Opinion ID: 1238594
Heading Depth: 1
Heading Rank: 6

Heading: Personal Liability of Corporate Officer.

Text: A. Preservation of Error. We first address the argument by Jasper that Hussain failed to preserve his claim that he cannot be individually liable for any wrongful termination by Kid University. Hussain submitted the claim to the district court in a motion for summary judgment prior to trial and again in a motion for judgment notwithstanding the verdict after the trial. The district court granted the motion for judgment notwithstanding the verdict, but only on the alternative ground that there was no underlying tort for wrongful discharge as a matter of law. Thus, Hussain was ultimately successful in obtaining a dismissal of the case against him, but not on the specific grounds that a corporate officer or employee of the corporation could not be individually liable for the tort. Jasper then appealed, and Hussain raised the issue of individual liability as an alternative ground for affirming the district court ruling on appeal. Jasper now claims Hussain failed to preserve error for appeal because he failed to raise the issue by way of a cross-appeal and further failed to request a ruling by the district court after the court dismissed the case on grounds that no cause of action existed. Hussain was not required to cross-appeal or to request the district court to rule on the issue after the district court dismissed the case on other grounds. As a successful party at trial, error was preserved by asserting the claim before the district court. [3] An erroneous decision by the district court can be affirmed on appeal based on a different ground that was properly raised at trial. State ex rel. Miller v. Nat'l Farmers Org., 278 N.W.2d 905, 906 (Iowa 1979). B. Individual Liability of Corporate Officer and Employee. We adopted the tort of wrongful discharge in violation of public policy within the context of liability of an employer. In the subsequent development of our law on the tort, we have not addressed the issue of individual liability of corporate officers and other employees who participate in the discharge. We have in existence, however, a rich body of law that generally imposes individual liability on corporate officers for their own torts, even when acting in their official corporate capacity. Haupt v. Miller, 514 N.W.2d 905, 907-09 (Iowa 1994); Briggs Transp. Co. v. Starr Sales Co., 262 N.W.2d 805, 809 (Iowa 1978); Grefe v. Ross, 231 N.W.2d 863, 868 (Iowa 1975); White v. Int'l Text-Book Co., 173 Iowa 192, 194, 155 N.W. 298, 299 (1915) (The corporation and its servants, by whose act the injury was done, may be joined in an action of tort in the nature of trespass. (quotations omitted)); Restatement (Third) Agency § 7.01, at 115 (2006) (An agent is subject to liability to a third party harmed by the agent's tortious conduct. Unless an applicable statute provides otherwise, an actor remains subject to liability although the actor acts as an agent or an employee, with actual or apparent authority, or within the scope of employment.). In adopting this rule, we reasoned that the legal status of a corporation as an independent entity was not created to insulate officers from liability for their own tortious conduct, but was only intended to generally insulate shareholders from individual liability for corporate conduct and officers from liability for corporate contracts. Haupt, 514 N.W.2d at 909. To impose individual liability, however, the corporate officer must personally participate in the tortious conduct. Id. While we have not previously considered the question of individual liability for the tort of wrongful discharge, a few jurisdictions have decided the issue with mixed results. Those states that impose liability on an individual employee who participates in the tort of wrongful discharge essentially view wrongful discharge as any other tort within the existing rule that imposes individual liability on employees for their own tortious conduct. See DeCarlo v. Bonus Stores, Inc., 512 F.3d 173, 177 (5th Cir.2007); Higgins v. Assmann Elecs., Inc., 217 Ariz. 289, 173 P.3d 453, 458 (App. 2007); Ballinger v. Del. River Port Auth., 172 N.J. 586, 800 A.2d 97, 110-11 (2002); Harless v. First Nat'l Bank, 169 W.Va. 673, 289 S.E.2d 692, 698-99 (1982). Those courts that refuse to impose personal liability do not challenge the general rule of individual liability of corporate officers for their own tortious conduct, but essentially conclude the tort can only be committed by the person or legal entity that employs the terminated employee. See Hooper v. North Carolina, 379 F.Supp.2d 804, 814-15 (M.D.N.C.2005) (North Carolina law); Miklosy v. Regents of the Univ. of Cal., 44 Cal.4th 876, 80 Cal.Rptr.3d 690, 188 P.3d 629, 644-45 (2008); Buckner v. Atl. Plant Maint., Inc., 182 Ill.2d 12, 230 Ill.Dec. 596, 694 N.E.2d 565, 569 (1998); Rebarchek v. Farmers Coop. Elev., 272 Kan. 546, 35 P.3d 892, 903 (2001); Bourgeous v. Horizon Healthcare Corp., 117 N.M. 434, 872 P.2d 852, 855-56 (1994); see also Reno v. Baird, 18 Cal.4th 640, 76 Cal.Rptr.2d 499, 957 P.2d 1333, 1347 (1998). These courts reason that an individual officer or employee of a corporation cannot commit the tort of wrongful discharge because an individual officer or employee has no authority separate from the authority exercised on behalf of the corporation to discharge an employee of the corporation. In this way, these courts view the discharge as an element of the tort, as well as the injurious act, which an officer or employee commits only as an agent of the corporation. In other words, wrongful discharge is a corporate tort within a corporate setting, not an individual tort. While all courts who have considered the question of individual liability rely at least in part on the general legal principles governing individual liability in a corporate setting, we think the more fundamental question is whether the tort itself should apply to the conduct of individuals who act in the name of the corporation. If the tort includes individual liability independent of corporate liability, then the corporate structure will not insulate individual officers and employees authorized to make discharge decisions from liability for the underlying tortious conduct in exercising that authority. See Haupt, 514 N.W.2d at 907 (legal fiction of the corporation as an independent entity serves in part to insulate officers from liability for corporate contracts, not from liability for their own torts). We acknowledge that an officer or employee of a corporation who discharges an employee in the name of the corporation has no contractual liability in the event the discharge violates an obligation under an employment contract. The limited-liability principles of corporate law serve to insulate officers from liability for corporate contracts and obligations. Tort law, however, concerns liability imposed by society for acts by individuals deemed to be undesirable in society. The tort seeks to encourage responsibility for individual behavior. The tort of wrongful discharge is clearly influenced by contract law because the tort involves the termination of an employment relationship between an employee and employer. However, that influence does not control the scope of liability under the tort. The tort of wrongful discharge does not impose liability for the discharge from employment, but the wrongful reasons motivating the discharge. In an at-will employment arrangement, an employer can terminate an employee for any reason that does not violate public policy. Thus, in the context of tort law, the reason for the discharge is the undesirable, injurious act prohibited by the tort. It is this act that gives rise to liability, not the termination of the employment arrangement per se. Since the tort is directed at the reasons behind the discharge, not the discharge itself, the type of authority exercised by the person who carries out the discharge for violations that violate public policy is largely irrelevant. Our tort laws should be applied to encourage responsible behavior for all individuals, not insulate unwanted conduct by individuals based on the legal fiction of a corporation as an independent entity. See Haupt, 514 N.W.2d at 909. The purpose of the tort will clearly be better served if corporate decision makers are held to the same standard of responsibility imposed on corporate actors for other tortious conduct. Some courts have expressed a concern that the imposition of personal liability on supervisors and others for wrongful discharge would adversely affect the management of personnel in the corporate world. See Reno, 76 Cal.Rptr.2d 499, 957 P.2d at 1341-42. Yet, the very purpose of the tort is designed to alter the dynamics of the management of personnel by encouraging management to make decisions consistent with fundamental principles of public policy and by giving employees the freedom to refuse to follow management decisions inconsistent with such policy. Moreover, we do not need to decide how deep the tort could reach in the corporate chain of management in a particular situation. In this case, Hussain was essentially Kid University. Hussain authorized and directed the decision making, including the decision to terminate Jasper. Thus, we only hold that liability for the tort can extend to individual officers of a corporation who authorized or directed the discharge of an employee for reasons that contravene public policy. Hussain may be held individually responsible for wrongfully discharging Jasper. We reinstate the verdict against Hussain. C. Remittitur. Subject to the condition we impose later in this opinion, Kid University is entitled to a new trial. However, we conclude the new trial should be limited to damages for emotional distress. No error affected the jury's determination that Kid University was liable for wrongful discharge, and that Hussain was individually liable. The same observation holds for the jury's determination of damages for lost wages. Additionally, the district court did not err in setting aside the award for other economic damages and properly denied the claim for punitive damages. A new trial is necessary only because the award of emotional-distress damages was excessive and not supported by sufficient evidence. When a damage verdict is excessive because it is not supported by sufficient evidence, we may order a remittitur as a condition to avoiding a new trial. WSH Props., 761 N.W.2d at 49-50; Iowa R. Civ. P. 1.1010. This procedure seeks to provide fair compensation, yet avoid the time and expense of a new trial. Thus, we may impose a condition on the grant of a new trial in this case to allow Jasper an opportunity to accept a reduced and modified judgment. When a remittitur of damages is granted, only the excess of the award is remitted. WSH Props., 761 N.W.2d at 50. Generally, this standard means the award should be reduced to the maximum amount proved under the record. In re Knickerbocker, 827 F.2d 281, 289 n. 6 (8th Cir.1987). We have already determined that the absence of aggravating circumstances places this case into the lower range of emotional-distress damages for wrongful-termination cases. Under the record presented, we conclude the maximum award is $50,000. We are primarily influenced both by Jasper's relatively brief period of employment and unemployment. Her personal identity was not tied to this particular employment, and she found new employment in the same field and in the same position within a relatively short period of time. On the other hand, the manner of her discharge was at best insensitive, principally because she was not allowed to retrieve her children and the police were called. In addition, she experienced emotional distress, particularly on the day of her discharge and on other days for several months, but not much more than the common manifestations of any job loss. Jasper may accept this reduced amount of damages for pain and suffering to avoid a new trial. [4]