text:
    STATE OF MONTANA, Plaintiff and Respondent, v. GARY DENNIS McMAHON, Defendant and Appellant.
    No. 94-196.
    Submitted on Briefs March 16, 1995.
    Decided May 4, 1995.
    52 St.Rep. 353.
    894 P.2d 313.
    271 Mont. 75.

      For Appellant: Bruce E. Becker, Attorney at Law, Livingston.
    For Respondent: Hon. Joseph P. Mazurek, Attorney General; Micheál Wellenstein Ass’t Attorney General, Helena; John V. Potter, Meagher County Attorney, White Sulphur Springs.
   JUSTICE LEAPHART

delivered the Opinion of the Court.

Gary Dennis McMahon (McMahon) appeals his conviction in the Fourteenth Judicial District, Meagher County, of misdemeanor assault and two counts of felony intimidation. We reverse.

Since this matter is being remanded for retrial, we set forth only enough facts to put the issue into proper context.

On September 16, 1993, McMahon took a high dosage of valium and codeine, brandished a rifle, and the sheriff was summoned. The sheriff called to the scene found McMahon laying face down on the floor of his trailer. The sheriff also found two pill bottles and took them from the trailer to ascertain the threat the pills posed to McMahon. McMahon allegedly came from the trailer with a knife and threatened the sheriff physically and verbally until the bottles were given back to McMahon. McMahon was handcuffed and bound at the knees and ankles, and strapped to a gurney. It is alleged that McMahon threatened to kill the sheriff and sheriff’s wife and threatened ambulance and hospital personnel. He was charged with misdemeanor assault and two counts of felony intimidation.

Six issues are presented:

1. Was there sufficient evidence to support McMahon’s conviction for misdemeanor assault.

2. Was the information charging McMahon with intimidation defective?

3. Was McMahon properly charged with intimidation?

4. Did the District Court err in denying McMahon’s motion for a directed verdict?

5. Did the District Court err in denying McMahon’s motion for mistrial when, during voir dire and in front of other prospective jurors, several prospective jurors commented on McMahon’s reputation and one prospective juror commented on her fear of McMahon arising out of the incident in question?

6. Whether McMahon’s intoxication rendered him incapable of forming the requisite criminal intent.

Since we reverse on the basis of improper juror comments during voir dire (Issue 5) we need not discuss Issues 1, 2, 3, 4, and 6.

Did the District Court err in denying McMahon’s motion for mistrial when, during voir dire and in front of other prospective jurors, several prospective jurors commented on McMahon’s reputation and one prospective juror commented on her fear of McMahon arising out of the incident in question?

When asked about the difficulty of following the judge’s instructions regarding the presumption of innocence, prospective juror P.H. stated that “I was kind of involved, you know what I mean. When someone calls and says, You better come get your children, because there’s a guy with a gun,’ then you know, I ran. I was scared and they were scared. So, I don’t know.” Prospective juror K.M. stated he should not be a juror because of extensive time spent with McMahon in the classroom and his knowledge of McMahon. He stated that “I’ve had different situations arise with him.” When being questioned about potential bias, prospective juror C.C. stated “I could try to listen to all of the evidence. It’s kind of hard, because I’ve seen him downtown in action. I know he’s capable of doing things.” The judge admonished that he did not want the prospective jurors to address the specifics of any prior knowledge they had about the defendant, but merely to answer whether they had prior knowledge. McMahon’s counsel moved for, and the judge denied, a motion for a mistrial.

The standard of review applied to a district court’s denial of a motion for mistrial is “clear and convincing evidence that the trial court’s ruling was erroneous.” State v. Gollehon (1993), 262 Mont. 293, 302, 864 P.2d 1257, 1263 (citation omitted). “The decision of a district court judge as to the impartiality of a jury should not be set aside unless there is clear abuse of discretion.” State v. Sullivan (1994), 266 Mont. 313, 320, 880 P.2d 829, 834. Regarding juror prejudice, this Court further stated that:

It is only where [jurors] form fixed opinions of the guilt or innocence of the defendant which they would not be able to lay aside and render a verdict solely on the evidence presented in court that they become disqualified as jurors.

Sullivan, 880 P.2d at 834; Great Falls Tribune v. District Court (1980), 186 Mont. 433, 439-40, 608 P.2d 116, 120. Although the Court in Sullivan was considering whether the district court erred in its failure to strike individual jurors for cause, its analysis is applicable to the instant case.

In State v. Dixon (1994), 264 Mont. 38, 869 P.2d 779, we upheld the conviction where the prosecutor’s improper comments were considered insignificant when viewed in the context of the entire record. We noted that the judge instructed the jury not to use comments such as counsel’s as evidence, and to consider only evidence when debating the verdict. Dixon, 869 P.2d at 781. In State v. Walton (1986), 222 Mont. 340, 342, 722 P.2d 1145, 1146, the prosecutor made potentially erroneous and prejudicial comments regarding presentation of evidence to the judge but the judge admonished the prosecutor, issued precautionary statements to the jury, and the jury ultimately rej ected several of the State’s charges. In State v. Gafford (1977), 172 Mont. 380, 563 P.2d 1129, we held that non-responsive and prejudicial answers by a prospective juror were not cause for reversal when the defendant’s motion was not made at the first recess following the answers and the answers had been invited by further questions of defense counsel which were common and expectable. In State v. Rhodes (1974), 164 Mont. 455, 524 P.2d 1095, we held that a mistrial for prejudice against the defendants, caused by a juror’s comments, was not warranted because defense counsel did not make a sufficient showing of prejudice.

These cases demonstrate a trend that improper comments by-prosecutors or prospective jurors about the defendant or about the evidence, are not grounds for mistrial if the judge instructs the jury to disregard the questionable comment and if the court is satisfied that the juror can lay aside a fixed opinion and render a verdict solely on the evidence presented. Sullivan, 880 P.2d at 834. In the instant case, the judge admonished the prospective jurors to avoid bias and to confine their discussion to the fact that they may have a bias rather than the substance or source of that bias.

We conclude, however, that the prospective juror comments in this case were so prejudicial that reversal is warranted. Comments by prospective jurors C.C. and K.M. damaged McMahon’s reputation from the start. Prospective juror P.H.’s at the start of a two-day trial — in which one of the primary issues was whether McMahon had the ability to carry out his threats — clearly prejudiced McMahon’s right to a fair and impartial jury. McMahon contends that his threats were conditional only and he had no ability to carry them out. Certain prospective jurors commented, in the presence of the entire panel of venireman, that they had “seen him downtown in action,” that “situations” had arisen with him, and that the incident in question caused one of the prospective jurors to be fearful. These comments served to directly contradict McMahon’s contention that his threats were mere words. They attested to the jurors’ beliefs that McMahon’s threats were not idle, that he was a man of action; and that he was a man who engendered fear in others. It would be extremely difficult, if not impossible for any juror, having heard these assessments of McMahon, to sit in impartial judgment of his claim that he posed no threat to anyone.

Although the instant facts are different from those in Putro v. Baker (1966), 147 Mont. 139, 410 P.2d 717, the decision in that case is instructive. Putro was a passenger in an automobile which was involved in an accident with a truck driven by Baker. Two other occupants of the Putro vehicle were killed in the accident. Baker pled guilty to manslaughter with regard to those two deaths. Putro, the survivor, then filed a civil suit for personal injury. By pre-trial order, it was ordered that there would be no reference to the criminal proceeding in the civil suit. The Great Falls Tribune published an article about the civil trial and made reference to the fact that Baker had pled guilty to manslaughter as a result of the two deaths. One of the jurors brought this article to the jury room with her the following day. Three of the jurors admitted to having read the article. Noting that the three jurors denied having been influenced by the article and that two of the three voted for the defense, the district court denied the motions for mistrial and new trial. This Court reversed.

The trial court should have declared a mistrial in justice to itself as well as to parties, so that a fair trial may result and the verdict when rendered may be entitled to the respect of both parties and the confidence of the court. We cannot be too strict in guarding trials by juries from improper influences. This strictness is necessary to give due confidence to parties in the results of their causes, and to enlighten the public who have recourse to our courts that any improper influence which has the natural tendency to prejudice the verdict is grounds for a mistrial. See Wright v. Eastlick, 125 Cal. 517, 58 P. 87; Hayward v. Richardson Construction Co., 136 Mont. 241, 347 P.2d 475, 77 A.L.R.2d 1144.

Putro, 410 P.2d at 722.

This Court then went on to hold that the trial court must assess the “natural tendency” that the outside influence may have upon the jurors’ deliberations.

It is the duty of the trial judge to critically assess the “natural tendency” of the references made in a newspaper article. If, on its face, it has an apparent prejudicial effect, and if possible and indeed probable prejudice and bias would be created in the minds of the jurors by reason of the damaging statement it contained, the admissions by the jurors that they had read the article, that it was in their presence in the jury room, and that comments were made about it during their deliberations upon a verdict, creates a situation of such inherent unfairness that a mistrial should be ordered to prevent a possible miscarriage of justice. In such a case, contact of the jurors with outside, prejudicial influences is clearly demonstrated.

Putro, 410 P.2d at 722.

The Court reversed the district court concluding, that unexplained prejudicial references to important matters in litigation may have a “natural tendency” to infect the proceedings with an unfairness that can be corrected only by starting anew the legal contest. Restricting the source of the facts to be considered by the jury to the witness stand is important in all cases.

Putro, 410 P.2d at 722.

Although the improper influence (newspaper article) in Putro is factually distinguishable from the improper influence (volunteered comments during voir dire) in the present case, the principles established in Putro are equally applicable in this matter. In particular, the principle that “any improper influence which has the natural tendency to prejudice the verdict is grounds for a mistrial.” Putro, 410 P.2d at 722. Under the present facts, we hold that comments made in the presence of the entire panel indicating that certain jurors not only knew the defendant but were aware of his propensity for violence were highly prejudicial. Such prejudicial comments have a “natural tendency” to infect the proceedings with an unfairness that can be. corrected only by declaring a mistrial and “starting anew the legal contest.”

Our holding in this case should be interpreted narrowly, reserved only for the most egregious and prejudicial prospective juror comments; our holding does not encompass all statements volunteered by prospective jurors during voir dire. It pertains only to those comments which indicate the prospective juror is harboring a bias which he or she cannot lay aside or those comments which, when made in the presence of other prospective jurors, amount to inadmissible opinions or comments about the defendant’s character or propensities, thereby poisoning the perspective of the entire jury panel in such a way that the court cannot rectify the problem through admonishment or curative jury instructions.

In future cases, it would be advisable for district courts, before voir dire commences, to advise prospective jurors not to volunteer the substance of any comments or opinions that they may have about the parties. Rather, that they should merely advise the court that they have information (or an opinion) about a party. The trial Judge can then explore the substance of that information in camera thereby avoiding any taint to the entire jury panel.

Reversed.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY, TRIEWEILER, HUNT, NELSON and WEBER concur.


source: Caselaw Access Project

author: JUSTICE TRIEWEILER

license: Public Domain

text:
    MICHAEL A. TEFFT, EDWARD C. PETERS, JOSEPH E. GASPAR, NANCI ELLEN GREEN, RANDY J. ARCHERY, JOSEPH M. McKAMEY, GEORGE L. DOMME, MICHAEL D. CROSS, MICHAEL E. HEISLER, and JACK C. STIMAC, Plaintiffs and Respondents, v. THE STATE OF MONTANA, Defendant and Appellant.
    No. 94-229.
    Submitted on Briefs January 19, 1995.
    Decided May 4, 1995.
    52 St.Rep. 357.
    894 P.2d 317.
    271 Mont. 82.

      For Appellant: W. D. Hutchinson, Assistant Attorney General, Agency Legal Services Bureau, Helena.
    For Respondents: Lawrence A. Anderson, Attorney at Law, Great Falls.
   JUSTICE TRIEWEILER

delivered the Opinion of the Court.

The plaintiffs, who are firefighters employed by the Montana Air National Guard in Great Falls, filed this action in the District Court for the Eighth Judicial District in Cascade County to recover wages due from the defendant, State of Montana, and liquidated damages for violation of the Federal Fair Labor Standards Act (FLSA). The District Court granted plaintiffs’ motion for partial summary judgment and held that the State violated the FLSA when it reduced plaintiffs’ wages and that its actions were not taken in good faith. After a nonjury trial, the District Court found the amount of wages and damages due, and entered judgment in favor of plaintiffs for that amount. The State appeals from the District Court’s order granting summary judgment and the amount of damages awarded. We affirm the judgment of the District Court.

We restate the issues on appeal as follows:

1. Did the District Court err when it granted plaintiffs’ motion for summary judgment?

2. Did the District Court abuse its discretion when it awarded liquidated damages under 29 U.S.C. § 216(b) (1988) of the Fair Labor Standards Act?

3. Were the District Court’s findings regarding the amount of plaintiffs’ damages clearly erroneous?

FACTUAL BACKGROUND

Plaintiffs are firefighters who provide protection for civilian aircraft and a unit of the Montana Air National Guard at the Great Falls International Airport. Prior to 1975, they were employed by the federal government. In 1975, when the federal firefighting jobs were discontinued, plaintiffs were employed by the Montana Department of Military Affairs. However, through a cooperative arrangement, the federal government still paid for most of the costs associated with their jobs.

After the State established the fire crew jobs in 1975, plaintiffs’ salaries were based on the State’s statutory pay matrix. Section 2-18-312, MCA. The State initially paid plaintiffs biweekly for 80 hours of work during each two week period. However, plaintiffs’ actual schedules had them working 24 hour shifts, followed by 48 hours off duty. Therefore, they worked substantially more hours during each two week period than the 80 hours for which they were paid. They actually worked between 96 and 120 hours during a two week period, and 2912 hours per year, but were paid on the basis of a 2080 hour year. The State failed to pay them for the actual time worked, or to keep accurate records of their time at work.

In 1982, the State began to reflect actual hours worked on plaintiffs’ time cards, but plaintiffs were still paid for only 80 hours of work biweekly. During a brief period from 1985 to 1986, the State began to pay plaintiffs for the actual hours they worked. However, to avoid overtime requirements, the State added an additional day off, or “Kelly day,” for each pay period. One count of plaintiffs’ complaint, the “straight time” claim, was a claim for wages for those hours worked, but for which they were not paid, between 1979 and 1985. In separate litigation, plaintiffs settled claims for overtime compensation during this period.

In 1985, the United States Supreme Court reversed previous case law which excluded state jobs from coverage under the federal Fair Labor Standards Act. See Garcia v. Metropolitan Transit Authority (1985), 469 U.S. 528, 105 S. Ct. 1005, 83 L. Ed. 2d 1016. As a result, FLSA provisions became binding on state and local governments.

The FLSA provides that a firefighter must be paid at the overtime rate if the firefighter’s tour of duty exceeds 212 hours in 28 days. 29 U.S.C. § 207 (1988); 29 C.F.R. § 553.201 (1993). Plaintiffs’ hours consistently exceeded this number, with the exception of the period from September 1985 to July 1986.

Following Garcia, Congress passed two amendments to the FLSA. The first amendment eased the financial burden on state and local governments by exempting them from liability for FLSA violations that occurred before April 15, 1986. Pub. L. No. 99-150, 99 Stat. 787, § 2(c) (29 U.S.C. § 216 note (1988) (Effect of Amendments by Public Law 99-150 on Public Agency Liability Respecting any Employee Covered Under Special Enforcement Policy)); see Hill v. City of Greenville (N.D. Tex. 1988), 696 F. Supp. 1123, 1126. A second amendment enacted an anti-discrimination provision to deter state and local governments from decreasing employees’ wages to offset the increased overtime compensation requirement. Pub. L. No. 99-150, § 8, 99 Stat. 791 (29 U.S.C. § 215 note (1988) (Liability of Public Agency for Discrimination Against Employee for Assertion of Coverage)).

In response to Garcia, the Department of Military Affairs proposed changes in the manner in which firefighters were paid. However, the proposal was rejected by the State’s Personnel Division on the basis that it deviated from the State pay matrix. The Department, therefore, requested an exclusion from the State’s pay plan under § 2-18-103(6), MCA, which excludes officers or members of the militia. The State granted the exclusion by July 1986. Plaintiffs were required to be members of the National Guard and became part of a new class known as the Militia Protective Services, an exempt classification. We recently held that the requirement of National Guard membership was unconstitutional because the State could not establish a rational basis for it. McKamey v. State (1994), [268 Mont. 137], 885 P.2d 515.

Following this reclassification, the State reduced plaintiffs’ hourly wages. The Kelly day was eliminated and plaintiffs were paid biweekly based on a reduced hourly wage multiplied by the number of hours actually worked. The new hourly wages were effectively determined by dividing each plaintiff’s set annual salary by 2912 hours instead of 2080 hours.

Plaintiffs filed a complaint, and later an amended complaint, that demanded lost compensation for (1) unpaid “straight time,” and (2) discrimination in violation of the FLSA based on the State’s reclassification. Plaintiffs contended they were entitled to unpaid wages and were entitled to liquidated damages pursuant to the FLSA, based on the State’s reduction of their wages in response to the Garcia decision. The plaintiffs moved for and received summary judgment on the FLSA claim. In its order, the District Court held that the State had failed to raise a factual issue regarding its violation of the Act, or whether it acted in good faith when it reduced plaintiffs’ wages. Accordingly, the court held that plaintiffs were entitled to liquidated damages.

The District Court ordered a hearing on the remaining issues, including the amount of damages, and the State was allowed to submit additional proof of good faith and reasonable grounds for its actions. Both parties offered expert testimony regarding damage calculations. The State failed to offer evidence satisfactory to the District Court that it had acted in good faith when it reduced plaintiffs’wages. The District Court found plaintiffs’ damage calculations more reliable than the State’s, and adopted plaintiffs’ damage figures. On January 31, 1994, the District Court entered judgment against the State for $485,434.60.

ISSUE 1

Did the District Court err when it granted plaintiffs’ motion for summary judgment?

The nature of our inquiry when we review a district court’s summary judgment decision is identical to the trial court’s. Cooper v. Sisters of Charity (1994), 265 Mont. 205, 207, 875 P.2d 352, 353 (citing Minnie v. City of Roundup (1993), 257 Mont. 429, 431, 849 P.2d 212, 214). Summary judgment is proper only when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P; Spain-Morrow Ranch, Inc. v. West (1994), 264 Mont. 441, 444, 872 P.2d 330, 331-32.

In 1985, the United States Supreme Court decided Garcia, which applied the minimum-wage and overtime provisions of the FLSA to state employees. In order to minimize financial impact on state and local governments, Congress enacted amendments to the FLSA. Hill, 696 F. Supp. at 1125. Congress also enacted what is referred to as § 8 to prohibit governmental discrimination against employees who are entitled to financial benefits as a result of Garcia. 29 U.S.C. § 215 note (1988), Pub. L. No. 99-150, § 8, 99 Stat. 791. Section 8 provided:

A public agency which is a State, political subdivision of a State, or an interstate governmental agency and which discriminates or has discriminated against an employee with respect to the employee’s wages or other terms or conditions of employment because on or after February 19, 1985, the employee asserted coverage under section 7 of the Fair Labor Standards Act of 1938 [29 U.S.C. § 207] shall be held to have violated section 15(a)(3) of such Act [29 U.S.C. § 215(a)(3)]. The protection against discrimination afforded by the preceding sentence shall be available after August 1, 1986, only for an employee who takes an action described in section 15(a)(3) of such Act.

Section 7 sets forth the number of hours after which firefighters must be paid overtime. 29 U.S.C. § 207 (1988). Section 215(a)(3) makes it unlawful for any person to discriminate against an employee because the employee has filed a complaint or instituted a proceeding under the FLSA. 29 U.S.C. § 215(a)(3) (1988).

The District Court’s order correctly noted that the State conceded, in its brief in opposition to plaintiffs’ motion for summary judgment, that it reduced plaintiffs’ hourly wages in response to Garcia and to avoid increasing annual pay. Other courts have concluded that discrimination in violation of the FLSA occurs under these circumstances. See Drollinger v. State of Arizona (9th Cir. 1992), 962 F.2d 956; Blanton v. City of Murfreesboro (6th Cir. 1988), 856 F.2d 731; Hill, 696 F. Supp. 1123. In Drollinger, the Ninth Circuit Court of Appeals concluded that Arizona violated § 8 as a matter of law when it lowered hourly wage rates for firefighters as a response to Garcia. Drollinger, 962 F.2d at 957-59.

The State argues that the District Court erroneously decided that the State’s “reclassification” plan violated § 8 of the FLSA amendments, and 29 U.S.C. § 215(a)(3). First, the State claims that it did not discriminate against plaintiffs because they asserted coverage under the FLSA. Instead, the State contends that it lawfully responded to budgetary constraints. The District Court rejected the State’s “economic necessity” defense.

Other courts have rejected an “economic necessity” defense in similar circumstances. See Blanton, 856 F.2d at 735; Hill, 696 F. Supp. at 1126. The court in Hill recognized that congressional amendments were designed to delay the impact of the FLSA overtime provisions to give state and local governments sufficient time to rearrange their budgets in order to comply with the FLSA. Hill, 696 F. Supp. at 1126. In Blanton, the Eighth Circuit Court of Appeals rejected an economic necessity defense where a city decreased its firefighters’ wages.

Actions by public employers to reduce employee pay and benefits, taken as the sole and direct result of fiscal pressures created by the mandated extension of Fair Labor Standard Act benefits, run afoul of the strictures of section 8.

Blanton, 856 F.2d at 735. In order to justify a reduction based on economic necessity, an employer must prove that wages were reduced from fiscal concern which was not attributable to the extra cost of complying with the FLSA. Blanton, 856 F.2d at 735.

We too reject the State’s assertion of an economic necessity defense. The State argues that the federal government provided funding for plaintiffs’ salaries, and after Garcia the State did not receive additional funding. However, the District Court stated, and we agree, that the State failed to establish that it could not augment federal funds with state funds, or implement a different plan, without violating the FLSA.

The State also argues that plaintiffs did not assert FLSA violations until 1988, and therefore, that the State could not have reclassified plaintiffs in response to their assertion of coverage under the Act in violation of §§ 8 and 215(a)(3). Section 215(a)(3) makes it unlawful for the State to discriminate against an employee because the employee has filed a complaint or instituted or caused to be instituted any proceeding under the FLSA. 29 U.S.C. § 215(a)(3) (1988).

In Drollinger, the Ninth Circuit rejected an argument similar to the State’s when it held that:

[T]he FLSA prohibits not only FLSA violations in response to employee assertions of coverage, but also FLSA violations in anticipation of assertions of coverage: any other interpretation would nullify the Act’s protections. Section 8 would be meaningless if an employer were permitted to reduce hourly wages in response to Garcia and thereby avoid the FLSA’s pay-and-a-half provisions as long as he did so before his employees learned of their statutory entitlements and had a chance to request that they be afforded the benefits due them.

Drollinger, 962 F.2d at 958, n.2.

Likewise, the Eighth Circuit in Blanton resolved this issue against a city which asserted a similar argument. That court cited legislative history for the proposition that employers’ actions to decrease wages that are intended to avoid the FLSA constitute discrimination under § 8, whether or not they are in response to employee assertions of coverage. Blanton, 856 F.2d at 736. The Eighth Circuit added that:

[I]t is not necessary to prove the employer intended to retaliate to prove a violation of section 8 if an employer, such as the City of Murfreesboro, reduced its employees’ rates of pay so as to nullify the effect of extending the Act’s coverage.

Blanton, 856 F.2d at 736. Finally, in Hill, the court recognized that an assertion of coverage need only be some act that would give the employer notice that employees are covered by the FLSA. That court added that where the employer already had notice that employees were covered by the FLSA, it would be superfluous to require the employees to affirmatively notify their employer that they are covered by the FLSA. Hill, 696 F. Supp. at 1125.

The State has conceded that it had actual notice that the FLSA covered plaintiffs as early as July 1985. Therefore, as the court stated in Hill, further notice in the form of a claim by its employees was unnecessary.

Finally, the State asserts that the plaintiffs “ratified” the wage cuts when they signed agreements that reduced their hourly wage. However, the United States Supreme Court has held that employees’ rights under the FLSA cannot be abridged by contract or otherwise because it would defeat the purpose of the FLSA. Barrentine v. Arkansas-Best Freight System (1981), 450 U.S. 728, 739-40, 101 S. Ct. 1437, 1444-45, 67 L. Ed. 2d 641, 652-53.

For these reasons, we conclude that the uncontroverted evidence established a violation of the federal Fair Labor Standards Act by the State of Montana, and that the District Court did not err when it granted plaintiffs’ motion for summary judgment on that issue.

ISSUE 2

Did the District Court abuse its discretion when it awarded liquidated damages under 29 U.S.C. § 216(b) (1988) of the Fair Labor Standards Act?

What constitutes good faith and reasonable grounds, as those notions relate to the issue of liquidated damages, involves mixed questions of law and fact. To the extent that legal principles are involved, the standard of review is de novo, but to the extent that factual issues are involved, we will reverse the district court only for clear error. Bratt v. County of Los Angeles (9th Cir. 1990), 912 F.2d 1066, 1071, cert. denied (1991), 498 U.S. 1086, 111 S.Ct. 962, 112 L.Ed.2d 1049. The State argues that the District Court erred when it awarded liquidated damages and decided that the State did not prove it acted in good faith or on reasonable grounds. We note that despite its summary judgment decision, which awarded liquidated damages, the District Court allowed the State to submit evidence of good faith and reasonable grounds at the hearing, but found that it either had not done so, or that its evidence was insufficient.

As set forth above, § 8 violations are deemed violations of 29 U.S.C. § 215(a)(3). The damage provision for these violations provides in relevant part:

Any employer who violates the provisions of section 15(a)(3) of this Act shall be liable for such legal or equitable relief as may be appropriate to effectuate the purposes of section 15(a)(3), including without limitation employment, reinstatement, promotion, and the payment of wages lost and an additional equal amount as liquidated damages.

29 U.S.C. § 216(b) (1988). However, 29 U.S.C. § 260 states that in claims to recover damages under the FLSA:

[I]f the employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that he had reasonable grounds for believing that his act or omission was not a violation of the Fair Labor Standards Act ... the court may, in its sound discretion, award no liquidated damages ....

See also Bratt, 912 F.2d at 1071. The State acknowledges that an employer has the burden of proving that its violation of the FLSA was in good faith and that the employer had reasonable grounds to believe it did not violate the FLSA. See E.E.O.C. v. First Citizens Bank of Billings (9th Cir. 1985), 758 F.2d 397, 403, cert. denied (1985), 474 U.S. 902, 106 S.Ct. 228, 88 L.Ed.2d 228.

Courts have utilized different standards to determine what constitutes good faith and reasonable grounds. Compare Kinney v. District of Columbia (D.C. Cir. 1993), 994 F.2d 6, 12, and Bratt, 912 F.2d at 1072, with Walton v. United Consumers Club Inc., 786 F.2d at 303, 312 (7th Cir. 1986). As discussed below, we conclude that the Fifth Circuit’s test to determine good faith and reasonable grounds based on an objective standard is more reliable.

Judge Easterbrook, writing for the court in Walton, stated that the correct standard is the one provided by the statute:

[WJhether the employer’s conduct — objectively viewed through the lens of the “reasonable man” famous in tort law — acted “in good faith and ... had reasonable grounds for believing that his act or omission was not a violation” of the FLSA.

Walton, 786 F.2d at 312. The Walton court concluded that the objective standard was especially appropriate in claims against corporate or governmental employers which do not have an actual mental state. Walton, 786 F.2d at 312. That court added that a decision made aboveboard and justified in public is more likely to satisfy the test. Walton, 786 F.2d at 312. Double damages are meant to be the norm and not the exception. Walton, 786 F.2d at 310. In addition, double damages are partly designed to compensate for concealed violations. Utilizing these damages when concealed violations are detected presents employers with the full costs of their actions, a goal stressed in the legislative history of the double damage provision. Walton, 786 F.2d at 312.

We have already concluded that overwhelming evidence supported “the conclusion that the [State’s military service] requirement’s sole purpose [was] to circumvent the wage and overtime standards set forth in the Fair Labor Standards Act ...” McKamey, 885 P.2d at 522.

In its summary judgment order, the court mentioned that the State’s decision to reduce plaintiffs’ wages and eliminate them from the State’s pay plan was not made aboveboard nor justified to the public. The court added that the militia exception was frivolous and a subterfuge designed to avoid legal obligations imposed by the FLSA. Other factors the court found persuasive are: the State was aware of Garcia’s ramifications, other available alternatives were not pursued, the State unilaterally declared plaintiffs exempt from the State pay plan, and the State did not inform plaintiffs of its decision to do so. The record supports the District Court’s findings.

Based on our decision in McKamey, and evidence cited by the District Court, we conclude that the District Court was not clearly erroneous, did not abuse its discretion, and did not err as a matter of law when it found and concluded that plaintiffs were entitled to liquidated damages under § 216, and that the State did not objectively demonstrate good faith or reasonable grounds under § 260.

ISSUE 3

Were the District Court’s findings regarding the amount of plaintiffs’ damages clearly erroneous?

“A district court’s damage determination is a factual finding which must be upheld if it is supported by substantial evidence; we will not overturn a district court unless its determination was clearly erroneous.” Semenza v. Bowman (1994), [268 Mont. 118], 885 P.2d 451, 455 (citing Columbia Grain Int’l v. Cereck (1993), 258 Mont. 414, 417, 852 P.2d 676, 678). We rely on a three-part test to determine if a finding is clearly erroneous. First, we review the record to ensure the findings are supported by substantial evidence. Second, if there is an evidentiary basis for the finding, we consider whether the district court misapprehended the effect of the evidence. Third, if the other two criteria are satisfied, we may still determine that a finding is clearly erroneous when a review of the record leaves the Court with a firm conviction that a mistake has been made. Interstate Prod. Credit Ass’n v. DeSaye (1991), 250 Mont. 320, 323, 820 P.2d 1285, 1287.

The District Court’s findings were based on conflicting expert testimony. The trial judge has the duty to resolve conflicts in evidence and this Court gives due regard to the trial judge’s superior opportunity to judge the credibility of witnesses. Williams v. DeVinney (1993), 259 Mont. 354, 359, 856 P.2d 546, 549. A district court is “not bound by the opinion of a particular party or expert but remains free to adopt any reasonable valuation that is supported by the record.” Goodover v. Lindey’s (1992), 255 Mont. 430, 440, 843 P.2d 765, 771 (citing In re Marriage of Dzivi (1991), 247 Mont. 165, 167, 805 P.2d 567, 568).

In its brief, the State concedes that substantial evidence supports the District Court’s “straight time” wage award, but argues that a review of the record leads to a conclusion that the District Court misapprehended the evidence and made a mistake. Specifically, the State attacks the adequacy of the foundation for the testimony of the plaintiffs’ damage expert. However, the foundation was made difficult by the State’s failure to maintain accurate records of the hours worked by the plaintiffs.

The District Court recognized that the State breached its duty to properly account for the hours plaintiffs actually worked, and therefore, that plaintiffs were entitled to substantiate their claim without precise time records. See Wage Claim of Holbeck v. Stevi-West, Inc. (1989), 240 Mont. 121, 125-26, 783 P.2d 391, 394 (citing Garsjo v. Department of Labor and Industry (1977), 172 Mont. 182, 188-89, 562 P.2d 473, 476).

Garsjo relied on language from a United States Supreme Court case discussing the difficulty an employee confronts when an employer keeps insufficient records. Garsjo, 562 P.2d at 476 (citing Anderson v. Mt. Clemens Pottery Co., (1946), 328 U.S. 680, 687, 66 S. Ct. 1187, 1192, 90 L. Ed. 1515, 1523). In Anderson, 328 U.S. at 687-88, 66 S.Ct. at 1192, the United States Supreme Court reasoned:

[W]here the employer’s records are inaccurate or inadequate and the employee cannot offer convincing substitutes, a more difficult problem arises. The solution, however, is not to penalize the employee by denying him any recovery on the ground that he is unable to prove the precise extent of uncompensated work. Such a result would place a premium on an employer’s failure to keep proper records in conformity with his statutory duty; it would allow the employer to keep the benefits of an employee’s labors without paying due compensation as contemplated by the Fair Labor Standards Act. In such a situation we hold that an employee has carried out his burden if he proves that he has in fact performed work for which he was improperly compensated and if he produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference. The burden then shifts to the employer to come forward with evidence of the precise amount of work performed or with evidence to negative the reasonableness of the inference to be drawn from the employee’s evidence. If the employer fails to produce such evidence, the court may then award damages to the employee, even though the result be only approximate.

In Garsjo, we also quoted similar reasoning from the Michigan Supreme Court, which held that:

“When the employee shows, as he did here, ‘that he did in fact perform overtime work for which he was not properly compensated and produces sufficient evidence to show the extent and amount of such work as a matter of just and reasonable inference, the burden shifts to the employer to come forward with evidence of the precise amount of the work performed or with evidence to negate the reasonableness of the inference to be drawn from the evidence of the employee. And if the employer fails to produce such evidence, it is the duty of the court to enter judgment for the employee, even though the amount be only a reasonable approximation.’ ”

Garsjo, 562 P.2d at 476-77 (quoting Purcell v. Keegan (Mich. 1960), 103 N.W.2d 494, 497).

Each party used a different approach to determine the unpaid “straight time” claim based on the available data. Plaintiffs’ expert assumed that each plaintiff worked a standard schedule of 2912 hours per year and used this figure as a ceiling to compute unpaid “straight time” for each year. He used the total hours worked, minus total overtime paid from settlement of the previous suit, minus “straight time” hours paid, to determine unpaid “straight time” hours. Plaintiffs’ expert then multiplied the unpaid “straight time” with the hourly pay rate for the year in question to determine the amount of damages.

The State’s expert challenged the use of a 2912 hour average ceiling and noted that in later years when more accurate time cards were used, records indicated some plaintiffs took leave without pay. As a result, the total for each plaintiff may not have been exactly 2912 hours.

The trial court criticized this approach, stating that if the State was going to use this approach it should have used the most rehable records, which were after 1986. However, the State did not explain its failure to use these records. The records used by the State showed that plaintiffs averaged approximately 2700 hours per year. However, after 1986, records reflected that plaintiffs averaged approximately 2900 hours per year. The court found plaintiffs’ formula “reasonable in light of the lack of other records to come to more accurate figures.”

The other damage issue involves the FLSA claim. As noted above, in 1986 the State recomputed each plaintiff’s hourly wage by dividing his or her annual salary by 2912, instead of 2080 as required by statute. Sections 2-18-306, -312, MCA. The District Court’s Conclusion of Law No. 7 noted that the State’s method was illegal.

Plaintiffs’ expert compared 2080 hours to 2912 hours to arrive at a factor of .714, which he then used to arrive at the total amount by which plaintiffs were underpaid. The State argues that plaintiffs’ expert should have audited actual records, instead of using the formula. Plaintiffs respond that this could not be done because of inaccurate record keeping by the State.

The State’s expert testified that he based his calculations on an audit of payroll records. However, the District Court noted numerous errors in his method, several of which the State’s expert admitted during cross-examination.

Plaintiffs introduced evidence that they worked hours for which they were not properly compensated. Plaintiffs produced sufficient evidence of the amount of uncompensated work, based on reasonable inferences, to entitle them to damages based on a reasonable approximation. The District Court found that the State failed to produce sufficient evidence of the precise amount of work performed, or to negate the inference produced by the plaintiffs. The District Court is in a better position than this Court to reconcile contradictory expert testimony. Based on our review of the record, we are not convinced the District Court misapprehended the evidence, nor are we convinced the District Court made a mistake. Therefore, we conclude that the District Court’s damage calculations were not clearly erroneous.

The judgment of the District Court is affirmed.

JUSTICES GRAY, HUNT, WEBER and LEAPHART concur.

      . While this contention, may be technically correct, it is not correct as a practical matter. It is true that on March 21, 1988, the District Court first granted plaintiffs’ motion to amend their complaint in Stimac v. State of Montana, Cascade County Cause No. BDV-84-1570, regarding overtime and allege a claim based on the FLSA. However, the motion to allow that amendment was filed on June 6, 1986. The reduction in wages was authorized on June 19, 1986, and was actually implemented during July 1986.


author: JUSTICE LEAPHART JUSTICE GRAY, JUSTICE WEBER

text:
    CARL LARSON, Petitioner and Appellant, v. CIGNA INSURANCE COMPANY, Respondent/Insurer and Respondent, YELLOWSTONE FORD TRUCK SALES, Employer.
    No. 94-523.
    Submitted on Briefs March 16, 1995.
    Decided May 4, 1995.
    52 St.Rep. 369.
    894 P.2d 327.
    271 Mont. 98.

      For Appellant: James G. Edmiston, HI, Attorney at Law, Billings.
    For Respondent: Sara R. Sexe; Marra, Wenz, Johnson & Hopkins, Great Falls.
   JUSTICE LEAPHART

delivered the Opinion of the Court.

This is an appeal from the judgment of the Workers’ Compensation Court holding that appellant Carl Larson could not receive permanent total disability benefits for his work-related hernia condition due to the fact that he first became totally disabled by a pre-existing, non work-related and independent heart condition. We reverse the decision of the Workers’ Compensation Court and remand for further proceedings.

Factual Background

Until December 15, 1981, the last day of his employment, Larson worked in the truck parts business for approximately thirty years. From 1978 through December 15, 1981, Larson was parts manager for Yellowstone Ford Truck Sales in Billings, Montana.

On August 20, 1980, Larson suffered a heart attack and was off work for several months. On October 13,1980, he underwent a heart catheterization. On October 16, 1980, he underwent open heart surgery which involved a resection of a left ventricular aneurism. In April, 1981, he had a second heart catheterization. Larson was unsure as to precisely when he returned to work, but he agreed that he probably went back to work full time sometime during the spring of 1981. When he returned to work, Larson assigned the heavier tasks to the other employees. Then, on July 15,1981, Larson suffered a left inguinal hernia when he lifted a 150-pound truck spring. This injury occurred in the course and scope of Larson’s employment with Yellowstone Ford Truck Sales. At the time of the hernia injury, Yellowstone Ford was insured by Cigna.

Cigna accepted liability for Larson’s hernia injury and paid medical benefits and temporary total disability benefits. On September 14, 1981, Larson had hernia repair surgery. He returned to work in October, 1981, at which time his doctor considered his hernia one hundred percent healed.

Following his heart attack in August of 1980 and his hernia in July of 1981, Larson had difficulty performing his normal job duties of heavy lifting and running up and down stairs. On December 15,1981, Larson was laid off work due to his inability to perform his job. As of December 15, 1981, Larson considered himself unable to work and, therefore, retired.

Larson was awarded Social Security Disability benefits as a result of his heart condition. Those benefits became effective in February, 1981 and continued through March 16,1988, when Larson turned 65 and became eligible for Social Security retirement benefits.

Despite his physician’s determination that the hernia was one hundred percent healed, in May, 1982, Larson’s left inguinal hernia symptoms flared up. On June 17, 1982, a recurrence of the left inguinal hernia was medically diagnosed. However, Larson received no further treatment for his hernia symptoms until December, 1984. The left inguinal hernia was surgically repaired in 1985, 1986, and finally in 1987. There has been no recurrence of his left inguinal hernia since 1987. Larson, however, continues to experience localized pain in his left groin. Medical bills for Larson’s hernia repairs were submitted to Cigna and were paid. In September, 1992, Larson submitted a claim for additional compensation benefits respecting his hernia.

Dr. Shaw gave Larson an impairment rating of twenty-five percent of the whole person based on the inguinal hernia. The Workers’ Compensation Court found that, based on Dr. Shaw’s testimony, Cigna had paid Larson eight months of temporary total disability benefits. At the time of trial, Cigna’s counsel indicated that Cigna had agreed to pay an additional six months of temporary total disability benefits for purposes of retraining and 500 weeks of permanent partial disability benefits, including amounts due for the impairment rating. Larson’s post-trial briefs indicate that payment was made shortly after trial.

The Workers’ Compensation Court denied Larson’s application for permanent total disability benefits under § 39-71-116(13), MCA (1979).

The Workers’ Compensation Court held that Larson was ineligible to receive permanent total disability benefits for his work-related hernia, due to the fact that he first became totally disabled by a preexisting, non work-related and independent heart condition. The Workers’ Compensation Court held, in its conclusion of law No. 4, as follows:

4. Claimant has failed to carry his burden of proof. A preponderance of credible evidence establishes that as of December 15,1981, claimant was permanently totally disabled by a preexisting heart condition that was not work-related. The heart condition preceded claimant’s industrial injury and the permanent disability was the result of a natural progression of that condition. It does not appear that claimant ever returned to full duties after his August 1980 heart attack. During the short periods he did return to work he had difficulty performing his job. Ultimately, he could not perform his job at all, even though he had successfully recovered from his hernia operation. While claimant’s left inguinal hernia subsequently occurred, he was already permanently disabled.
The Court is also not persuaded that the hernia would have recurred absent the totally disabling heart condition. The heart condition, and the inactivity it caused, increased claimant’s risk of recurrence.
As a result of his heart attack claimant sustained a “total loss of wages” and had no “reasonable prospect of employment of any kind in the normal market.” Thus, claimant had nothing else to lose on account of his industrial accident. He does not meet the criteria for permanent total disability and is therefore not entitled to permanent total disability benefits.

Discussion

This case presents an issue of first impression in the State of Montana. This Court has not had occasion to address a situation involving independent, disabling conditions, one work-related and the other not. Although this Court has not been presented with this particular fact situation before, courts from other jurisdictions have dealt with the issue presented.

In 1974, the Court of Appeals of Washington decided Shea v. Department of Labor and Industry (Wash. Ct. App. 1974), 529 P.2d 1131. The Shea case involved facts very similar to those presently before this Court. As early as 1961, Mr. Shea first began to suffer the effects of a non work-related degenerative vascular disease and resultant hypertension, which were treated with medication permitting him to continue his work. Mr. Shea then injured his right shoulder in a work-related accident in 1964. However, by November of 1965, Mr. Shea could not have worked at any occupation on a reasonably continuous basis since he was totally disabled due to the progressively degenerative, non work-related vascular condition. Mr. Shea did not work subsequent to November, 1965. His shoulder condition continued to worsen and, in 1971, after the shoulder claim was reopened and brought to hearing, Mr. Shea argued that he was permanently totally disabled by the 1964 shoulder injury.

The Washington court characterized the situation as follows: Thus, viewing the evidence in a light most favorable to the workman (which we must), we visualize him as suffering from two totally independent conditions, each of which is progressively causing increasingly serious disabilities. On the one hand, disregarding his industrial injury and the effects thereof, he was effectively removed from the labor market as early as November, 1965, by reason of a condition which preexisted and was not affected by the industrial injury, but which, nevertheless became seriously disabling after the 1964 injury. On the other hand, disregarding the preexisting condition and the subsequent effects thereof, he was also effectively removed from the labor market on or about August, 1971, by reason of the disability attributable to the 1964 injury.

Shea, 529 P.2d at 1133. In concluding that the subsequent work-related disability was compensable, the Washington court relied upon a number of well-established principles of workers’ compensation law:

We start with the obvious — and oft-repeated — concepts that the workmen’s compensation act was designed to provide benefits not only to workmen with no prior physical or mental impediments, but also to workmen who may be afflicted with preexisting physical or mental infirmities or disabilities [citation omitted] and that the remedial and beneficial purposes of the act should be liberally construed in favor of workmen and beneficiaries [citations omitted] . It is a fundamental principle of workmen’s compensation acts that if the injury complained of is a proximate cause of the disability for which compensation is sought, the previous physical condition of the workman is immaterial and recovery may be had for the full disability independent of any preexisting weakness ....

Shea, 529 P.2d at 1133.

The principles enunciated and relied upon by the Washington court are equally applicable to the case presently before us. The workers’ compensation statutes in effect on the date of the original injury must be applied in determining benefits. Buckman v. Montana Deaconess Hospital (1986), 224 Mont. 318, 730 P.2d 380. Larson originally suffered his hernia injury in 1981. At that point in time, workers’ compensation claims were governed by the following principles: the Workers’ Compensation Act was to be liberally construed in favor of the injured worker pursuant to § 39-71-104, MCA; Stokes v. Delaney & Sons, Inc. (1964), 143 Mont. 516, 519-20, 391 P.2d 698, 700. (The liberal construction provision was deleted by the 1987 amendments to the Montana Workers’ Compensation Act.) Further, it was (and is) well established in Montana that an employer takes his employee subject to the employee’s physical condition at the time of the employment, Bond v. St. Regis Paper Co. (1977), 174 Mont. 417, 420, 571 P.2d 372, 374; compensation laws are not made solely for the protection of employees in normal physical condition, but for those who are not super physical specimens. Peitz v. Industrial Accident Board (1953), 127 Mont. 316, 322-23, 264 P.2d 709, 712.

The Washington court acknowledged that, since Mr. Shea was described as permanently totally disabled in 1965 due to a non-industrial injury, it appeared inconsistent to then declare that he was again rendered permanently totally disabled in 1971 from an industrial injury. Concluding that this was a superficial rather than a “genuine inconsistency,” the court stated:

When the character and quantum of that evidence indicate the workman’s inability to perform reasonably obtainable work suitable to his qualifications and training, he is said to be totally disabled. When a significantly contributing cause of that inability is an industrial injury or disease, the workman is entitled to receive total disability benefits under the workmen’s compensation act, regardless of the fact that other circumstances and conditions may also be considered contributing causes of that inability.

Shea, 529 P.2d at 1134.

The Supreme Court of Alaska relied upon the Shea rationale in deciding Estate of Ensley v. Anglo Alaska Const. (Alaska 1989), 773 P.2d 955. In the Alaska case, Ensley suffered a back strain injury in December of 1984 but then, while off work with the back strain, was diagnosed with terminal cancer in February of 1985. The Alaska Workers’ Compensation Board initially found that “[t]he cancer was a supervening cause analogous to death which terminated the employee’s economic life,” and that therefore no temporary total disability benefits were payable for the back injury after the cancer was diagnosed. Ensley’s estate appealed the Board’s finding to the Alaska Supreme Court.

The Alaska court concluded that Ensley’s situation was unique because the worker suffered from two independent conditions, one work-related and one non work-related, either of which would have prevented him from working. Relying extensively on the Washington decision in Shea, the Alaska court found, “[t]o construe the Act so as to deny coverage would create a windfall to employers simply because of the employee’s misfortune in developing an independent medical problem.” Ensley, 773 P.2d at 959. The Alaska court held that Ensley’s estate was entitled to recover the temporary total disability benefits which should have been paid during the period in which Ensley’s back injury would have prevented him from returning to work regardless of the fact that he was undergoing cancer treatment.

We agree with the rationale set forth by the Washington court in Shea and the Alaska court in Ensley. In the present case, if the evidence shows that Larson’s inguinal hernia produced a permanent total disability, he is entitled to receive total disability benefits under the Workers’ Compensation Act regardless of the fact that his preexisting, non work-related heart condition may also be considered a cause of that permanent total disability. Having concluded that Larson was permanently and totally disabled as a result of his preexisting heart condition, the Workers’ Compensation Court did not make a finding as to whether the subsequent work-related hernia injury was also permanently totally disabling. Accordingly, we reverse the decision of the Workers’ Compensation Court and remand for further proceedings consistent with this opinion; in particular, specific findings and conclusions as to whether Larson’s subsequent, inguinal hernia constitutes an independent, totally disabling work-related condition.

Reversed and remanded.

JUSTICES TRIEWEILER, HUNT and NELSON concur.

JUSTICE GRAY,

specially concurring.

I specially concur in the Court’s opinion.

I do not disagree with the adoption of the legal principles from Shea and Ensley. I am less convinced than the Court, however, that the Workers’ Compensation Court actually erred as a matter of law, even applying those principles to the case now before us. The most that can be said, perhaps, is that we cannot be certain that the court applied the principles we have now adopted; it is for that reason alone that I join the Court in reversing and remanding for the entry of findings and conclusions.

It is important, in my view, to further clarify what this Court is and is not actually directing the Workers’ Compensation Court to do on remand. My understanding is that the Court is not attempting, in any way, to “direct a verdict” on the facts of this case. The Workers’ Compensation Court is to reconsider the evidence before it and enter findings and conclusions relating to whether the claimant’s May 1982 (and later) hernia problems meet the definition of “permanent total disability” under § 39-71-116(13), MCA (1979); in doing so, it is to consider and apply the Shea and Ensley principles. That, as I understand it, is the Workers’ Compensation Court’s role on remand as stated by this Court.

In that regard, the court must determine initially whether the claimant has established by a preponderance of the evidence that his May 1982 (and later) hernia problems resulted from the work-related injury on July 15, 1981, which first caused the hernia. See § 39-71-116(13), MCA (1979). If not, the inquiry will end. If so, then the court also must determine under the statute whether the claimant’s work-related injury resulted in his loss of actual earnings or earning capability; this portion of the analysis necessarily will entail application of the Shea and Ensley legal principles.

On this basis, I join the Court in reversing and remanding to the Workers’ Compensation Court.

JUSTICE WEBER

dissents as follows:

Under differing facts, I could agree that it is appropriate to adopt the Shea rationale from the state of Washington. My particular problem here is that the findings of fact and conclusions of law of the Workers’ Compensation Court require that we affirm rather than remand for reconsideration.

I believe the following findings of fact and conclusions of law are necessary for consideration of the issues before us:

FF #17: At trial claimant testified he did not specify his hernia as contributing to his disability because of the paperwork that would have entailed. The court then stated:

A preponderance of credible evidence persuades me that when claimant was laid off and he pursued social security disability benefits, he believed he was disabled solely on account of his heart condition. His hernia was not a factor in his decision to pursue benefits nor in his belief that he was unable to work. (Emphasis supplied.)
18. As of December 15, 1981, claimant considered himself unable to work and therefore retired ... he presented no evidence indicating that he ever made a subsequent effort to find employment of any sort and a review of claimant’s medical records concerning his heart condition provide convincing evidence that after December 15, 1981, claimant was in fact permanently totally disabled and unable to perform any sort of employment because of his heart condition. According to claimant, he was at one time considered a candidate for heart transplant. (Emphasis supplied.)

Paragraph 19 mentions the award of social security disability benefits and No. 20 how claimant had surgery for another aneurysm to replace a mitral valve.

21. In May 1982, some of the claimant’s left inguinal hernia symptoms reoccurred ... On June 17, 1982, a reoccurrence of the left inguinal hernia was diagnosed. However, claimant received no further treatment for his hernia symptoms until December 1984. (Emphasis supplied.)
22. The left inguinal hernia was surgically re-repaired in 1985, 1986 and, finally in 1987.
25. The claimant did not submit a claim for additional compensation benefits respecting his hernia until September 1992, almost 11 years after he returned to work.... In all his correspondence with Cigna, claimant never asked Cigna about compensation benefits ... claimant also never told Cigna that he was off work because of his hernia condition. (Emphasis supplied.)
26. However medical bills for claimant’s subsequent hernia repairs were submitted to Cigna and paid.
27. On account of his heart condition, as of December 15,1981, the claimant was no longer available for work in the open labor market. Thus, claimant’s total wage loss and loss of earning capability was due to a prior, totally disabling condition and was not attributable to his hernia. (Emphasis supplied.)
28. Claimant has also failed to persuade the court that, absent his heart condition and termination of employment, his inguinal hernia would have recurred. Dr. Elmer Kobold, a surgeon who treated claimant for his hernias, testified that decreased physical activity and a weakening of muscles increases an individual’s susceptibility to developing hernias. When specifically asked about the increased susceptibility of “an individual who has recently stopped working and had been in a physically declining state because of that,” Dr. Kobold responded, ‘Yes. I am sure with his cardiac surgery he was severely physically limited for months, and that would give him more of a chance for muscle weakness and reoccurrence.” (Emphasis supplied.)
30. ... Cigna agreed to pay claimant 8 months of temporary total disability benefits. ...
31. Dr. Shaw gave claimant an impairment rating of 25% of the whole person based on the inguinal hernia. (Emphasis supplied.) CL #5.... Even if claimant is deemed not to have reached maximum healing following his initial hernia, he most certainly reached maximum healing within 3 months after his final surgery in 1987. While claimant continues to suffer pain in the left inguinal area, he has suffered no reoccurrence of a hernia. His condition has been static in the last 7 years. Dr. Shaw’s testimony that maximum healing should have been achieved within 3 months following that surgery was unrebutted. ... (Emphasis supplied.)

I conclude there is clearly substantial evidence to support the conclusion of the Workers’ Compensation Court that claimant here failed to prove total disability as a result of his hernia. Under that circumstance, there is no basis for a remand.

I therefore strongly disagree with the statement at the conclusion of the opinion that if the evidence shows that Larson’s inguinal hernia produced a permanent total disability, he is entitled to receive total disability benefits. He had that opportunity and failed to present such evidence. At most, he presented evidence unrebutted that he had an impairment rating of twenty-five percent of the whole person based on the inguinal hernia as determined by Dr. Shaw.

The important point here is that Larson did not meet his burden to present evidence that his hernia produced permanent total disability. It is not up to this Court to provide claimant a second chance to do what he previously failed to do. The Workers’ Compensation Court correctly determined that claimant had not met his burden of proof.

I would affirm.

CHIEF JUSTICE TURNAGE concurs in the foregoing dissent.


author: JUSTICE LEAPHART

text:
    MARTA CORPORATION, a Montana corporation, PAUL R. SMITH and DONNA C. SMITH, husband and wife; WALTER J, VERMEDAHL and PATRICIA L. VERMEDAHL, husband and wife; and ARLEN WISSEMAN, Plaintiffs, Counterclaim Defendants and Appellants, v. ROBERT A. THOFT and SUSIE M. THOFT, husband and wife, Defendants, Counterclaimants and Respondents.
    No. 94-524.
    Submitted on Briefs February 23, 1995.
    Decided May 4, 1995.
    52 St.Rep. 374.
    894 P.2d 333.
    271 Mont. 109.

      For Appellant: Douglas J. Wold; Wold Law Firm, Poison.
    For Respondent: Sam E. Haddon; Boone, Karlberg & Haddon, Missoula.
   JUSTICE LEAPHART

delivered the Opinion of the Court.

Marta Corporation, Paul and Donna Smith, Walter and Patricia Vermedahl, and Arlen Wisseman (Appellants) appeal from the September 23, 1994 order of the Twentieth Judicial District, Lake County, denying their motion requesting reconsideration of court orders enforcing a stipulation and relief from an order granting a show cause hearing to find Appellants in contempt. We affirm.

This case started with a water rights dispute involving conflicting claims to waters of White Earth Creek and to the Irvine Flats aquifer in Lake County. Appellants and Robert and Susie Thoft (Respondents) claim water rights in White Earth Creek, which flows through the parties’ properties. Respondents hold irrigation water claims from a well which draws its water from the Irvine Flats aquifer. Additionally, one Appellant party, the Smiths, have a developed spring which draws its waters from the Irvine Flats aquifer. Appellants, all neighboring ranchers, sued Respondents for injunctive relief arising from Respondents’ use of surface and ground water.

This case was originally filed on September 30, 1992. On May 5, 1993, the District Court entered an order appointing a Special Master to effect an agreement for interim management of the water rights at issue. The Special Master completed a report and recommendation on June 30,1993, but it was set aside by the court on August 11,1993 because of “substantial error in the proceedings.”

On May 12, 1994, the morning of the scheduled trial, the court initiated settlement discussions, during which the parties agreed to general settlement terms. The court directed the parties’ attorneys to meet and prepare a stipulation for entry of an order. The court scheduled a meeting for 6:00 p.m. on May 19, 1994 for entry of the order. On May 16,1994, Respondents’ counsel sent a draft stipulation to Appellants’ counsel. On May 19, 1994, Respondents’ counsel sent Appellants’ counsel the final form of the stipulation: Appellants’ counsel signed and mailed the stipulation to the court and the parties that same day. He did not have client approval but anticipated their approval for three reasons: First, they had an urgent need for water, second, the terms of the stipulation provided for modification if it became unworkable, and third, the court imposed the May 19 deadline. The next day, in accordance with the stipulation, counsel filed a motion to replace the Special Master.

Appellants received the stipulation on May 23, 1994 and they concluded that the written stipulation was unacceptable. They were not able to talk with their counsel until May 24, 1994. Appellants allege that after they explained to him that it was unacceptable, he called the court and spoke with the judge’s assistant. At that time the stipulation had not been signed by the judge. Appellants allege that their counsel told the judge’s assistant he wanted to withdraw the stipulation and she agreed to withdraw it and notify the judge that further documents would be filed. Appellants allege that, relying on the judge’s assistant’s assurances, they believed that the stipulation had been withdrawn. On May 26, 1994, Appellants’ counsel signed and mailed a motion to reschedule the trial date.

On May 29, 1994, the court signed the stipulation and order that both parties’ counsel had signed on May 19, 1994. On May 31, 1994, Respondents filed their motion to enforce the stipulation and order. On June 6,1994, the stipulation was filed with the clerk of court. On June 14, 1994, Respondents wrote to Appellants Smiths that they (Respondents) intended to enforce the signed stipulation and that unless the Smiths wrote a letter indicating a willingness to “honor and carry out” the terms of the stipulation, they would commence contempt proceedings. On July 7, 1994, Respondents moved for an order to show cause why the Smiths should not be held in contempt for their failure to carry out the terms and conditions of the stipulation. On July 15, 1994, the court granted Respondents’ motion to enforce the stipulation and order (and for attorney’s fees and costs) and denied Appellants’ motion to reschedule the trial date. On September 23, 1994, the District Court denied Appellants’ motion for relief from, and reconsideration of, its June 6 and July 15 orders, and granted Respondents’ request to prepare and submit an order to show cause regarding Appellants’ contempt. This appeal followed.

Two issues are presented on appeal:

1. Did the District Court err in denying Appellants relief from the court’s orders of June 6 and July 15, 1994?

2. Did the District Court err in granting Respondents’ motion for a show cause hearing to find Appellants in contempt for not complying with the June 6, 1994 order?

I

Did the District Court err in denying Appellants relief from the court’s orders of June 6 and July 15, 1994?

In Hetherington v. Ford Motor Company (1993), 257 Mont. 395, 849 P.2d 1039, after settlement negotiations, it appeared as if the parties had reached a settlement agreement. The Hetheringtons agreed to Ford’s settlement offer and gave their counsel authority to accept the offer. Their counsel sent a letter stating that his clients had decided to accept Ford’s offer of settlement. The letter specified the amount of the settlement offer, the parties’ contributions, and stated that each party would forward certain paperwork. Hetherington, 849 P.2d at 1041.

Four days after this letter was sent, the Hetheringtons wrote a letter to their counsel indicating that they were discharging him and his firm, that they were not interested in the settlement which had been offered, and that they did not wish him to negotiate further on their behalf. The Hetheringtons contended that it was their understanding that their right to bring their claim would be preserved until the “written settlement agreement was formally approved and executed.” Hetherington, 849 P.2d at 1041. We held that “[a]n agreement is binding if made by an unconditional offer, and accepted unconditionally.” Hetherington, 849 P.2d at 1042. In that case, we held that the attorney’s letter, and conference between the Hetheringtons and their attorney, “disclosed no conditions or manifestations of conditional intent.” Hetherington, 849 P.2d at 1042.

In the instant case, during the May 12 settlement discussion, the parties agreed to general terms, and the parties’ counsel were instructed to meet and prepare a stipulation for entry of an order. Appellants’ attorney executed a signed stipulation and submitted it to the judge for his signature. As in Hetherington, there were no conditions placed on Appellants’ acceptance of the settlement agreement. Appellants and Respondents were present and represented at the settlement discussion and therefore were party to the agreement on general terms. Although Appellants argue strenuously, after the fact, that the written stipulation did not meet their wishes and was unacceptable to them, they do not point to any specific instances wherein the written stipulation is contrary to what they agreed to at the May 12 settlement conference.,

Appellants argue that their attorney was unauthorized to execute the stipulation and that the court mistakenly entered the stipulation after it had been withdrawn. Appellants, however, were participants in the May 12, 1994 settlement discussion, at which time the terms of the stipulation were formulated. Applying the rationale of Hetherington to these facts, we hold that Appellants are bound by the terms of the written stipulation signed by their counsel pursuant to the Appellants’ participation in a settlement conference. “The intentions of the parties are those disclosed and agreed to in the course of negotiations. Aparty’s latent intention not to be bound does not prevent the formation of a binding contract.” Hetherington, 849 P.2d at 1042. The instant case is more compelling than Hetherington which involved oral settlement negotiations followed by a letter of acceptance. Here we have a signed stipulation filed with the court. That Appellants no longer wish to be bound by the settlement agreement, as set forth in the written stipulation, does not excuse them from complying with the terms of that stipulation.

II

Did the District Court err in granting Respondents’ motion for a show cause hearing to find Appellants in contempt for not complying with the June 6, 1994 order?

In its September 23,1994 order and memorandum, the District Court granted Respondents’ request to prepare and submit an order to show cause regarding Appellants’ alleged contempt for not complying with the signed stipulation. No hearing has been held on this issue. The Smiths argue that the facts do not support their contempt and no hearing should be held. We do not rule on the former contention and we disagree with the latter contention.

Rule 1 of the Rules of Appellate Procedure states in part:

(b) In civil cases a party aggrieved may appeal from a judgment or order, except when expressly made final by law, in the following cases:
(1) From a final judgment entered in an action or special proceeding commenced in a district court, or brought into a district court from another court or administrative body.

No contempt hearing was held and no final judgment regarding the Smiths’ contempt was issued. It is premature for us to rule on this issue.

Affirmed.

JUSTICES GRAY, TRIEWEILER, HUNT, NELSON and WEBER concur.


text:
    JERRY PINYERD, Petitioner and Appellant, v. STATE COMPENSATION INSURANCE FUND, Respondent and Insurer for PRESTIGE TOYOTA, Employer.
    No. 94-474.
    Submitted on Briefs February 16, 1995.
    Rehearing Denied May 18, 1995.
    Decided April 25, 1995.
    52 St.Rep. 332.
    894 P.2d 932.
    271 Mont. 115.

      For Appellant: Patrick R. Sheehy, Halverson, Sheehy & Plath, Billings.
    For Respondent: Daniel J. Whyte, Legal Counsel, State Compensation Insurance Fund, Helena.
   JUSTICE TRIEWEILER

delivered the Opinion of the Court.

The claimant, Jerry Pinyerd, filed a petition in the Workers’ Compensation Court for the State of Montana in which he sought medical and disability benefits from the State Compensation Mutual Insurance Fund for injuries he alleged were sustained during the course of his employment with Prestige Toyota. After a trial, the Workers’ Compensation Court denied Pinyerd’s claim for benefits, based on its conclusion that his injury did not arise out of his employment. Pinyerd appeals this conclusion. We reverse the judgment of the Workers’ Compensation Court.

The following issue is presented on appeal.

Did the Workers’ Compensation Court err when it concluded that the assault which caused Pinyerd’s injuries did not arise out of his employment?

FACTUAL BACKGROUND

Jerry Pinyerd was born and raised in California and moved to Billings in 1993. In June of that year, he began working for Prestige Toyota in Billings. Prestige Toyota is insured against compensation claims by the State Compensation Mutual Insurance Fund (State Fund). On September 18, 1993, while working for Prestige, Pinyerd was involved in an altercation with fellow employee Robert “Jake” Jacobson during which Pinyerd was struck several times and from which he claims he was injured. Pinyerd and Jacobson were the only witnesses called to testify before the Workers’ Compensation Court.

Both Pinyerd and Jacobson testified that the work environment at Prestige was highly competitive.

Prestige divided its salespeople into two teams which competed against each other, and imposed quota requirements on each member. In addition, team members competed against their own “teammates” for commissions and quotas. Bonuses were paid at the end of each month based on sales volume, and daily sales meetings were held at which each salesperson’s progress toward his or her quota was discussed in front of the other sales staff. Pinyerd and Jacobson were salesmen on the same team.

At Prestige, a potential customer who enters the business premises is referred to as an “up.” There was no organized system for assigning salespeople to “ups.” The first salesperson to reach the “up” got the “up.” Prestige offered cash incentives (“spiffs”) for test drives and for getting an “up” into the financial office.

Prestige also encouraged “turns.” If one salesperson was not making progress with a potential customer, he or she was supposed to “turn” the customer to another salesperson. Any commission was split between the staff involved in the turn.

Pinyerd testified that the staff argued over who was entitled to an “up.” Because no organized procedure was established, salespeople would “stash” themselves among the cars to approach “ups.” This caused daily conflict among the sales staff.

He also testified that sharing a commission based on a “turn” created problems when one staff member spent more time with the customer than the other. Prestige did not have a formal method for resolving commission disputes. There was additional friction over bad “turns” if one staff member turned a “flake,” who would likely never buy a car, over to another staff member simply to waste his or her time so he or she could not compete for other “ups.” This and other testimony indicated that Prestige was a highly competitive work environment.

When Pinyerd first arrived at Prestige, he made few sales because he was shut out by the other salespeople. However, after the intervention of management, he became more successful. During July and August he was “hot” at a large Autorama sale with other car dealers. He earned the second largest amount for “spiffs” among 16 salespeople, and a substantial amount for commissions.

Pinyerd testified that Jacobson was resentful of his success. He testified that Jacobson expressed jealousy about his money, car, and property, and that he received bad “turns” from Jacobson.

The two witnesses disagreed about the cause of the altercation that occurred at Prestige’s parking lot in September 1993. Pinyerd testified that Jacobson had invited him in for a beer after he drove Jacobson home from work several days earlier, and that while in the home he noticed an open bottle of pills which he advised Jacobson to close and put in a more secure location. Pinyerd stated that he was surprised to learn the following day that Jacobson believed he had stolen some of the pills and was very upset with him.

Jacobson testified that ten pills were missing and that he was furious that Pinyerd stole some of his pills. He added that he knew Pinyerd stole the pills because a co-worker told Jacobson that Pinyerd had a pill. Jacobson claims that his outrage from the alleged theft was the sole cause of his attack on Pinyerd at work several days later.

Pinyerd testified that for several days after he was at Jacobson’s, he was informed by others at work that Jacobson was after him. He avoided Jacobson by situating himself in the driver’s seat of a pickup truck located on the car lot. On the date that Pinyerd claims he was injured, he states that he saw Jacobson run toward the truck, and that when he reached him, Jacobson started punching him through an open window of the truck. Pinyerd testified that he leaned over to avoid being struck in the face and instead was repeatedly punched in the back and leg. He testified that at some point before or during the attack, Jacobson yelled, “Get off the lot. Get out of this town. You’ll never work in this town again. You have no business working here to begin with.”

The Workers’ Compensation Court found that Jacobson was resentful because he did not accomplish as much as Pinyerd at Autorama. The court also found that Jacobson’s testimony was not credible, including his testimony that Pinyerd came to his house for drugs to relieve back pain. The court found that the immediate cause of the assault was Jacobson’s belief that Pinyerd stolé some pills, but that resentment about Pinyerd’s recent “success in car sales” contributed to Jacobson’s general hostility toward Pinyerd. Based on its findings, the court concluded that the assault did not arise out of and in the course of employment as required by § 39-71-407, MCA. Therefore, the court denied Pinyerd’s claim for benefits.

DISCUSSION

Did the Workers’ Compensation Court err when it concluded that the assault which caused Pinyerd’s injuries did not arise out of his employment?

This issue involves the application of Montana law to the facts of this case. Our standard of review of a Workers’ Compensation Court’s conclusions of law is whether the court’s interpretation of the law was correct. Stordalen v. Ricci’s Food Farm (1993), 261 Mont. 256, 258, 862 P.2d 393, 394 (citing Martelli v. Anaconda-Deer Lodge County (1993), 258 Mont. 166, 168, 852 P.2d 579, 580).

Pinyerd contends that the assault occurred in the course of, and arose out of, his employment with Prestige. He claims he was performing his job on his employer’s premises when he was assaulted. He adds that Penny v. Anaconda Co. (1981), 194 Mont. 409, 632 P.2d 1114, which the Workers’ Compensation Court relied on, is factually distinguishable, and that the court misapplied our holding in that case.

The State Fund responds that the Workers’ Compensation Court correctly applied Penny, and correctly concluded that any injuries caused by Jacobson’s blows did not arise out of Pinyerd’s employment with Prestige.

Section 39-71-407(1), MCA, of the Workers’ Compensation Act provides:

Every insurer is liable for the payment of compensation, in the manner and to the extent provided in this section, to an employee of an employer that it insures who receives an injury arising out of and in the course of employment ....

(Emphasis added.)

We note at the outset that the Workers’ Compensation Court erroneously concluded that the assault did not occur in the course of employment. The language “in the course of employment,” generally refers to the time, place, and circumstances of an injury in relation to employment. Landeen v. Toole County Refining Co. (1929), 85 Mont. 41, 54, 277 P. 615, 620. The injury here was in the course of employment because it occurred on the employer’s car lot, during work hours, when both Pinyerd and Jacobson were supposed to be performing work duties. The critical question is whether the assault “arose out of’ employment. The phrase “arising out of’ is related to the concept of causation. See 1 Arthur Larson, Workmen’s Compensation Law, § 6.10 (1993); see also Landeen, 277 P. at 620 (stating that the words “out of’ point to the cause of the accident and are descriptive of the relationship between the injury and employment).

Our decision in Penny involved an assault in the workplace. Penny was an employee who was involved in a fight with a co-worker that occurred on the employer’s premises. The hearing examiner found that Penny started the fight solely to gratify personal feelings of hatred or anger toward a co-worker. The hearing examiner also found that the fight was not connected to a disagreement that had occurred over union policies four years earlier. Based on findings that the fight resulted from personal animosity unrelated to employment, the hearing examiner concluded that the injuries from the fight did not arise out of Penny’s employment. The Workers’ Compensation Court adopted these findings and conclusions as its basis for its judgment, and Penny appealed. Penny, 632 P.2d at 1116-17.

In this Court’s opinion, we held that pursuant to § 39-71-407, MCA, an injury must arise out of and occur in the course of employment before it is compensable. Penny, 632 P.2d at 1116. We stated that unless a reasonably immediate service to the employer is discernible, the determination of “whether an injury arises out of and occurs in the scope of employment is controlled by the particular facts and circumstances of each case.” Penny, 632 P.2d at 1116-17 (citing Guarascio v. Industrial Accident Board (1962), 140 Mont. 497, 502, 374 P.2d 84, 86). We recognized that there are two lines of authority regarding work-connected assaults in which conditions of employment place employees under strain. Penny, 632 P.2d at 1117 (citing 1 Larson, Workmen’s Compensation Law, § 11.16). We followed the rule set forth by the Connecticut Supreme Court in Willis v. Taylor & Fenn Co. (Conn. 1951), 79 A.2d 821, 822, which provides that:

“ ‘The fact that employees sometimes quarrel and fight while at work does not make the injury which may result one which arises out of their employment. There must be some reasonable connection between the injury suffered and the employment or the conditions under which it is pursued.’ ”

(Emphasis added.) The Court in Penny held that substantial evidence supported the finding that the fight was not reasonably connected to Penny’s employment. Penny, 632 P.2d at 1117.

In Penny and Willis, the fact finders found that the claimant was the aggressor. In Penny, the hearing examiner found that Penny was motivated solely by feelings of personal animosity and hatred. In this case, Pinyerd was not the aggressor, nor were Jacobson’s feelings of animosity unrelated to the conditions under which he and Pinyerd pursued their employment at Prestige.

While the Workers’ Compensation Court found that the precipitating cause of Jacobson’s assault was his belief that Pinyerd had stolen pills from him, the court also found that Jacobson’s resentment of Pinyerd’s success in car sales contributed to his general hostility toward Pinyerd.

Pursuant to our decision in Penny, the issue is not simply what precipitated Jacobson’s assault, but whether there was a reasonable connection between Pinyerd’s injury and the conditions under which he pursued his employment. That connection was established when the court found that Jacobson’s hostility toward Pinyerd was contributed to by his resentment of Pinyerd’s sales success.

Jacobson and Pinyerd met because of their employment at Prestige. They had to compete against each other for sales quotas and commissions without any organized framework within which to compete. Evidence established that Prestige’s policies created daily friction among its sales staff and were substantial cause for animosity.

Since this underlying animosity was caused in part by the employer’s policies, it was incidental to a salesperson’s duties.

For these reasons, we conclude that Jacobson’s assault of Pinyerd which occurred on September 18, 1993, did “arise out of’ and occur in the course of his employment with Prestige Toyota. We reverse the judgment of the Workers’ Compensation Court and remand for further proceedings consistent with this opinion.

CHIEF JUSTICE TURNAGE, JUSTICES HUNT, WEBER and LEAPHART concur.