Petition for Writ of Certiorari — Ingersoll-Rand Co. v. McClendon

89-1298 | | Fea

No, ————

IN THE

Suprene Court of the United States

OCTOBER TERM, 1989

INGERSOLL-RAND COMPANY,

Petitioner,

Vv.

PERRY MCCLENDON,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

SUPREME COURT OF TEXAS

GLEN D. NAGER

(Counsel of Record)

JONES, DAY, REAVIS & POGUE

1450 G Street, N.W.

Washington, D.C. 20005-2088

Of Counsel: (202) 879-3939

WILLIAM T. LITTLE Houuis T. HurpD

GILPIN, PAXSON & BERSCH JONES, Day, REAVIS & POGUE

2300 First Interstate Tower One Mellon Bank Center

1300 Post Oak Boulevard 500 Grant Street

Houston, Texas 77056-3010 Pittsburgh, Pennsylvania 15219

(713) 623-8800 (415) 391-3939

RS SE ND I A SE

WILSON - EPES PRINTING Co., INC. - 789-O096 - WASHINGTON. D.C. 20001

adie

QUESTION PRESENTED

Whether the Employee Retirement Income Security

Act of 1974 (“ERISA”) preempts a state common law

claim that an employer has unlawfully discharged an em-

ployee in order to interfere with his attainment of bene-

fits under an ERISA-covered benefit plan.

(i)

il

PARTIES TO THE PROCEEDING

The parties to the proceedings in the court below were:

Perry McClendon and the Ingersoll-Rand Company.*

“Ingersoll-Rand Company has an interest in the following cor-

porate entities and partnerships: Dresser-Rand Company: Dresser-

Rand Machinery; Dresser-Rand Italia; Dresser-Rand S.A.; Dresser-

Rand Canada, Inc.; Dresser-Rand Compression Services S.A.:

Dresser-Rand Service Personnel B.V.; Dresser-Rand Japan Ltd.:

Dresser-Rand B.V.; Turbodyne S.A. de C.V.; Dresser-Rand Singa-

pore Pte. Ltd.; Dresser-Rand de Venezuela S.A.; Dresser-Rand

GmbH; Kongsberg Dresser Power, Inc.; Kongsberg Dresser Power

Pte. Ltd.; KDP Commercio E. Industrial Ltd.; Kongsberg Dresser

Power A/S: Dresser-Rand Holding Company: Dresser-Rand Over-

seas Sales Company; Dresser-Rand Sales Company, S.A.; Southwest

Industries, Inc.; Turbodyne Electric Power Co.; Tepco/Pembroke

Power, Inc.; Dresser-Rand U.K. Ltd.; Dresser-Rand Service S.a.r.e. :

Norton ‘Torrington Ceramic Bearings Company; Nastach, Inc.:

Ingersoll-Rand (India) Limited: and Niject Services Company.

TABLE OF CONTENTS

OPINIONS BELOW ............. aamecae Beiceateltictnancceekes

ic iecsencesacsscecerasecsssesssensssuse

CONSTITUTIONAL AND STATUTORY PROVI-

a datnreaceensateenncscccsceveosecencosness

EE

REASONS FOR GRANTING THE PETITION ...........

I. THE DECISION BELOW CONFLICTS WITH

Il.

ITT.

FEDERAL AND STATE COURT DECISIONS

HOLDING THAT ERISA PREEMPTS A

STATE LAW CLAIM THAT AN EMPLOYER

HAS WRONGFULLY DISCHARGED AN EM-

PLOYEE IN ORDER TO INTERFERE WITH

THE ATTAINMENT OF BENEFITS UNDER

AN ERISA-COVERED EMPLOYEE BENE-

ai tecisdnitidniidcienncenecseseerecsteessoeteccceccesee

THE EXTANT JUDICIAL CONFLICT DE-

STROYS THE UNIFORMITY AND EXCLU-

SIVITY OF ERISA AND INAPPROPRI-

ATELY BURDENS THE MAINTENANCE

OF ERISA-COVERED BENEFIT PLANS...

THE COURT BELOW ERRED IN CONCLUD-

ING THAT ERISA DOES NOT PREEMPT A

STATE COMMON LAW CLAIM THAT AN

EMPLOYEE HAS BEEN WRONGFULLY

DISCHARGED TO PREVENT HIS VESTING

IN PENSION BENEFITS .........................:00--

A. A State Law Claim That An Employer Has

Interfered With The Attainment Of An Em-

ployee’s Benefits “Relates To” An Employee

Benefit Plan And Is Therefore Preempted....

(Vi)

13

17

iv Vv

TABLE OF CONTENTS—Continued TABLE OF AUTHORITIES

Page CASES Page

B. The Decision Below Errs In Holding That Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504

ERISA’s Preemption Provision Applies Only (1981) ...... EE ITEP IIHS PA ALENT ay 28 OED 8-9, 14, 17

To Claims For Benefits, And Not To Claims Andresen v. Maryland, 427 U.S. 463 (1976) ....... 14

For Wrongful Discharge Loe 19 Authier v. Ginsberg, 757 F.2d 796 (6th Cir. 1985),

cert. denied, 474 U.S. 888 (1985)... ite 13

INIT <a;.1c,'ccegvnseadéndanvosensstnaeseebnecercadaiomanue ie 21 Conaway v. Eastern Associated Coal Corp., 358

Ff Ff Fe ren 12

Dale v. Chicago Tribune Co., 797 F.2d 458 (7th

Cir. 1986), cert. denied, 479 U.S. 1066 (1987)... 15

Dependahl v. Falstaff Brewing Corp., 653 F.2d

1208 (8th Cir.), cert. denied, 454 U.S. 968 and

ee 12

Fitzgerald v. Codex Corp., 82 F.2d 586 (1st Cir.

1989) . oe abaiashadeastseamediatidentaaiveinseid ae

Fort Halifax Packing Co. . Coyne, 482 U.S. 1

|, RRS rie cicndebiciaseseammaantansecanaeeaiicamnaion 14

Franchise Tax Board v. Construction Laborers

Vacation Trust, 463 U.S. 1 (1983) .. es 14

Gavalik v. Continental Can Co., 812 F.2d 834 (3d

Cir.), cert. denied, 484 U.S. 979 (1987) ........... 15

Hovey v. Lutheran Medical Center, 516 F. Supp.

554 (E.D.N.Y. 1981) . scat 9

KMart Corp. v. Ponsock, 732 P.2d 1364 (Nev.

1987) . ms 9, 15, 16

Lakeside + v. _ Oregon, ‘435 US. 333 (1978) . ae 14

Maxfield v. Central States Health, Welfare & Pen-

sion Funds, 559 F. Supp. 158 (N.D. Ill. 1982). 13

Metropolitan Life Insurance Co. v. Massachusetts,

I Wis Ee GID caciscctincerscctecnnpecetnenssactenanseaese: 18

Metropolitan Life Insurance Co. v. Taylor, 481 U.S.

RRR pepe caer oR Wc ee aS Pr RR Teta Ne 11

Nemeth v. Clark Equipment Co., 677 F. Supp. 899

(W.D. Mich. 1987) . ‘ 15

Nixon v. Celetex Corp., 693 F. Supp. 547 (W.D.

I CI on Oe «nk esanteeeaduaiaeen 15

Pane v. RCA Corp., 868 F. 2d 631 (3d Cir. 1989)... 10, 15

Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41

IRR CRE RM tions inks oetoersn meee brnens te ese sane passim

vi

TABLE OF AUTHORITIES—Continued

Page

Pratt v. Delta Air Lines, Inc., 675 F. Supp. 991

Is aes cea biaiemnncnmeeanaiaa 13

Rose v. Intelogie Trace, Inc., 652 F. Supp. 1328

OU I II asin cose sonsanabiccivancoreceniqniciicanh 13

Savodnik v. Korvettes, Inc., 488 F. Supp. 822

(E.D.N.Y. 1980) ............. Soe pccinsetiaepedbeaaiaboumaanamiandes 9

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983). passim

Sorosky v. Burroughs Corp., 826 F.2d 794 (9th

rs tuaaetaeeaudeenm 11

United Air Lines, Inc. v. McMann, 434 US. 192

RIERA ECON PRED RE Oy Pel TORE RAST eR i 20

Varhola v. Doe, 820 F.2d 809 (6th Cir. 1987)... 16

Wray v. J. C. Penney Co., No. 85-2629-S (D. Kan.

July 29, 1986) ............. fn Sl pA LR I sh 13

STATUTES

SR a 22 ON a eae 1

Employee Retirement Income Act of 1974

(“ERISA”), 29 U.S.C. $$ 1001 et seq. 13

ERISA § 502, 29 U.S.C. § 1132 2-3, 15, 20-21

ERISA § 510, 29 U.S.C. § 1140 000... passim

ERISA § 514, 29 U.S.C. § 1144 EON Es Rare aa passim

ERISA § 514(a), 29 U. S. C.$ 1144(a) ..... passim

Tex. Rev. Civ. Bs SEED CIEE vncacccreinecncedoceseccsus SUS 6

LEGISLATIVE HiSTORY

3 Legislative History of the Employee Retirement

Income Security Act of 1974 (Comm. Print

UY sical ae PRN RENT 20

IN THE

Suprenw Court of the United States

OCTOBER TERM, 1989

INGERSOLL-RAND COMPANY,

‘ Petitioner,

PERRY MCCLENDON,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

SUPREME COURT OF TEXAS

Ingersoll-Rand Company respectfully petitions for a

writ of certiorari to review the judgment of the Supreme

Court of Texas in this case.

OPINIONS BELOW

The opinion of the Supreme Court of Texas (App.,

infra, at la-16a) is reported at 779 S.W.2d 69. The

opinion of the Court of Appeals of Texas (App., infra,

at 17a-24a) is reported at 757 S.W.2d 816. The opinion

of the district court granting summary judgment for

petitioner ‘App., infra, at 25a-26a) is unreported.

JURISDICTION

The judgment of the Supreme Court of Texas was en-

tered on October 18, 1989. A timely motion for rehear-

ing was denied on November 15, 1989. App., infra, at

27a. The jurisdiction of this Court is invoked under 28

U.S.C. § 1257.

2

CONSTITUTIONAL AND

STATUTORY PROVISIONS INVOLVED

Section 502 of ERISA, 29 U.S.C. § 1132, provides in

pertinent part:

(a) Persons empowered to bring a civil action

A civil action may be brought—

‘l) by a participant or beneficiary—

(A) for the relief provided for in subsec-

tion ‘(¢! of this section, or

(B) to recover benefits due to him under

the terms of his plan, to enforce his rights

under the terms of the plan, or to clarify

his rights to future benefits under the

terms of the plan;

(2) by the Secretary, or by a participant, bene-

ficiary or fiduciary for appropriate relief under

section 1109 of this title;

(3) by a participant, beneficiary, or fiduciary

(A) to enjoin any act or practice which violates

any provision of this subchapter or the terms

of the plan, or (B) to obtain other appropriate

equitable relief (i) to redress such violations or

(ii) to enforce any provisions of this subchapter

or the terms of the plan;

(4) by the Secretary, or by a participant, or

beneficiary for appropriate relief in the case of

a violation of 1025(c) of this title;

(5) except as otherwise provided in subsection

‘b) of this section, by the Secretary (A) to en-

join any act or practice which violates any pro-

vision of this subchapter, or (B) to obtain other

appropriate equitable relief (i) to redress such

violation or (ii) to enforce any provision of this

subchapter; or

3

(6) by the Secretary to collect any civil penalty

under subsection (i) of this section.

* = a ”

(e! Jurisdiction

(1) Except for actions under subsection (a)

(1)(B) of this section, the district courts of the

United States shall have exclusive jurisdiction

of civil actions under this subchapter brought

by the Secretary or by a participant, beneficiary,

or fiduciary. State courts of competent juris-

diction and district courts of the United States

shall have concurrent jurisdiction of actiors un-

der subsection (a) (1) (B) of this section.

(2) Where an action under this subchapter is

brought in a district court of the United States,

it may be brought in the district where the plan

is administered, where the breach took place, or

where a defendant resides or may be found, and

process may be served in any other district

where a defendant resides or may be found.

Section 510 of ERISA, 29 U.S.C. § 1140, provides:

It shall be unlawful for any person to discharge,

fine, suspend, expel, discipline, or discriminate

against a participant or beneficiary for exercising

any right to which he is entitled under the provi-

sions of an employee benefit plan. this subchapter,

section 1201 of this title, or the Welfare and Pen-

sion Plans Disclosure Act [29 U.S.C.A. § 301 et

seq.|, or for the purpose of interfering with the at-

tainment of any right to which such participant may

become entitled under the plan, this subchapter, or

the Welfare and Pension Plans Disclosure Act. It

shall be unlawful for any person to discharge, fine,

suspend. expel, or discriminate against any person

because he has given information or has testified or

is about to testify in any inquiry or proceeding re-

lating to this chapter or the Welfare and Pension

Plans Disclosure Act. The provisions of section 1132

of this title shall be applicable in the enforcement of

this section.

d

Section 514 of ERISA, 29 U.S.C. § 1144, provides in

pertinent part:

‘a’ Supersedure; effective date

Except as provided in subsection (b) of this sec-

tion, the provisions of this subchapter and subchap-

ter III of this chapter shall supersede any and all

State laws insofar as they may now or hereafter re-

late to any employee benefit plan described in section

1003:a) of this title and not exempt under section

1003(b! of this title. This section shall take effect

on January 1, 1975.

(c) Definitions

For purposes of this section:

(1) The term “State law” includes all laws, de-

cisions, rules. regulations, or other State action

having the effect of law, of any State. A law

of the United States applicable only to the Dis-

trict of Columbia shall be treated as a State

law rather than a law of the United States.

(2) The term “State” includes a State, any

political subdivisions thereof, or any agency or

instrumentality of either, which purports to reg-

ulate, directly or indirectly, the terms and con-

ditions of employee benefit plans covered by

this subchapter.

STATEMENT

1. Petitioner, Ingersoll-Rand Company, hired respond-

ent, Perry McClendon, in August 1972 as a salesperson

and distributor of construction equipment. App., infra,

at la-2a. At the time, petitioner provided respondent

with a “Compensation Arrangement” that detailed the

commissions that respondent would earn on any sales

made during the course of the next year. Id. at 2a, 18a,

19a. Respondent also participated in petitioner’s em-

ployee benefit plans, including its pension plan. /d. at

2a, 18a.

5

Respondent thereafter performed for petitioner in a

generally satisfactory manner. App., infra, at 2a. When

the market for construction equipment declined in the

fall of 1982, however, petitioner terminated respondent

in a reduction-in-force. Jd. at 2a, 24a. At the time of his

termination, respondent had accumulated nine years and

eight months of actual service with petitioner. Jd. at

2a, 18a. Respondent believed that, as a consequence, he

was four months shy of the service credits necessary for

vesting under petitioner’s pension plan. Jd. at 2a, 18a,

24a.

2. Respondent thereafter initiated suit against peti-

tioner in state court fer wrongful discharge. App., infra,

at 2a & n.2. Respondent claimed that petitioner had

breached a contract of employment and a duty of good

faith and fair dealing in connection with the employment

relationship. /d. Respondent further claimed that, even

though he had actually vested in his pension benefits,

peu.cioner had terminated him in order, among other

things, to prevent him from vesting under the pension

plan. /d. The trial court rendered summary judgment

in favor of petitioner. Jd. at 25a-26a.

3. The court of appeals affirmed. App.. infra at 17a-

24a. It initially held (id. at 20a-22a) that the ‘““Compen-

sation Agreement” in no way limited the circumstances

in which petitioner could dissolve its employment rela-

tionship with respondent. It further held (id. at 22a-

24a) that, under Texas law, no covenant of good faith

and fair dealing is implied in the employment relation-

ship. Finally, it rejected respondent’s claim that he had

been discharged for an illicit reason, finding ‘id. at 24a)

that respondent had “incorrectly concluded that being

discharged before ten years of service would prevent him

from collecting certain benefits,” and that petitioner

“did nothing more than react to an economic downturn

by reducing its sales force.”

6

4. In a 5-4 decision, the Supreme Court of Texas re-

versed and remanded. App., infra, at la-l6a. It declined

to address respondent’s claim that a duty of good faith

and fair dealing should be implied into the employment

relationship between petitioner and respondent. Jd. at

2a, n.l. Instead, it held that a cause-of-action lies under

Texas common law against an employer whose “princi-

pal reason” for terminating an employee is to avoid con-

tributing to or paying benefits under the employee’s pen-

sion fund. 7d. at la, 5a. In reaching this conclusion, the

court expressly held that Section 514 of the Employee

Retirement Income Security Act of 1974 (“ERISA”), 29

U.S.C. § 1144, did not preempt the state law cause of

action recognized by the court. /d. at 5a n.3.

a. The majority of the Supreme Court of Texas began

by noting (App., infra, at 3a) that, while ‘Texas courts

have traditionally followed the employment at-will doc-

trine,” they have placed “numerous exceptions . . . on its

application.”” The majority explained (id. at 4a) that

many states, including Texas, “have accepted the prin-

ciple that publie policy can limit an employer’s power

to discharge at-will employees.”” Specifically, it pointed

out (id. at 4a-5a) that the United States District for the

Eastern District of New York, construing New York law,

“has recognized a cause of action for wrongful discharge

when an employee alleges that he was terminated to de-

prive him of pension benefits.”

The majority next found (App., infra, at 5a) that the

State of Texas “has an interest in protecting employees’

interests in pension plans.” In support of this conclu-

sion, the court cited ‘id. at 5a) both a Texas statute

(Tex. Rev. Civ. Stat. Title 110B), which provides pen-

sions for public employees, and Section 510 of ERISA,

29 U.S.C. § 1140, which makes it unlawful for an em-

ployer, among other things, to discharge an employee

“for the purpose of interfering with the attainment of

any right to which such participant may become en-

titled” under a pension plan. Indeed, the majority stated

7

(App., infra, at 5a) that “|t]/he very passage of ERISA

demonstrates the great significance attached to income

security for retirement purposes.”’

The majority then concluded (App., infra, at 5a) that

“public policy favors the protection of integrity in pen-

sion plans and requires in this case an exception to the

employment at-will doctrine.” Specifically, it held that

(id. at 5a) an employee should be “allow/ed] recovery

when {he] proves that the principal reason for his ter-

mination was the employer’s desire to avoid contributing

to or paying benefits under the employee’s pension fund.”

In so concluding, the majority conceded (id. at 5a, n.3)

that there are cases holding “that a claim for wrongful

discharge in order to avoid the payment of pension funds

is preempted by ERISA.” But the majority determined

(id. (emphasis in original)) that these cases are dis-

tinguishable because respondent “is not seeking lost pen-

sion benefits but is instead seeking lost future wages,

mental anguish and punitive damages as a result of the

wrongful discharge.”

b. Justice Cook, joined by Chief Justice Phillips and

Justice Hecht, filed a dissenting opinion. App., infra, at

6a-13a. Justice Cook agreed with the majority (id. at

6a) that “ERISA demonstrates the great significance

attached to income security for retirement.” Nonetheless,

he found it even more significant (id.) that ERISA “con-

fers upon employees a federal version of the cause of ac-

tion created by this court, confines litigation of the fed-

eral cause of action to the federal courts, and preempts

the state cause of action.” Specifically, he found (id. at

7a) that, under Section 514(a) of ERISA, “all provisions

of the subchapter in which § 510 is contained preempt

state laws that ‘relate to’ employee benefit plans,” and

that “[t]here can be no doubt that the law created today

by [the majority] relates to a pension plan and directly

conflicts with the specific provisions of § 510 establishing

a federal cause of action under ERISA.” Justice Cook

8

also objected (id. at 9a) to “the confusion and prolonged

litigation we have thrust upon employers and employees

in their efforts to resolve disputes concerning their pen-

sion plans.” !

c. Justice Gonzalez also dissented. App., infra, at 13a-

léa. He agreed with Justice Cook’s conclusion (id. at

13a) that ‘this cause of action is preempted by ERISA.”

He further found (id. at 14a-l6a) that “the federal au-

thority that the court finds persuasive is questionable,”

and noted that other courts have refused to follow it.

REASONS FOR GRANTING THE PETITION

This case raises important issues concerning the appli-

cation of ERISA’s preemption provision to a state law

that makes it unlawful for an employer to discharge an

employee for the purpose of interfering with the attain-

ment of benefits under an ERISA-covered employee bene-

fit plan. The court below narrowly construed ERISA to

preempt only state law claims for pension benefits. As

other federal and state courts have recognized, however,

Section 510 of ERISA regulates the employment relation-

ship in order to preserve employee rights under ERISA-

covered plans, and Section 514 of ERISA preempts state

laws that attempt to do the same. Although this Court

has previously addressed related issues, see, e.g., Pilot

Life Insurance Co. v. Dedeaux, 481 U.S. 41 (1987) (pre-

emption of state common law action asserting improper

processing of disability benefits claim); Shaw v. Delta

Air Lines, Inc., 463 U.S. 85 (1983) (preemption of state

human rights law forbidding discrimination in employee

benefits on the basis of pregnancy); Alessi v. Raybestos-

1J—n the remainder of his dissent, Justice Cook argued (9a-13a)

that the majority’s decision had made summary judgment essen-

tially unavailable in cases alleging discharge to interfere with attain-

ment of pension benefits, and that respondent had similarly erred in

asking that an implied covenant of good faith and fair dealing be

implied into the employment relationship.

9

Manhattan, Inv., 451 U.S. 504 (1981) ‘preemption of

state statute prohibiting offsets of workers compensation

benefits against pension benefits), it has not directly ad-

dressed the precise issue presented here. The need for

prompt guidance from this Court is compelling, since

the state and federal courts are sharply divided over

this ERISA preemption question, and since the resulting

multiplicity in rules and laws regulating employers and

their benefit plans is fundamentally at odds with the

purpose of ERISA’s expansive preemption provision— -

i.e., to establish a single, comprehensive scheme for reg-

ulating benefit plans and employer conduct with respect

thereto. Accordingiy, this Court’s immediate review is

necessary.

I. THE DECISION BELOW CONFLICTS WITH FED-

ERAL AND STATE COURT DECISIONS HOLDING

THAT ERISA PREEMPTS A STATE LAW CLAIM

THAT AN EMPLOYER HAS WRONGFULLY DIS-

CHARGED AN EMPLOYEE IN ORDER TO INTER-

FERE WITH THE ATTAINMENT OF BENEFITS

UNDER AN ERISA-COVERED EMPLOYEE BENE-

FIT PLAN

As the majority opinion below notes ‘App.. infra, at

4a-5a!, the Supreme Court of Texas is not alone in

holding that ERISA does not preempt a state law claim

that an employer has wrongfully discharged an emplovee

in order to interfere with the attainment of benefits un-

der an ERISA-covered employee benefit plan. See, e.4.,

Savodnik v. Korvettes, Inc., 488 F. Supp. 822, 826

(E.D.N.Y. 1980): Hovey v. Lutheran Medical Center,

516 F. Supp. 554, 557-58 (E.D.N.Y. 1981) (relying on

Savodnik in recognizing a state law wrongful discharge

claim! ; ef. KMart Corp. v. Ponsock, 732 P.2d 1564, 1373

(Nev. 1987) (approving compensatory and punitive dam-

ages award under state law for wrongful discharge based

on claim that emplover discharged emplovee in order to

avoid paying retirement benefits). These decisions, how-

10

ever, directly conflict with the overwhelming weight of

judicial authority in the federal and state courts on this

issue.

In Fitzgerald v. Codex Corp., 882 F.2d 586 (1st Cir.

1989), the First Circuit held that ERISA preempted a

state law claim that an employer had wrongfully dis-

charged an employee in order to prevent the employee’s

beneficiary from collecting benefits under the employer’s

ERISA-covered health benefits plan. The court noted

(882 F.2d at 587-88! that, under Section 514/a) of the

statute, “ERISA specifically preempts most state laws

that ‘relate to’ plans covered under ERISA.” The court

then concluded (id. at 588) that, “|n]ot only does | plain-

tiff’s; claim ‘relate to’ a plan covered under ERISA and

thus become preempted under ERISA’s preemption

clause, but a specific provision of the Act creates a sim-

ilar cause of action that protects an employee from

wrongful interference by the employer.” The court ex-

plained (id.) that:

'Plaintiff’s] complaint is grounded upon Codex’s

alleged wrongful motivation in terminating his em-

ployment: to avoid payment under an ERISA plan

to [plaintiff’s] former wife. This claim has much

more than the requisite “connection or reference” to

an ERISA plan (citation omitted). Its focus is

Codex’s interference with alleged benefit rights. This

is precisely the type of action that section 510 sought

to cover and that is essential to the Act’s protection.

The Third Cireuit reached an identical conclusion in

Pane v. RCA Corp., 868 F.2d 631 (3d Cir. 1989). In

Pane, an employee sued his employer for compensatory

and punitive damages under ERISA and New Jersey

law, alleging that the employer had discriminated against

him for the purpose of preventing his eligibility for sev-

erance pay and to retaliate against him for seeking sey-

erance pay. 868 F.2d at 633. The Third Circuit, how-

ever, held (id. at 639) that the employee’s “state law

11

claims were properly dismissed because they are pre-

empted by ERISA.” See also id. at 634, 635.

Similarly, in Sorosky v. Burroughs Corp., 826 F.2d 794

(9th Cir. 1987), the Ninth Cireuit held that ERISA pre-

empted a state law claim that an employer had wrong-

fully discharged an employee in order to prevent him

from acquiring retirement benefits under its employee

benefits pian. In Sorosky, the question on appeal con-

cerned whether the suit had properly been removed from

state court to federal court. 826 F.2d at 798-799. The

Ninth Circuit held that, under this Court’s decision in

Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58

(1987), a state law claim is removable where preempted

by ERISA, and that the employee’s state law claim was

in fact preempted by ERISA. 826 F.2d at 799. The

court reasoned (id. at 799-800) :

The preemption issue seems clear to us.... In

substance, Sorosky alleges that Burroughs agreed in

writing to provide him with monthly retirement ben-

efits and then sought to prevent him from acquiring

those bene®ts. To the extent that this first claim

refers to the employee benefit plan, it is preempted

Sorosky’s third claim, for breach of the duiy of

good faith and fair dealing, and his fourth claim,

alleging conspiracy to interfere with a_ protected

property interest, for the most part incorporate the

allegations made in the first claim. Therefore, the

third and fourth claims are preempted to the same

extent as the first claim.

* * * *

Sorosky . . . had a federal claim under section

502(a!(3) to enforce his right under section 510 to

non-interference with his employee benefits... .

The allegations in Soroskv’s complaint that relate to

the employee benefit plan state a claim under, and

are therefore within the scope of, section 502(a)

(3)[,] even if that section does not provide the en-

12

tire remedy that Sorosky seeks in his complaint.

These claims are thus so completely preempted as to

state a claim arising under federal law (citation

omitted).

The Eighth Circuit, in Dependahl v. Falstaff Brewing

Corp., 653 F.2d 1208 (8th Cir.), cert. denied, 454 U.S.

968 and 454 U.S. 1084 (1981), adopted similar reason-

ing in finding that ERISA preempted state law tort

claims based on alleged interference with benefit rights.

In Dependah!, three executives were terminated after a

change in corporate control, and brought suit alleging

tortious interference with their rights under severance

pay and life insurance plans. 653 F.2d at 1210-1211.

After a non-jury trial, the district court granted judg-

ment in favor of the executives on their state law claims.

Id, at 1211. The Eighth Circuit reversed (id. at 1215-

1216), relying on Sections 510 and 514(a) of ERISA:

The thrust of the former executives’ argument

against federal preemption of the state tortious in-

terference with contract cause of action focuses on

the lack of substantial damage such a cause of action

would have on the overall purpose of ERISA. This

argument, however, misses the point. If Congress

has already provided a remedy for the violation of

the former executives’ benefit plans, then once Con-

gress has expressed its intention to occupy the fiel/,

the state law is preempted, regardless of whether

or not a conflict exists which involves a direct inter-

ference by the state law with the substantive federal

legislation. Here, Congress has provided a remedy

for the wrong allegedly done the former executives

The Supreme Court of West Virginia reached the same

conclusion when it was confronted with this ERISA pre-

emption question. In Conaway v. Eastern Associated

Coal Corp., 358 S.E.2d 423 (W. Va. 1986), a former em-

plovee sued his former employer for wrongful discharge

under state law. alleging that the employer had tortiously

13

discharged him to prevent both the vesting of his pen-

sion rights and his eligibility for benefits under a long-

term disability plan. The Supreme Court of West Vir-

ginia affirmed summary judgment for the employer, hold-

ing that such state law tort claims are “preempted by

Federal ERISA law, see 29 U.S.C. § 1001 et seg. (1982),

and such action is illegal under 29 U.S.C. § 1140

(1982).” 358 S.E.2d at 427.

In short, contrary to the decision below, four federz!

courts of appeals and one state supreme court have held,

by reference to Sections 510 and 514(a) of ERISA, that

federal law preempts a state law wrongful discharge

claim where the employee alleges that the employer has

acted for the purpose of interfering with attainment of

rights under an ERISA-covered employee benefit plan.-

Only this Court can resolve this conflict.

Il. THE EXTANT JUDICIAL CONFLICT DESTROYS

THE UNIFORMITY AND EXCLUSIVITY OF ERISA

AND INAPPROPRIATELY BURDENS THE MAIN-

TENANCE OF ERISA-COVERED BENEFIT PLANS

The judicial conflict on this ERISA preemption ques-

tion warranis this Court’s immediate review. Rule 10.1

2 While the Fourth, Fifth, Seventh, and Tenth Circuits have not

addressed the issue, various district courts in these circuits have

held, in contrast to the decision below, that ERISA preempts a state

law claim that an employer wrongfully discharged an employee to

prevent the vesting of pension benefits under an ERISA-covered

plan. See, e.g., Pratt v. Delta Air Lines, Inc., 675 F. Supp. 991, 999

(D. Md. 1987); Rose v. Intelogie Trace, Inc., 652 F. Supp. 1328,

1330-31 (W.D. Tex. 1987); Wray v. J. C. Penney Co., No. 85-2629-S

(D. Kan. July 29, 1986) (LEXIS, Genfed lib:ary, Dist. file), at 2:

Marfield v. Central States Health, Welfare & Pension Funds, 559

F. Supp. 158. 160 (N.D. Ill. 1982). The decision below also conflicts

with the Sixth Circuit's reasoning that ERISA preempts a state law

claim that an employer has wrongfully terminated an employee in

retaliation for the performance of duties under ERISA. See Authier

v. Ginsberg, T57 F.2d 796, 800-801 (6th Cir. 1975), cert. denied,

474 U.S. 888 (1985).

14

(b) of the Rules of this Court makes clear that the

presence of a conflict between a federal court of appeals

and the highest court of a state counsels in favor of

certiorari review. See also Andresen v. Maryland, 427

U.S. 463, 470 n.5 (1976); Lakeside v. Oregon, 435 U.S.

333, 3386 & n.3 (1978). The need to resolve such a con-

flict is especially apt in the ERISA context, where “Con-

gress intended to depart from its previous legislation

that ‘envisoned the exercise of state regulation over pen-

sion. funds’ and meant to establish pension plan regula-

tion as exclusively a federal concern.” Alessi v. Raybestos-

Manhattan, Inc., 451 U.S. at 523 (citation omitted).

Allowing the extant judicial conflict to persist will seri-

ousiy undermine the concerns for uniformity and exclu-

sivity that motivated the enactment of ERISA’s preemp-

tion provision.

In 1974, Congress determined that, with exceptions not

relevant to this case, the field of employee benefits, es-

pecially pension plans, should not be subject to state

regulation. See Shaw v. Delta Air Lines, Inc., 463 U.S.

at 96-100, 104-106. Congress was particularly concerned

with the substantial administrative burdens that con-

flicting or inconsistent state or local regulation would

impose on such plans. Jd. at 105 & n.25. See also Fort

Halifax Packing Co. v. Coyne, 482 U.S. 1, 9-10 (1987).

It was also concerned that muitiple rules and regula-

tions would discourage employers from providing em-

ployee benefits. Shaw v. Delta Air Lines, Inc., 463 U.S.

at 105 n.25; see also Fort Halifax Packing Co. v. Coyne,

482 U.S. at 10. Accordingly, it enacted ERISA’s “vir-

tually unique pre-emption provision” to ensure that all

regulation of the field of employee benefits would be a

matter of exclusive federal concern. Franchise Tax Board

v. Construction Laborers Vacation Trust, 463 U.S. 1,

24 n.26 (1983); see also Pilot Life Insurance Co. v.

Dedeaux, 481 U.S. at 46.

15

Permitting the above-referenced judicial conflict to per-

sist would disrupt this exclusive federal scheme. Individ-

ual states would be free to prescribe different substan-

tive standards for employer conduct, so that conduct by

the employer that was lawful under Section 516 of ERISA

might simultaneously be unlawful under the law of the

particular state where the affected employees worked or

resided—resulting in the very patchwork quilt of incon-

sistent regulation that Congress sought to avoid through

ERISA’s preemption provision.* Likewise, some states

would be free to prescribe their own procedural frame-

works for the enforcement of these rights, even though

ERISA establishes a uniform federal enforcement scheme,

see 29 U.S.C. $ 1132; thus, exhaustion of internal claims

and appeal procedures and the manner of trial (by judge

or jury! could vary from the rules adopted by the fed-

_eral courts. Compare Dale v. Chicago Tribune Co., 797

F.2d 458, 466 (7th Cir. 1986), cert. denied, 479 USS.

1066 (1987) (requiring exhaustion of internal claim and

appeal procedures in ERISA cases}, and Pane v. RCA

Corp., 868 F.2d 631, 635-637 .3d Cir. 1989) (trial by

judge in ERISA cases), with KMart Corp v. Ponsock,

732 P.2d 1364 (Nev. 1987) (jury trial without any ex-

haustion efforts). Finally, states would be free to pre-

scribe their own array of remedies for violations of these

3 Under the decision below, for example, the employer's decision is

unlawful if “the principal reason” for it is the employer’s “desire to

avoid” paying benefits. App., infra, at 5a. It is unclear what this

formulation will come to mean in the Texas state courts and, more

importantly, how that standard compares to the federal case law

standard. See Gavalik v. Continental Can Co., 812 F.2d 854, 851-853

(3d Cir.), cert. denied, 484 U.S. 979 (1987); Nixon v. Celotexr Corp.,

693 F. Supp. 547, 555 (W.D. Mich. 1988); Nemeth v. Clark Equip-

ment Co., 677 F. Supp. 899, 906 (W.D. Mich. 1987). Moreover, under

the decision below (see App., infra, at 5a), an employer's desire to

avoid contributing to the pension fund would be a violation of Texas

law, even if the employer’s purpose was not to interfere with the

attainment of benefits—a gross variance from the substantive re-

quirements of ERISA Section 510 and a clear invasion of the sepa-

rate funding requirements of ERISA.

16

rights, even though ERISA’s comprehensive remedial

scheme for Section 510 violations might not allow one or

more of those remedies (such as punitive damages). Com-

pare Varhola v. Doe, 820 F.2d 809 ‘6th Cir. 1987) (no

punitive damages under ERISA), with KMart Corp. v.

Ponsock, supra (compensatory and punitive damages

awarded).

The multiplicity and inconsistency of such regulation

-would impose on employers and their benefit plans pre-

cisely the burdens that Congress intended for ERISA’s

broad preemption provision to avoid. Contrary to con-

gressional intent, it would tend to discourage the estab-

lishment and maintenance of employee benefit plans. Em-

ployer conduct, such as termination of an employee’s em-

ployment, otherwise unquestionable in the absence of an

employee benefit plan would instantly become subject to

suspicion and challenge under state law if the employer’s

action interfered with the attainment of an employee’s

benefits under an employee benefit plan. Moreover, state

regulation of such employer conduct would impose a fi-

nancial burden on the plans themselves. An employer

with an employee benefit plan, knowing that its employ-

ment decisions would be subject to suspicion and chal-

lenge under state law, would tend to modify its conduct

—for example, refrain from discharging an employee

merely because a person is close to vesting in a pension—

so that more employees would get greater employee bene-

fits than they weuld otherwise have received. Finally,

state regulation of such employer conduct would impair

the ability of an employer effectively and efficiently to

manage its business. imposing costs on the production

process that Congress intended to avoid in ERISA.

It is true, of course, that Section 510 itself imposes

some of these burdens on employers and their plans. But,

in enacting Section 510, Congress carefully fashioned the

substantive rights, the procedures, and the available rem-

edies so that the burdens thereby created would be tol-

erable when balanced against the protections afforded

17

employees. See Pilot Life Insurance Co. v. Dedeaux, 481

U.S. at 52-57. The same cannot be said for whatever

variant of Section 510 a state might choose to impose.

A state cause-of-action imposing a different substantive

standard of conduct, with a different burden of proof,

as well as jury trials and punitive damages, obviously

would increase the burdens on employers and their plans.

It would, as Justice Cook noted in dissent below (App.,

infra, at 9a), merely produce ‘confusion and prolonged

litigation between employers and employees in their ef-

forts to resolve disputes concerning pension plans”; in-

deed, variant state causes-of-action would create intoler-

able confusion, cost, and uncertainty in the administra-

tion benefit programs and the resolution of claims. Thus,

this Court’s immediate review is necessary to resolve the

judicial conflict and eliminate these adverse consequences.

Ill. THE COURT BELOW ERRED IN CONCLUDING

THAT ERISA DOES NOT PREEMPT A STATE

COMMON LAW CLAIM THAT AN EMPLOYEE HAS

BEEN WRONGFULLY DISCHARGED TO PRE-

VENT HIS VESTING IN PENSION BENEFITS

On the merits, the court below plainly erred in its

construction of ERISA’s preemptive scope. ERISA pre-

empts a state common law claim that an employer has

unlawfully discharged an employee in order to prevent

him from vesting in pension benefits.

A. A State Law Claim That An Employer Has Inter-

fered With The Attainment Of An Empioyee’s Bene-

fits “Relates To” An Employee Benefit Plan And Is

Therefore Preempted

ERISA’s pre-emption provision is “deliberately expan-

sive.” Pilot Life Insurance Co. v. Dedeaux, 481 U.S. at

46. As noted above, it aims to make “pension plan reg-

ulation . . . exclusively a federal concern.” Alessi v.

Raybestos-Manhattan, Inc., 451 U.S. at 523. Thus, by

the terms of Section 514/a), “the provisions of |E RISA]

. supersede any and all State laws insofar as they

18

may now or hereafter relate to any employee benefit

plan” covered by the statute. 29 U.S.C. $ 1144(a).

A state law that bars an employer from discharging

an employee in order to prevent his vesting in pension

bene“ts plainly “relate|s] to’ an employee benefit plan

within the meaning of Section 514(a). As this Court

has repeatedly stated, a “law ‘relates to’ an employee

benefit plan, in the normal sense of the phrase, if it has

a connection with or reference to such a plan.” Shaw v.

Delta Air Lines, Inc., 463 U.S. at 96-97. See also Met-

ropolitan Life Insurance Co. V. Massachusetts, 471 U.S.

724, 739 (1985) ‘citation omitted). A claim of discharge

to prevent vesting in a pension plan clearly has such a

“connection” and “reference”: The claim requires proof

that the employer's actual purpose in terminating the

employee revolved around an employee benefit plan, and,

as the Supreme Court of Texas noted ‘App., infra, at

5a}, is expressly designed to “‘protect| | employees’ inter-

ests in pension plans.” Indeed, litigation of the claim

would, in many instances, require examination of the

terms of the plan in order to understand how the em-

ployer’s action interfered with the attainment of a bene-

fit under it.

That such a state law claim “relates to” a benefit plan

within the meaning of Section 514(a) is confirmed by

the remaining language of the preemption provision. This

language makes it plain that it is the “provisions of this

subchapter’’—i.e., the subchapter in which Section 514 (a)

appears—that preempt state laws relating to benefit plans.

29 U.S.C. Section 1144‘a}. Section 510 of ERISA is one

of the provisions of that subchapter. By so incorporating

Section 510 into the terms of Section 514(a), Congress

made it clear that claims concerning “interference” with

the attainment of benefits ‘relate to” the employee bene-

fit plan. Accord, Fitzgerald v. Codex Corp., 882 F.2u at

588.

19

B. The Decision Below Errs In Holding That ERISA’s

Preemption Provision Applies Only To Claims

For Benefits, And Not To Ciaims For Wrongful

Discharge

In reaching the contrary conclusion, the Supreme

Court of Texas held (App., infra, at da n.3) that

ERISA’s preemption provision applies only to claims for

benefits, and not to claims for wrongful discharge. It

reasoned (id. (emphasis added in original)) that re-

spondent “is not seeking lost pension benefits but is in-

stead seeking lost future wages, mental anguish and

punitive damages as a result of wrongful discharge.”

This reasoning is fallacious.

ERISA does not preempt only state law-based actions

seeking benefits. It preempts any state law that ‘relates

to’ an employee benefit plan. As this Court’s decisions

evidence, a state law may “relate to” an employee bene-

fit plan even though it seeks damages other than lost

benefits. See, e.g., Pilot Life Insurance Co. v. Dedeaux,

481 U.S. 41 (1987) (preemption of state common law

action seeking punitive damages for improper processing

of a disability benefits claim).

Moreover, a state law claim may “relate to” an em-

ployee benefit plan, and thus be preempted by ERISA,

even though it is intended to regulate the terms of the

employment relationship (and not the terms of the bene-

fit plan itself). Just like Section 510 of ERISA, the

state law claim would seek indirectly to protect employee

benefit rights by directly regulating the employment re-

lationship—i.e., by prohibiting employment decisions that

might otherwise defeat employee benefit rights under the

plan. In other words, the state law claim would have the

same substantive objective and effect as Section 510 of

ERISA, and Section 510 is one of the critical substantive

20

components of ERISA that were supposed to preempt the

field of employee benefits. '

Indeed, the fact that respondent is seeking state law

remedies for what is essentially a Section 510 claim only

reinforces the conclusion that the claim allowed by the

court below must be preempted. Section 510 provides

that its terms are to be enforced under the provisions of

Section 502 of ERISA. See 29 U.S.C. § 1140. Section

502 sets forth a comprehensive enforcement scheme for

actions covered by ERISA, and this Court has held that

“varying state causes of action for claims within the

scope of $ 502'a! would pose an obstacle to the purposes

and objectives of Congress.’ Sce Pilot Life Insurance Co.

vu. Dedeaux, 481 U.S. at 52. Thus, any attempt by the

State of Texas to add to the remedies available under

Section 502 for a claim relating to an interference with

4 The legislative history of ERISA confirms this conclusion. As

this Court has noted, “|t}he bill that became ERISA originally con-

tained a limited pre-emption clause, applicable only to state laws

relating to the specific subjects covered by ERISA.” Shaw v. Delte

Air Lines, Inc., 463 U.S. at 98. “The Conference Commiittce rejected

these provisions in favor of the present language, and indicated that

the section’s pre-emptive scope was as broad as its language.” /d.

at 98. There is no basis in the legislative history for sugvesting

that, in so expanding the scope of the preemption clause, the Con-

ference Committee intended to allow state regulation of specific

subjects covered by ERISA—such as Section 510’s coverage of

actions that might “interfere” with the attainment of benefits under

the plan. Cf. United Air Lines, Ine. v. MeMann, 434 U.S. 192

(1977) (finding that the ex mption for “involuntary retirement” in

original Age Discrimination in Employment Act bill was implicitly

embodied in subsequent amendment’s broader exemption for “boni.

fide emp!oyvee benefit plans’). On the contrary, the legislative his-

tory indicates that Congress viewed Section 510 as a critical sub-

stantive component of ERISA’s protective scheme and, furthermore,

that, with the narrow exceptions specified in the bill, the substantive

and enforcement provisions of that scheme were intended to pre-

empt the field of regulation. Ser 3 ERISA Legislative History 4597-

98: see also id. at 4670 (‘remarks of Rep. Dent): id. at 4745-46

(remarks of Sen. Williams) ; id. at 4770-71 (remarks of Sen. Javits).

21

attainment of benefits—like a claim under Section 510—-

must be preempted. As the Court stated in Piloi Life,

“(t]he policy choices reflected in the inclusion of certain

remedies and the exclusion of others under the federal

scheme would be completely undermined if ERISA-plan

participants and beneficiaries were free to obtain rem-

edies under state law that Congress rejected in ERISA.”

481 U.S. at 54.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

GLEN D. NAGER

(Counsel of Record )

JONES, Day, REAVIS & POGUE

1450 G Street, N.W.

Washington, D.C. 20005-2088

Of Counsel: (202) 879-3939

WILLIAM T. LITTLE Houuis T. Hurp

GILPIN, PAXSON & BERSC1! JONES, Day, REAVIS & POGUE

2300 First Interstate Tower One Mellon Bank Center

1300 Post Oak Boulevard 500 Grant Street

Houston, Texas 77056-3010 Pittsburgh, Pennsylvania 15219

(713) 623-8800 (415) 391-3939

FEBRUARY 1990

APPENDIX

la

APPENDIX

SUPREME COURT OF TEXAS

No. C-7973

PERRY MCCLENDON,

_ Petitioner,

INGERSOLL-RAND COMPANY, d b a INGERSOLL-RAND

COMPANY CONSTRUCTION EQUIPMENT GROUP,

Respondent.

Oct. 18, 1989

Rehearing Denied Nov. 15, 1989

Michael Y. Saunders, John W. Tavormina, Houston,

for petitioner.

William T. Little, Houston, for respondent.

SPEARS, Justice.

This is a suit for wrongful discharge. Perry McClen-

don sued his former employer, Ingersoll-Rand Company.

McClendon alleged that he was discharged from his em-

ployment so that Ingersoll-Rand could escape its obliga-

tion to contribute to his pension fund. The trial court

rendered summary judgment in favor of Ingersoll-Rand.

The court of appeals affirmed. 757 S.W.2d 816 (1988).

We reverse the judgment of the court of appeals and

remand the cause to the trial court.

In August 1972, McClendon began employment with

Ingersoll-Rand as a sales-person and distributor of con-

2a

struction equipment. He was paid on a commission basis

in accordance with the terms of a “Compensation Ar-

rangement” that was to remain in effect through Decem-

ber 1982; however, this “compensation arrangement”

did not specifically dictate the term of MeClendon’s

employment.

In late 1979, Ingersoll-Rand transferred McClendon

from San Antonio to Dallas so that he could develop a

potentially lucrative market there. McClendon secured

a substantial amount of business in Dallas, and McClen-

don’s supervisor later testified that he was satisfied with

McClendon’s job performance. Nevertheless, Ingersoll-

Rand fired McClendon on November 19, 1982. Ingersoll-

Rand justified McClendon's termination by claiming that

external economic factors mandated a work force reduc-

tion of one salesperson.

McClendon’s termination from employment occurred

after he had accumulated nine years and eight months

of service to Ingersoll-Rand. Further, the termination

occurred exactly four months prior to the vesting of Me-

Clendon’s retirement and pension benefits, at which time

Ingersoll-Rand would have been required to contribute to

MeClendon’s pension fund.

In filing suit, MeClendon alleged that Ingersoll-Rand

breached its employment contract with him and breached

its duty of good faith and fair dealing in connection

with the employment relationship.’ In addition, Me-

Clendon asserted a cause of action for wrongful dis-

eharge and alleged that Ingersoll-Rand had terminated

him to escape its obligation to contribute to his pension

fund* and to avoid paying him the commission from a

particular sale.

1 Because we have decided this cause on other grounds, we need

not reach the issues relating to the tort duty of wood faith and fair

dealing and we express no view on this matter.

2? Although Ingersoll-Rand ultimately allowed McClendon's pen-

sion to vest, McClendon argues that such subsequent vesting does

3a

At issue is whether McClendon's allegations state a

cause of action under Texas law. Texas courts have tra-

ditionally followed the employment-at-wil! doctrine which

allows that employment for an indefinite term may be

ended at will and without cause. East Line & R.R.R. Co.

v. Scott, 72 Tex. 70, 10 S.W. 99 (1888); Molder v. South-

western Bell Tel. Co., 665 S.W.2d 175 (Tex.App.—-

Houston [1st Dist.] 1983, writ ref’d n.r.e.).

Although this doctrine has been widely accepted, nu-

merous exceptions and limitations have been placed on its

application. For example, federal law prohibits the dis-

charge of an employee because of age, race. religion,

sex, color or national origin. Age Discrimination in Em-

ployment Act of 1967, 29 U.S.C. § 623(d) (1982 & Supp.

i.« 1985); Title VII, Civil Richts Act of 1964, 42 U.S.C.

$ 2000e-2(a) (1977). Federal Jaw also prohibits a pri-

vate employer from discharging an employee who exer-

cises his rights under the Fair Labor Standards Act to

minimum wage and overtime. 29 U.S.C. § 215/a) (3)

(1977 & Supp.1982). Similarly. Texas has enacted vari-

ous statutes that restrict an employer’s discretion to ter-

minate the employment relationship. See, ¢.qg.. TEX.REV.

Civ.STAT. art. 5207a (discharge based on union member-

ship): Tex.Crv.Prac. & ReM.Cope § 122.001 (discharee

because of jury service): TEX.REV.CIV.STAT. art. &307¢

(discharge for filing a worker’s compensation claim):

TEX.Gov’T CopE § 431.006 (discharge because of active

duty in the state military forces); TEx.Rev.Crv.STar.

art. 5221k, $5.01 (discharge based on race, color, handi-

cap, religion, sex, national origin or age).

not retroactively reverse any bad faith conduct in which Ingersoll-

Rand engared when it terminated McClendon to avoid pension

contributions. MeClendon argues that the pension plan issue is

relevant in order to explain the motivation behind Ingersoll-Rand’s

initial termination of McClendon.

4a

In addition to state and federal legislation, courts have

developed various common-law restraints on the doctrine

of employment-at-will. In Sabine Pilot Service, Ine. ¢.

Hauck, 687 S.W.2d 733 (Tex.1985', this court recognized

a cause of action for a plaintiff alleging that he was dis-

charged for refusing to perform an illegal act. In creat-

ing this exception to the employment-at-will doctrine, we

considered the changes in American society and in the

employer employee relationship over the course of the

past century, and we held that publie policy, as expressed

in both state and federal law, required such an exception.

See also Petermann v. International Brotherhood of

Teamsters, Local 396, 174 Cal. App.2d 184, 344 P.2d 25

(1959) (‘recognizing public policy exception to employ-

ment-at-will doctrine in case of employee alleging that he

was wrongfully discharged for refusing to perjure him-

self before a iegislative investigative committee!.

Numerous other states have accepted the principle that

public policy can limit an employer’s power to discharge

at-will employees. See Kelsay ». Motorola, Inc., 74 Ml.2d

172, 23 Ill.Dee. 559. 384 N.E.2d 353 (1978); Frampton

v. Central Indiana Gas Co.. 260 Ind. 249, 297 N.F..2d 425

(1973): Fortune v. National Cash Register Co., 373

Mass. 96, 364 N.F.2d 1251 (1977): Monge v. Beebe Rib-

ber Co., 114 N.H. 130, 316 A.2d 549 (1974); Nees v.

Hocks, 272 Or. 210, 526 P.2d 512 (1975): Harless +.

First Nat’l Bank, 162 W.Va. 116, 246 S.E.2d 270

(1978). More specifically. the Eastern District of New

York has recognized a cause of action for wrongful dis-

charge when an employee alleges that he was terminated

to deprive him of pension benefits. Hovey v. Lutheran

Medical Center, 516 F.Supp. 554 (F.D.N.Y.1981). The

court expressly recognized the public policy associated

with the preservation of pension plans for both govern-

mental and private employees. Id. at 558: see alvo Savod-

nik v. Korvettes, Inc., 488 F.Supp. 822, 826 (E.D.N.Y.

1980: (recognizing strong public policy “favoring the

protection of integrity in pension plans” and allowing

5a

wrongful discharge cause of action for plaintiff who al-

leged that employer fired him to avoid paying pension

benefits '.

In determining whether McClendon has stated a cause

of action under Texas law, we recognize that the state

has an interest in protecting employees’ interests in pen-

sion plans. Cf. Trex.Rev.Civ.Stat., Title 110B (Ver-

non 1988) (reflecting state’s interest in preserving pen-

sion plans for public employees!. Also, the Employee Re-

tirement Income Security Act (ERISA) makes it unlaw-

ful for any person to discharge, fine, suspend or diserim-

inate against any employee for the purpose of interfering

with that employee’s potential rights under a_ pension

plan. 29 U.S.C. $1140. The very passage of ERISA

demonstrates the great significance attached to income

security for retirement purposes.

We hold that public policy favors the protection of in-

tegrity in pension plans and requires in this case an ex-

ception to the employment-at-will doctrine. This excep-

tion allows recovery when the plaintiff proves that the

principal reason for his termination was the emplover’s

desire to avoid contributing to or paying benefits under

the employee’s pension fund."

We reverse the judgment of the court of appeals and

remand this cause to the trial court for trial.

COOK, J., files a dissenting opinion in which PHIL-

LIPS, C.J., and HECHT. J., join.

% Two federal district court cases have held that a claim for

wiongful discharge in order to avoid the payment of pension funds

is preempted by ERISA. Pratt v. Delta Air Lines, Inc., 675 F.Supp.

991 (D.Md.1987): Cahall v. Westinghouse Electric Corp., 644

F.Supp. 806 (E.D.Penn.1986). These cases, however, can be dis-

tinguished from the present action because here the plaintiff

acknowledged in his brief to the court of appeals that he is nof

seeking lost pension benefits but is instead seeking future wages,

mental anguish and punitive damages as a result of the wrongful

discharge.

6a

GONZALEZ, J., files a dissenting opinion.

COOK, Justice, dissenting.

I dissent. The central issue in this case, as argued and

briefed by the parties, concerns whether the duty or im-

nlied covenant of good faith and fair dealing exists in

the context of an employment-at-will relationship. The

majority opinion not on'y fails to address this issue, bot

also creates a state cause of action based on conduct al-

ready prohibited by federal statute. Given the adverse

impact that the majority opinion will have upon our

court systems, | woul? affirm the judgment of the court

of appeals. |

I. ERISA

The court reminds us that £510 of the Employee Re-

tirement Income Security Act (ERISA) makes it unlaw-

ful for any person to interfere intentionally with impend-

ing pension eligibilitv. 29 U.S.C. £1140 +1985). Accord-

ing to the court, “PISA demonstrates the great signifi-

cance attached to income security for retirement.

I agree. ERISA’s $510 is indeed significant, so sig-

nificant that it confers unon employees a federal version

of the cause of action created by this court, confines liti-

gation of the federal cause of action to the federal court:

and preempts the state cause of action.

Section 510 of ERISA expressly states that it is “un-

lawful for any person to discharge, fine. suspend, expel.

discipline, or discriminate against a participant or bene-

ficiary for exercising any right to which he is entitled

under the provisions of an employee benefit plan.” //.

The case law has interpreted § 510 to delineate a cause of

action that applies in precisely the same sitvations as

the one considered today. See, e.g., Gavalik v. Conti-

nenta!l Can Co., 812 F.2d 834 (3d Cir.), cert. denied, 484

U.S. 979. 108 S.Ct. 495, 98 L.Ed.2d 492 (1987).

Ta

Congress provided for the enforcement of £510 in

‘502, which comprises the statute’s civil enforcement

provisions. 29 U.S.C. at $1132. Section 502‘e' (1) con-

fines litigation of certain claims to federal court. /d. at

£11321a)13). One of those claims is the § 510 action.

/d.; 29 U.S.C. at £1140. Consequently, an ERISA claim-

ant who sues for termination resulting from intent to

avoid pension responsibility may sue only in federal

court.

The provisions of $510 do not initially appear to af-

fect the law set out today. It is, after all, possible for

state and federal law to address the same problem. Sec-

tion 514 of ERISA, however, makes it clear that duplica-

tion of effort in this area of the law is simply not al-

lowed. 29 U.S.C. at $1144. Under § 514/a) all provi-

sions of the subchapter in which £ 510 is contained pre-

empt state laws that “relate to”’ employee benefit plans.

Id. at $1144'a)}. In Pilot Life Ins. Co. v. Dedeaux, 481

U.S. 41, 57, 107 S.Ct. 1549, 1558, 95 L.Ed.2d 39 (1987),

the United States Supreme Court decided that § 514

superseded a state common law that related to an em-

ployee benefit plan. The powerful effect of $ 514'a) was

repeatedly emphasized by the Court, which expressed its

unanimous conviction that Congress intended to estab-

lish pension plan regulation as an exclusively federal

coneern. Id. at 45-47, 52-56, 107 S.Ct. at 1551-53, 1555-

57.

There can be no doubt that the law created today by

this court relates to a pension plan and directly conflicts

with the specific provisions of £510 establishing a fed-

eral cause of action under ERISA. Consequently, that

section preempts our new law through £ 514ia!. See

Sorosky v. Burroughs Corp., 826 F.2d 794 ‘9th Cir.

1987). Furthermore, because preemption of the claim at

issue le@ves a plaintiff with a cause of action that can be

litigated only in federal court, ERISA preempts the

forum as well as cause of action. Arguably, this simul-

8a

taneous affect on forum and claim may deprive the state

court of the power to adjudicate. See International Long-

shoremens Ass'n v. Davis, 476 U.S. 380, 106 S.Ct. 1904,

90 L.Ed.2d 389 (1986).

Notwithstanding the power of this set of ERISA pro-

visions, a plaintiff might still rely on our decision today

to bring our version of the claim for pension-related

wrongful discharge in a state court. The plaintiff could

purge ERISA from the face of the petition and rely on

the well-pleaded complaint rule to deter removal of the

case to federal court. See Louisville & Nashville R.R.

Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126

(1908). Under that rule, which states that a petition

that describes only state claims on its face prevents re-

moval by a defendant to federal court, a defendant would

be left with nothing better than the dubious opportunity

to convince a state court that the pertinent ERISA pro-

visions deprive the state court of subject maiter juris-

diction.

This procedural block to removal, however, no longer

deters the ERISA s 502(a) defendant. In Metropolitan

Life Ins. Co. v. Taylor, 481 U.S. 58, 67, 107 S.Ct. 1542,

1548, 95 L.Ed.2d 55 (1987), the United States Supreme

Court created an exception to the well-pleaded complaint

rule in deciding that these defendants may remove. Fur-

thermore, the fact that a state court has no jurisdiction

over the claim to begin with, which once prohibited re-

moval, restrains defendants no longer. 28 U.S.C. § 1441

‘e! (Supp.1989). It is clear, therefore, that defendants

faced with a petition that states no more than our new

cause of action may remove to federal court, raise the

defense of preemption, and replace the common law claim.

By creating today’s exception to the employment at

will doctrine, the court misleads employees by providing

them with an imaginary claim. ERISA, on the other

hand, provides them with a real and enforceable claim

that they may bring in federal court and at the same

9a

time supersedes the claim manufactured today. I believe

that ERISA’s provisions make it doubtful that a state

court even has power to adjudicate the new cause of

action. In any case, astute defendants need not wait to

find out. They need only remove to federal court and

raise a defense of preemption. I sincerely regret the con-

fusion and prolonged litigation we have thrust upon em-

ployers and employees in thef® efforts to resolve disputes

concerning their pension plans.

II. SUMMARY JUDGMENT

An equally profound implication of the majority opin-

ion concerns the availability of summary judgment pro-

ceedings in wrongful discharge cases. In its motion for

summary judgment, the general supervisor for Ingersoll-

Rand submitted a sworn affidavit stating that McClen-

don’s termination arose as part of a company-wide re-

duction of the workforce in response to adverse economic

conditions. The response by McClendon noted that his

termination occurred four months prior to the vesting

of his pension, at which time the conipany would have

been required to contribute $3000 to his employee pension

fund. McClendon also relied on comments made by his

supervisor, who stated his general satisfaction with Mc-

Clendon’s job performance. This evidence, according to

the holding of the majority, is sufficient to raise a fact

issue on whether the employer terminated the employee

in part to escape contributions to the employee pension

fund.

This holding, however, raises a question that remains

unanswered: when will the evidence presented on motion

for summary judgment be insufficient to raise an issue

of fact on the employer's intent? The court today finds a

fact question under the evidence presented in this case,

a case in which the termination preceded the vesting of

the benefits by four months; would a fact question also

be raised when the termination preceded the vesting by

10a

five months or nine years and eleven months? The ma-

jority opinion unfortunately fails to provide trial courts

and litigants with the answer to this crucial question.

In the absence of an answer, an employee is presumably

guaranteed a jury trial by merely alleging that the prin-

cipal reason for his termination was the employer's de-

sire to avoid contributing to or paying benefits under the

employee’s pension fund.

This approach undercuts the very purpose of summary

judgment proceedings, which are designed to eliminate

patently unmeritorious claims and untenable defenses.

See In re Estate of Price, 375 S.W.2d 900, 904 (Tex.

1964). The provision for summary judgment proceedings

serves the critieal functions of eliminating baseless claims

from congested trial dockets and saving the unwarranted

expenses involved in trying such actions. This concern

has likewise been recognized in the context of wrengful

discharge actions brought pursuant to ERISA. For ex-

ample, an employee must establish more than the mere

fact that the termination of his employment resulted in

:. monetary savings to his employer; otherwise, an ERISA

violation would occur every time an employer terminated

a vested employee. See Nixon v. Celotex Corp., 693

F.Supp. 547, 555 (W.D.Mich.1988) ; Donohue v. Custom

Management Corp., 634 F.Supp. 1190, 1197 | W.D.Pa.

1986).

Herein lies the crux of my concern with the majority

opinion. By permitting tort damages in actions based on

the employer's desire to escape an obligation to contribute

to pension funds and yet failing to deliniate those circum-

stances under which a summary judgment would be ap-

propriate, the court has unduly chilled an employer's

right to terminate an at-will employee with or withour

cause. No longer can the vast number of employers rely

on a valid reason in terminating employees without a

jury’s scrutinization of their decisions and the possible

imposition of tort damages. By terminating employees

lla

at any point prior to their retirement, employers need

only wait for the court summons to explain and justify

their decisions to a jury. The proverbial ‘floodgates of

litigation” have never been a more appropriate concern

than in the decision reached by this court today. For this

reason, I strongly oppose the majority’s decision io place

unwarranted limitations on the employment-at-will doc-

trine.

III. BREACH OF GOOD FAITH AND

FAIR DEALING

In his arguments presented to this court, McClendon

seeks to hold Ingersoll-Rand to the duty of good faith

and fair dealing in the context of their former employ-

ment relationship. Despite his characterization of this

duty as an “implied covenant,” which suggests an action

sounding in contract, McClendon also seeks the recovery

of tort damages such as mental anguish, emotional dis-

tress, and punitive damages. McClendon based his claim

for tort damages on Arnold v. National County Mit.

Fire Ins. Co., 725 S.W.2d 165 (Tex.1987), a case in

which this court recognized a duty on the part of in-

surers to deal fairly and in good faith with their in-

sureds. This duty arises from the special relationship

that exists in the insurance context due to an unequal

bargaining power between the parties and the special

nature of such contracts. Arnold, 725 S.W.2d at 167.

While implied covenants are contractual in nature, the

duty of good faith and fair dealing is imposed by law in

insurance velationships. Chitsey v. National Lloyds Ins.

Co., 738 S.W.2d 641, 643 n. 1 (Tex.1987).

Employers, however, do not generally receive economic

benefits by terminating productive employees and thus

do not require disincentives to terminate employees in

addition to those already imposed by law. Foley v. In-

teractive Data Corp., 47 Cal.3d 654, 765 P.2d 373, 396,

254 Cal.Rptr. 211, 234 (1988); Epstein, Jn Defense of

12a

the Contract at Will, 51 U.CHI.REV. 947, 973-74 (1984)

(hereinafter Epstein, Contract at Will). Further, em-

ployment relationships do not possess an inequality in

bargaining power as a universal characteristic and thus

cannot be analogized to insurance relationships on this

basis. See Epstein, Contract at Will, 51 U.CHI.L.REv. at

973-74: see also Note, Defining Public Policy Torts in

At-Will Dismissals, 34 STAN.L.REv. 153, 165-67 (1981)

(hereinafter Note, Defining Torts).

The employment relationship is also distinguishable

on the basis of the duties owed by the respective parties

under the contract. Employers, unlike insurers, do not

owe similar fiduciary duties to their employees, who are

themselves agents of the employers and are obligated to

act in their employers’ interests. Foley, 765 P.2d at 395,

254 Cal.Rptr. at 233, (citing Note, Defining Torts, 34

STAN.L.REV. at 165-67). The duties owed in an em-

ployment-at-wi!l relationship are instead premised on the

mutuality of obligations existing between the employee

and employer, both of whom are able to terminate the

relationship with or without cause. I would therefore

decline to extend the duty articulated in Arnold and its

imposition of tort damages to employment-at-will rela-

tionships. There should not be a tort cause of action for

a breach of good faith and fair dealing in an employ-

ment-at-will relationship. I would thus follow the ma-

jority of jurisdictions that have not allowed the recovery

of tort damages for a breach of the duty or implied

covenant of good faith and fair dealing in at-will em-

ployment relationships.

Additionally, McClendon is not entitled to recover con-

tract damages under an implied covenant of good faith

and fair dealing in this case. According to McClendon,

the company terminated his employment to avoid paying

any commissions that he would have earned from future

sales. The contractual right to these commissions was

set forth in a written compensation agreement, which

13a

expressly addressed the commissions to be earned by

McClendon in the event that Ingersoll-Rand terminated

his employment for any reason. McClendon has not al-

leged that the company owed any commissions that had

already been earned under the terms of this agreement

at the time of his termination. Instead, McClendon ap-

parently seeks the recovery of commissions that would

have eventually been earned from future sales.

McClendon and Ingersoll-Rand contemplated and ex-

pressly set forth the manner by which the commissions

would have been earned in the event of a termination.

Under the express terms of this agreement, the parties

did not create a right on behalf of McClendon to earn

potential commissions. Thus, the covenant of good faith

and fair dealing cannot be implied in this instance to set

aside the express terms of their agreement and permit

McClendon’s recovery of potential commissions. See Willis

". Champlain Cable Corp., 109 Wash.2d 747, 759, 748

P.2d 621, 627 (1988).

McClendon further alleges that Ingersoll-Rand termi-

nated his employment in order te prevent the vesting of

his retirement and pension benefits, thereby relieving the

company of its required contribution to his pension fund.

On motion for summary judgment, however, Ingersoll-

Rand presented an uncontroverted affidavit stating that

MeClendon’s benefits have in fact vested. Because Mc-

Clendon has received his retirement and pension benefits,

the trial court properly rendered summary judgment

with respect to the recovery of these contractual benefits.

I would accordingly affirm the judgment of the court of

appeals.

PHILLIPS, C.J., and HECHT, J., joint in this dissent.

GONZALEZ, Justice, dissenting.

I join with Justice Cook’s conclusions that this cause

of action is preempted by ERISA, and that it will be

l4a

very difficult, if not impossible, to filter out meritiess

cases by summary judgment as a result of today’s opin-

ion. I write, however, to emphasize what the court’s de-

cision does not do. It does not extend the duty of good

faith and fair dealing to the employment-at-will doc-

trine: and it does not decide what damages are available

for this new cause of action. I further note that the fec-

eral authority that the court finds persuasive is question-

able.

By point of error. MeClendon invited us to engraft the

duty of good faith and fair dealing as enunciated in A?r-

nold v. National County Mutual Fire lis. Co... T25

S.W.2d 165, 167 (Tex.1987) on to the employment-at-will

doctrine.’ We refuse’.

In responding to this point of error, the court instead

created a narrow “exception to the employment-at-will

doctrine.” In creating this exception, the court fails to

give the bench and bar clear guidance as to whether this

“exception” creates a new cause of action sounding in

tort or whether it merely climinates the doctrine az a

contractual defense. Sce Brockmeyer v. Dun & Bred-

street, 118 Wis.2d 561, 3235 N.W.2d 834 (1982); see qgen-

erally, Annotation, Discharge of At-Will Employee, 12

A.L.R. 4th 544 11982).

In an attempt to avoid the preemptive effect of ERISA,

the court observes that the plaintiff here is “seeking lost

future wages, mental anguish and punitive damages” as

a result of the alleged wrongful discharge. P. 71 ai n. 5.

The court, however, does not resolve whether the plaintiff

is entitled to all damages pleaded. This is essentially an

open question. In Azar Nut Co. v. Caille, 734 S.W.2d 667

(Tex.1987', we allowed punitive damages, but this was

1 We granted McClendon's application for writ of error on points

two and four. Point four contended: “The Court of Appeals erred

when it failed to recognize that a covenant of good faith and fair

dealing should be applied to Respondent’s employment relationship

with Petitioner.”

lda

in a statutorily-created cause of action for which the

right to exemplary damages could reasonably be inferred

from the language of the statute. In Sabine Pilot Ser-

vice, Inc. v. Hauck, 687 S.W.2d 733 (Tex.i985', we rec-

ognized a common law exception but did not decide the

question of available damages. /d. at 736 (Kilgarlin, J.,

concurring!. As a general rule, the damages available

for common law wrongful termination are contractual

in nature. Greater Fort Worth and Tarrant County

Community Action Agcncy v. Mims, 627 S.W.2d 149

(Tex.1982).

Furthermore, the court’s reliance upon two federal dis-

trict court cases, Hovey v. Lutheran Medical Cenier, 516

F.Supp. 554 (E.D.N.Y.1981') and Savodnik v. Korvettes,

Ine., 488 F.Supp. 822 (E.D.N.Y.1980) is misplaced.

Those two courts created a public policy exception to the

employment-at-will doctrine that another New York fed-

eral district court refused to follow, stating:

|A| change in New York's law such as the recogni-

tion of a tort which for the last 90 years has not

been recognized by the New York Court of Appeals,

should not be brought about by a federal district

court deciding issues of state law solely by virtue of

the diversity of citizenship of the parties before it

(citations omitted). [H]irings for an unspecified or

indefinite period are freely terminable at the will of

either party.

Salanger v. U.S. Air, 560 F.Supp. 202, 205 «N.D.N.Y.

1983). Additionally, one New York intermediate court

of appeals considered and refused to follow the same

cases the court now finds persuasive:

We find no case in this state wherein a cause of ac-

tion for abusive discharge based on a violation of

public policy has been sustained and we are unable

to subscribe to such a cause of action in light of the

well-established principle that an at-will employee

may be discharged at any time without cause.

l6a

Pavolini v. Bard Air Corp., 88 A.D.2d 714, 715, 451

N.Y.S.2d 288, 289 (1982). The highest court of the

State of New York has declined opportunities to carve

out exceptions to the employment-at-will doctrine. See

Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458, 443 N.E.2d

441, 457 N.Y.S.2d 193 (1982); Murphy v. American

Home Products Corp., 58 N.Y.2d 293, 448 N.E.2d 8&6,

461 N.Y.S.2d 232 (1983); see also Salanger, 560 F.Supp.

at 205; Patrowich v. Chemical Bank, 98 A.D.2d 318, 470

N.Y.S.2d 599 (1984).

For the above reasons, I dissent.

17a

COURT OF APPEALS OF TEXAS

HOUSTON (14TH DIST.)

No. C14-87-768-CV

PERRY MCCLENDON,

Appellant,

Ve

INGERSOLL-RAND Co.,

Appellee.

July 21, 1988

Rehearing Denied Aug. 18, 1988

Michael Y. Saunders, John W. Tavormina, Houston,

for appellant.

William T. Little, Mary W. Costley, Houston, for ap-

pellee.

Before JUNELL, SEARS and CANNON, JJ.

OPINION

JUNELL, Justice.

This is a wrongful discharge case. Appellant Perry

McClendon sued his former employer, Ingersoll-Rand Co.,

after he was released from his position as a salesman.

He alleged that his employment contract was not termi-

nable at will. He also alleged that appellee had breached

an implied covenant of good faith and fair dealing, and

that appellee intentionally inflicted emotional distress

upon him. The trial court rendered summary judgment

against appellant. We affirm.

18a

Appellee had employed appellant for nine years and

eight months at the time of the termination. Appellant

stated in his petition that retirement benefits would have

vested to his benefit if he had continued in appellee’s

employ for four more months. Furthermore, he alleged

‘hat he had laid the ground work for a large transaction

with Trinity Equipment, but that the wrongful discharge

deprived him of commissions from that sale. In support

of his claims that the employment relationship was not

terminable at will, he points to a series of writings which

govern the calculation of such commissions.

At the time of the termination (Nov. 19, 1982) appel-

lant and his employer determined commissions by refer-

ence to a “Compensation Arrangement.” Each year the

employer promulgated guidelines in such a document

which fixed the sales quota, expense budget, and commis-

sion schedules for all sales personnel. The parties dis-

agree over whether the compensation arrangement limited

their ability to end the relationship at will. Although it

does not address the issue directly, the 1982 version of

the “arrangement” provides in part:

TERMINATIONS

Vhen the employment by I-R of a commissioned

Distributor Representative terminates for any rea-

son before the equipment on which he has been rec-

ommended for commission has been invoiced, he is

to be paid one-half ‘'.)' commission on the sales

credit when the equipment is invoiced. In the deter-

mination of commission payable under this para-

graph, only firm orders on which the commissioned

Distributor Representative is recommended for com-

mission and which are received up to the close of

the last full working day of the Distributor Repre-

sentative’s actual employment shall be included, pro-

vided such orders are accepted by the Company.

Any monthly commission on Rental Equipment ceases

19a

at the time of termination. Only equipment invoiced

within ninety (90) days from termination date will

qualify for commission.

From the effective date of termination there will be

a thirty (30) day period in which the Distributor

Representative will be required to furnish I-R with

all commissionable sales due him. No commission

request beyond this thirty (30) day period will be

honored.

The Special Commission Schedule for attaining

quotas does not apply if termination occurs prior to

the end of the calendar year.

The document ends by noting that it is subject to change

by appellee at any time, and that in any event it expires

at the end of 1982. Appeliant signed the document, as

did a representative of appellee.

The first point of error asserts that the written com-

pensation agreement barred application of the “at will”

employment doctrine. The at will rule, as usually formu-

lated, allows either party to an employment relationship

to dissolve that relationship at any time and for any

reason (or no reason at all). This customary statement

of the rule constitutes a serious misrepresentation of the

law, however, because employers must abide by a host of

restrictions on their discretion.

Federal legislation prohibits the firing of any employee

for reasons of race, color, religion, sex, or national origin.

Title VII, Civil Rights Act of 1964, 42 U.S.C. § 2000e-

2(a). Federal law likewise bars arbitrary discharge

based on age. Age Discrimination in Employment Act

of 1967, 29 U.S.C. § 623. The Texas Commission on Hu-

man Rights Act echoes these restrictions and additionally

outlaws discharge based on handicap. TEX.REv.CIV.STAT.

art. 5221k § 5.01. Retaliatory discharge is illegal in a

number of circumstances. See, e.g., Judiciary and Judi-

cial Procedure Act, 28 U.S.C. § 1875 (jury service); Na-

20a

tional Labor Relations Act, 29 U.S.C. $158 (union ac-

tivity); Occupational Safety and Health Act of 1970, 29

U.S.C. § 660 (reporting workplace hazards); TEX.REV.

Civ.STAT. art. 8307c (filing a worker’s compensation

claim! ; see generally Comment, The At-Will Doctrine: A

Proposal to Modify the Texas Employment Relationship,

36 Baylor L.Rev. 667, 669-70 (1984) (listing other statu-

tory limits).

Texas common law similarly curtails an employer's

ability to terminate an employee when the sole reason

for termination is the employee’s refusal to commit an

illegal act. Sabine Pilot Service, Inc. v. Hauck, 687

S.W.2d 733 (Tex. 1985).

However, appellant rests his argument not on statutory

or common law bases, but on the compensation arrange-

ment. Ingersoll-Rand convinced the trial court that the

written document merely stated company policy in the

area of sales commissions, and we agree. That the writ-

ing calls itself an agreement is in no way a hindrance

to dissolution of the employment relation. Indeed, the

document’s termination paragraphs plainly contemplate

that termination may occur at any time. Our conclusion

is bolstered by the provision that the “agreement is sub-

ject to change, at any time, by the Company without

prior written notice.”

Appellant relies on Benoit v. Polysar Gulf Coast, Inc.,

728 S.W.2d 403 (Tex.App.—Beaumont 1987, writ ref’d,

n.r.e.) for the proposition that an employer’s right to

terminate an employee is limited when a writing so pro-

vides “in a meaningful and special way.” Id. at 406

(emphasis in original). Rather than engage in a se-

mantic dispute over what the Beaumont Court meant,

we regard the quoted phrase simply as a rhetorical!

flourish on the more pedestrian expression of the rule in

the case it cited, Webber v. M.W. Kellogg Co., 720 S.W.2d

124, 127 (Tex.App.—Houston [14th Dist.] 1986, writ

ref’d n.r.e.}. Webber states that employment is at will

2la

absent a writing which “specifically” says otherwise. The

writing at hand merely regulates sales commissions.

Point of error one is overruled.

Point of error two claims that the compensation agree-

ment is ambiguous. Although appellant maintains in his

reply brief that he raised this argument below, his re-

sponse to the motion for summary judgment contains no

mention of ambiguity. The oniy conceivable reference to

ambiguity appears in the response at paragraph VI, en-

titled “Burden of Proof.” That paragraph reminds the

court that Ingersoll-Rand assumes the burden of proof on

all elements of its cause of action, including a showing

that the “provision in question is capable of only one

meaning or interpretation.” The next and final sentence

states that “Defendants have not met this burden, and

Defendants’ Motion for Summary Judgment must be

denied.”

This passing comment does not meet the requirement

that a response expressly present the issue to the trial

court. TEX.R.CIv.P. 166a(e); City of Houston v. Clear

Creek Basin Auth., 589 S.W.2d 671 ‘Tex. 1979). On the

contrary, this is no more than a challenge to the legal

sufficiency of the movant’s proof, a challenge which is

available on appeal in any event, regardless of whether

a response has been filed. Appellant’s third point of error

raises just such a challenge. We overrule the second

point of error.

The third point of error asserts that fact issues exist

concerning interpretation of the compensation agreement.

We glean no such fact issues from either of the deposi-

tions on file; neither does the instrument itself admit of

any interpretation even remotely supportive of appel-

lant’s position. The third point of error is overruled.

In his fourth point of error, appellant contends that

he substantially performed in regard to the Trinity

Equipment deal. This contention does not appear in his

22a

response to the motion for summary judgment, although

Trinity Equipment is mentioned in paragraph III, en-

titled “Plaintiff Was Terminated Without Good Cause.”

(We will address the good cause issue in due course).

Appellant’s reference to the Trinity Equipment deal can

only be read as fortifying his argument that good cause

was lacking. Rule 166a‘c) does not permit presentation

of the substantial performance argument on appeal. We

overrule the fourth point of error.

Point of error five squarely raises the question whether

the parties incorporated a good cause limitation onto

Ingersoll-Rand’s otherwise unfettered discretion to termi-

nate the relationship. Appellant presented this issue

below, despite appeliee’s claims to the contrary, in para-

graph III of his response. Appellant characterizes his

employment relationship as containing an “implied in

fact’ agreement that he not be released except for good

cause. This he calls an exception to the at will rule. As

evidence of this limitation he points out that he relocated

himself and his family to Dallas, implicitly relying on

Ingesoll-Rand’s willingness to continue his employment.

As to the existence of an implied in fact agreement,

both sides’ arguments cast more heat than light. The

question is not whether such an “exception’”’ in the con-

tract is real or illusory; rather the question is simply,

what is the scope of the contract? The contract of em-

ployment was never reduced to writing, contained no

specification of duration and lacked any limitation on

the parties’ abilities to go their separate ways. Ingersoll-

Rand presented affidavit testimony which corroborates

our reading of the compensation agreement. Accordingly,

the common law rule applies. See East Line & R.R. Ry.

Co. v. Scott, 72 Tex. 70. 10 S.W. 99 (1888). The fifth

point of error is overruled.

Ir point of error six appellant asks us to create an

imped covenant of good faith and fair dealing. The

starting point in our analysis is Supreme Court prece-

23a

dent. As recently as five years ago the Supreme Court

expressly rejected an invitation to recognize such a rule.

English v. Fischer, 660 S.W.2d 521, 522 (Tex. 1983)

Appellant regards English, however, as incapable of su. -

vival without extraordinary means, in view of Arnold v.

National County Mut. Fire Ins. Co., 725 S.W.2d 165

(Tex. 1987). In the latter case the Court imposed such

a covenant on insurers hecause of a special relation-

ship between insurers and their insureds. Nevertheless,

Arnold furnishes us no warrant for renouncing a binding

precedent and fashioning a new rule to the contrary.

If we were to recogize the employer-employee relation-

ship as “special,” that would be tantamount to putting

every commercial contract under the umbrella of Arnold:

vendor-purchaser, lessor-lessee, Jender-borrower. Such an

extension would undermine the very foundation of Arnold

by denying that an insurance relationship is deserving

of any special protection: it would in effect repudiate

the Court’s rationale to confuse the exceptional with the

everyday.

Furthermore, the Supreme Court has gone on record

as disapproving encumbrances on free movement in the

workplace. See Bergman v. Norris of Houston, 734

S.W.2d 673 (Tex. 1987); Hill v. Mobile Auto Trim, Iine.,

725 S.W.2d 168 (Tex. 1987). An employee is as free to

leave the relationship as an employer in a competitive

environment: “it is but a normal effect of a free market

economy.” Hill v. Mebile, at 172. See also Tex.Const.

art. I, § 26.

Finally, as discussed earlier, there is no want of legis-

lation which restricts an employer’s ability to dissolve an

employment contract. It wou'd be impertinent for us to

arrogate to ourselves the right to pass additional laws

under the guise of deciding cases. Tex. CoNnsr. art. II,

$1. As Chief Justice Guittard said in a wrongful dis-

charge case virtually identical to this one, “In our system

of constitutional government, the primary agency to de-

24a

clare the policy of the state is the legislature. Although

legislative processes may be imperfect, appeals for judi-

cial legislation based on legislative inaction betray a loss

of faith in democratic government.” Watson v. Zep Mfg.

Co., 582 S.W.2d 178, 180 (Tex.Civ.App.—Dallas 1979,

writ ref’d n.r.e.): accord Molder v. Southwestern Bell

Tel. Co., 665 S.W.2d 175, 177 (Tex.App.—Houston [1st

Dist.! 1983, writ ref’d n.r.e.) (“the legislature is the

appropriate agency for effecting a change in policy re-

garding the employer-employee relationship.”). To say

that the at will doctrine—a misnomer to begin with—

Was judicially created and can therefore be judicially

abolished is to misstate history. The at will doctrine was

not generated ex nihilo in 1888 against a backdrop of

some contrary legal regime. See Tex.Civ.Prac. & Rem.

Code § 5.001 (adopting the common law of England as

the rule of decision when no local source ean be found) :

Comment, The At-Will Doctrine: A Proposal to Modify

the Texas Employment Relationship, 36 Baylor L.Rev.

667, 667-68 (1984) (tracing the history of the rule back

to England). The sixth point of error is overruled.

The final point of error assigns error to the adverse

summary judgment on appellant’s claim of intentional

infliction of emotional distress. The summary judgment

proof establishes beyond dispute that the discharge of

appellant was neither extreme nor outrageous. (Indeed,

appellant incorrectly concluded that being discharged be-

fore ten years of service would prevent him from collect-

ing certain benefits. He was in fact never denied those

benefits). Ingersoll-Rand did nothing more than react

to an economic downturn by reducing its sales force.

Such conduct is in no way actionable. The seventh point

of error is overruled.

The judgment is affirmed.

25a

IN THE DISTRICT COURT OF

HARRIS COUNTY, TEXAS

133RD JUDICIAL DISTRICT

No. 84-44080

PERRY MCCLENDON,

~ Plaintiff,

INGERSOLL-RAND Co. d b/a INGERSOLL-RAND Co.

CONSTRUCTION EQUIPMENT GROUP,

Defendant.

| July 31, 1987 |

ORDER GRANTING DEFENDANT'S

MOTION FOR SUMMARY JUDGMENT

BE IT REMEMBERED that on the 27th day of July,

1987, the Motion for Summary Judgment filed in this

cause pursuant to Rule 166A of the Texas Rules of Civil

Procedure by INGERSOLL-RAND COMPANY, d/b/a

INGERSOLL-RAND CO. CONSTRUCTION EQUIP-

MENT GROUP, Defendant. Proper notice of the hear-

ing on this Motion for Summary Judgment was provided

to opposing counsel. After considering the Defendant’s

Motion and the Summary Judgment evidence submitted

in support thereof, after reviewing the Plaintiff’s Re-

sponse to this Motion for Summary Judgment and after

entertaining argument of counsel, this Court is of the

opinion that the Defendant’s Motion is good and should

be granted as hereinafter provided. Accordingly, it is

hereby

ORDERED that the Defendant’s Motion for Summary

Judgment filed in this cause pursuant to Rule 166A of

26a

the Texas Rules of Civil Procedure is hereby GRANTED

in all respects. Accordingly, it is also

ORDERED, ADJUDGED and DECREED that PERRY

McCLENDON, Plaintiff, take nothing by reason of his

lawsuit against INGERSOLL-RAND COMPANY d/b/a

INGERSOLL-RAND CO. CONSTRUCTION EQUIP-

MENT GROUP, Defendant. Further, that said Defend-

ant shall so forth with its costs to be paid by the Plain-

tiff herein, for which let execution issue.

SIGNED on this the 31 day of of July, 1987.

‘s [Illegible]

Judge Presiding

Approved as to form and content:

GILPIN, POHL & BENNETT

By: s’ William T. Little

WILLIAM T, LITTLE

State Bar No. 12427100€

Allied Bank Tower, 23rd Floor

1300 Post Oak Blvd.

Houston, Texas 77056

(713) 623-8800

Attorneys for Defendant,

Ingersoll-Rand Company d ba

Ingersoll-Rand Co. Construction

Equipment Group

PL:07.pl

27a

SUPREME COURT OF TEXAS

P.O. Box 12248

Supreme Court Building

Austin, Texas 78711

John T. Adams, Clerk

November 15, 1989

Mr. Michael Y. Saunders

Helm, Pletcher, Hogan, Bowen & Saunders

2700 America Tower

2929 Allen Parkway

Houston TX 77019

Mr. John W. Tavormina

Helm, Pletcher, Hogan, Bowen & Saunders

2700 America Tower

2929 Allen Parkway

Houston TX 77019

Mr. William T. Little

Gilpin, Paxson & Bersch

2300 First Interstate Tower

1300 Post Oak Boulevard

Houston TX 77056

RE: Case No. C-7973

STYLE: PERRY MCCLENDON

Vv. INGERSOLL-RAND COMPANY, d'b/a INGERSOLL-RAND

COMPANY

Dear Counsel:

Today, the Supreme Court of Texas overruled the mo-

tion for rehearing in the above referenced cause.

Respectfully yours,

JOHN T. ADAMS

Clerk

By ‘s [Tllegible]

Deputy

28a

FOURTEENTH COURT OF APPEALS

1307 San Farinto, 11th Floor

Houston, Texas 77002

August 18, 1988

Hon. Michael Y. Saunders

Helm, Pletcher & Hogan

2929 Allen Parkway

Suite 2700

jlouston, TX 77019

Hon. John W. Tavormina

lelm, Pletcher, Hogan, Bowen, & Saunders

2929 Allen Parkway

Suite 2700

Houston, TX 77019

William T. Little

Gilpin, Paxson & Bersch

2300 First Interstate Tower

1300 Post Oak Blvd.

Houston, TX 77056

Hon. Mary W. Costley

Gilpin, Maynard, Parsons, Pohl & Bennett

Allied Bank Tower, Suite 2400

1300 Post Oak Boulevard

lfouston, TX 77056

RE: Case No. 14-87-00768-CV

Trial Court Case No. 84-44080

STYLE: MCCLENDON, PERRY

v. INGERSOLL-RAND COMPANY

Counsel:

Please be advised that, on this date, the Court OVER-

RULED appellant’s(s’) motion for rehearing in the above

cause.

29a

Further, application for writ of error, if any, must be

submitted on or before Monday, September 19, 1988.

Respectfully yours,

MARY JANE SMART

Clerk

's’ Charlene Mitchell

Deputy