Opinion ID: 2518281
Heading Depth: 2
Heading Rank: 1

Heading: the employee manual creates a contract between cabaness and bountiful power as a matter of law

Text: ¶ 47 Cabaness argues that the district court erred in denying his motion for partial summary judgment and by holding as a matter of law that the Employee Manual did not give rise to an implied contract. In conjunction with these claims of error, Cabaness argues that the district court erred in denying his rule 59(a) and 60(b) motion and determining that the city employee affidavits were inadmissible. Additionally, Cabaness argues that the district court erred by finding in the alternative that Cabaness' implied contract claim was barred by governmental immunity. We begin by determining whether the district court erred in not admitting the city employee affidavits and then turn to the merits of Cabaness' implied contract claim.
¶ 48 Cabaness argues that the district court erred in striking the city employee affidavits and that we should therefore consider the affidavits in our determination of the implied contract issue before us. We decline to do so. ¶ 49 After the district court entered summary judgment, Cabaness filed a rule 59(a) and 60(b) motion to alter or amend the order of summary judgment. The motion was accompanied by the city employee affidavits. The city employee affidavits address Bountiful Power's alleged intent that the Employee Manual constitute a contract between Bountiful Power and its employees. The district court found that the city employee affidavits failed to satisfy the newly discovered evidence standards of rule 59(a) and rule 60(b) and were therefore inadmissible. ¶ 50 We review a district court's decision to strike affidavits under an abuse of discretion standard. Daines v. Vincent, 2008 UT 51, ¶ 21, 190 P.3d 1269 (With regard to our review of the exclusion of evidence, we grant a trial court broad discretion to admit or exclude evidence and will disturb its ruling only for abuse of discretion.). Both rule 59(a) and rule 60(b) allow a court to open and amend or alter a judgment based on, among other things, newly discovered evidence, which by reasonable due diligence could not have been discovered or produced prior to or at the hearing or trial that resulted in the judgment. Utah R. Civ. P. 60(b); Utah R. Civ. P. 59(a)(4). Under rule 59(a)(4) a moving party must establish: (1) the existence of newly discovered evidence which is material and competent; (2) that by due diligence the evidence could not have been discovered and produced before judgment was entered; and (3) that the evidence is not merely cumulative or incidental, but is substantial enough that there is a reasonable likelihood of a different result. Barson v. E.R. Squibb & Sons, Inc., 682 P.2d 832, 841 (Utah 1984). ¶ 51 Here, the district court found that one exercising reasonable due diligence would have discovered the evidence contained in the city employee affidavits prior to or at the summary judgment hearing and therefore the evidence was untimely and inadmissible. Cabaness argues that he did not present the affidavits earlier because he was unaware of Defendants' argument that Bountiful Power did not intend the Employee Manual to create a contract between the City and its employees or, in other words, that he was unfairly surprised by the Defendants' argument. This argument is unavailing. Defendants' answer to Cabaness' original pleading denied that the Employee Manual created an implied contract and Cabaness was under the obligation to demonstrate that each element of implied contract was met, including intent of the parties. We therefore hold that the district court did not abuse its discretion when it denied Cabaness' rule 59(a) and 60(b) motions. Accordingly, we do not consider the evidence contained in those affidavits. ¶ 52 We now turn to whether the district court erred in determining as a matter of law, that the Employee Manual did not create an implied contract between the parties.
¶ 53 Bountiful Power argues that the district court correctly determined as a matter of law that the plain language of the Employee Manual did not create an implied contract. We disagree. ¶ 54 Bountiful Power is a division of the City of Bountiful, and as such, its employees are public employees. Ordinarily, employment of public employees is `governed by statute, not contract.' Canfield v. Layton City, 2005 UT 60, ¶ 16, 122 P.3d 622 (quoting Buckner v. Kennard, 2004 UT 78, ¶ 32, 99 P.3d 842). We have recognized, however, that circumstances may exist where `the government voluntarily undertakes an additional duty' beyond its normal obligation to the employee, `in which case an implied contract arises.' Id. (quoting Buckner, 2004 UT 78, ¶ 32, 99 P.3d 842). Although Cabaness was a public employee, he argues that Bountiful Power voluntarily undertook additional duties in developing and distributing the Employee Manual thereby creating an implied-in-fact employment contract. We agree. ¶ 55 An implied contract may arise from a variety of sources including personnel policies or provisions of an employment manual. See Canfield, 2005 UT 60, ¶ 17, 122 P.3d 622 ([A]n implied contract may `arise from a variety of sources, including... announced personnel policies ....' (quoting Berube v. Fashion Centre, Ltd., 771 P.2d 1033, 1044 (Utah 1989))); Johnson v. Morton Thiokol, Inc., 818 P.2d 997, 1000 (Utah 1991)(an employee manual can operate as implied-in-fact contract terms); Brehany v. Nordstrom, Inc., 812 P.2d 49, 54 (Utah 1991)([E]mployment manual provisions may constitute implied-in-fact terms of the employment arrangement....); Caldwell v. Ford, Bacon & Davis Utah, Inc., 777 P.2d 483, 485 (Utah 1989) ([A]n employer's internally adopted policies and procedures... can, in effect, become part of the contractual relationship between the employer and the employee.). In Canfield, we suggested in dicta that an employee manual may create an implied contract because employees may reasonably rely on the document's provisions and may expect the employer to conform to the procedures it outlines. 2005 UT 60, ¶ 17, 122 P.3d 622 (internal quotation marks omitted). [I]f an employee manual is to be considered part of an employment contract, the terms should be considered terms of a unilateral contract, [8] and therefore must meet the requirements for an offer of a unilateral contract. Morton Thiokol, 818 P.2d at 1001-02. Specifically, [t]here must be a manifestation of the employer's intent that is communicated to the employee and sufficiently definite to operate as a contract provision. Id. at 1002 (internal citations omitted). ¶ 56 Because [t]he existence of [an implied contract] is [normally] a question of fact which turns on the objective manifestations of the parties' intent, it is primarily a jury question. Morton Thiokol, 818 P.2d at 1001 (internal citations omitted). However, `the court retains the power to decide whether, as a matter of law, a reasonable jury could find that an implied contract exists.' Ryan v. Dan's Food Stores, Inc., 972 P.2d 395, 401 (Utah 1998) (quoting Sanderson v. First Sec. Leasing Co., 844 P.2d 303, 306 (Utah 1992)). Similarly, if the evidence of intent relied on by the parties does not present any triable issues of fact, the court may also determine the existence or non-existence of an implied contract as a matter of law. ¶ 57 Relevant evidence of the intent of the parties usually includes the language of the manual itself, the employer's course of conduct, and pertinent oral representations. Brehany, 812 P.2d at 56. In this case, however, Bountiful Power relies solely on the plain language of the Employee Manual without providing any other evidence of the non-existence of an implied contract. Similarly, Cabaness also relies on the plain language of the Employee Manual as evidence of the existence of an implied contract and testified that he expected that Bountiful Power would comply with the terms of the Manual. Given the evidence provided by the parties, the district court determined, and we agree, that there were no triable issues of fact relevant to the existence of an implied contract and the issue therefore could be resolved as a matter of law. We accordingly interpret the plain language of the Employee Manual to determine whether it provides a manifestation of Bountiful Power's intent with terms that are sufficiently definite to operate as contract provisions. ¶ 58 Bountiful Power argues that the disclaimer in the Employee Manual precludes a finding that it intended to create an implied contract between itself and its employees. The disclaimer contained in Section 101 of the Employee Manual entitled Purpose of this Manual states that No contract exists between Bountiful City and its employees with respect to salary, salary ranges, movement within salary ranges, or employee benefits. (Emphasis added). In Morton Thiokol, we agreed with other jurisdictions and held, a clear and conspicuous disclaimer, as a matter of law, prevents employee manuals or other like material from being considered as implied-in-fact contract terms. 818 P.2d at 1003. In that case, we held that the manual ... at issue contain[ed] clear and conspicuous language disclaiming any contractual liability. Id. Specifically, the disclaimer categorically stated that the manual did not create a binding contract or any other obligation or liability on the company. Id. Unlike the disclaimer in Morton Thiokol, the disclaimer in this case does not contain broad and conspicuous language disclaiming any and all contractual liability. To the contrary, it only disclaims contractual liability with respect to a few specifically identified items. Indeed, the plain meaning of the disclaimer in this case is that Bountiful Power intended to create a contract with its employees with respect to the items in the Employee Manual that are not specifically listed in the disclaimer. ¶ 59 Additional provisions in the Employee Manual also manifest Bountiful Power's intent to voluntarily undertake additional duties beyond its normal obligations to its employees. Although some portions of the Employee Manual express only policies, procedures, and expectations of Bountiful Power, others rise to the level of promises on the part of Bountiful Power on which its employees should reasonably be able to rely. For instance, section 406 of the Employee Manual, entitled Work Environment, states that City policy will not tolerate verbal or physical conduct by any employee which harasses, disrupts, or interferes with another's work performance or which creates an intimidating, offensive, or hostile work environment.... (Emphasis added). Additionally, section 408, entitled Work Place Violence, mandates that [o]ral or written threats, physical assault, harassment, intentional damage, and every other act or threat of violence is strictly prohibited.  (Emphasis added). Finally, Section 409, entitled Sexual and Other Harassment, provides as follows: Any behavior or conduct of a harassing or discriminating nature ... which is pervasive, unwelcome, demeaning, ridiculing, derisive or coercive, or results in a hostile, abusive or intimidating work environment, constitutes harassment and shall not be tolerated by the City. .... No City official or employee shall harass, coerce, intimidate, threaten or discipline employees who exercise their rights under this procedure in good faith. Any such form of reprisal will render the official or employee subject to disciplinary actions. (Emphasis added). ¶ 60 Contrary to Bountiful Power's argument, these provisions in conjunction with the clear language of the limited disclaimer evince Bountiful Power's intent to voluntarily undertake additional duties to protect its employees from misconduct by supervisors or other employees. We therefore hold as a matter of law that the relevant provisions of the Employee Manual create an implied contract between Bountiful Power and Cabaness. [9] ¶ 61 Having determined that the Employee Manual creates an implied contract between Cabaness and Bountiful Power, we also hold as a matter of law that an implied covenant of good faith and fair dealing was inherent in that contract. See Brehany, 812 P.2d at 55 ([E]very contract is subject to an implied covenant of good faith....). ¶ 62 We now address whether the district court erred in holding in the alternative that Cabaness' implied contract claim was barred by Utah's Governmental Immunity Act.
¶ 63 The district court alternatively held that even assuming the Employee Manual created an implied contract between Cabaness and Bountiful Power, the claim was still barred under Utah's Governmental Immunity Act (the GIA). See Utah Code §§ 63-30-1 to -38 (1997). [10] Under section 63-30-3, governmental entities are immune from suit for any injury which results from the exercise of a governmental function.... In order to determine whether a governmental entity retains immunity from suit under the GIA we address three questions: (1) does the activity at issue constitute a governmental function under Utah Code section 63-30-3 of the GIA? (2) if the activity is a governmental function, has another section of the GIA waived governmental immunity? and (3) if governmental immunity has been waived, does the GIA contain an exception that restores governmental immunity? Ledfors v. Emery County Sch. Dist., 849 P.2d 1162, 1164 (Utah 1993). Here, the parties do not dispute that the activity at issue is a governmental function. Instead, Cabaness argues that Utah Code section 63-30-5 of the GIA waives governmental immunity and that the exceptions in section 63-30-10 do not apply and accordingly do not restore immunity. We therefore focus on the last two prongs of the immunity analysis beginning with the question of whether governmental immunity was waived under section 63-30-5. ¶ 64 Under section 63-30-5 of the GIA, governmental entities waive immunity as to any contractual obligations. Utah Code Ann. § 63-30-5(1). As discussed above, the Employee Manual created an implied contract between Bountiful Power and Cabaness. Accordingly, under the plain language of section 63-30-5, governmental immunity is waived with respect to any contractual obligations Bountiful Power owes to Cabaness under the Employee Manual. Next we determine whether any exceptions under the GIA restore immunity to Bountiful Power. ¶ 65 Section 63-30-10 of the GIA initially waives [i]mmunity from suit of all governmental entities ... for injury proximately caused by a negligent act or omission of an employee committed within the scope of employment.... Id. § 63-30-10. However, subsection 63-30-10(2) restores governmental immunity if the injury arises out of, in connection with, or results from ... infliction of emotional anguish. Id. § 63-30-10(2). Bountiful Power argues that the broad language of subsection (2) bars Cabaness' contract claim because his injury arises out of the infliction of emotional anguish. Bountiful Power's argument assumes that the exception contained in subsection 63-30-10(2) applies not only to the initial waiver of immunity in section 63-30-10, but also to the waiver of immunity for contractual obligations in section 63-30-5. We reject such an assumption and hold that the waiver of immunity in section 63-30-5 is independent of the exceptions contained in section 63-30-10. Specifically, the statutory language of the GIA and relevant case law do not support a finding that the exceptions in section 63-30-10 apply to the independent waiver of governmental immunity for contractual obligations in section 63-30-5. ¶ 66 When examining a statute, we first look to its plain language. State v. Laycock, 2009 UT 53, ¶ 19, 214 P.3d 104. We read the plain language of a statute as a whole and interpret its provisions in harmony with other statutes in the same chapter and related chapters. Id. (internal quotation marks and alteration omitted). In relevant part, section 63-30-10 states that governmental immunity is waived for injury proximately caused by a negligent act or omission of an employee committed within the scope of employment except if the injury arises out of, in connection with, or results from ... infliction of mental anguish. Utah Code Ann. § 63-30-10(2). On their face, the exceptions to waiver listed in section 63-30-10 do not apply to contract claims brought under section 63-30-5. Instead, under the plain language of the statute, the exceptions apply only to the waiver of immunity for negligence actions brought under section 63-30-10. ¶ 67 We acknowledge that under our prior case law, the exceptions to waiver in section 63-30-10 have been applied to other independent waivers of governmental immunity. In Keegan v. State, we noted that the exceptions in section 63-30-10 have been applied to the waivers of immunity in both sections 63-30-8 and 63-30-9. 896 P.2d 618, 621 (Utah 1995). In that case, we held that an exception in section 63-30-10 barred plaintiff's complaint brought under section 63-30-8. Id. at 623. And relying on Keegan, we held in Taylor v. Ogden City School District that the exceptions in 63-30-10 apply to the waiver of immunity in section 63-30-9. 902 P.2d 1234, 1234 (Utah 1995) (per curiam). After the injuries occurred in both Keegan and Taylor, but before the cases were decided, the legislature amended sections 63-30-8 and 63-30-9 and qualified the waiver of governmental immunity by stating that immunity was waived [u]nless the injury arises out of one or more of the exceptions to waiver set forth in Section 63-30-10. Keegan, 896 P.2d at 620-21 (quoting Utah Code Ann. § 63-30-8 (1993)); Taylor v. Ogden City Sch. Dist., 927 P.2d at 159, 160, n. 2 (Utah 1996); see also Utah Code Ann. §§ 63-30-8, 63-30-9 (1997). Thus, although it is now clear that the exceptions in section 63-30-10 apply to sections 63-30-8 and 63-30-9, the Keegan and Taylor cases may appear somewhat troubling because both applied the exceptions in section 63-30-10 to independent waivers of governmental immunity before the legislative amendments were effective. However, after reviewing the Keegan and Taylor cases and their predecessors, it is clear that the exceptions in section 63-30-10 were applied to other independent waivers of immunity because the initial causes of action at issue in these cases sounded in negligence. [11] See Keegan, 896 P.2d at 622 (reviewing prior cases holding that the exceptions in 63-30-10 applied to other independent waivers of immunity). ¶ 68 Unlike Keegan and other prior cases, Cabaness' claim against Bountiful City does not sound in negligence. Rather, it sounds squarely in contract. While we will reject claims that reflect attempts to evade the[ ] statutory categories [of the GIA] by recharacterizing the supposed cause of the injury, Ledfors, 849 P.2d at 1166, that is not the case here because Cabaness has a legitimate contractual claim against Bountiful Power. As discussed above, the Employee Manual created an implied contract between Bountiful Power and Cabaness with specific enforceable provisions. And although some of Cabaness' injuries may have arisen from the infliction of mental anguish, that is exactly the type of injury that the terms of the contract appear designed to prevent. ¶ 69 Further, it is significant that when the legislature amended sections 63-30-8 and 63-30-9 to incorporate the exceptions listed in section 63-30-10, it did not amend the waiver of immunity in section 63-30-5. Instead, the plain language of section 63-30-5 indicates that it was intended to apply to  any contractual obligation[s] of a governmental entity, without qualification. Utah Code Ann. § 63-30-5 (emphasis added). ¶ 70 In summary, we hold that under the plain language of the GIA, the exception to waiver in section 63-30-10(2) does not apply to actions that are brought under section 63-30-5 and that legitimately sound in contract. Accordingly, governmental immunity in this case is waived under section 63-30-5 and no other provisions of the GIA restore it. Therefore, the district court erred in holding that Cabaness' implied contract claim was barred by the GIA. [12] Next we address whether consequential damages apply to Cabaness' implied contract claim.
¶ 71 Bountiful Power argues that damages for emotional or mental distress are not recoverable on Cabaness' contract claim. Given the unusual nature of the contract at issue here, we hold that compensation for emotional distress and mental suffering may be available where emotional distress and mental suffering naturally flow from a breach of the terms of the contract between Bountiful Power and were within the contemplation of the contracting parties. Because questions of fact remain regarding whether these damages were within the contemplation of the parties at the time the contract was formed, the district court erred in granting defendants' summary judgment on this issue. ¶ 72 A non-breaching party may recover both general damages, which flow naturally from the breach, and consequential damages, which, while not an invariable result of breach, were reasonably foreseeable by the parties at the time the contract was entered into. Mahmood v. Ross, 1999 UT 104, ¶ 19, 990 P.2d 933 (internal quotation marks omitted). Generally, there is no recovery of damages for mental anguish stemming from a breach of contract. Ams. Disabled for Accessible Pub. Transp. v. SkyWest Airlines, Inc., 762 F.Supp. 320, 326 (D.Utah 1991). But we have recognized an exception to this general rule in unusual circumstances. In the context of a breach of a first-party insurance contract, we held that consequential damages for mental anguish might be provable because insurance frequently is purchased not only to provide funds in case of loss, but to provide peace of mind for the insured or his beneficiaries. Beck v. Farmers Ins. Exch., 701 P.2d 795, 802 (Utah 1985). Although our analysis in Beck was based on the unique nature and purpose of an insurance contract and has not yet been applied to other types of breach of contract cases, we find the analysis instructive in the case before us. Id. ¶ 73 In Beck, we stated that the foreseeability of contractual damages related to economic distress or mental anguish will always hinge upon the nature and language of the contract and the reasonable expectations of the parties. Id. While this statement was made within the context of an insurance contract, we believe it applies to all contract actions. Other jurisdictions have similarly recognized that contractual damages related to emotional distress may be an appropriate remedy depending on the foreseeability of such damages and the specific nature of the contract at issue. See, e.g., Sullivan v. O'Connor, 363 Mass. 579, 296 N.E.2d 183, 188-89 (1973) ([T]here is no general rule barring such items of [emotional] damage[s] in actions for breach of contract. It is all a question of the subject matter and background of the contract....); Stewart v. Rudner, 349 Mich. 459, 84 N.W.2d 816, 824 (1957) (holding that economic distress is a recoverable contract damage when the contract concerns matters of mental concern or solicitude and such damages were within the contemplation of the parties); Lamm v. Shingleton, 231 N.C. 10, 55 S.E.2d 810, 813 (1949) (Where the contract is personal in nature and the contractual duty or obligation is so coupled with matters of mental concern or solicitude, or with the sensibilities of the party to whom the duty is owed, that a breach of that duty will necessarily or reasonably result in mental anguish or suffering, and it should be known to the parties from the nature of the contract that such suffering will result from its breach, compensatory damages therefor may be recovered.); see also, Restatement (Second) of Contracts § 353 (1981) (stating that a non-breaching party may recover emotional damages whenever the contract or the breach is of such a kind that serious emotional disturbance was a particularly likely result). ¶ 74 In a recent decision discussing this issue, the United States Court of Appeals for the Eleventh Circuit made the following statement: Although the general rule is that emotional damages for breach of contract will not lie, this rule is simply a shorthand way of saying that emotional distress is usually not a foreseeable consequence of breach. But when the nature of the contract is such that emotional distress is foreseeable, emotional damages will lie. Sheely v. MRI Radiology Network, P.A., 505 F.3d 1173, 1200 (11th Cir.2007) (internal citations omitted). We agree and recognize that emotional distress is typically not recoverable in an action for breach of contract because such damages are rarely a foreseeable result of breach. To be sure, in the ordinary commercial contract, damages are not recoverable for disappointment, even amounting to alleged anguish, because of breach. Stewart, 84 N.W.2d at 823. This is so because, although [i]n such cases breach of contract may cause worry and anxiety varying in degree and kind from contract to contract, depending upon the urgencies thereof, the state of mind of the contracting parties, and other elements, but it has long been settled that recovery therefor was not contemplated by the parties as the natural and probable result of the breach. Id. Indeed, [s]ome type of mental anguish, anxiety, or distress is apt to result from the breach of any contract which causes pecuniary loss. Yet damages therefor are deemed to be too remote to have been in the contemplation of the parties at the time the contract was entered into to be considered as an element of compensatory damages. Lamm, 55 S.E.2d at 813. ¶ 75 But we also agree that in rare cases the non-breaching party to a contract may recover damages for emotional distress. Accordingly, given our discussion above, we hold that a non-breaching party may recover general and/or consequential damages related to emotional distress or mental anguish arising from a breach of contract when such damages were both a foreseeable result of the breach of contract and explicitly within the contemplation of the parties at the time the contract was entered into. As we stated in Beck, the applicability of such damages will always hinge upon the nature and language of the contract and the reasonable expectations of the parties. 701 P.2d at 802. ¶ 76 In this case, Bountiful Power contracted with Cabaness and agreed, among other things, that it would not tolerate verbal or physical conduct by any employee which harasses, disrupts, or interferes with another's work performance or which creates an intimidating, offensive, or hostile work environment. Because this contractual provision of the Employee Manual is specifically directed toward matters of mental concern and solicitude, any breach thereof may result in emotional distress and mental anguish. Further, the unusual nature of the contractual obligations and the specific language of the contractual provisions give rise to the possibility that emotional damages were within the contemplation of the parties at the time the contract was entered. Therefore, the district court erred when it granted summary judgment in favor of Bountiful Power on this issue. We therefore remand to the trial court the questions of whether emotional damages were within the contemplation of the parties at the time of the contract was formed and whether such damages are therefore recoverable.