State Supreme Court returns grievance case to District Court

The Montana Supreme Court has said that a state union is not exempt from paying punitive damages. On the specific case that prompted the opinion involving a former Whitefish police officer’s claim that the Montana Public Employees Association mishandled an employee grievance, however, the high court has sent the issue back to Flathead District Court.

Former police officer Jeffrey Folsom in 2014 sued the city of Whitefish and the Montana Public Employees Association union after he was fired from the Whitefish Police force. Folsom claimed the city did not have a legal reason to fire him and that the union unfairly represented him. Folsom eventually settled with the city.

Flathead District Judge Heidi Ulbricht in March 2016 ordered the association to pay more than $100,000 for the mishandling of the employment grievance.

According to court documents, the settlement was awarded because the court found that the association failed to properly handle the grievance after Folsom was fired.

The Montana Public Employees Association and Folsom appealed the decision to the Montana Supreme Court.

In its decision issued Aug. 22, the state Supreme Court reversed the District Court’s decision and returned the case to the lower court for further proceedings.

As part of the decision, Justice Dirk Sandefur, along with Justice Michael Wheat, issued a specially concurring opinion in the case. The opinion says that the Montana Public Employees Association is not exempt from punitive damages under state law.

Sandefur said it was important for the court to resolve the issue, as presented in the appeal, “rather than merely kick the can down the road without guidance” because the original case is being remanded to the District Court.

“... the assertion that punitive damages exposure will weaken unions is no more valid in regard to unions than to other benevolent entities subject to punitive damages liability,” the opinion says.

In court documents, Sandefur notes that federal rules and public policy involving the Montana Public Employees’ Collective Bargaining Act provide protection to the vitality of public employees’ unions by adopting a “higher standard of liability that shields public employees’ unions from liability for merely negligent conduct” to protect unions from excessive punitive damage awards. However, he adds, state law embodies an equally important policy of holding entities accountable regardless of status.

“To that end, punitive damages are available in Montana ‘for the sake of example and for the purpose of punishing’ defendants who engage in ‘actual fraud’ or ‘actual malice,’ as narrowly defined [by state law],” the opinion says.

Punitive damages are still subject to federal due process limitations and limitations provided in state law.

In regards to the specifics of the Folsom case, the state Supreme Court upheld some of the District Court’s decision, but said the lower court erred in other areas of its ruling.

The District Court in March 2016 found that the association failed to properly handle the grievance and ordered the association pay Folsom $47,550 in attorneys fees, $50,000 in punitive damages and additional costs in the amount of $6,067.95.

The Supreme Court ruled that Folsom cannot be awarded attorney fees in the case. The court said that an employee could be awarded attorney fees incurred “to enforce grievance rights against an employer if caused by the union’s breach of its duty of fair representation,” but not in a lawsuit against the union.

The Court also said that Folsom is not entitled to punitive damages because compensatory damages were not awarded in the case.

“Here the erroneous attorney fee award was the only element of compensatory damages awarded to Folsom,” the opinion says. “Absent a valid compensatory damages award, punitive damages were unavailable to Folsom as a matter of” state law, the court said.

In addition, the Supreme Court ruled that the District Court abused its discretion in refusing to grant the association’s motion for relief from summary judgment in the case and resulting attorney fees and punitive damage awards.

Also, the Supreme Court found that Folsom could not independently argue his claim that the union breached its duty of fair representation and common law fraud claim in the case. Folsom is “attempting to creatively cleave two independent tort claims out of one” and creating a predicate for punitive damages perceived to be unavailable on his claim the union did not complete its duty of fair representation.

The Supreme Court did uphold a District Court ruling that denied Folsom’s claim for compensatory lost wages and benefits on the grounds that he failed to prove that the city terminated his employment in violation of a collective bargaining agreement and that the union’s mishandling of his grievance caused his claimed damages.

Folsom sued the city and association in August 2014. The association is the union that Folsom was part of when he was fired in 2013.

Folsom claimed the city did not have a legal reason to fire him, and that the union unfairly represented him in an alleged breach of a collective bargaining agreement.

He claimed that he was fired after he attempted to seek legal advice. He alleged that other officers had violated his rights and Montana state law by recording officers’ conversations in the police department.

In its appeal, the association did not dispute that Folsom’s case was mishandled. In documents, the association said it was clear that the association’s legal counsel “engaged in serious misconduct, and that the misconduct has resulted in manifest injustice.”

The union argued that state law does not provide a basis for damages to be awarded in the case.

Folsom, in court documents, said that the District Court wrongfully denied his claim for lost wages and benefits as compensatory damages for the mishandling of the grievance.

Folsom settled his case with the city in 2015, without a monetary settlement.