Fenwick v. State Dept. of Military Affairs

Fenwick v. State Dept. of Military Affairs, Disaster & Emerg. Svcs. Div., 2016 MT 80 (April 5, 2016) (Rice, J.) (5-0, aff’d)

Issue: (1) Whether the district court properly held the severance agreement was lawful; (2) whether the district court erred in granting summary judgment when Fenwick claims her consent to the severance agreement was given under duress, undue influence, etc.; (3) whether the district court properly held that the consideration for the agreement did not fail; (4) whether the district court properly dismissed Fenwick’s constitutional claims; and (5) whether the district court properly denied summary judgment to the department on Fenwick’s claims for intentional interference and bad faith.

Short Answer: (1) Yes; (2) this issue was not raised below and is waived; (3) yes; (4) the Court does not reach this issue as any error would be harmless; and (5) having failed to file across-appeal, the department has waived appellate review of this issue.

Affirmed

Facts: In April 2011, Fenwick and the department executed a severance agreement under which the department agreed to lay off Fenwick rather than terminate her for cause, and Fenwick released all claims against the department. Both parties were represented by counsel. As consideration, the agreement obligated the department to do several things: (1) eliminate Fenwick’s position; (2) allow Fenwick to participate in the job registry for two years; (3) provide Fenwick with neutral employment references; and (4) provide Fenwick with severance pay, health insurance and access to training. In return, Fenwick was obligated to waive all claims against the department and waive all benefits not specifically mentioned in the agreement.

The department eliminated Fenwick’s position, the Office of Homeland Security Grants Manager, and seven months later created a new position, Disaster and Emergency Services Grants Program Manager. Fenwick applied for this position but was not hired.

Fenwick started an independent consulting business and contracted with Butte-Silver Bow to provide grants administration services. The department allegedly contacted the county and stated Fenwick should not contact department coordinators in the course of her work for the county.

Fenwick filed this action claiming the agreement should be rescinded for various reasons, and alleging wrongful discharge, intentional interference with a business relationship, bad faith, and constitutional tort claims. The district court dismissed the constitutional tort claims, and the parties filed cross-motions for summary judgment.

Procedural Posture & Holding: The district court granted partial summary judgment to the department, holding that the severance agreement could not be rescinded, but held that genuine issues of material fact precluded summary judgment on Fenwick’s claims for intentional interference and bad faith. Fenwick moved for certification under Rule 54(b), and the district court granted the motion. Fenwick appeals and the Supreme Court affirms.

Reasoning: (1) Fenwick argues the severance agreement was unlawful because it violated a provision of the Reduction-in-Force Policy, but the Court holds the policy is not law, and therefore a violation of it does not render the agreement unlawful.

(2) Fenwick did not raise the issue of her consent to the district court, so the Supreme Court refuses to consider it.

(3) Rescission on the basis of partial failure of consideration must touch the fundamental purpose of the contract and defeat the parties’ object in making he contract. Here, the undisputed facts establish that the consideration did not fail. A new position was created and funded by the Legislature. Although the positions were similar, they were not the same. Additionally, Fenwick was entitled to participate in the job registry; she was not to be given preference for any positions. Fenwick waived all provisions of the RIF Policy not specifically mentioned in the agreement. Finally, the department’s communications with Butte-Silver Bow county were not employment references and therefore do not constitute failure of consideration.

(4) Even if the district court erred in dismissing Fenwick’s constitutional claims, such an error would be harmless given the Court’s holding that the severance agreement may not be rescinded, as such claims were waived under the agreement.

(5) Because the department did not file a cross-appeal, its claim that the district court erred in denying summary judgment on Fenwick’s intentional interference and bad faith claims is waived on appeal.