## Facts

- Arthur W. Stephenson, then a pilot employed by Western Airlines with rights to continued employment, could take a leave of absence up to six months without losing those rights.
- In September 1950, Alaska Airlines (a small territorial airline) recruited Stephenson in New York and employed him as its general manager under an oral arrangement.
- Stephenson promptly began work, took a six-month leave from Western, and later moved his family from California to Anchorage, Alaska, in reliance on the job.
- Stephenson contended the employment was for a substantial fixed term and that Alaska Airlines promised to execute a written contract once it obtained an operating certificate.
- As Stephenson’s Western leave neared expiration, he pressed for a signed written contract; he had a draft prepared and discussed it with the chairman and company counsel, but Alaska Airlines refused to sign until the certificate issue was resolved.
- The operating certificate was granted in May 1951; Stephenson nevertheless did not receive a signed contract and soon lost the ability to return to his prior Western position.
- Alaska Airlines terminated Stephenson shortly after, and Stephenson sued for damages including salary and related losses.

## Issues

1. Whether promissory estoppel can bar Alaska Airlines from invoking the statute of frauds to defeat enforcement of an oral fixed-term employment agreement.
2. Whether sufficient evidence supported a finding that the parties formed an employment contract of definite, substantial duration rather than an at-will relationship.
3. Whether the damages award and jury instructions were erroneous, including whether Stephenson failed to mitigate damages.

## Decision

- The Ninth Circuit affirmed the judgment for Stephenson.
- The court held Alaska Airlines was estopped from asserting the statute of frauds because its promises foreseeably induced Stephenson’s definite and substantial reliance and enforcement was necessary to avoid injustice.
- The court upheld the fact-finder’s determination that an enforceable fixed-term agreement existed on the evidence presented.
- The court rejected Alaska Airlines’ challenges to damages and mitigation, finding no reversible error and concluding the employer did not carry its burden to show unreasonable failure to mitigate.

## Legal Principles

- Under Restatement (First) of Contracts § 90, a promise is binding if the promisor should reasonably expect it to induce action or forbearance of a definite and substantial character, it does so induce, and enforcement is required to avoid injustice.
- Promissory estoppel may preclude reliance on the statute of frauds when the promisee substantially changes position in reasonable reliance on an oral promise.
- Whether a definite-term contract was made and whether reliance was substantial are fact-intensive determinations ordinarily left to the jury when supported by evidence.
- In wrongful discharge damages, the defendant bears the burden to prove failure to mitigate by showing comparable employment was available and that the plaintiff unreasonably failed to pursue it.

## Conclusion

The Ninth Circuit affirmed liability and damages where an employer’s oral fixed-term employment promise, coupled with a promise to reduce it to writing, induced substantial reliance (including relinquishing prior employment rights and relocating), making it unjust to permit a statute-of-frauds defense.


Alaska Airlines, Inc. v. Stephenson, 217 F.2d 295 (9th Cir. 1954)