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Shoen v. Amerco

May 25, 1995

L. L. S. SHOEN, APPELLANT,
v.
AMERCO, INC., A NEVADA CORP., RESPONDENT.



Appeal from orders of the district court granting summary judgment in an employment contract case. Eighth Judicial District Court, Clark County; Carl J. Christensen, Judge.{/History}

Law Office of Daniel Marks and Keith M. Lyons, Las Vegas, for Appellant.

Jimmerson, Davis & Santoro, Las Vegas, for Respondent.

Per Curium: Appellant Leonard S. Shoen (Shoen) entered into an employment contract with respondent Amerco, Inc. (Amerco), of which Shoen was the founder. The contract provided Shoen with employment for seven years, and an option to renew the contract for three subsequent seven-year periods. The contract further provided that it was the intent of the parties to provide Shoen with the right to be employed by Amerco for his lifetime. After seven years, Amerco terminated Shoen. Shoen sued Amerco for breach of contract, tortious breach of contract in violation of public policy, breach of the implied covenant of good faith and fair dealing, intentional infliction of emotional distress, and negligent infliction of emotional distress. The district court granted summary judgment on all claims. For the reasons stated below, we reverse and remand for trial on all claims except tortious breach of contract.

FACTS

This dispute centers around an employment contract entered into by Shoen and Amerco, a Nevada corporation. Amerco was created in 1969 as the holding company for all companies comprising the U-Haul Rental System. Shoen founded the original U-Haul company in 1945. He managed the business for over forty-one years, turning the small company into a multi-product organization having an estimated net worth of $4.4 billion. Shoen served as President and Chairman of the Board of Directors of Amerco from its inception until 1986. As the U-Haul company grew, Shoen began making gifts of his holdings to his children. Approximately 92 percent of Amerco's stock is now owned by Shoen's children. Shoen's four oldest sons each own approximately 10 percent of Amerco's stock, while the younger children own greatly decreasing amounts. Shoen's allegations in the instant case involve the actions of his sons, Edward J. Shoen (Joe) and Mark V. Shoen (Mark), in their capacity as officers and directors of Amerco. Joe has been President and CEO of Amerco for the past seven years and Mark has been a member of the Board of Directors for over twenty years. On December 27, 1979, at the age of fifty-nine, Shoen entered into an employment contract with Amerco. When the parties executed the agreement, Shoen was President and Chairman of the Board of Amerco. The contract provided that Shoen was to be employed "for a period of 6 years, 11 months, and 30 days, beginning on January Two, 1980

[111 Nev. 735, Page 738]

and ending on January One, 1987." Shoen had the option to renew the contract for three additional six year, eleven month, and thirty day periods by giving Amerco written notice of intent to renew within thirty days of the expiration of the then current period of employment. Immediately following the provision for renewal, the contract stated that it was "the intention of the parties hereto to provide the Employee with the right to be employed by the Employer for the Employee's lifetime." The contract could be terminated only upon the mutual written agreement of both parties, by Shoen's death, or by Shoen's intentional failure to renew the contract at the end of a specific employment period. Shoen's salary was $300,000.00 a year, subject to cost of living adjustments. The contract further provided that Shoen's duties would consist of serving in any capacity directed by Amerco, and being at all times subject to the plans and policies of the Amerco board of directors. Shoen was prohibited from providing services to any business competing with Amerco or its subsidiaries. Further, the contract characterized Shoen's services as unique and unusual, allowing Amerco to seek equitable relief to prevent breach of the agreement. Shoen continued to serve as President and Chairman of Amerco after signing the contract until 1986, when Shoen informed Amerco by letter of his decision to retire. 1 Shoen stated that he planned to continue serving Amerco as a consultant pursuant to the terms of the contract, which provided that in the event of Shoen's retirement or inability to perform due to disability, Shoen should "reasonably perform as a consultant to the officers and members of the Board of Directors of the company." Additionally, at this time, Shoen informed Amerco of his election to renew the contract for a second seven years, "as well as [his] election to renew the Contract every subsequent seven years in accord with the intention of the contract to provide for [his] employment and compensation for [his] lifetime." Shoen continued to be compensated pursuant to the terms of the contract. In approximately February, 1987, Shoen asserted that he was unable to perform his consulting and guidance duties for Amerco, and began receiving disability compensation pursuant to the contract. In 1988, the Board gave Shoen a cost of living increase. Shoen was informed in a letter from Amerco dated February 20, 1989, that he

[111 Nev. 735, Page 739]

had breached the employment contract and that his "compensation [was] therefore being immediately stopped." Amerco stated that it had learned that Shoen had testified under oath that he did not suffer from bipolar affective disorder, though he had been compensated by disability salary for such a disorder since February, 1987. 2 Amerco further stated: "If you are not disabled, your past failure to act in the best interest of your employer constituted a breach of your Employment Contract and your compensation is therefore being immediately stopped." In closing, Amerco stated that if Shoen could controvert his testimony by a physician's certificate, he should provide this to the company for consideration. The letter was signed by Joe, as President and CEO of Amerco. Shoen contends that the real reason for his termination was his testimony against Joe in an IRS tax trial in Phoenix, Arizona, on February 6, 1989, for which Shoen was subpoenaed to testify. Shoen alleges that though he was not notified of his termination until February 20, his disability compensation was actually discontinued on Sunday, February 5, 1989"the day before he testified regarding Joe's activities in a corporation named Form Builders, which was eventually found liable for a large sum of unpaid federal income tax. Shoen further alleges that prior to and immediately after testifying at this trial, he was assaulted and harassed by his son Mark, a member of Amerco's Board of Directors, who faced similar income tax consequences from the trial. On September 24, 1989, Shoen filed a complaint alleging that Amerco had: (1) breached the employment contract by terminating him; (2) tortiously discharged him in retaliation for testifying at an IRS trial in Phoenix, Arizona; (3) breached the implied covenant of good faith and fair dealing; (4) intentionally inflicted emotional distress by terminating him; and (5) negligently inflicted emotional distress by terminating him. Shoen requested punitive damages. Amerco asserted that Shoen had breached the employment agreement, and that Amerco had acted in good faith in terminating Shoen. On August 27, 1991, Amerco filed a motion for partial summary judgment on Shoen's claims for breach of contract, tortious discharge, and bad faith discharge. Amerco asserted that the contract was for lifetime employment, that lifetime contracts are indefinite and unenforceable, and that accordingly, Shoen was terminable at will. The district court, noting that Shoen had testified in his deposition that the contract was intended to be for the

[111 Nev. 735, Page 740]

rest of his life and was renewable at his option, granted summary judgment in favor of Amerco on the first three causes of action. On November 16, 1992, Amerco filed a motion for partial summary judgment on Shoen's claims for intentional and negligent infliction of emotional distress. Amerco argued that such claims were not recognized in the employment termination context, and that Nevada does not recognize a direct cause of action for negligent infliction of emotional distress. The district court granted Amerco's motion for summary judgment on the emotional distress claims, and on Shoen's claim for punitive damages. Shoen appeals from both grants of summary judgment.

DISCUSSION

Standard of Review

Summary judgment is appropriate only where there is no genuine issue of material fact remaining and the moving party is entitled to judgment as a matter of law. Sawyer v. Sugarless Shops, 106 Nev. 265, 267, 792 P.2d 14, 15 (1990). The evidence must be construed in the light most favorable to the nonmoving party, and all of the non-movant's statements must be accepted as true. Id. at 267-68, 792 P.2d at 15.

Breach of Contract

The district court granted summary judgment for Amerco on Shoen's breach of contract claim based on its determination that Shoen's contract with Amerco was for lifetime employment, that contracts for lifetime employment are unenforceable as a matter of law, and that, as a result, Shoen's employment was at-will. We hold that the district court erred in concluding that a contract for lifetime employment is unenforceable in these circumstances. 3 Amerco argues that the general rule supported by a substantial number of jurisdictions is that a contract calling for "lifetime" employment amounts to employment for an indefinite duration, terminable at the will of either party. Amerco assets that in Nevada, it is a well-settled principle that "employment for an indefinite term may be terminated at

[111 Nev. 735, Page 741]

any time for any reason or for no reason by either the employee or the employer without legal liability." In support of this argument, Amerco cites Bally's Grand Employees' Federal Credit Union v. Wallen, 105 Nev. 553, 557, 779 P.2d 956, 958 (1989), in which this court determined that certain testimony described an agreement of employment for an indefinite term, characteristic of an at-will relationship. Generally, courts have found that "lifetime" contracts are at-will for reasons other than the indefinite nature of such a contract:

[W]here the employment is "permanent" or "for life" the majority of courts interpret this as being an agreement at will, terminable by either party at his election. Deeming such agreements to be at variance with general usage and sound policy, the courts have shown a marked reluctance to enforce contracts for life employment. In large part, this stems from the realization that such contracts frequently are, in practical effect, unilateral undertakings by the employer to provide a job for so long as the employee wishes to continue in it but impose no corresponding obligation upon the latter. When this is the ...


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