Klein v. HP Pelzer Automotive Systems, Inc.
306 Mich. App. 67
Mich. Ct. App.2014Background
- In Nov 2009 HP Pelzer CEO Dean Youngblood sent letters to Douglas and Amy Klein stating they would be entitled to a minimum severance equal to one year’s compensation "if your employment with HP Pelzer Automotive Systems Inc is terminated or ended in any manner in the future."
- In June 2011 COOs John Pendleton sent letters rescinding the 2009 severance letters and reminded employees HP Pelzer was an at-will employer.
- Plaintiffs’ counsel rejected the rescission and plaintiffs then resigned effective Aug 2, 2011 and sought severance under the 2009 letters.
- Plaintiffs sued for breach of express contract, breach of implied contract, and promissory estoppel; trial court granted summary disposition for plaintiffs on the express-contract claim and awarded damages.
- Defendant appealed; the court reviewed whether the 2009 letters created an enforceable unilateral contract (vested severance) or instead a revocable policy, and whether implied-contract and estoppel claims survived.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the 2009 letters create an enforceable unilateral contract for one-year severance? | Youngblood’s letters were unilateral offers that plaintiffs accepted by continuing employment; Cain prevents revocation after acceptance. | The letters created a revocable severance policy because they required no performance or forbearance; no unilateral contract formed. | Held: No unilateral contract — letters were a revocable policy because they required no consideration/vested act. |
| Could defendant revoke the severance policy before plaintiffs resigned? | Plaintiffs argued acceptance had vested rights so revocation was precluded. | Pendleton’s June 7, 2011 letters validly rescinded the policy; no vesting had occurred. | Held: Revocation was effective; policy was not vested and was revoked before resignations. |
| Could plaintiffs prevail on an implied-contract (Toussaint-style) claim? | Plaintiffs asserted legitimate expectations arising from employer statements could create enforceable rights. | Defendant argued Toussaint’s legitimate-expectations doctrine does not extend to severance pay/policies and employer may change policies with notice. | Held: No implied contract; courts decline to extend Toussaint to severance policies and, in any event, the policy was revoked with reasonable notice. |
| Does promissory estoppel apply to enforce the severance promise? | Plaintiffs claimed they relied and would be unjustly harmed if promise not enforced. | Defendant argued there was no reasonable expectation that revocation would induce resignation soon after; no detrimental reliance of required character. | Held: Promissory estoppel fails — no reasonable expectation of inducement and no enforceable reliance. |
Key Cases Cited
- Cain v Allen Elec. & Equip. Co., 346 Mich 568 (company policy offering termination pay became enforceable after employee’s continued service)
- Sniecinski v Blue Cross & Blue Shield of Mich., 469 Mich 124 (unilateral contract principles and consideration by performance/forbearance)
- Kolka v Atlas Chem. Indus., 13 Mich App 580 (separation pay policy unenforceable where employee could not provide consideration)
- In re Certified Question, 432 Mich 438 (written personnel policies are flexible operational guidance; employers may unilaterally modify with reasonable notice)
- Toussaint v Blue Cross & Blue Shield of Mich., 408 Mich 579 (discharge-for-cause doctrine and legitimate-expectations analysis)