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Termination of Contractual Relations for Other than breach: Employment Contracts

Case: Hillesland v. Federal Land Bank Association of Grand Forks (1987; ND)

Procedural History: District court dismissed P's action via summary judgment. P
appealed.

Facts: P, was CEO of D bank. While employed, he discovered that customers of


the D bank were experiencing financial difficulties, and wished to sell a farm,
and discussions lead to a proposal for P's sons to purchase the farm. In
accordance with standard bank procedure, P submitted details of the proposed
transaction for approval, and it was approved. P then submitted to review
committee for approval, and was told that there was a conflict of interest which
prohibited further involvement by P in the transaction. The sale to P's sons was
then completed. Bank then investigated the matter and bank then discharged P from
employment. Their rationale for the termination was that P had violated written
standards of conduct, had damaged the image and reputation of the bank and the
Association, and had exercised poor business judgment. P filed the action alleging
violation of provisions of the Farm Credit Act, breach of contract, age
discrimination, and tortious interference by the Bank with P's employment K.

Holding: Case dismissal affirmed.

Reasoning:
• Breach of K Claim -
○ P argues that his was not an at-will employment, but a permanent position
to be terminated only if he did not satisfactorily perform. He alleges that more
info is needed based on his performance to be decided at trial. ND's "at will"
doctrine says that if there is no specified term in a K, employment can be
terminated at will.
○ Court says: No evidence to suggest there was a contractual obligation by
D, so his employment can be terminated at will.
• Implied Covenant of good Faith and fair dealing
○ P argues there is implied covenant of good faith in discharging employees,
and D violated that.
○ Court says there is not necessarily an implied covenant of good faith.
They will not adopt this view:
§ The employment K should have the provision, through negotiations btwn
the parties. The courts should not intrude on those negotiations. If the K is for
at-will, which doesn’t require a cause, then that's how it should be. The only
time a court should intrude is when the termination violates a statute (like based
on discrimination).
§ Also, court says the limits of employers of freely terminating their
employees should be taken up by legislature, not the courts.
○ Dissent says: Believes the termination was not w/o due cause. The cause
was exercise of poor judgment. Judge believes there is always an obligation to
not act in bad faith.

Notes
• CEO of bank counseling farmers having financial difficulties. His sons end up
buying the farm.
• Bank approved the transaction. Then CEO is fired.
• As a legal matter, is there an implied covenant of good faith (would P be able
to prove this?) - No.