In The Court of Appeals

Victor L. Smalls,        Appellant,


Fuji Photo Film, Inc.,        Respondent.

Appeal From Greenwood County
Gary E. Clary, Circuit Court Judge

Unpublished Opinion No. 2003-UP-480
Heard June 10, 2003 – Filed August 7, 2003


Steven M. Krause and Mary C. McCormac, both of Anderson, for Appellant.

Richard J. Morgan  and Reginald W. Belcher, both of Columbia, for Respondent.

PER CURIAM: Victor Smalls brought this action against Fuji Photo Film, Inc. alleging breach of contract and breach of covenant of good faith and fair dealing arising out of the parties’ previous employment relationship.  The circuit court granted summary judgment in favor of Fuji.  We affirm.


Smalls was hired by Fuji in September 1995 as a light room technician in the color paper factory located in Greenwood. In October 1997, Smalls heard a department manager, Darrell Dunning, broadcast over a radio that someone had acted “just like a Jew.” Smalls found this statement to be discriminatory and offensive, and he reported the incident to his direct supervisor, Jerry Childress. According to Smalls, Childress discouraged him from reporting the matter and warned him there would be “repercussions” if he reported the incident.

Smalls reported the incident to Fuji’s human resources director, Debbie Walling. When Smalls first approached Walling he asked whether a hypothetical situation involving the “just like a Jew” statement would be considered offensive. According to Smalls, Walling encouraged him to inform her if someone had made that statement.  Smalls stated that Walling promised him that his name would be kept confidential if he reported the incident. Smalls then told Walling about Dunning’s  “just like a Jew” comment.

Walling claims that the incident reported by Smalls was promptly investigated and that Dunning was warned to avoid using such comments in the future. Walling further stated that Smalls’s name was never revealed during the investigation. However, prior to her meeting with Smalls, Walling had a discussion with Dunning in which she informed him that Smalls had requested to meet with her.  After her meeting with Smalls, Walling went to Dunning to discuss Smalls’s allegations. Walling admitted that based on her previous conversation with him, Dunning deduced that it was Smalls who reported the incident.  According to  Walling, Dunning agreed that he should not have made the statement in the workplace, that it would never happen again, and that Smalls would not be treated any differently for having made the complaint.

In March 1998, Fuji terminated Smalls’s employment.  According to Fuji, Smalls was fired based on his job and safety performance which had progressively deteriorated during the last year of his employment despite repeated warnings and efforts by the company to encourage Smalls to perform better. At the time of Smalls’s termination, Fuji had identified at least ten major documented errors and performance problems that Smalls had committed between March of 1997 and January of 1998. These errors included numerous safety violations, poor job performance, and several altercations between Smalls and his co-workers. Immediately prior to Smalls’s termination, at least four Fuji employees indicated that they had witnessed him commit safety violations and reported the incidents to their supervisors.

Smalls admitted that he had committed safety violations but claimed that  Fuji tolerated these violations in the past.  Smalls stated that he believed he was being retaliated against for reporting the comment made by Dunning. In March of 1997, Smalls’s job evaluation was very positive, but his evaluations in December of 1997 and March of 1998 were not. Smalls stated that he believed he received poor evaluations after reporting the incident because his supervisors were retaliating against him for reporting Dunning.  Fuji indicated that Smalls’s job performance had drastically deteriorated and that he was terminated because of his poor job and safety performance. Fuji also indicated that it did not retaliate in any way against Smalls following the complaint against Dunning.  In fact, Fuji claimed: “[B]ecause Mr. Smalls had complained regarding a potential race discrimination issue, the Company actually treated him more leniently than it otherwise would have when Mr. Smalls continually disrupted meetings and his job and safety performance progressively deteriorated.”

In July 1999, Smalls filed an action against Fuji in federal court alleging retaliation in violation of Title VII of the 1964 Civil Rights Act, breach of contract, and breach of the implied covenant of good faith and fair dealing.  The federal district court issued an order granting Fuji summary judgment as to Smalls’s cause of action alleging retaliation in violation of Title VII. The district court declined to address Smalls’s remaining two causes of action under South Carolina law on the basis that the district court had dismissed all claims over which it had original jurisdiction. Smalls then filed action in state court alleging the following causes of action: (1) breach of contract based on Fuji’s failure to maintain the confidentiality of his internal complaint; (2) breach of contract based on Fuji’s retaliation toward him following the internal complaint; (3) breach of covenant of good faith and fair dealing based on Fuji’s breaches of contract. Smalls alleged that Fuji’s employee handbook altered his status as an at-will employee and constituted an employment contract.  Specifically, Smalls alleged that Fuji violated its provision of the employee handbook regarding Equal Employment Opportunity Policy and Procedure.  This provision stated:

If you feel you are a victim of sexual harassment or any other type of adverse employment action on the basis of your sex, race, color, religion, national origin, age, handicap or veteran statute, you should immediately report the matter to your supervisor, if appropriate.  Alternatively you may report directly to the Director of Human Resources.  Your disclosure will be held in the utmost confidence and you will be protected against any retaliatory action by those involved.

Fuji filed a motion for summary judgment, and a hearing was held before the circuit court. The circuit court granted Fuji’s motion.  This appeal follows.


“Summary judgment is appropriate when it is clear there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.” Toomer v. Norfolk S. Ry. Co., 344 S.C. 486, 489, 544 S.E.2d 634, 635 (Ct. App. 2001); Rule 56(c) SCRCP.  Summary judgment “is not appropriate[, however,] where further inquiry into the facts of the case is desirable to clarify the application of the law.”  Carolina Alliance for Fair Employment v. South Carolina Dep’t of Labor, Licensing & Regulation, 337 S.C. 476, 484, 523 S.E.2d 795, 799 (Ct. App. 1999).  “In determining whether any triable issues of fact exist [as will preclude summary judgment], the evidence and all inferences which can be reasonably drawn from the evidence must be viewed in the light most favorable to the nonmoving party.”  Strother v. Lexington County Recreation Comm’n, 332 S.C. 54, 61, 504 S.E.2d 117, 121 (1998). 


I.       Breach of Contract Based on Retaliation

Smalls first argues that Fuji altered his status as an at-will employee by promising to protect him from retaliation for reporting discriminatory actions and that Fuji breached this promise by firing him in retaliation to his discrimination report.  We disagree.

In the employee handbook, Fuji merely restates the language in Title VII, which prohibits an employer from retaliating against employees who have: (1) opposed a practice made unlawful by an employment discrimination statute or (2) participated in an investigation, proceeding, or hearing under an employment discrimination statute.  42 U.S.C.A. § 2000e-3(a).   On January 19, 2001, the U.S. District Court concluded that Fuji had not retaliated against Smalls under Title VII and that “Fuji has produced a substantial showing that Smalls was terminated for poor job performance and/or his inability to get along with his superior.” Based on this ruling, the doctrine of issue preclusion prohibits Smalls from pursuing his breach of contract claim based on retaliation.

“[T]he party seeking issue preclusion must show that the issue was actually litigated and directly determined in the prior action, and that the matter or fact directly in issue was necessary to support the first judgment.” Town of Sullivan's Island v. Felger, 318 S.C. 340, 344, 457 S.E.2d 626, 628 (Ct. App. 1995).  “Factors to consider in determining the defense of collateral estoppel, notwithstanding a lack of privity, include ‘whether the doctrine is used offensively or defensively, and whether the party adversely affected had a full and fair opportunity to litigate the relevant issue effectively in the prior action.’”  Pye v. Aycock, 325 S.C. 426, 436, 480 S.E.2d 455, 460 (Ct. App. 1997) (quoting Graham v. State Farm Fire & Cas. Ins. Co., 277 S.C. 389, 390-91, 287 S.E.2d 495, 496 (1982)).

In Smalls’s case, the district court already ruled Fuji had not retaliated against Smalls and that Fuji terminated Smalls for non-retaliatory reasons.  Thus, Smalls is precluded from raising the same argument in this lawsuit.

II.      Breach of Contract Based on the Promise of Confidentiality

Smalls next argues the trial court erred in granting summary judgment because Fuji altered Smalls’s status as an at-will employee by promising to keep his identity confidential after reporting discriminatory actions and because Fuji breached this promise of confidentiality.   We disagree.

In Bookman v. Shakespeare Co., 314 S.C. 146, 442 S.E.2d 183 (Ct. App. 1994), Shakespeare’s sexual harassment policy provided that complaints of sexual harassment would be investigated by management.  When an employee, Bookman, was fired for fighting with a fellow employee, she claimed that if the incident had been investigated, management would have discovered the altercation resulted from the other employee sexually harassing her.  The court of appeals found that “the only limitation on Shakespeare’s right to terminate Bookman was a prohibition against retaliatory discharge for filing a sexual harassment complaint;” thus, even if Shakespeare had indeed breached its promise to investigate, “Shakespeare was nevertheless free to fire Bookman for any reason or no reason except in retaliation for filing a sexual harassment complaint.”  Id. at 149, 442 S.E.2d at 184.

In Smalls’s case, the district court already ruled that Fuji terminated Smalls because of his insubordination, not because Fuji was retaliating against him for reporting discrimination.  Therefore, similar to the reasoning in Bookman, even assuming Fuji promised Smalls confidentiality and subsequently breached that promise, Fuji was free to terminate Smalls’s employment for any or no reason except in retaliation for reporting discriminatory actions.  Therefore, summary judgment was properly granted in favor of Fuji on this issue.

III.    Breach of the Covenants of Good Faith and Fair Dealing

Additionally, Smalls argues the trial court erred in granting summary judgment as to his cause of action for breach of covenant of good faith and fair dealing.  Specifically, Smalls argues that he “suffered loss of employment, loss of compensation, [and] loss of benefits” because Fuji breached the covenant of good faith and fair dealing by not protecting his confidentiality and retaliating against him for reporting the incident. 

The covenant of good faith and fair dealing is implied in every employment contract that alters an employee’s at-will status.  See Shelton v. Oscar Mayer Foods Corp., 319 S.C. 81, 91, 459 S.E.2d 851, 857 (Ct.App.), aff’d, 325 S.C. 248, 481 S.E.2d 706 (1997)(“[W]e find no authoritative case law holding the implied covenant of good faith and fair dealing is not applicable to employment contracts that alter the employee’s at-will status.”); Com. Credit Corp. v. Nelson Motors, Inc., 247 S.C. 360, 367, 147 S.E.2d 481, 484 (1966) (“[T]here exists in every contract an implied covenant of good faith and fair dealing.”).  However, a cause of action for breach of the implied covenant of good faith and fair dealing stemming from an employment contract action is limited to contractual damages.  Williams v. Riedman, 339 S.C. 251, 274, 529 S.E.2d 28, 40 (Ct. App. 2000) (rehearing denied May 13, 2000).

Here, Smalls’s at-will status was only altered to the extent that Fuji could not terminate him in retaliation to his report of discrimination.  Because the district court made a final ruling that Smalls was rightfully terminated for insubordination, Fuji’s termination of Smalls did not breach the implied covenant of good faith and fair dealing.  Accordingly, the trial court’s grant of summary judgment is


HEARN, C.J., CONNOR and STILWELL, J.J., concur.