Opinion
Civil Action 20-628
02-15-2023
PATRICK R. VIANCOURT Plaintiff, v. PARAGON WHOLESALE FOODS CORP., Defendant.
Fischer District Judge.
REPORT AND RECOMMENDATION, ECF NOS. 96 & 99
LISA PUPO LENIHAN UNITED STATES MAGISTRATE JUDGE.
I. RECOMMENDATION
It is respectfully recommended that the Motion for Summary Judgment filed by Defendant Paragon Wholesale Foods Corp. (ECF No. 96) be denied. It is further recommended that the Motion for Summary Judgment filed by Plaintiff Patrick R. Viancourt (ECF No. 99) be denied.
II. REPORT
A. Facts
The following facts are taken from the parties' Concise Statements of Material Facts and Responses thereto at ECF Nos. 98, 115, 102, 113 and 120, and are undisputed unless otherwise indicated.
In November 2018, Defendant Paragon Wholesale Foods Corp. (“Paragon” or “Defendant”) was searching for a candidate to fill the position of president. ECF Nos. 98 & 115 ¶ 1. At that time, Elaine Bellin (“Bellin”), Paragon's CEO, received a telephone call from a mutual friend of Bellin and Plaintiff Patrick R. Viancourt (“Viancourt” or “Plaintiff”), in which he recommended that Bellin speak to Viancourt about possibly filling this position. Id. ¶ 2. On November 19, 2018, Bellin called Viancourt, told him that she had received his name from a mutual friend, and indicated that she would like to talk to him about filling the position of president of her company, Paragon. Id. ¶ 3. Bellin approached Viancourt because of his experience in managing and operating companies, and because she believed he could be instrumental in helping her grow Paragon and position the company for sale within the next five years. ECF Nos. 102 & 113 ¶ 7. At the time he was contacted by Paragon, Plaintiff had several years of experience working in executive roles for multiple private equity firms and private equity-owned companies, which were successfully sold during Plaintiff's tenure. Id. ¶ 8. Viancourt and Bellin agreed to meet to become acquainted and to discuss the position. ECF Nos. 98 & 115 ¶ 5.
Viancourt and Bellin met at Paragon's offices on November 29, 2018. Id. ¶ 6. The meeting was a general introductory meeting which did not include any discussion about the terms and conditions of employment or any compensation proposal. Id. ¶ 7. During the next few weeks, Viancourt and Bellin continued discussing the expectations of the role of president. Id. ¶ 8. On December 15, 2018, Belin requested that Viancourt send her the compensation program Plaintiff had with his former employer, Hospitality Mints, along with his compensation proposal for Paragon. Id. ¶ 9. Viancourt prepared a compensation proposal that described his compensation package with Hospitality Mints and his proposal for Paragon and submitted them to Bellin on December 16, 2018. Id. ¶ 10. Viancourt and Bellin met on December 21, 2018 during which they discussed his proposal. Id. ¶ 11. Viancourt's proposal included a long-term incentive plan (“LTIP”) that described his former plan with Hospitality Mints as well as what he was seeking from Paragon. Id. ¶ 12. Having a compensation package that included a LTIP was an important condition to Viancourt's willingness to work at Paragon. ECF Nos. 102 & 113 ¶ 12.
On December 29, 2018, Bellin made a written offer of employment to Viancourt. ECF Nos. 98 & 115 ¶ 28. Bellin's offer included three components to his compensation: a base salary, a bonus structure, and a long-term compensation structure (LTIP). Id. On January 2, 2019, Viancourt emailed Bellin his response to Paragon's proposed compensation terms. ECF Nos. 102 & 113 ¶ 18. With regard to the LTIP provision, Plaintiff indicated that he would need further details “to make sure we're both on the same page. How is value defined?” Id.
The parties agree that Paragon was represented by counsel in connection with the drafting of Plaintiff's Employment Agreement but dispute whether Paragon's counsel assisted with the drafting of the LTIP provision. Id. ¶¶ 19 & 20. The terms of the Employment Agreement went through three drafts. Id. ¶¶ 22-34.
Viancourt and Paragon entered into the final version of the Employment Agreement (“Agreement”) effective January 28, 2019. Id. ¶ 35. Pursuant to the Agreement, Viancourt was promised three main components of compensation: 1) an annual salary of $292,000; 2) an annual performance bonus to be paid no later than April 15 of the year following the calendar year to which the bonus relates; and 3) a Long-Term Incentive Plan or LTIP. Id. ¶ 40 & 42. Defendant disputes that the LTIP was part of the Agreement because Exhibit B, referenced in the LongTerm Incentive Plan provision, was never completed and attached to the Agreement. ECF Nos 98 & 115 ¶ 53.
The Agreement provides in relevant part as follow:
3.3 Long-Term Incentive Plan. During the Employment Period, Employee shall be eligible to participate in a long-term incentive payment in accordance with the Plan as set forth in the attached Exhibit B and as modified time to time in the future by mutual written agreement between the Employer and Employee. All payments under the Plan will be subject to applicable withholding requirements. In drafting the "Stock Appreciation Rights Plan" to be attached hereto as Exhibit B, Employer and Employee agree that it shall include, but not be limited to, the following:
Months of Employment/% of Value Creation
% of Value Creation/Vested
0-24
3%
0-12 months =1.5%, 12+ months = 3.0%
25-48
5%
24+ months = 4.0%, 36+ months = 5.0%
49-60
10%
48+ months = 10%
61+
15%
60+ months =15%
Baseline for value creation to the Employer from the Effective Date off of 2018 financials and company value. Employee's right to trigger, in whole or part, vested equity payouts after 72 months from Effective Date if change of control (as generally defined by federal tax law) has not occurred, or in the event of termination as expressly set forth in Section 5.2. This also accounts for upside of the value creation on strategic value, not appreciation value. If earnings results are ahead of plan consistent with the next time bound threshold, the % payout jumps to that next threshold. Except for Cause, would receive the vested % of value creation up to the date of termination.
Section 5.2 of the Agreement governs “Termination Pay” and states in relevant part as follows:
Effective upon the termination of the Employment Period but subject to the terms and conditions hereof, Employer will be obligated to pay Employee . . . only such compensation as is provided in this Section 5.2....Notwithstanding any other provision of this Section 5.2 or this Agreement to the contrary, Employer will begin to pay the amounts provided in Sections 5.2(a) through 5.2(c), . . . no later than Forty-Five (45) days following the termination of the Employment Period, but only if by such 45th day (i) Employee . . . executes and delivers to Employer a Release and Waiver of Claims and (ii) and any revocation period provided under applicable law has expired without Employee's revocation of the Release and Waiver of Claims. Additionally, Employee will forfeit all amounts owed under this Section 5.2 unless Employee is and continues to be in compliance with the terms of Sections 6 and 7 of this Agreement.
Section 5.2 (c) governs termination pay in the event of Paragon's termination of Plaintiff without cause:
If Employer terminates Employee's employment without Cause then (i) prior to the six month anniversary of the Effective Date, Employer will pay to Employee his then current Salary for a period of six (6) months and on or after the six month anniversary of the Effective Date, Employer will pay to Employee his then current Salary for a period of twelve (12) months, in each case in accordance with normal payroll practice and with such payments commencing on the first payroll date following the expiration date for any revocation period available under applicable law, with respect to the Release and Waiver of Claims; (ii) if the date of termination of employment occurs within the last six (6) months of a calendar year, pay Employee a pro-rata
portion of the Annual Performance Bonus for the year in which the termination of employment occurs (pro-rated based on the number of days Employee was employed in such year) within the time period and subject to the achievement of the performance conditions set forth in Section 3.2; (iii) promptly pay to Employee any Accrued Obligations, and (iv) pay Employee any payments owed to Employee as of the termination of the Employment Period under the Plan as set forth in Section 3.3; provided, however, that upon any breach by Employee of the terms or agreements set forth in Section 6 or Section 7 of this Agreement, Employer's obligation to make such payments shall immediately terminate; Employer shall not be required to commence performance of its obligations under Subsection 5.2(c) (other than the Accrued Obligations) until the regular payroll practice immediately following Employee executing and delivering to Employer the Release and does not revoke the Release.ECF Nos. 102 & 113 ¶¶ 43, 44, 45. Bellin testified that Viancourt was eager to begin his employment with Paragon, and Bellin was eager for him to get started. Bellin Dep., ECF No. 98-1 at 71, 104, 182. She further testified that she had a difficult time reaching her counsel, Attorney McDonough, and that the negotiations were “just very, very rushed.” Id. at 100-02, 182.
Before and after Plaintiff commenced his employment at Paragon, Plaintiff and Bellin discussed obtaining a valuation of the company for use in calculating the LTIP payments under Section 3.3 of the Employment Agreement as the required “[b]aseline for value creation to the Employer from the Effective Date off of 2018 financials and company value.” ECF Nos. 102 & 113 ¶ 50. In early May of 2019, Paragon retained the accounting firm of Grossman Yanak & Ford (“GYF”) to perform a valuation of Paragon. According to the Report generated by GYF, the valuation was “to render an opinion as to the fair market value of a one percent equity ownership interest, on a non-controlling, nonmarketable basis in Paragon as of December, 2018.” ECF Nos. 113 & 120 ¶ 51. The valuation report further states that GYF's conclusion “will be utilized by management of the Company in conjunction with certain corporate planning strategies, including the implementation of a Stock Appreciation Rights (‘SARs') incentive plan” and suggests that it “should not be used for any purpose other than that set forth in the preceding paragraph.” ECF Nos. 102, 113 & 120 ¶ 51. Following Paragon's engagement of GYF, Bellin and Viancourt often discussed the valuation and were the two Paragon employees who supplied the materials GYF relied upon in completing its valuation. ECF Nos. 102 & 113 ¶¶ 53 &54. Paragon provided GYF with twenty-one internal documents for its use in conducting its valuation. These documents included, among other things, Paragon's financials and a copy of Viancourt's Employment Agreement. ECF Nos. 102, 113 & 120 ¶ 56. GYF set fair market value of the equity at $44,700,000, on a controlling, marketable basis. Using this figure GYF opined that the fair market value of a one percent, nonmarketable, equity ownership in Paragon was $314,000. Id. ¶ 58. Upon receiving GYF's valuation report in September of 2019, Bellin shared a copy with Plaintiff. ECF Nos. 102 &113 ¶ 59.
Paragon had the best financial performance in the company's history in 2019, and as of November 2019, Paragon's financial performance substantially exceeded the numbers forecasted for 2019 in GYF's valuation. ECF Nos. 102, 113 & 120 ¶¶ 61-62. Paragon disputes any implication that Plaintiff contributed to Paragon's 2019 financial performance. Id. ¶ 61. Bellin testified that, as Paragon's President, Plaintiff “brought nice structure to the organization,” “conducted meetings on a regular basis,” contributed “corporate experience” and “routine,” and brought “discipline” to Paragon and the company's pricing strategies. ECF Nos. 102 & 113 ¶ 65. Plaintiff substantially fulfilled all terms and conditions of the Employment Agreement, he was never reprimanded, and he did not receive any negative reviews from Bellin or Paragon during his employment as the company's President. Id. ¶ 66.
On November 29, 2019, Paragon terminated Plaintiff effective immediately and without cause. Following his employment with Paragon, Plaintiff complied with all postemployment terms and conditions of the Employment Agreement. Id. ¶¶ 67-68. Under Section 5.2(c) of the Employment Agreement, Paragon was required to pay Plaintiff's salary for a period of twelve (12) months in accordance with normal payroll practice if Plaintiff was terminated without cause in November 2019. At all relevant times, Paragon paid wages to its employees every two weeks resulting in 26 pay periods in a year. On December 6, 2019, Paragon paid Plaintiff gross compensation of $11,230.77 that, after appropriate payroll deductions, resulted in a net payment to Plaintiff of $7,836.44 for the work he performed during the pay period that ended November 29, 2019. Paragon made a Salary Continuation payment to Plaintiff on December 20, 2019, for the pay period beginning December 1, 2019-and continued making Salary Continuation payments every two weeks up to, and including, March 13, 2020. Paragon made no further Salary Continuation payments until July 2020. ECF Nos. 102, 113 & 120 ¶¶ 67-81.
Under Section 5.2 of the Employment Agreement, where-as here-the date of termination of employment occurs within the last six (6) months of a calendar year, Paragon was obligated to pay Plaintiff a pro-rata portion of the Annual Performance Bonus for the year in which termination occurs within the time period and subject to the achievement of performance conditions set forth in Section 3.2. Section 3.2 of the Employment Agreement requires the Annual Performance Bonus to be paid to Plaintiff no later than April 15 of the calendar year following the calendar in which the Annual Performance Bonus was earned. Plaintiff earned an Annual Performance Bonus under Section 3.2 of the Employment Agreement in calendar year 2019. Paragon did not pay Plaintiff his Annual Performance Bonus on or before April 15, 2020. ECF Nos. 102 & 113 ¶¶ 82-85.
Effective March 16, 2020, the Governor of Pennsylvania Governor ordered that all restaurants and bars in five Pennsylvania counties, including Allegheny County, must close their dine-in-facilities due to the COVID-19 pandemic. The next day, March 17, 2020, Bellin left Plaintiff a voice message in which she alluded to the fact that Paragon would not have the funds to pay Plaintiff going forward. ECF Nos. 102 & 113 ¶¶ 92-93. Paragon received a PPP loan for over $2.3 million on April 4, 2020. Plaintiff states that Paragon's receipt of the PPP loan during the same period it was claiming it could not afford to pay Plaintiff's compensation is directly relevant to Plaintiff's claims for liquidated damages and other relief under Pennsylvania's Wage payment Collection Law. ECF Nos. 102, 113 & 120 ¶ 96.
Plaintiff commenced this lawsuit by filing his initial complaint on April 28, 2020. On July 3, 2020, Paragon resumed making its Salary Continuation payments to Plaintiff every two weeks. On July 31, 2020, Paragon paid Plaintiff the seven Salary Continuation payments, which were required to be paid every two weeks from March 27, 2020 to June 19, 2020. Also on July 31, 2020, Paragon paid Plaintiff his Annual Performance Bonus. ECF Nos. 102 & 113 ¶¶ 97100. To date, Paragon has refused to pay Viancourt any LTIP compensation because the parties dispute whether it is due pursuant to Section 3.3 of the Employment Agreement. ECF Nos. 102 & 113 ¶ 101.
B. Legal Standard
Summary judgment is appropriate if, drawing all inferences in favor of the nonmoving party, the pleadings, documents, electronically stored information, depositions, answers to interrogatories and admissions on file, together with any affidavits or declarations, show “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56 (a) & (c). Summary judgment may be granted against a party who fails to adduce facts sufficient to establish the existence of any element essential to that party's case, and for which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the initial burden of identifying evidence which demonstrates the absence of a genuine issue of material fact; that is, the movant must show that the evidence of record is insufficient to carry the non-movant's burden of proof. Id. Once that burden has been met, the non-moving party must set forth “specific facts showing that there is a genuine issue for trial” or the factual record will be taken as presented by the moving party and judgment will be entered as a matter of law. Matsushita Elec. Indus. Corp. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting Fed.R.Civ.P. 56(e)) (emphasis added by Matsushita Court). An issue is genuine only “if the evidence is such that a reasonable jury could return a verdict for the non-moving party.” Anderson v. Liberty-Lobby, Inc., 477 U.S. 242, 248 (1986). In Anderson, the United States Supreme Court noted the following:
[A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.... [T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.Id. at 249-50 (internal citations omitted).
C. Analysis
1. The Parties' Competing Arguments on Summary Judgment
Paragon argues that it is entitled to judgment as a matter of law for the following reasons: 1). assuming that the Employment Agreement is enforceable, any duty on Paragon's part to pay LTIP benefits never materialized because a) strategic value never came into existence; b) the LTIP was never created because Exhibit B to the Employment Agreement never came into existence; c) Plaintiff had no vested equity interest to pay out; and d) even if Plaintiff had vested equity, his claim is premature because he has no right to trigger payout until after 72 months from the effective date of the Employment Agreement. 2) Paragon argues that it is also entitled to judgment as a matter of law on Plaintiff's WPCL claims because no contract to pay LTIP exists; the LTIP payments do not constitute wages under the WPCL; Plaintiff never asserted a claim under the WPCL for salary continuation and bonus payments; and Paragon acted in good faith at all times.
Plaintiff argues that he is entitled to judgment as a matter of law because the parties clearly manifested their intent to be bound by the LTIP by their words and actions both before and after they executed the Employment Agreement; that the LTIP terms are sufficiently definite and capable of enforcement against Paragon because the Employment Agreement: 1) provides a detailed framework for determining the amount of compensation owed to Plaintiff depending on the number of months he was employed by Paragon and percentage of value creation; 2) the Agreement specifies that the baseline for value creation to Paragon would be measured “from the Effective Date . . . off of [Paragon's] 2018 financials and company value;” 3) the Agreement specifically identifies when Plaintiff could trigger the LTIP payouts, including upon termination; and 4) the Agreement identifies how much Plaintiff would receive if terminated without cause (i.e., “the vested % of value creation up to the date of termination”). Plaintiff concludes that Paragon's subsequent performance in obtaining the company's valuation as of December 31, 2018, from GYF, among other things, affirmed the LTIP provision in the employment Agreement. As to Plaintiff's claims pursuant to the WPCL, Plaintiff argues that the LTIP are wages pursuant to the WPCL, and Paragon failed to timely pay Plaintiff's Salary Continuation and Annual Bonus payments pursuant to the terms of the Employment Agreement.
2. Count I: Breach of the Employment Agreement to Pay LTIP
As to Count I, the parties' dispute is focused on the interpretation of the Agreement's provision, Section 3.3, as to whether Plaintiff is entitled to earn LTIP when he was terminated without cause. The parties' competing interpretations of Section 3.3 suggest that this contractual provision is ambiguous. That is, the objective meaning assigned to the words employed by the parties in negotiating the LTIP supports both parties' interpretation of the LTIP provision. See Mellon Bank, N.A. v. Aetna Bus. Credit, Inc., 619 F.2d 1001, 1011 (3d Cir. 1980) (A contract provision is ambiguous if it is susceptible of two reasonable alternative interpretations.). If the contract is ambiguous, then the interpretation of the contract is for the factfinder to resolve the ambiguity in light of extrinsic evidence. Id. Accord Stendardo v. Nat'l Mortgage Ass'n, 991 F.2d 1089, 1094 (3d Cir. 1993) (“If the court determines that a given term in a contract is ambiguous, then the interpretation of that term is a question of fact.”). The intent of the parties in employing the ambiguous term is likewise a question of fact for the factfinder. Stendardo, 991 F.2d at 1094. (citing Tigg Corp. v. Dow Corning Corp., 822 F.2d 358, 362 (3d Cir. 1987)).
Pennsylvania law employs the “plain meaning rule” when interpreting contracts, which assumes that the intent of the parties to a contract is “embodied in the writing itself, and when the words are clear and unambiguous the intent is to be discovered only from the express language of the agreement.” Hullett v. Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107, 111 (3d Cir. 1994) (citing Cnty. of Dauphin v. Fid. & Deposit Co., 770 F.Supp. 248,251 (M.D. Pa. 1991)). A court's determination of whether the language of an agreement is ambiguous may not be possible, however, without examining “the words of the contract, the alternate meaning suggested by counsel, and the nature of the objective evidence to be offered in support of that meaning.” Mellon, 619 F.2d at 1011.
The parties agree that the Employment Agreement “shall be governed by and construed under Pennsylvania law.” ECF Nos. 102 & 113 ¶ 39.
Here, both parties have advanced reasonable alternative interpretations of Section 3.3 and its related sections. Section 5.2(c)(iv) provides that Defendant agrees to pay Plaintiff “any payments owed to employee as of the termination of the Employment Period under the Plan as set forth in Section 3.3.” ECF Nos. 102, 113 & 120 ¶ 86. Although the parties agree that “the Plan,” which was to be attached to the Agreement as Exhibit B, was never created, they vehemently dispute the meaning and relevance of various words and phrases of Section 3.3:
3.3 Long-Term Incentive Plan. During the Employment Period, Employee shall be eligible to participate in a long-term incentive payment in accordance with the Plan as set forth in the attached Exhibit B and as modified time to time in the future by mutual written agreement between the Employer and Employee. All payments under the Plan will be subject to applicable withholding requirements. In drafting the "Stock Appreciation Rights Plan" to be attached hereto as Exhibit B, Employer and Employee agree that it shall include, but not be limited to, the following:
Months of Employment/% of Value Creation
% of Value Creation/Vested
0-24
3%
0-12 months =1.5%, 12+ months = 3.0%
25-48
5%
24+ months = 4.0%, 36+ months = 5.0%
49-60
10%
48+ months = 10%
61+
15%
60+ months =15%
Baseline for value creation to the Employer from the Effective Date off of 2018 financials and company value. Employee's right to trigger, in whole or part, vested equity payouts after 72 months from Effective Date if change of control (as generally defined by federal tax law) has not occurred, or in the event of termination as expressly set forth in Section 5.2. This also accounts for upside of the value creation on strategic value, not appreciation value. If earnings results are ahead of plan consistent with the next time bound threshold, the % payout jumps to that next threshold. Except for Cause, would receive the vested % of value creation up to the date of termination.
One dispute concerns the following sentence from Section 3.3: “Employee's right to trigger, in whole or part, vested equity payouts after seventy-two (72) months from Effective Date if change of control (as generally defined by federal tax law) has not occurred, or in the event of termination as expressly set forth in Section 5.2.” Plaintiff contends that this sentence sets forth two distinct temporal events, separated by the disjunctive “or,” that would allow Plaintiff to obtain LTIP compensation in the event he is terminated at any time. Plaintiff contends that the second event, termination, is the only event at issue under the facts at bar-it occurs upon Plaintiff's termination as expressly set forth in Section 5.2. Defendant contends that the payouts will be made upon termination only after seventy-two (72) months because the word “or” was not meant to create two distinct temporal triggering events, but that the 72 months applies to both a change in control and Plaintiff's termination. Defendant also asserts that because Exhibit B was never created, no payments are possible “under the Plan” because there existed no “Plan.” Although the record reflects that Paragon engaged GYF for purposes of creating a Plan that was to be attached to the Agreement as Exhibit B, GYF completed its Report in September 2019 but for reasons not reflected in the record, the “Plan” was not finalized into an Exhibit B before Plaintiff's termination in November 2019. Bellin only testified that she did nothing with the Report because Viancourt was terminated shortly thereafter. Bellin Dep. ECF No. 98-1 at 157-161.
The parties also provide alternative meanings for the portion of Section 3.3 which provides that unless Plaintiff was terminated “for Cause, [h]e would receive the vested % of value creation up to the date of termination,” with the “[b]aseline for value creation to the Employer from the Effective date off of 2018 financials and company value.” Plaintiff relies on the Table reflected in Section 3.3 that identifies the “vested % of value creation” for payouts prior to 12 months of employment as 1.5%. ECF No. 102 ¶ 89. Defendant contends that because Plaintiff owned no equity, let alone no vested equity, the language of Section 3.3 is clear that he is not entitled to a payout. ECF No. 113 ¶ 89. Plaintiff responds that the Table in Section 3.3 does not reference the word “equity” and he therefore is not required to “own equity” in Paragon in order to receive LTIP compensation that he was promised under Section 3.3. ECF No. 120 ¶ 89. Instead, Plaintiff notes that the term “vested equity payouts” applies only when the LTIP is triggered after 72 months of employment if no change in control has occurred, and has no bearing when Plaintiff is terminated without cause after less than 72 months. ECF No. 119 at 4.
This is the last line of Section 3.3 and appears to be an incomplete sentence.
Another debated point of contract interpretation is that concerning “strategic value.” Defendant contends that because strategic value was never determined, Plaintiff is not entitled to an LTIP payout. That is, Defendant's interpretation of Section 3.3 construes strategic value as a necessary part of the value creation equation. ECF No. 97 at 15. Defendant points to Plaintiff's deposition testimony that Paragon was being positioned for sale within a 3 to 5-year time frame and it would only make sense that he was looking for a payout upon the sale of the company. ECF No. 97 at 19. Plaintiff, however, directs the Court to the precise language of Section 3.3, indicating that there is no requirement that strategic value is essential to Paragon's obligation to pay LTIP: “Baseline for value creation to the Employer from the Effective Date off of 2018 financials and company value.” Instead, Plaintiff looks to the only language of Section 3.3 where strategic value is mentioned: “This also accounts for upside of the value creation on strategic value, not appreciation value.” Plaintiff posits that the word “also” indicates that strategic value is one of multiple types of value that might be accounted for. ECF No. 114 at 13. Plaintiff also notes that the requirement that the company be sold in order for Paragon's LTIP obligations to take effect renders the surrounding language of Sections 3.3 and 5.2 meaningless. That is, according to Plaintiff, Section 3.3 permits Plaintiff to trigger LTIP payments “in the event of termination” in accordance with Section 5.2 without regard to whether any sale has occurred. Plaintiff further notes that Section 3.3 gives Plaintiff the right to trigger LTIP payments “if change of control . . . has not occurred” after 72 months from the Employment Agreement's effective date. Plaintiff concludes that Section 3.3 expressly contemplates Paragon's obligation to pay LTIP compensation even if no sale of the company took place. ECF No. 114 at 14. Instead, Plaintiff posits that the more logical reading of Section 3.3 is that the parties intended to measure “value creation” using the same method that was employed to determine the 2018 “baseline.” ECF No. 114 at 15.
The parties agree that the meaning of strategic value is the value of the company if sold.
The GYF report indicated that it could not determine strategic value because the company was not looking to a specific buyer at the time of its Report.
Under Third Circuit law, a contract is ambiguous if it is susceptible of two reasonable alternative interpretations. Ambiguous language must be interpreted by the fact finder. Both parties' interpretations of the above provisions are reasonable alternatives. Therefore, the language regarding whether Plaintiff is entitled to LTIP compensation when terminated without cause is ambiguous and must be determined by the fact finder. See Hullett, 38 F.3d at 111. The Cross-Motions for Summary Judgment should be denied as to Count I for breach of contract.
3. Counts II, III, & IV: Wage Payment Collection Law
As noted by Plaintiff, the parties have since resolved the issues underlying Count V of Plaintiff's First Amended Complaint, which sought declaratory judgment, so the Court need not address it here. ECF No. 101 at 7 n.1.
The purpose of the WPCL is to remove some of the obstacles employees face in litigation by providing them with a statutory remedy of an employer's breach of its contractual obligation to pay wages. See Laborers Combined Funds v. Mattei, 518 A.2d 1296, 1298 (Pa. Super. Ct. 1986); 43 P.S. § 260.1 (WPCL authorizes legal action to collect contractually agreed upon wages). “The WPCL does not create an employee's substantive right to compensation; rather, it only establishes a statutory vehicle to enforce payment of wages and compensation to which an employee is otherwise entitled by the terms of an agreement.” Scungio Borst & Assocs. v. 410 Shurs Lane Dev., LLC, 106 A.3d 103, 109 (Pa. Super. Ct. 2014) (en banc). Therefore, the right to recover wages “earned” by employees upon separation from employment under the WPCL is a statutory remedy which supplements rather than supplants a common law action for breach of contract. 43 P.S. § 260.9a(a).
Also at issue is an employee's right to recover liquidated damages for the untimely payment of wages due under an employment contract. Pursuant to the WPCL, a party is entitled to liquidated damages:
Where wages remain unpaid for thirty days beyond the regularly scheduled payday, or, in the case where no regularly scheduled payday is applicable, for sixty days beyond the filing by the employe of a proper claim or for sixty days beyond the date of the agreement, award or other act making wages payable, or where shortages in the wage payments made exceed five percent (5%) of the gross wages payable on any two regularly scheduled paydays in the same calendar quarter, and no good faith contest or dispute of any wage claim including the good faith assertion of a right of set-off or counter-claim exists accounting for such non-payment, the employe shall be entitled to claim, in addition, as liquidated damages an amount equal to twenty-five percent (25%) of the total amount of wages due, or five hundred dollars ($500), whichever is greater.43 P.S. § 260.10 (emphasis added). See also Thomas Jefferson Univ. v. Wapner, 903 A.2d 565, 574 (Pa. Super. Ct. 2006) (“The WPCL is not only a vehicle for recovery of unpaid wages; it also provides for damages in the event an employer withholds compensation in the absence of good faith.”).
The employer has the burden of proving good faith by clear and convincing evidence. Id. at 575. “[B]ad judgment does not prevent an employer from acting in good faith under the WPCL.” Hartman v. Baker, 766 A.2d 347, 355 (Pa. Super. Ct. 2000). And where an employer holds a genuine, good-faith belief that it does not owe an employee any further wages, “[i]t remains for a jury, not the Court, to divine [the employer's] intent and decide if that excuse is genuine or reasonable in the face of the contrary evidence [Plaintiff] presents.” Kairys v. S. Pines Trucking, Inc., No. 2:19-CV-1031-NR, 2021 WL 2073797, at *14 (W.D. Pa. May 24, 2021).
Here, whether Viancourt may recover under the WPCL is determined by the terms of the Employment Agreement. See Braun v. Wal-Mart Stores, Inc., 24 A.3d 875, 957 (Pa. Super. Ct. 2011) (entitlement to compensation under WPCL determined by provisions of employment contract). See also Riseman v. Advanta Corp., 39 Fed.Appx. 761, 765 (3d Cir. 2002) (Annual performance bonuses considered “wages” under the WPCL); Cook Techs., Inc. v. Panzarella, No. 15-CV-1028, 2018 WL 6616932, at *27 (E.D. Pa. Dec. 18, 2018) (Salary continuation payments are considered “wages” under the WPCL). Therefore, as to Plaintiff's LTIP payments, because the Court has determined that there are issues of material fact as to whether Plaintiff is owed LTIP payments, the parties' cross motions for summary judgment as to Count III should be denied.
As to remaining Counts II and IV relating to Paragon's failure to make timely Salary Continuation and Annual Performance Bonus payments, the parties agree that Plaintiff is entitled to these payments. They argue, however, that each is entitled to judgment as a matter of law as to whether Plaintiff may recover liquidated damages because Defendant's payments were untimely under the WPCL. While Plaintiff comes forward with evidence that his Salary Continuation and Annual Performance Bonus payments were untimely, Defendant responds that it acted in good faith in delaying these payments. Defendant emphasizes that it never denied that Plaintiff was entitled to these payments. Instead, it merely sought to delay them because of COVID-19's impact on Paragon's financial situation. Bellin testified that in March of 2020, Paragon lost all but 10 percent of its business. She was forced to lay off two-thirds of its staff and she needed to pay those employees who remained working during the pandemic, rather than those who were not. Bellin Dep., ECF No. 98-1 at 173-77.
Plaintiff responds, however, that the Salary Continuation and Annual Performance Bonus “were earned by Plaintiff, and accrued by Paragon, in 2019,” well before the COVID-19 pandemic could have impacted Paragon's finances. ECF No. 114 at 32. Plaintiff further raises the undisputed fact that Paragon received over $2 million in PPP funds on April 4, 2020. ECF Nos. 102 & 113 ¶ 96.
Because of the unprecedented impact of COVID-19 on the food service industry and on our economy in general, it must be left to the factfinder, “not the Court, to divine [the employer's] intent and decide if that excuse is genuine or reasonable in the face of the contrary evidence [Plaintiff] presents.” See Kairys, 2021 WL 2073797, at *14.
The Court could uncover no caselaw as to whether the impact of COVID-19 on a company's finances constituted a good faith reason for failing to timely pay earned compensation pursuant to the WPCL.
Defendant further contends that because it settled the claims for these payments before Plaintiff added the WPCL claims to the Amended Complaint, Plaintiff is not entitled to attorneys' fees because pursuant to § 260.9a(f), recovery of costs and attorneys' fees is limited to claims “brought under this section.” ECF No. 97 at 45-46. Plaintiff, however, added these claims pursuant to the WPCL for liquidated damages for the untimely payments pursuant to § 260.9a(b) and § 260.10. Therefore, Viancourt is entitled to fees and costs if the factfinder determines Paragon lacked a good-faith basis to dispute its obligation to pay wages when due. See Bair v. Purcell, 1:04-CV-1357, 2010 WL 3282653, at *2, 7 (M.D. Pa. Aug. 17, 2010) (where employer fully paid claimed back wages, leaving only propriety of liquidated damages for untimely payments, employee entitled to reasonable attorneys' fees where employer lacked good faith basis for untimely payments). Importantly, and contrary to Defendant's argument, the WPCL is to be liberally construed to effectuate its purpose. See Braun v. Wal-Mart Stores, Inc., 24 A.3d 875, 953 (Pa. Super. Ct. 2011) (“[T]he Pennsylvania rules of statutory construction require the civil provisions of the WPCL to be liberally construed.”) (internal quotation omitted).
Because issues of material fact remain as to whether Paragon had a good faith reason for failing to timely pay Plaintiff the Salary Continuation and Annual Performance Bonus payments, the cross motions for summary judgment should be denied on Counts II and IV of the Amended Complaint.
III. CONCLUSION
For the reasons discussed above, it is respectfully recommended that the Motion for Summary Judgment filed by Defendant Paragon Wholesale Foods Corp. (ECF No. 96) be denied. It is further recommended that the Motion for Summary Judgment filed by Plaintiff Patrick R. Viancourt (ECF No. 99) be denied.
In accordance with the Magistrate Judges Act, 28 U.S.C. §636(b)(1)(B) and (C), and Rule 72.D.2 of the Local Rules of Court, the parties are allowed fourteen (14) days from the date of service of a copy of this Report and Recommendation to file objections. Any party opposing the objections shall have fourteen (14) days from the date of service of objections to respond thereto. Failure to file timely objections will constitute a waiver of any appellate rights.