Trepanier v. Getting Organized Inc.

NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
that corrections may be made before this opinion goes to press.


                                No. 88-165


Albert Trepanier, et al                      Supreme Court

                                             On Appeal From
     v.                                      Chittenden Superior Court

Getting Organized, Inc. and                  June Term, 1989
Tommy Styles


James L. Morse, J.

Francis X. Murray, John T. Leddy and William F. Ellis of McNeil, Murray &
  Sorrell, Inc., Burlington, for plaintiffs-appellants

Allan R. Keyes of Ryan Smith & Carbine, Ltd., Rutland, for defendants-
  appellees


PRESENT:  Dooley, J. and Barney, C.J. (Ret.), Keyser, J. (Ret.) and
          Springer, D.J. (Ret.), Specially Assigned


     DOOLEY, J.   Plaintiffs, former employees or representatives of former
employees of Nordic Ford, Inc., appeal a superior court order dismissing
their suit against defendants Getting Organized, Inc. (GO, Inc.) and Tommy
Styles, an "efficiency firm" and its agent, who were hired by Nordic to
improve flagging motor vehicle sales and who advised Nordic to fire
plaintiffs.  In dismissing the complaint and granting summary judgment in
favor of defendants, the court ruled that the doctrine of collateral
estoppel precluded plaintiffs from relitigating any of the counts brought in
their complaint, since the gravamen of the complaint is age discrimination
and a federal district court jury had already determined that Nordic did not
fire plaintiffs because of their age.  We affirm in part and remand for
further proceedings consistent with this opinion.
     The facts of this case are related in some detail in a 1986 companion
case, Payne v. Rozendaal, 147 Vt. 488, 520 A.2d 586 (1986).  Plaintiffs
filed suit against Nordic and defendants in 1982, claiming that they were
fired because defendants had advised Nordic to shed its "retirement home
image" and replace the current employees with "young go-getters."  The
complaint alleges that Nordic violated both federal and state law when it
fired plaintiffs without just cause based solely on their age, and that
defendants tortiously interfered with the contractual relationship between
plaintiffs and Nordic.  In addition, plaintiffs allege that the actions of
Nordic and defendants constituted intentional infliction of emotional
distress and resulted in the wrongful death of one of the former employees
and his widow's loss of consortium.
     Plaintiffs first brought suit in United States District Court for the
District of Vermont pursuant to the Age Discrimination in Employment Act
(ADEA), 29 U.S.C. {{ 621-634, joining in the complaint their state law
claims.  Citing the greater scope of potential remedies for some of the
state claims and the additional matters of proof for others, the federal
district court dismissed the pendent state claims without prejudice in
October of 1982.  Eventually, the case went to trial on the ADEA claim
against Nordic only, and a jury returned a verdict for defendant in July,
1984.  Plaintiffs appealed the judgment but entered into a stipulated
settlement of dismissal while the appeal was pending.
     Meanwhile, in October of 1982, plaintiffs brought their state claims
before the superior court.  In response to a motion for summary judgment by
Nordic and defendants, the court dismissed all of plaintiffs' claims except
for the claim of tortious interference with contractual relations against
defendants.  The court ruled that no state law in existence at the time of
the discharge restricted Nordic's right to fire plaintiffs on the basis of
their age, and that only the tortious interference claim could be sustained
in the absence of a viable claim for wrongful discharge.  In 1986, this
Court reversed the superior court's dismissal of plaintiffs' other claims
and remanded the case for further proceedings, holding that at the time of
the discharge plaintiffs had a viable common-law cause of action for
wrongful discharge.  Payne v. Rozendaal, 147 Vt. 488, 495, 520 A.2d 586, 590
(1986).  The Court affirmed the superior court's refusal to dismiss the
tortious interference claim against defendants.  Id. at 496, 520 A.2d  at
591.
     Upon remand, defendants filed a motion to dismiss and/or for summary
judgment, arguing that the federal jury verdict collaterally estopped
plaintiffs from further litigating any of their state claims because age
discrimination is an essential element of all of the claims.  They also
argued that plaintiffs had presented no evidence of improper interference
with contractual relations.  In January, 1988, the superior court dismissed
the case, ruling that the gravamen of the complaint was age discrimination,
that plaintiffs had had a full and fair opportunity to litigate that issue
in the federal court, and that the federal court judgment estopped them from
relitigating their claims, all of which sought damages as a result of the
alleged age discrimination.
     On appeal, plaintiffs argue that the court erred in ruling that they
were collaterally estopped from relitigating the issue of age
discrimination.  They also claim that the court erred in dismissing their
claim of tortious interference with contractual relations, as well as their
emotional distress, wrongful death, and loss of consortium claims.
                                    I.
     Plaintiffs argue that collateral estoppel should not apply in the
instant case because:  (1) defendants were not parties to the federal
litigation; (2) the precise issues involved here were not determined in the
federal action; (3) they did not have a full and fair opportunity to
litigate their claims against defendants; and (4) defendant's invocation of
the doctrine was untimely.  The first part of the argument is a plea for
retention of the doctrine of mutuality. (FN1) Under this doctrine, neither
party can use a prior judgment against the other unless both parties are
bound by the judgment.  See, e.g., Dunnett v. Shields, 97 Vt. 419, 431, 123 A. 626, 632 (1924).  In effect, the doctrine provides parties who litigated
and lost an opportunity to relitigate identical issues against new parties
in another action.
     After years of creating various exceptions to the rule, some
artificial, most courts have abandoned the mutuality requirement because it
fails to distinguish between those parties who have never litigated an issue
and those who have litigated and lost.  See Annotation, Mutuality of
Estoppel as Prerequisite of Availability of Doctrine of Collateral Estoppel
to a Stranger to the Judgment, 31 A.L.R.3d 1044 { 2 (1970 & Supp. 1990).
Indeed, "[n]onmutual issue preclusion is now permitted in federal courts, in
most state courts, and in the overwhelming majority of state decisions that
have recently reconsidered the question."  18 C. Wright, A. Miller & E.
Cooper, Federal Practice and Procedure { 4463, at 560 (1981).  In the
leading case, Justice Traynor cogently stated the rationale behind the
abandonment of mutuality: "[I]t would be unjust to permit one who has had
his day in court to reopen identical issues by merely switching
adversaries."  Bernhard v. Bank of America, 19 Cal. 2d 807, 813, 122 P.2d 892, 895 (1942).  Moreover, issue preclusion without requiring mutuality
protects the court system and potential litigants from the burdens of
relitigation, encourages litigants to join all parties in one action, and
decreases the chances of inconsistent adjudication.
     The abandonment of the mutuality requirement does not mean that issue
preclusion without mutuality follows as a matter of course.  Rather,
preclusion should be found only when the following criteria are met: (1)
preclusion is asserted against one who was a party or in privity with a
party in the earlier action; (2) the issue was resolved by a final judgment
on the merits; (3) the issue is the same as the one raised in the later
action; (4) there was a full and fair opportunity to litigate the issue in
the earlier action; and (5) applying preclusion in the later action is fair.
See Bernhard, 19 Cal. 2d  at 813, 122 P.2d  at 895; Blonder-Tongue
Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 328
(1971).  No one simple test is decisive in determining whether either of the
final two criteria are present; courts must look to the circumstances of
each case.  Among the appropriate factors for courts to consider are the
type of issue preclusion, (FN2) the choice of forum, the incentive to litigate,
the foreseeability of future litigation, the legal standards and burdens
employed in each action, the procedural opportunities available in each
forum, and the existence of inconsistent determinations of the same issue in
separate prior cases.  See Parklane Hoisery Co. v. Shore, 439 U.S. 322, 331-
32 (1979); Blonder-Tongue, 402 U.S. at 333-34; Restatement (Second) of
Judgments {{ 28-29 (1982).  In short, in order to satisfy the final two
criteria, the party opposing collateral estoppel must show the existence of
circumstances that make it appropriate for an issue to be relitigated.  See
Carter-Wallace, Inc. v. United States, 496 F.2d 535, 539 (Ct. Cl. 1974).
     We now join those courts that have abandoned an uncritical acceptance
of the doctrine of mutuality.  We refuse to ground the applicability of
collateral estoppel on a mechanical use of the mutuality requirement.
Rather, the critical inquiry is whether the party to be bound has had a full
and fair opportunity to contest an issue resolved in an earlier action so
that it is fair and just to refuse to allow that party to relitigate the
same issue.  The absence of mutuality will not preclude the use of
collateral estoppel unless the party denying the estoppel shows special
circumstances indicating unfairness.  Cf. In re Estate of Leno, 139 Vt. 554,
558, 433 A.2d 260, 263 (1981) (Court implicitly accepted nonmutual issue
preclusion).
     Plaintiffs argue second that the issue decided by the federal jury was
not the same issue involved in this case.  Specifically, plaintiffs contend
that the federal jury decided only that age discrimination was not a
"determining factor" in their discharge; therefore, they are not
collaterally estopped from claiming that age played "some role" in
defendants' advice that they be discharged.  We find no merit in this
argument.  The gist of the complaint is that defendants advised Nordic to
fire plaintiffs because of their ages, and that Nordic followed defendants'
advice.  In the federal case, the judge instructed the jury that in order to
prevail, a plaintiff "must prove that his age was a 'determining factor' in
the discharge, in the sense that, but for the employer's motive to
discriminate against him because of age, he would not have been discharged."
(Emphasis in original.)  If Nordic did not fire plaintiffs because of their
age, defendants' alleged discriminatory advice to Nordic could not have
constituted age discrimination resulting in wrongful discharge, and,
consequently, cannot trigger the common law remedy for "discharge of an
employee solely on the basis of age" created by Payne v. Rozendaal, 147 Vt.
488, 494, 520 A.2d 586, 589 (1986). (FN3)
     Plaintiffs also allege that collateral estoppel does not apply because
they did not have a full and fair opportunity to litigate their claims
against defendants in the federal action.  On this point, plaintiffs have
confused issue preclusion with claim preclusion.  It is irrelevant to our
analysis here whether plaintiffs were precluded from litigating their state
claims in federal court.  The pertinent question is whether plaintiffs had a
full and fair opportunity to litigate an issue necessarily decided by the
federal court, and whether it is fair to prevent plaintiffs from
relitigating that issue here.  We cannot find, and plaintiffs have not
shown, any reason why their federal court opportunity was not full and fair.
Accordingly, we reject this argument.
     Finally, plaintiffs contend that defendants' motion for summary
judgment based on collateral estoppel was untimely.  The motion was filed
after the remand from this Court and after the verdict in the federal court.
We cannot see how defendants could have raised the defense any earlier.  For
the above reasons, we conclude that plaintiffs common-law age-discrimination
claim is barred by the preclusive effect of the federal court judgment.
Since there is no longer any "genuine issue as to any material fact" on the
age discrimination claim, the trial court properly granted summary judgment
for defendant on this claim.
                                    II.
     Next, plaintiffs argue that even if the trial court was correct in
precluding relitigation of the age discrimination issue, its dismissal of
their claim of tortious interference with contractual relations was
erroneous because age discrimination is not necessarily an element of that
claim.  We agree that the tortious interference claim was not necessarily
derivative of the age discrimination claim.
     In order "to be liable for interference with a contractual
relationship, the defendant must have intentionally and improperly induced
or caused [a person] not to perform under its contract with the plaintiff."
Williams v. Chittenden Trust Co., 145 Vt. 76, 80, 484 A.2d 911, 913 (1984).
This tort provides protection even to contracts terminable at will.
Mitchell v. Aldrich, 122 Vt. 19, 23, 163 A.2d 833, 836 (1960).  The intent
element is satisfied even "if the actor does not act with the desire to
interfere with the contract but knows that interference will be
substantially certain to occur as a result of his or her action." (FN4)
Williams, 145 Vt. at 81, 484 A.2d  at 914.  Nevertheless, the defendant
might intentionally interfere with the plaintiff's interests without
liability if there is an acceptable purpose behind the interference.
Accordingly, interference with contractual relations is not "improper" if it
results from "honest advice."  Id. at 83, 484 A.2d  at 915 (citing
Restatement (Second) of Torts { 772(b) (1979)).  Pursuant to this qualified
privilege, "efficiency experts," among others, are protected in the
performance of their services as long as their advice is requested, is given
within the scope of the request, and is honest.  Restatement (Second) of
Torts { 772 comment c.
     If the above three conditions are met, "it is immaterial that the actor
also profits by the advice or that he dislikes" the person whose contract
was interfered with.  See id.; Riblet Tramway Co. v. Ericksen Assoc., Inc.,
665 F. Supp. 81, 87-88 (D.N.H. 1987) (no genuine issue of fact as to
whether advice of defendant engineering consultant was dishonest despite
the plaintiffs' claim that consultant was maliciously predisposed toward
them).  Thus, the defendant's qualified privilege remains intact even if the
defendant's motives were mixed.  See Los Angeles Airways, Inc. v. Davis, 687 F.2d 321, 328 (9th Cir. 1982) (business advisor of corporation retains
privilege even assuming plaintiff's allegations of mixed motives were true);
Welch v. Bancorp Management Advisors, Inc., 296 Or. 208, 218, 675 P.2d 172,
178-79 (1983) (financial advisor privileged to interfere with contract as
long as it acted within scope of employment and to further principal's
interest, even if it profited by advice). (FN5) On the other hand, if the
advisor acts in an improper manner solely for his own interests, he may be
liable for tortious interference.  Welch, 296 Or. at 218, 675 P.2d  at 179.
     The consultant's advice is honest if it is made in good faith; no more
is required.  Restatement (Second) of Torts { 772 comment e.  Because
justification for interference with contractual relations is an affirmative
defense, the intervenor "has the burden of proving his privilege to
intervene."  Mitchell, 122 Vt. at 24, 163 A.2d  at 836; see also Payne, 147
Vt. at 496, 520 A.2d  at 590 (same); Restatement (Second) of Torts { 767
comment k at 38 (whether special relation exists between advisor and
advisee, thereby making it appropriate for latter to "advise freely," is a
matter of justification for which the defendant retains the burden of
proof).  The intervenor can meet its burden of showing honest advice by
establishing the objective reasonableness of its conduct under the
circumstances; it need not prove subjective good faith.  Cf. Hayes v. Mercer
County, 217 N.J. Super. 614, 621, 526 A.2d 737, 741 (1987) (objective good-
faith standard applied in defining good-faith component of qualified
immunity under New Jersey Tort Claims Act).  Further, subjective good faith
may serve as a defense if the intervenor cannot show that it acted
reasonably.  Id.  In either case, a contracting party who acts in complete
disregard of the honest advice it is contractually obligated to give merely
to further its own interests may lack good faith.  Cf. Marley v Borough of
Palmyra, 193 N.J. Super. 271, 294, 473 A.2d 554, 566 (1983) ("Reckless
action may deny good faith."). (FN6)
     Plaintiffs have made a number of claims, some of which do not involve
age discrimination, to show that defendants have no valid justification for
their actions.  Plaintiffs have alleged that defendants lied about
plaintiffs' job performance.  Further, they have alleged that defendants'
action in recommending termination of plaintiffs was motivated by
defendants' desire to earn fees for the selection of replacement employees.
Given the fact that plaintiffs have raised questions regarding defendants'
actions and motives in advising Nordic to fire plaintiffs, and that
defendants have the burden of showing justification for their actions,
summary judgment is inappropriate here.  See Payne, 147 Vt. at 496, 520 A.2d  at 590 (the defendant's justification or privilege is question for
resolution by the jury); see also Messier v. Metropolitan Life Ins. Co., 1
Vt. L.W. 221, 222 (1990) (in deciding whether genuine issue of material fact
exists, all allegations made in opposition to summary judgment are regarded
as true if supported by affidavits or evidence).  Accordingly, we reverse
the grant of summary judgment on the tortious interference claim and remand
the matter for consideration of whether defendants improperly interfered
with the at-will employment contracts of Nordic and plaintiffs.
                                   III.
     Finally, plaintiffs argue that because it was error for the trial court
to dismiss their tortious interference claim, it was also error to dismiss
their emotional distress, wrongful death, and loss of consortium claims,
since they are derivative of the tortious interference claim.  We agree that
these claims are not necessarily derivative of the age discrimination claim
and therefore should not have been summarily dismissed on that basis.  We
point out, however, that the wrongful death and loss of consortium claims
are derivative in nature and must fail absent an independent underlying
tort.  Derosia v. Book Press, Inc., 148 Vt. 217, 220, 531 A.2d 905, 907
(1987) (loss of consortium is derivative action); Whitchurch v. Perry, 137
Vt. 464, 469, 408 A.2d 627, 630 (1979) (wrongful death is derivative
action).  Emotional distress damages may be available to one who is harmed
by tortious interference with contractual relations, Restatement (Second) of
Torts { 774A(1)(c), and their presence may also give rise to an independent
cause of action.  See, e.g., Crump v. P & C Food Markets, 1 Vt. L.W. 187,
191 (1990).
     The order of the superior court granting defendants' motion is affirmed
as to counts I and IV, and reversed as to counts II, III, V, and VI.  The
matter is  remanded for further proceedings consistent with this opinion.

                              FOR THE COURT:


                              _______________________________________
                              Associate Justice




FN1.    We reject defendants' argument that federal law on issue preclusion
controls here.  While some courts and commentators prefer a simple rule
declaring that questions of res judicata must be resolved according to the
law of the court that rendered the judgment or decided the issue, see,
e.g., Degnan, Federalized Res Judicata, 85 Yale L.J. 741 (1976), there is no
reason to apply such a rule when the original court allows preclusion
without mutuality, particularly when the the original court is a federal
court and there is no federal question involved in the subsequent state
court proceeding.  18 C. Wright, A. Miller & E. Cooper, Federal Practice and
Procedure { 4465 at 616-17 and { 4468 at 657-58 (1981).

FN2.    There is defensive use of collateral estoppel, as in the instant
case, where a plaintiff is estopped from asserting a claim that he or she
had previously litigated and lost on the same issue against another
defendant, see, e.g., Blounder-Tongue Laboratories, Inc. v. University of
Illinois Foundation, 402 U.S. 313 (1971), and offensive use of collateral
estoppel, where a new plaintiff seeks to estop a defendant from relitigating
an identical issue that the defendant previously litigated and lost against
another plaintiff.  See, e.g., Parklane Hoisery v. Shore, 439 U.S. 322
(1979).  The use of offensive collateral estoppel is more controversial than
the use of defensive collateral estoppel, and generally requires additional
considerations.  See Parklane, 439 U.S.  at 329-31.

FN3.    Therefore, neither can plaintiffs argue that because defendants'
conduct constituted age discrimination, defendants improperly interfered
with the contractual relationship between plaintiffs and Nordic, since the
federal court verdict forecloses the possibility that such conduct "induced
or otherwise caused" the interference with the contract, as required by
Williams v. Chittenden Trust Co., 145 Vt. 76, 81-82, 484 A.2d 911, 914
(1984).

FN4.    Because it is clear from the record, and indeed defendants do not
contest the fact, that defendants were aware that their advice, if followed,
would lead to the termination of plaintiffs' at-will employment contracts,
we need not determine here whether negligent interference with contractual
relations is a viable cause of action in Vermont.  We point out, however,
that most courts agree that the basis of liability for tortious interference
is intent, and that most of the cases where this rule appears not to be
followed are actually situations where the economic loss caused by the
"tortious interference" is an item of the damages that resulted from an
independent tort, such as where negligent injury to a person results in lost
wages.  See W. Keeton, Prosser and Keeton on Torts { 129 at 982 and 997
(1984); Green Mountain Power Corp. v. General Elec. Corp., 496 F. Supp. 169,
174-75 (D. Vt. 1980) (application of doctrine of negligent interference with
contract is "wholly artificial" and best left to "more familiar tort
terrain").

FN5.    We are aware that the two cases cited speak in terms of "agent" and
"principal," while the relationship between Nordic and defendants in the
instant case would most likely be characterized as "principal" and
"independent contractor."  Nevertheless, the rationale quoted below for the
mixed-motive rule when a principal-agent relationship exists holds equally
well for a principal-independent contractor relationship:
               We believe that advice by an agent to a principal
          is rarely, if ever, motivated purely by a desire to
          benefit only the principal.  An agent naturally hopes
          that by providing beneficial advice to his principal,
          the agent will benefit indirectly by gaining the further
          trust and confidence of his principal.  If the
          protection of the privilege were denied every time that
          an advisor acted with such mixed motive, the privilege
          would be greatly diminished and the societal interests
          it was designed to promote would be frustrated.
Los Angeles Airways, Inc. v. Davis, 687 F.2d 321, 328 (9th Cir. 1982).

FN6.    We do not adopt the subjective good-faith standard explicated in
Marley.  We do, however, agree with the court's conclusion that reckless
conduct may establish a lack of good faith.