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Wade v. Kessler Institute

July 27, 2001

SHEILA WADE, PLAINTIFF/RESPONDENT,
v.
KESSLER INSTITUTE, DEFENDANT/APPELLANT.



On appeal from the Superior Court of New Jersey, Essex County, Law Division, L-3760-98.

Before Judges Wallace, Jr., Lintner and Parrillo.

The opinion of the court was delivered by: Wallace, Jr., J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: May 31, 2001

In this wrongful discharge case, a jury found defendant Kessler Institute breached an implied covenant of good faith and fair dealing and awarded plaintiff Sheila Wade $65,000 in damages. On appeal, defendant contends the trial court erred by: (1) failing to instruct the jury that a finding of bad faith was required for the breach of an implied covenant of good faith and fair dealing claim; (2) failing to require the jury to find that a grievance proceeding would have resulted in plaintiff's reinstatement; (3) denying defendant's motion for judgment notwithstanding the verdict; and (4) allowing plaintiff to recover damages of lost wages in contravention of the exclusive remedy of the Workers' Compensation Act. We reverse and remand for a new trial.

The evidence presented at trial showed that plaintiff began working for defendant in 1982 as a nurse's aide, and eventually became a unit secretary in 1991. In addition to performing her ordinary duties as a unit secretary, plaintiff was asked by a supervisor and agreed to collect money from employees in her unit for various occasions such as weddings, baby showers, and funerals.

Plaintiff would tell her co-workers about the collection, and place the money she received in an envelope. She did not put the names of the individuals or the amounts they donated on the envelopes to avoid embarrassing them, but did put the name of the intended beneficiary on the envelope. Once all of the money was collected, she would purchase a card and give the card and the funds collected to the intended recipient.

In March 1996, plaintiff was asked by her supervisor to begin a collection for an employee. Plaintiff began the collection, took an excused medical sick leave for eight days, and completed the collection upon her return to work. Plaintiff also collected for two other employees around the same time.

On April 2, 1996, Joan Alverzo, the director of nursing at the hospital, informed plaintiff she was being suspended for three days due to an impropriety with the money plaintiff was collecting. This was the first time plaintiff's integrity had ever been questioned. After the suspension ended on April 5 plaintiff met with Alverzo to further discuss the issue. Plaintiff brought the three envelopes containing the collection money with her and gave them to Alverzo, along with letters explaining the status of the collections.

Alverzo informed plaintiff she was being terminated because plaintiff "collected money way back and did not give it to the patient or person until they came back to [the hospital], [and] was still holding the money." The sole reason given to plaintiff for her termination was the alleged mishandling of the money.

Plaintiff tried to explain the reason she had not given the money to its intended recipients was because she was trying to collect more money to make it a more "respectable amount," but was terminated anyway. Alverzo claimed that one of the envelopes was short $5, but plaintiff denied this. Plaintiff stated there was no way Alverzo could have known this based upon her method for making the collections. Plaintiff testified she was so upset at the time that she was suicidal.

The employee handbook, which all employees received, provided procedures by which employees could present a grievance. Plaintiff drafted letters asking for a hearing on the matter and sent them to Kenneth Atchison, the president of the hospital, Stanley Shepard, the assistant vice president, Robert Geller, vice president of human resources, and the labor board. Plaintiff stated in the letters that she had a grievance and requested a fair hearing. Plaintiff also called Geller's office a few times, but never received a response, in writing or by telephone. She became depressed because her side of the story was never heard and no one would believe her. She claimed the ordeal negatively affected her job search because her "mind [was] not there."

Plaintiff presented the testimony of Dr. Paul J. Kiell, a board certified psychiatrist. Dr. Kiell testified plaintiff suffered from a major depressive disorder. He said it is considered major depression because "she has a sleep disorder, and an eating disorder, and . . . loss of pleasure seeking. There's no drive, . . . no zest for living." Given a hypothetical that plaintiff testified she suffered "from humiliation, emotional distress, difficulty sleeping, loss of appetite, [and] loss of interest socially," Dr. Kiell opined there would "definitely" be a causal relation to her termination and the accusation of her mishandling funds.

The jury was asked to decide whether plaintiff proved that defendant (1) breached the implied covenant of good faith and fair dealing; (2) breached the implied employment contract; or (3) intentionally inflicted emotional distress upon plaintiff. Following a four-day trial, the jury decided in favor of plaintiff on the breach of the implied covenant of good faith and fair dealing claim and decided in favor of defendant on the other two issues. The jury awarded plaintiff $65,000. Defendant's motion for judgment not withstanding the verdict was denied. This appeal followed.

I.

Defendant contends the trial court erred in the charge for breach of the implied covenant of good faith and fair dealing. Specifically, defendant contends the trial court failed to instruct the jury that a breach of the implied covenant of good faith and fair dealing required a finding of bad faith on the part of defendant.

Initially, we note that appropriate and proper jury charges are essential for a fair trial. Velazquez v. Portadin, 163 N.J. 677, 688 (2000). "Jury charges must outline the function of the jury, set forth the issues, correctly state the applicable law in understandable language, and plainly spell out how the jury should apply the legal principles to the facts as it may find them." Ibid. (internal quotation marks omitted.) However, "[t]he trial judge's instructions must be read as a whole. So long as the charges adequately convey the law to the jury and do not mislead or confuse, we should not interfere." Zappasodi v. Department of Corrections, 335 N.J. Super. 83, 89 (App. Div. 2000)(citing Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 418 (1997). Nevertheless, an improper jury instruction may require reversal if the instruction tended to confuse or mislead the jury. See Conklin v. Hannoch Weisman, 145 N.J. 395, 409 (1996).

Before applying these principles, we state the basic law regarding the implied covenant of good faith and fair dealing. "[E]very contract in New Jersey contains an implied covenant of good faith and fair dealing." Sons of Thunder, supra, 148 N.J. at 420. Our Supreme Court has stated that "[i]n every contract there is an implied covenant that 'neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract; in other words, in every contract there exists an implied covenant of good faith and fair dealing.'" Palisades Properties Inc. v. Brunetti, 44 N.J. 117, 130 (1965) quoting 5 Williston on Contracts, §670, pp. 159-60 (3d ed. 1961). See also Wilson v. Amerada Hess Corporation ___ N.J. ___ (2001).

However, "[i]n the absence of a contract, there can be no breach of an implied covenant of good faith and fair dealing." Noye v. Hoffmann-La Roche, Inc., 238 N.J. Super. 430, 434 (App. Div.), certif. denied, 122 N.J. 146 (1990). The obligation to perform in good faith exists in every contract including where the contract is terminable at will. Bonczek v. Carter-Wallace, Inc., 304 N.J. Super. 593, 599 (App. Div. 1997), certif. denied, 153 N.J. 51 (1998).

While we have not developed a definition of good faith and fair dealing for all cases, recently our Supreme Court gave guidance in this area. The Court explained:

What constitutes good faith performance and fair dealing has been the subject of considerable analysis. For transactions involving merchants and the sale of goods, the Uniform Commercial Code has defined good faith as "honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade." N.J.S.A. 12A:2- 103(1)(b). The Restatement (Second) of Contracts notes that every contract imposes on each party a duty of good faith and fair dealing in its performance and enforcement. Restatement (Second) of Contracts § 205 (1981). A comment to the Restatement states that "[g]ood faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party; it excludes a variety of types of conduct characterized as involving 'bad faith' because they violate community standards of decency, fairness or reasonableness." Restatement (Second) of Contracts § 205 comment a (1981). [Wilson, supra, ___ N.J. at ___.]

The Court emphasized that "[b]ad motive or intention is essential." Id. at ___.

One commentator has described good faith as follows:

Good faith, as judges generally use the term in matters contractual, is best understood as an "excluder" – a phrase with no general meaning or meanings of its own. Instead, it functions to rule out many different forms of bad faith. It is hard to get this point across to persons used to thinking that every word must have one or more general meanings of its own – must be either univocal or ambiguous.

. . . In most cases the party acting in bad faith frustrates the justified expectations of another . . . whether an aggrieved party's expectations are justified must inevitably vary with attendant circumstances. For these reasons it is not fruitful to try to generalize further. It is easy enough to formulate examples of bad faith and work from them. Besides, any general definition of good faith, if not vacuous, is sure to be unduly restrictive, especially if cast in statutory form. [Robert S. Summers, "Good Faith" in General Contract Law and the Sales Provisions of the Uniform Commercial Code, 54 VA. L. Rev. 195, 262-63 (1968) (footnotes omitted).]

Judge Stein in his concurrence in Noye, noted that "[t]he majority opinion does not define 'good faith and fair dealing' . . . . This is understandable. Concepts such as good faith and fair dealing are chameleonlike in character, necessarily assuming the colorings of the surroundings in which they find themselves." Noye, supra, 238 N.J. Super. at 442. Judge Stein suggested that the employer breaches the covenant of good faith and fair dealing "where the employer, without an honest belief ...


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