they pertain. 

I 

Hobbs' first attack is upon instructions given to the 

jury relating to the theory of breach of the implied covenant 

of good faith and fair dealing. Hobbs contends that the 

given instructions were inadequate, placed an improper burden 

of proof upon the plaintiff, and amounted to a directed 

verdict in favor of the defendant upon the issue. From our 
examination, we find the instructions inadequate, confusing 

and misleading, and therefore requiring reversal. 

First, a resume of pertinent cases from this Court is in 

order. In Gates v. Life of Montana Insurance Company (1982), 

196 Mont. 178, 638 P.2d 1063 (Gates - I), we had an employee 

who was hired under an oral contract of indefinite duration. 

After she was employed, the employer issued a handbook, which 

assured employees that they would be given a hearing before 

termination. Gates was fired without a hearing. The 

employer claimed the right to discharge Gates without a 

hearing because she was an at-will employee. This Court 

reversed a summary judgment in favor of the employer, say;-ng: 

. . . The circumstances of this case are that the 

employee entered into an employment contract 

terminable at the will of either party at any time. 

The employer later promulgated a handbook of 

personnel policies establishing certain procedures 

with regard to terminations. The employer need not 

have done so, hut presumably sought to secure an 

orderly, cooperative and loyal work force by 

establishing uniform policies. The employee, 

having faith that she would be treated fairly, then 

developed the peace of mind associated with job 

security. If the employer has failed to follow its 

own policies, the peace of mind of its employees is 

shattered and an injustice is done. 

We hold that a covenant of good faith and fair 

dealing was implied in the employment contract of 

the appellant . . . 

Gates, 638 P.2d at 1067. 

On remand to the District Court, Gates' case was tried 

before a jury, which resulted in a verdict in her favor for 

both compensatory and punitive damages. In Gates v. Life of 

Montana Insurance Company (1983), 205 Mont. 304, 668 P.2d 213 

(Gates - 11), we sustained the punitive damage award on the 

grounds that a breach of an implied covenant for good faith 

and fair dealing in employment constituted a tort. 
Dare v. Montana Petroleum Marketing Company was decided 

by this Court in 1984. 212 Mont. 274, 687 P.2d 1-015. The 

District Court had granted summary judgment against Dare 

because no handbook existed, such as in Gates. This Court 

stated: 

. . . We conclude that the District Court construed 

-- Gates too narrowly. 

Whether a covenant of good faith and fair dealing 

is implied in the particular case depend.s upon 

objective manifestations the - employer giving 

rise to the employees' reasonable belief that he or 

she has job security and will be treated fairly. 

Gates, 638 at 1067, 39 St.Rep. at 20. The presence 

of such facts indicates that the term of employment 

has gone beyond the indefinite period contemplated 

in the at will employment statute, section 

39-2-503, MCA, and is founded upon some more secure 

and objective basis. In such cases, the implied 

covenant protects the investment of the employee 

who in good faith accepts and maintains employment 

reasonably believing their job is secure so long as 

they perform their duties satisfactorily. Such an 

employee is protected from bad faith or unfair 

treatment by the employer to which the employee may 

be subject due to the inherent inequality of 

bargaining power present in many employment 

relationships. The implied covenant seeks to 

strike a balance between the interests of the 

employer in controlling the work force and the 

interests of the employee in job security. Gates, 

638 P.2d at 1066-67, 39 St.Rep. at 20. 

We hold that an employment handbook as promulgated 

by the employer in Gates is not essential to a 

cause of action for breach of the implied covenant 

of good faith and fair dealing. Implication of the 

covenant depends upon existence of objective 

manifestations w the employer giving-rise to the 

employees reasonable belief that he or she has job 

security and will be treated fairly. (Emphasis 

supplied. ) 

Dare, 687 P.2d at 1020. 
In Crenshaw v. Rozeman Deaconess Hospital (19841, 213 

Mont. 488, 693 P.2d 487, this Court held that a probationary 

employee was owed the duty of good faith under Gates - I, and 

that the duty coexisted with the right to terminate an 

at-will employee. This Court said: 

. . . This requirement of good faith and fair 

dealing does not conflict with section 39-2-503, 

MCA, [the at-will employment statute1 but merely 

supplements it. Employers can still terminate 

untenured employees at-will and without notice. 

They simply may not do so in bad faith or unfairly 

without becoming liable for damages. 

Crenshaw, 693 P.2d at 492. See also, Nye v. Montana 

Livestock Department (1982), 196 Mont. 222, 639 P.2d 498. 

The nature of an implied covenant of good faith and fair 

dealing in a contract was described by this Court in 

Nicholson v. United Pacific Insurance Company (Mont. 1985) , 

710 P.2d 1342, 42 St.Rep. 1822. There we said part: 

. . . but whether performing or breaching, each 

party has a justifiable expectation that the other 

will act as a reasonable person. (Citing a case.) 

The nature and extent of an implied covenant of 

good faith and fair dealing is measured - in - a 

particular contract -- by the justifiable expectations 

of the parties. Where one party acts arbitrarily, 

caprici~usly, or unreasonably, that conduct exceeds 

the justifiable expectations of the second party. 

The second party then should be compensated for 

damages resulting from the other's culpable 

conduct. (Emphasis supplied.) 

The District Court in this case before us gave two 

instructions that related to the issue of the implied 

covenant and good faith and fair dealing: 

COURT'S INSTRUCTION -- NO. 17 

Mr. Hobbs has made claims concerning his dismissal 

from employment with Pacific Hide and Fur. You 

should understand that generally an employment 
contract for an indefinite term or period may be 

terminated at any time by either party, provided 

that party gives notice to the other. However, no 

prior notice is required, so that an employer or 

emplovee may tell the other that the employment 

contract is terminated on the same day notice is 

given. If you find that Mr. Hobbs and Pacific had 

an employment contract with no specified term, then 

Pacific had the right to terminate Mr. Hobbs's 

employment at any time and for any reason. That is 

the general rule. I will now instruct you on the 

causes of action for breach of the implied covenant 

of good faith and fair dealing. If you find that 

Mr. Hobbs has proven by a preponderance of the 

evidence that the defendant breached the implied 

covenant of good faith and fair dealing, then you 

may find for Mr. Hobbs. But if not, then you must 

apply the general rule that an employment contract 

can be terminated for any reason or no reason at 

all. Good cause need not be shown for the 

termination. 

An employer is entitled to be motivated by and to 

serve its own legitimate business interests; an 

employer must have wide latitude in deciding whom 

it will employ in the face of the uncertainties of 

the business world; and an employer needs 

flexibility in the face of changing circumstances. 

COURT'S INSTRUCTION -- NO. 19 

You are instructed that the defendant Pacific Hide 

and Fur Depot owed plaintiff Clifford Hobbs an 

implied-in-law duty of good faith and fair dealing 

arising out of the emplover/employee relationship 

that existed between the parties. In considering 

whether the defendant acted in bad faith in the 

manner in which plaintiff Clifford Hobbs was 

treated during the employment relationship and at 

the time the plaintiff was discharged, you should 

consider all the evidence which tends to establish 

either good faith or bad faith. If you find that 

the defendant has violated this obligation imposed 

by law, the plaintiff is entitled to be compensated 

for all detriment or injury proximately caused 

thereby whether that detriment or injury could have 

been anticipated or not. 
Taken together, the court's instructions failed to tell 

the jury the nature and extent of the implied covenant of 

good faith and fair dealing. The instructions informed the 

jury that as a matter of law Pacific owed Hobbs an implied in 

law duty of good faith and fair dealing, but did not tell the 

jury that the implied covenant is measured in a particular 

contract by the justifiable expectations of the parties. 

Nicholson, supra. We therefore hold that the cause must be 

reversed for the failure to give proper instructions on this 

issue. A party has a right to have instructions given which 

are adaptable to his theory of the case. Northwestern Union 

Trust Company v. Worm (1983), 204 Mont. 184, 663 P.2d 325. 

Without binding either counsel or the District Court on 

retrial, we suggest that instructions to the jury might 

properly include the following: 

Montana statutory law provides that an employment 

relationship having no specific duration may be 

terminated at the will of either party on notice to 

the other. This is referred to as the at-will 

employment doctrine. 

However, if there are objective manifestations by 

the employer giving rise to a reasonable belief on 

the part of the employee that he has job security 

and will be treated fairly, the right of the 

employer to terminate the employee at will is 

limited by a covenant of good faith and fair 

dealing which the law implies into the employment 

relationship. An employer may still terminate an 

employee at will and without prior notice; however, 

the implied covenant of good faith and fair dealing 

requires the employer to have a fair and honest 

reason for termination, and not to act arbitrarily, 

capriciously or unreasonably. 

In this case the covenant of good faith and fair 

dealing is implied into the employment 

relationship, and you are instructed that a breach 

of this covenant would render the employer liable 

to the employee for damages. 
In determining whether the defendant violated 

the duty of good faith and fair dealing, you must 

balance the interests of the defendant in 

controlling its work force with the interest of the 

plaintiff in job security. An employer such as 

Pacific is entitled to be motivated by and to serve 

its own legitimate business interest, and must be 

given discretion in determining who it will employ 

and retain in employment. 

Thus, if the employer is motivated to 

discharge the employee for reasons unfair or not 

honest, the employee is entitled to recover damages 

proximately caused by the breach. On the other 

hand, if the employer was motivated by honest 

business reasons in discharging the employee, the 

employer had the right to terminate the employment 

on the same day as notice is given for the 

discharge. 

Hobbs maintains that the District Court committed 

reversible error hy the manner in which it controlled the 

discovery and pretrial proceedings in this case. 

There are two items of pretrial discovery that ought to 

Se made available to Hobbs before any subsequent retrial.. 

Prior to the trial in the District Court, Hobbs 

requested of the defendant corporation that it produce two 

copies of all federal and state income tax records of the 

defendant corporation for the years 1979 through 1982. 

Inasmuch as Thiebes' letter terminating Hobbs represented 

that one of the reasons for the termination was difficult 

economic times adversely affecting his financial standing in 

the corporation, the income tax records of the corporation 

were relevant to the reasons stated. Rule 26 (b) (1) , 

M.R.Civ.P. It appears that Hobbs was entitled to production 

of these documents for his pretrial preparation, and for use 

at the trial as evidence. 
Also prior to the trial in the District Court, Hobhs 

requested of the defendant corporation information as to the 

salary and annual bonuses paid to all of the branch managers 

of the corporation during 1979, 1980 and 1981. The court 

granted, after objection, the motion as to the salary and 

annual bonuses paid to the branch managers of Branches 1, 2 

and 40, and as to the other five branch managers of branches 

that sold steel in 1979, 1980 and 1981, those who received 

the highest salary and annual bonuses in said years. 

During the trial, counsel for Pacific, in 

cross-examining Mr. Carestia, Hobbs' financial expert, used 

information relating to the salaries and bonuses of branch 

managers for the additional years of 1982 and 1983. An 

argument ensued between counsel before the court in chambers 

as to whether the information relating to the years 1982 and 

1983 had improperly been withheld from Hobbs' counsel so that 

it was impossible to advise Carestia, prior to the trial, of 

such information in the preparation of his testimony. The 

record is not clear to us as to which counsel was correct 

with respect to whether the information had been requested or 

supplied in time. In any future retrial of this cause, we 

direct that upon a proper request for discovery, information 

that may be used by either party in direct or 

cross-examination of witnesses must be supplied in accordance 

with the request for production. 

In this case, the District Court permitted the 

corporation's counsel to cross-examine Carestia on 

information which had not been supplied to the expert. The 

court felt that the jury was aware of the fact that the 

witness did not have the information that he was being 

questioned about and that on redirect examination by Hobbs' 

counsel, the jury would be made well aware of it. On that 

basis, the District Court permitted the cross-examination 
over objection. It is probable that the District Court was 

unable, as we are unable, to determine which of the parties 

was right as to the extent of the request for the production 

of documents. In any event, this issue can be obviated on 

retrial if, on proper request for production, information is 

exchanged as to documents that will be used either for direct 

or cross-examination of either parties' witnesses on retrial. 

The objective of the District Court in controlling and 

regulating discovery is to insure a fair trial to a11 

concerned, neither according one party an unfair advantage 

nor placing the other at a disadvantage. Massaro v. Dunham 

(1979), 184 Mont. 400, 603 P.2d 249; Lindberg v. Leatham 

Rros., Inc. (1985), 215 Mont. 11, 693 P.2d 1234. 

We find no merit in other issues raised hy Hobbs as to 

discovery as regulated by the District Court, and it is 

unnecessary to set them forth here. 

111 

At the time of the trial in this cause in the District 

Court, the corporation president involved in terminating 

Hobbs had died. In the course of the trial, through several 

witnesses, statements made by the deceased Thiebes to those 

witnesses were permitted into evidence. Hobbs raises a 

general objection to this kind of evidence, claiming hearsay. 

At issue in this case, as indicated in the proposed 

instructions foregoing, is whether the employer was motivated 

to discharge the employee for reasons unfair or not honest, 

as a breach of the implied covenant of good faith and fair 

dealing. Therefore, the facts relating to the method used by 

the deceased Thiehes in deciding to terminate Hobbs were 

relevant to those issues. Thus, it may be that statements 

made by Thiebes to others relating to the discharge of Hobbs 

would he indicative of the facts considered by him in making 
the discharge, as to whether he was acting fairly and 

honestly. 

V7hether a witness is available or not, under Rule 

803(3), M.R.Evid., statements are not excluded by the hearsay 

rule if those statements indicate the then existing mental, 

emotional or physical condition of the declarant. When a 

declarant is unavaj-lable as a witness, as for reason of 

death, Rule 804(a) (4), his statements are not excluded by the 

hearsay rule if there are comparable circumstantial 

guarantees of trustworthiness. Rule 804 (a) (b) (5) , M.R.Evid. 

Whether there are circumstantial guarantees of 

trustworthiness is a matter for determination by the District 

Court in the first instance which will be upheld in this 

Court absent an abuse of discretion. 

In any retrial of this case, those rules should guide 

the District Court in considering whether to admit such 

statements. 

IV 

Hobbs objects to an instruction given by the District 

Court on the subject of constructive fraud on the ground that 

it was repetitious and misleading. The District Court 

submitted the issue of constructive fraud to the jury in a 

special interrogatory and the jury responded that the 

defendant had not committed constructive fraud which was the 

proximate cause of the damages to Hobbs. 

We do not comment on the instruction given by the 

District Court in this case for the reason that we find 

plaintiff's theory or basis for constructive fraud is not 

proper1.y conceived in this case. Statements were made by 

Palmer to Hobhs before his employment that Pacific was a 

"gold mine," that Palmer was offering to Hobbs the 

"opportunity of a lifetime," and that Hobbs would be 

reporting directly to the president or executive vice 
president of the company and not to Palmer. Such statements 

are not the source of plaintiff's problems in this case nor 

are they demonstrahl-y false. The statements may arguably 

have given rise to justifiable expectations in Hobbs about 

his employment, but they do not constitute a basis for 

constructive fraud. It is true that defendant's fraudulent 

intent is not a necessary element in an action against it for 

constructive fraud, 5 28-2-406 (I), MCA, nor must there exist 

a fiduciary or confidential relationship between the 

pl-aintiff and the defendant, Mends v. Dykstra (1981), 195 

Mont. 440, 449-50, 637 P.2d 502, 507-08. Here, however, 

given the statements made, their nature, and the 

circumstances existing between the parties at the time the 

statements were made, Hobbs can show no duty imposed on 

Pal-mer or any other officer of Pacific "to speak out on the 

circumstances," indicating that the statements were false or 

misleading and should not be relied on. Palmer seems only to 

have expressed his opinion, belief or judgment on the matters 

stated and not necessarily statements of positive fact. See 

Restatement (Second) of Torts 5 53821 Comments a-g (1977). 

These statements do not have in them the elements of 

concealment or falsity that characterize the statements or 

representations which led to the contract in McGregor IT. 

Momrner (Mont. 1986), 714 P.2d 536, 43 St.Rep. 206, upon which 

case Hobbs relies on appeal. 

v 

Accordingly, the judgment of the District Court in this 

case is reversed, and the cause remanded for retrial in 

accordance with this Opinion. Cosfs to plaintiff. ,. . / \ 

\ ,,- ,Ijhb\ , ,&k~t-A.~- 

/ 

/ Justice ( 

We Concur: 
A 

Chief Justice 

Justices 
Mr. Justice Fred J. Weber dissents: 

The majority concludes that reversal is required in this 

case because the instructions did not tell the jury that the 

implied covenant is measured by the justifiable expectations 

of the parties. This conclusion is based upon Nicholson v. 

United Pacific Insurance Company (Mont. 1985), 710 P.2d 1342, 

42 St.Rep. 1822. It seems inappropriate to apply a legal 

theory which had not yet been stated by this Court. In the 

present case, the jury instructions were given on May 1, 

1984, nearly one year prior to the 1985 Nicholson decision. 

I conclude there is no reversible error, and I would affirm 

the jury verdict and judgment for the defendant. 

The facts stated in the majority opinion present a very 

favorable picture of the plaintiff's claim. No facts are 

presented which suggest a basis for the jurv verdict for the 

defendant. However, the record demonstrates there were 

approximately 30 witnesses who testified in behalf of the 

defendant during a month long trial. I believe it appropriate to set forth some of the facts which support the iury's 

verdict. 

When plaintiff first went to work for Pacific Hide and 

Fur Depot (Pacific), Mr. Palmer testified that Mr. Thiebes 

authorized him to offer plaintiff a 532,000 per year salary 

plus an unknown bonus. There is no testimony from Pacific 

that anyone represented to plaintiff that he would receive 

any higher salary. Furthermore, plaintiff himself testified 

that he realized any bonus he might receive would be discretionary with Mr. Thiebes and would have to be approved by Mr. 

Thiebes prior to receipt. Mr. Palmer also testified that 

plaintiff said he was anxious to leave Colorado and move to 

Yontana. This testimony is relevant in considering the 

argument that the plaintiff was enticed to move his family 
from Denver to Great Falls based upon Pacific's representations of a "glowing future." 

Several Pacific employees testified as to the dissension 

between plaintiff and Mr. Palmer and the disruptive effect it 

had on the purchasing department under plaintiff's supervision. The Vice-president of Pacific testified that plaintiff 

had an obsession with Mr. Palmer's interference with the 

purchasing department. An agent within the department testified to the effect that plaintiff was very candid about his 

dislike of Mr. Palmer and his disapproval of Mr. Palmer's 

ideas and the way he did things. Another purchasing agent 

testified that employees within the department found plaintiff to be harsh and abusive, and that under his supervision, 

the department had experienced a considerable loss of morale. 

The agent testified that he had considered resigning due to 

the pressure of having to work for plaintiff and had expressed that inclination to Mr. Thiebes. Plaintiff agreed 

that the problems he had with Mr. Palmer created confusion 

within the corporation and that the confusion spilled over 

into other corporate branches. 

Witnesses testified that the plaintiff frequently complained about his immediate supervisor to individuals outside 

the company. These complaints were expressed to one individual who testified that because of plaintiff's statements, he 

formed a negative opinion of Mr. Palmer, and he believed that 

plaintiff's statements were destructive to the interests of 

Pacific. Another individual unrelated to the company testified that plaintiff's preoccupation with Mr. Palmer and his 

constant talk about the inner workings of Pacific demonstrated a lack of professionalism. At one point, plaintiff told 

this individual about an "ultimatum" which he had given Mr. 

Thiebes a few months prior to his termination, indicating 

that "the situation was unworkable" and that "it will either 
he Roger or him, and that was the way he wanted to resolve 

it." 

The record contains substantial evidence that the plaintiff had been advised of the need to cooperate with Mr. 

Palmer, his superior, and that if his performance did not 

improve, the plaintiff could be terminated. The evidence 

further demonstrated that shortly thereafter, the plaintiff 

contacted another steel company concerning alternative employment, and this contact was made prior to his termination 

by Pacific. 

Mr. Thiebes ultimately made the decision to terminate 

the plaintiff. Because Mr. Thiebes died prior to trial, we 

are not able to ascertain all of his reasons for the termination. The record does establish that Mr. Thiebes was well 

aware of the prohl-ems between the plaintiff and Mr. Palmer. 

He had also been told that the purchasing department was 

experiencing morale problems and that an employee was considering resignation. Supervisory employees of Pacific had 

indicated to Mr. Thiebes that if Pacific had to choose between the plaintiff and Mr. Palmer, it would be wise to 

terminate the plaintiff and retain Mr. Palmer. Mr. Palmer 

was described by several other Pacific empl.oyees as being 

more knowledgeable of the steel business and more dedicated 

to that business than was the plaintiff. 

Other key employees testified that the plaintiff experienced a lack of effort when he was managing branch I of the 

steel business as well corporate purchasing. Mr. Thiebes' 

letter of termination stated that the economic times and the 

plaintiff's inability to manage branch I along with his 

purchasing duties were the primarv causes for his 

termination. 

Such evidence supports the contention of the defendant 

that its decision to terminate the plaintiff was a sound 
business decision. The jury accepted that idea, as d-emonstrated by the following question presented to it: 

Do you find that defendant Pacific Hide and Fur 

breached an implied covenant of qood faith and fair 

dealing to thi plaintiff, which was a proximate 

cause of damages to plaintiff Clifford Hobbs? 

To that question the jury answered, "No." There is clearly 

substantial evidence to support the conclusion of the jury. 

I do not find a factual basis for trial reversal. In ordering a retrial, I note that almost 8 years have passed since 

the date of termination and 5 years since the trial. We are 

posing a difficult trial problem for all parties by the 

present reversal. 

The basic reason for reversal stated in part I of the 

majority opinion is that the instructions were inadequate. 

The problem instructions were 17 and 19. Instruction 19 

stated: 

You are instructed that the defendant Pacific Hide 

and Fur Depot owed plaintiff Clifford Hobbs an 

implied-in-law duty of good faith and fair dealing 

arising out of the employer/employee relationship 

that existed between the parties. In considering 

whether the defendant acted in bad faith in the 

manner in which plaintiff Clifford Hobbs was treated during the employment relationship and at the 

time the plaintiff was discharged, you should 

consider all the evidence which tends to establish 

either good faith or bad faith. If you find that 

the defendant has violated this obligation imposed 

by law, the plaintiff is entitl-ed to be compensated 

For all detriment or injury proximately caused 

thereby whether that detriment or injury could have 

been anticipated or not. 

The instruction stated that the District Court concluded that 

the duty of good faith and fair dealing did arise in the 

present contract. As a result there was no need to require 

the iury to weigh any circumstances to determine if such a 
covenant was appropriate. The majority refers to Gates I, 

pointing to the circumstances under which a covenant of good 

faith and fair dealing may be implied. That does not appear 

relevant where the District Court already concluded that the 

covenant did arise in the present contract. In a similar 

manner, the majority refers to Dare with emphasis upon the 

objective manifestations by an employer from which the covenant may be implied. Again, that does not appear relevant 

where the trial court had already reached that conclusion. 

As previously mentioned, that "measurement" of the 

justifiable expectations of the parties had not been enunciated by this Court at the time of trial. While the Nicholson 

wording was not used in the present case, it seems to me that 

instruction 19 contains a good explanation of the duty. That 

instruction stated that in considering whether the defendant 

acted in bad faith, the jury may consider the manner in which 

the plaintiff was treated during the employment relationship 

and ---- at the time the plaintiff was discharged. The instruction further emphasizes that the iurv should consider -- all the 

evidence which tends to establish either good or bad faith. 

It ends with the statement that if the jury finds the defendant has violated this obligation, the plaintiff is entitled 

to compensation for all injury proximately caused by that 

violation. I conclude this is a fair statement of the law as 

it existed and was available to the trial judge and attorneys 

during the 1984 trial. 

The jury was also instructed on the nature of the 

at-will employment contract and how the cause of action for 

breach of the implied covenant interplays with that relationship in instruction 17 which states in part that: 

If you find that Mr. Hobbs has proven by a preponderance of the evidence that the defendant breached 

the implied covenant of good faith and fair 
dealing, then you must find for Mr. Hobbs. But if 

not, then you must apply the general rule that an 

employment contract can be terminated for any 

reason or no reason at all. 

I conclude there is no basis for reversal because of the 

wording of jury instructions 17 and 19. 

I would affirm the verdict of the jury and the judgment 

of the District Court. 

Mr. Justice L. C. Gulbra the foregoing 

dissent.