Katz v. Danny Dare, Inc.
610 S.W.2d 121 (1980)
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Rule of Law:
A promise to pay a pension is enforceable under the doctrine of promissory estoppel when an at-will employee, in reliance on that promise, voluntarily retires and thereby forgoes a salary, even if the employee faced the alternative of being discharged.
Facts:
- I. G. Katz began working for Danny Dare, Inc. in 1950, where his brother-in-law, Harry Shopmaker, was president.
- In February 1973, Katz suffered a head injury during a robbery at work, which subsequently impaired his job performance.
- Due to Katz's diminished performance, Shopmaker decided Katz should retire and began negotiations to induce him to do so with a pension, though Katz initially wished to continue working.
- After 13 months of negotiations, Shopmaker offered Katz a lifetime pension of $13,000 per year, which was less than his current $23,000 salary but presented as a better financial option.
- On May 22, 1975, Dare's board of directors passed a formal resolution approving the $13,000 annual pension for Katz for life.
- Relying on this promise, Katz voluntarily retired on June 1, 1975, at age 67.
- Dare paid the pension for approximately three years, but in July 1978, it reduced the payment and then stopped it entirely.
- Shopmaker testified that the company stopped the pension because he believed Katz's health had improved enough for him to work more.
Procedural Posture:
- I. G. Katz filed three lawsuits against Danny Dare, Inc. in the Associate Division of the Circuit Court.
- The Associate Division court found in favor of Katz in two of the suits.
- Danny Dare, Inc. (defendant) requested a trial de novo in a circuit court, and the cases were transferred to a circuit judge.
- The third suit was also transferred and all three cases were consolidated for a trial without a jury.
- The circuit court entered a judgment in favor of Danny Dare, Inc. on all claims.
- I. G. Katz (plaintiff-appellant) appealed the circuit court's judgment to the Missouri Court of Appeals (this court).
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Issue:
Does an employer's promise to pay a pension become legally binding under the doctrine of promissory estoppel when an at-will employee, who could have been fired, voluntarily retires in reliance on that promise?
Opinions:
Majority - Turnage, Presiding Judge.
Yes. An employer's promise to pay a pension is legally binding under promissory estoppel when an at-will employee voluntarily retires in reliance on that promise. The court found that all three elements of promissory estoppel were satisfied: (1) Dare made a clear and definite promise of a lifetime pension to Katz; (2) Katz detrimentally relied on that promise by voluntarily giving up his job and its $23,000 annual salary in exchange for the $13,000 pension; and (3) injustice could only be avoided by enforcing the promise, as Katz was now 70 and could not return to the financial position he abandoned. The court rejected the trial court's reasoning that Katz suffered no detriment because he could have been fired. Citing Feinberg v. Pfeiffer Company, the court clarified that the relevant action was not that Katz was an at-will employee, but that he was not fired and instead was induced to voluntarily retire by a specific promise. The act of retirement itself, in reliance on the promise, constituted the necessary detrimental change in position.
Analysis:
This case reinforces the application of promissory estoppel as a substitute for consideration in the context of at-will employment and pension promises. It clarifies that an employee's voluntary retirement is sufficient detrimental reliance, even if the employer held the power to terminate the employee at any time. The decision establishes that the focus is on the promise and the induced reliance, not on the employee's pre-existing legal rights to employment. This precedent strengthens protections for employees who make significant life decisions, like retirement, based on their employers' assurances, preventing employers from using the threat of termination as a defense against a promise they induced the employee to accept.
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