Supreme Court of Texas.
SAFESHRED, INC., Petitioner,
Louis MARTINEZ, III, Respondent.
Argued Oct. 24, 2011.
Decided April 20, 2012.
As Corrected June 8, 2012.
Attorneys & Firms
*657 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 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.
*658 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. See 49 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 dunnage1 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 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.
In Sabine Pilot claim or determine the types of damages available under it.
A. The Availability of Punitive Damages
1. Tort or contract
The first question we must answer is whether a 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 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 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 claim sounds in tort, not in contract.
2. Punitive Damages for This Tort
Safeshred contends that, even if we recognize a Sabine Pilot plaintiffs may recover any reasonable tort damages, including punitive damages.
B. Legal Sufficiency of Malice Evidence
Following a liability question (which asked whether Safeshred fired Martinez for the sole reason that he refused to perform an illegal act), the trial court instructed the jury on malice, a prerequisite to an award of punitive damages according to this charge3:
Do you find by clear and convincing evidence that the harm to Louis Martinez, III resulted from malice attributable to Safeshred, Inc.?
a. a specific intent by [Safeshred] to cause substantial injury to Louis Martinez, III; or
b. an act or omission by [Safeshred],
(i) which when viewed objectively from the standpoint of [Safeshred] at the time of its occurrence involves an extreme degree of risk, considering the probability and magnitude of the potential harm to others; and
(ii) of which [Safeshred] has actual, subjective awareness of the risk involved, but nevertheless proceeds with conscious indifference to the rights, safety, or welfare of others.
Safeshred argues that the “harm to Louis Martinez” referenced in this instruction was the firing itself, and that Martinez presented no evidence at trial that the act of firing involved any extremely reprehensible conduct. Martinez contends that there was legally sufficient evidence under Safeshred’s formulation, and also argues that malice could be shown through Safeshred’s indifference to the potential harm to Martinez (and to the public at large) had he gone through with the illegal acts. We agree with Safeshred, and conclude that the evidence of malice in this case was not legally sufficient because it did not relate to the firing itself.
1. What is “malice” in a Sabine Pilot Claim?
“The type of malice necessary to support punitive damages varies with the nature of the wrongful act at issue in any given category or particular type of case.” Cazarez, 937 S.W.2d at 454 (requiring “actual malice” where the cause of action itself required intentional wrongdoing).
A Cazarez, 937 S.W.2d at 454 (noting that punitive damages are only appropriate in the most egregious cases).
Therefore, in evaluating whether Safeshred officials specifically intended or were consciously indifferent to the prospect of substantial injury to Louis Martinez,4 the “substantial injury” referred to in the charge must be something “independent and qualitatively different from the ... compensable harms associated with [the cause of action].” Town Hall Estates–Whitney, Inc. v. Winters, 220 S.W.3d 71, 89 (Tex.App.-Waco 2007, no pet.) (finding *663 sufficient evidence of malice where nursing home made employee’s conduct look worse than it was before state nursing board, resulting in plaintiff’s two-year probation). Damage to the employee’s reputation or future employment prospects is a qualitatively different injury from the firing itself, and conscious indifference to a risk of that injury might warrant punitive damages.
Courts have also recognized malice where an employer engages in harassment in connection with a wrongful firing. See Sabine Pilot case by evidence that Safeshred, in firing Martinez, consciously ignored a risk of some additional serious harm, such as interference with his future employment, harassment, or terminating his employment knowing the reason for doing so is unlawful.
But while both parties agree that malicious circumstances surrounding the firing, like those described above, would constitute malice in this case, Martinez suggests that we must also consider the dangerousness of the illegal acts he was asked to perform. We disagree. “The legal justification for punitive damages is similar to that for criminal punishment, and like criminal punishment, punitive damages require appropriate substantive and procedural safeguards to minimize the risk of unjust punishment.” State Farm explained:
A defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business. Due process does not permit courts, in the calculation of punitive damages, to adjudicate the merits of other parties’ hypothetical claims against a defendant.... Punishment on these bases creates the possibility of multiple punitive damages awards for the same conduct....
538 U.S. at 423, 123 S.Ct. 1513.
Applying these principles to a Sabine Pilot claim immediately after being asked to perform an illegal activity, but must first refuse and be fired. Allowing punitive damages premised not on the actionable firing itself, but on the illegal conduct that might have occurred while the employment relationship was still ongoing, would be an improper expansion of the cause of action.
Moreover, it would be inconsistent with the way this Court and others have evaluated malice in other exceptions to the employment-at-will doctrine. In workers’ compensation retaliation cases like Strube, 953 S.W.2d at 859–60. All of these cases confirm that in retaliatory termination cases, the only malice relevant to allowing punitive damages is that surrounding the actual termination itself.
Furthermore, the nature of a Sabine Pilot plaintiff to recover punitive damages based on the dangerousness of the employer’s hypothetical illegal activities could lead to the employer’s being punished multiple times for the same conduct.
Accordingly, even if there was legally sufficient evidence that Safeshred was grossly negligent in ordering Martinez to drive the illegal truck loads, that gross negligence would not support punitive damages in this action because it was not relevant to the actionable firing itself. Malice in this case could only be shown by clear and convincing evidence that Safeshred, in firing Martinez, intended or ignored an extreme risk of some additional harm (like interference with his future employment, harassment, or terminating him knowing it was unlawful to do so).
2. Evidence of Malice in This Case
Based on the formulation delineated above, Martinez did not present legally sufficient evidence for a reasonable trier of fact to form a firm belief or conviction that Safeshred acted with malice in firing him. See Garza, 164 S.W.3d at 627 (setting forth the standard for evaluating the legal sufficiency of evidence of a finding that requires clear and convincing evidence at trial). The only evidence relevant to this inquiry was that (1) Safeshred designated Martinez as “ineligible for rehire” in its internal employment records, and (2) the reason given on an internal report for Martinez’s firing was that he “abandoned his job,” with no mention of the dispute over the safety regulations.6 This evidence is insufficient to support a firm conviction that Safeshred was consciously indifferent to a risk of interfering with Martinez’s future employment prospects or causing some other serious harm stemming from the firing itself.
Designating Martinez as “ineligible for rehire” could not have caused any harm that is qualitatively different from the firing itself. Having chosen to terminate Martinez, rightfully or wrongfully, Safeshred was fully entitled to choose not to rehire him. See Sabine Pilot, 687 S.W.2d at 735. Conduct which was necessary merely for liability cannot serve as a basis for punitive damages.
Secondly, evidence of the objective risk7 of a disruption of Martinez’s employment prospects was tenuous at best. The allegedly damaging remarks were made on an internal record, and there was no evidence that Safeshred ever communicated those sentiments to other companies in the industry. In fact, Martinez *666 obtained a new job just two months after being fired by Safeshred, and a new job in the trucking industry a few months after that. Moreover, Martinez points to no evidence of the subjective component of gross negligence. Even assuming the remarks were potentially damaging, there was no evidence that Safeshred knew or intended that those remarks would interfere with Martinez’s future employment or otherwise cause him harm. Under the formulation of malice appropriate for this case, no reasonable juror could have formed a firm conviction that Safeshred acted with malice. And without the prerequisite finding of malice, Martinez was not entitled to exemplary damages.
In summary, we hold that (1) a Sabine Pilot claim sounds in tort; and (2) punitive or exemplary damages are available under such a claim with a showing of malice surrounding the plaintiff’s firing. Because there was legally insufficient evidence of malice in this case, the exemplary damages award must be reversed. Accordingly, the judgment of the court of appeals is reversed insofar as it affirms the award of exemplary damages, and in all other respects is affirmed.
Martinez described dunnage as any material placed in between two rows of equipment, to fill in any empty space and prevent the rows from shifting and becoming off balance. A driver may use sacks—blown up with air to fill the space—or empty pallets shoved in the gap to accomplish this purpose.
E.g., Hanold v. Raytheon Co., 662 F.Supp.2d 793, 803 (S.D.Tex.2009).
Chapter 41 of the Civil Practice and Remedies Code requires that, unless otherwise specified by the statute creating the cause of action, a jury must find fraud, malice (specific intent to cause substantial harm), or gross negligence as a prerequisite to an award of exemplary damages. City of Ft. Worth v. Zimlich, 29 S.W.3d 62, 71 (Tex.2000).
The jury charge included, in part (b) of the malice definition, “the potential harm to others ” (emphasis added). But our cases hold, and Martinez concedes, that, while potential harm to the public at large may be relevant to the reprehensibility of Safeshred’s conduct for purposes of evaluating the constitutionality of the amount of punitive damages awarded, only potential harm to Martinez himself is relevant to the availability of punitive damages in the first place. See Philip Morris USA v. Williams, 549 U.S. 346, 355, 127 S.Ct. 1057, 166 L.Ed.2d 940 (2007)).
The jury charge in Garza and here is that, because of the jury charge we are bound by in this case, we may consider not just intentional actions by Safeshred, but also grossly negligent ones (per part (b) of the definition).
No evidence in this case of harassment in connection with the firing, or of Safeshred’s knowledge that firing Martinez was unlawful. The court of appeals, in finding legally sufficient evidence of malice, relied primarily on evidence that Safeshred managers knew that driving the unsafe truck loads was illegal. But that is not the sort of conscious indifference that supports a finding of malice in a case like this. A malice finding based on Safeshred’s knowledge of illegality would require a showing that the company knew the loads were illegal and was aware that the law did not permit it to fire an employee for refusing to perform an illegal act, but fired anyway. Martinez presented no such evidence.
Gross negligence (a type of “malice” according to the charge here) has two components: objective dangerousness or risk, and subjective knowledge of and disregard for that risk. Moriel, 879 S.W.2d at 23.