Safeshred, Inc. v. Martinez

365 S.W.3d 655

33 IER Cases 1220

55 Tex. Sup. Ct. J. 595

55 Tex. Sup. Ct. J. 827

SAFESHRED, INC., Petitioner,

v.Louis MARTINEZ, III, Respondent.

No. 10–0426.

Supreme Court of Texas.

Argued Oct. 24, 2011.

Decided April 20, 2012.

As Corrected June 8, 2012.

Craig A. Morgan, Attorney at Law, James W. Hackney, Law Office of Bob Roberts, Austin, TX, for Safeshred, Inc.

Gregory D. Jordan, Law Offices of Gregory D. Jordan, Austin, TX, for Louis Martinez, III.

Linda Boston Schlueter, Attorney at Law, Deborah J. La Fetra, Pacific Legal Foundation, Sacramento, CA, for Amicus Curiae Pacific Legal Foundation.

Justice LEHRMANN delivered the opinion of the Court.

This case requires us to clarify the nature and scope of the cause of action for wrongful termination of an employee for refusing to perform an illegal act that we recognized in Sabine Pilot Service, Inc. v. Hauck, 687 S.W.2d 733 (Tex.1985). In particular, we must determine whether a plaintiff in a Sabine Pilot action may recover punitive damages, and if so, what must be shown as a prerequisite for those damages. We agree with the court of appeals' conclusion that a Sabine Pilot cause of action sounds in tort and allows punitive damages upon proper proof. However, because we hold that Martinez failed to present legally sufficient evidence of malice relating to his firing, we reverse the court of appeals' judgment insofar as it affirms the award of exemplary damages.

I. Facts

Martinez worked for Safeshred in October of 2007 as a commercial truck driver, hauling loads of cargo between Dallas, San Antonio, Houston, and Austin. Prior to each haul, he was required to perform a pre-trip inspection of the truck to confirm its compliance with relevant safety regulations. Martinez repeatedly discovered safety violations in the vehicle he was asked to drive throughout the beginning of October, but was consistently ordered to drive the truck anyway. The first incident occurred on October 1st, when Martinez was asked to drive a truck despite his pointing out a missing Texas Department of Transportation identification number and expired dealer's tag (both violations of relevant regulations). The same defects remained in the truck he was ordered to drive on October 8th, and on that trip Martinez was pulled over and cited by a Department of Public Safety officer for numerous violations of state and federal regulations. Among the citations was one for improperly secured cargo, due in part to substantial cuts in straps used to secure the load to the truck bed. See49 C.F.R. § 393.106(b) (2011) (requiring proper cargo placement and restraint to protect against shifting and falling cargo). Martinez testified that he showed the citation and described the problems to Safeshred management. Having been told by the DPS officer not to drive the truck again until the defects had been remedied, Martinez refused to drive the truck when asked by Safeshred to do so again on October 9th.

After a week of administrative duties during which time Safeshred supposedly sought to bring the truck into compliance with state and federal regulations, Martinez was again asked to drive the truck on October 15th. But while Safeshred had apparently corrected some of the defects on the truck (like the missing and expired tags), Martinez's concerns about the load's legality persisted. The cut straps that had prompted a citation by the DPS officer on October 8th remained, the load was unsafely stacked higher than the top of the truck's cab, and there was no dunnage ¹ between the two main rows of the steel shelving. For a third time, Martinez complied with Safeshred's order to drive the truck anyway. Finally, on October 17th Safeshred again asked Martinez to drive an improperly secured load. In addition to the cut straps, highly stacked load, and lack of dunnage, the steel shelving extended off the back of the trailer. This time, Safeshred managers called DPS and confirmed the legality of the shelving extending off the back. But Martinez continued to warn Safeshred about the other safety hazards (straps, height, and dunnage) despite conceding the legality of the overhang. Martinez began to drive the truck, but turned around after a few miles when he felt the cargo shifting and feared for his safety. After again urging his concerns over the legality of the load all the way up Safeshred's chain of command, he was told to either drive the truck or go home. He went home and was fired.

In December, Martinez brought a wrongful termination claim against Safeshred under Sabine Pilot, seeking lost wages, mental anguish damages, and exemplary damages. The jury awarded $7,569.18 in lost wages, $10,000 in mental anguish damages, and $250,000 in exemplary damages, which the trial judge reducedto $200,000 to comply with the statutory cap in section 41.008 of the Texas Civil Practice and Remedies Code. The court of appeals found the evidence factually insufficient to support the mental anguish damages, but affirmed the other two awards.

II. Discussion

In Sabine Pilot, we recognized a narrow exception to the at-will employment doctrine allowing employees to sue their employers if they are discharged “for the sole reason that the employee refused to perform an illegal act.” 687 S.W.2d at 735. The at-will employment doctrine generally holds that employment for an indefinite term may be terminated at will and for any reason. Id. at 734 (citing East Line & R. R. R. Co. v. Scott, 72 Tex. 70, 10 S.W. 99, 102 (1888)). However, we recognized a narrow exception in Sabine Pilot because of the public policies expressed in our criminal laws, id. at 735, and to prevent employers from forcing employees to choose between illegal activity and their livelihoods, see Winters v. Hous. Chron. Pub. Co., 795 S.W.2d 723, 724 (Tex.1990). We have yet to elaborate on the fundamental nature of a Sabine Pilot claim or determine the types of damages available under it.

A. The Availability of Punitive Damages1. Tort or contract

The first question we must answer is whether a Sabine Pilot claim sounds in tort or contract, because the answer to that question will decide whether exemplary damages are recoverable. While exemplary or punitive damages may generally be awarded for torts involving malicious or grossly negligent conduct, they are not available for breach of contract claims. Amoco Prod. Co. v. Alexander, 622 S.W.2d 563, 571 (Tex.1981). Safeshred argues that the employment relationship is inherently contractual, and that Sabine Pilot essentially supplements that relationship with an implied contractual provision preventing discharge for refusal to perform an illegal act. Martinez, on the other hand, notes that every Texas case to categorize a Sabine Pilot claim has labeled it a tort,² and that comparisons to other statutory wrongful termination causes of action support that characterization. Courts outside of Texas are split on whether a public policy exception to the employment-at-will doctrine, like a Sabine Pilot claim, sounds in tort or contract. Compare Brockmeyer v. Dun & Bradstreet, 113 Wis.2d 561, 335 N.W.2d 834, 841 (1983) (contract), and Monge v. Beebe Rubber Co., 114 N.H. 130, 316 A.2d 549, 551 (1974) (same), with Thompson v. St. Regis Paper Co., 102 Wash.2d 219, 685 P.2d 1081, 1089 (1984) (en banc) (tort), and Parnar v. Americana Hotels, Inc., 65 Haw. 370, 652 P.2d 625, 631 (1982) (same). We conclude that such claims sound in tort.

Apart from Sabine Pilot, this Court has steadfastly adhered to the employment-at-will doctrine. See, e.g., Ed Rachal Found. v. D'Unger, 207 S.W.3d 330, 332 (Tex.2006). In that vein, we have consistently refused to expand Sabine Pilot beyond the “narrow exception” we recognized in that case. See id. at 332–33 (refusing to expand Sabine Pilot liability to cover whistlebloweractions not already authorized by statute); Winters, 795 S.W.2d at 725 (same). Safeshred argues that, in order to maintain that narrow interpretation, we must call a Sabine Pilot claim a contract claim. But, in fact, the opposite is true. To say the cause of action sounds in contract, we would need to drastically alter our view of the at-will employment relationship in general, rather than merely recognize a narrow exception to the at-will doctrine.

This is so because, to say that Sabine Pilot created an implied contractual provision would presume, in the first place, that there is a contract between at-will employees and their employers in which to place an implied provision. We have never recognized such a proposition. See, e.g., Montgomery Cnty. Hosp. Dist. v. Brown, 965 S.W.2d 501, 502–03 (Tex.1998) (treating the implied employment contract urged by petitioners as a significant departure from at-will employment); Garcia v. Sunbelt Rentals, Inc., 310 F.3d 403, 404 (5th Cir.2002) (“[N]o Texas court has held that an at-will employment relationship constitutes an oral contract....”). On the contrary, we have long held firm to the principle that, in Texas, an at-will employee may be fired for a good reason, a bad reason, or no reason at all. Brown, 965 S.W.2d at 502. And where the promise of continued employment is illusory, it cannot form the basis of an enforceable contract. Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644, 660–61 (Tex.2006) (citing Restatement (Second) of Contracts § 77 cmt. a (1981); 3 Williston on Contracts § 7.7 (4th ed.1992)). It would be inconsistent to call Sabine Pilot an implied contractual restriction on a relationship that is not even contractual. Cf. City of Midland v. O'Bryant, 18 S.W.3d 209, 216 (Tex.2000) (“[A] contractual limitation [like a duty of good faith and fair dealing] would afford more rights to the plaintiffs than at-will employees possess.”).

Instead, we conclude that Sabine Pilot claims are not contractual in nature, but sound in tort, providing a remedy when an employee refuses to comply with an employer's directive to violate the law and is subsequently fired for that...