Summary
instructing trial court to include evidence of possible lost retirement benefits on remand for damages in wrongful discharge
Summary of this case from In re BrownOpinion
February 28, 1968. —
April 9, 1968.
APPEAL from a judgment of the circuit court for Milwaukee county: RONOLD A. DRECHSLER, Circuit Judge. Reversed.
For the appellant there were briefs by Godfrey, Trump Davidson, attorneys, and Richard R. Robinson of counsel, all of Milwaukee, and oral argument by Mr. Robinson.
For the respondent there was a brief by A. M. Frederickson, attorney, and Anthony J. Melo of counsel, both of Milwaukee, and oral argument by Mr. Melo.
This case involves an action for wrongful discharge of a railroad employee.
In January of 1944, and at the age of thirty-nine, plaintiff-respondent Sylvester McDonald left the family farm in Oak Creek near Milwaukee and started working the defendant-appellant, Chicago, Milwaukee, St. Paul Pacific Railroad Company (railroad hereinafter). With the exception of the period between 1951 and 1954 McDonald continued to work for the railroad until October 20, 1959. Throughout his employment by the railroad, McDonald was a member of the Brotherhood of Maintenance of Way Employes, a labor union that represented a segment of the railroad's employees. The union and the railroad were subject to an agreement whereby all members of the union were granted certain employment and working rights and were guaranteed employment as long as they properly performed their work and work was available.
McDonald was employed as a section laborer. On the morning of October 20, 1959, he reported for work as usual at the railroad's Franksville depot. McDonald was working with a crew that included three other section laborers and Carl Matthes, the section foreman. The crew proceeded to the day's jobsite in a motor car. After spending the day putting in a frog (a device enabling railroad cars to move from one track to another) the crew boarded the motor car for the return trip to the depot. The testimony is conflicting as to where McDonald was sitting in the motor car and what he was instructed to do during the return trip. Matthes claimed that McDonald was instructed to sit in the rear of the car holding a red flag and to keep a lookout for trains. McDonald denied this.
When the crew, after an uneventful trip, returned to the Franksville depot, Matthes told McDonald that he was fired. Subsequently, McDonald received a typed discharge notice which stated that his services were no longer required because he had violated safety rule number 444. The rule provides that:
"444. When two or more employes are riding on a track car, each should occupy his, designated place and one man with a red flag in hand must be assigned to face the rear to keep a constant lookout and be ready to flag a train in emergency without further instructions. When necessary lighted fusees in addition should be used."
The notice was signed by Matthes.
Of the three other section laborers in Matthes' crew, two were young men who were not in the union and the other was a temporary worker from the Racine employment office. Matthes admitted that the two young men on the crew were friends of his. During the workday of October 20, 1959, Matthes conferred with his immediate superior, Leon Cole, the roadmaster. Matthes denied that their conversation concerned any possible layoffs of section laborers on his crew. The next day Cole told Matthes to reduce his crew to two men, which he did by laying off the temporary man and retaining the two younger workers. Had McDonald not been discharged the day before, the seniority provisions of the labor contract would have necessitated his retention at the expense of one of the younger employees.
McDonald commenced separate actions against the railroad and the union for wrongful discharge. The complaint against the railroad stated that the plaintiff "accepts the railroad's action in discharging him as final thereby ceasing to be an employee and brings this suit claiming damages for breach of contract."
The railroad and union each demurred to the complaint on the grounds that the court lacked jurisdiction of the subject matter and that the complaint failed to state facts sufficient to constitute a cause of action. The circuit court sustained the demurrers on the ground that it was' without jurisdiction because the Railway Labor Act vested exclusive jurisdiction in the national railroad adjustment board.
On appeal, this court reversed the circuit court holding that the lower court did have jurisdiction to entertain an action for wrongful discharge. The court held that while the complaint against the railroad did state facts sufficient to constitute a cause of action, the complaint against the union, since it failed to allege that he had asked the union to look after his interests, did not state facts sufficient to constitute a cause of action against the union.
McDonald v. Chicago, M., St. P. P. R. R. (1964), 25 Wis.2d 205, 130 N.W.2d 794.
On remand, following this reversal, the plaintiff amended his complaint continuing his action against the railroad but dropping his suit against the union. In a jury trial the jury found that the plaintiff had been discharged without reasonable cause and that $23,341.26 was reasonable compensation. The railroad appeals from a judgment entered on the jury verdict. McDonald cross-appeals asserting error by the trial court in denying him the opportunity to seek additional damages predicated on the value of lost retirement benefits.
Three issues are raised on the railroad's appeal. They are:
1. Did the trial court have jurisdiction to hear the case?
2. Did the trial court err in striking the affirmative defense asserted by the railroad that McDonald had not exhausted the grievance procedure set forth in the labor contract?
3. Should the railroad be permitted to show nonexhaustion of this procedure by way of mitigating McDonald's damages?
Preliminary to the consideration of these issues it should be noted that no question is raised about the jury's finding that the discharge of McDonald was wrongful. Our subsequent discussion starts with the assumption that the jury verdict has resolved this hotly contested issue.
Jurisdiction.
On the first appeal in this case, in McDonald v. Chicago, M., St. P. P. R. R., this court relied on Moore v. Illinois Central R. R., Transcontinental Air v. Koppal, and several federal and state cases, to hold that a discharged employee who accepts dismissal as final is not precluded by the Railway Labor Act from bringing an action for wrongful discharge in a state court.
Id.
(1941), 312 U.S. 630, 61 Sup. Ct. 754, 85 L. Ed. 1089.
(1953), 345 U.S. 653, 73 Sup. Ct. 906, 97 L. Ed. 1325.
McDonald, supra, at footnote 25.
McDonald, supra, at footnote 28.
45 U.S. Code, p. 462, sec. 151 et seq.
The holding of the first McDonald Case in effect reiterated the rule that a discharged railroad employee has the option of seeking reinstatement and back pay by challenging the validity of his discharge under the auspices of the national railroad adjustment board or of accepting the dismissal as final and bringing a civil suit for damages resulting from the unlawful discharge. In the former situation, the adjustment board has exclusive jurisdiction; in the latter situation, the employee may seek recourse in the state courts.
The touchstone of the limited state court jurisdiction in this area is a discharge and more importantly, an acceptance of that discharge as final. When an employee refuses to accept the discharge as final, exclusive jurisdiction to adjudicate the dispute is in the adjustment board.
Ferro v. Railway Express Agency, Inc. (2d Cir. 1961), 296 F.2d 847; Hundley v. Illinois Central R. R. (6th Cir. 1959), 272 F.2d 752; Walters v. Chicago N.W. R. R. (7th Cir. 1954), 216 F.2d 332; see Newman v. Baltimore Ohio R. R. (3d Cir. 1951), 191 F.2d 560.
The appellant railroad's first argument on this appeal is that McDonald has not accepted the discharge as final and the state court was consequently without jurisdiction to entertain the case. This contention is without merit. Appellant's sole tenet in pursuing this proposition is that respondent's complaint sought lost wages and retirement benefits from the date of discharge through what would have been his retirement date in 1969, and that this "belies" respondent's acceptance of his discharge as final. This argument is fatally defective on two grounds. First, the tip-off that one is not accepting a discharge as final and the action which would truly belie such acceptance, would be the seeking of reinstatement. This the respondent has never done. His complaint stated that the discharge was final and did not make any inconsistent allegations that he sought to be reinstated. The mere fact that respondent sought to recover the value of his lost wages and retirement benefits certainly is not tantamount to a request for reinstatement. These requests were only employed as a yardstick for measuring the damages that respondent suffered from the wrongful discharge.
Secondly, the allegation in plaintiff's complaint that the discharge was accepted as final was not denied by the railroad in its answer. Nor was plaintiff's claim in this regard ever disputed during the trial, on motions to set aside the verdict, or on motion for a new trial. Therefore, the defendant is attempting to raise this issue for the first time on appeal. This court has frequently said that it will not countenance the raising of issues for the first time on appeal. While this rule is "one of administration and not of power," there is no compelling reason to depart from the general practice in this case.
Gebhardt Bros., Inc., v. Brimmel (1966), 31 Wis.2d 581, 583, 143 N.W.2d 479; State v. Conway (1967), 34 Wis.2d 76, 83, 148 N.W.2d 721.
Culligan, Inc., v. Rheaume (1954), 268 Wis. 298, 310, 67 N.W.2d 279.
Appellant's Affirmative Defense.
Paragraph 8 of the appellant's answer alleged as an affirmative defense that the plaintiff, following his discharge, failed to follow the internal grievance procedure outlined in Rule 18 of the labor contract to which his union was a signatory. The trial court, ruling on motion by the plaintiff, ordered that the affirmative defense be stricken on the ground that Rule 18 is only applicable when reinstatement is sought and that when a party elects to sue for damages, noncompliance with the rule is no longer material or relevant.
Rule 18, in pertinent part, provides that:
"An employe who has been disciplined or dismissed . . . shall be given a fair and impartial hearing before the officer designated by the Railroad Company to handle such matters, provided that request for hearing is made in writing to the Superintendent within ten (10) days from date of advice of discipline or complaint. [Presumably this would also mean within ten days of dismissal although the rule does not expressly so state.] The hearing shall be held . . . and decision . . . rendered within ten (10) days from date the hearing is completed."
The rule goes on to prescribe appeal machinery within the grievance structure.
In the first McDonald Case this court noted that the employee's complaint did not state what grievance procedure was available under the contract, or that the plaintiff had exhausted that procedure. The court did hold however that " if it is to be claimed that some provision of the collective-bargaining contract cuts off a wrongfully discharged employee's right of action for damages for breach of contract, that is a matter of affirmative defense, and the facts must be pleaded by defendant." (Emphasis ours.)
McDonald, supra, at pages 217, 218.
The contract provision the court had in mind by this language was a mandatory provision calling for resort to a grievance procedure, the failure to follow which would result in an absolute bar to plaintiff's action. In the instant case we do not consider Rule 18 mandatory. Thus that rule was not the type of contract provision contemplated by the first McDonald Case to be asserted as an affirmative defense. The court's holding in the first McDonald Case was repeated in Cheese v. Afram Brothers Co. In Cheese the plaintiff sued his former employer for damages resulting from a wrongful discharge. Although the case turned on different grounds, our court made this observation regarding exhaustion of remedies.
(1966), 32 Wis.2d 320, 145 N.W.2d 716.
"Although the employer also urges that the complaint against it is defective because of the failure to allege an exhaustion of remedies, we note that the case in which this court held that there was an obligation to allege and prove exhaustion of remedies in an action against an employer was one in which the employee sought reinstatement. Widuk v. John Oster Mfg. Co. (1962), 17 Wis.2d 367, 374, 117 N.W.2d 245. However, in McDonald v. Chicago, M., St. P. P. R. Co. (1964), 25 Wis.2d 205, 217, 130 N.W.2d 794, this court distinguished between an action for damages against an employer and one for reinstatement. In the same case, the court also distinguished between a damage suit for wrongful expulsion against the employer as opposed to such an action against the union. In this suit for damages, under our ruling in the McDonald Case, Afram Brothers is not entitled to rely on Mr. Cheese's failure to allege an exhaustion of remedies. Instead, the employer must plead such failure as an affirmative defense."
Id. at page 325.
Neither the first McDonald Case nor Cheese held that in a state action the railroad can plead the failure to comply with any provision calling for the nonmandatory use of a contract provision specifying a grievance procedure as an affirmative defense to that action but only such provision as is deemed mandatory. In the first McDonald Case the cause was before this court on demurrer and the court did not have before it the precise wording of Rule 18. Hence the holding could be only in terms of the general principle involved and not on the basis of the exact wording of the rule. The trial court was correct in striking the railroad's alleged affirmative defense that the plaintiff's action was barred by his failure to use and exhaust the grievance procedure contained in Rule 18 of the contract governing hours of service, rates of pay, and working conditions of employees in the maintenance of way department of the railroad.
Mitigation of Damages.
Plaintiff's cause of action springs from the rights plaintiff has secured under the contract. Although exhaustion of the grievance procedure is not mandatory under Rule 18, the railroad was entitled to show that this failure to resort to that procedure could mitigate plaintiff's damages in that if that procedure had been followed the railroad might have reinstated plaintiff, thus reducing plaintiff's wage loss. True, the railroad, after the trial court's decision striking its affirmative defense as previously discussed, by way of mitigation of plaintiff's damages did not offer any evidence as to plaintiff's failure to exhaust the grievance procedure. The railroad may have deemed the trial court's opinion supporting its action striking the affirmative defense, that "the noncompliance with that rule is immaterial and irrelevant in this case" in effect barred an assertion by the railroad of plaintiff's noncompliance with Rule 18 even for the limited purpose of mitigating plaintiff's damages.
Apparently the jury arrived at its damage award for the plaintiff in the sum of $23,341.26, as the trial court states, by allowing $11,000 as the total gross income "which plaintiff earned in money and reasonable value of room and board during the 91 months since his discharge to the trial date."
The evidence shows that, as the trial court states, plaintiff "made no effort to find work, other than returning to work and live on the family farm; which was what he had done before he was employed by defendant."
But the jury did not have the opportunity to consider plaintiff's failure to exhaust the grievance procedure in further possible mitigation of plaintiff's damages. We conclude that under sec. 251.09, Stats., a new trial should be ordered in the interest of justice on the single issue of damages.
Value of Lost Retirement Benefits.
By cross appeal the plaintiff-respondent seeks a review of the trial court's decision "whereby the Plaintiff was limited to the proof of damages and loss of wages on the part of the Plaintiff to the date of the trial herein, and whereby Plaintiff was denied the right to prove loss of wages during the life expectancy of the Plaintiff and denied the right to prove and recover for the loss of Plaintiff's retirement benefits for the term of his life expectancy."
The law is well settled that an employee who has been wrongfully discharged by his employer may sue and recover the amount which he would have earned under that contract less what he earned or might reasonably have earned, in the meantime, while working elsewhere. This recovery in the instant case is subject to such further mitigation as may be credited to the railroad by the jury for plaintiff's failure to exhaust grievance procedures provided for in the contract.
Larson v. Fisher (1951), 259 Wis. 355, 360, 48 N.W.2d 502, and cases cited therein.
The loss that McDonald sustained from the wrongful discharge not only includes his loss of wages up until the time of trial and thereafter up to the time of retirement, but also includes the loss of any possible retirement benefits that would have inured to him under the contract had he not been prevented from working until retirement age. We think that the jurors should have heard the testimony regarding plaintiff's retirement benefits and life expectancy and that they should have been allowed to consider this evidence in determining the total loss sustained by the wrongful discharge.
We think plaintiff made a proper offer of proof under which the district manager of the railroad retirement board testified that the value of the plaintiff's retirement benefits (at the time of trial when plaintiff was sixty-two and at voluntary retirement age) was approximately $128 per month. This together with plaintiff's life expectancy should have gone to the jury. At the new trial plaintiff should be permitted to attempt to prove the loss of retirement benefits.
By the Court. — Judgment reversed, and cause remanded for it new trial consistent with this opinion. No costs on this appeal.