Marsh v. Coleman Co.
774 F. Supp. 608 (1991)
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Rule of Law:
An express written employment contract allowing for termination with notice may be modified by a subsequent implied-in-fact contract requiring termination only for cause, based on the parties' course of conduct and oral representations. Additionally, an amended claim does not relate back to the original complaint for statute of limitations purposes if it arises from entirely different facts, transactions, and occurrences.
Facts:
- On February 15, 1960, William J. Marsh began his employment with Coleman Company, Inc.
- On November 18, 1963, Marsh and Coleman entered into a written employment agreement which, in exchange for the assignment of Marsh's invention rights, stipulated that Coleman could not terminate Marsh without just cause except upon thirty days' written notice.
- In 1984, following a reorganization, Sheldon C. Coleman ('Sheldon Junior') informed Marsh there were no positions left for him in his group but advised him to seek a position in another division.
- In February 1985, at a company party honoring Marsh, Sheldon Junior stated in a speech that 'there will always be a place for Bill Marsh at the Coleman Company.'
- Marsh transferred to a new position as Director of Manufacturing in January 1985 and was promoted again in 1987.
- In early January 1988, following the announcement of a merger between two company divisions, Marsh's new supervisor, Joe Nold, repeatedly assured him not to worry about his job and that everything was fine.
- On January 20, 1988, Nold informed Marsh that his employment was being terminated as part of a reduction in force resulting from the divisional merger.
Procedural Posture:
- William J. Marsh sued Coleman Company, Inc. in the U.S. District Court for the District of Kansas, initially alleging age discrimination and breach of a written contract.
- Marsh moved for leave to amend his complaint to add claims for fraud and breach of an implied contract.
- A Magistrate Judge granted Marsh's motion to amend the complaint over the defendant's opposition.
- Defendant Coleman Company, Inc. filed a motion for partial summary judgment on the two common-law claims for fraud and breach of an implied contract.
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Issue:
Does an express written employment agreement that allows for termination with thirty days' notice preclude an employee's claim for breach of an implied contract requiring termination only for just cause, where the implied contract is allegedly formed through subsequent oral assurances and the parties' course of conduct?
Opinions:
Majority - Crow, District Judge
No, an express written employment agreement does not preclude a claim for breach of a subsequent implied contract. The court held that while the general rule is that an express contract on a subject excludes the possibility of an implied contract of a different nature, an exception exists for modification. The original 1963 written agreement can be modified by the parties' later conduct and representations. To establish modification, a party must show mutual assent, which can be implied from the circumstances and conduct of the parties, and it must be supported by independent consideration. Here, Marsh presented evidence of oral assurances from company executives (e.g., 'there will always be a place for Bill Marsh') and a long history of positive performance reviews and promotions. This evidence is sufficient to create a material issue of fact as to whether the original written contract was modified to require termination only for just cause. Therefore, the employee can proceed with his claim for breach of implied contract, and summary judgment for the defendant on this claim is inappropriate. However, the court granted summary judgment for the defendant on the plaintiff's fraud claim, finding it was barred by the two-year statute of limitations. The fraud claim, based on promises made in 1984-1985, did not relate back to the original complaint, which focused solely on the 1988 termination, because it arose from entirely different transactions and occurrences.
Analysis:
This case demonstrates the significant erosion of the traditional employment-at-will doctrine through the implied contract exception, even in the presence of an express written agreement. The court's decision establishes that subsequent oral assurances, company conduct, and personnel policies can create a triable issue of fact regarding the modification of an existing written contract. This holding requires employers to be cautious about informal promises and representations made to long-term employees, as they may be interpreted as altering formal contractual relationships. The case also provides a clear application of the 'relation back' doctrine under Fed. R. Civ. P. 15(c), reinforcing that amendments alleging new claims based on facts distant in time and nature from the original complaint will likely be time-barred.
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