Max Huber (“Huber”) filed a complaint in state court against his former employer, Standard Insurance Company (“Standard”), seeking compensatory and punitive damages for (1) wrongful discharge, (2) breach of the covenant of good faith and fair dealing, (3) intentional infliction of emotional distress, and (4) breach of contract concerning payment of commissions. The action was removed to federal court on the basis of diversity jurisdiсtion. After discovery was completed, Standard filed a motion for summary judgment. The district court granted partial summary judgment dismissing the first three causes of action and striking the claim for punitive damages. The parties subsequently settled the fourth cause of action. Huber appeals the grant of summary judgment as to the second and third causes of action and as to the striking of the claim for punitive damages.
We reverse the district court’s grant of summary judgment as to the second and third causes of action and as to striking the claim for punitive damages.
BACKGROUND
Huber and Standard entered into a written employment contract effective on November 20, 1973. According to this contract, Huber was employed by Standard as agency manager of Standard’s Los Angeles *982 agency. Huber was forced, at the threat of termination, to agree to an amended version of this contract effеctive April 16, 1981. The amended contract states that “either you [Huber] or Standard may terminate this Contract by sending thirty days written notice to that effect to the other at his last known address.” Huber was terminated on July 22, 1982, effective August 21, 1982.
Uncontested statements made in Huber’s affidavit show that Standard never informed Huber of any dissatisfaction with his performance before the day of his termination. The letter terminating Huber’s employment listed as the reasons fоr termination (1) Huber’s negative attitude and criticism of Standard’s new products, which adversely affected the Los Angeles agency, (2) the Los Angeles agency’s increasing expense ratio, and (3) the Los Angeles agency’s unsuccessful recruiting.
Huber's affidavit opposing summary judgment contradicts the assertion that he was critical of the new products and that the Los Angeles agency had been adversely affected. Huber’s affidavit states that he did not express unhappiness about the new products and actually encouraged the members of his agency concerning them. Furthermore, as stated in the affidavit, Huber’s alleged critical attitude concerning the new products could not have adversely affected performance during Huber’s tenure because the new products were released in the Los Angeles area only five days before Huber was informed of his termination. Huber’s affidavit also states that the Los Angeles agency ranked second in performance among all of the Standard agencies for the six months ending June 30, 1982, the period immediately preceding Huber’s termination on July 22. This fact was publicized in a Standard publication.
Huber’s affidavit opposing summary judgment shows that the factors negatively affecting the expense ratio during 1982 were not within Huber’s control, but rather were in the control of his superiors. Huber’s affidavit lists as examples a decision by his superiors in 1982 to increase office space thereby doubling the rent, against Huber’s recommendation, and a decision by his superiors in 1981 to decrease the commission rate on first year commissions to be paid to agents. Furthermore, Huber’s affidavit states that his agency operated within the budgetary limitations set by his superiors.
Huber’s affidavit shows that his recruiting was successful. Huber’s affidavit states that during his tenure as agency manager for the Los Angeles agency, he had a net increase of agents under contract of 1100%, and that the company as a whole had a substantial decrease over the same period.
All three of Huber’s superiors whose names appear on his termination letter, Canfield, Halverson, and Johnson, have admitted in deposition testimony that they had not considered terminating Huber until June 1982. Two of them, Canfield and Johnson, testified that Huber’s termination had not been considered until July 1982, the month Huber was terminated.
In 1981 Huber was informed that Johnson, who was then Canfield’s immediate superior, wished to terminate Canfield, who was Huber's immediate superior. When Johnson asked Huber to evaluate Canfield, Huber decided to put his comments about Canfield in writing and to send copies of the evaluation to other Standard officers. Huber contends in his affidavit that his letter positively evaluating Canfield made it impossible to terminate Canfield. Instead, Johnson had Canfield moved to another position. Huber also contends in his affidavit that as a result of these events leading to Canfield’s transfer on January 1, 1982, Johnson sought in 1982 to retaliate and terminate Huber.
According to Huber’s affidavit, Standard has a practice of allowing terminated agency managers to continue as agents until their pensions vest. Huber, who was 60 at the time of his termination, requested such a demotion when he was informed of his termination as agency manager. His superiors did not grant this request. In addition, Huber was informed of his termination on a Thursday and was asked to *983 vacate his office before the following Monday.
STANDARD OF REVIEW
This court reviews a grant of summary judgment de novo. Our determination is governed by the standard found in Fed.R. Civ.P. 56(c) governing summary judgment in the trial court.
Darring v. Kincheloe,
DISCUSSION
I. The Covenant of Good Faith and Fair Dealing
a. Elements of the Tort
In order to review the district court’s grant of summary judgment against Huber’s claim that Standard committed a tort by breaching the implied covenant of good faith and fair dealing, we must decide what the elements of such a tort are in the context of an employment contract under California law.
The California Supreme Court has recognized that “in California, the law implies in
every
contract a covenant of good faith and fair dealing,” but has also stated that “the proposition that ... breach of the covenant always gives rise to an action in tort ... is not so clear.”
Seaman’s Direct Buying Serv., Inc. v. Standard Oil Co.,
Because the California Supreme Court has not directly addressed the issue, we look to decisions of the California courts of appeal for guidance.
Miller v. Fairchild Indus.,
One line of court of appeal opinions holds fast to the language of
Cleary v. American Airlines,
[t]wo factors are of paramount importance in reaching our result that plaintiff has pleaded a viable cause of action. One is the longevity of service by рlaintiff. ...
The second factor of considerable significance is the expressed policy of the employer.... [I]ts existence compels the conclusion that this employer had recognized its responsibility to engage in good faith and fair dealing rather than in arbitrary conduct with respect to all of its employees_ [These factors preclude] any discharge of such an employee by the employer without good cause.
The other line of court of appeal cases has held that the factors discussed in
Cleary
do not define the tort in the case of an employment contract cоntaining no term of employment. For instance, in
Khanna v. Microdata Corp.,
a breach of the implied covenant of good faith and fair dealing in employment contracts is established whenever the employer engages in “bad faith action extraneous to the contract, combined with the obligor’s intent to frustrate the [employee’s] enjoyment of contract rights.” The fаcts in Cleary establish only one manner among many by which an employer might violate this covenant.
If ... the existence of good cause for discharge is asserted by the employer without probable cause and in bad faith, that is, without a good faith belief that good cause for discharge in fact exists, the employer has tortiously attempted to deprive the emрloyee of the benefits of the agreement, and an action for breach of the implied covenant of good faith and fair dealing will lie.
To determine whether summary judgmеnt for Standard with respect to the breach of the covenant was proper, we must adopt one of the two approaches taken by the courts of appeal.
The
Foley
approach, which requires longevity and an express policy not to terminate arbitrarily to establish breach of the covenant, does not square with the precedent.
Cleary,
the supposed source of this approach, does not present longevity and express policy as prerequisites.
Cleary
says only that these two considerations are “factors ... of paramount importance in reaching our result,” “factor[s] ... of considerable significance.” Ill Cal.App.3d at 455,
The
Khanna/Koehrer
approach is more compelling because it does not treat the implied- covеnant of good faith and fair dealing in employment contracts as a distinct area of the law. Instead, this approach treats the implied covenant in employment contracts as a species of the implied covenant of good faith and fair dealing that is, according to the California Supreme Court, implied in every contract.
*985
Seaman’s,
b. Bad Faith Acts Extraneous to the Contract
Khanna,
as stated above, predicates the tort upon “bad faith action extraneous to thе contract, combined with the obligor’s intent to frustrate the [employee’s] enjoyment of contract rights.”
Khanna,
Standard argues that the requirement of acts extraneous to the contract places upon Huber the burden of proving the existence of some hidden motivation that directly shows bad faith on the part of the employer. Proоf that the employer did not have good cause to terminate the employee is, according to Standard, insufficient as a matter of law to establish a breach of the implied covenant. Standard has cited and we have found no authority requiring proof of a hidden motivation.
In
Cleary,
the court said the following with respect to the plaintiff’s burden: “We recognize, of course, that plaintiff has the burden of proving that he was terminated unjustly, and that the employer, American Airlines, will have its opportunity to demonstrate that it did in fact exercise good faith and fair dealing with respect to plaintiff.”
In
Khanna,
the court accepted proof resembling the proof offered in the instant ease as sufficient to sustain a jury verdict. The court stated that although evidence discrediting the stated reasons for plaintiff’s termination “did not compel a finding that ... [the employer] acted in bad faith, it did provide a substantial basis for the jury to infer bad faith.”
In the present case, Huber has presented affidavits establishing genuine issues of mаterial fact as to his claim of wrongful discharge. Standard stated in the termination letter that Huber was discharged for the effect that his negative attitude about the new products had on the Los Angeles agency’s performance. Yet there is undisputed evidence that the Los Angeles agency performed well, and that in any event Huber was terminated only five *986 days after the new products were released in the Los Angeles areа. Standard stated in the termination letter that Huber was discharged because of the Los Angeles agency’s increasing expense ratio. Yet there is undisputed evidence that the expense ratio was adversely affected by factors beyond Huber’s control, and that the agency stayed within budget guidelines. Finally, Standard stated in the termination letter that Huber was discharged because of unsuccessful recruiting. Yet there was undisputed evidеnce that recruiting in the Los Angeles agency was more successful than recruiting in Standard as a whole.
Because Huber presented affidavit evidence reciting easily verifiable facts contradicting each of Standard’s stated reasons for termination, Huber has raised genuine issues of material fact as to wrongful discharge, and thus has raised genuine issues of material fact as to the existence of a prima facie сase of breach of the covenant of good faith and fair dealing.
II. Intentional Infliction of Emotional Distress
For an action in intentional infliction of emotional distress to lie, the defendant must engage in outrageous conduct that is “so extreme as to exceed all bounds of that usually tolerated in a civilized community.”
Davidson v. City of Westminster,
In
Rulon-Miller v. International Business Machines Corp.,
In
Wallis v. Superior Court,
Behavior may be considered outrageous if a defendant (1) abuses a relation or position which gives him power to damage the plaintiff’s interest; (2) knows the plaintiff is susceptible to injuries through mental distress; or (3) acts intentionally or unreasonably with the recognition that the acts are likely to result in illness thrоugh mental distress.
Wallis,
In the present case there is undisputed evidence that Huber, who was an *987 agency manager for Standard for approximately 8 years, was terminated without ever having been warned that his conduct was unsatisfactory. Furthermore, the purported reasons for Huber’s termination were memorialized in a letter, leaving a record for potential future employers. It is also undisputed that Huber, at the age of fifty, was not allowed to stay on as an employee until his pension would vest, even though there is evidence that the standard procedure for terminated agency managers was to allow them to stay on. Finally, although Huber’s termination was еffective thirty days from notice of termination, it is undisputed that he was asked to vacate his office in one work day.
This evidence tends to show that the way in which Standard allegedly wrongfully terminated Huber would humiliate and degrade him. Furthermore, the evidence that there was a letter memorializing for potential employers the purported reasons for termination and that Standard would not allow Huber to stay on in an inferior capacity in order for his pension to vest tends to show that Standard abused its position of power to damage Huber’s interests. Therefore, this evidence raises genuine issues of material fact as to intentional infliction of emotional distress.
III. Punitive Damages
To be entitled to punitive damages for the commission of a tort, the tortfeasor “must be guilty of oppression, fraud, or malice.” Cal.Civ.Code § 3294. The tortfeasor must “act with the intent to vex, injure or annoy, оr with a conscious disregard of the plaintiff’s rights.”
Silberg v. California Life Ins. Co.,
The plaintiff need not directly prove malice on the part of the defendant to be entitled to punitive damages. Malice may be proved “ ‘either expressly (by direct evidence probative on the existence of hatred or ill will) or by implication (by indirect evidence from which the jury may draw inferences).’ ”
Neal v. Farmers Ins. Exchange,
Huber has presented indirect evidence of malice. Evidence that Standard terminated Huber without cause and without warning, memorialized in a letter damaging pretex-tual reasons for discharge, refused to allow Huber’s pension to vest, requested Huber’s immediate removal from his office, combined with evidence that retaliation was the motive for termination, raise genuine issues of material fact as to whether punitive damages are proper in the instant case.
CONCLUSION
We hold that Huber has presented sufficient evidence to establish genuine issues of material fact as to breach of the implied covenant of good faith and fair dealing, the intentional infliction of emotional distress, and the availability of punitive damages. Accordingly, we reverse the district court’s order granting Standard’s motion for summary judgment.
REVERSED and REMANDED.
Notes
. At least one court has held that there can be no breach of the covenant of good gaith and fair dealing when a written contract provides for termination at any time.
See Malmstrom v. Kaiser Aluminum & Chemical Corp.,