Weisman v. Connors

WILNER, Judge. In 1981, Arthur Connors was an executive with the Ford Motor Company who had reached the end of his career ladder. He had been passed over for promotion; he had received no salary increase for two years and no bonus for 1980; his staff had been significantly curtailed. Things were bleak, and he was searching around for something better.

Fortuitously for Mr. Connors, Frederick R. Weisman, owner of Frederick Weisman Company (FWC), was looking for an automobile executive to oversee FWC’s various subsidiary companies, including its major subsidiary, Mid-Atlantic Toyota (MAT). After extensive arm’s length negotiations, FWC rescued Mr. Connors from his uncertain future at Ford and gave him a three-year contract at a salary substantially in excess of what he was then making. But alas, Mr. Connors did not measure up, and, when Mr. Weisman complained and tried to take corrective measures, Mr. Connors quit, with nine months still to go on his contract. That is how Mr. Weisman and FWC see this case.

Arthur Connors was a high-level executive at Ford, handpicked in 1976 by Henry Ford II and Lee Iacocca to be vice-president for sales, worldwide. He was chairman of the company’s marketing committee, a member of its product planning and quality committees, and was in line to become vice-president for all of Ford’s European operations. His compensation was substantial. He earned a base salary of $140,000 a year.

He also had regularly received annual ⁷³⁶ bonuses averaging about 62% of his salary. In 1977 and 1978, his bonus was $135,000; in 1979, it was $80,000. It was due only to a severe but temporary slump in the industry that he, along with other Ford executives, received no bonus for 1980. In addition to the monetary compensation, he was able to participate in a stock option plan under which he had options on 12,000 shares of Ford stock, a special savings plan where Ford would match a percentage of deferred compensation, and a pension plan that would allow him to retire at 60% of his salary.

He had the use of two company cars—one a Lincoln—and the company paid his country club dues and the premiums on a $200,000 life insurance policy. Although he was not happy about the temporary retrenchment measures undertaken by Ford, he was not actively seeking other employment. Along came an uninvited industrial “headhunter,” who lured him to a meeting with Mr. Weisman. Weisman, a first-class charmer, promised him full managerial control over FWC and its subsidiaries, an equity position in all new ventures undertaken by Weisman relating to the automobile industry, and full compensation for all the perquisites he would forfeit by leaving Ford.

Believing Mr. Weisman to be a man of his word, Connors reluctantly severed his 32-year association with Ford and went to work for FWC. Weisman soon changed everything, however; he demoted Connors, failed to provide the bonuses and perquisites promised, and actually hired someone else for the position specified in Connors’ contract. Regarding this as a constructive discharge, Connors left. That is how Arthur Connors sees this case.

It is also how a jury in the Circuit Court for Anne Arundel County saw the case. At the end of a long trial at which both versions of the relevant events were forcefully presented, it found that Weisman and FWC had not only breached their contract with Mr. Connors but had induced him to enter into it by negligent misrepresentations. To compensate Mr. Connors for his resulting loss, it awarded damages of $2,705,- ⁷³⁷ 961—$221,900 for the constructive discharge/breach of contract and $2,484,061 for the negligent misrepresentation. It goes without saying that Mr. Weisman and FWC are not well pleased with those verdicts, and so they have appealed from the judgments entered on them.

Six issues are presented, four dealing with the legal theories underlying Connors’ case, one challenging the method by which the jury calculated damages, and one involving certain expert testimony that apparently provided the basis of the damages award. Finding no reversible error, we shall affirm. 1 I. Theories of Recovery A. Averments and Evidence The case proceeded on Connors’ Second Amended Complaint, which contained four counts—breach of a written employment agreement with FWC, breach of a separate oral agreement with Weisman, negligent misrepresentation, and fraud. The court, on motion, dismissed the action based on the alleged oral agreement, and so the jury considered only the other three counts. It found for the defendants on the fraud count, but, as noted, returned a plaintiff’s verdict on the remaining breach of contract and the negligent misrepresentation counts.

The underlying basis for all of the causes of action was set forth in a number of introductory paragraphs in the complaint. We shall skip over how, when, and where the parties met, which is not especially germane, and start with the alleged inducements. Connors pled and in his testimony at trial confirmed the following: 2 ⁷³⁸ (1) Weisman was the owner of FWC, which was essentially a holding company. It had, at the time, a number of subsidiaries, the major one being Mid-Atlantic Toyota (MAT), a major Toyota distributor responsible for five States and the District of Columbia.

The general manager of MAT was one Robert McCurry. (2) Connors made clear that he was not interested in running MAT—that his job with Ford was on a much higher level than that. Weisman responded that he was satisfied with McCurry, although he had a “communication problem” with him, that what he was looking for was someone “to supervise all automotive related operations of FWC and the expansion of FWC into new business ventures.” He stated further that Connors would not be the general manager of the distributorship but would instead be the “Chief Operating Officer of FWC, would report directly to Weisman, would supervise the general managers of the automotive businesses owned by FWC, including MAT, that he would direct the development of new business ventures for FWC and for Weisman, individually, and that he would share in the ownership of those ventures.” (Emphasis added.) (3) The issue of equity participation was important to Connors. He was not interested in leaving Ford simply for a higher salary, as he would be giving up a lot of perquisites that had value to him; and he conveyed that to Weisman.

Weisman “gave Connors the assurances he sought.” He represented that “[t]he value of the ownership interests Connors would receive in those ventures ... would surpass the reduction in Connors’ pension benefits from Ford and would compensate him for the intangible losses which would flow from Connors’ leaving Ford.” (4) As part of the inducement, Weisman reminded Connors, then 56 years old, that, if he remained at Ford, he would have to retire at age 65, but that “with FWC, he ⁷³⁹ could work beyond the age of 65 and the value of his equity interests would grow over the years.” (5) Based on these representations, Connors agreed to leave Ford and join FWC. He had a lawyer prepare a letter agreement which, together with one addendum, both parties signed. The written agreement was in the form of a letter from FWC to Connors. It was dated May 5, 1981, and “outlines the essential terms of our agreement____” FWC agreed to employ Connors “as Executive Vice President of the corporation” for a term of three years commencing June 1, 1981.

As Executive Vice President, “it is expected that you will have broad responsibility for the entire operations of the Company’s Automotive Division, including Mid-Atlantic Toyota,” three other subsidiaries, “and related operations.” The “basic salary” would be $200,000 per year. Paragraph 3 of the agreement described a bonus arrangement. It provided for a flat $50,000 bonus at the end of FWC’s current fiscal year, and: “At the end of each subsequent fiscal year of the Company during the term of your employment, you will be entitled to receive a bonus to be determined in accordance with a formula to be agreed to between you and the Company prior to the beginning of each such fiscal year. It is anticipated that your bonus target will be $100,-000.00 per year.

You will also be eligible for consideration of additional merit bonuses, as may be awarded from time to time by the Company in its sole discretion.” The other provisions pertinent to this case are as follows: “4. You will have a vested participation in those future ventures of the Company where you will have operating responsibility. The vested participation for each new venture will be negotiated separately. 5. Two (2) years after the Commencement Date, you and the Company will consider extending the term of your employment for an additional two (2) years upon such terms and conditions as may be mutually agreed ⁷⁴⁰ upon; if such extension is agreed upon, the term of this agreement shall be five (5) years from the Commencement Date. ****** 7.

On or before the Commencement Date, the Company shall purchase, for its own account, 2,300 shares of the common stock of Ford Motor Company. The Company shall forthwith transfer full ownership of such stock to you upon the execution of an extension agreement under paragraph 5 above. 8. On the Commencement Date, and on each anniversary thereof during the term of your employment, the Company shall pay the insurance premium in connection, with a $200,000.00 limited payment, full life insurance policy designed to be paid up in ten (10) equal annual installments. Such life insurance policy shall be owned by you and your assigns and the beneficiary thereof shall be your wife or such other person or persons as you may from time to time designate.” Pursuant to this agreement, Connors began work for FWC on June 1, 1981.

He soon found, however, that: (1) Weisman had more than a “communication problem” with Mr. McCurry and indeed had decided, even while negotiating with Mr. Connors, to get rid of McCurry. In November, 1981, Weisman insisted that Connors fire McCurry, whereupon Connors had to assume the role of managing MAT. (2) FWC never purchased the $200,000 life insurance policy and never purchased the 2,300 shares of Ford stock. (3) Connors received his $50,000 bonus for FY 1981, but, instead of receiving his “target” bonus of $100,000 for FY 1982, he received only $50,000.

(4) Throughout 1982 and into 1983, Weisman “interfered with Connors' attempts to perform his duties,” becoming “directly involved in routine management functions at MAT.” ⁷⁴¹ (5) Finally, in June, 1983, Weisman/FWC hired one Jack Brown as “Executive Vice President Automotive Division of Frederick Weisman Company,” limited Connors’ duties to operating MAT, and required Connors to report to Weisman through Brown. Connors was taken off FWC’s payroll and placed on MAT’S payroll. 3 Regarding this as a demotion, a violation of his contract, a breach of the representations made to him, and a constructive discharge, Connors, after consulting counsel, resigned. Although Weisman had started certain new ventures related to the automobile industry, Connors had not been offered any equity position in them. Count I, for breach of contract, was based on the constructive discharge and on FWC’s failure to give Connors vested participation in new ventures, to pay the appropriate bonuses, to purchase the life insurance policy, and to negotiate in good faith an extension of the contract for an additional two years.

In Count III, based on negligent misrepresentation, Connors complained in particular of two representations made by Weisman which, he said, Weisman knew or should have known were false, which were negligently made, and which induced him to leave Ford and accept the position with FWC: (1) That Connors would not be required to perform the duties of general manager of MAT; and (2) That Connors would receive equity interests in new ventures of FWC, through which he would be compensated for the losses he would sustain by leaving Ford. In Count IV, charging fraud, Connors averred that Weisman either knew that those representations were false or acted with reckless disregard for their truth or falsity. Further, he claimed that Weisman and FWC knowingly and intentionally failed to disclose to Connors that Weisman had ⁷⁴² already decided to discharge Mr. McCurry as general manager of MAT. As we observed earlier, Weisman and FWC had a much different story to tell.

The “facts” were very much in dispute. B. Instructions In instructing the jury on the breach of contract action, the court carefully restricted the jury’s focus to two matters—whether FWC constructively discharged Mr. Connors and whether it failed to purchase life insurance as provided for in the contract. It made clear that the jury could not consider FWC’s failure to give equity participation, to give bonuses, or to extend the contract beyond the third year as a breach, although, if the jury found a breach otherwise, it could consider the failure to give equity participation or bonuses as an element of damages. In describing the concept of constructive discharge, the court essentially repeated what we said in Beye v. Bureau of National Affairs, 59 Md.App. 642, 649-53 , 477 A.2d 1197 , cert. denied 301 Md. 639 , 484 A.2d 274 (1984).

The court defined the tort of negligent misrepresentation by reciting, almost verbatim, the five elements set forth in Martens Chevrolet v. Seney, 292 Md. 328, 337 , 439 A.2d 534 (1982). It told the jury that “[ojpinions or judgments” are not ordinarily sufficient to constitute a negligent misrepresentation, even if they turn out to be wrong. Similarly, it said: “[A] statement concerning the speaker’s intention to do or not to do something in the future may be a misrepresentation only if the speaker in fact was lying---- If a person truly states his intention to do or not do something and later changes his mind and acts differently, such statement about his intention is not a misrepresentation in the context of these instructions.” C. Appellants’ Complaints As noted, four of appellants’ six complaints deal with the legal bases of Connors’ breach of contract and negligent ⁷⁴³ misrepresentation actions. As to the breach of contract action, they argue that (1) the court erred in defining a constructive discharge, (2) the evidence did not suffice to establish a constructive discharge, and (3) to the extent that they did not live up to the obligations initially specified by the contract, the contract was modified by the conduct of the parties.

With regard to the action for negligent misrepresentation, appellants contend that (1) Connors failed to prove certain elements of the tort, and (2) the jury should have been instructed to ignore three of the five statements allegedly made by Weisman because they do not, as a matter of law, qualify as misrepresentations, and the court’s failure to give that instruction vitiates the verdict. We shall deal with those complaints in that order. D. Breach of Contract The problem with appellants’ first complaint is that it rests upon a fundamental misconception of the law. They seem to suggest either that a constructive discharge cannot arise except in an at-will employment or that, to have a constructive discharge, there must be some “truly outrageous conduct” on the part of the employer approximating that needed to constitute an “abusive discharge” under Adler v. American Standard Corp., 291 Md. 31 , 432 A.2d 464 (1981).

No authority is cited for either proposition, and for good reason: the law is quite to the contrary. As pointed out in Brock v. Mutual Reports, Inc., 397 A.2d 149, 152 (D.C.Ct.App.1979), “The law is well established: when an employee contracts to fill a particular position any material change in duties or significant reduction in rank will constitute a constructive discharge which, if unjustified, is a breach of contract.” (Emphasis in original.) See also Hayes v. Resource Control, Inc., 170 Conn. 102 , 365 A.2d 399, 400 (1976); Steranko v. Inforex, Inc., 5 Mass.App.Ct. 253 , 362 N.E.2d 222 (1977); Annot., Reduction In Rank Or Authority Or Change Of Duties As Breach Of Employment Contract, 63 A.L.R.3d 539 , 545 (1975). This view is entirely consistent with the concept of constructive discharge enunciated by us in Beye v. Bureau ⁷⁴⁴ of National Affairs, supra, 59 Md.App. 642 , 477 A.2d 1197 , and in Moniodis v. Cook, 64 Md.App. 1, 11 , 494 A.2d 212 , cert. denied, 304 Md. 631 , 500 A.2d 649 (1985): has the employer “deliberately caused or allowed the employee’s working conditions to become so intolerable that a reasonable person in the employee’s place would have felt compelled to resign”? See, in particular, Cumb. & Penn.

R.R. Co. v. Slack, 45 Md. 161 (1876), where the Court recognized a constructive discharge involving a contractual employee. It is beyond question that the evidence adduced by Mr. Connors sufficed to require submission of the issue to the jury. Appellants’ argument as to contract modification stems from the proposition that, “assuming that the original contract could have been breached if Connors had been forced to serve as general manager of MAT, the contract was modified when Connors agreed voluntarily to serve and then served as general manager from November of 1981 to September of 1983____” There are two answers to that argument. First, at best it would be a jury question of whether Connors’ assumption of those duties amounted to a modification of the contract, especially in light of his testimony on the matter.

See Steranko v. Inforex, Inc., supra, 362 N.E.2d 222 . Second, even if Connors could be regarded as having acquiesced in assuming the role of general manager of MAT, he certainly did not acquiesce in the other changes made by Weisman, in particular the sharp curtailment in his responsibilities and authority vis a vis FWC. E: Negligent Misrepresentation Appellants make a number of attacks on the negligent misrepresentation action, most of which rest upon a mischaracterization of the nature of the inducements made by Mr. Weisman. One is based on a theory of law that was flatly rejected by the Court of Appeals. ⁷⁴⁵ The principal elements of the tort of negligent misrepresentation were succinctly summarized in Martens Chevrolet v. Seney, supra, 292 Md. 328, 337 , 439 A.2d 534 , as follows: “(1) the defendant, owing a duty of care to the plaintiff, negligently asserts a false statement; (2) the defendant intends that his statement will be acted upon by the plaintiff; (3) the defendant has knowledge that the plaintiff will probably rely on the statement, which, if erroneous, will cause loss or injury; (4) the plaintiff, justifiably, takes action in reliance on the statement; and (5) the plaintiff suffers damage proximately caused by the defendant’s negligence.” That is the framework for our analysis. 4 Appellants contend “that commercial parties who bargain at arm’s length owe each other no duty of care,” and so, “in the absence of fraud or warranty,” where a “special relationship” exists between the parties, “solid Maryland precedent accords with the general rule, rejecting the imposition of liability for negligent misrepresentation between the parties in most commercial situations.” That argument was also made in Martens Chevrolet , and this is what the Court said of it (n. 7 at 338, 439 A.2d 534 ): “Appellees have also argued that even if negligent misrepresentation is a viable tort in this State, it can never be applied to statements made in connection with consummation of an arm’s length transaction, as was involved in the present case.

We find nothing in Virginia Dare [Stores v. Schuman, 175 Md. 287 , 1 A.2d 897 (1938)] or its ⁷⁴⁶ progeny to support such a sweeping assertion and we reject it.” The commercial or arm’s length nature of the transaction and negotiations is no doubt relevant to