400 P.3d 706
Mont.2017Background
- Folsom, a non-probationary Whitefish police officer, faced termination under the CBA after WPPA affiliated with MPEA (the union). MPEA (through field rep Dahle, then in-house counsel Picotte) handled attendant grievance steps but allegedly failed to timely and effectively pursue Step 3/4 rights.
- Picotte allegedly misrepresented to Folsom (Oct. 25, 2013) that he had filed and was prosecuting court action to enforce the grievance; later Picotte had taken little or no action. Folsom sued the City (wrongful discharge) and MPEA (duty of fair representation (DFR) and common-law fraud).
- MPEA (Picotte) failed to respond to extensive discovery (69 Rule 36 requests), producing deemed admissions; Folsom moved for summary judgment on union liability (not on causation/damages). The District Court granted summary judgment for Folsom on DFR and fraud liability.
- After a damages hearing the court denied lost-wages damages (finding no proof City breached the CBA), but awarded $47,550 in attorney fees as compensatory damages and $50,000 punitive damages for fraud. MPEA moved under Rules 59/60 alleging counsel misconduct; those motions were denied and both parties appealed.
- Montana Supreme Court reversed: (1) common-law fraud claim is subsumed by DFR here; (2) lost-wage denial was correct because Folsom failed to prove City causation; (3) attorney-fee award to Folsom was erroneous under the American Rule absent proof fees were incurred to pursue the employer and caused by union breach; (4) punitive damages improper without valid compensatory-damages predicate; and (5) District Court abused discretion in denying MPEA post-judgment relief based on its counsel’s gross neglect — remand ordered for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Whether common-law fraud is independently cognizable from DFR | Fraud claim premised on Picotte’s misrepresentation that induced reliance is distinct from DFR | Fraud is part of the same continuous union misconduct and thus subsumed by DFR | Fraud claim is subsumed by the DFR claim on this record; not independently cognizable |
| 2. Whether Folsom proved causation for lost wages | MPEA’s breach forced him into litigation and caused termination/losses; MPEA’s answer admitting City lacked cause is a judicial admission | City’s liability was not established; plaintiff bears burden to prove employer breached CBA | Court correctly held Folsom failed to prove City breached CBA; therefore lost wages not awarded |
| 3. Whether attorney fees can be awarded as compensatory damages on DFR | Fees are compensatory because union forced plaintiff to hire counsel to pursue employer | American Rule bars recovery of fees absent statute/contract or recognized exception; fees against union only for fees incurred pursuing the employer if caused by union breach | Fees improperly awarded where plaintiff failed to prove employer breach and court did not separate fees spent on employer v. union claims; award reversed |
| 4. Whether punitive damages are available | Plaintiff sought punitive damages for fraud/bad faith by union agent | Punitive damages unavailable absent compensatory-damages predicate; (and federal Foust suggests bar for DFR) | Punitive damages require an underlying compensatory award under § 27-1-220(1); award reversed; Court declines to decide whether Foust applies to Montana DFR but concurrence would allow punitive damages under Montana law |
Key Cases Cited
- Vaca v. Sipes, 386 U.S. 171 (union breach of duty of fair representation requires proof of arbitrary, bad faith, or discriminatory conduct)
- Int’l Bhd. of Elec. Workers v. Foust, 442 U.S. 42 (1979) (federal rule: punitive damages not available on federal DFR claims)
- Czosek v. O’Mara, 397 U.S. 25 (union only liable for damages that flow from its own conduct; employer remains liable for contract damages)
- Dutrisac v. Caterpillar Tractor Co., 749 F.2d 1270 (9th Cir.) (attorney fees incurred to enforce employer rights because of union’s failure may be recoverable as damages against union)
- Akins v. U.S.W., Local 187, 237 P.3d 744 (N.M. 2010) (state high court rejecting Foust’s per se punitive-damages bar for state-law DFR; policy analysis favoring availability of punitive damages under state law)