Unpublished Disposition, 904 F.2d 710 (9th Cir. 1990)

MEMORANDUM^** 

Appellant John D. McLeod appeals a summary judgment awarded to appellee Ladd Petroleum Corporation, a wholly-owned subsidiary of General Electric. Ladd hired McLeod in early 1985 as a geologist in its Billings, Montana office after McLeod responded to a newspaper advertisement. McLeod performed well in his new job; however, in May 1986, Ladd closed its Billings office and McLeod's job was terminated. McLeod claims that Ladd was negligent in terminating his employment and breached the covenant of good faith and fair dealing implied into the employment relationship under Montana law. The district court granted summary judgment for Ladd. We review the summary judgment de novo and affirm.

* McLeod first argues that the district court erred in granting summary judgment on the issue of breach because, he claims, a court may not resolve whether the implied covenant of good faith and fair dealing exists at summary judgment. The district court did not address either the existence of the implied covenant or its possible breach because it determined that Ladd ended McLeod's employment for economic reasons.

Even when the implied covenant of good faith and fair dealing applies, a layoff for economic reasons is not actionable as a breach of the implied covenant under Montana law. Kerr v. Gibson's Products, 226 Mont. 69, 733 P.2d 1294 (1987); Flanigan v. Prudential, 221 Mont. 419, 720 P.2d 257 (1986). Termination of an employee for economic reasons alone does not constitute bad faith. Flanigan, 720 P.2d at 261. The Montana Supreme Court has recently stated that "the implied covenant of good faith and fair dealing does not prevent an employer from making legitimate reductions in work force necessary to maintain business viability." Coombs v. Gamer Shoe Co., --- Mont. ----, 778 P.2d 885, 887 (1989). Accordingly, the district court did not err when it decided that it need not reach the question of the covenant's existence if it found that he had been terminated in an economic reduction.

Ladd proffered uncontroverted evidence that an economic depression in the oil industry resulted in reduced prices which, combined with reduced and largely unsuccessful exploration, motivated it to close the Billings office. The Billings office's drilling expenses rose to $150 per new barrel of oil while the price for which Ladd could sell each barrel dropped from $26 per barrel in 1984 to $14 per barrel in 1986. Supplemental Excerpt of Record, Spence Deposition at 31-35. The severe drop in the price of oil required Ladd to lay off 51 of approximately 400 total employees, to close three regional offices, and consolidate two others.¹  Because Ladd had made deep cuts throughout all its offices, it was unable to transfer employees such as McLeod to other offices. Id.

Once Ladd proffered evidence that it had conducted a legitimate, company-wide reduction in force based on economic considerations, which are not actionable, the burden shifts to McLeod, the non-moving party, to present evidence creating a factual issue. See Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). McLeod complains that the district court improperly resolved conflicting factual evidence but fails to identify a single disputed fact about why he was terminated. Appellant's Reply Brief at 1-3. In fact, McLeod does not argue that the layoff was a pretext to conceal an improper motive for closing the Billings office. He simply asserts that Ladd should never have hired him in the first place and should have transferred him to another office or paid him damages. McLeod cannot predicate his request for relief on Ladd's offering him a job and Ladd proffered evidence that it could not transfer him because it had eliminated jobs throughout the company. Finally, McLeod insists that the district court erred in his case because it denied Ladd summary judgment in a prior, unrelated case involving another Billings employee. The record in that case is sealed and the case has been settled. Accordingly, the district court's decision there has neither precedential nor binding effect now and cannot help McLeod.

McLeod has failed to meet his burden of identifying any issue of material fact about the economic considerations behind his termination. The reasons for his termination are not in dispute. Such being the case, there is no liability for bad faith, because termination of an employee for economic reasons alone does not constitute bad faith on the part of an employer. See Coombs, 778 P.2d at 887. The district court was correct in granting summary judgment to Ladd on the claim of breach of the implied covenant of good faith and fair dealing.

II

McLeod also argues that the district court erred in granting summary judgment to Ladd on the claim of negligent termination. The district court ruled that McLeod failed to identify any corporate policy or procedure for terminating employees which Ladd had failed to follow. We agree.

Montana law recognizes negligence as a proper basis for recovery in wrongful termination cases when the employer either negligently fails to investigate the employee's performance before termination, or fails to follow handbook procedures in accomplishing the termination. See, e.g., Rupnow v. City of Polson, --- Mont. ----, 761 P.2d 802 (1988); Crenshaw v. Bozeman Deaconess Hospital, 213 Mont. 488, 693 P.2d 487 (1984); Flanigan v. Prudential Federal Savings, 221 Mont. 419, 720 P.2d 257 (1986). McLeod relies upon statements contained in the General Electric Annual Report to shareholders for the year 1986, about how reductions in the General Electric workforce had been accomplished "in ways that were fair and compassionate to those involved." Appellant's Opening Brief at 32; Appellant's Appendix K at 2. This statement, according to McLeod, imposed a duty upon Ladd, a fully-owned subsidiary of General Electric, to afford him "fair and compassionate treatment" upon his termination.

The district court correctly decided that General Electric's statements in an annual report directed to its shareholders about the treatment which its own terminated employees had received in the past could not be construed as establishing a termination policy or procedure for Ladd. Ladd has shown the absence of any express policy or procedure requiring specific termination procedures and McLeod has failed to identify a Ladd or General Electric policy which requires Ladd to retrain him for or transfer him to another position within the company. The district court was correct in determining that McLeod did not meet his burden in opposing summary judgment on the negligence issue.

AFFIRMED.