Asmus v. Pacific Bell

Pacific Bell (defendant) instituted its management employment-security policy (MESP) in 1986. The MESP guaranteed continued employment to all of its management employees even if it required reassignment or retraining so long as Pacific Bell’s business plan was not materially affected by a change in circumstances. Four years later, Pacific Bell issued a notice to its managers regarding the potential discontinuation of the MESP. The notice warned of possible needs for cost reduction in the future that would require discontinuation of the MESP. About two years after the notice, Pacific Bell informed its employees that it was terminating the MESP and adopting a new layoff policy, the management force adjustment program (MFAP). Pacific Bell also provided a generous severance program. The company provided enhanced pension benefits to employees who continued working. It provided additional enhanced pension benefits to employees who chose to resign or retire early. Craig Asmus and other employees (plaintiffs) stayed with Pacific Bell for several years after the MFAP replaced the MESP. They received increased pension benefits. Pacific Bell laid off Asmus and other employees after a couple of years. The employees sued Pacific Bell for breach of contract. The district court granted summary judgment in favor of the employees because Pacific Bell did not show that it was materially affected by a change in circumstances. Pacific Bell appealed to the California Supreme Court.