430 S.W.3d 396
Tex.2014Background
- In 2002 DuPont announced a spin-off of its Terathane unit into a wholly owned subsidiary, DuPont Textiles and Interiors (DTI); employees were urged to transfer to DTI.
- DuPont allegedly told Unit employees DTI would not be sold; unbeknownst to them DuPont had discussed a sale to Koch and later negotiated and closed that sale.
- Most Unit employees moved to DTI; after the sale Koch reduced their compensation and retirement benefits.
- 63 former employees sued DuPont in 2006 for fraudulently inducing them to terminate DuPont employment and accept DTI employment; they seek over $23 million.
- DuPont argued at-will employees cannot sue for fraud based on promises of continued employment; 59 employees relied on a collective bargaining agreement (CBA) that limited discharge to "just cause." DuPont countered the CBA was terminable on 60 days’ notice.
- The Fifth Circuit certified two Texas-law questions: (1) may at-will employees sue their employer for fraud causing loss of employment, and (2) may employees covered by a 60-day-terminable CBA limiting discharge to just cause sue for such fraud?
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Can at-will employees bring fraud claims against their employer for loss of employment? | Employees: fraud claims may lie when employer misrepresents intent to continue employment. | DuPont: at-will doctrine bars fraud claims dependent on continued employment. | No — at-will employees cannot recover in fraud for promises dependent on continued employment; such promises are illusory and reliance is unjustifiable. |
| 2) Can employees covered by a CBA that limits discharge to "just cause" (though terminable on 60 days’ notice) bring fraud claims for being induced to leave? | Employees: CBA protections allow a fraud claim because they were not truly at-will and could show detrimental reliance. | DuPont: even if CBA was terminable, it remained in force and provided exclusive remedies for wrongful discharge; fraud suit would circumvent the parties’ bargain. | No (in these circumstances) — because the CBA, as in effect, modified at-will status and provided contractual remedies for unjust discharge, the plaintiffs cannot bypass those remedies via a fraud action. |
Key Cases Cited
- Montgomery Cnty. Hosp. Dist. v. Brown, 965 S.W.2d 501 (Tex. 1998) (states Texas presumption of at-will employment absent explicit agreement otherwise)
- Sabine Pilot Serv., Inc. v. Hauck, 687 S.W.2d 733 (Tex. 1985) (recognizes narrow common-law exception barring discharge for refusal to perform illegal act)
- City of Midland v. O’Bryant, 18 S.W.3d 209 (Tex. 2000) (refuses to impose duty of good faith when express contractual discharge limits exist)
- Johnson & Johnson Medical, Inc. v. Sanchez, 924 S.W.2d 925 (Tex. 1996) (held no fraud recovery where plaintiff lacked detrimental reliance evidence)
- Texas Farm Bureau Mut. Ins. Cos. v. Sears, 84 S.W.3d 604 (Tex. 2002) (declines to impose common-law duties that would erode at-will doctrine)
- Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432 (Tex. 1986) (addresses employer intent in promise of future compensation; not a general ruling that fraud claims can supplant at-will rule)
- Stone v. Lawyers Title Ins. Corp., 554 S.W.2d 183 (Tex. 1977) (sets elements of fraud requiring justifiable reliance)