ROBERT E. GRAM vs. LIBERTY MUTUAL INSURANCE COMPANY & OTHERS. [Note 1]

WILKINS, J. We consider in a new context the rights of an employee at will whose employer discharged him without good cause. We conclude that, in the circumstances, the employee is not entitled to normal contract damages for the termination of his at-will employment. He is, however, entitled to recover identifiable, reasonably anticipated future compensation, based on his past services, that he lost because of his discharge without cause. We also consider whether the evidence warranted a verdict for the employee on his claim that his immediate superiors tortiously interfered with his rights under his employment contract. We conclude that there was no case for the jury on the employee's claim against his immediate superiors.

We summarize the evidence most favorable to the plaintiff (see Boyle v. Wenk, 378 Mass. 592, 593 [1979]), and resolve in his favor all reasonable inferences that could be drawn from that evidence (see Alholm v. Wareham, 371 Mass. 621, 627 [1976]). The plaintiff, Robert E. Gram, was an insurance sales representative for Liberty Mutual Insurance Company (Liberty) from 1970 until he was discharged on January 6, 1977. His compensation was determined by percentage commissions on new sales and by lower percentage commissions on the renewal of policies previously sold. In 1976, Gram's renewal commissions amounted to $9,850, or about 28% of his total earnings for that year. Gram's employment contract was partially oral and partially written. At the time he was hired Gram signed an agreement limiting his right to compete in soliciting insurance contracts in a limited geographical area for a period of eighteen months after termination of his employment for any reason. At the time of his discharge, Gram was assigned to Liberty's Chelmsford office. His immediate superior was the defendant Richard G. Gosselin, the district sales manager for Chelmsford and Andover. Gosselin's immediate superior was the defendant James C. Fisher, an assistant division

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sales manager, who worked in an office in Lexington. Regular appraisals of Gram's work showed his work to be good, at least satisfactory, in all categories of performance and excellent in certain respects. Gram was a hard worker, the most productive salesman in policies and premiums of the nine sales representatives under Gosselin.

There were certain incidents during Gram's term of employment that presented administrative problems in the view of his superiors. In September, 1973, Gram altered a company mailing by having a headline printed in block letters -- "10% AUTO DIVIDEND." He then changed by hand the printed percentage to 15%. Gosselin told him that no alterations were permitted in company mailings, and Gram did not thereafter alter any company mailings. At a sales managers' meeting held sometime between October, 1974, and July, 1976, Gosselin and Fisher said that they would like to have Gram out of the Chelmsford office. The witness who overheard these statements, attributed to Gosselin and Fisher, testified that he inferred from this that they did not like Gram. A former coworker testified that Gram was not disliked in the office. In June, 1976, Fisher summoned Gram to discuss Gram's use of a map Gram had prepared to show customers and prospective customers the location of the Chelmsford office. Fisher told Gram that the map was not authorized by Liberty and should not be used. Gram ceased using it. In September, 1976, Fisher and Gosselin challenged Gram's use of certain rubber stamps Gram had had made up, and they also discussed with Gram his obligations as a salesman.

The incident that led to Gram's discharge occurred in early January, 1977. Gram had typed a note on a personal memo pad to send to between thirty and fifty prospective customers whom he had already met and for whom he had made out applications for 1977 motor vehicle insurance. He xeroxed the typed note, a copy of which is set forth in the margin, [Note 2] for each prospective customer and placed each

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note in an open, addressed envelope to be stamped and mailed in the regular course for Liberty's Chelmsford office. These envelopes and their contents came to Gosselin's attention, and he in turn brought them to Fisher's attention. They told their superior, one Edward Argent, thHt the notes were unauthorized mailings in violation of Liberty's policies and sought Argent's approval to discharge Gram. They did not first confront Gram with their conclusions. They made no statements favorable to Gram in their meeting with Argent. After checking with his superior, Argent authorized Fisher to fire Gram but only after they had given him a chance to explain his actions. Gram told Fisher and Gosselin that the notes were personal notes. Fisher disagreed and, on January 6, 1977, after consulting with Argent, he fired Gram.

The jury were warranted in finding that the mailing of xeroxed, personalized copies of a typewritten note to customers with whom Gram had already dealt did not violate any policy of the company. They were further warranted in concluding that Gram was discharged without good cause. As will be seen, the questions remain whether the jury were warranted in concluding that Gosselin and Fisher acted with malice and that Liberty dealt unfairly and in bad faith in discharging Gram so as to justify imposing liability on Liberty for breach of contract.

Gram brouvht this action promptly after his discharge, alleging against Liberty a bad faith breach of his oral contract of employment and alleging against Gosselin and Fisher intentional interference with his employment contract by tortiously procuring his discharge. The defendants

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unsuccessfully moved for directed verdicts at the close of the plaintiff's case and at the close of all the evidence. See Mass. R. Civ. P. 50(a), 365 Mass. 814 (1974). The jury returned a verdict against Liberty in the amount of $100,000, against Fisher in the amount of $40,000, and against Gosselin in the amount of $30,000. The judge denied the defendants' motion for judgments notwithstanding the verdicts or for a new trial. See Mass. R. Civ. P. 50(b), 365 Mass. 814 (1974). We transferred the defendants' appeals here on our own motion.

We consider first the question whether the evidence warranted the verdicts against Gosselin and Fisher because, if, as we conclude, there was insufficient evidence to warrant a finding that they acted with malice toward Gram, that conclusion has a bearing on the question whether Liberty acted without good faith and fair dealing in discharging Gram. [Note 3]

1. The evidence did not warrant a verdict against Gosselin or Fisher or Gram's claim that each intentionally interfered with his contractual rights with Liberty. Because Gosselin and Fisher were acting within the scope of their employment responsibilities, Gram acknowledges that each was privileged to act as he did unless he acted out of malevolence, that is, with "actual" malice. See Steranko v. Inforex, Inc., 5 Mass. App. Ct. 253, 272-273 (1977), where the authorities are carefully collected. See also Owen v. Williams, 322 Mass. 356, 360-361 (1948) (jury warranted in finding no privilege existed); Caverno v. Fellows, 300 Mass. 331, 336-338 (1938) (evidence did not show that malevolence was the supervisor's sole or even dominant reason for making a report which led to the plaintiff's discharge). The rule assigning liability to corporate officials only when their actions are motivated by actual, and not merely implied, malice has particular force because "their freedom of action

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directed toward corporate purposes should not be curtailed by fear of personal liability." Steranko v. Inforex, Inc., supra at 273. See Avins, Liability for Inducing a Corporation to Breach its Contract, 43 Cornell L.Q. 55, 59 (1957).

Malice may be shown by the proof of facts from which a reasonable inference of malice may be drawn. The line between a proper inference and unwarranted conjecture is not easily drawn. The answer depends on the evidence in each case and on what the trier of fact may reasonably infer from that evidence. The fact that there is no direct evidence that Gosselin and Fisher acted with malice to obtain Gram's discharge is not dispositive. There might be sufficient proof that spite or ill will was the controlling factor in urging Gram's discharge, derived from a "rational inference of probabilities from established facts." Bigwood v. Boston & N. St. Ry., 209 Mass. 345, 348 (1911). See Zezuski v. Jenny Mfg. Co., 363 Mass. 324, 329 (1973). Any reasonable inference of malice must, however, be "based on probabilities rather than possibilities." Alholm v. Wareham, 371 Mass. 621, 627 (1976). See Poirier v. Plymouth, 374 Mass. 206, 212 (1978). [Note 4]

Gram relies on evidence that Fisher and Gosselin, some months before Gram's discharge, expressed a desire that Gram not be in Liberty's Chelmsford office. This was not, of course, evidence of a wish that Gram be fired. The witness who overheard the conversation inferred that neither man liked Gram. We think the inference, assuming it to be reasonable, that Gosselin and Fisher did not like Gram would not alone reasonably warrant a further inference that it was probable that Gosselin or Fisher acted with ill will to obtain Gram's discharge. Such an inference on an inference

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is particularly unwarranted where, despite years of close association with Gosselin and Fisher, Gram did not testify to, or otherwise present evidence of, a single, direct manifestation of ill will toward him by Gosselin or Fisher.

We must, of course, consider the evidence collectively in deciding whether an inference of malice was warranted. Gram argues that it is incredible that Gosselin and Fisher really believed that he had violated a company rule. He says the level of stupidity required to hold that belief was so low that they could not really have believed their stated reason for discharging Gram. Gram argues that, because their stated reason was incredible, the jury could reasonably draw the inference that the individual defendants acted maliciously. We note, however, that their stated reason was not devised after the discharge as a justification. They did not act on their own because they subjected their conclusion for consideration by their superiors.

Even if we assume, as seems reasonably warranted, that Gosselin and Fisher wished Gram did not work under them, that they did not conduct an adequate investigation of the alleged rule violation and that, in fact, there was no new or good reason to justify Gram's discharge, an inference of an intent to obtain Gram's discharge out of ill will toward him is no more probable than is the inference that Gosselin and Fisher acted in response to a sincerely held but erroneous view that the mailing of more than thirty substantially identical memoranda was contrary to company policy. An inference of the probability of malice, action motivated by spite, does not reasonably follow from a showing, in these circumstances, only of negligence or of sloppy and unfair business practices.

2. We come then to the question whether the judge should have granted Liberty's motion for a directed verdict in its favor or Liberty's motion for judgment notwithstanding the verdict, each of which presents the same issue. D'Annolfo v. Stoneham Hous. Auth., 375 Mass. 650, 657 (1978). We have recognized a right of recovery for the bad faith termination of a business relationship which involved

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overreaching by one party seeking to deny the reasonable expectations of the other party to a financial benefit of that relationship. Thus, in RLM Assocs. v. Carter Mfg. Corp., 356 Mass. 718 (1969), we upheld the plaintiff's right to recover a lost commission where the evidence permitted the conclusion that the defendant's termination of its employment arrangement with the plaintiff was based in part on a desire to avoid paying the commission. That motive in turn warranted the inference that the termination was in bad faith. See Malloy v. Coldwater Seafood Corp., 338 Mass. 554, 562-563 (1959). A somewhat similar situation existed in Fortune v. National Cash Register Co., 373 Mass. 96 (1977), where we imposed an obligation of good faith and fair dealing in the termination of the employment of a salesman in spite of the fact that the terms of his employment permitted his discharge without cause and without any express obligation on the employer to pay the commission. Id. at 104-105. We said that "[w]e think that the evidence and the reasonable inferences to be drawn therefrom support a jury verdict that the termination of Fortune's twenty-five years of employment as a salesman with NCR the next business day after NCR obtained a $5,000,000 order from First National was motivated by a desire to pay Fortune as little of the bonus credit as it could." Id. at 105. These cases involved an intent of the defendants to benefit financially at the plaintiffs' expense.

We have not decided, however, to impose liability on an employer for breach of a condition of good faith and fair dealing in the discharge of an employee simply because there was no good cause for the employee's discharge. In the Fortune case, we expressly left open the question whether we would adopt the rule announced in Monge v. Beebe Rubber Co., 114 N.H. 130 (1974), that there was an obligation to act in good faith implicit in every contract for employment at will. See Fortune v. National Cash Register Co., supra at 104. Nor have we equated the absence of good cause for the discharge of an employee with the absence of good faith. Id. Thus, in Richey v. American Auto.

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Ass'n, 380 Mass. 835, 839 (1980), where we assumed that the decision to discharge an employee was "bad, unjust, and unkind" (thus without good cause) and contrary to the employee's expectations, we said "if the present facts should be held to qualify a discharged employee for relief, then a new practical definition might have to be given to employments theoretically terminable at will." [Note 5] We have, however, recognized that good faith in the termination of a contractual relationship may require more than simply adhering to the requirement of good faith as defined in the Uniform Commercial Code. Zapatha v. Diary Mart, Inc. 381 Mass. 284, 297 n.17, 299-300 (1980). See, e.g., G. L. c. 106, Section 1-201 (19) ("honesty in fact in the conduct or transaction concerned"); G. L. c. 106, Section 2-103 (1) (b) (as to a merchant, under the sales article, "honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade"). In the Zapatha case, which involved termination of a franchise agreement without good cause, we looked at the consequences of the termination and concluded that the franchisees were not deprived of any earnings, loss of good will, or loss of investment and were not subjected to any unfair dealing. Concluding that the franchise was properly terminated, we said the result was appropriate "[u]nless we were to take the position that termination without cause of a franchise agreement of the character involved here is prohibited invariably by the law of the Commonwealth, a position we decline to adopt (cf. Richey v. American Auto. Ass'n, 380 Mass. 835 [1980])." Zapatha, supra at 300.

Gram does not argue that he is entitled to recover damages for breach of contract simply because he was discharged

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without good cause. Appropriately, he does not equate the employer's obligation of good faith and fair dealing (see Fortune, supra at 104) with good cause. Certainly good cause to discharge an employee would tend to negate the existence of bad faith in the decision to discharge an employee. But termination in the absence of good cause does not establish bad faith, and it is only a factor in determining whether there was fair dealing. Nor does Gram rely on some specific public policy against upholding his discharge, such as appears in cases in which an employer's retaliatory discharge was its reaction to appropriate, socially desirable conduct of the employee. [Note 6] He does point, however,

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to the absence of any good cause for his discharge, to the absence of any bona fide inquiry into whether his discharge was justified, and to the benefit Liberty obtained in the retention of his renewal commissions as evidence of bad faith. Liberty makes no argument that it is isolated from liability because its higher executives who authorized the firing were immune from the allegedly improper motives that infected Gosselin and Fisher. [Note 7]

We find no basis for a reasonable inference that Liberty was motivated to discharge Gram by a desire to obtain the

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benefit of Gram's renewal commissions. There was no evidence that Liberty even considered the matter of renewal commissions. Gram was the most productive salesman in the office. If one assumes, as seems unavoidable, that Liberty regarded successful sales efforts to be to its economic benefit, the possibility of its acquisition of Gram's renewal commissions was a minor factor balanced against the potential of Gram's continued successful sales efforts. Thus, the evidence did not warrant a finding of overreaching of the character found in the RLM Assocs. and Fortune cases. Nor did the evidence warrant a finding that Gram's employment contract had an implied condition that he would not be discharged except when Liberty had a good faith belief that his firing was justified for business reasons. What we have is a case in which the jury were warranted in concluding that Gram's discharge was "bad, unjust, and unkind" (see Richey v. American Auto. Ass'n, supra at 839), contrary to Gram's reasonable expectations, and the product of inadequate investigation.

The question, then, is whether we should allow recovery for breach of a contract of employment at will where an employee is discharged without cause by an employer who had no improper motive for discharging the employee, unless one regards the absence of good cause itself or the mistaken belief that there is good cause as conclusively demonstrative of bad faith. A forceful argument can be made that job security should be assured by a common law rule protecting a person in Gram's position. [Note 8] Collective

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bargaining agreements and public employment statutes generally permit discharge only for good cause. But other employment relationships, unless the employee is dealing knowledgeably from strength, generally do not provide that measure of job security. We could, of course, adopt a rule extending a common law right to an at-will employee to recover damages for breach of an imposed condition of his or her employment contract that he or she not be discharged except for good cause. It is also within the authority of the Legislature to enact such a rule. The Employment Security Law of the Commonwealth recognizes the right of a wrongfully discharged employee to receive limited payments for a period of time. G. L. c. 151A, Sections 22-37. Our adoption of a common law right of recovery for discharge without cause would tend to duplicate (or perhaps supersede or supplement) certain benefits available under the Employment Security Law. We decline at this time to adopt a general rule that the discharge of an at-will employee without cause is alone a violation of an employer's obligation of good faith and fair dealing. We are aware of no case that has gone this far. [Note 9]

There is in this case, however, an element of Gram's compensation that requires special consideration. Although there is no evidence warranting an inference that Liberty discharged Gram for the purpose of appropriating his renewal commissions, the fact remains that Gram lost reasonably ascertainable future compensation based on his past services. Gram had a reasonable expectancy of some renewal

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commissions, although, to be sure, each renewal commission depended on the policyholder deciding to continue his coverage with Liberty. Gram would not apparently have been entitled to renewal commissions after his retirement. His right to renewal commissions was in no sense guaranteed. Moreover, a certain amount of "servicing" of these policyholders would be required from time to time, work that some other Liberty employee, in Gram's stead, would have to perform.

We think that the obligation of good faith and fair dealing imposed on an employer requires that the employer be liable for the loss of compensation that is so clearly related to an employee's past service, when the employee is discharged without good cause. See Druker v. Roland Wm. Jutras Assocs., 370 Mass. 383, 385 (1976); Restatement (Second) of Contracts, Section 205 (1981). Our decisions have recognized a distinction between the loss of future wages for past service (see Fortune v. National Cash Register Co., 373 Mass. 96, 105-106 [1977]); RLM Assocs. v. Carter Mfg. Corp., 356 Mass. 718 [1969]), and the loss of future income for future services (see Zapatha v. Dairy Mart, Inc. 381 Mass. 284, 299-300 [1980]; Richey v. American Auto. Ass'n, 380 Mass. 835, 839 [1980]). Gram's contribution to Liberty's future income was not tenuous. Liberty benefited from its discharge of Gram without cause, assuming that the normal course of the servicing of renewal business would cost less than the "forfeited" renewal commissions. In such a case, Liberty's absence of good faith need not be proved to the extent that there must be a showing of an improper motive for the discharge. Fair dealing, the other aspect of the obligation imposed on an employer, requires recognition of the agreed worth of such an employee's past service. [Note 10]

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We remand the case for a determination of damages, measured by the amount of renewal commissions Gram reasonably could have expected to receive, reduced to reflect the proportion of his time that would reasonably have been expected to have been devoted to the servicing of those renewal policies. Gram has made no specific showing of his loss of any other identifiable, future benefit, such as pension rights, reflective of past services to Liberty. Cf. Moore v. Home Ins. Co., 601 F.2d 1072, 1074-1075 (9th Cir. 1979).

A retrial of only the question of damages is necessary in these circumstances. [Note 11] The judge charged the jury that they could return a verdict against Liberty only if they found that Gram was not discharged for good cause. There is no

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dispute about Gram's right to renewal commissions had he continued to work for Liberty as a salesman.

3. The judgments against Gosselin and Fisher are reversed, and judgments shall be entered in their favor. The judgment against Liberty is vacated, and the case is remanded for the determination of damages on the count against Liberty. We affirm the order denying Liberty's motion for a new trial.

So ordered.

NOLAN, J. (dissenting in part, concurring in part, with whom Lynch, J., joins). I dissent only from part 2 of the opinion. The court should not impose a condition on parties to a contract which neither party had ever considered. Admittedly, there was no evidence of overreaching by Liberty of the kind which makes the cases of RLM Assocs. v. Carter Mfg. Corp., 356 Mass. 718 (1969), and Fortune v. National Cash Register Co., 373 Mass. 96 (1977), so readily distinguishable. Gram was not fired to permit Liberty to pocket renewal commissions. Somebody must service these accounts and be compensated for such efforts. The court has restructured an at-will employment agreement to reflect an imposed condition never heretofore recognized by this court and one of doubtful legitimacy.

We are not here charged with giving relief to a party under a statute which permits compensation for a discharge without cause. We are faced with an at-will agreement freely made by competent parties and terminated by one party in a manner not inconsistent with its terms.

An employer should be free to discharge an employee without cause and without liability attaching for future compensation based on past services where such right never vested in the employee and where it is conceded that absence of good cause is not to be equated with the presence of bad faith.

The opinion calls for a trier of fact to determine "damages, measured by the amount of renewal commissions Gram

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reasonably could have expected to receive, reduced to reflect the proportion of his time that would reasonably have been expected to have been devoted to the servicing of those renewal policies." The judge or jury must somehow factor into the computation of damages the possibility that the policy holder might die or cancel his policy with Liberty or that Gram might die. The court is ordering the trier of fact to engage in extravagant speculation. Pro dolor.