Lead Opinion
In this case, we must decide whether or to what extent a jury may examine or review the factual bases of an employer’s decision to terminate an employee in the absence of an express directive from the employment contract. That question has been answered in this jurisdiction with regard to two
I.
The controversy surrounds an employment agreement between Michael Conte, the employee, and Towson University (the University), the employer. In 1996, the University hired Dr. Conte to become the director of the Regional Economic Studies Institute at Towson University (RESI). The University and Dr. Conte executed an employment contract that enumerated Dr. Conte’s duties as the new director of RESI, as well as his compensation, period of employment, and the causes for which he could be terminated.
In 1998, several events came to the attention of the University and led to the decision to terminate Dr. Conte. Most of these events centered around RESI’s relationship with the State Department of Human Resources (DHR), RESI’s primary revenue source. As the owner of RESI’s computer database and software, under federal regulations, DHR was entitled to compensation for any income generated by RESI’s use of DHR equipment. Dr. Conte was responsible for developing an acceptable methodology for compensating DHR. In June 1998, DHR complained to Dr. Conte about RESI’s accounting of that compensation, which was, according to DHR, inconsistent and incomprehensible. Troubled by RESI’s accounting procedures, DHR hired a private accounting firm to review them and tried to resolve its issues with RESI through Dr. Conte. None of these attempts was successful, and the relationship between DHR and Dr. Conte deteriorated until the University Provost John Haeger was informed of the dispute and intervened. Although the University eventually was able to save the contract and settle the disputed costs with DHR, it became extremely dissatisfied with the manner in which Dr. Conte had handled the issues and blamed him for the accelerated reduction in DHR’s contract by $2,300,000.00 the following fiscal year.
In November of 1998, President Smith convened a meeting to discuss RESI’s status. The meeting included RESI’s associate director, an assistant director, and a former assistant director who had raised concerns about Dr. Conte’s management of RESI. Shortly after the meeting, President Smith asked the University’s counsel to investigate whether the University had just cause to terminate Dr. Conte. During the investigation, various other problems with RESI came to the University’s attention, including irregularities in the services provided to other clients and Dr. Conte’s alleged attempt to convert RESI into a private entity. After the meeting, Dr. Conte was informed of the University’s intent to terminate him and its request for him to resign.
Because Dr. Conte refused to resign, Provost Haeger sent him a detailed letter explaining the causes for his termination. Alleging “incompetence” and “wilful neglect of duty” — two of the just causes for termination enumerated in Dr. Conte’s employment contract — the University cited Dr. Conte’s handling of the DHR contract, which resulted in an approximate $2,300,000 revenue loss for the fiscal year 1999; RESI’s estimated operating losses of $930,000 for the period between July and December 1998; RESI’s failure to abide by federal, state, and University regulations in its record-keeping practices; the dissatisfaction of other clients with RESI’s work product; the dissatisfaction of several RESI employees who complained about Dr. Conte’s management style; as well as various other reasons for the termination. Dr. Conte disputed
Dr. Conte filed a complaint in the Circuit Court for Baltimore County against the University, alleging, inter alia, that the University had wrongfully discharged him and breached his employment contract. He sought damages for his alleged wrongful termination as director of RESI, the University’s refusal to pay him additional compensation as defined by his employment agreement,
In September 2001, trial commenced before a jury in the Circuit Court for Baltimore County. At the close of the evidence and testimony of several witnesses, the trial judge instructed the jury that the “University has the burden to prove by a preponderance of the evidence that one or more of the [causes in Dr. Conte’s] contract existed for the plaintiffs termination” (emphasis added). The trial judge refused the University’s request to instruct the jury that, in the event they find just cause to be required under the contract, the University was nevertheless permitted to terminate Dr. Conte for “common law cause” or cause that goes to the “essence of the contract.” The jury returned with a verdict in Dr. Conte’s favor, finding that the University did not prove by a preponderance of the evidence that just cause existed under the contract to fire Dr. Conte, and awarding him $926,822.00 in damages.
The University filed a petition for writ of certiorari in this Court to consider two questions.
II.
From petitioner’s perspective, a jury’s role in disputes involving just cause employees is not to determine whether just cause in fact existed, but to determine whether the employer acted in good faith, and not arbitrarily or capriciously, when it decided there was just cause to fire the employee. Put another way, provided the University genuinely believed that Dr. Conte was incompetent or wilfully neglectful of his duties as director, whether Dr. Conte was actually incompetent or wilfully neglectful is irrelevant to the jury’s inquiry. According to petitioner, then, the jury’s inquiry must center
Underlying petitioner’s position is the strong judicial policy against interfering with the business judgment of private business entities. See Sadler v. Dimensions,
Supplementing the argument, petitioner also asserts that Dr. Conte’s employment contract expressly reserved to the University, not to a trial court or jury, the right to determine whether just cause existed, i.e., the fact-finding prerogative. Petitioner reasons that because Paragraph 6.2 of the employment contract establishes a procedure for appeal from the employer’s decision to terminate, that procedure necessarily implies that the University had the sole authority to determine whether just cause existed. Relatedly, petitioner argues that absent any express provision assigning the fact-finding prerogative to a third-party or jury, the trial court should not have permitted the jury to determine de novo whether just cause had been proved by a preponderance of the evidence. Petitioner urges this Court to “confirm, as have a number of decisions from other states, that an employer reserves the right to terminate an employee for cause unless the employ
In response to petitioner’s arguments, respondent asserts that petitioner essentially wants to transform an express, just cause employment contract into an at-will employment contract. The cases relied upon by petitioner are almost all in the context of “implied” employment contracts, as in contracts implied from employee handbooks, or “satisfaction” contracts, in which the employer expressly reserves the right to terminate if it deems the employee’s performance unsatisfactory. None of the cases deal "with an express contract sans a satisfaction clause, like the one agreed to by both parties to this litigation.
Furthermore, respondent states that petitioner’s reading of the contract distorts its plain meaning, which indicates the intention by both the University and Dr. Conte to permit termination only for just cause. Paragraph 6.2 of the contract merely promises a perfunctory hearing before the President, basically a “rubber-stamp” of the decision to terminate after it unquestionably had been determined already. Respondent argues that under Maryland law, one party is not permitted to retain the ultimate fact-finding prerogative with respect to a breaching event, unless the contract expressly grants the fact-finding prerogative to one of the parties. Respondent cites Foster-Porter Enterprises v. De Mare,
Notably, neither party points to Maryland case law that deals squarely with the jury’s role in deciding wrongful termination cases. Both parties rely mainly on cases from other
III.
A.
Our analysis begins, as it should, with the language of the employment contract at issue. The interpretation of a contract, including the determination of whether a contract is ambiguous, is a question of law, subject to de novo review. Sy-Lene v. Starwood,
“[A court is to] determine from the language of the agreement itself what a reasonable person in the position of the parties would have meant at the time it was effectuated. In addition, when the language of the contract is plain and unambiguous there is no room for construction, and a court must presume that the parties meant what they expressed. In these circumstances, the true test of what is meant is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant. Consequently, the clear and unambiguous language of an agreement will not give away to what the parties thought that the agreement meant or intended it to mean.”
Calomiris,
6. Termination:
6.1 The University may terminate this appointment for cause which shall include:
(a) the intentional violation of University of Maryland
System Regulations or University regulations
(b) wilful neglect of duty
(c) insubordination
(d) incompetence
(e) misconduct
(f) criminal conduct
(g) long-term physical or mental condition which renders
Dr. Conte unable to perform the duties essential to the
Director’s position
6.2 In the event the University terminates this Appointment, for the above reasons, it shall notify the Director, in writing, of the cause for which termination is sought and the right of the Director to request a hearing by the University President or the President’s designee. The hearing must be requested within 30 days of the Director’s receipt of the written termination notice. In the event no such hearing is requested, the termination shall become immediately effective.
Two legal consequences relevant to our discussion can be drawn from the language of the contract.
First, Paragraph 6.1 of the contract makes clear that Dr. Conte was not an “at-will” employee. The University could not fire Dr. Conte on a whim, nor could it avail itself of the various legal protections afforded employers who terminate at-will employees. Although employment in Maryland is presumptively at-will, see Porterfield v. Mascari,
Second, the language of the contract is ambiguous as to whether the fact-finding prerogative lies with the University. On the one hand, we note the glaring absence of express language directing the fact-finding prerogative to the University. Paragraph 6.2 provides a procedural safeguard for Dr. Conte — a hearing before the President of the University before termination may take effect. But it does not say the President’s decision is final, nor does it intimate that the traditional judicial remedy was foreclosed to Dr. Conte if he disagreed with the President’s decision. The contract is silent as to adequate investigation, fact-finding, or arbitration in the event of dispute, and it provides no semblance of procedural or evidentiary safeguards that would imply that adjudicatory
On the other hand, it is just as difficult, if not more difficult, to understand Paragraph 6.2 as having a rational basis for existence unless it was meant to reserve, at some level, the fact-finding prerogative for the University. If the parties intended to permit the relitigation of every fact related to Dr. Conte’s termination, why was it necessary to grant Dr. Conte the right to a hearing in the first place? One response is that Dr. Conte’s hearing provides an avenue whereby a factual dispute or mistake might be resolved by the parties before resorting to the expensive measure of litigation. But that response is not persuasive with regard to Paragraph 6.2, which grants Dr. Conte the “right” to a hearing. Resolving disputes privately does not require giving the employee the right to a hearing as a condition for effective termination. That avenue always exists, even in the absence of a provision like Paragraph 6.2. In other words, a hearing would accomplish nothing that would not be accomplished in court before the jury. Paragraph 6.2 would be rendered superfluous, and courts do not interpret contracts in a manner that would render provisions superfluous or as having no effect. See Walker v. Dept. of Human Resources,
In that case, we must decide, in the employment law sphere, who should presumptively retain the fact-finding prerogative. We have already addressed this issue with regard to two different types of employees, the employee at-will and the employee subject to a satisfaction employment contract. We now address this issue with regard to a third type of employee, who, like Dr. Conte, may be fired only for just cause.
B.
In order to glean guidance on this issue, we start with an analysis of the presumptive fact-finder in the types of employment relationships for which this question has already been answered. In the at-will employment context, we have held that a jury may not review any aspect of the employer’s decision to terminate and that the employer may, absent a contravening public policy, terminate an employer for any reason, even a reason that is arbitrary, capricious, or fundamentally unfair. See Porterfield,
A jury’s review, however, is ratcheted up one step when the employment is pursuant to a “satisfaction” employment contract. See, e.g., H & R Block, Inc. v. Garland,
“In a contract where the employer agrees to employ another as long as the services are satisfactory, the employer has the right to terminate the contract and discharge the employee, whenever he, the employer, acting in good faith is actually dissatisfied with the employee’s work. This applies, even though the parties to the employment contract have stipulated that the contract shall be operative during a definite term, if it provides that the services are to be performed to the satisfaction of the employer. It is not necessary that there exist grounds deemed adequate by the trier of facts for the employer’s dissatisfaction. He is the judge as to whether the services are satisfactory. However, this dissatisfaction, to justify the discharge of the employee, must be real and not pretended, capricious, mercenary, or the result of a dishonest design. If the employer feigns dissatisfaction and dismisses the employee, the discharge is wrongful. The employer in exercising the right of dismissal because of dissatisfaction must do so honestly and in good faith.”
Id. at 85-86,
Finally, there are employment contracts that grant a greater level of protection from termination than both the at-will and satisfaction employment contracts, by which we mean the just cause employment contract. To what extent may a jury review an employer’s decision to terminate when the employer has promised not to terminate except for just cause? At-will employment contracts permit review of neither the employer’s motivation nor the factual bases for termination. Satisfaction employment contracts permit review only of the employer’s motivation, limited to his or her subjective motivation, but not the factual bases for termination. Just cause employment contracts, such as in the case sub judice, logically permit the jury to review with greater scrutiny the employer’s decision to terminate than do satisfaction contracts. Does a just cause employment contract require, as respondent posits, a jury’s review of the factual bases in addition to the employer’s motivation? Or, as petitioner argues, is a just cause contract similar to a satisfaction contract, permitting review of the employer’s “good faith,” but nothing more?
While we disagree that just cause employment contracts should be treated like satisfaction contracts, we will not
Following closely on the heels of Toussaint, however, a case by the Oregon Supreme Court implicitly rejected the Tous-saint holding. Simpson v. Western Graphics Corp.,
We agree with the Oregon Supreme Court that absent some express indication otherwise, an employer does not contract away his core function as ultimate fact-finder with regard to an employer’s workplace performance. We will not interpret Dr. Conte’s employment contract as granting a third-party, the jury, the authority to review the factual bases of the University’s decision to terminate him — especially in light of our previous holdings, with regard to satisfaction and at-will employment relationships, that have consistently attributed the fact-finding prerogative to the employer. As Judge Cathell, then on the Court of Special Appeals, aptly warned, “[t]o hold otherwise would be to put the courts in the position of making ... personnel decisions, acting as a super personnel officer, or of second-guessing a company’s decisions.” Elliott,
“[Allowing a jury to trump the factual findings of an employer with regard to just cause] would create the equivalent of a preeminent fact-finding board unconnected to the challenged employer, that would have the ultimate right to determine anew whether the employer’s decision to terminate an employee.... This ex officio ‘fact-finding board,’ unattuned to the practical aspects of employee suitability over which it would exercise consummate power, and unexposed to the entrepreneurial risks that form a significant basis of every state’s economy, would be empowered to impose substantial monetary consequences on employers whose employee termination decisions are found wanting.”
Vargas,
“As several courts have pointed out, a standard permitting juries to reexamine the factual basis for the decision to terminate for misconduct — typically gathered under the exigencies of the workaday world and without benefit of the slow-moving machinery of a contested trial — dampens an employer’s willingness to act----
“Equally significant is the jury’s relative remoteness from the everyday reality of the workplace. The decision to terminate an employee for misconduct is one that not uncommonly implicates organizational judgment and may turn on intractable factual uncertainties, even where the grounds for dismissal are fact specific. If an employer is required to have in hand a signed confession or an eyewitness account of the alleged misconduct before it can act, the workplace will be transformed into an adjudicatory arena and effective decisionmaking will be thwarted. Although these features*89 do not justify a rule permitting employees to be dismissed arbitrarily, they do mean that asking a civil jury to reexamine in all its factual detail the triggering cause of the decision to dismiss — including the retrospective accuracy of the employer’s comprehension of that event-months or even years later, in a context distant from the imperatives of the workplace, is at odds with an axiom underlying the jurisprudence of wrongful termination. That axiom ... is the need for a sensible latitude for managerial decisionmaking and its corollary, an optimum balance point between the employer’s interest in organizational efficiency and the employee’s interest in continuing employment.”
Id. at 420-421 (citation omitted). The majority of high courts that have considered the issue are in agreement with California, see supra, and so are we.
As outlined above and in addition to the logical progression of our precedent, the practical considerations of running a business overwhelmingly favor a legal presumption that an employer retain the fact-finding prerogative underlying the decision to terminate employment. Indeed, this case is a good example as to why a jury should not be permitted to review the factual bases for termination in the employment context. Because of the strict evidentiary rules of a judicial proceeding, the University was barred from admitting into evidence hearsay statements relied upon by the University in its termination decision. Nevertheless, employers often “rely on hearsay, on past similar conduct, on their personal knowledge of people’s credibility, and on other factors that the judicial process ignores,” indicating that “|w]hat works best in a judicial proceeding may not be appropriate in the employment context.” Waters v. Churchill,
Respondent refers us to two Court of Special Appeals cases, Tricat v. Harper,
Finally, we are unpersuaded by respondent’s argument that many of the cases that have held, as we do, that the presumption of fact-finder lies with the employer apply only to the implied contract case. Cf Cotran,
In sum, we agree with the majority of jurisdictions that have considered this issue and hold that a jury’s role in a wrongful discharge case does not include that of ultimate fact-finder. Instead, in the just cause employment context, a jury’s role is to determine the objective reasonableness of the employer’s decision to discharge, which means that the employer act in objective good faith and base its decision on a reasoned conclusion and facts reasonably believed to be true by the employer.
IV.
Although Part III of this opinion resolves the dispute and will require a new trial, we will give guidance on the second question presented, as it will undoubtedly arise again in the litigation. This issue is whether Dr. Conte’s employment contract was exclusive in its enumeration of the just
6. Termination:
6.1 The University may terminate this appointment for cause which shall include:
(a) the intentional violation of University of Maryland System Regulations or University regulations
(b) wilful neglect of duty
(c) insubordination
(d) incompetence
(e) misconduct
(f) criminal conduct
(g) long-term physical or mental condition which renders Dr. Conte unable to perform the duties essential to the Director’s position
* * *
6.3 The appointment shall terminate for the following reasons:
(a) The Director’s acceptance of other employment; the Director’s resignation, or the Director’s retirement.
(b) Pursuant to Maryland law, if funds are not appropriated or otherwise made available to support continuation of this position on or after July 1, 1997, and the Director chooses not to operate RESI on a self-supporting basis.
(c) The Director’s death.
7. Faculty Appointment:
In the event the Director is terminated for reasons other than those provided in paragraph 6.1(a) through (g) and 6.3(a), or if this Appointment is not renewed, the Director shall be appointed Professor of economies, with tenure, subject to the University of Maryland System Appointment, Rank and Tenure Policies and Procedures and University*93 Policies and Procedures on the appointment of tenured faculty, as amended from time to time.
Because we find these provisions clearly and unambiguously manifest an intent by the parties not to limit the just causes for which Dr. Conte could be terminated, we will enforce those terms.
Dr. Conte’s contract does not limit the causes for his termination to those enumerated by 6.1(a) — (g) because the language in Paragraph 6.1 of the contract is clear and unambiguous. “The University may terminate this employment for cause which shall include [the enumerated seven causes].” This language does not expressly or impliedly make those causes exclusive. The word “include” ordinarily means “comprising by illustration and not by way of limitation.” Group Health Ass’n v. Blumenthal,
This interpretation is further supported by the word “may” in Paragraph 6.1. Connoting a permissive, discretionary action, the word “may” indicates that the University, at its discretion, could terminate Dr. Conte for the seven enumerated causes, but it did not require the University to do so. Cf. Board of Physician v. Mullan,
Respondent argues that the causes “other than those provided for in Paragraph 6.1(a) through (g) and 6.3(a)” refer to 6.3(b) alone and do not imply that “other” just causes might exist. We find this explanation unpersuasive and objectively unreasonable. If the parties had truly intended such a thing, a much more logical, simple, and intuitive way of articulating their intent would have been to use language such-as “for the reason stated in 6.3(b) of this contract.” Indeed, the plain language of the contract refutes respondent’s interpretation, for it uses the plural, “reasons,” indicating that the singular reason stated in 6.3(b) is not the only reason for termination contemplated by the contract. To adopt respondent’s understanding of the contract would belie common sense.
Therefore, the claim that the contract intended the causes of Paragraph 6.1 to be exclusive is unpersuasive. The implication for petitioner is that the University may base its cause for termination on reasons other than those listed in the contract. See Regal Savings Bank v. Sachs,
This understanding of the contract does not transform Dr. Conte into an employee at-will. As we have already stated, the contract establishes, and it is conceded, that Dr. Conte could be terminated only for just cause. Thus, as long as the
In this case, the University could base its termination on “common law cause” — which permits an employer to terminate an employee for a “material breach” of the contract, one that goes “to the essence” of the contract itself — even though that cause is not mentioned in the contract. See id. But it could not terminate Dr. Conte at its discretion or for any other reason that would not satisfy the just cause requirement.
In his dissent, Judge Eldridge raises two jurisdictional or quasi-jurisdictional issues — that Dr. Conte’s only available judicial remedy was to seek judicial review of the administrative decision by the President of Towson, and that his breach of contract action was filed beyond the one year allowed by Maryland Code, § 12-202 of the State Government Article. On the state of the record before us, neither of those issues appears apposite.
Towson University is part of the University System of Maryland. See Maryland Code, § 12-101 of the Education Article. Section 12 — 104(j)(2) of the Education Article makes clear that, except with respect to grievance appeals under Title 13, subtitle 2 of the Education Article, of which this action is not one, the contested case provisions of the Administrative Procedure Act do not apply to the University, and there is, accordingly, no statutory provision for any administrative hearing to which Dr. Conte would be entitled or any APA-type of judicial review of administrative proceedings provided for in his contract.
Although, under our case law, the courts have inherent authority, by mandamus or injunction, to review administrative decisions alleged to be arbitrary, capricious, or unlawful in some way (see, e.g., Criminal Inj. Comp. Bd. v. Gould,
With respect to Conte’s alleged failure to comply with the one-year limitations period provided in § 12-202 for bringing a breach of contract action against the State, it would appear that his action was, in fact, timely. His contract and employment were formally and effectively terminated on January 26, 1999, and his action was filed on January 24, 2000. Whether Dr. Conte could have sued for injunctive relief prior to January 26, 1999, to preclude Towson University from terminating his contract or for an anticipatory breach of contract — an issue that is not before us — his cause of action for the actual breach did not and could not arise until the contract was, in fact, terminated.
Citing and relying upon Delaware State College v. Ricks,
JUDGMENT OF THE COURT OF SPECIAL APPEALS REVERSED. CASE REMANDED TO THAT COURT WITH DIRECTIONS TO REVERSE THE JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE COUNTY AND TO REMAND THE CASE TO THAT COURT FOR A NEW TRIAL. COSTS IN THIS COURT AND IN THE COURT OF SPECIAL APPEALS TO BE PAID BY RESPONDENT.
BELL, C.J. and ELDRIDGE, J., dissent.
Notes
. While discovery was proceeding, the Circuit Court dismissed, on limitation grounds, Dr. Conte's claim for additional compensation for fiscal years 1997 and 1998.
. We denied Dr. Conte's cross-petition for certiorari.
. Petitioner argues that the burden of proving just cause or the absence thereof lies with Dr. Conte, and that the trial court erred when it assigned the burden to the University. While this issue was raised and argued before the trial and intermediate appellate courts, the issue is not contained in the petition for certiorari, and we will not consider it. See Maryland State Police v. Zeigler,
. Section 2 of Dr. Conte's employment contract provides a set employment period from April 1, 1996 to June 30, 1999.
. We do not intimate that the subjective standard applies to satisfaction contracts outside the employment sphere. See First National v. Warren-Ehret,
Dissenting Opinion
dissenting.
In this case, Towson University, the petitioner, and Michael Conte, the respondent, entered into an employment contract, pursuant to which the petitioner’s right to terminate the respondent’s employment was conditioned on there being “just cause” for doing so.
The majority accurately characterizes this contractual arrangement as a “just cause” contract, one pursuant to which the employee “may be fired only for cause,” see Towson University v. Michael Conte,
In defining the fact-finder’s limited role in the review of satisfaction contracts, the majority relies on Ferns v. Polan-sky, from which it quotes the rule, as follows:
“In a contract where the employer agrees to employ another as long as the services are satisfactory, the employer has the right to terminate the contract and discharge the employee, whenever he, the employer, acting in good faith is actually dissatisfied with the employee’s work. This applies, even though the parties to the employment contract have stipulated that the contract shall be operative during a definite term, if it provides that the services are to be performed to the satisfaction of the employer. It is not necessary that there exist grounds deemed adequate by the trier of facts for the employer’s dissatisfaction. He is the judge as to whether the services are satisfactory. However, this dissatisfaction, to justify the discharge of the employee, must be real and not pretended, capricious, mercenary, or the result of a dishonest design. If the employer feigns dissatisfaction and dismisses the employee, the discharge is wrongful. The employer in exercising the right of dismissal because of dissatisfaction must do so honestly and in good faith.”
Towson,
“... the jury may not review whether the factual bases for termination actually occurred or whether they were proved by a preponderance of the evidence submitted for its review. Instead, the proper role of the jury is to review the objective motivation, i.e., whether the employer acted in objective*100 good faith and in accordance with a reasonable employer under similar circumstances when he decided there was just cause to terminate the employee. The jury’s inquiry should center on whether an employer’s termination was based upon any arbitrary, capricious, or illegal reason, or based on facts not reasonably believed to be true by the employer. But the fact-finding prerogative will remain with the employer, absent some express intention otherwise.” [3 ]
Id. at 84-85,
Underlying this decision, as urged by the petitioner, is “the strong judicial policy against interfering with the business judgment of private business entities,” [
At the outset, I can see little, if any, distinction between the test the majority enunciates for the review of “just cause”
Notwithstanding its being characterized as being a subjective one, Towson,
I am not at all convinced that the “business judgment rule,” treated, and relied upon, in Sadler and Elliott supports, lest
Rather than the cases on which the majority relies, the majority view, I am persuaded, on both accounts, by the reasoning of Toussaint v. Blue Cross & Blue Shield of Michigan,
“Where the employer has secured a promise not to be discharged except for cause, he has contracted for more than the employer’s promise to act in good faith or not to be unreasonable. An instruction which permits the jury to review only for reasonableness inadequately enforces that promise.”
Id.
Moreover, rejecting the notion that there is an identity between satisfaction contracts and “just cause” contracts, the
The cases on which the majority relies, and therefore the basis on which the majority has decided this case, proceed on a premise that is antithetical to the ordinary rules of contract construction,
The well settled rule of contract construction is, of course, to the contrary. It is that, where the words of the contract are clear and unambiguous, no interpretation is required or permitted, see Wells v. Chevy Chase Bank, FSB,
And the use of a legal presumption is not the appropriate way to resolve an ambiguity; as I have pointed out, and this Court has repeatedly held, see Sy-Lene of Washington Inc., v. Starwood Urban Retail II,
The only basis on which the majority can justify the legal presumption it applies to hold in favor of the petitioner is by reference to the business judgment rule. But, as I have demonstrated, while the business judgment rule may preclude a court from substituting its judgment for that of the business whose judgment is at the core of a case, it was never intended to prevent the business from entering into contracts with such terms as the business desires nor to impact, one way or the other, the bargain that the business and the other party or parties to the contract made. Stated differently, the business judgment rule does not, and should not, change the terms of a contract negotiated at arms length. That this is so is made clear by the fact that no business is required to contract away its ability to terminate its employees; it need not agree to a “just cause” contract.
To be sure, the majority’s concern that permitting the jury to be the final arbiter of whether the termination was justified may put the employer in a difficult position is legitimate. It may very well, and that might well be the situation in this case. It should be borne in mind, however, as- the concurring and dissenting Justice in Cotran pointed out, that “the difficulty of the employer’s position is matched or exceeded by the plight of a falsely accused and wrongfully terminated employee who is denied all legal redress.”
The majority’s evident and expressed concern that the everyday reality of the workplace is respected and that the efficient conduct of business is protected is reminiscent of the concern expressed by the dissenting judge in Sanders v. Parker Drilling Company,
One judge took the contrary view. Id. at 204-218 (Kozinski, J., dissenting). He expressed concern that the more expansive role of the jury would have an adverse impact on the employer’s obligation to provide a safe working environment and did not give sufficient deference to the employer’s policies against the use of drugs in the workplace, opining, in part:
“Working on an oil rig is dangerous business. It requires total concentration, precise timing, a fair degree of coordination and a significant amount of speed. Rig accidents can have disastrous consequences, ranging from severed limbs and multiple deaths to massive despoliation of the environment. It goes without saying that drug abuse has no place on oil rigs and that a company operating oil rigs has the right — indeed, the obligation — to take decisive action when*110 it obtains reliable information that some of its employees may be abusing drugs while on duty.
“This is the unhappy tale of a company that did just that. Company officials reasonably believed that three employees had used drugs on the job, not once but repeatedly. Two eyewitnesses fingered the drug-using employees; the company pursued the matter promptly, but not precipitously, obtaining confirmation from yet a third eyewitness before discharging the violators. The personnel action was taken in a balanced, detached, professional manner, free from any hint of rancor or personal animosity. Had the company acted less decisively, it would have betrayed its responsibility to other employees and the environment we all share. Yet when all is said and done, the fingered employees walk off with a cool third of a million dollars, while the company is left to pick up the tab, pay its lawyers and scratch its head wondering what it could have done differently. It is a question we all might ponder as we contemplate the bitter lesson of this cockeyed morality tale.”
Id. at 204-205. Responding, the court pointed out:
“The dissent sympathizes with Parker’s obligation to provide a safe working environment for its employees. It cites strong policy arguments against the use of drugs as authority to alter Alaska’s law. Judge Kozinski does not believe that the jury should have the prerogative to second-guess Parker’s determination that plaintiffs smoked marijuana on the oil rigs. Although we share Judge Kozinski’s concern for safety in the workplace, we respectfully do not believe that concern provides us a mandate to water down centuries of respect for the place of juries in our civil justice system. At this level of our system of jurisprudence — the appellate level — the issue we confront as judges is not whether the use of certain drugs and narcotics is a serious threat to our nation, which it is, or whether the use of marijuana is dangerous to workers on oil rigs, which it is, but whether the verdict of the jury is supported by the evidence presented. The war on drugs can be waged without turning our*111 back on the rightful function of juries in resolving factual disputes.”
Id. at 195. This response is just as appropriate and applicable to the case sub judice. Respect for, and deference to, the business judgment rule may be, and should be, given in an appropriate case, when the employer’s business judgment is at issue. It should not be used, and it was not intended, to emasculate, in cases of express contracts between businesses and individuals employees, “the rightful functions of juries in resolving factual disputes” or to render the end of the playing field allocated to the employees in such cases a steep and ever increasing incline.
Certainly, evidence as to the business judgments made and the rationale for them may well be admissible and the jury would have to be instructed appropriately in light of the evidence. This is not the same, however, as abdicating to the business itself, the final word as to the efficacy of that judgment and its determinative effect in the case in which those business judgments were applied. Just as important, holding the parties to the bargain they struck does not, in any way, undermine the business judgment rule. Indeed, it really enhances it; it is after all, the exercise of business judgment to enter into a contract with specific and enumerated terms. Having exercised its business judgment to negotiate a contract acceptable to it, in which it incorporated contract terms favorable to it, the business should not be allowed then to decide, in the guise of business judgment, whether and, if so, how, those terms acceptable, but not uniformly favorable, to it, but favorable to the employee, are to be interpreted and applied.
I dissent.
. Paragraph 6 of the Employment Contract addressed the termination of the contract. Section 6.1 provides
"The University may terminate this appointment for cause which shall include:
"(a) the intentional violation of University of Maryland System Regulations or University regulations
"(b) wilful neglect of duty
"(c) insubordination
"(d) incompetence
"(e) misconduct
*98 "(f) criminal conduct
"(g) long-term physical or mental condition which renders Dr. Conte unable to perform the duties essential to the Director's position.”
. Section 6.2 of the contract provides:
"In the event the University terminates this Appointment, for the above reasons, it shall notify the Director in writing, of the cause for which termination is sought and the right of the Director to request a hearing by the University President or the President’s designee. The hearing must be requested within 30 days of the Director's receipt of the written termination notice. In the event no such hearing is requested, the termination shall become immediately effective.”
. This latter statement is curious. By limiting the employer's right to discharge its employee, except for "just cause,” I would have thought that the contract provision to that effect was an "express intention otherwise.”
. The petitioner is, to be sure, a public university and not, as Judge Eldridge, in dissent, points out,
. It is well to repeat that this contract does expressly provide that the respondent could be discharged only for cause and, thus, I submit, does contain an express indication otherwise that the employer is contracting away his fact-finding function as to the quality of the employees' workplace performance. The rule that the majority espouses would be more palatable were the parties' contract to contain express language reserving to the University the right to determine whether there was “just cause” for discharge.
. It seems clear to me that an employee’s proof of the non-existence of the purported factual basis for his or her termination is quintessentially and a fortiori proof of bad faith and, therefore, the lack of good faith. Moreover, it is difficult to conceive of a better way to attack an employer’s objective motivation than by demonstrating that the grounds on which it acted did not exist. By parity of reasoning, there is no better way for the jury to assess a party's subjective motivation.
. The court in Toussaint v. Blue Cross & Blue Shield of Michigan,
"Where the employer claims that the employee was discharged for specific misconduct intoxication, dishonesty, insubordination and the employee claims that he did not commit the misconduct alleged, the question is one of fact for the jury: did the employee do what the employer said he did? ...
"Where the employer alleges that the employee was discharged for one reason excessive tardiness and the employee presents evidence that he was really discharged for another reason because he was making too much money in commissions the question also is one of fact for the jury.... The jury is always permitted to determine the employer’s true reason for discharging the employee.”
Id. at 896 (footnotes omitted).
. It is well settled that contracts are construed in accordance with, and governed by, the canons of statutory construction. See Walker v. Department of Human Resources,
. A legal presumption is necessary given the majority's assumption, as the petitioner argued, that the contract language is ambiguous and does not speak one way or the other to the issue of the fact-finding prerogative. Towson, 384 at 80,
Although the majority did not resolve the conflicting arguments of the parties as to the real meaning and effect of Paragraph 6.2, it does suggest the possibility that the paragraph, because “a hearing would accomplish nothing that would not be accomplished in court before a jury,” would be superfluous except as a means of reserving to the employer the fact-finding prerogative. Id. at 81,
Dissenting Opinion
dissenting.
The majority opinion, Chief Judge Bell’s dissenting opinion, the courts below, and the parties, all treat this case as an appropriate common law breach of contract action which was timely filed. The majority takes the position that this “breach of contract” action is controlled by the so-called business
The difference between private employment contracts and public employment contracts, terminable only for cause, has substantial ramifications. •
First, if it were appropriate to treat this lawsuit as a common law breach of contract action, I believe that the lawsuit would be untimely under the one-year limitations period for breach of contract actions against state government agencies set forth in Maryland Code (1984, 1999 Repl.Vol.), § 12-202 of the State Government Article. Therefore, the suit would be barred by governmental immunity.
Second, I believe that it would be more appropriate to treat this action as a Maryland common law action for judicial review of a state government adjudicatory administrative proceeding, and to remand the matter to the agency for proper findings of fact and conclusions of law.
Finally, regardless of whether Conte is entitled to an administrative hearing with findings of fact and conclusions of law, or to a judicial breach of contract action, the “business judgment” rule applied by the majority has no application to a governmental employment relationship terminable only for cause. Under due process principles applicable to the state government, an employee in Conte’s position is entitled to present his defenses and obtain a de novo determination either in an administrative hearing which complies with Maryland law or in court.
I.
If the majority, Chief Judge Bell, the courts below, and the parties were correct in treating this case as a common law breach of contract action, it was not filed within one year of the date on which the claim arose, as required by Maryland
Although a private breach of contract action is subject to a three-year statute of limitations which may be waived by a failure to raise the issue, a breach of contract action against a state agency must be filed within one year. Furthermore, as recently reaffirmed by this Court in State v. Sharafeldin,
“was intended as a conditional waiver of the State’s sovereign immunity in contract actions, which was to be accomplished by precluding the State and its agencies from raising that defense if the action was founded on a written contract executed by an authorized official or employee and the action was brought within the one-year period. If the action was not brought within that period, however, it was ‘barred.’ The sovereign immunity that the State enjoyed remained in effect; it could not be waived by subordinate agencies or their attorneys, and thus the agencies were required by law to raise the defense. We hold, therefore, that § 12-202 is not a mere statute of limitations but sets forth a condition to the action itself. The waiver of the State’s immunity vanishes at the end of the one-year period....”
Because neither Towson University nor its attorneys may waive the issue of governmental or sovereign immunity by failing to raise it, this Court “must consider whether the doctrine of sovereign immunity is applicable in this case even though it was not previously raised by the parties.” Board v. John K. Ruff, Inc.,
Conte requested a hearing before the President of Towson University, as provided for in the employment contract, and President Hoke L. Smith held the hearing on January 18, 1999. On January 21, 1999, President Smith notified Conte that he was terminated for the reasons set forth in the December 10, 1998, letter and that the termination was “effective the close of business January 26, 1999.” President Smith’s January 21st decision consisted of one short paragraph and contained no findings of fact or conclusions of law based upon evidence introduced or arguments made at the hearing.
The statutory time limit for filing a breach of contract action begins to run from the initial breach of the contract. Jones v. Hyatt,
If January 21, 1999, the date on which Conte was last notified of his termination, was the date on which his cause of action arose, the action was barred by the one year period set
The majority opinion baldly asserts, without citing any case-law or other authorities, and without any reasoning, that Conte’s “cause of action for the actual breach” of his employment contract arose when the contract was “effectively terminated on January 26, 1999.” Opinion at 96,
If there were a breach of the employment contract between Conte and Towson University, it is likely that the breach occurred on November 20, 1998, or December 10, 1998, when the University informed Conte that the contract was terminated and suspended Conte. A change in an employee’s status, such as a suspension, has been held to constitute a breach of the employment contract even though the employee’s pay is not terminated or changed. See 9 Corbin On Contracts § 958, at 752 (Interim Edition 2002). Furthermore, the fact that a plaintiff may have defenses to the defendant’s action does not necessarily prevent the running of limitations. Cf. Himelfarb v. American Express Company,
At any rate, the breach of contract had certainly occurred, and Conte’s cause of action had clearly arisen, by January 21, 1999, when Conte for the third and final time was notified that the contract was terminated.
This Court has held that repudiation of an employment contract, even before the time for performance, “in our judgment, constituted a breach which gave an immediate right of action and entitled the plaintiff to recover damages,” Dugan v. Anderson,
In common law breach of employment contract actions, as well as statutory actions based upon wrongful breaches of employment contracts or wrongful terminations of employment, the general rule is that the running of limitations begins when notice of termination is issued by the employer and not when the termination becomes effective.
For example, in the leading case of Chardon v. Fernandez,
Another leading Supreme Court case is Delaware State College v. Ricks,
Numerous cases, both federal and state, have relied upon the Supreme Court’s Chardon and Ricks opinions, as persuasive authority, to hold that the statute of limitations, in an employee’s action based upon termination of employment, begins to ran from the time the employee received notice of the termination and not from a later date when the termination became effective or the employment actually ceased. See, e.g., Cooper v. St. Cloud State University,
Moreover, even in situations where, after notice of termination, an employee is entitled to invoke contractual or other grievance procedures or administrative procedures to challenge the termination, the statute of limitations for an independent breach of contract, tort, or statutory action based upon the termination, begins to run from the time of notice and not from the decision under the grievance or administrative procedures. See Holmes v. Texas A & M University, supra,
If the present case is to be treated as a breach of contract action, it was untimely. Under these circumstances, the judgments below should be vacated and the case should be remanded to the Circuit Court -with directions to dismiss the action on the ground of governmental immunity. This Court has no occasion to reach the questions dealt with in the majority’s opinion and Chief Judge Bell’s dissenting opinion.
II.
Towson University’s status as an agency in the Executive Branch of the State Government, and Conte’s status as a government employee who could only be terminated for cause, coupled with the express contractual provision for a hearing before the head of the agency, i.e., the President of Towson University, necessarily presents the issue of whether a common law breach of contract action in the Circuit Court is an appropriate proceeding for resolving this dispute.
An employee in the Executive Branch of the State Government, who can only be disciplined or terminated for cause, is, as a matter of constitutional due process, entitled to a hearing
The majority opinion seems to suggest that a common law breach of contract action is a “remedy available” to an employee for purposes of defending against the charges brought by the state agency. Opinion at 96,
“[Wjhen the attributes attendant to public employment under State law are such as to give the employee ‘a legitimate claim of entitlement’ to the position, as under a tenure plan or where dismissal may only be for cause, a property interest in that employment is created, and the right to procedural due process ordinarily requires the opportunity of a pre-termination hearing.”4
Considerations of due process, plus the express provisions of the employment contract, certainly appear to require an administrative hearing before the head of an agency within the Executive Branch of Maryland Government, i.e., the President of Towson University. In fact, the majority’s deference to the governmental “factfinder” confirms that the majority, although unwittingly, is actually treating the proceedings culminating in Conte’s termination as governmental administrative adjudicatory proceedings.
In its insistence that this case should properly be treated as a common law breach of contract action, the majority relies on Maryland Code (1978, 2004 Repl.Vol.), § 12-104(j)(2) of the Education Article, which provides as follows:
“(2) Except with respect to grievance appeals under Title 13, Subtitle 2 of this article, Title 10, Subtitles 1 and 2 of the*124 State Government Article (‘Administrative Procedure Act’) are not applicable to the University.”
Title 13, Subtitle 2, of the Article deals -with classified employees of the University System of Maryland. Consequently, termination proceedings with regard to classified employees of Towson University are subject to the Administrative Procedure Act, and termination proceedings concerning non-classified employees, including Conte, are exempt from the Administrative Procedure Act.
The fact that the termination proceedings here are exempt from the Administrative Procedure Act furnishes no reason to conclude that a common law breach of contract action is appropriate. Numerous types of adjudicatory administrative proceedings are exempt from the Administrative Procedure Act, but such exemption does not change the inherent nature of such proceedings or convert them into common law breach of contract actions. See, e.g., Code (1984, 1999 Repl.Vol.), §§ 10-102(b) and 10-203 of the State Government Article, containing lists of administrative agencies or proceedings exempt from the Administrative Procedure Act.
An exemption from the Administrative Procedure Act or other administrative law statute simply means that the administrative proceeding is governed by Maryland common law administrative law principles and that judicial review in a circuit court takes the form of mandamus, certiorari, declaratory judgment, or equitable proceedings. It also means that the 30-day period of limitations set forth in Maryland Rule 7-203 is inapplicable. See Rule 7-201(a). The standards, however, are essentially the same regardless of whether the administrative/judicial review proceedings are pursuant to statute or are governed by Maryland common law administrative law principles. See, e.g., Board of License Commissioners for Anne Arundel County v. Corridor Wine, Inc.,
In fact, the General Assembly’s express exemption of all University System of Maryland proceedings from the Administrative Procedure Act, except those involving classified employees, could hardly be a determination that no such proceedings are by nature adjudicatory administrative proceedings and that all disputes should be resolved by common law contract or tort actions in the courts. Obviously, numerous types of adjudicatory administrative proceedings take place in the University System. See, e.g., Frankel v. Board of Regents,
It would seem that the Towson University proceedings leading up to Conte’s termination should be regarded as adjudicatory administrative proceedings subject to normal judicial review for substantial evidence underlying factual findings, arbitrariness, legal error, etc.
Like governmental immunity, public policy considerations mandate that issues of primary jurisdiction, exhaustion of administrative remedies, and the propriety of bringing an action other than a judicial review action, “are issues which this Court will address sua sponte.” Furnitureland v. Comptroller, supra,
If, as I believe, the appropriate circuit court action in this case was not a breach of contract suit but was a common law action for “substantial evidence” judicial review under the principles set forth in Bucktail v. Talbot County, supra,
In the interests of justice, I would prefer this third alternative. Furthermore, I would direct that the administrative decision be vacated and that the case be remanded for findings of fact and conclusions of law. The short one-paragraph opinion of President Smith after the January 18, 1999, hearing, contains no findings of fact or conclusions of law. It fails to deal with any evidence or arguments that may have been advanced at the January 18th administrative hearing. Thus, in Bucktail v. Talbot County, supra,
“Logically, the next step in our analysis would be to determine if the facts found by the Council are supported by substantial evidence. The difficulty here, however, is that the Council’s ‘findings’ are insufficient to permit judicial review.
“ ‘The court’s task on review is not to substitute its judgment for the expertise of those persons who constitute the administrative agency[.]’ ” A reviewing “Court may not uphold the agency order unless it is sustainable on the agency’s findings and for the reasons stated by the agency.” A court’s role is limited to determining if there is substantial evidence in the record as a whole to support*128 the agency’s findings and conclusions, and to determine if the administrative decision is premised upon an erroneous conclusion of law.
United Parcel Serv., Inc. v. People’s Counsel for Baltimore County,336 Md. 569 , 576-77,650 A.2d 226 , 230 (1994) (citations omitted). Accord Harford County v. Earl E. Preston, Jr., Inc.,322 Md. 493 , 505,588 A.2d 772 , 778 (1991) (“[A] fundamental right of a party to a proceeding before an administrative agency [is] to be apprised of the facts relied upon by the agency in reaching its decision and to permit meaningful judicial review of those findings. In a judicial review of administrative action the court may only uphold the agency order if it is sustained by the agency’s findings and for the reasons stated by the agency.”); United Steelworkers of America AFL-CIO, Local 2610 v. Bethlehem Steel Corp.,298 Md. 665 , 679,472 A.2d 62 , 69 (1984) (same).
“In accordance with the above standard of judicial review, in order for the reviewing court to determine whether the Council’s action was fairly debatable, findings of fact are required.
“Findings of fact must be meaningful and cannot simply repeat statutory criteria, broad conclusory statements, or boilerplate resolutions.”
See also, e.g., Turner v. Hammond,
Nevertheless, regardless of the nature of the Towson University termination proceedings or the appropriate type of
. The parties in ihe courts below did raise the issue of the timeliness of Conte’s claims for compensation in fiscal years 1997 and 1998, and the
. Furthermore, because an action for an injunction is equitable, in such an action against a private employer, the statute of limitations would not ordinarily be directly applicable, and the timeliness issue would be governed by principles of laches.
. In Oker v. Ameritech Corp.,
The Supreme Court of Oregon, however, has disagreed with the rule set forth in Ricks, holding that, in a tort action based on wrongful discharge, limitations runs from the end of the employment relationship because the tortious discharge occurred on the last day of employment. Stupek v. Wyle Laboratories,
. The majority intimates that my position is that an administrative/judicial review proceeding "is a jurisdictional requirement.” Opinion at 96,
. In fact, using a breach of contract action instead of a "substantial evidence" judicial review action, to review an adjudicatory administrative proceeding and decision by the Executive Branch of the State Government, may well present serious Maryland constitutional problems under the principles set forth in Department of Natural Resources v. Linchester Sand and Gravel Corporation,