Lead Opinion
OPINION
In this appeal, Sandra Zeilinger seeks to avoid summary disposition of her wrongful discharge case against SOHIO Alaska Petroleum Company, her former employer. We affirm in part and reverse in part.
I
Sandra Zeilinger was employed by the SOHIO Alaska Petroleum Company (SAPC) in a non-exempt clerical position
SAPC notified Zeilinger on August 29, 1985, that a reduction in force (RIF) necessitated her termination as of September 30, 1985. Apparently as part of this notification, SAPC offered her an “Involuntary Separation Program.” This program consisted of various benefits, worth approximately $10,000; the recipient of those benefits was required to sign a separation agreement which, in part, released SAPC from any legal liability in connection with the recipient’s discharge. The benefits offered Zeilinger included severance pay and three months’ life and medical insurance coverage.
According to Zeilinger, the RIF came as a complete surprise. Although she was aware that SAPC and its parent, SOHIO Petroleum Company (SPC), were in the process of reorganizing, she was under the impression from “town meetings” with SAPC management that this reorganization would not affect her.
Zeilinger, along with two other non-exempt workers who had received RIF notices, met with SAPC management officials in Anchorage shortly after her RIF notification. At that meeting, SAPC denied Zeil-inger’s request for additional time within which to consider whether to sign the
Following the meeting, Zeilinger consulted counsel, who told her that if she signed the agreement she was giving up her right to challenge it. After hearing about Zeil-inger’s finances, however, counsel opined that her economic situation might allow her to challenge the agreement on grounds of economic duress. Several days later, Zeil-inger contacted counsel again, after learning that SAPC was inviting other employees to apply for her position. Counsel then told her that such action might also provide a ground for challenging the document, should she decide to sign it.
On September 16, 1985, Zeilinger signed the separation agreement and accepted the severance benefits offered by SAPC. According to Zeilinger, she did so because she felt her economic situation left her no choice. Even before the termination, her obligations exceeded her income by about $2,000 per month. Family medical problems made her feel that she could not forgo the medical insurance which would only be available if she signed the agreement. Moreover, there is evidence in the record from which a jury could reasonably conclude that SAPC was aware of her financial situation. When Zeilinger endorsed the check that she received as part of the separation package, she wrote on it “partial payment accepted under protest.”
It is apparently undisputed that a RIF was undertaken by SAPC at the direction of its parent company. After having drawn up a list of exempt employees to be terminated, SAPC was directed on or about August 22, 1985, to further cut its North Slope staff. SAPC then decided to terminate some non-exempt personnel, including Zeilinger. SAPC decided which non-exempt employees to terminate by examining their performance ratings; Zeilinger .was selected because she was considered “a marginal or poor employee within the criteria that [had been] set.” SAPC concedes, however, that absent a bona fide RIF, it did not have cause to terminate Zeilinger based on performance alone.
Both parties agree that from the time of the RIF on September 30, 1985, to the end of 1986, the number of non-exempt employees on the North Slope first decreased, then increased. SAPC attributes the ultimate increase, “at least in part,” to the integration of non-exempt employees from a sister corporation that had been closed; these employees brought with them some new job functions. Although the integration did not take place until after the beginning of 1986, a jury could reasonably conclude that, at the time they terminated Zeilinger, SAPC management was aware that the integration would take place.
Three months after she was terminated, Zeilinger filed suit against SAPC to rescind the separation agreement and to recover damages for wrongful discharge. Over the next four years, the superior court granted various motions for partial summary judgment, which are discussed below. The remaining issues came on for trial by jury in October 1989.- At the conclusion of the plaintiffs case, the superior court directed verdict in favor of SAPC. Zeilinger appeals.
Zeilinger’s case depends first upon avoiding summary judgment or directed verdict on her attempt to rescind the separation agreement, which contains a release clause.
A
To avoid enforcement of a contract on the ground of misrepresentation, a party must show four things:
First, there must have been a misrepresentation. Second, the misrepresentation must have been either fraudulent or material. Third, the misrepresentation must have induced the recipient to make the contract. Fourth, the recipient’s reliance on the misrepresentation must have been justified.
Johnson v. Curran,
Before this court, Zeilinger continues to insist that she signed the agreement involuntarily: “Zeilinger had no choice at the time the termination benefits were offered to her but to accept them; she feared bankruptcy, loss of her home and assets, and loss of health insurance and other benefits.” Appellant’s Brief at 5 (citing Zeilinger’s trial testimony). Without citation or explanation, she asserts that “[i]t was error for the trial court to preclude Zeilinger’s misrepresentation defense, simply because she asserted an economic duress defense, as well.”
Even assuming that there are factual issues concerning the other three elements of Zeilinger’s misrepresentation, she cannot avoid summary judgment unless there is also a factual issue concerning reliance. There is simply no way a jury could conclude that Zeilinger relied on SAPC’s representations that a RIF was the reason for her dismissal. In addition to her explicit and continuing insistence to the
B
Subsequent to the grant of summary judgment concerning the issue of misrepresentation, Zeilinger amended her complaint to add a claim for breach of the covenant of good faith and fair dealing as another defense to the separation agreement. The theory behind this claim is that SAPC’s alleged misrepresentations concerning the true reason for releasing Zeil-inger constitute a breach of the covenant of good faith and fair dealing implied in every employment contract in Alaska, Mitford v. De Lósala,
Zeilinger, in her brief, makes no legal or logical argument as to how a breach of the employment agreement should act to set aside the separation agreement that released SAPC from liability for any breach of the employment agreement. She merely asserts that “[bjreach of the covenant in obtaining the release should allow the employee to avoid the separation agreement.” As SAPC points out, this argument is circular: Zeilinger seeks to avoid her release of claims on the ground that she had a claim.
The argument suffers from an additional flaw in that it is founded upon SAPC’s alleged misrepresentation as to the real reason for her dismissal. While the misrepresentation by itself might support a breach of contract action on the employment agreement, it has no demonstrable relation to the separation agreement, unless the misrepresentation somehow played a part in inducing Zeilinger to give up rights under the employment agreement. This, however, is merely a restatement of the misrepresentation theory that has already failed.
C
Zeilinger’s final ground for setting aside the separation agreement is that she signed it while under economic duress. The superior court directed a verdict on this issue, in SAPC’s favor, at the conclusion of Zeilinger’s case. When reviewing directed verdicts, this court determines whether the evidence, when viewed in the light most favorable to the nonmoving party, is such that reasonable persons could not differ in their judgment. Bendix Corp. v. Adams,
This court first addressed the claim of economic duress in Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Serv. Co.,
In this case, Zeilinger claims she acted involuntarily, and SAPC concedes the point inasmuch as the test is subjective. Hel-strom,
In determining whether a reasonable alternative was available, we employ an objective test, and the outcome depends on the circumstances of each case. Totem Marine,
Zeilinger, however, has to demonstrate a factual issue concerning each of the three prongs. See Wassink v. Hawkins,
Zeilinger’s theory seems to be that the wrongfulness of her discharge, if proved, would provide the necessary coercive act. We disagree. Assuming for the sake of argument that Zeilinger’s discharge was not pursuant to a valid RIF, there is still no evidence that the discharge was intended to, or that it did in fact, “coerce” Zeilinger into signing the release. SAPC notified her she was being terminated; there were no conditions, and she was given no opportunity to avoid termination. SAPC then offered her the chance to compromise any claims she might have arising out of the termination in exchange for valuable consideration. In connection with the offered release, SAPC neither made any threats nor undertook any action which could be considered coercive. See Restatement (Second) of Contracts § 175 (1981) (“If a party’s manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim.”); see also Totem Marine,
What did induce Zeilinger to release her claims was her burdensome financial circumstances. These circumstances were of her own making, and thus cannot be blamed on SAPC. See EEOC v. American Express Publishing Corp.,
Ill
Zeilinger also appeals the superior court’s award of $80,470 to SAPC for its
On its face, the claimed actual fees of $200,000 appear clearly excessive. The facts in the case were not particularly complex or unique, nor even subject to much dispute. The case did not involve questions of technical expertise, the legal issues weren’t especially novel or original, and the trial was relatively brief.
The question whether too much time was spent by SAPC’s attorneys is for the superior court. Integrated Resources Equity Corp. v. Fairbanks North Star Borough,
The superior court’s grants of summary judgment and directed verdict against Zeil-inger are AFFIRMED. Its award of attorney’s fees to SAPC is REVERSED and this case REMANDED for further proceedings consistent with this opinion.
Notes
. Non-exempt employees were generally the clerical and secretarial support staffs. They were compensated on an hourly basis and received overtime if they worked more than their scheduled hours. By contrast, exempt employees were generally salaried professionals.
. SAPC officials testified, however, that they opposed the integration.
. SAPC’s president testified:
A ... One thing about the jobs that came from SCC [the sister company], they were coming with them, they were not replacing specifically SAPC. They brought with them the job, because part of the thing we absorbed was part of the work from SCC.
Q So you[’re] testifying that these were brand new jobs that were coming over from SCC and they were not taking away from existing SAPC jobs?
A Some of them.
. The separation agreement provided:
In exchange for the benefits described in paragraph 2, I release and discharge SAPC and its officers, directors, stockholders, employees, agents, subsidiaries, parents, and affiliates from any and all claims, demands, or liabilities whatsoever, which I ever had or may now have against any of them, including but not limited to, any claims, demands, or liabilities in connection with my employment.
I understand and expressly agree that this termination agreement extends to all claims of every nature and kind whatsoever, known or unknown, suspected or unsuspected, past or present, which existed at the time of the execution of this Separation Agreement.
. We note our long-held view that "the preservation of agreements entered into in good faith and the encouragement of settlement of disputes constitute strong arguments for enforcing releases.” Witt v. Watkins,
.This court reviews grants of summary judgment to determine whether there are any genuine issues of material fact and, if not, whether the moving party is entitled to judgment on the established facts. Zeman v. Lufthansa German Airlines,
Dissenting Opinion
dissenting.
I dissent from the court’s affirmance of the superior court’s grant of a directed verdict against Zeilinger as to her claim that the separation agreement should be set aside because she signed it while under economic duress.
The court correctly concludes that a directed verdict against Zeilinger would have been inappropriate as to the first two elements of economic duress: an involuntary acceptance of terms provided by another; and that the circumstances permitted no other alternative but to execute the release. My difference with the court’s opinion centers on its conclusion that Zeilinger’s proof failed to raise a jury issue as to the third element of economic duress. More particularly, that the circumstances were the result of coercive acts on the part of SAPC. Helstrom v. North Slope Borough,
This third element of economic duress consists of two prongs: coercive acts on the part of the other party (SAPC) and a causal link between the coercive acts and the circumstances of economic duress. As to this third element, the court notes that it is to be liberally construed but nevertheless holds that: “Even thus construed, however, no ‘coercive act’ is present in Zeilinger’s case.” In support of this conclusion the court reasons in part that Zeilinger’s discharge was not intended to, nor did it in fact, coerce her into signing the release. “What did induce Zeilinger to release her claims were her burdensome financial circumstances.”
In regard to this latter question Zeilinger argues in part that:
(1) Sandra’s financial obligations were based in part on assurances by SAPC management that North Slope employees should not expect any reductions in force; in part upon temporary and unavoidable financial problems;
(2) the company added Zeilinger to a legitimate reduction in force in an attempt to terminate her without utilizing the progressive discipline steps to which she was entitled; there was never any intent to reduce the clerical force or eliminate Zeilinger’s position;
(3) the supervisor who added Zeilinger to the RIF list was well aware of her financial difficulties; he added her to the RIF list to avoid the progressive discipline policy.2
. I am in agreement with the court’s disposition of the remaining issues in this appeal.
. Review of the record indicates evidentiary support for these assertions.
. Implicit is my further conclusion that the act which deprived Zeilinger of her income — more particularly her termination, was wrongful and that Zeilinger's evidence on the point is sufficient to withstand a motion for directed verdict.