Smalls v. Fuji Photo Film

THE STATE OF SOUTH CAROLINA

In The Court of Appeals

Victor L. Smalls,       
Appellant,

v.

Fuji Photo Film, Inc.,       
Respondent.

Appeal From Greenwood County

Gary E. Clary, Circuit Court Judge

Unpublished Opinion No. 2003-UP-480

Heard June 10, 2003 – Filed August 7, 2003

AFFIRMED

Steven M. Krause and Mary C. McCormac, both of Anderson, for
Appellant.

Richard J. Morgan  and Reginald W. Belcher, both of Columbia,
for Respondent.

PER CURIAM: Victor Smalls brought this action
against Fuji Photo Film, Inc. alleging breach of contract and breach of covenant
of good faith and fair dealing arising out of the parties’ previous employment
relationship.  The circuit court granted summary judgment in favor of Fuji.
 We affirm.

FACTS/PROCEDURAL HISTORY

Smalls was hired by Fuji in September 1995
as a light room technician in the color paper factory located in Greenwood.
In October 1997, Smalls heard a department manager, Darrell Dunning, broadcast
over a radio that someone had acted “just like a Jew.” Smalls found this statement
to be discriminatory and offensive, and he reported the incident to his direct
supervisor, Jerry Childress. According to Smalls, Childress discouraged him
from reporting the matter and warned him there would be “repercussions” if he
reported the incident.

Smalls reported the incident to Fuji’s human
resources director, Debbie Walling. When Smalls first approached Walling he
asked whether a hypothetical situation involving the “just like a Jew” statement
would be considered offensive. According to Smalls, Walling encouraged him to
inform her if someone had made that statement.  Smalls stated that Walling promised
him that his name would be kept confidential if he reported the incident. Smalls
then told Walling about Dunning’s  “just like a Jew” comment.

Walling claims that the incident reported
by Smalls was promptly investigated and that Dunning was warned to avoid using
such comments in the future. Walling further stated that Smalls’s name was never
revealed during the investigation. However, prior to her meeting with Smalls,
Walling had a discussion with Dunning in which she informed him that Smalls
had requested to meet with her.  After her meeting with Smalls, Walling went
to Dunning to discuss Smalls’s allegations. Walling admitted that based on her
previous conversation with him, Dunning deduced that it was Smalls who reported
the incident.  According to  Walling, Dunning agreed that he should not have
made the statement in the workplace, that it would never happen again, and that
Smalls would not be treated any differently for having made the complaint.

In March 1998, Fuji terminated Smalls’s
employment.  According to Fuji, Smalls was fired based on his job and safety
performance which had progressively deteriorated during the last year of his
employment despite repeated warnings and efforts by the company to encourage
Smalls to perform better. At the time of Smalls’s termination, Fuji had identified
at least ten major documented errors and performance problems that Smalls had
committed between March of 1997 and January of 1998. These errors included numerous
safety violations, poor job performance, and several altercations between Smalls
and his co-workers. Immediately prior to Smalls’s termination, at least four
Fuji employees indicated that they had witnessed him commit safety violations
and reported the incidents to their supervisors.

Smalls admitted that he had committed safety
violations but claimed that  Fuji tolerated these violations in the past.  Smalls
stated that he believed he was being retaliated against for reporting the comment
made by Dunning. In March of 1997, Smalls’s job evaluation was very positive,
but his evaluations in December of 1997 and March of 1998 were not. Smalls stated
that he believed he received poor evaluations after reporting the incident because
his supervisors were retaliating against him for reporting Dunning.  Fuji indicated
that Smalls’s job performance had drastically deteriorated and that he was terminated
because of his poor job and safety performance. Fuji also indicated that it
did not retaliate in any way against Smalls following the complaint against
Dunning.  In fact, Fuji claimed: “[B]ecause Mr. Smalls had complained regarding
a potential race discrimination issue, the Company actually treated him more
leniently than it otherwise would have when Mr. Smalls continually disrupted
meetings and his job and safety performance progressively deteriorated.”

In July 1999, Smalls filed an action
against Fuji in federal court alleging retaliation in violation of Title VII
of the 1964 Civil Rights Act, breach of contract, and breach of the implied
covenant of good faith and fair dealing.  The federal district court issued
an order granting Fuji summary judgment as to Smalls’s cause of action alleging
retaliation in violation of Title VII. The district court declined to address
Smalls’s remaining two causes of action under South Carolina law on the basis
that the district court had dismissed all claims over which it had original
jurisdiction. Smalls then filed action in state court alleging the following
causes of action: (1) breach of contract based on Fuji’s failure to maintain
the confidentiality of his internal complaint; (2) breach of contract based
on Fuji’s retaliation toward him following the internal complaint; (3) breach
of covenant of good faith and fair dealing based on Fuji’s breaches of contract.
Smalls alleged that Fuji’s employee handbook altered his status as an at-will
employee and constituted an employment contract.  Specifically, Smalls alleged
that Fuji violated its provision of the employee handbook regarding Equal Employment
Opportunity Policy and Procedure.  This provision stated:

If you feel you are a victim of sexual harassment or any
other type of adverse employment action on the basis of your sex, race, color,
religion, national origin, age, handicap or veteran statute, you should immediately
report the matter to your supervisor, if appropriate.  Alternatively you may
report directly to the Director of Human Resources.  Your disclosure will be
held in the utmost confidence and you will be protected against any retaliatory
action by those involved.

Fuji filed a motion for summary judgment,
and a hearing was held before the circuit court. The circuit court granted Fuji’s
motion.  This appeal follows.

STANDARD OF REVIEW

“Summary judgment is appropriate when it is clear
there is no genuine issue of material fact and the moving party is entitled
to judgment as a matter of law.” Toomer v. Norfolk S. Ry. Co., 344 S.C.
486, 489, 544 S.E.2d 634, 635 (Ct. App. 2001); Rule 56(c) SCRCP.  Summary judgment
“is not appropriate[, however,] where further inquiry into the facts of the
case is desirable to clarify the application of the law.”  Carolina Alliance
for Fair Employment v. South Carolina Dep’t of Labor, Licensing & Regulation,
337 S.C. 476, 484, 523 S.E.2d 795, 799 (Ct. App. 1999).  “In determining whether
any triable issues of fact exist [as will preclude summary judgment], the evidence
and all inferences which can be reasonably drawn from the evidence must be viewed
in the light most favorable to the nonmoving party.”  Strother v. Lexington
County Recreation Comm’n, 332 S.C. 54, 61, 504 S.E.2d 117, 121 (1998). 

LAW/ANALYSIS

I.       Breach of
Contract Based on Retaliation

Smalls first argues that Fuji altered his status
as an at-will employee by promising to protect him from retaliation for reporting
discriminatory actions and that Fuji breached this promise by firing him in
retaliation to his discrimination report.  We disagree.

In the employee handbook, Fuji merely restates
the language in Title VII, which prohibits an employer from retaliating against
employees who have: (1) opposed a practice made unlawful by an employment discrimination
statute or (2) participated in an investigation, proceeding, or hearing under
an employment discrimination statute.  42 U.S.C.A. § 2000e-3(a).   On January
19, 2001, the U.S. District Court concluded that Fuji had not retaliated against
Smalls under Title VII and that “Fuji has produced a substantial showing that
Smalls was terminated for poor job performance and/or his inability to get along
with his superior.” Based on this ruling, the doctrine of issue preclusion prohibits
Smalls from pursuing his breach of contract claim based on retaliation.

“[T]he party seeking issue preclusion
must show that the issue was actually litigated and directly determined in the
prior action, and that the matter or fact directly in issue was necessary to
support the first judgment.” Town of Sullivan's Island v. Felger, 318
S.C. 340, 344, 457 S.E.2d 626, 628 (Ct. App. 1995).  “Factors to consider in
determining the defense of collateral estoppel, notwithstanding a lack of privity,
include ‘whether the doctrine is used offensively or defensively, and whether
the party adversely affected had a full and fair opportunity to litigate the
relevant issue effectively in the prior action.’”  Pye v. Aycock, 325
S.C. 426, 436, 480 S.E.2d 455, 460 (Ct. App. 1997) (quoting Graham v. State
Farm Fire & Cas. Ins. Co., 277 S.C. 389, 390-91, 287 S.E.2d 495, 496
(1982)).

In Smalls’s case, the district court already ruled Fuji
had not retaliated against Smalls and that Fuji terminated Smalls for non-retaliatory
reasons.  Thus, Smalls is precluded from raising the same argument in this lawsuit.

II.      Breach of Contract Based on the Promise of Confidentiality

Smalls next argues the trial court erred
in granting summary judgment because Fuji altered Smalls’s status as an at-will
employee by promising to keep his identity confidential after reporting discriminatory
actions and because Fuji breached this promise of confidentiality.   We disagree.

In Bookman v. Shakespeare Co.,
314 S.C. 146, 442 S.E.2d 183 (Ct. App. 1994), Shakespeare’s sexual harassment
policy provided that complaints of sexual harassment would be investigated by
management.  When an employee, Bookman, was fired for fighting with a fellow
employee, she claimed that if the incident had been investigated, management
would have discovered the altercation resulted from the other employee sexually
harassing her.  The court of appeals found that “the only limitation on Shakespeare’s
right to terminate Bookman was a prohibition against retaliatory discharge for
filing a sexual harassment complaint;” thus, even if Shakespeare had indeed
breached its promise to investigate, “Shakespeare was nevertheless free to fire
Bookman for any reason or no reason except in retaliation for filing a sexual
harassment complaint.”  Id. at 149, 442 S.E.2d at 184.

In Smalls’s case, the district court
already ruled that Fuji terminated Smalls because of his insubordination, not
because Fuji was retaliating against him for reporting discrimination.  Therefore,
similar to the reasoning in Bookman, even assuming Fuji promised Smalls
confidentiality and subsequently breached that promise, Fuji was free to terminate
Smalls’s employment for any or no reason except in retaliation for reporting
discriminatory actions.  Therefore, summary judgment was properly granted in
favor of Fuji on this issue.

III.    Breach of the Covenants of Good Faith and Fair Dealing

Additionally, Smalls argues the trial court erred
in granting summary judgment as to his cause of action for breach of covenant
of good faith and fair dealing.  Specifically, Smalls argues that he “suffered
loss of employment, loss of compensation, [and] loss of benefits” because Fuji
breached the covenant of good faith and fair dealing by not protecting his confidentiality
and retaliating against him for reporting the incident. 

The covenant of good faith and fair dealing is
implied in every employment contract that alters an employee’s at-will status. 
See Shelton v. Oscar Mayer Foods Corp., 319 S.C. 81, 91, 459 S.E.2d
851, 857 (Ct.App.), aff’d, 325 S.C. 248, 481 S.E.2d 706 (1997)(“[W]e
find no authoritative case law holding the implied covenant of good faith and
fair dealing is not applicable to employment contracts that alter the employee’s
at-will status.”); Com. Credit Corp. v. Nelson Motors, Inc., 247 S.C.
360, 367, 147 S.E.2d 481, 484 (1966) (“[T]here exists in every contract an implied
covenant of good faith and fair dealing.”).  However, a cause of action for
breach of the implied covenant of good faith and fair dealing stemming from
an employment contract action is limited to contractual damages.  Williams
v. Riedman, 339 S.C. 251, 274, 529 S.E.2d 28, 40 (Ct. App. 2000) (rehearing
denied May 13, 2000).

Here, Smalls’s at-will
status was only altered to the extent that Fuji could not terminate him in retaliation
to his report of discrimination.  Because the district court made a final ruling
that Smalls was rightfully terminated for insubordination, Fuji’s termination
of Smalls did not breach the implied covenant of good faith and fair dealing. 
Accordingly, the trial court’s grant of summary judgment is

AFFIRMED.         

HEARN, C.J., CONNOR and STILWELL, J.J., concur.