Free Appendix - District Court of California - California

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47 CaL. 3d 654, *; 765 P.2d 373, **;

254 CaL. Rptr. 211, ***; 1988 CaL. LEXIS 269

tract to bar plaintiffs wife from their gaming tables led to the breakup of his marriage; the cour found a triable issue of fact whether damages for mental suffering were reasonably foreseeable and within the contemplation of
the contracting parties. Windeler v. Scheers Jewelers

added.) After considering these principles, the majority

conclude that "focus on available contract remedies offers the most appropriate method of expanding available

(1970) 8 CaL.App.3d 844 (88 CaL.Rptr. 39) upheld recov-

ery for emotional distress when defendant, in breach of a
contract of bailment, lost jewelr of great sentimental

value.

remedies for wrongful termation." (Ante, p. 699, italics added.) But ths case is not about extending or expanding remedies for wrongful discharge. All plaintiffs seek, and all the dissenters seek, is to retain existing remedies. It is the defendants, and the majority, who seek a radical contraction in existing remedies.
I maintain that we should retain the well-recognized tort cause of action for bad faith discharge. To demonstrate the point, I propose to show (1) that a tort cause of action for bad faith discharge is an established featue of Californa common law, (2) that the analogy between the insurance cases, in which a tort cause of action has long

These precedents have not yet been applied to
wrongful discharge. But a review of the facts of the Cour of Appeal cases overrled by the majority in part
II of their opinion, and similar cases pending before this

cour, makes it clear that in many cases the employer is aware at the time of the contract that bad faith discharge
wil create great mental and emotional distress. In such

cases, the application of existing precedent could serve to provide some redress for that injur. i
1 Application of these precedents wil not solve

been recogned, justifies tort recovery (***242) for
bad faith discharge; (3) that the existence of a cause of
action in contract for discharge in breach of contract does

not exclude a tort action for bad faith; and (4) that it is fundamentally ilogical to abolish a tort cause of action
on the ground that radical change in existig remedies

all the problems the majority create. There will be cases in which the probability of emotional distress is not present at the time of contracting,

should be left to legislative action.
1. A tort remedy for bad faith discharge is well established in California law.

but becomes apparent only later, after the employee has put in years on the job and come to rely on it for his economic security. Most of the
cases cited seem to limit recovery to damages

Prior to Tameny v. Atlantic Richfield Co. (1980) 27

foreseeable at the time of the contract. (But see
Civ. Code, § 3300 (the measure of damages for

Ca1.d 167 (164 Cal.Rptr. 839, 610 P.2d 1330, 9 A.L.R.4th 314), (**404) Californa decisions had recogned a tort action for bad faith breach of insurance contracts. (See, e.g., Comunale v. Traders & General
Ins. Co. (1958) 50 CaL.2d 654, 658 (328 P.2d 198, 68

breach of contract "is the amount which wil
compensate the part aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom"); Overstreet v. Merritt (1921)
186 CaL. 494, 505 (200 P. 11) ("(one) who in bad

A.L.R.2d 883); Gruenberg v. Aetna Ins. Co. (1973) 9
CaL.3d 566, 578 (108 CaL.Rptr. 480, 510 P.2d 1032).) In
upholding a tort cause of action for wrongful discharge

faith violates his contract is liable for all damages
traceable to the breach, including even those

which could not be foreseen at the time of making the contract"). Secondly, these precedents

provide no basis for puntive damages, no matter
how outrageous the employer's conduct, or how

in violation of public policy, Tameny noted an alternative theory -- breach of the employer's duty of good faith and fair dealing. "(Past) Californa cases," we said, citing the insurance cases, "have held that a breach of ths impliedat-law covenant sounds in tort as well as in contract." (
Tameny, supra, 27 Ca1.d 167, 179, fn. 12.) In Tameny, however, we found it unecessary to decide whether tort

essential such damages may be to deter futue
wrongful conduct.
II.

recovery would be available under that theory.
That issue was fust decided in Cleary v. American Airlines (1980) 111 CaL.App.3d 443 (168 CaL.Rptr. 722). Plaintiff in Cleary pled that the employer, despite a written policy to the contrary, arbitrarily discharged him

The majority's discussion of the cause of action for wrongful discharge transposes the positions of plaintiffs and defendants, asserting, incorrectly, (*703) that plaintiffs seek to change established law. For example, the majority introduce their analysis with the statement that "where an extension of tort remedies is sought for a duty whose breach previously has been compensable by contractual remedies, it is helpful to consider certain principles relevant to contract law." (Ante, p. 683, italics

(*704) after 18 years of satisfactory service. The Cour
of Appeal unanimously ruled that "(should) plaintiff sustain his burden of proof, he wil have established a cause of action for wrongful discharge that sounds in both contract and in tort." (P. 456, italics added.)
The next case, Crosier v. United Parcel Service,

Inc. (1983) 150 CaL.App.3d 1132 (198 CaL.Rptr. 361),

endorsed Cleary, which it described as based on "present

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economic realities and the reasonable expectations of the parties" (p. 1137), but concluded that since the company was enforcing a general rule known to the employee, the
discharge was not in bad faith. A subsequent case,

of interest a mere pretext and the discharge in bad faith.

The Cour of Appeal affumed; we denied a hearing.
The next two cases, Walls v. Superior Court (1984) 160 Cal.App.3d 1109 (207 Cal.Rptr. 123), and Wayte v.

Shapiro v. Wells Fargo Realty Advisors, (1984) 152

Cal.App.3d 467 (199 Cal.Rptr. 613), similarly applied the reasoning of Cleary, but found plaintiffs allegations insuffcient to show bad faith.
In Seaman's Direct Buying Service, Inc. v. Standard

Rollns International, Inc. (1985) 169 Cal.App.3d 1 (215
Cal.Rptr. 59), did not involve discharge. (Wallis con-

cerned bad faith refusal of an employer to pay retiement benefits; Wayte concerned bad faith refusal of an employer acting as an insurer to pay medical benefits.) Both cases, however, affumed the analogy of the employment relationship to insurance. As stated in Wallis, "the characteristics of the insurance contract which give rise to an action sounding in tort are also present in most employer-employee relationships." (160 Cal.App.3d 1109,

Oil Co. (1984) 36 Cal.3d 752 (206 Cal.Rptr. 354, 686
P.2d 1158), we concluded a tort action was available for

breach of a commercial contract only when the breaching

part denied in bad faith the existence of the contract. (P. 769.) We noted that tort remedies had a broader
scope in insurance cases because of the special relationship between insurer and insured, and added that "no doubt there are other relationships with similar characteristics and deserving of similar legal treatment." (P. 769.) The footnote to that sentence noted that in Tameny v.

1l16, fn. 2.)
Khanna v. Microdata Crop. (1985) 170 Cal.App.3d 250 (215 Cal.Rptr. 860) is recogned by the majority as

Atlantic Richfield Co., supra, 27 Cal.3d 167, 179, footnote 12, "this cour intimated that breach of the covenant
of good faith and fair dealing in the employment rela-

one of the two leading cases on bad faith discharge. In that case the employer refused to acknowledge a contract

to pay plaintiff a commssion, then fued the employee when he sued to enforce the contract. The opinon reviewed Cleary, supra, 111 Cal.App.3d 443, and other

tionship might give rise to tort remedies. That relationship has some of the same characteristics as the relation-

Californa decisions and concluded that a tort cause of
action is stated whenever the employer engages in "'bad

ship between insurer and insured." (36 Cal.3d at p. 769,

fn. 6.) Comig after published decisions in Cleary v. American Airlines, Inc., supra, 111 Cal.App.3d 443, Shapiro v. Wells Fargo Realty Advisors, supra, 152
Cal.App.3d 467, and Crosier v. United Parcel Service, supra, 150 Cal.App.3d 1132, this language signaled the cour's approval of a tort remedy for bad faith discharge.
2

faith action extraneous to the contract, combined with the obligor's intent to frstrate the (employee's) enjoyment of contract rights.'" (Khanna, supra, at p. 262, quotig

Shapiro v. Wells Fargo Realty Advisors, supra, 152
Cal.App.3d at pp. 478-479.) Gray v. Superior Court

(1986) 181 Cal.App.3d 813 (226 Cal.Rptr. 570), relied

on Khanna to find that a worker fued on the basis of a false performnce report could state a cause of action in
tort.

2 Chief Justice Bird, in her concuring and dis-

senting opinon, wrote that tort remedies should
have a broader scope in insurance and employment cases. She observed that "breach of an em-

The other leading case, Koehrer v. Superior Court

(1986) 181 Cal.App.3d 1155 (226 Cal.Rptr. 820), was a
decision by Justice Kaufman, now on this cour. It is

ployment contract by the employer can, in some
situations, cause severe harm to an employee's

reputation and ability to find new employment. The harm caused cannot be undone by an award of backpay. Thus, employees may be entitled to expect that their contracts wil not be breached
for frivolous or improper reasons." ( Seaman's,

well summarized in his dissenting opinon here. As noted in Koehrer, a tort cause of action for bad faith discharge may arise if the employer asserts the existence of good cause for discharge without probable cause and in
bad faith. (P. 117 1.)

Finally, the Cour of Appeal in the present case
adopted the most limited view of that cause of action of any of the Californa decisions. It claimed that to state a tort cause of action, the plaintiff must allege facts comparable to those in Cleary -- 18 years longevity, and the

supra, 36 Cal.3d at p. 780.)

(***243) Shortly after Seaman's was fied, the
cour in Rulon-Miler v. International Business Ma-

chines Corp. (1984) 162 Cal.App.3d 241 (208 Cal.Rptr.

524), considered whether defendant could fue an employee for "confict of interest" because she was dating a
fellow employee. The case was submitted to the jur

employer's violation of specific employment guidelines. But, for cases within those facts, the Cour of Appeal would permt a tort action.

under instrctions based on Cleary v. American Airlines,
Inc., (*705) supra, 111 Cal.App.3d 443. (**405) The

In sum, there are eight unanimous Cour of Appeal decisions permtting a tort action for bad faith discharge,
plus dictum approving such an action (*706) in cases

jur awarded tort damages, finding the asserted confict

here and in the Cour of AppeaL. Thus it is not surrising

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that when the Ninth Circuit considered the matter in a case arising under California law, it had no doubt that such a cause of action existed. (See Huber v. Standard Ins. Co. (9th Cir. 1988) 841 F.2d 980.) The only unsettled question, from the viewpoint of the federal judges,
was whether the tort cause of action was limited to cases comparable to Cleary, as the Cour of Appeal held in the
present case. The Ninth Circuit correctly concluded that

The majority do not deny the existence of prior
precedent, or the consequent reliance thereon, but point

out that there has been no decision by this cour declaring a cause of action for bad faith discharge. They

assert

it was not so limited, citing Koehrer v. Superior Court,

supra, 181 Cal.App.3d 1l55-1l69 and Khanna
(***244) v. Microdata Corp., supra, 170 CaI.App.3d

that "(ifj we were to follow the dissent's urging that we should therefore leave this area of law untouched, we would be abdicating our role." (Ante, p. 689, (*707) fn. 28.) They mistake my purose. I do not claim that this cour should never repudiate prior precedent and revise Californa common law, but only that when it considers

doing so it should recognie that the doctrine of stare
decisis and judicial reluctance to penalize justified reliance on precedent weigh heavily against such a decision. The majority here in fact radically restrctue Californa law by abolishing an established cause of action, yet they write as if theirs is nothing more than a conservative decision declinig to extend remedies into uncharted

250, 262 as declarative of Californa law.

Many commentators have written sumaries or analyses of Californa law in this area. (See Cal. Wrong-

ful Employment Termnation Practice (Cont.Ed.Bar
1987) § 2.42; Kornblum et aI., CaI.Practice Guide: Bad
Faith (1986) § 12.13; McCarthy, Punitive Damages in

Wrongful Discharge Cases (1985) § 2.2; Brandon, From

realms. I cannot join them in this retrogressive decision.

Tameny to Foley. Timefor Constitutional Limitations on California's Employment at Wil Doctrine (1988) 15
Hastings Const. L.Q. 359, 371-372 (hereafter Brandon);

2. Analogy to the cases upholding a tort cause of action for bad faith breach of a contract of insurance justi-

Brody, Wrongful Termination as (**406) Labor Law (1988) 17 Sw. V.L. Rev. 434, 442.) All recent writings consider the existence of a tort cause of action for bad
faith discharge an established part of the Californa

fies a tort action for bad faith discharge of an employee.

The majority deride the prior cases for their uncritical incorporation of the insurance model into the employment context without considering the significant
differences between the insurer-insured and employer-

common law.

Such unanimous agreement among justices and
commentators generates reliance. 3 Employers have revised personnel policies and purchased insurance policies. Insurers have calculated and collected premium.

employee relationships. (Ante, p. 689.) But when we consider the differences noted by the majority, we find
that they are not significant at alL.

The majority find one fudamental difference between insurance and employment relationships: "(ifj an insurer pays a claim, it diminishes its fiscal resources. . .
(while) as a general rule it is to the employer's economic benefit to retain good employees." (Ante, at p. 693.) But

Attorneys have been hied and trained, even entie law fum have been established. Litigants have filed suits,
accepted settlement offers, rejected other offers, gone to

trial, and appealed. Hundreds of cases are proceeding before the trial cours in which both parties have based their strategy on the assumption that a tort action exists. Many others pending in the Cour of Appeal await our
decision. There are 10 or so such cases pending before
this cour. 4

their comparison is not between insurers and employers,
but between short-sighted insurers and far-sighted em-

3 The majority do not decide whether their decision abolishing the tort cause of action for bad faith discharge is retroactive. A pattern of reliance similar to that present here led this cour to
make its decision in Moradi-Shalal v. Fireman's

ployers. In the short run, the insurer saves money by not (***245) paying claims, and the employer by not payig wages. (If the work cannot be deferred, he can hie less experienced but cheaper help.) In the long run, an insurer that never paid claims would be out of business, and an employer that always fired experienced help would not
be much better off. Thus if we examine insurers and

employers with the same lens, the difference the majority
find fudamental simply disappears.

Fund Ins. Companies (1988) 46 Cal.3d 287, 305 (250 Cal.Rptr. 116, 758 P.2d 58), prospective.
4 This cour has granted review in 14 cases

pending the decision of the present case. Most of those cases involve, among other issues, the question of a tort remedy for bad faith discharge, and
in all such cases the Cour of Appeal unani-

But the majority's analysis leaves a lingering trace, for it betrays their misunderstanding of the problem. We need not be concerned about insurers that never pay

(**407) claims or employers that fue all experienced help -- the marketplace wil take care of them. The concern is with the insurer or employer that acts arbitrarily

mously upheld the existence of a tort remedy.

some of the time -- and can get away with it unless
threatened with damages that, unlike traditional contract
damages, exceed the short-term profit. 5

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5 Consider, for example, the case of K Mart

Finally, the majority reject the idea that an employee is like an insured because both contract for financial security. A business, they point out, may also seek finan-

Corp. v. Ponsock (1987) 103 Nev. 39 (732 P.2d

1364). Ponsock was a forklift driver with 10
years longevity, whose pension would vest in an-

other 6 months. He discovered that the battery cover on his forklift needed painting. Finding a
damaged (and thus unsaleable) can of spray paint,
he used it to paint the forklift. Although other

cial security. They put the case of a business contracting to secure a reliable source of supply. But what emerges
from the majority's analysis is tlee propositions: a) that

insureds generally buy insurance policies for financial

forklifts had been painted in a similar manner
without any action against the employee in question, Ponsock was fued for "defacing" company

security; (b) that employees generally seek financial security in their employment; (c) that businesses occasionally contract for financial security. These propositions
should lead the majority to conclude that the employ-

propert and "stealing" a can of paint. When he attempted to explain his conduct, he was excluded from the premises. After a long period of unemployment, he finally obtained a job as a laborer at half his previous wage with no benefits.
This income was inadequate to meet mortgage

ment contract is more analogous to an insurance contract than to a commercial contract.

The majority are focusing upon the exceptions, not upon the general rule. If we must argue analogies, the
question is not whether the employment contract differs

from an insurance contract in one particular respect, or
resembles a commercial contract in another. It is

payments, and Ponsock was forced to sell his
home at a loss.

Traditional contract damages would not compensate Ponsock for the loss incured on the sale of a home, or for emotional suffering. In addition, such damages would do nothng to deter
fuher arbitrary actions. The employer would be

whether, as a whole, the (*709) contract of employment more closely resembles an insurance contract or an ordinary commercial contract. The answer is (***246)
clear. The pricipal reason we permt tort damages for

breach of the covenant of good faith and fair dealing in
an insurance contract is that persons do not generally

purchase insurance to obtain a commercial advantage,

required to compensate Ponsock for the differ-

ence between his prior wage and his present
wage, but since Ponsock could be replaced by a lower wage worker whose pension would not vest for many years, the employer might profit from
his wrong.

but to secure the peace of mind and security it will provide in protectig against accidental

loss. (See Crisci v.

Security Ins. Co. (1967) 66 Cal.2d 425,434 (58 Cal.Rptr.

13, 426 P.2d 173). That reason applies equally to the employer-employee relationship. A man or a woman
usually does not enter into employment solely for the money; a job is status, reputation, a way of defining one's self-worth and worth in the community. It is also essen-

(*708) The majority also point to some nonfundamental distinctions between the insurer-insured and the
employer-employee relationships. They argue that the

tial to financial security, offering assurance of futue
futue obligations. Without a secure job a worker fre(**408) income needed to repay present debts and meet
quently cannot obtain a retirement pension, and often

discharged employee may be able to mitigate damages
while the insured generally cannot. But as we all know, in many cases the discharged worker cannot mitigate damages. As Justice Kaufman asks, "What market is

there for the factory worker laid-off after 25 years of labor in the same plant, or for the middle-aged executive fued after 25 years with the same fum?" (Con. and dis.

lacks access to affordable medical insurance. In short, "in a modern industralized economy employment is central to one's existence and dignty." (Gould, The Idea of
the Job as Property in Contemporary America: The Le-

opn., ante, at p. 718.) The ability of some persons to
mitigate damages is no reason to deny a cause of action to those unable to mitigate them.
It is next suggested that the employer, unlike the insurer, is not performng a "public service." I fail to understand the significance of the statement. Employment

gal and Collective Bargaining Framework, 1986 B.YD.
L. Rev. 885, 892.) 6

is even more important to the community than insurance;

most people value their jobs more than their insurance policies. The public interest in deterring arbitrary breach of employment contracts is, I suggest, at least equal to
that in deterring arbitrary breach of insurance contracts.

6 A second significant similarity is that both insurance contracts and employment contracts arise from a context of disparity of bargainig power. Numerous cases have noted ths disparity in insurance cases; it has led to the adoption of a gen-

eral rule that insurance contracts are constred
against the insurer. There are fewer cases in the employment context, but here the principle is embodied in a statuory finding that "the individual unorganied worker is helpless to exercise actuallibert of contract and to protect his freedom

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of labor, and thereby to obtain acceptable term
and conditions of employment." ( Lab. Code, § 923.)

Because workers value their jobs as more than
merely a source of money, contract damages, if limited to loss of income, are inadequate. (See K Mart Corp. v.
Ponsock, supra, 732 P.2d 1364, 1371; Comment, Recon-

previously advanced in opposition to tort recovery in the insurance cases, and has there been rejected by this cour. Finally, the majority mistake the distinction between a contract action for wrongful discharge and a tort action for bad faith discharge.
A suit in contract for wrongful discharge is not

structing Breach of the Implied Covenant of Good Faith
and Fair Dealing as a Tort (1985) 73 Cal.L.Rev. 1291,

1330; cf. Traynor, op. cit. supra, 8 Bus. L. News 1, 13.)

Again the analogy to the insurance cases is close. Explaing the basis for tort damages in insurance cases,

based directly upon the covenant of good faith and fair dealing, but upon some other provision limiting the right of the (**409) employer to discharge at wil. 7 A provision may prohibit discharge without "good cause," in which the employer's good faith may be relevant in deciding whether good cause exists. ( Pugh v. See's Can-

Walls v. Superior Court, supra, 160 Cal.App.3d 1109,

1l18, said that "(money) damages paid pursuant to a
judgment years after. . . do not remedy the harm suf-

dies, Inc. (1981) 116 Cal.App.3d 31l, 330 (171 Cal.Rptr.

fered . . ., namely the immediate inability to support oneself and its attendant horrors" -- language which applies equally to a suit for wrongful discharge. As sumaried

917). The provision may, instead, establish some other limitation on the employer's power to discharge the employee. It may, for example, prohibit the discharge of

the worker before January 1, or so long as he produces
400 widgets per month, or without an opportty for a

in Miler & Estes, Recent Judicial Limitations On the
Right to Discharge: A California Trilogy (1982) 16 u.c.

grevance hearing -- in which examples good faith would

not be relevant. The point is that all such actions rest not
on proof of the employer's bad faith, but of his breach of

Davis L.Rev. 65, 90-91, insureds and employees both

depend on the contracts "for their security, well-being,

some contractual provision apart from the covenant.
7 All contracts, including contracts for employment at wil, include a covenant of good faith and

and peace of mind. If insurance companies or employers

act in bad faith, the consequences can be very severe, indeed much greater than those that result from a breach
of contract. "

fair dealing, but the arbitrary discharge of an employee at wil is not a breach of contract. (See

In contrast, commercial contracts, generally speaking, are negotiated between parties of more nearly equal

discussion in maj. opn., ante, at p. 698, fn. 39.)
A tort action for bad faith discharge also requires

bargainng strength, and are entered (*710) into for purose of profit. Breach entails only lost profits, and
often a market exists in which the damaged part can
cover its loss. I conclude that past decisions were justi-

that the discharge be wrongful -- that is, in breach of
contract. But once that prerequisite is satisfied, (*711) it

fied in analogizing the relationship between employer and employee to that between insurer and inured, and in distinguishing both from commercial contracts for the
sale of goods and services.

focuses not upon the employee's right to enforce a particular contractual provision, but upon society's right to

deter and demand redress for arbitrary or malicious conduct which inflicts harm upon one of its members. This is the proper and traditional function of tort law.

3. The existence of a contract action for discharge in breach of contract does not exclude a tort action for bad faith. The majority also assert that the prior cases have not carefully considered the fundamental policies underlying

The majority attack a tort remedy because it is different than a contract remedy, as if tort law itself served
no purose. They argue, for example, that abolition of a

the development of tort and contract law. (Ante, at p. 689.) Their argument, in essence, is that the covenant of
good faith and fair dealing is simply one provision in the contract. When the employer acts in "bad faith," they argue, he breaches the contract, and the appropriate rem-

tort remedy for bad faith discharge wil enhance predictability of damages. 8 The unpredictability of damages in a tort action for bad faith discharge is the consequence of

allowing recovery for emotional distress. Damages in other torts permtting recovery for emotional distress,
such as negligence, products liability, malpractice, inten-

tional infiction of emotional distress, etc., are equally
unpredictable. I see no reason why predictability is more important to employers in connection with wrongful discharge actions than, for example, in actions for injuries
caused by defective products. Of course, one can en-

edy is an action for damages recoverable for breach of
contract.

There are several objections to ths reasoning. First, as pointed out by Justice Kaufman, the covenant is a duty

imposed (***247) by law, not one arising from the
the contract. (Conc. & dis. opn. of Kaufman, J., ante, at p. 716).) Second, the majority's reasoning was term of

hance predictability by denying recovery for injuries suffered, but this is not a trade-off cours have generally been wiling to make. It is a decision which, by the majority's own logic, is better left to the Legislatue.

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the concept of reasonableness, like that of bad
8 The importance of predictability of damages, as the majority note (see ante, p. 683, fn. 25), is

faith, is one familiar to tort law, and not generally considered so unpredictable or subjective as to
justify denial of relief for injuries suffered.

that it facilitates economically effcient breach. A part who can calculate damages can determine whether he can profit by breachig his contract, accepting liability in retu for the benefits
of breach. This attitude may be appropriate in a

11 The majority's fear that plaintiffs wil plead bad faith when they have no basis for that pleading seems exaggerated. I see no more reason to

fear false pleading in this context than in any
other cause of action. In any case, the majority's

commercial context. It should not be condoned

in the employer-employee relationship, where
breach may cause injury beyond that of mere loss

of income, injur which cannot easily be mitigated. It is diffcult to summon sympathy for the employer who needs predictability of damages so he can calculate whether he wil profit by fuing
his employee in breach of the employment contract.

decision wil not limit initiation and prosecution of litigation since plaintiffs wil retain a contractual remedy. At best, it prevents plaintiffs from including false and groundless tort claims in their
complaint, but does so only by also preventing
them from including tre and meritorious claims.

The majority partcularly attack Koehrer v. Supe-

The majority then argue that it would be diffcult if not impossible to formulate a rule to confne tort relief to

rior Court, supra, 181 Cal.App.3d 1155, on the ground that "it failed, however, to recogne that in traditional
contract law, the motive of the breaching part generally has no bearing on the scope of damages that the injured

"deserving" cases, apparently because the concept of
"good faith" is subjective. 9 In fact, a suitable test is simple to describe: an employer acts in bad faith in discharging an employee if and only if he does not believe he has a legal right to discharge the employee. io (***248) The majority assert that under similar tests employed by the cours" an ordinary contract breach might give rise to a bad faith action" (ante, p. 698) and that a requirement of
bad faith "(does) nothig. . . to differentiate between

part may recover for breach of the implied covenant."

(Ante, p. 699, italics in originaL.) The argument seems misplaced in the majority opinon; it belongs in the dissent. The fact that traditional contract law draws no dis-

tiction between good faith and bad faith, between innocent breach and malicious breach, is a good reason for

lookig to tort law where such distinctions are recognied. Indeed, the majority argument on ths point, and,
one might say, on the entire issue of tort damages, makes no sense unless the majority believe that there should be no distinction between innocent and malicious breach -that the employer who maliciously and arbitrarily fues a worker knowing that he has no right to do so should pay no more in damages than the employer who believed in good faith that he had a right to fue the worker -- and in

those cases properly and traditionally compensable by
contract damages and those in which tort damages

should flow" (**410) (ante, p. 699). But these assertions are obviously mistaken. A breach of contract does
(*712) not require bad faith. The distinction between

contract and tort is between a discharge done in good
faith, where the employer believes he has a legal right to
discharge the worker, and deliberate, arbitrary violation

of the employee's rights. Indeed, the majority acknowledge in a footnote the effectiveness of a similar test in limiting tort recovery, and complain only that it does not

partcular that the bad faith employer should not pay for the suffering he knowingly and deliberately caused. That is not a belief which I share.

"serve to limit initiation and prosecution of litigation
based on almost any discharge." (Ante, p. 697, fn. 35.) I see no reason why the defense remedies of demurer and summary judgment wil not prove as effective here as in

4. It is fundamentally ilogical for the majority to abolish an established tort remedy for bad faith discharge and then to argue that radical change in existing

remedies is best left to the Legislature.
The majority in their concluding words recognize

any other tort action: presumably if plaintiff cannot
prove bad faith he wil not assert it in his complaint; if he does he will lose on sumary judgment. ii

the need to provide wrongfully discharged workers with an adequate remedy. They also observe that traditional
contract remedies may be inadequate. They assert, how-

9 Of course, tort law is rife with subjective elements -- "malice," "wilful misconduct," "reckless
disregard," and, in insurance cases, "bad faith."

ever, (*713) that an action in tort is not necessarily the
answer. Commentators, they say, have pointed out that a tort remedy has social and economic implications which could be more easily studied and weighed by a legislatue than by the cours. 12 Some have suggested alterna-

1 0 Some cases and writers have suggested that
the cours should also consider whether the em-

ployer acted reasonably. Since the majority abol-

ish the entire cause of action, it is pointless now to decide that question. I would note only that

tive (**411) remedies, such as arbitration, which could
be enacted by legislation but not by judicial (***249)

decision. Thus, according to the majority, the choice

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between tort remedies and alternative remedies is one
best made by the Legislatue, not by the cours. 13 One

But the majority do not clarify existing law. They
repudiate it. They reject the guidance of the only cases

reading this argument would expect that the majority opinion would be limited to clarifying existing law relating to the availability of a tort remedy and that any drastic change in existing law, such as the abolition of the

by this cour to discuss tort actions for wrongful dis-

charge. They reverse the Cour of Appeal decision in this
case. They overrle seven other unanimous Cour of

tort remedy or its replacement by some other remedy,
would be left to the Legislatue.

12 Many of the commentators the majority cite
to support their assertion that a tort remedy for bad faith discharge could have economic draw-

Appeal decisions -- every Cour of Appeal decision to decide that issue. 14 They wil cause reversals in (*714) approximtely 10 other cases in which review has been granted and held for ths decision, since everyone of
those cases recognied a tort cause of action. Having
thus swept the table clean of Californa precedent, IS they

backs are inapposite. A number of the artcles
deal solely with commercial contracts, and do not discuss a tort remedy for employees. (See Louderback & Jurika, Standards for Limiting the Tort
of Bad Faith Breach of Contract (1982) 16

adopt a rule limiting workers discharged in bad faith to
contract damages -- a rule rejected by most of the

(***250) commentators on whom the majority rely, and
recognzed as inadequate by the majority themselves.

14 The majority disapprove Cleary v. American

U.S.F. L.Rev. 187; Putz & Klippen, Commercial Bad Faith: Attorney Fees -- Not Tort Liabilty -is the Remedy for Stonewalling, supra, 21 V.S.F. L.Rev. 419; Traynor, op. cit. supra, 8 Bus. L.
News 1; Comment, Reconstrcting Breach of the Implied Covenant of Good Faith and Fair Deal-

Airlines, Inc., supra, 111 Cal.App.3d 443, "and its progeny." (Ante, p. 700, fn. 42.) The progeny of Cleary include Koehrer v. Superior Court, supra, 181 Cal.App.3d 1155; Gray v. Superior
Court, supra, 181 Cal.App.3d 813; Khanna v.
Microdata Corp., supra, 170 Cal.App.3d 250;

ing as a Tort, supra, 73 Cal.L.Rev. 1291.) Others
are pririly concerned with the rights of at-wil

employees, but the tort remedy for bad faith
breach applies almost exclusively to cases involving employees with contractual protection against arbitrary discharge. (E.g., Gould, The Idea of the
Job as Property in Contemporary America: The

Rulon-Miler v. International Business Machines Corp., supra, 162 Cal.App.3d 241; Shapiro v.
Wells Fargo Realty Advisors, supra, 152

Cal.App.3d 467; and Crosier v. United Parcel Service, Inc., supra, 150 Cal.App.3d 1132.
15 The majority refer to decisions of other juris-

Legal and Collective Bargaining Framework, supra, B.Y.V. L. Rev. 885, 905.)

dictions, but present a misleading count. Five decisions of other jurisdictions uphold a tort
cause of action ( Huber v. Standard Ins. Co., supra, 841 F.2d 980; Carter v. Catamore Co., Inc.

Most important, most of the commentators

recogne the problem of inadequacy of contract

(N.D.Il 1983) 571 F.Supp. 94, 97 (R.I. law);
Dare v. Montana Petroleum Marketing Co.

damages and, if they do not support a tort remedy, support some alternative. I doubt that any would support the majority's act of abolishig tort
damages without providing an alternative. 13 The majority are not entiely consistent on this point, for they appear to leave open the possibility that the cours, without legislative action,

(Mont. 1984) 687 P.2d 1015,1020; Gates v. Life

of Montana Ins. Co. (1983) 205 Mont. 304 (668 P.2d 213); K Mart Corp. v. Ponsock, supra, 732
P.2d 1364, 1369-1370); tlee reject that cause of

action ( Arco Alaska, Inc. v. Akers (Alaska 1988)

could expand the measure of damages recoverable for discharge in breach of contract. I find it

753 P.2d 1150, 1153-1154; Martin v. Federal Life Ins. Co. (1982) 109 IlApp.3d 596 (440
N.E.2d 998, 1006); Murphy v. American Home
Products Corp. (1983) 58 N.Y.2d 293 (461

diffcult to see why a common law cour has
greater ability to change the measure of damages in contract than to create a cause of action in tort.
But the practical problem with the majority's

N.Y.S.2d 232, 238, 448 N.E.2d 86).) If we dis-

count Huber as based on Californa law, the
count stands at four to three. The majority compile a more extensive list of decisions by includnumber of

suggestion is that while they abolish the cause of action in tort, they only suggest the possibility of
expanded contract damages. This is to trade a

ing cases involving quite different issues. A those decisions hold (contrary to Cali-

bird in the hand for the hope there wil be one in
the bush next year. Employees lose an adequate

fomia law) that there is no implied covenant of good faith in contracts for employment at wil -- a

remedy, and mayor may not get a replacement
sometime.

holding which says nothng about whether tort
damages would be awarded for the breach, in bad

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faith, of a contract barring termation without
good cause.
If we count all cases, including Californa

16 For the proposed legislation relating to wrongful discharge, see ante, page 714; for proposed legislation concerning insurance bad faith, see Moradi-Shalal v. Fireman's Fund Ins. Com-

decisions and those based on Californa law, the curent count is 13 cases upholding a tort cause of
action and 3 rejecting it. This figure does not in-

panies, supra, 46 Ca1.d 287,300 and pages 295296 (Mosk, J., dis.).

clude the 10 or so additional cases upholding the

I have considerable respect for the doctrine of judicial restraint, but that doctrine must ru both ways. Judi-

cause of action depublished by the grant of review by this cour and held pending the present

decision.

cial restraint should not only restrain the cour from creatig new remedies, it should also restrain the cour from
dismantling existing ones.

Only after completely rewriting Californa law on
the subject do the majority leave the matter to the Legis-

latue. But two thngs have changed. First, the Legislatue wil face a problem -- the inadequacy of damages in

KAUFMAN,J.
I concur in parts I and II of the majority opinon.

actions for bad faith discharge -- which did not exist before. Second, the burden of seekig legislative (**412)

change, which was previously on employers and insurers, two well-organied and financed groups, is now on
the unorganied worker.

However, I respectfully dissent from part II dealing with breach of the implied duty of good faith and fair dealing. Contrary to the majority, I would hold that such a breach in the context of employment termation may give rise

to tort remedies. The reasons which impel me to this
conclusion are set fort below.

In fact, the Legislatue has already considered ths
matter. In the 1985-1986 legislative session Senator

Greene and Assemblyman McAllister both introduced bils which would have abolished a tort remedy for bad faith discharge, and provided for arbitration of contract
claims. (See Sen. Bil No. 1348 and Assem. Bil No.

Breach of the Implied Duty of Good Faith and Fair Dealing
Thi years ago, in Comunale v. Traders & Gen-

2800, summarized in Brandon, op. cit. supra, 15 Hastings Const. L.Q. 359, 373-374.) Neither bil was enacted.

eral Ins. Co. (1958) 50 Cal.2d 654 (328 P.2d 198, 68
A.L.R.2d 883), this cour fust recogned that breach of the implied duty of good faith and fair dealing may give

One cannot infer too much from the Legislatue's failure
to enact a bil, but it seems safe to say that the Legisla-

rise to a cause of action sounding in tort. I would not have thought, after these many years, that it was stil
necessary to defend and explain this basic principle. In
purortg to trace its origins, however, the majority fundamentally misstates the natue of the tort, and

tue was not contemplating abolishig a tort remedy

without a suitable replacement.
(*715) 5. Conclusion.

The majority's action in abolishing the tort remedy for bad faith discharge comes soon after its decision in
Moradi-Shalal v. Fireman's Fund Ins. Companies, su-

thereby subverts the powerful impetus for its extension to the area of employment termnation. A brief summary (***251) of familiar principles, therefore, may be usefuL.

pra, 46 Cal.3d 287, which abolished the tort cause of

action for bad faith settlement practices by insurers. In

both cases the cour has reached out to overt precedent and to abolish a cause of action recognized by Californa law. The decisions abolish protections previously accorded consumers and workers; they extend protection to insurers and employers, giving them tort immunity not
for inocent error but for bad faith breach of duty. In

(*716) In attempting to emphasize its contractual origins, the majority characterie the covenant of good faith and fair dealing i as (**413) "a contract term"
(maj. opn. at p. 684) "aimed at making effective the agreement's promises." (Maj. opn. at p. 683.) That char-

acterization is simply incorrect under the decisions of
ths cour and the authorities on which they relied. It is
tre that the law implies in every contract a duty of good

both cases, moreover, the Californa Legislatue has considered abolishig the cause of action in question but

refrained from so doing; 16 the decisions of this cour grant immunities which the Legislatue has declined to give, and shift to the unorganized consumer and worker
the burden of seeking legislative change. It is the fuc-

faith and fair dealing. ( Seaman's Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 768 (206

Cal.Rptr. 354, 686 P.2d 1158); Egan v. Mutual of
Omaha Ins. Co. (1979) 24 Ca1.d 809, 818 (169
Cal.Rptr. 691, 620 P.2d 141). The duty to deal fairly and

tion of the common law "to protect the weak from the
insults of

the stronger." (3 Blackstone, Commentaries 3.)

in good faith with the other part to a contract, however, "is a duty imposed by law, not one arising from the terms
of the contract itself In other words, this duty of dealing

The majority's decision subverts that fuction.

fairly and in good faith is nonconsensual in origin rather

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than consensuaL" ( Richardson v. Employers Liab. As-

sur. Corp. (1972) 25 Cal.App.3d 232, 239 (102

Cal.Rptr. 547), italics added, quoted with approval in

vation for obtainng disability insurance is to provide funds during periods when the ordinary source of the
insured's income -- his earnings -- has stopped. The pur-

Gruenberg v. Aetna Ins. Co. (1973) 9 Ca1.d 566, 574

chase of such insurance provides peace of mind and se-

Atlantic Richfield Co. (1980) 27 Ca1.d 167, 175-176
(164 Cal.Rptr. 839, 610 P.2d 1330, 9 AL.Ro4th 314).) While the natue of the obligations imposed by this duty

(108 Cal.Rptr. 480, 510 P.2d 1032); accord Tameny v.

curty in the event the insured is unable to work." (24
Cal.3d at p. 819.) We also observed that "the relationship

of insurer and insured is inherently (***252) unbalanced; the adhesive natue of insurance contracts places the insurer in a superior bargainng position." ( Id. at p.
820.)

is dependent upon the natue and purose of the contract
and the expectations of the partes, these obligations are

not consensual, not agreed to in the contract; they are

imposed by law and thus reflect the normtive values of
society as a whole. ( Gruenberg v. Aetna Ins. Co., supra, 9 Cal.3d at pp. 573-575; Koehrer v. Superior Court (1986) 181 Cal.App.3d 1155, 1169 (226 Cal.Rptr. 820).

In the classic tradition of the common law, which

adapts functional priciples from precedent as changing social and economic conditions require, a number of
cours and commentators have distilled from our holdings in the insurance context a relatively narrow but ser-

The interest which the duty of good faith and fair dealing
is designed to preserve and protect is essentially not the

parties' interest in having their promises performed, but society's interest in protecting its members from harm on
account of nonconsensual conduct. ( Gruenberg v.

viceable "bad (**414) faith" doctrine for application in other areas: Breach of the duty of good faith and fair dealing may give rise to an action in tort where the con-

Aetna Ins. Co., supra, 9 Ca1.d at pp. 573-574; Koehrer
v. Superior Court, supra, 181 Cal.App.3d at pp. 1169-

tractual relation manifests elements similar to those which characterize the "special relationship" between
insurer and insured, i.e., elements of public interest, adhesion, and financial dependency. ( Walls v. Superior
Court (1984) 160 Cal.App.3d 1109, 1117-1119 (207

1l71.)(23)
1 As the commentators have noted, the very

Cal.Rptr. 123); Louderback & Jurika, Standards for Limiting the Tort of Bad Faith Breach of Contact (1981) 16 U.S.F. L.Rev. 187, 220-226; accord, Seaman's Direct Buying Service, Inc. v. Standard Oil Co., supra, 36

term "implied covenant" is misleading, since it "evokes the notion of contract, and therefore the
term 'duty' might be more appropriate for treatig

the violation of good faith and fair dealing as a tort." (Note, Reconstrcting Breach of the Implied Covenant of Good Faith and Fair Dealing
as a Tort (1985) 73 Cal.L.Rev. 1291, 1307, fn.

Cal.3d at pp. 768-769.)

Captued by the force of such reasonig, and fueled

by dicta in Tameny and Seaman's suggesting that the
employment relationship uniquely satisfies these several
criteria ( Tameny v. Atlantic Richfield Co., supra, 27

76.) The Restatement Second of Contracts, section 205, has adopted the language of duty:
"Every contract imposes upon each part a duty

Ca1.d at p. 179, fn. 12; Seaman's Direct Buying Ser-

of good faith and fair dealing in its performnce
and enforcement."

vice, Inc. v. Standard Oil Co., supra, 36 Cal.3d at p. 769,
fn. 6), recent Cour of Appeal decisions have unani-

Because tort actions enforce "duties of conduct. . .
imposed by law, and are based primarily upon social

mously recogned that wilful and malicious discharge from employment may give rise to tort remedies. (See
Koehrer v. Superior Court, supra, 181 Cal.App.3d at pp.
1167-1l71, Gray v. Superior Court (1986) 181

policy, and not necessarily upon the wil or intention of
the parties. . . ." ( Tameny v. Atlantic Richfield Co., supra, 27 CaI.3d at p. 176, quoting Prosser, Law of Torts (4th ed. 1971) p. 613), it was quite natual that cours

Cal.App.3d 813,820-821 (226 Cal.Rptr. 570); Khanna v.
Microdata Corp. (1985) 170 Cal.App.3d 250, 260-264
(215 Cal.Rptr. 860); Shapiro v. Wells Fargo Realty Ad-

would eventually approve the extension of tort remedies, in appropriate circumstances, to violations of the duty of

visors (1984) 152 Cal.App.3d 467, 477-479 (199

Cal.Rptr. 613); Rulon-Miler v. International Business
Machines Corp. (1984) 162 Cal.App.3d 241, 251-253

good faith and fair dealing. (See Note, supra, 73 Cal.L.Rev. at p. 1307.) Indeed, (*717) this cour was
among the fust to recognie that the natue of the obligations, the puroses of the contract and the expectations of the partes all combine to impose a heightened duty upon

(208 Cal.Rptr. 524).)
The majority is not unmndful of these numerous authorities which have concluded that the criteria which

insurers. As we explained in Egan v. Mutual of Omaha
Ins. Co., supra, 24 Cal.3d 809, "The insured in a contract

make the relationship between insurer (*718) and insured suitable for tort remedies, apply with even greater force in the employment context. Indeed, the majority
reviews the pertent cases and authorities with considerable care. (Maj. opn. at pp. 685-692.) At the end of

like the one before us does not seek to obtain a commer-

cial advantage by purchasing the policy -- rather, he
seeks protection against calamity. . . . (The) major moti-

lengthy prologue, however, the majority concludes that

this

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all of the arguments are deficient in comparative analysis, and proceeds to explain why it is "not convinced" that a relationship analogous to that between insurer and insured exists in the employment context. (Maj. opn. at
p. 692.) That explanation, in its entirety, is as follows.

nant of good faith and fair dealing wil lie unless it has
first been proved that, expressly or by implication, the

employer has given the employee a reasonable expectation of continued employment so long as the employee
perform satisfactorily. ( Koehrer v. Superior Court,

First, the majority asserts that a breach in the employment context "does not place the employee in the same economic dilemma that an insured faces" because
the insured "cannot tu to the marketplace," while an

supra, 181 Cal.App.3d at p. 1171.) And that expectation

constitutes a far greater and graver security interest than any which inheres in the insurance context. Most of us can live without insurance. Few of us could live without

employee presumably may "seek alternative employment." (Maj. opn. at p. 692.) Next, the majority argues

ajob.
Peace of mid? One's work obviously involves more than just earnng a living. It defines for many people their identity, their sense of self-worth, their sense of belonging. The wrongful and malicious destrction of one's employment is far more certain to result in serious emotional distress than any wrongful denial of an insurance claim.
If everyhing this cour has written concerning the

that an employer, unlike an insurance company, does not

sell economic "protection." (Maj. opn. at p. 692.) The majority also rejects the insurance analogy because an employee, unike an insured, allegedly does not seek a "different kind of financial securty than those entering a tyical commercial contract." (Maj. opn. at p. 692.) Finally, the majority asserts that insurance and employment contracts differ "(fundamentally)" because the insured's and insurer's interests are "financially at odds," while the employer's and employee's interests allegedly
are "most frequently in alignment." (Maj. opn. at p. 693.)

relation between insurer and insured has any deeper meaning; if we have created a living principle based
upon justice, reason and common sense and not merely a fixed, narrow and idiosyncratic rule of law, then we must acknowledge the iresistible logic and equity of extend-

Such conclusions, in my view, expose an umealistic if not mythical conception of the employment relationship. They also reveal a misplaced reluctance to define
the minimal standards of decency required to govern

ing that principle to the employment relationship. We
can reasonably do no less.

(***253) that relationship. The delineation of such
standards is not, as the majority strongly implies, judicial legislation, but rather constitutes this cour's fudamental
obligation.

Beyond, and perhaps underlying, its rejection of the special relationship analogy, the majority makes two additional arguments. The extension of tort remedies to the employment relation, the majority asserts, is a matter
best left to the Legislatue, for the decision involves

It is, at best, naive to believe that the availability of the "marketplace," or that a supposed "alignent of interests," renders the employment relationship less special
or less subject to abuse than the relationship between
insurer and insured. Indeed, I (**415) can thi of

no

relationship in which one part, the employee, places

more reliance upon the other, is more dependent upon the other, or is more vulnerable to abuse by the other, than the relationship between employer and employee. And, ironically, the relative imbalance of economic
power between employer and employee tends to increase

"policy" choices which may "profoundly" affect social and commercial relations. (Maj. opn. at p. 694.) Additionally, the majority asserts that "bad faith" is a tort impervious to practical "delineation." (Maj. opn. at p. 698.) Thus, the majority raises the familiar "floodgate-oflitigation" specter to warn of "potentially enormous consequences for the stability of the business community." (Maj. opn. at p. 699.) These sorts of arguments have not fared partcularly well with this cour in the past, and ths
case presents no occasion for exception.

rather than diminish the longer that relationship contiues. Whatever bargaining strength and marketability the

employee may have at the moment of hiing, diminishes rapidly thereafter. Marketplace? What market is there for the factory worker laid off after 25 years of labor in
the same plant, or for the middle-aged executive fued

As to the contention that a recogntion of tort remedies for breach of the duty of good faith and fair dealing is best left to the Legislatue, the short answer was aptly
summarized in People v. Pierce (1964) 61 Cal.2d 879, 882 (40 Cal.Rptr. 845,395 P.2d 893), "In effect the contention is a request that cours abdicate their responsibil-

after 25 years with the same firm?
(*719) Financial security? Can anyone seriously

ity for the upkeep of the common law. That upkeep it
needs continuously, as this case demonstrates."

dispute that employment is generally sought, at least in part, for financial security and all that that implies: food on the table, shelter, clothing, medical care, education for
one's children. Clearly, no action for breach of the cove-

(*720) (***254) The responsibility to which we
referred in Pierce, supra, 61 Cal.2d 879, arises from the
unque genius of the common law system and the critical role which the cours play in that system. "In Californa as in other jurisdictions of Anglo-American heritage, the

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common law 'is not a codification of exact or infexible rules for human conduct. . . but is rather the embodiment of broad and comprehensive unwritten principles, inspired by natual reason and an inate sense of justice, (**416) and adopted by common consent for the regulation and governent of the affairs of men. . . .'

Corning Hospital Dist., supra, 55 Cal.2d at p. 219.)
(*721) In Li v. Yellow Cab Co. (1975) 13 Cal.3d

804 (1l9 Cal.Rptr. 858, 532 P.2d 1226, 78 AL.R.3d
393), ths cour judicially abolished the doctrine of con-

tributory negligence as a total bar to recovery and

"'The inherent capacity of the common law for
growth and change is its most significant featue. Its development has been determed by the social needs of the community which it serves. It is constantly expanding and developing in keeping with advancing civilization and the new conditions and progress of society. . . .'''
( Rodriguez v. Bethlehem Steel Corp. (1974) 12 CaI.3d

adopted a rule of comparative negligence in direct pro-

porton to fault. We did so despite the contention that
"widespread disagreement among both the commentators and the states as to which (system was) best" rendered

the matter more suitable for legislative action. ( Id. at p. 833 (dis. opn. of Clark, J.).) "(Logic), practical experience, and fundamental justice," we held, made judicial
action

382,393-394 (115 Cal.Rptr. 765, 525 P.2d 669). "This flexibility and capacity for growt and adaptation is the peculiar boast and excellence of the common
law." ( Hurtado v. California (1884) 110 U.S. 516, 530

imperative. ( Id. atpp. 812-813.)

Over the express objection that fundamental tort re-

form should be left to the Legislatue, we judicially
abandoned the long-standing distinctions among business

(28 L.Ed. 232, 237, 4 S.Ct. 111).

"But that vitality can flourish only so long as the cours remain alert to their obligation and opportty to
change the common law when reason and equity demand it . . . . Although the Legislatue may of course speak to the subject, in the common law system the primary instrments of evolution are the cours, adjudicating on a regular basis the rich variety of individual cases brought
before them." ( Rodriguez v. Bethlehem Steel Corp.,

invitees, social guests and trespassers in determing the standard of liability for dangerous conditions on land ( Rowland v. Christian (1968) 69 Cal.2d 108, 121 (70
Cal.Rptr. 97, 443 P.2d 561, 32 A.L.R.3d 496)); recognied that a marred person whose spouse is injured
(***255) by the negligence of a thid part has a cause

of action for loss of consortum ( Rodriguez v. Bethlehem Steel Corp., supra, 12 Cal.3d at pp. 389-404); and abrogated the rule of interspousal immunity for negligent
torts. ( Klein v. Klein (1962) 58 Cal.2d 692, 697-699

supra, 12 Cal.3d at p. 394.)

This cour has adhered to these principles over the
years, consistently rejecting claims that the reconsidera-

(26 Cal.Rptr. 102,376 P.2d 70).

tion, expansion or abolition of settled common law rules should await action by the Legislatue. In Muskopf v.
Corning Hospital Dist. (1961) 55 Cal.2d 211 (11

Cal.Rptr. 89, 359 P.2d 457), for example, we judicially

abolished the doctrine of sovereign immunity from tort liability, overrling earlier decisions which had expressly

held that "abrogation or restriction of this doctrine is primrily a legislative matter. . . ." ( Vater v. County of
Glenn (1958) 49 Cal.2d 815, 820 (323 P.2d 85); see also

Everyone of these landmark decisions required a difficult choice among competing social and economic policies. It is hardly novel or surrising, therefore, to be confonted (**417) with conflicting arguments over the relative economic effciency or political wisdom of allowing tort remedies for wrongful and malicious employment termation, or to find that competing policies have been advanced and adopted elsewhere. What is both novel and distressing is to find such arguments being cited by the majority as a justification for judicial
abstention. The imposition of a tort duty is not contin-

Talley v. Northern San Diego Hasp. Dist. (1953) 41
Ca1.d 33, 41 (257 P.2d 22).) In so holding, we empha-

sized that the doctrine was "cour made" (55 Cal.2d at p. 218), and finding no continued "rational basis" for it (
id. at p. 216), we ended it. 2
2 In rejectig the doctrine of sovereign immu-

gent upon a consensus of so-called experts. The courts are the custodians of the common law -- not the economists, or the legislators, or even the law professors. We abdicate that duty when we abjure decision of common

law questions under the guise of "deference" to the political branches.
The second contention of

nity we relied in part on earlier decisions in
which we had abolished the doctrine of tort im-

the majority, that bad faith

munity of charitable institutions ( Malloy v.
Fang (1951) 37 Cal.2d 356 (232 P.2d 241); Silva
v. Providence Hospital of Oakland (1939) 14

liability cannot adequately be delimited and therefore
must be denied, has also been generally rejected by this
cour. As we explained in Dilon v. Legg (1968) 68

Cal.2d 728 (69 Cal.Rptr. 72,441 P.2d 912), "The 'con-

Cal.2d 762 (97 P.2d 798)), "an immunty that was
also claimed to be so finy imbedded that only

the Legislatue could change it." ( Muskopf v.

tention that a rule permtting the maintenance of the action would be impractical to admster. . . is but an argument that the cours are incapable of performng their

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appointed tasks, a premise which has frequently been
(*723) Conclusion

rejected.''' ( Id. at (*722) p. 736.) The umeasoning fear
that we cannot successfully adjudicate futue cases of
bad faith termnation, pursuant to the guidelines already

formulated and applied by the Cours of Appeal, should
not be permtted to bar recovery in an otherwise meritorious case.

The majority's views of the bad faith issue reflect one overriding concern -- that of judicial overreaching. It is a familiar concern.

The power of the cours as both guardian and expositor of the common law is considerable. To be effec-

Contrary to the implication of the majority, the standard set forth in Koehrer v. Superior Court, supra, 181

Cal.App.3d 1155, is fully adequate to distinguish between simple breach of contract for discharge without

tive, such power must be exercised with restraint. Judgemade law must progress incrementally, "interstitially" as Justice Holmes said, filling the legislative gaps, neither too far ahead of nor too far behid the body politic.
Stil, Justice Cardozo believed, as his landmark

cause, and breach of the implied duty of good faith and fair dealing. "If the employer merely disputes his liability under the contract by assertng in good faith and with probable cause that good cause existed for discharge, the implied covenant is not violated and the employer is not liable in tort. ( Seaman's, supra, 36 Cal.3d at p. 770.) If, however, the existence of good cause for discharge is asserted by the employer without probable cause and in bad faith, that is, without a good faith belief that good cause for discharge in fact exists, the employer has tortiously attempted to deprive the employee of the benefits of the agreement, and an action for breach of the implied
covenant of good faith and fair dealing wil

common law decisions attest, that the "fissures in the
common law are wider than the fissures in a statute. . . ."

(Cardozo, The Natue of the Judicial Process (1921) p. 71.) His point, it appears, is that within the framework of
the traditional common law responsibilities of the judiciary, the cours may respond to changing social needs
without deference to legislative action. As Professor

Corbin said: "It is the function of our cours to keep the doctrines up to date with the mores by continual restate-

ment and by giving them a contiually new content.
This is judicial

legislation, and the judge legislates at his

lie. " (/d. at p.

1171; see also Khanna v. Microdata Corp., supra, 179 Cal.App.3d 250, 262, 263 (breach of good faith and fair dealing established by proof of employer's bad faith action extraneous to the contract coupled with intent to
frstrate the employee's contract rights).) Thus, under the

periL. Neverteless, it is the necessity and duty of such legislation that gives to judicial offce its highest honor; and no brave and honest judge shiks the duty or fears the periL" (Corbin, The Offer of an Act for a Promise
(1920) 29 Yale L.J. 767, 771- 772, italics added.)

Koehrer standard no bad faith action would lie unless the wrongful discharge was both wilful and malicious.

The majority's implicit fears of judicial activism are
unfounded. We overstep no institutional bounds or con-

As the majority candidly states, its concern is not so much with the workability of the foregoing standard as the fact that "any fuing . . . could provide the basis for a

stitutional constraints in recogning that a willful and