Unpublished Disposition, 902 F.2d 39 (9th Cir. 1990)

MEMORANDUM^* 

Hesse brought this diversity action for wrongful discharge against Air France under California state law. The district court granted a directed verdict and judgment notwithstanding the verdict on certain of Hesse's theories of recovery. A jury returned a general verdict on Hesse's remaining theories. Both parties appealed.

After Hesse filed this appeal, the California Supreme Court limited the theories under which recovery for wrongful discharge may be awarded. The court also made its holding retroactive. This appeal was withdrawn from submission pending these intervening developments in California state law. We now vacate the judgment and remand for a new trial.

* Hesse worked for Air France for nearly 25 years. In 1978, a box of oboes arrived from France and was stored for about a week in a warehouse where Hesse worked. Sometime after claiming the box, the owner discovered that some of the oboes were missing. One of them was later discovered in Hesse's possession. Hesse denied that he stole the oboe and said that he bought it at a swap meet. In 1980, after a hearing, Air France terminated Hesse's employment. His request for a post-termination hearing was denied.

Hesse now contends that his discharge was retaliatory. He argues that he was really discharged because he was an active employee representative, disclosed morale problems to senior management, and reported OSHA violations to the government.

In 1981, Hesse brought this action for wrongful discharge under three theories available under California state law. He sought contract damages for breach of the implied covenant of good faith and fair dealing in his employment contract. He sought tort damages, including punitive damages and damages for emotional distress, for breach of the same implied covenant. Finally, he sought tort damages for intentional infliction of emotional distress.

The case went to trial in 1985. The district court granted a directed verdict for Air France on the claim for emotional distress. The case was submitted to the jury on the other theories. The jury returned a general verdict for Hesse, awarding compensatory damages and punitive damages. Hesse elected to have the judgment entered on his tort claim. The district court then granted a partial JNOV, reducing compensatory damages by about half and eliminating the punitive damage award. Both parties appealed.

Air France agrees that jurisdiction was proper in the district court under 28 U.S.C. § 1330. We have jurisdiction over this timely appeal under 28 U.S.C. § 1291.

II

At the time Hesse filed this action, California law recognized a cause of action for wrongful discharge based on the theory of breach of an implied covenant of good faith and fair dealing in an employment contract. See Foley v. Interactive Data Corp., 219 Cal. Rptr. 866, 869 (App.Ct.1986) (Foley I) . This theory is a recognized exception to the general rule that employment contracts are terminable at will. Id. at 868. At the time Hesse filed this action, both contract and tort damages were available for such a breach. See Cleary v. American Airlines, Inc., 111 Cal. App. 3d 443, 456, 168 Cal. Rptr. 722, 729 (1980). Accordingly, Hesse requested both tort and contract damages in his complaint. After the jury awarded a general verdict, Hesse elected to have judgment entered on the tort claim.

After entry of the judgment, the California Supreme Court accepted and then decided the appeal of Foley I. In Foley v. Interactive Data Corp., 47 Cal. 3d 654, 698, 254 Cal. Rptr. 211, 237, 765 P.2d 373 (1988) (en banc) (Foley II), the California court continued to recognize that an employment contract may contain an implied covenant of good faith and fair dealing. However, the court held that recovery for breach of this covenant is limited to contractual remedies. Tort remedies are available only if the plaintiff can show other kinds of harm, such as that the discharge violates public policy. Id., 254 Cal.Rptr. at 214-18; see Tameny v. Atlantic Richfield Co., 27 Cal. 3d 167, 164 Cal. Rptr. 829, 610 P.2d 1330 (1980); see also Kern v. Levolor Lorentzen, Inc., No. 87-6689, slip op. at 2529, 2536-39 (9th Cir. Mar. 9, 1990) (applying Foley II) ; deHorney v. Bank of America Trust Fund, 879 F.2d 459, 465-67 (9th Cir. 1989) (same).

Shortly after deciding Foley II, the California Supreme Court also determined that its holding would be retroactively applied to all cases not yet final as of January 30, 1989. Newman v. Emerson Radio Corp., 48 Cal. 3d 973, 976, 258 Cal. Rptr. 592, 593, 772 P.2d 1059 (1989) (en banc). This appeal was argued and submitted to us on April 6, 1986. It was withdrawn from submission on July 30, 1986, and resubmitted to us on September 15, 1989. Accordingly, as of January 30, 1989, this matter was not yet final and the Newman rule of retroactivity applies. We must therefore apply Foley II to our decision here. Erie RR Co. v. Tompkins, 304 U.S. 64 (1938).

Applying Foley II to the case before us, we find that one of the theories on which Hesse's claim was submitted to the jury is now legally defective. This is also the theory on which Hesse elected to have judgment entered. Air France is no longer subject to tort liability and Hesse is no longer entitled to tort damages for breach of an implied covenant of good faith and fair dealing in his employment contract.

III

We must now determine whether the judgment may be upheld or whether it must be vacated.

The general rule in this circuit is that a general jury verdict will be upheld only if each and every theory of liability submitted to the jury is not legally defective. Syufy Enters. v. American Multicinema, Inc., 793 F.2d 990, 1001 (9th Cir. 1986); Brocklesby v. United States, 767 F.2d 1288, 1294 (9th Cir. 1985). The Supreme Court has also held that when one theory of liability upon which a general verdict may have rested is erroneous, the verdict cannot be upheld. Sunkist Growers, Inc. v. Winckler & Smith Citrus Products Co., 379 U.S. 19, 29-30 (1962).

Hesse nevertheless urges us to exercise our discretion to uphold the jury verdict, citing Traver v. Meshriy, 672 F.2d 934, 938 (9th Cir. 1980). In Traver, we held that we may exercise our discretion to uphold a general verdict when the potential for jury confusion is low, the evidence supporting the surviving cause of action is strong, and the defenses presented apply to the surviving theory and would have been considered by the jury with reference to that theory. We have recently applied Traver to a wrongful discharge claim when the plaintiff stressed the contractual basis of the claim to the jury. See Kern, slip op. at 2540.

Here we find the potential for jury confusion high. Hesse states in his brief that he requested both contract and tort damages under both his causes of action. He simultaneously argues that the case was presented to the jury on only one cause of action, wrongful discharge, and that he has presented a successful argument for tort recovery on public policy grounds. After the trial, he elected to have judgment entered on his tort theory.

At the time Hesse filed his suit, the law of wrongful discharge was notoriously confused. See Levine, Judicial Backpedaling: Putting the Brakes on California's Law of Wrongful Termination, 20 Pac.L.J. 993, 997 (1989) ("The legal community looked forward to clarification and guidance from California's high court in its decision of Foley."). In light of the intermingled nature of Hesse's claims, the confusion in the law at the time of the trial, the Supreme Court's unequivocal holding in Sunkist, and the discretionary nature of relief under Traver, we decline to exercise our discretion here. Syufy, 793 F.2d at 1001; see Landes Constr. Co. v. Royal Bank of Canada, 833 F.2d 1365, 1373 (9th Cir. 1987) (in case of alternative theories of liability, " [t]he correct procedure appears to be a remand for a new trial.").

We conclude that because one of the theories under which recovery may have been granted is now legally defective, the very theory on which Hesse elected to have judgment entered, the general verdict cannot be upheld. Accordingly, the judgment must be vacated and the case remanded for a new trial.

IV

On appeal, Air France contends that Hesse's recovery is barred by the Statute of Frauds.¹  We have recently rejected a similar argument. See Robards v. Gaylord Bros., Inc., 854 F.2d 1152, 1154-55 (9th Cir. 1988). The California Supreme Court has now provided controlling California precedent. See Foley II, 47 Cal. 3d at 675, 254 Cal. Rptr. at 221. The statute of frauds does not bar a claim of breach of an oral or implied term of an employment contract. Id.

V

Air France requests that, if the case is remanded, the new trial be held before a judge and without a jury. Air France did request a jury for the first trial. However, under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1330(a), Air France is entitled to a bench trial. See Argentine Republic v. Amerada Hess Shipping Corp., 109 S. Ct. 683, 687-88 (1989). Air France now seeks to invoke that provision despite its earlier waiver of this option.

Hesse does not oppose this request by Air France and has at no time requested a jury trial himself. Rather, Hesse requests that if a bench trial is held, it be held before a different court. Hesse makes this request because the trial court has since been involved in settlement discussions between the parties.

In light of the agreement between the parties that a bench trial would be appropriate, as well as the statutory protection offered by Congress to an agency of a foreign government, we agree that on remand the new trial should be a bench trial. Whether or not that trial should be held before the same court we leave to the sound discretion of the district court on remand.

VI

Under California law, Air France is no longer subject to tort liability for breach of an implied covenant of good faith and fair dealing in its employment contract with Hesse. Because the theories of contract and tort liability were both presented to the jury and the jury returned a general verdict, we vacate the judgment and remand for a new trial. The new trial shall be a bench trial. We leave the decision concerning reassignment to the sound discretion of the district court.

VACATED and REMANDED.