Opinion
J. S19028/06, No. 1805 EDA 2005.
Filed: September 12, 2006.
Appeal from the Judgment Entered May 20, 2005 In the Court of Common Pleas of Delaware County Civil Division at No. 02-9368.
BEFORE: FORD ELLIOTT, P.J., BENDER, J. and McEWEN, P.J.E.
¶ 1 Vis.align, LLC (Vis.align) and Jennifer Horrocks, CEO (Horrocks) appeal from a judgment entered in favor of Jason Leedy in a suit brought by Leedy arising out of an employment contract. Specifically, Vis.align argues, inter alia, that the trial court erred in denying its motion for post-trial relief requesting judgment notwithstanding the jury's verdict (JNOV). For the reasons that follow, we vacate the judgment and remand for entry of judgment notwithstanding the verdict in favor of Appellants Vis.align and Horrocks.
¶ 2 In April 2000, Leedy entered into an employment agreement with Vis.align. Leedy and Vis.align agreed to a contract term of three years, during which Leedy was "to receive a base salary of $200,000 per year, an annual bonus and other fringe benefits." Trial Court Opinion (T.C.O.), 10/14/2005, at 1. At issue in this case was whether Vis.align breached the employment agreement when the company's Chief Executive Officer, Jennifer Horrocks, terminated Leedy in April 2002.
¶ 3 According to the express terms of the employment agreement as outlined in Paragraph 7(a), Leedy could be terminated "for cause" if, "in the judgment of the Chief Operating Officer, Chief Executive Officer or the Board, Employee has been grossly negligent, incompetent or insubordinate, or has committed willful misconduct in carrying out his duties hereunder. . . ." Employment Agreement at ¶ 7(a). Additionally, the employment agreement contained a provision that would go into effect if Leedy was terminated "without cause." That clause provided:
In the event of termination of this Agreement pursuant to this Paragraph 8, the Company shall have no further obligations or liabilities under this Agreement other than payment of Base Salary for a period equal to the remainder of the Term, which shall be payable in accordance with the Company's normal payroll practices. . . .
Employment Agreement at ¶ 8(c).
¶ 4 The disputed facts in the case revolved around whether Horrocks terminated Leedy "for cause" or "without cause," which in the latter case would necessitate further payments to Leedy by Vis.align. On the date of Leedy's termination, almost a year remained on his employment agreement. The trial court noted that "Vis.align did not pay [Leedy] the remainder of his base salary (approximately $194,000) nor did it reimburse him for expenses he incurred through his termination date." T.C.O. at 2. While Vis.align justified its refusal to pay any additional amount based upon Horrocks' "for cause" termination, Leedy claimed payment was due and owing because his termination was "without cause." Thus, Vis.align's non-payment precipitated Leedy's breach of contract allegation.
¶ 5 Horrocks alleged that Leedy was terminated "for cause" in compliance with the provisions set forth in the employment contract and testified to specific circumstances on which she based her decision. For instance, during the six-month time period when Leedy led the Working Internet Group (WIG Group), Horrocks pointed to a revenue loss of $400,000. N.T., 5/11/04, at 101-02. In addition, Horrocks testified that Leedy failed to adequately forecast repeat business from existing Vis.align customers and inaccurately predicted new business. Id. at 115-18. The latter failure, in particular, led to increased expenditures in billable time with no realization of any resulting business. Id. at 118. In the CEO's judgment, Leedy proved to be incompetent and grossly negligent in his management of the WIG Group.
¶ 6 As testified to by Vis.align's Chief Financial Officer, under Leedy's control, the WIG Group only achieved 48% of its revenue target for the first quarter of 2002 in comparison to two other Vis.align groups, which achieved 85% and 112% for the same time period. N.T., 5/14/04, at 98-99. Horrocks warned Leedy about the WIG Group's unsatisfactory profit and loss statements as well as the unjustifiable "bench" or people carried, which not only contributed to the negative financials but effectively derailed efforts to get back on a positive performance track. N.T., 5/11/04, at 73-74. During his testimony, Leedy acknowledged that his group was "not doing well" and that employees were, at the time, under-utilized. N.T., 5/13/04, at 331-32. ¶ 7 Moreover, Horrocks testified that she found Leedy's professional skills as a negotiator to be overly aggressive, and Leedy himself testified to his "pit bull" style. Id. at 333. Horrocks described a situation with Microsoft where Leedy alienated certain representatives of Microsoft during negotiations to collect the proceeds of a contract. N.T., 5/11/04, at 145. When Microsoft refused to pay the full value of the contract, Horrocks had to step in to salvage the business relationship and the deal, but felt obliged to accept considerably less, resulting in yet another financial loss for Vis.align. Id. at 146-47.
¶ 8 While Horrocks and Leedy agreed that their management styles differed, Leedy testified that Horrocks lacked both the technical knowledge and sales ability necessary for a position as CEO of an information technology company and that he reported such criticisms to Vis.align's Board of Directors. N.T., 5/13/04, at 322, 325. Cognizant of Leedy's criticisms, Horrocks later regarded Leedy as insubordinate when he delayed in implementing her recommended methodology. N.T., 5/11/04, at 358. Horrocks further indicated that Leedy engaged in willful misconduct in carrying out his responsibilities. N.T., 5/14/04, at 196. Having concluded that Leedy did not meet "her expectations" in multiple circumstances, Horrocks terminated him "for cause" as defined in Paragraph 7(a) of the operative employment agreement. N.T., 5/11/04, at 217.
¶ 9 Leedy, on the other hand, produced evidence that he was terminated for reasons other than "cause." T.C.O. at 6. These reasons included "an economic downturn, company-wide layoffs, and personal problems between Horrocks and Leedy." Id. The facts are undisputed that Vis.align, like many other technology companies, was forced to respond to the dire state of the economy during the time period in question. Horrocks testified to an even greater need for practice leaders to re-evaluate their strategies in order to maintain cash flow and survive. N.T., 5/11/04, at 68-69, 73-74. In her assessment, Leedy did not rise to the occasion.
¶ 10 Several months after his termination, Leedy filed suit, alleging that Vis.align, Jennifer Horrocks, CEO, and Jeffrey Stello, Chief Financial Officer (CFO) breached the terms of the employment contract. Leedy claimed that because his termination was "without cause," he was entitled to and failed to receive post-employment payments. Following various pre-trial motions, rulings, and orders, this matter eventually proceeded to a jury trial, which began on May 10, 2004, and lasted through May 17, 2004.
During the trial and as stipulated to by both parties, Jeffrey Stello was dismissed from the lawsuit.
¶ 11 Over Vis.align's objections, the sole question presented to the jury was whether Leedy had proven by a preponderance of the evidence that Vis.align/Horrocks did not terminate his employment "for cause" as that term is defined in Paragraph 7(a) of Leedy's employment agreement. N.T., 5/17/04, at 179-80. The trial court further instructed the jury that, in making this determination, the judgment of Horrocks had to be "fair and reasonable under the circumstances," thus imposing an additional condition found nowhere in the employment agreement. Id. at 189.
¶ 12 On May 17, 2004, the jury found in favor of Leedy and against Vis.align and Horrocks. Vis.align and Horrocks filed a Motion for Post-Trial Relief, which the trial court denied. On May 20, 2005, the court entered judgment in the amount of $357,108.64 against Vis.align and Horrocks. This timely appeal followed.
¶ 13 On appeal, Vis.align and Horrocks argue that:
[1] The Trial Court Erroneously Instructed The Jury That Horrocks' Judgment Had To Be "Fair And Reasonable Under The Circumstances.["]
[2] The Trial Court Erroneously Denied Defendants' Motion for Judgment N.O.V. As Leedy Failed to Present Evidence Sufficient, As a Matter Of Law, To Sustain His Breach Of Contract Claim.
[3] The Trial Court Erred As a Matter Of Law In Denying Defendants' Motion To Dismiss Leedy's Claims Under The WPCL [Wage Payment and Collection Law, 43 P.S. § 260.3 (WPCL)].
[4] The Trial Court Erred In Refusing To Instruct The Jury With Regard To Leedy's Breach Of The Employment Contract.
[5] The Trial Court Erred In Refusing To Instruct The Jury On Leedy's Duty To Mitigate His Damages.
[6] The Trial Court Abused Its Discretion In Excluding Documentary Rebuttal Evidence Which Would Have Contradicted Leedy's Claims That No Such Evidence Existed.
[7] The Trial Court Abused Its Discretion In Denying Defendants' Motion To Bifurcate The Issue Of Liquidated Damages Under The WPCL.
[8] The Trial Court Erred in Finding That Defendants Should Have Raised Pre-Trial Issues Relating To Discovery Sanctions And Interlocutory Dispositive Motions In A Post-Trial Motion In Order To Preserve The Issues On Appeal.
[9] The Court Below Abused Its Discretion In Summarily Vacating Its Earlier Orders Of Sanctions Against Leedy, In Summarily Dismissing Defendants' Petition To Vacate And In Summarily Dismissing Defendants' Motion To Dismiss Or, In The Alternative, For Summary Judgment.
Vis.align and Horrocks' Brief at i — ii. We will address the second argument as this issue alone is dispositive of this appeal.
¶ 14 This Court's standard of review with regard to the denial of a motion for JNOV is well-settled. "In reviewing the denial of [a] motion for JNOV, this court must view the evidence in the light most favorable to the verdict winner and give the verdict winner the benefit of every reasonable inference arising therefrom while rejecting all unfavorable testimony and inferences." Kennedy v. Sell, 816 A.2d 1153, 1156 (Pa.Super. 2003). We further note:
[a] JNOV can be entered upon two bases: (1) where the movant is entitled to judgment as a matter of law; and/or (2) the evidence was such that no two reasonable minds could disagree that the verdict should have been rendered for the movant. When reviewing a trial court's denial of a motion for JNOV, we must consider all of the competent evidence admitted to decide if there was sufficient competent evidence to sustain the verdict. . . . Concerning any questions of law, our scope of review is plenary. Concerning questions of credibility and weight accorded the evidence at trial, we will not substitute our judgment for that of the finder of fact . . . [.] A JNOV should be entered only in a clear case.
Russock v. AAA Mid-Atlantic Ins. Co., 2006 PA Super 72, 5 (April 3, 2006) (quoting J.W.S. Delavau, Inc. v. Eastern Am. Transp. Warehousing, Inc., 810 A.2d 672, 679-80 (Pa.Super. 2002)). "An appellate court will reverse a trial court's ruling only if it finds an abuse of discretion or an error of law that controlled the outcome of the case." Russock, 2006 PA Super 72, 5 (quoting Scott v. Southwestern Mut. Fire Ass'n, 647 A.2d 587, 590 (Pa.Super. 1994)). Moreover,
[a]n abuse of discretion is not merely an error of judgment, but if in reaching a conclusion the law is overridden or misapplied, discretion is abused. Nor does our determination in this regard turn on whether this Court might have reached a different conclusion, but depends instead on whether there was such lack of support for the trial court's action as to render it clearly erroneous.Duncan v. Mercy Catholic Med. Ctr. of Southeastern Pennsylvania, 813 A.2d 6, 10 (Pa.Super. 2002) (internal citations omitted).
¶ 15 In order to properly review the instant matter, we must necessarily turn to Pennsylvania law regarding basic contract law interpretation. Under Pennsylvania law, the interpretation of contractual language to ascertain the parties' intent is initially a question of law. Hutchison v. Sunbeam Coal Corp., 519 A.2d 385, 390 (Pa. 1986); In re Estate of Duran, 692 A.2d 176, 179 (Pa.Super. 1997). Pennsylvania courts apply the "plain meaning approach" of contract interpretation, which assumes that the intent of the parties to an instrument is embodied in the writing itself. Steuart v. McChesney, 444 A.2d 659, 662 (Pa. 1982). When the words are clear and unambiguous, the meaning is to be discovered only from the express contractual language. Hutchison, 519 A.2d at 390. Therefore, the preliminary inquiry regarding the existence of an ambiguity is a matter of law for the court to decide. Id.
¶ 16 Moreover, "[a] contract is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense." Id. "If the contract is determined to be ambiguous, then the interpretation of the contract is left to the factfinder, [sic] to resolve the ambiguity in light of extrinsic evidence." Stendardo v. Federal Nat'l Mortgage Ass'n, 991 F.2d 1089, 1094 (3d Cir. 1993) (citing Ram Constr. Co. v. American States Ins. Co., 749 F.2d 1049, 1052 (3d Cir. 1984)). Because we find no ambiguity in the language of Leedy's employment contract, we find the threshold question of whether Horrocks' decision to terminate Leedy violated the terms of the contract to be a question of law, not of fact, and our review is plenary.
¶ 17 In order to determine whether an ambiguity exists, the Court may "consider the words of the contract, the alternative meaning suggested by counsel, and the nature of the objective evidence to be offered in support of that meaning." Mellon Bank, N.A. v. Aetna Bus. Credit, Inc., 619 F.2d 1001, 1011 (3d Cir. 1980). In the employment contract, the "for cause" termination clause reads that Leedy could be terminated if, "in the judgment of" Ms. Horrocks, CEO, Leedy "has been grossly negligent, incompetent or insubordinate, or has committed willful misconduct in carrying out his duties. . . ." Employment Agreement at ¶ 7(a) (emphasis added). To clarify the plain meaning of the phrase "in the judgment of" we turn to a dictionary definition of the word "judgment," which is defined as "the ability to make considered decisions or come to sensible conclusions. . . ." THE NEW OXFORD AMERICAN DICTIONARY 919 (2001). When viewed in the context of the employment agreement, the phrase "in the judgment of" unambiguously created the reality that any of the named parties could subjectively consider and decide the basis of Leedy's "for cause" termination.
¶ 18 Giving due regard to evidence in Leedy's favor, we evaluate but conclusively reject alternative meanings provided for the relevant contract language. We find unpersuasive Leedy's contention that the phrase "in the judgment of . . ." was used "solely to identify the person(s) who would be authorized to make the 'for cause' determination, not to neuter the parties' clear intention of defining a specific objective definition of 'for cause.'" Leedy's Brief at 3 n. 2. Not only did the contract identify the parties with the most authority to evaluate Leedy's performance, but also it provided explicit grounds on which a "for cause" termination could be made. Nor are we persuaded by either Leedy's argument or the trial court's opinion that the "for cause" clause proved that "the parties intended the agreement to be more than just an 'at will' contract." T.C.O. at 4; Leedy's Brief at 5. Notwithstanding the inclusion of a "Termination Without Cause" provision, we are constrained to read the language of "The Termination For Cause" provision as distinctively establishing the "for cause" determination as a subjective one, based on a considered decision or sensible conclusion by the COO, CEO, or Board that Leedy has been "grossly negligent, incompetent or insubordinate, or has committed willful misconduct. . . ." ¶ 7(a).
¶ 19 Because we regard the contractual language as clear and unambiguous, "the focus of interpretation is upon the terms of the agreement as manifestly expressed, rather than as, perhaps, silently intended." Steuart, 444 A.2d at 661. Accordingly, we rely on the long-standing principle that "[i]t is not the province of the court to alter a contract by construction or to make a new contract for the parties; its duty is confined to the interpretation of the one which they have made for themselves, without regard to its wisdom or folly." Id. at 662 (quoting Moore v. Stevens Coal Co., 315 Pa. 564, 568, 173 A. 661, 662 (1934) (internal citation omitted)).
¶ 20 In addition, Pennsylvania Courts have recognized the principle in the Restatement (Second) of Contracts § 205 that "[e]very contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement." Stamerro v. Stamerro, 889 A.2d 1251, 1259 (Pa.Super. 2005) (quoting John B. Conomos, Inc. v. Sun Co., Inc. (R M), 831 A.2d 696, 705-06 (Pa.Super. 2003), appeal denied, 845 A.2d 818 (Pa. 2004)). This Court has defined the duty of "good faith" as "[h]onesty in fact in the conduct or transaction concerned." Somers v. Somers, 613 A.2d 1211, 1213 (Pa.Super. 1992). We also note that the Court applies the implied duty in limited circumstances for "[i]mplied duties cannot trump the express provisions in the contract." Stamerro, 889 A.2d at 1259 (quoting Conomos, 831 A.2d at 706).
¶ 21 Nevertheless, employment contracts, even where the employee has been held to be an employee at will, have been held subject to the implied duty of good faith. Somers, 613 A.2d at 1213-14; See also Baker v. Lafayette College, 504 A.2d 247, 255 (Pa.Super. 1986) (holding that the employer had a limited duty to evaluate the employee in good faith with regard to its contractual undertakings and that "the evaluation and review process must be honest and meaningful, not a sham formality designed to ratify an arbitrary decision already made").
¶ 22 As patently expressed, the "for cause" termination depended solely upon the judgment of, in this case Horrocks, the CEO. We need only resolve that, after reviewing the totality of her testimony, Horrocks produced evidence sufficient to justify a "for cause" termination on any of the grounds defined. Without repeating the facts already stated in the opening portion of this opinion, the testimony of record amply supports this proposition. Horrocks testified to specific circumstances in which Leedy's inadequate performance resulted in lost revenue as well as to particular instances suggestive of Leedy's insubordination. Thus, in Horrock's subjective opinion, during his employment at Vis.align, Leedy had been negligent, incompetent and insubordinate, and had committed willful misconduct in carrying out his duties. N.T., 5/14/06, at 195-96. Furthermore, acknowledging a limited obligation to act in good faith and expressly to use "judgment," i.e., sensible conclusions, in the performance of her assumed contractual duties, the record contains no evidence that Horrocks acted in bad faith or arbitrarily in either her evaluation of Leedy or her decision to terminate him, necessitating a jury determination on the matter.
¶ 23 Our careful consideration of the employment agreement, in pertinent part, leads us to conclude that the trial court did, in fact, commit reversible error. "If no 'reasonable' alternative meanings are put forth, then the writing will be enforced as the judge reads it on its 'face.'" Mellon Bank, 619 F.2d at 1013. Having found no other reasonable interpretation of the phrase "in the judgment of," we conclude that the fact-finder's determination on the matter was erroneous. There was no legally sufficient basis for the jury to find in Leedy's favor on the "for cause" issue. Horrocks' contractual right to assess and pass judgment on the detrimental impact resulting from Leedy's conduct as an employee of Vis.align existed as a matter of law. Horrocks' obligation to make that determination was an essential part of the contract voluntarily entered into by the parties. With the assistance of counsel, Leedy unfortunately and, no doubt, unintentionally signed a contract that cannot be construed in his favor. N.T., 5/13/04, at 317.
¶ 24 Although we are cognizant of the contextual basis of the relevant provisions as written within the contract as a whole, we are not at liberty to extract a meaning antithetical to a plain reading of the contractual language. Horrocks dutifully demonstrated justifiable reasons for terminating Leedy. Therefore, according to the express language of the "for cause" provision of the employment agreement, Leedy's breach of contract claim fails as a matter of law. A judgment in favor of Vis.align and Horrocks is warranted, nothwithstanding the jury's verdict.
As a result of our disposition, we need not address Vis.align and Horrocks' remaining arguments.
¶ 25 Judgment vacated. Remanded for entry of JNOV in favor of Vis.align and Horrocks. Jurisdiction relinquished.
¶ 26 P.J.E. McEwen files a dissenting statement.
¶ 1 While the Opinion of the Majority has provided a careful analysis, and undertaken a persuasive expression of rationale, I am compelled to dissent since, in my view, the distinguished Judge George A. Pagano correctly determined (1) that the language of the employment agreement was ambiguous, and (2) that it was the responsibility of the jury to decide whether Leedy had proven by a preponderance of the evidence that appellants did not terminate his employment "for cause" as defined in Paragraph 7(a) of Leedy's employment agreement.
¶ 2 Paragraph 7(a) of Leedy's employment agreement defines "cause" in relevant part to mean: " in the judgment of the Chief Operating Officer, Chief Executive Officer or the Board, employee has been grossly negligent, incompetent or insubordinate, or has committed willful misconduct in carrying out his duties" (emphasis supplied). Appellants argue that this provision allowed Horrocks, in her capacity as Chief Executive Officer, to terminate Leedy based upon her subjective belief regarding Mr. Leedy's performance, whereas Leedy contends that the distinction in the agreement between termination "for cause" and termination "without cause" imposed an objective component to the interpretation of the "for cause" provision. While the Majority finds no ambiguity in the terms of the agreement, I agree with the trial judge that to accept appellants' position — that Horrocks could terminate Leedy based upon her non-reviewable, subjective determination that she had "cause" — would render the "for cause" provision meaningless. As I see it, a corporate officer's exclusive, non-reviewable judgment to make the determination to terminate an employee "for cause" is
The trial judge aptly opined:
If the contract provisions which called for Leedy to be terminated only if "grossly negligent, incompetent, etc. . . ." were not given any true effect by this court, the employment agreement would have been a purely "at will" contract and those contract provisions would have been illusory. The parties could not have intended the termination provisions to be meaningless.
Trial Court Opinion, Pagano, J., October 14, 2005, p. 5.
• inconsistent with the New Oxford Dictionary definition of "judgment", upon which the Majority relies, specifically, "considered decisions" and "sensible conclusions," and
Majority Opinion, p. 10.
• incompatible with the "duty of good faith and fair dealing" recognized by the Majority,
Id., pp. 11-12.
because it permits judgment to be exercised in an unfair, oppressive manner without recourse of any type.
¶ 3 Thus it is that I conclude that the employment agreement cannot be read to mean that Horrocks' subjective judgment in determining discharge "for cause" was non-reviewable, and that, therefore, the trial judge properly submitted to the jury the question of whether Mr. Leedy was or was not terminated "for cause." Accordingly, I dissent.