Williams v. B & K MEDICAL SYSTEMS, INC

• Decision Date: 07 July 2000
• Docket Number: No. 97-P-1768.,97-P-1768.
• Parties: JOHN A. WILLIAMS v. B & K MEDICAL SYSTEMS, INC., & another.
• Court: Appeals Court of Massachusetts

49 Mass. App. Ct. 563

732 NE 2d 300

JOHN A. WILLIAMS v. B & K MEDICAL SYSTEMS, INC., & another.¹

No. 97-P-1768.

Court of Appeals of Massachusetts, Middlesex.

April 13, 1999.

July 7, 2000.

Present: BECK, DREBEN, & GILLERMAN, JJ.

Bruce G. Garr for the defendants.

Eric P. Finamore for the plaintiff.

BECK, J.

This case requires us to consider the legal standards governing corporate conduct in terminating the employment of an executive who has a written employment contract. In addition to a breach of contract claim, the issues include accord and satisfaction, mitigation of damages, and a related company's intentional interference with contract. The employer and its "grandparent" company appeal from a Superior Court judge's findings in favor of the employee.

1. Factual background. The facts, as set out in the judge's memorandum of decision, augmented by additional facts in the record consistent with the trial judge's findings, are as follows. See Bruno v. Bruno, 384 Mass. 31, 35 (1981).

a. The parties. In February, 1989, John A. Williams, the plaintiff, signed an offer of employment to be the national medical sales manager in the United States for Bruel & Kjaer Instruments, Inc. (Bruel & Kjaer), a Danish company specializing in "sound, vibration and data analysis instrumentation." He was subsequently promoted to vice-president. In the spring of 1992, the plaintiff signed an employment contract with Bruel & Kjaer and a "to-be newly formed medical company." That new company was incorporated as B & K Medical Systems, Inc. (B & K), in May or June of 1992, with the plaintiff as president. In August, 1992, Analogic Corporation (Analogic) purchased a controlling interest in the Danish parent company of B & K. (The record is confusing as to the identity of the parent company.)

b. The contract. As relevant here, the employment contract executed in April, 1992, contained the following terms:

"Commission Program: You will receive 0.2% on medical instrument shipments ....

"Car Allowance: Bruel & Kjaer Instruments, Inc. will continue to pay a Car Allowance in the amount of $500.00 per month including insurance, gasoline and normal maintenance....

"Severance Clause: Other than for-cause reasons (performance or misconduct), employment may be terminated by either party by giving not less than twelve (12) calendar months notice in writing to the other party, and during which period of termination, full base salary and benefit continuation will be provided.

"In the event either entity is sold or a takeover occurs (hostile or amicable) the above severance clause will remain in effect."

The plaintiff's base salary was to "remain constant at $120,000."

c. The termination. On August 18, 1993, the plaintiff was scheduled to meet with Carl Simony, the international sales manager of Bruel & Kjaer, who was one of the plaintiff's supervisors. Plans were changed at the last minute. The meeting was held at Analogic's headquarters in the office of Julian Soshnick, the vice-president and general counsel of Analogic. Upon the plaintiff's arrival, Soshnick demanded the plaintiff's resignation and said that, if the plaintiff did not submit his resignation, he would be discharged. Soshnick warned the plaintiff that, if the plaintiff did not sign the letter of resignation, which had already been prepared, Soshnick would create a "black cloud" around the plaintiff's career, and the plaintiff would never find employment in the medical products industry again.

The purported basis of the demand for the plaintiff's resignation was the conclusion of B & K's parent company that the plaintiff had received approximately $10,519 in excess commissions and excess car expense reimbursements under the 1992 contract. As to the commissions, the plaintiff had received twotenths of one percent of the total invoices, which included "instruments, sales, service, and warranty." Soshnick claimed the plaintiff was entitled to a commission only on the charges for the instruments themselves. As to the car allowance, the dispute concerned the meaning of the word "including" — whether the plaintiff was to receive reimbursement for insurance, gasoline, and normal maintenance in addition to the $500, or whether the $500 was intended to be the entire allowance.

Soshnick demanded an immediate answer and stated that the resignation was not negotiable. The plaintiff requested severance pay. Soshnick offered two and one-half months, making clear that if the plaintiff rejected that offer he would be terminated and receive nothing. After a brief telephone call to a lawyer, the plaintiff accepted the two and one-half months and signed the letter of resignation. The plaintiff testified he told Soshnick that anything he signed would be under duress.

d. Prior proceedings. In 1994, a year after the meeting with Soshnick, the plaintiff filed this action against B & K and Analogic. At a jury-waived trial in October, 1996, a Superior Court judge heard testimony from four witnesses: the former payroll, commissions, and fleet car administrator at Bruel & Kjaer and B & K; the former controller at Bruel & Kjaer and B & K; the plaintiff; and Soshnick. Soshnick's testimony was limited to the information disclosed at his deposition, when he claimed an attorney-client privilege.

The judge found that "based on the testimony and all of the credible evidence presented ... the plaintiff's termination was arbitrary and capricious. The employer did nothing to attempt to discern whether the plaintiff's receipt of so called `excess' reimbursement was intentional or by mistake.... The money received by the plaintiff, which was less than ten percent of his annual salary, was never questioned during his employment.... Forcing ... the plaintiff to resign without paying the severance required by the contract constituted a breach of its contract." However, the judge rejected the plaintiff's claims against Analogic on the ground that Analogic was the parent corporation of B & K and therefore not a third party "in this situation." Despite his finding against the plaintiff on his claims against Analogic, the judge awarded the plaintiff contractual severance pay with interest against the defendants (plural) "for the month of November and that proportional share of December, 1993, until he was hired and on the payroll of his new employer as well as his costs of litigation and reasonable attorneys' fees."

Several months later, the judge, presumably in response to the plaintiff's motion to "amend rulings of law," issued an "order of amendment" pursuant to Mass.R.Civ.P. 52(b), as amended, 423 Mass. 1402 (1996). The order struck the original rulings on the claims against Analogic and inserted the following ruling: "Soshnick, on behalf of Analogic, intentionally and unjustifiably interfered in the employment contract which existed between the plaintiff and B & K Medical Systems, Inc., by falsely accusing the plaintiff of knowingly receiving improper payments and demanding his immediate resignation." The judge further found that "the intentional interference of Analogic Corporation in the contractual relationship between B & K Medical Systems, Inc., and the plaintiff constitutes an unfair and deceptive act prohibited by G. L. c. 93A, § 2." "In all other respects," including the awards of damages and attorneys' fees, the earlier decision and judgment were to stand.

2. Discussion. In their brief on appeal, the defendants set out in nine numbered subheadings multiple errors in the judge's findings. As the defendants acknowledge, a judge's findings are not to be set aside "unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses." Starr v. Fordham, 420 Mass. 178, 182 (1995), quoting from Mass.R.Civ.P. 52(a), 365 Mass. 816 (1974). This standard applies to findings of subsidiary facts as well as to ultimate findings. Starr v. Fordham, 420 Mass. at 182. The question is not whether we would have arrived at the same result as the trial judge but rather whether, on the entire evidence, we are "left with the definite and firm conviction that a mistake has been committed." Id. at 186. We discuss each of the claimed errors, adding such further facts as may be necessary.

a. Breach of contract. The defendants set out a litany of reasons why the judge erred in finding that the plaintiff's termination was wrongful. We discuss the most fundamental: (1) that B & K did not exist at the time of the contract and therefore cannot be held to its terms; and (2) that in any case the payments to the plaintiff were clearly improper. As to the first point, we think it sufficient to point out that the contract explicitly says, "This letter will confirm your contract and 1992 Compensation Program between you and Bruel & Kjaer Instruments, Inc., USA and the to-be newly formed medical company." The terms were accepted by Niels Kryger Andersen "on behalf of the to-be newly formed medical company." There is no dispute that B & K was the "to-be newly formed" company. We see no basis for allowing B & K to repudiate the contract that was made on its behalf, by its parent company. See Polaroid Corp. v. Rollins Envtl. Servs. (NJ), Inc., 416 Mass. 684, 696-697 (1993) (party bound by its outward manifestations), citing Restatement (Second) of Contracts § 2 comment b (1981).

Under their interpretation of the contract, the defendants claim that the car payments and commissions were clearly excessive. Contrary to the defendants' argument, the words of the contract, particularly in view of the course of dealing between the parties, see Keating v. Stadium Mgmt. Corp., 24 Mass. App. Ct. 246, 251-252 (1987), are not "plain and free from ambiguity." See generally Starr v. Fordham, 420 Mass. at 190. The judge found that the termination was arbitrary and capricious because "the employer did nothing to attempt to discern whether the plaintiff's receipt of so called `exces...