Opinion ID: 2180889
Heading Depth: 1
Heading Rank: 2

Heading: Speckman's Claims

Text: Speckman's complaint contains three claimed grounds for relief which we address in turn: a contract claim, a property interest, and a liberty interest. A. Contract Claim. As a general rule, Indiana employment relationships are terminable at the will of either party. If an employee gives independent consideration for an employment contract, however, the employer may terminate the employee only for good cause without incurring liability for its action. Ohio Table Pad Co. of Indiana, Inc. v. Hogan (1981), Ind. App., 424 N.E.2d 144. An example of independent consideration is an employee's assignment of a valuable coal lease to the employer in return for employment. Mt. Pleasant Coal Co. v. Watts (1926), 91 Ind. App. 501, 151 N.E. 7. Independent consideration to support a contract of permanent employment also exists when an employee surrenders or releases a claim for personal injuries sustained at the hands of the contract employer. Ohio Table Pad, 424 N.E.2d at 146. Under the agreement between Speckman and the City, Speckman agreed to release all claims of wrongful discharge he had against the City. The City contends that prior to this case sources of independent consideration for an employment contract were limited to the kinds recognized in Mt. Pleasant Coal and Ohio Table Pad. The City contends that the Court of Appeals erred in expanding the definition of executed consideration to include the release of intentional torts such as defamation, which could be committed by employees acting outside of the course and scope of their employment. The City's contention is not persuasive because an employer receives the same benefit if an employee releases it from liability in either case. In both instances the employer bargains for an immunity from legal process for an act already committed. Speckman's settlement agreement provides independent consideration by releasing the City from a tort claim. The presumption that employment is at will can also be rebutted by an agreement between the employer and the employee. Department of Natural Resources v. Evans (1986), Ind. App., 493 N.E.2d 1295. Evans was involved in litigation over the Two Percent Club, a method of monetary contribution by public employees to the political party with power over their employment. Parties to the suit negotiated a settlement in which Evans agreed to release D.N.R. in exchange for a non-retaliation agreement. Evans then tried to get a job with D.N.R. but was not given political clearance. Evans sued based on the non-retaliation clause of the settlement agreement. The Court of Appeals upheld an award of damages for lost wages because of breach of the agreement. It found that if Evans had been hired by the Department, she would not have been a true at-will employee because her employment would have been conditioned by the settlement contract. If hired, the Department could have discharged Evans at anytime without liability only if the Department did not violate the settlement contract in doing so. Id. at 1302. Similarly, in its settlement agreement with Speckman, the City agreed to treat Speckman in accordance with the City of Indianapolis Personnel Policies and Procedure Manual. That manual requires just cause be established before any disciplinary action is taken against an employee. Thus, Speckman's employment was not at will, but rather was conditioned by the settlement agreement. While there is room to debate the scope of the rights afforded Speckman under the contract, such contracts are valid and enforceable. Speckman had stated a claim on which relief might be granted, subject to proper proof. Accordingly, count II of his complaint was not subject to dismissal under Trial Rule 12(B)(6), Ind. Rules of Procedure. B. Property Interest. Count III of Speckman's complaint alleged that the City terminated him in violation of the fourteenth amendment by failing to afford him a hearing before his discharge. A pre-termination hearing is required only if an employee has a protected property or liberty interest in his or her employment. Speckman claims he has a property interest in his job which is protected by federal procedural due process. A property interest may arise from a statute, ordinance, or contract. The U.S. Supreme Court has said: To have a property interest in a benefit [such as a job] a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it. Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548, 561 (1972). In Roth the Supreme Court held that property interests are not created by the U.S. Constitution, but rather by existing rules or understandings that stem from an independent source such as state law. Id. Once a property interest in a civil service job is created by the legislature, the constitutional right to due process attaches. Cleveland Board of Education v. Loudermill, 470 U.S. 532, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985). However, the Court recognized the right of a state legislature to choose whether or not to create a property interest in civil service jobs. Speckman does not have a federal due process right to a hearing merely because he is a public employee. Speckman's only claim to a due process right flows from the potential entitlement to continued employment that may exist by virtue of his written employment contract. The trial court must be allowed to determine if Speckman's particular contract created a legitimate claim of entitlement to continued employment, and whether or not the City's actions were in violation of the contract. A finding in favor of Speckman on that issue would give vitality to his due process claim. The City might have sought summary judgment on count III by accepting count II for the sake of argument and attempting to demonstrate that Speckman had been afforded due process adequate under the circumstances. It chose instead to seek dismissal of count III. Because the motion to dismiss the contract claim should not have been granted, it was also improper to dismiss the property interest claim, count III. C. Liberty Interest. Speckman argues that he had a liberty interest, protected by the fourteenth amendment, in his good name and reputation and was therefore entitled to an opportunity to clear his name at a pre-termination hearing. The Court of Appeals determined that Speckman has a cognizable claim to a liberty interest precluding dismissal under Trial Rule 12(B)(6), Ind. Rules of Procedure. It held that Speckman was entitled to the opportunity to prove the legitimacy of his claim to federal due process protection. We agree. The U.S. Supreme Court held, Where a person's good name, reputation, honor, or integrity is at stake because of what the government is doing to him, notice and an opportunity to be heard are essential. Wisconsin v. Constantineau, 400 U.S. 433, 437, 91 S.Ct. 507, 510, 27 L.Ed.2d 515, 519 (1971). The Court has said that the phrase because of what the government is doing to him, refers to a governmental action ... [which] deprived the individual of a right previously held under state law ... Paul v. Davis, 424 U.S. 693, 708, 96 S.Ct. 1155, 1164, 47 L.Ed.2d 405, 418 (1976). Speckman claims to be deprived of the right to continued employment under his employment contract. An employee must receive an opportunity to prove his claim of entitlement to continued employment under certain circumstances. Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972). Sindermann was discharged from his position as a college professor. The Court held that Sindermann's lack of a formal contract or tenure agreement was not determinative of his right to procedural due process. The Court acknowledged that Sindermann had not yet shown that he was deprived of an interest that could invoke procedural due process protection but the Court nonetheless held that he must be given an opportunity to prove the legitimacy of his claim of such entitlement ... 408 U.S. at 599, 603, 92 S.Ct. at 2698, 2700, 33 L.Ed.2d at 578, 580. Under Sindermann an employee need not establish the actual existence of a property or liberty interest to get a hearing on his due process claims, but merely has to raise a genuine issue as to his interest in continued employment. Speckman must be allowed to present more evidence on his contract claim before the court can determine whether there is a genuine issue as to his claim of a liberty interest. In the companion case to Sindermann, the Supreme Court stated that a person who is not rehired in one job, but remains as free as before to seek another job is not deprived of a liberty interest. Board of Regents v. Roth, 408 U.S. at 575, 92 S.Ct. at 2708, 33 L.Ed.2d at 560 (Roth not deprived of a liberty interest merely because his teaching contract was not renewed). The Court noted that mere proof that an employee's record of nonretention in one job might make him somewhat less attractive to some other employers does not establish the kind of foreclosure of opportunities amounting to a deprivation of liberty. Id. at 574 n. 13, 92 S.Ct. at 2707 n. 13, 33 L.Ed.2d at 559 n. 13. [2] Defamation alone is not a deprivation of liberty. Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976). The Court implies that if the government defames an individual in connection with a refusal to rehire then an action might arise under the fourteenth amendment. [3] However, that does not establish that every firing automatically triggers a deprivation of liberty. In Bishop v. Wood, Bishop claimed that he was deprived of liberty because the reasons given for his discharge were false, and because the reasons were so serious as to cause stigma and possible damage to his reputation. The Supreme Court refused to recognize a violation of Bishop's liberty interest because there was no public disclosure of the reasons for which Bishop was fired. To hold otherwise, Justice Stevens wrote, would discourage forthright and truthful communications between employer and employee and would enable every discharged employee to assert a constitutional claim ... 426 U.S. 341, 349, 96 S.Ct. 2074, 2079-80, 48 L.Ed.2d 684, 692-93 (1976). Justice Stevens closed the opinion in Bishop with this admonition: In the absence of any claim that the public employer was motivated by a desire to curtail or to penalize the exercise of an employee's constitutionally protected rights, we must presume that official action was regular and, if erroneous, can best be corrected in other ways. The Due Process Clause of the Fourteenth Amendment is not a guarantee against incorrect or ill-advised personnel decisions. 426 U.S. at 350, 96 S.Ct. at 2080, 48 L.Ed.2d at 693. A similar principle was described in Lawson v. Sheriff of Tippecanoe County, 725 F.2d 1136 (7th Cir.1984): [W]hen a state fires an employee for stated reasons likely to make him all but unemployable in the future, by marking him as one who lost his job because of dishonesty or other job-related moral turpitude, the consequences are so nearly those of formally excluding him from his occupation that the law treats the state's action the same way, and insists that due process be provided. Id. at 1139. The Seventh Circuit found a due process action for invasion of a liberty interest to be inappropriate for Lawson. They decided that while she may have been defamed by the statements that the sheriff made in explanation of why he had fired her, the interest that is invaded by defamation ... is not property or liberty within the meaning of the due process clause. Id. at 1138. These cases lead us to the conclusion that the trial court must examine the facts surrounding Speckman's discharge, and determine if the City's alleged defamation of Speckman was so maligning as to foreclose Speckman from continuing in the same occupation and to damage his standing in the community.