Panhandle Eastern Pipe Line Co. v. Smith

Citations: 637 P.2d 1020; 112 L.R.R.M. (BNA) 3075; 1981 Wyo. LEXIS 403Docket: 5506

Court: Wyoming Supreme Court; December 16, 1981; Wyoming; State Supreme Court

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Panhandle Eastern Pipe Line Company (appellant) appeals a Wyoming Supreme Court decision affirming a district court's judgment that awarded damages to Nowlin Smith, Jr. (appellee) for breach of contract. Panhandle contends that no contract existed and that the dispute should have been arbitrated per the collective bargaining agreement. It also claims that, if a contract is recognized, the damage award lacked sufficient evidence. 

Smith was terminated in October 1979 and followed the grievance process, eventually reaching a meeting with company officials. Initially, Panhandle upheld the termination but later offered to withdraw it if Smith agreed to specific terms. Smith signed this offer, adding handwritten notations and a signature, with the union representative also signing. 

Panhandle argues that Smith's modifications to the offer constituted a counteroffer, thus invalidating the original agreement, and that he did not adhere to the prescribed mode of acceptance. However, the court noted that Panhandle did not raise the "mode of acceptance" argument at the district court level, focusing instead on the counteroffer claim. The court clarified that while an offeror can demand a specific mode of acceptance, such demand must be clearly stated in the offer itself. The December 13 letter indicated that written acceptance by both Smith and the union was a condition for withdrawing the discharge, which was satisfied by their signatures.

Panhandle claims to have modified its offer to Mr. Smith by instructing him during a phone call to sign the letter without any additions. Mr. Smith, however, disputes this recollection, asserting he did not understand that any modifications would reject the offer. The evidence must be viewed favorably for Mr. Smith, as established in Madrid v. Norton. The court finds that Panhandle did not effectively modify the December 13, 1979, written offer, as it failed to clearly indicate an exclusive mode of acceptance. The offer only required terms to be agreed upon in writing, and any ambiguity regarding the acceptance method necessitates explicit expression from the offeror. The expectation that no handwritten additions be made appears unreasonable, lacking clear intent from Panhandle.

The text also distinguishes between modifying an offer and making a counteroffer. Panhandle argues Mr. Smith's added request to view his personnel file constituted a counteroffer. However, an acceptance that adds an implied request may still be valid. Testimonies indicated that employees had the right to access their personnel files, suggesting that this right was implicitly included in the offer to withdraw Mr. Smith's discharge. Mr. Smith's comments about his personnel file and financial issues were characterized as cautious acceptance rather than rejection. Despite his reservations, Mr. Smith signed the letter, indicating acceptance of the terms, and he began taking steps to fulfill the agreement, such as seeking medical help and maintaining his insurance.

Mr. Smith sought access to his personnel file upon returning to work but was concerned that this request would jeopardize benefits offered to him by Panhandle. Despite accepting Panhandle's offer from December 13, 1979, he faced a "Catch-22" situation when his inquiry about the personnel file was interpreted by Panhandle as a reluctance to resolve issues leading to his discharge. Panhandle required Mr. Smith to undergo counseling and allowed him six months to improve his emotional health. However, when Mr. Smith's request was viewed as a negative attitude, he was terminated for not rehabilitating spontaneously.

Although Panhandle's offer was considered generous, it could not rescind it due to Mr. Smith's inability to meet its contradictory expectations. Panhandle argued that Mr. Smith's breach of contract claim should be subject to arbitration as per the collective bargaining agreement, which outlined a grievance procedure culminating in binding arbitration. However, the court emphasized that arbitration is contractual and that a party cannot be compelled to arbitrate disputes not agreed upon.

Mr. Smith had previously pursued a grievance regarding his termination, which was resolved in favor of the company. Following that, Panhandle extended a new contract offer, which was treated as separate from the initial grievance proceedings. The dispute regarding the December 13 offer was determined not to arise under the collective bargaining agreement. The court held that Panhandle would need to demonstrate that the dispute was arbitrable, and if they desired arbitration, they should have followed the procedures set out in the Uniform Arbitration Act.

A party seeking to compel arbitration must demonstrate a valid agreement to arbitrate, prompting the court to order arbitration and stay any related pending actions. However, a party may be estopped from asserting arbitration if their conduct indicates a waiver of the right, as established in case law (e.g., Vaca v. Sipes). The right to arbitration can be waived both expressly and implicitly. In this case, Panhandle waived its arbitration rights by suggesting its offer was separate from the collective bargaining agreement and denying the existence of a contract. Additionally, Panhandle did not follow the required statutory procedure for arbitration.

Regarding damages, the trial court found sufficient evidence to support a $40,000 award for breach of an employment contract. Damages aim to place the injured party in the position they would have been in had the contract been fulfilled, accounting for earnings from alternative employment. The contract with Panhandle was for an indefinite term and implied reinstatement only for contract violations. Testimony indicated that Mr. Smith, an employee for eight and a half years with intentions to retire at fifty-five, would likely have continued working beyond the average seniority of twelve years at the company. The trial judge reasonably inferred an expected continued employment period of eight years. Damages were set at $5,000 annually for eight years, with fringe benefits calculated at approximately $12.52 per hour based on testimony from Panhandle’s supervisor.

The trial judge recognized that Mr. Smith suffered significant non-monetary losses due to the breach of contract by Panhandle Eastern, resulting in a less favorable job situation. Mr. Smith's current employment lacks the benefits, working conditions, and stability he previously had, leading to an assertion that the lost benefits, while intangible, warrant compensation. The judge emphasized that the inability to assign an exact dollar value to these losses does not preclude recovery. Citing relevant case law, the judge reinforced that while the existence of damages must be established, the precise amount of damages need not be mathematically exact. Reasonable certainty based on available evidence is sufficient for determining damages. The judge concluded that the evidence presented adequately demonstrated that Mr. Smith's current employment is inferior to his former position, justifying compensation for the substantial harm suffered, even if the exact monetary value is difficult to ascertain.

Substantial justice is preferred over exact injustice in this case, as highlighted by the precedent set in Weinglass v. Gibson. The appellant contends Mr. Smith had the opportunity to find a better job, but he was required to demonstrate reasonable care and diligence to mitigate his damages—a determination left to the discretion of the trier of fact. The burden was on Panhandle, the breaching party, to prove that Mr. Smith failed to mitigate his damages, which it did not accomplish. Panhandle argued Mr. Smith's new job paid $12.50 an hour, implying it was superior to his previous position, but the trial judge considered various factors beyond hourly pay, including job security and working conditions. The judge concluded Mr. Smith's new job was inferior and thus did not warrant a remand for damages recalculation. The court emphasized the flexibility of damage recovery laws in breach of contract cases, acknowledging the unique circumstances of each case. The district court was found to have jurisdiction, confirmed the existence of a breached contract, and its damages award was supported by sufficient evidence, leading to an affirmation of the decision. Justice Thomas, while concurring with the majority on the existence of the contract and Smith's right to recover, dissented on the handling of Smith's damages. The majority correctly articulated the rule regarding damages in employment contract breaches, which involves the agreed compensation minus what the employee could have reasonably earned elsewhere.

In a wrongful discharge action, the standard measure of damages involves deducting the net earnings of the employee, or potential earnings from comparable employment, from the compensation they would have received had the employer not breached the contract. For the employee, Smith, an hourly wage of $12.53 is determined, reflecting his $8.35 wage plus half that amount for fringe benefits. At the time of trial, Smith earned $12.50 an hour, leading to an annual earning estimate of $208,499.20 over eight years, based on a 40-hour work week. However, actual earnings from a new job, which may not consistently provide a full 40-hour week, should be deducted from this total to determine damages. The majority opinion incorrectly suggests that Smith's new job was qualitatively inferior, which would have justified not accounting for those earnings. Accepting new employment indicates Smith conceded the absence of a qualitative difference between the jobs, focusing solely on the actual dollar value difference. The majority's reliance on speculative factors in determining damages is criticized, particularly concerning the valuation of intangible benefits, which remain uncertain and elusive. The conclusion is that the trial court's ability to ascertain damages should not rely on vague definitions of benefits, leading to speculation in the awarded damages.

The court supports a finding that Smith's position with Panhandle Eastern Pipeline Company was valued at $5,000 more annually than his actual pay, or is inferring that his new job is worth $5,000 less than his reported earnings without sufficient evidence. A reversal and remand to the district court for recalculation of damages is proposed, while concurrence with the majority on the right to recover damages is affirmed. 

Additionally, the Company has agreed to withdraw Smith's discharge, contingent upon his acceptance of specified terms and conditions, which must be mutually agreed upon in writing by both Smith and the Union. Key conditions include limiting Smith's contact with Company personnel to avoid perceptions of intimidation, requiring him to engage with a mental health professional within two weeks, and establishing a treatment schedule to address his emotional disorder during a six-month leave of absence. Noncompliance with these conditions may lead to Smith’s discharge being reinstated. A reference to a relevant case, American Sanitary Sales v. Purchase, is included for further legal context.