Opinion
No. 2-891 / 02-0007, No. 2-904 / 02-0361.
Filed February 28, 2003.
Appeal from the Iowa District Court for Polk County, Douglas F. Staskal, Judge.
Ralph Beal and I.G.F. Insurance Company separately appeal the judgment for Beal in this action for breach of an employment contract. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
Charles Gribble of Parrish, Kruidenier, Moss, Dunn, Boles Gribble, L.L.P., Des Moines, for Ralph Beal.
Rebecca Boyd Parrott of Dickinson, Mackaman, Tyler Hagen, P.C., Des Moines, for I.G.F. Insurance and I.G.F. Holdings.
David Charles of Belin Lamson McCormick Zumbach Flynn, P.C., Des Moines, for Symons.
Heard by Sackett, C.J., Huitink, J., and Harris, S.J.
Senior Judge assigned by order pursuant to Iowa Code section 602.9206 (2003).
Ralph Beal and I.G.F. Insurance Company (I.G.F.) separately appeal the judgment for Beal in this action for breach of an employment contract. Beal claims the trial court erred in failing to award him additional compensation as required by the contract and liquidated damages pursuant to Iowa Code chapter 91A (1999). He also challenges the trial court's award of attorney fees without affording the parties a hearing on that issue.
I.G.F. claims Beal was discharged for cause and the trial court erred in concluding otherwise. I.G.F. also argues that Beal failed to mitigate his damages and was not entitled to an award of attorney fees.
I. Background Facts Proceedings
On April 25, 1997, Beal entered into an employment agreement with I.G.F. The contract provided:
This Agreement shall commence as of May 1, 1997 and shall continue in effect until April 30, 2000, provided, however, that the term of this Agreement shall automatically be extended without further action of either party for additional one year periods unless, not later than six months prior to the end of the then effective term, either the Company or the Employee shall have given written notice that such party does not intend to extend this Agreement.
The contract provided for termination of employment in the following circumstances: (1) mutual agreement of the parties; (2) Beal's retirement; (3) Beal's death or disability; or (4) for cause. If Beal was terminated for cause, he would receive no severance pay. If he was terminated without cause, he would receive an amount equivalent to his salary for six months.
On March 1, 2000, Beal's supervisor, Brian Neal, sent him a letter and an e-mail which stated, "Please take notice that IGF does not intend to renew your employment agreement that terminates April 30, 2000 but wishes to honor the spirit of the agreement by providing you six months (until August 31, 2000) to make arrangements for alternative employment." For personal reasons, Beal asked to remain as an employee for an additional month and I.G.F. agreed.
I.G.F. then offered to pay Beal a lump sum payment equivalent to his salary for five months, $25,000, if he would sign a release and waiver of the employment agreement. Beal refused to sign the release, claiming that because I.G.F. failed to give him notice of its intention not to renew his contract "six months prior to the end of the then effective term," the employment agreement was automatically extended for an additional year. Beal insisted I.G.F. owed him a year's salary, $60,000.
In order to be in compliance with the nonrenewal provision of the contract, I.G.F. would have to have given notice before November 1, 1999.
Beal filed suit against I.G.F. alleging breach of the employment agreement. Beal amended his petition to add as defendants I.G.F. Holdings, Inc. (I.G.F. Holdings), the parent company of I.G.F., and Symons International Group, Inc. (Symons), the parent company of I.G.F. Holdings. At trial, I.G.F. argued Beal had been terminated for cause and was not entitled to any additional compensation.
On December 14, 2001, the district court entered a decision finding that although under the agreement Beal's employment was automatically renewed for one year because I.G.F. missed the nonrenewal deadline, that did not mean I.G.F. could not thereafter terminate the agreement. The court found Beal was terminated without cause. The court determined, "In this case, the parties agreed that if IGF terminated the agreement without cause it would be liable to Beal for six months' salary." The court also determined Beal was not entitled to liquidated damages under chapter 91A because I.G.F. had a good faith belief Beal was not entitled to severance pay. The court awarded Beal attorney fees of $10,000. Beal appealed.
The case then progressed to a hearing on motions to dismiss by I.G.F. Holdings and Symons. On January 29, 2002, the district court dismissed these parties. I.G.F. then appealed. We consider the two appeals in this opinion.
II. Standard of Review
Our scope of review in this action is for the correction of errors at law. Iowa R.App.P. 6.4. The findings of fact in a law action are binding upon us if they are supported by substantial evidence. Iowa R.App.P. 6.14(6)( a). Evidence is substantial if a reasonable mind would accept it as adequate to reach the same findings. Frontier Props. Corp. v. Swanberg, 488 N.W.2d 146, 147 (Iowa 1992).
III. Timeliness of Appeal
Beal claims I.G.F.'s appeal is untimely because it was not filed within thirty days of the court's order on December 14, 2001. See Iowa R.App.P. 6.5(1). We determine I.G.F.'s appeal was timely under Iowa Rule of Appellate Procedure 6.5(3), which provides:
Notwithstanding these rules, an order disposing of an action as to fewer than all of the parties to the suit, even if their interests are severable, or finally disposing of fewer than all the issues in the suit, even if the issues are severable, may be appealed within the time for an appeal from the order, judgment, or decree finally disposing of the action as to the remaining parties or issues.
Here, the district court's ruling on December 14, 2001, was not dispositive as to all the parties to the suit, namely I.G.F. Holdings and Symons. I.G.F. timely appealed the January 29, 2002, order "finally disposing of the action as to the remaining parties or issues."
IV. Employment Agreement
Beal contends the employment agreement essentially gave I.G.F. three options regarding his discharge from employment — nonrenewal of his contract, termination for cause, and termination without cause. He asserts I.G.F.'s notice his contract would not be renewed was untimely under the terms of the agreement, and thus, his contract continued for an additional year. The district court agreed with Beal's contention, but determined the renewal of Beal's contract did not prohibit I.G.F. from terminating him. We agree with the district court's conclusion. Under the terms of the contract, termination, with or without cause, could take place at any time during the contract term.
Beal also asserts I.G.F. only exercised the first option, nonrenewal of his contract, and did not attempt to terminate his employment. We find there is substantial evidence in the record to support the district court's conclusion that I.G.F. terminated the employment agreement. Neal testified that when he called Beal on March 1, 2000, Beal understood his employment would terminate as of that day. It is clear Beal recognized Neal's intent to terminate him, as shown by Beal's request to extend his employment for one month. We affirm the district court's conclusion that Beal is not entitled to his salary for one year because he was terminated from his employment.
We turn then to the question of whether Beal was terminated for cause or without cause. I.G.F. claims it had cause to terminate Beal and that he was not actually entitled to any severance package. On this issue the district court stated:
The court concludes that the employment agreement was not terminated for cause. This is not a difficult decision to make since Neal himself testified that he did not terminate Beal for cause, although he believed he could have. The court agrees with the plaintiff's assertion that the contractual consequences of the parties' actions must be measured by what they actually did, not what they believe they could have done but did not.
The question of whether an employee has been terminated for cause is an issue of fact, to be determined by the fact-finder. See Kerndt v. Rolling Hills Nat'l Bank, 558 N.W.2d 410, 417 (Iowa 1997). The court's factual finding on this issue is supported by substantial evidence. We conclude Beal was terminated without cause and under the terms of the agreement he is entitled to an amount equivalent to his pay for six months.
V. Liquidated Damages
Beal claims that he is entitled to liquidated damages under chapter 91A because I.G.F. intentionally withheld payment of his severance pay. Iowa Code § 91A.8. An employer who knows that wages are due but does not pay them is liable for liquidated damages. Condon Auto Sales Serv., Inc. v. Crick, 604 N.W.2d 587, 597-98 (Iowa 1999). By the same token, an employer who refuses to make a payment as a result of a good faith dispute that the payment is due, is not liable for liquidated damages. Id.
The definition of "wages" in Iowa Code § 91A.4(7)(b), includes "severance payments which are due an employee under an agreement with the employer." McClure v. Int'l Livestock Improvement Servs. Corp., 369 N.W.2d 801, 804 (Iowa 1985).
The district court determined there was a good faith dispute as to whether Beal had been terminated for cause or without cause, and thus whether or not he was entitled to payment of a severance package. The court concluded, "[t]herefore, IGF's failure to pay severance was based on a good faith belief that none was due, precluding the imposition of liquidated damages." We determine there is substantial evidence to support the district court's findings on this issue, and we affirm.
VI. Mitigation of Damages
I.G.F. claims Beal had a duty to mitigate damages. It relies on Kerndt, 558 N.W.2d at 417, where damages in an action for wrongful discharge were based on the difference between what the plaintiff would have earned under his written employment agreement and what he actually earned at a different job after he was terminated. See also Hunter v. Bd. of Trustees, 481 N.W.2d 510, 517 (Iowa 1992) (discussing whether discharged employee reasonably sought other employment in order to mitigate damages).
Beal asserts this breach of an employment contract case did not involve wrongful discharge, but failure to pay the severance payments specified in the employment contract. Therefore, the damages in this case should not be based on Beal's potential wages, but are based on the terms of the employment contract. Parties may fix damages by contract when the amount of damages is uncertain and the amount fixed is fair. Aurora Bus. Park v. Albert, Inc., 548 N.W.2d 153, 156 (Iowa 1996) (citing Rohlin Constr. Co. v. City of Hinton, 476 N.W.2d 78, 79 (Iowa 1991)). A liquidated damages provision provides a ready and relatively easy calculation of damages if there is a breach of contract. American Soil Processing, Inc. v. Iowa Comprehensive Petroleum Underground Storage Tank Fund Bd., 586 N.W.2d 325, 333 (Iowa 1998). Under these circumstances, we conclude the district court properly found a mitigation defense was "not applicable where the damages sought consist of a specific payment unconditionally due under the terms of a contract."
VII. Attorney Fees
The district court awarded Beal attorney fees of $10,000. Under section 91A.8, an employer is liable for the "usual and necessary attorney's fees incurred in recovering the unpaid wages or expenses." Regarding the procedure to establish attorney fees, our supreme court has stated:
If an employee prevails in a trial by jury of a suit he brought under section 91A.8 and he has requested attorney fees, then the trial court must assess those fees. The assessment of fees, like the assessment of costs, can not be done until liability has been established. Unless the parties agree to the contrary, a hearing to determine the amount of fees would be required. We arrive at this conclusion despite our recognition that the trial court is an expert on attorney fees and could reach a decision without having additional evidence.Maday v. Elview-Stewart Sys. Co., 324 N.W.2d 467, 470 (Iowa 1982); see also Audus v. Sabre Communications Corp., 554 N.W.2d 868, 874 (Iowa 1996). There is no evidence the parties agreed a hearing was unnecessary, and we determine Beal is entitled to a hearing on the issue of attorney fees. We therefore reverse the award of attorney fees and remand for such a hearing.
I.G.F. points out that prior to litigation, it offered to pay Beal wages for one month, plus the equivalent of his salary for five months as a severance payment. It asserts that because Beal is no better off after trial than he was before, none of his attorney fees are "usual and necessary." We determine this is an issue the district court may consider at the attorney fee hearing. See Mississippi Valley Broad., Inc. v. Mitchell, 503 N.W.2d 617, 619-20 (Iowa Ct.App. 1993) (holding court may consider proportionality between attorney fee and unpaid wages recovered).
We reverse the award of attorney fees and remand for reconsideration of the attorney fees awarded to Beal. We affirm on all other issues.