brought witnesses. Unlike McClanahan where no counsel were present and there was a potential conflict of interest, 517 N.E.2d at 395, the just cause issue was vigorously litigated at each administrative level and was ultimately affirmed by the Indiana Supreme Court through denial of transfer. This Court finds that this aspect of collateral estoppel is adequately satisfied.
3. The agency was acting in a judicial capacity:
The other implicit concern in McClanahan was that the agency was not acting in a judicial capacity. Again, in this case, however, the parties were represented by counsel, witnesses appeared, and detailed written decisions were handed down at each level. The concerns in McClanahan that the administrative proceedings were too informal are not present here.
In McClanahan, the administrative proceeding at issue occurred before the Referee without counsel. A decision adverse to the defendant was rendered, and no appeal was taken. 517 N.E.2d at 391. In this case, however, counsel were present at the Referee stage, appeal was taken to the three-person Review Board where counsel were again present, and appeal was again taken from that level. Thus, the level and type of administrative proceeding in issue in this case is different from that in McClanahan. Here, the relevant administrative decision was made at the three-person Review Board level,
whereas in McClanahan the decision was at the one-person Referee level.
The importance of this distinction cannot be over-emphasized, for at the end of its opinion in McClanahan, the Indiana Supreme Court almost implied that collateral estoppel could not be invoked from decisions of any branch of the Indiana Employment Security Division because of their informality. McClanahan, 517 N.E.2d at 395 ("The relative informality of the particular administrative procedure at issue here does not meet the test used in Cox. It is a procedure designed for quick and inexpensive determinations of unemployment benefits. * * * Whether other administrative proceedings might qualify under Cox is a matter for another day").
However, the "particular administrative procedure" at issue in McClanahan was at a lower and more informal level than present here. Proceedings before the one-person Referee are not final and binding as to factual matters, Forster, 420 N.E.2d 1287, they are to be conducted "informally," 640 Ind.Admin. Code § 1-11-3 (1988), and such hearings are held at local offices. Id. Proceedings before the Review Board, by contrast, are heard by at least three Board members, Ind.Code Ann. § 22-4-17-5, they are final and conclusive as to all factual matters, Ind.Code Ann. § 22-4-17-12; Forster, 420 N.E.2d at 1291, and such hearings are held at the Indianapolis office of the Review Board. Given the relative informality of the Referee's proceedings coupled with all the other problems such as lack of counsel and conflicts of interest present in McClanahan, it is understandable why the Indiana Supreme Court did not apply collateral estoppel to that administrative decision.
In this case, however, based on the reasoning of McClanahan and the standards set forth therein, this Court is convinced that the Indiana Supreme Court would apply the doctrine of administrative collateral estoppel to the higher-level, more formal administrative decision in this litigation. The tests for administrative collateral estoppel set forth in McClanahan are conclusively met, and there is no reason to relitigate the issue of just cause.
C. Measure of Damages :
1. Compensatory damages:
The Court has thus concluded that Mr. Spearman could not be discharged during the working month without just cause. Moreover, the Review Board's finding that Spearman was unjustly fired is binding in this action and bars relitigation of the issue. Thus, the only remaining issue on Count One is the amount of damages, if any, to which Spearman is entitled.
It is settled law in Indiana that the measure of damages for breach of a term employment contract is the "contract price for the unexpired term less what the employee has earned, or by reasonable diligence in mitigation of damages could have earned, in other employment since the discharge." Department of Natural Resources v. Evans, 493 N.E.2d 1295, 1302 (Ind.App. 1986). Accord, Pepsi-Cola General Bottlers, Inc. v. Woods, 440 N.E.2d 696, 699 (Ind.App. 1982); Hamilton v. Love, 152 Ind. 641, 53 N.E. 181 (1899). The question in this case, then, is whether Spearman is entitled to any damages for being discharged without cause on Friday, March 29, 1985, the last working day of March of 1985.
Defendant argues that no damages are recoverable, reasoning that no notice is required to terminate such a contract, and impliedly asserting that Spearman received his full monthly salary for the month of March.
In support of its position, however, Delco relies solely on a case from Alabama dealing with expiration of a contract of insurance rather than with an employment relationship. See Employers Insurance Company of Alabama v. Hare, 292 Ala. 637, 299 So. 2d 243 (1974). On the other hand, plaintiff has not provided any authority to the contrary on this issue, and the Court has not located any relevant precedent independently other than the general case law implying a duty of good faith in contractual dealings.
Accordingly, in order to properly address this narrow issue, the Court requests further limited briefing on the question of whether notice was required of the employer in this instance. If notice was not required, then plaintiff is not entitled to any damages (assuming that all of March's salary was paid). If notice was required and was not timely given, then plaintiff would be awarded his salary for April less any amounts he earned or could have earned with due diligence (up to the maximum $ 3,140.28 that he was earning per month at that time). The Court thus requests the parties to brief this issue in less than ten pages by Friday, June 30, 1989. The parties are also free to submit evidence on whether plaintiff received his full salary for March and whether he earned or could have earned amounts in mitigation in April.
Depending on the outcome of this issue, the Court will either rule by way of summary judgment or submit the few remaining factual issues to the jury when the defamation claim is tried. The Court in its discretion finds a separate trial on the issue of damages as to Count One unnecessary and thus DENIES the plaintiff's motion for a separate trial under Rule 42(b) of the Federal Rules of Civil Procedure. See generally 9 Wright & Miller, Federal Practice and Procedure § 2388 (1971) (discussing discretionary nature of Rule 42(b)).
2. Punitive damages:
Finally, the Court hereby GRANTS summary judgment for the defendant on the plaintiff's claim for punitive damages on Count One. In order to recover punitive damages in Indiana, the plaintiff must show by clear and convincing evidence that the defendant's actions were not inconsistent with the hypothesis that the conduct was the result of a mistake of law or fact, honest error of judgment, overzealousness, mere negligence or such other noniniquitous human failing. Travelers Indemnity Co. v. Armstrong, 442 N.E.2d 349, 362 (Ind. 1982); Ind. Code Ann. § 34-4-34-2. The defendant is cloaked with a presumption of innocence, and the evidence must exclude every reasonable hypothesis of innocence. Orkin Exterminating Co. v. Traina, 486 N.E.2d 1019 (Ind. 1986). And, since the Supreme Court's decision in Anderson v. Liberty Lobby, 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986), the heightened burden of proof must be met at the summary judgment stage as well. See e.g., Reed v. Ford Motor Co., 679 F. Supp. 873 (S.D.Ind. 1988) (Indiana's clear and convincing standard for punitive damages applies at summary judgment after Anderson).
In this case there is no evidence from which reasonable jurors could find, by a clear and convincing standard, that punitive damages are warranted. The evidence, as taken favorably for the plaintiff, simply does not show a level of conduct that is susceptible to such an award.
IT IS SO ORDERED this 19th day of June, 1989.
SUPPLEMENTAL ORDER on MOTION for SUMMARY JUDGMENT - July 10, 1989, Decided
The parties have filed their supplemental briefs and evidence on the issue of whether one month advance notice was required to discharge Spearman. The evidence submitted establishes as a matter of law that Delco Remy paid Spearman his full salary for the month of March in which he was discharged without cause. Thus, the only question is whether Spearman is entitled to any damages for the month of April.
Neither the parties nor the Court have been able to locate any Indiana law directly on point. Indeed, the most that can be said about Indiana law in this area is that it continues to adhere to the employment at will doctrine with only a few exceptions, and as such is generally more favorable to employers. The most relevant precedent comes from a 1927 Ohio case. In Red Star Yeast & Products Co. v. Hague, 25 Ohio App. 100, 157 N.E. 393 (1927), the Ohio Court of Appeals stated that a month to month employment contract which did not speak to notice of termination can be canceled by either party at the end of each month. The court wrote:
This is what is known as a month to month employment, and therefore the contract could be terminated and canceled under the terms and provisions thereof, by mutual consent or otherwise, at the end of each month. There is no provision as to notice, and none is necessary, for the reason that the contract itself is authority for its cancellation before the obligations of a succeeding month ensues.
Red Star Yeast, 157 N.E. at 394. Thus, Ohio interprets month to month contracts as requiring no notice concerning the next month (April in this case) for the reason that no contractual obligations concerning the succeeding month until it actually begins.
This Court, sitting in diversity and attempting to predict what the Indiana courts would do, finds that Indiana would follow Red Star Yeast and hold that no legal obligations arose between Spearman and Delco for the month of April, 1985. In so finding, the Court is mindful of Indiana's general philosophy of employment at will, and notes that Indiana public policy does not proscribe employment contracts allowing discharge without advance notice. Montgomery Ward & Co. v. Guignet, 112 Ind. App. 661, 45 N.E.2d 337, 340 (1942) (en banc).
The Court recognizes that this is a seemingly harsh result, but is constrained to predict and follow Indiana law. Plaintiff's analogy to month to month contracts in landlord-tenant relationships is well grounded in policy and could be persuasive to the Indiana Supreme Court. Only through appeal and certification, however, can plaintiff urge what would be a modification of existing law.
Accordingly, although plaintiff did obtain partial summary judgment on Count One as to liability, defendant is entitled to partial summary judgment on damages on Count One. Defendant made full payment for the unexpired term of March, 1985, and no other damages are available. Thus, judgment shall be entered for defendant on Count One, and Count one shall be Dismissed with prejudice.
IT IS SO ORDERED this 10th day of July, 1989.