## Facts

- Virginia Rulon-Miller worked for IBM from 1967 through a series of promotions and merit awards, eventually becoming a low-level marketing manager in IBM’s San Francisco office products division.
- IBM communicated to employees, in writing and orally, that career opportunities and continued employment were available so long as performance was satisfactory and the employee accepted new assignments.
- IBM maintained policies stating it was concerned with employees’ off-duty conduct only when it interfered with job performance or seriously affected IBM’s reputation.
- IBM also circulated conflict-of-interest guidelines focused on outside activities or associations that impaired an employee’s judgment, but had no policy specifically barring romantic relationships with employees of competitors.
- Rulon-Miller had a romantic relationship with Matt Blum, a former IBM employee who became a manager at a competing office products company; the relationship was known within IBM before the termination events.
- After Rulon-Miller received a significant merit raise, her supervisor, Phillip Callahan, questioned her about the relationship, labeled it a conflict of interest, and demanded she choose between the relationship and her job.
- Rulon-Miller objected on privacy grounds and relied on IBM’s stated policies limiting inquiry into off-duty life absent job-related impact.
- Callahan terminated her the next day, stating he had made the decision for her.
- A jury found for Rulon-Miller on wrongful discharge and intentional infliction of emotional distress, awarding $100,000 compensatory damages and $200,000 punitive damages.

## Issues

1. Whether IBM’s policies, practices, and job-security representations created an implied-in-fact contract limiting IBM’s discretion to terminate Rulon-Miller for an off-duty romantic relationship absent an actual conflict of interest or performance harm.
2. Whether the ultimatum to end the relationship and the summary termination, in context, constituted extreme and outrageous conduct supporting liability for intentional infliction of emotional distress.
3. Whether the evidence supported punitive damages based on malice or oppression attributable to IBM.

## Decision

- The Court of Appeal affirmed the judgment for Rulon-Miller against IBM and Callahan.
- The court held substantial evidence supported the jury’s finding that IBM’s own policies and assurances imposed implied contractual limits on termination and that the discharge violated those limits.
- The court upheld the IIED verdict, concluding the jury could find IBM’s conduct extreme and outrageous given IBM’s stated values and the coercive ultimatum followed by immediate discharge.
- The court upheld the $200,000 punitive damages award, finding sufficient evidence for the jury to determine IBM acted with malice or oppression and that the amount was not excessive.

## Legal Principles

- Employer policies, consistent practices, and representations of job security may create implied-in-fact contractual limits on an employer’s discretion to terminate, even where employment is generally at will.
- A discharge may be wrongful where it contravenes the employer’s own stated rules and standards governing when off-duty conduct is job-relevant.
- Where an employer represents it will not intrude into private, off-duty conduct absent defined business harm, termination based solely on a consensual off-duty relationship—without proof of genuine conflict or job impact—can support breach of implied contractual limitations.
- For IIED, workplace conduct may be found extreme and outrageous when a supervisor uses an ultimatum affecting an employee’s private life and then summarily terminates employment in a manner inconsistent with the employer’s professed policies and the employment relationship’s context.
- Punitive damages may be sustained where managerial conduct in terminating an employee reflects malice or oppression, including deliberate disregard of the employer’s own policies and the employee’s rights.

## Conclusion

The court affirmed liability and damages where IBM’s job-security and privacy-related policies supported an implied limitation on termination, the supervisor’s ultimatum and immediate firing for an off-duty relationship supported IIED, and the evidence permitted punitive damages based on malicious or oppressive conduct.


Rulon-Miller v. Int'l Bus. Machs. Corp., 162 Cal. App. 3d 241 (Cal. Ct. App. 1984)