Opinion ID: 2382233
Heading Depth: 1
Heading Rank: 5

Heading: The Contract Action

Text: Appellant argues that the College breached its contract of employment with him in two respects: first, because of verbal assurances given him at the time he was hired, his contract should have been renewed at the end of the two-year term; and second, because the College did not fulfil its obligation to make a fair evaluation of his performance as a member of the faculty. I agree with the majority that appellant's contract was for a two-year term and that there is no merit to appellant's argument that he was entitled to have it renewed. The majority states, however, that both of appellant's arguments fail [because] the College at no time assumed any contractual obligation beyond the two-year duration of his employment, Maj. op. at 81. This statement betrays a failure to recognize that appellant's second argument is fundamentally different from his first. It is undeniable, and the majority acknowledges, id. at 254 n. 2, that the faculty handbook was part of appellant's contract of employment. What the majority's statement fails to recognize is that the principal issue in this case  appellant characterizes it as the true gist of [his] complaint, Brief for Appellant at 26  is, not whether the College had the right to terminate appellant's contract at the end of its two-year term, but whether during that term the College performed its obligation under the contract to make a fair evaluation of appellant. In my opinion, there is a genuine issue of fact as to whether the College did perform that obligation. The majority's reliance on Krasik v. Duquesne University, 293 Pa.Super. 165, 437 A.2d 1257 (1981), demonstrates its misunderstanding. In Krasik, the appellant, the university's law librarian, sought to enjoin the university from terminating her employment at the end of its one-year term. The librarian relied on the fact that her contract had incorporated standards of the American Bar Association and the Association of American Law Schools; in her view, these standards required faculty approval before her employment could terminate, and although the President of the University had written her that her employment would terminate, the faculty had not approved the termination. We concluded, however, that appellant's contract expired by its own terms, and that the standards on which appellant relied were only vague advisory language that did not convert the agreement into a contract for permanent employment. . . nor [did they] require faculty review prior to the expiration of the [one-year] term of the agreement. Id., 293 Pa.Superior Ct. at 172, 437 A.2d at 1261. While Krasik supports the majority's dismissal of appellant's first argument, that he had a right to continued employment after his contract expired, it is irrelevant to his second argument, that the College breached its obligation to make a fair evaluation of him. In considering appellant's second, and principal, argument, it should be noted at the outset that this case differs from many breach of employment contract cases based on an employee handbook. Aside from cases in which an at-will employee has sued for breach of a clause providing for dismissal for just cause only, see, e.g., Toussaint v. Blue Cross and Blue Shield of Michigan. 408 Mich. 579, 292 N.W.2d 880 (1980); Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn. 1983); Woolley v. Hoffmann-LaRoche, Inc., 99 N.J. 284, 491 A.2d 1257 (1985); Thompson v. St. Regis Paper Co., 102 Wash. 219, 685 P.2d 1081 (1984); Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458, 443 N.E.2d 441, 457 N.Y.S.2d 193 (1982), many such cases involve a dismissed employee's rights to certain monetary benefits, such as severance pay or vacation pay, see, e.g., Sweet v. Stormont Vail Regional Medical Center, 231 Kan. 604, 647 P.2d 1274 (1982); Langdon v. Saga Corporation, 569 P.2d 524 (Okla.App. 1976). This case is more like cases in which it has been held that an action for breach of contract will lie because the employer did not honor handbook policy regarding demotions, Salimi v. Farmers Insurance Group, 684 P.2d 264, 265 (Colo.App. 1984), or probationary employees, Yartzoff v. The Democrat-Herald Publishing Co., Inc., 281 Or. 651, 576 P.2d 356 (1978), or grievance procedures, Carter v. Kaskaskia Community Action Agency, 24 Ill. App.3d 1056, 322 N.E.2d 574 (1974). Appellant's claim is that because of the negative evaluations that remain in his file, he has been unable to obtain favorable references in connection with his search for a position. If he were able to establish that these negative evaluations are in his file as a result of the College's failure to perform its obligation to make a fair evaluation of him, he would be entitled to damages. It should further be noted that this is not a case in which we are asked to read into an employment contract an obligation on the part of the employer to dismiss an employee only for good cause. Some courts have found such an obligation. See, e.g., Gates v. Life Insurance Co., 196 Mont. 178, 638 P.2d 1063 (1982); Monge v. Beebe Rubber Co., 114 N.H. 130, 316 A.2d 549 (1974), modified in Howard v. Dorr Wollen Co., 120 N.H. 295, 414 A.2d 1273 (1980); Cleary v. American Airlines, Inc., 111 Cal.App.3d 487, 168 Cal.Rptr. 722 (1980). Others have declined to do so. See, e.g., Parnar v. Americana Hotels, Inc., 65 Haw. 370, 652 P.2d 625 (1982); Brockmeyer v. Dun & Bradstreet, 113 Wis.2d 561, 335 N.W.2d 834 (1983); Daniel v. Magma Copper Co., 127 Ariz. 320, 620 P.2d 699 (Ct.App. 1980). The distinction that must be borne in mind here has been well stated by the Connecticut Supreme Court in Magnan v. Anaconda Industries, Inc., 193 Conn. 558, 479 A.2d 781 (1984). Said the court: While we see no reason to exempt employment contracts from the implication of a covenant of good faith and fair dealing in the contractual relationship, we do not believe that this principle should be applied to transform a contract of employment terminable at the will of either party into one terminable only at the will of the employee or for just cause. Id. at 568, 479 A.2d at 787. While concluding that an employer is bound to exercise good faith in the performance of its obligations under an employment contract, the court decline[d] the invitation of the plaintiff to transform the requirement of good faith into a condition that an employee may be dismissed only for good cause. Id. at 571, 479 A.2d at 788. These distinctions noted, it is in order to consider appellant's claim that the College breached its obligation to make a fair evaluation of him. If the College was under such an obligation, the obligation was not express but implied; for while the faculty handbook provides for evaluative procedures, it does not expressly state that these procedures must be fairly conducted. Under the Restatement, however, [e]very contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement. Restatement (Second) of Contracts, § 205 (1979) (emphasis added). See also 13 Pa.C.S. § 1203 (Commercial Code: Every contract or duty within this title imposes an obligation of good faith in its performance or enforcement.) Comment a to section 205 of the Restatement provides that [g]ood faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party. . . . And see generally Burton, Breach of Contract and the Common Law Duty to Perform in Good Faith, 94 Harv.L.Rev. 369 (1980) No Pennsylvania appellate case of which I am aware has explicitly held that the covenant of good faith and fair dealing is to be implied into every contract, although the courts of a majority of jurisdictions have so held. See Burton, supra at 369, 404 (Appendix). But see Atlantic Richfield Company v. Razumic, 480 Pa. 366, 390 A.2d 736 (1978) (duty to terminate franchise agreement in good faith). Nevertheless, without using the terms good faith or fair dealing, it has been held that contracts are to be performed with faithfulness to an agreed common purpose and consistency with the justified expectations of the other party. Restatement (Second) of Contracts, § 205 comment a. For example, in Philadelphia v. Philadelphia Transportation Company, 345 Pa. 244, 26 A.2d 909 (1942), it was said: [T]he contract itself must be read in the light of the circumstances under which it was made and [] it is necessary to consider the situation of the parties at that time, the necessities for which they naturally provided, and the advantages each probably sought to secure and the relation of the properties and rights in regard to which they negotiated. Id., 345 Pa. at 250, 26 A.2d at 912 quoting Baseman v. Shell Union Oil Corp., 138 Pa.Super. 512, 516, 10 A.2d 881, 883 (1939). See also Pritchard v. Wick, 406 Pa. 598, 178 A.2d 725 (1962). I therefore conclude that the College was under the obligation to make a fair evaluation of appellant's performance as a member of its faculty during his two-year term of employment. When the record is examined, as we must examine it, in the light most favorable to appellant, all doubts being resolved in appellant's favor, it is evident that a genuine issue of fact exists as to whether the College did make a fair evaluation of appellant. Without repeating the facts already stated in the opening portion of this opinion, some particularly significant facts may be noted. To begin, the jury might find, as the faculty advisory committee unanimously found, that Professor Gluhman was unable to make a fair evaluation of appellant, and that the Pease evaluation, conducted as it was clandestine[ly] and without consultation with appellant, was at least equally unfair. This finding made, the jury would presumably inquire whether the conduct of the College following the Gluhman and Pease evaluations, in response to appellant's appeal, was consistent with the College's obligation to make a fair evaluation of appellant's performance. At least one member of the advisory committee, Professor Norton, recommended to the President that a new evaluation be conducted. In his letter to appellant reaffirming the decision not to rehire him, the President, while stating that he had made an extensive review of the file and that he would remove the Pease evaluation, made no mention, either of the advisory committee's conclusion that the Gluhman and Pease evaluations had been unfair, or of the committee's recommendation that another evaluation be conducted. Yet the President's letter reveals that he too had doubts about the fairness of the Gluhman evaluations, for he said: Your statements must surely have raised some doubts in respect to opinions expressed by the head of your department. However, if your statements are to be taken at face value, fairness would clearly require opportunity for Dr. Gluhman to make comment and perhaps rebuttal. It will be recalled that at the time of the President's letter to appellant, Professor Gluhman had left the College. Even so, if doubts remained about opinions expressed by Gluhman, fairness might better have been assured, or so a jury might find, not by opening old wounds by inviting rebuttal by Gluhman, but by engaging an outside consultant to review appellant's performance anew, as Norton had recommended, and as was expressly provided for in the faculty handbook. Faculty Handbook, supra § 3.3553. Provost Sause's deposition reinforces the conclusion that a jury might find that while the College had doubts, at the least, about the fairness of the Gluhman evaluations, it was not prepared to resolve them, choosing instead to leave the evaluations in appellant's file. Certainly Sause did not resolve doubts about the evaluations; he, it will be recalled, made no effort to confirm any of the statements made in them. Nor did the President resolve the doubts, declining, without explanation, the recommendation to engage an outside consultant to make a new evaluation. Given the seriousness of the charges that Professor Gluhman had made, a jury might find that the College, in the exercise of its obligation to make a fair evaluation of appellant, was required to take some further action, either to confirm, qualify and explain, or remove the evaluations from appellant's file. Finally, a jury might find that the conduct of the Board of Trustees provided further support for appellant's position that he was not fairly evaluated. At the time of the trustee committee's report to the board, the decision regarding Professor Gluhman's tenure had been made and the Loerke report, which questioned Gluhman's ability to supervise the members of his department, was in hand. Yet with that knowledge, the committee, while acknowledging that [T]he Committee on Appointments, Promotions and Dismissals, made its determination [not to rehire appellant] upon the lack of a positive recommendation by the Department Head, [ i.e., Professor Gluhman] stated: The nature and extent of [the differences between Gluhman and appellant] are not relevant to this committee's determination except to state that Baker was under the impression that he was not looked upon favorably by his department head. It seems apparent, however, and a jury might find, that the differences between the two faculty members were indeed relevant, especially in view of the fact that on the basis of the Loerke report, the trustees had reason to question Gluhman's judgment. In addition, it is clear from the trustee committee's report that the committee considered the College's obligation to appellant as limited to employment for the two-year contract term, and its obligation on appeal as limited to inquiring, not whether appellant had been fairly evaluated, but only whether he had been afforded due process. How, a jury might ask, could the trustees say that appellant had been fairly treated, how could they find no injury to [appellant's] personal integrity, R.R. 144a, and at the same time not even read the evaluations on the basis of which appellant had not been rehired, (much less manifesting any knowledge of the fact that a faculty committee had rejected the evaluations as unfair)? [10] Was so empty an appeal consistent with the College's promise, implicit in its contract with appellant, that appellant's performance as a member of the faculty would be fairly evaluated? The majority states that [T]he record admits of no conclusion other than that the College at all times acted in good faith toward [appellant], and that it complied fully with the evaluation and appeal provisions of the contract.. . . Maj. op. at 85 (footnote omitted). I submit that these statements are not only not supported by but are contrary to the record, and that they represent fact-finding by the majority inconsistent with our obligation to examine the record in the light most favorable to appellant, resolving all doubts in his favor. The record makes plain what making a fair evaluation of appellant might have entailed: permitting appellant to see the Gluhman evaluations so that he could respond to them; telling appellant that the Gluhman evaluations had been rejected by the faculty advisory committee as unfair, that they were therefore being removed from his file, and that his appeal would be decided without reference to them; appointing an outside evaluator, as recommended by Professor Norton and as provided by the faculty handbook. None of these actions, however, nor any equivalent action, was taken. Instead, the Appointments, Promotions, and Dismissals Committee recommended that appellant not be rehired on the basis of evaluations that the College knew or should have known were unfair; throughout the appeal process appellant was never shown the evaluations; and appellant was never informed, and the record does not suggest, that the decision to deny his appeal was on a basis independent of the evaluations. The majority further states that [a]s a matter of sound public policy an institution of higher learning should be free to decide not to hire a particular faculty member [who] does not mesh with the institution's goals and philosophies, however excellent his work and distinguished his scholarship. Id. at 87. No one could quarrel with this proposition. It is irrelevant, however, to our consideration here, limited as we are  or should be  to deciding whether a jury might find that the College did not honor its obligation to make a fair evaluation of appellant's performance as a member of its faculty during his two-year term, and that as a result, appellant has suffered monetary loss. Except as to Professor Gluhman's memorandum regarding the presence of appellant's wife in his classroom, the orders of the trial court should be reversed and the case remanded for proceedings consistent with this opinion. SPAETH, President Judge, wrote this opinion before the expiration of his term on the court.