Unpublished Disposition, 852 F.2d 1289 (9th Cir. 1988)

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US Court of Appeals for the Ninth Circuit - 852 F.2d 1289 (9th Cir. 1988)

Michael J. FARRENS, Plaintiff-Appellee,v.MERIDIAN OIL, INC.; Milestone Petroleum, Inc., Defendants-Appellants.

No. 87-3675.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Oct. 9, 1987.Decided July 19, 1988.



A jury awarded Michael Farrens $2.5 million in damages after finding that Meridian Oil, Inc. had breached the duty of good faith and fair dealing imposed by Montana law when it discharged Farrens from employment. The district court denied Meridian's motions for judgment notwithstanding the verdict (JNOV), for a new trial on all issues, and, alternatively, for a new trial or remittitur on damages. Meridian timely appeals. We affirm in part, reverse in part and remand.

Meridian's objections to the conduct of the trial are without merit.

Since Meridian did not object to the admission of Exhibit 35 on the ground it now argues on appeal, reversal would be required only for plain error, (Fed.R.Evid. 103; Brocklesby v. United States, 767 F.2d 1288, 1293 n. 5 (9th Cir. 1985)), that resulted in a "miscarriage of justice" Wilson v. Attaway, 757 F.2d 1227, 1242 (11th Cir. 1985)--a test not satisfied here. Moreover, Meridian waived any objection by introducing evidence (the cost of wells under Farrens' control) which had the same tendency as Exhibit 35 to lead the jury to believe it was to determine the correctness of the decision to terminate Farrens rather than Meridian's good faith in arriving at that decision. See id.

The district court properly excluded Meridian's evidence of actual well costs in the Williston Basin as cumulative. Meridian had already introduced evidence regarding the costs of wells under Farrens' supervision relative to the costs of other wells in the area.

The jury was instructed that a covenant of good faith and fair dealing existed between Meridian and Farrens, and that " [t]his means the employer must have a fair and honest reason for terminating Mr. Farrens, arrived at in good faith." CR 97, Instruction 15. Meridian did not object, and an instruction given without objection becomes the "law of the case." See Moore v. Telfon Communications Corp., 589 F.2d 959, 966 (9th Cir. 1978). The question, therefore, is whether there was substantial evidence that Meridian's belief that Farrens was disloyal was arrived at in bad faith.1  We conclude there was. Because the parties are familiar with the record, we will describe the relevant facts only to extent necessary to indicate the basis for our decision.

Farrens' supervisor and Meridian's counsel had previously dismissed rumors that Farrens had a financial interest in Key Mud as reflecting "oilfield squabbles." Clayton later relied on these rumors as evidence that Farrens was connected to Key Mud, although he had no solid new evidence that the rumors had a basis in fact. Key Mud's co-founder denied that Farrens had any connection with that company as a director or otherwise, and Key Mud's attorney explained to Clayton how Farrens' name had mistakenly appeared on the Articles of Incorporation. Clayton made no further effort to verify his suspicions, despite these explanations. An investigation into Farrens' connection with Key Mud was in progress at Key Mud's Colorado office on the day Clayton fired Farrens. Clayton did not await word of the results of the investigation, although he had ordered that the investigation be conducted. (The investigator concluded there was no evidence that Farrens was a director or had any other connection with Key Mud, or that there was anything more than friendship between Farrens and the owners of Key Mud.)

This is substantial evidence of bad faith. While there was evidence from which a contrary conclusion might have been drawn, the jury could reasonably conclude that Clayton's termination of Farrens for disloyalty without regard to the company's prior dismissal of similar allegations, without regard to explanations offered by Key Mud's officers and Farrens' supervisors, and without waiting for the results of the investigation ordered by Clayton was arbitrary, capricious and unreasonable.2 

We consider Meridian's arguments that the damage claims were not supported by evidence, and that the verdict was grossly excessive.

Farrens' labor expert, Dr. Gaghen, calculated Farrens' lost future wages using two theories.

The first was based on the assumption Farrens would never again find work. We agree with Meridian that there was insufficient evidence to support this assumption. Farrens was a trained engineer with 26 years remaining in his worklife. Tr. 524. The only evidence suggesting Farrens might never find work in any occupation was that he had received no response to 322 letters of application sent to prospective employers within and outside the oil industry over a period of 500 days. In light of Farrens' age and marketable skills, this evidence was not sufficient to allow a jury to reasonably conclude Farrens would never find work again--as if he were permanently and totally disabled. See Simpson v. Union Oil Co., 411 F.2d 897, 909 (9th Cir.) rev'd on other grounds, 396 U.S. 13 (1969).

The evidence was sufficient to allow a reasonable jury to accept Dr. Gaghen's second calculation of lost future wages. This calculation assumed Farrens would find work in the future, but computed his alternative earnings on the assumption that his future compensation would begin at the salary of a starting mechanical engineer. Dr. Gaghen assumed this lower level of future compensation because Farrens' expertise was in the specialized area of drilling and completing oil wells, and was not readily transferable to other jobs; hence, any new employer would reduce Farrens' pay in anticipation of retraining expenses. Tr. 635. There was substantial evidence to support the reduction of the total amount of Farrens' lost wages by alternative earnings computed at this low beginning salary. A "headhunter" testified Farrens would never find another job in the oil industry. Farrens' two supervisors and his wife, who had some experience in the oil industry, also testified that Farrens would not find work in that industry again.3 

Meridian asserts Dr. Gaghen's calculations assumed Farrens would never earn more than a beginning engineer's salary throughout his work life, and argues there was no evidence to support such an assumption. Dr. Gaghen did not make this assumption. On the contrary, his calculation was based on the theory that Farrens' salary would increase at the rate of 2 per cent per year, the rate of increase reflected in Farrens' work record with Meridian. Tr. 625. The jury could reasonably accept Dr. Gaghen's premises, both as to the substantial and immediate reduction in Farrens' salary, and as to the expectation that Farrens' salary would increase in the future in the same rate as it had in the past.

The evidence supported submission of the claim for loss of reputation to the jury. The record shows that others learned Farrens was fired under an accusation of disloyalty. Mrs. Farrens learned of it. Tr. 1068. Farrens' supervisors learned of it. Tr. 661. Farrens' friends and co-workers learned of it. Tr. 1074-75. The difficulty Farrens experienced in finding employment also suggests potential employers learned of it.

It was not necessary for Meridian to disseminate word of Farrens' disloyalty to it to incur liability for Farrens' loss of reputation. Dissemination may be an essential element of an action for slander, but it is not required to recover damages for loss of reputation resulting from a tortious discharge. See Wiskotoni v. Michigan Nat'l. Bank-West, 716 F.2d 378, 390 (6th Cir. 1983). The decision in Johnson v. Supersave Markets, Inc., 686 P.2d 209, 214 (Mont.1984), is not to the contrary: in that case the damaging information was never made public at all.

We also reject Meridian's contention that the award for loss of reputation duplicates the award for lost future wages (a contention not raised as an objection to the instruction on loss of reputation). Recovery for lost reputation protects more than employability. "When one's reputation is impaired, it affects one's relations with others, including business, social, religious and family." Prosser & Keeton on Torts, Sec. 116A at 843 (5th ed.1984). The evidence that Farrens' wife, friends and co-workers were aware of the accusations underlying his discharge verifies that Farrens suffered more than simply a loss in employability.

Emotional distress is compensable when the defendant's conduct "results in a substantial invasion of a legally protected interest and causes a significant impact upon the person of plaintiff." Johnson, 686 P.2d at 213.

There was evidence that Farrens was mildly to severely despondent over the loss of his job. He felt embarrassed and humiliated. He shunned Meridian's headquarters. He felt other employees "knew who he was" and "treated him like he had the plague." He stayed at home with his three young children, but "star [ed] out the window alot" and was unable to care for them. Farrens often could not sleep and clenched or ground his teeth.

This evidence was sufficient to meet the "significant impact" test.4  In Johnson, testimony by the victim's divorce attorney that the victim was on the verge of tears, disoriented, confused, unable to form intelligent questions, and highly animated was sufficient to uphold the jury's award for emotional distress. Id. at 213-14. The reversals in McGregor v. Mommer, 714 P.2d 536, 545-46 (Mont.1986), and Noonan v. First Bank Butte, 740 P.2d 631, 635 (Mont.1987), rest primarily on errors in instructions which allowed recovery for emotional distress upon a showing of less than a significant impact.

We turn to Meridian's contention that the verdict was excessive.

Two factors limit review of the award in this case. First, it was in a lump sum, and " [e]ven a total inadequacy of proof on isolated elements of damages claims submitted to a jury will not undermine a resulting aggregated verdict which is nevertheless reasonable in light of the totality of the evidence." Los Angeles Memorial Coliseum Comm'n v. National Football League, 791 F.2d 1356, 1366 (9th Cir. 1986). Second, the award included nonpecuniary damages for emotional distress and loss of reputation, and " [t]here is no precise yardstick with which an appellate court can measure the propriety of a jury award for such damages." See Gibson v. Western Fire Ins. Co., 682 P.2d 725, 739 (Mont.1984). See also, C. McCormick, McCormick on Damages Sec. 18, p. 71 (1935). The jury's verdict may be rejected only if it is so grossly excessive as to show it was arrived at out of passion or prejudice, or it is clearly not supported by the evidence. Blanton v. Mobil Oil Corp., 721 F.2d 1207, 1216 (9th Cir. 1983); McCormick on Damages, Sec. 18, p. 71-72.

We assume the jury awarded Farrens $1,209,368 as compensation for lost past and future earnings since this is the maximum amount supported by the evidence. This leaves $1,290,632 as damages for emotional distress and loss of reputation. We consider this amount grossly excessive. A review of recent Montana jury verdicts indicates an award of this size for emotional distress and loss of reputation significantly exceeds Montana standards.5  Such an award would also significantly eclipse most jury verdicts for such damages nationwide.6 

Either a new trial or remittitur is an acceptable remedy for an excessive verdict. Fenner v. Dependable Trucking Co., Inc., 716 F.2d 598, 603 (9th Cir. 1983). When remittitur is the remedy, it is proper to require remission of the excess over the maximum amount sustainable by the evidence. D & S Redi-mix v. Sierra Redi-mix & Contracting Co., 692 F.2d 1245, 1249 (9th Cir. 1982). As we have said, $1,209,368 is the maximum amount sustainable for the loss of past and future earnings. When nonpecuniary damages are also involved, however, it is difficult to calculate a remittitur without imposing on the jury's function of assessing damages. Nevertheless, we think an award of approximately $500,000 is the maximum amount sustainable for loss of reputation and emotional distress. If Farrens believes a jury would conclude otherwise, we allow him the option of proving his damages at a new trial. See Fenner, 716 F.2d at 603.

We remand to the district court for a remittitur of the excess over $1.7 million or, at Farrens' option, a new trial on the issue of damages.7 

Each party shall bear its own costs.



This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3


We reject Meridian's suggestion that the district court's dismissal of the negligent investigation claim precludes consideration of the handling of the investigation as support for the verdict. The record reflects that the claim for negligent investigation was dismissed only because the district court (and Meridian's trial counsel) believed it was encompassed within the bad faith claim. Tr. 1102-03, 1672


Meridian's argument that "bad faith" requires a showing of vindictiveness or other willful conduct is not supported by Montana law. Generally, bad faith conduct is established when one party to a contract acts contrary to the reasonable expectations of another by engaging in conduct that is arbitrary, capricious or unreasonable. Nicholson v. United Pac. Ins. Co., 710 P.2d 1342, 1348 (Mont.1986). See also Maxwell v. Sisters of Charity of Providence, 645 F. Supp. 937, 939 (D. Mont. 1986) (applying the Nicholson standard to discharge from employment). In the cases Meridian cites (Gates v. Life of Montana (Gates II), 668 P.2d 213 (Mont.1983), Crenshaw v. Bozeman Deaconess Hosp., 693 P.2d 487, 492 (Mont.1984), and Flanigan v. Prudential Fed. Sav. & Loan Ass'n, 720 P.2d 257, 265 (Mont.1986)), the issue was whether there was sufficient evidence of malice or oppression to support punitive damages


Contrary to Meridian's assertion, this evidence is competent; Farrens was not required to present expert testimony concerning his loss of future earnings. Ewing v. Esterholt, 684 P.2d 1053, 1060 (Mont.1984)


Farrens easily met the first of the two prong Johnson test. Discharge in violation of an implied covenant of good faith and fair dealing resulted in a "substantial invasion of a legally protected interest."


See Safeco Ins. Co. v. Ellinghouse, 725 P.2d 217, 226 (Mont.1986) (award of $200,000 for emotional distress held excessive); Dunfee v. Baskin-Robbins, Inc., 720 P.2d 1148, 1154 (Mont.1987) (award of $150,000 for emotional distress was "generous," but not excessive); Gibson, 682 P.2d at 739 (award of $166,250 for emotional distress held not excessive); Miller v. Watkins, 653 P.2d 126, 132 (Mont.1982) (award of $55,000 for loss of business and damage to reputation from allegations of horse thievery upheld). Cf. Hart-Anderson v. Hauck, 748 P.2d 937, 938 (Mont.1988) (jury awarded $25,000 for emotional distress; reversed on liability issue); Noonan v. First Bank Butte, 740 P.2d 631, 632 (Mont.1987) (award of $700,000 for emotional distress; overturned because of improper instruction); Tynes v. Bankers Life Co., 730 P.2d 1115, 1119 (Mont.1986) (awards of $100,000 for each insurance bad faith plaintiff's emotional distress); Flanigan v. Prudential Federal Savings & Loan Assoc., 720 P.2d 257, 258 (Mont.1986) (award of $100,000 for emotional distress from wrongful discharge); Johnson, 686 P.2d at 214 ($17,000 award for emotional distress upheld). McGuire v. Armitage, 603 P.2d 253, 254 (Mont.1979) (award of $1000 for damages to reputation, health, business and credit)


See, e.g., Gillespie v. Klun, 406 N.W.2d 547, 557-58 (Minn.App.1987) ($75,000 award for loss of credit or reputation, $25,000 for emotional distress upheld); Brannan v. Wyeth Laboratories, Inc., 516 So. 2d 157, 172 (La.1987) (award of $250,000 for defamation in an action for wrongful breach of an employment contract); rev'd --- So.2d ----, 1988 WESTLAW 50952, (La., May 23, 1988); Becker v. Alloy Hardfacing & Eng Co., 401 N.W.2d 655, 661 (Minn.1987) (award of $30,000 for defamation by employer not excessive); Gerol v. Arena, 127 Wis.2d 1, 377 N.W.2d 618, 620 (1985) (award of $75,000 for damage to doctor's reputation resulting from defamatory letter to professional review board); Badger Bearing, Inc. v. Drives & Bearings, 111 Wis.2d 659, 331 N.W.2d 847, 854 (Wis.App.1983) ($15,000 for loss of reputation and sense of well-being for former employee slandered by employer)

These cases admittedly provide a cross-section of only those cases which have been appealed. These awards, however, are generally consistent with the jury verdicts reported in the national jury verdict reporter services. See, e.g. National Jury Verdict Review & Analysis, September 1987, at 34; Id., October 1986 at 16; Id., August 1986, at 16.


Because the evidence supported the jury's verdict on liability, the district court did not abuse its discretion in denying Meridian's motion for a new trial on all issues. Hadra v. Herman Blum Consulting Engineers, 632 F.2d 1242 (5th Cir. 1980)

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