Sawheny v. Pioneer Hi-Bred Intern., Inc.

• Decision Date: 27 August 1996
• Docket Number: No. 95-1569,HI-BRED,95-1569
• Citation: 93 F.3d 1401
• Parties: Tilak Raj SAWHENY, also known as Roger Sawheny, Appellant, v. PIONEERINTERNATIONAL, INC., an Iowa Corporation, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1401

93 F.3d 1401

Tilak Raj SAWHENY, also known as Roger Sawheny, Appellant, v. PIONEER HI-BRED INTERNATIONAL, INC., an Iowa Corporation, Appellee.

No. 95-1569.

United States Court of Appeals,

Eighth Circuit.

Submitted March 11, 1996.

Decided Aug. 27, 1996.

Glenn Leonard Norris, Des Moines, IA, argued (George F. Davison, Jr. and Carla T. Schemmel, on the brief), for appellant.

Jeffrey Lawrence Goodman, West Des Moines, IA, argued (John A. Templer, Jr., on the brief), for appellee.

Before McMILLIAN, BEAM, and HANSEN, Circuit Judges.

BEAM, Circuit Judge.

In this diversity action for damages, Roger Sawheny appeals the district court's ¹ orders: (1) granting summary judgment to Pioneer Hi-Bred International, Inc. (Pioneer) on Sawheny's RICO claim; (2) entering judgment for Pioneer after a bench trial on Sawheny's litany of tort and breach of contract claims; and (3) denying Sawheny's post-judgment motion to make additional findings of fact. We affirm.

I. BACKGROUND

Pioneer is an Iowa corporation engaged in the seed business. In 1978, Pioneer, through its wholly-owned subsidiary Pioneer Oversees Corporation (POC), ² formed Pioneer Seed Company Limited (PSCL) as a corporation licensed under the laws of India. To comply with Indian law, Pioneer retained ownership of only forty percent of the PSCL stock. Indian nationals owned the remaining sixty percent of the stock: Sanjogta Kapoor owned just under forty percent and her brother, Surinder Sehgal, owned twenty percent of the PSCL shares. Pioneer provided most of the funding for PSCL. Sehgal served as President of POC until 1988.

After the formation of PSCL, numerous agreements were executed between POC, Pioneer, and PSCL. These contracts included research agreements, a registered user agreement, a collaboration agreement, and a loan agreement. The Indian government approved each of these agreements when necessary. Under these agreements, Pioneer retained its proprietary rights in all seeds and their progeny, other genetic materials, research data, and research results.

In July 1983, Sawheny, a Canadian citizen, was hired by POC at Sehgal's behest. At the time, Sawheny was unemployed but married to Sehgal's niece. After an orientation period, Sawheny's primary duty was to investigate the condition of PSCL and report back to Sehgal, the President of POC. At meetings held in December 1983, Sawheny reported that PSCL was being mismanaged. In 1984, pursuant to the collaboration agreement with PSCL and with the approval of the Indian government, Pioneer sent Sawheny to India, where he soon became the General Manager of PSCL. Pioneer "deputed" or loaned Sawheny from its POC subsidiary to PSCL. Sawheny received a salary from POC of $30,000, which was deposited in a bank in Iowa. In addition, he received a separate salary in Indian currency (5,000 rupees per month), tax-free, and other benefits, from PSCL.

When Pioneer first hired Sawheny, he completed and signed a form stating that he was a Canadian citizen working outside of the United States. This form was filed with the appropriate income tax authorities. In a letter signed by Sehgal and dated July 5, 1983, Pioneer acknowledged that Sawheny was a POC employee beginning on July 1, 1983, and that his base salary was $30,000. The letter does not state that Sawheny's salary was to be tax free; nor does it state that Sawheny had no obligation to pay income tax.

In contrast, PSCL had agreed that Sawheny's salary would be tax-free. The Indian government, however, denied PSCL's application to have Sawheny's PSCL income declared exempt from Indian income taxes. As a result, PSCL paid the income taxes on Sawheny's PSCL salary as it had agreed to do. This tax obligation imposed upon Sawheny's PSCL income made him anxious about paying Indian income tax on his salary from POC. Consequently, Sawheny asked for a letter from POC designed to provide him with a colorable defense if Indian tax authorities attempted to tax his POC salary. In response to Sawheny's request, Sehgal asked POC counsel Ross Porter to prepare a letter. Porter drafted a letter for Sehgal, dated June 19, 1987, stating that POC would continue to compensate Sawheny for his work done outside of India while PSCL would continue to pay him a salary for his work done in India. This letter, however, also expressly stated that "every employee of Pioneer and its subsidiaries is expected to pay his or her own personal taxes." Joint App. at 5121.

In 1985, Sawheny was named President of PSCL, which was a change in title only because his duties remained the same as when he was General Manager. While working for both POC and PSCL from 1984 to late 1987, Sawheny did most of his work in India. In December 1987, Pioneer promoted Sawheny to the position of Regional Operations Director of POC's Asia/Pacific Region.

During this time, Pioneer had been working with its Indian lawyers and accountants to increase its share of PSCL stock to seventy percent, in accordance with a change in Indian law. Although neither Sehgal nor Sawheny objected to the proposed transfer of PSCL stock, Sehgal resisted efforts to reorganize Pioneer's overseas operations. Dissatisfied when the reorganization took place, Sehgal decided to leave Pioneer. He sought out persons who could supply him with venture capital in order to start a new company that would compete directly with Pioneer. In the fall of 1987, Sehgal held secret meetings which were attended by key POC employees (Hari Shukla and Ken Mishra), an employee of a Pioneer competitor (Dave Nanda), and Sawheny. At Sehgal's direction, Mishra prepared a plant breeding plan in which hybrids and inbreds owned by Pioneer, along with similar materials from other institutions and firms, would be used as genetic stock in a manner that would disguise their pilfered parentage.

In late February 1988, Mishra informed Pioneer's President and CEO, Thomas Urban, that Sehgal intended to start a new seed company to compete with Pioneer. Urban initially did not believe that his trusted employee Sehgal would do such a thing. Urban asked Mishra to gather proof of Sehgal's planned defection. On February 28, 1988, Mishra made a tape recording of a conversation with Sehgal that substantiated Mishra's allegation that Sehgal was planning to start a new company which would use Pioneer's technology. The tape was played to Pioneer executives. They were shocked by the plan. The next day, Sehgal met with venture capitalists in Boston who pledged $5 million for the new company.

On March 8, 1988, Urban confronted Sehgal. When Sehgal refused to confirm or refute the Mishra allegations, Urban terminated Sehgal. ³ On the same day, Urban called Sawheny, who was traveling on business in Thailand, and told him about Sehgal's termination. At that time, neither Urban nor the other executives at Pioneer knew that Sawheny participated in the secret meetings. They knew, however, that Sawheny was married to Sehgal's niece and thus Urban told Sawheny not to have contact with Sehgal. Concerned that its genetic material was at risk, Pioneer sent POC's Mishra to India to do whatever he could to protect the germplasm. Mishra and other Pioneer executives became concerned when Sawheny demonstrated reluctance to assist in complying with Pioneer's order to secure its property.

In March 1988, Urban contacted Sawheny and requested that he travel to Des Moines, Iowa, to discuss the establishment of POC's regional office in the Philippines. Urban, who became the President of POC upon Sehgal's termination, wanted to meet with Sawheny to be sure that Sawheny was the right person to serve as the Regional Director for the Asia/Pacific Region. Urban decided that Sawheny could not serve as both the Regional Director for POC in the Philippines and at the same time perform his full-time job as President of PSCL in India. Accordingly, Urban asked Sawheny to resign from PSCL. Sawheny agreed and signed a letter of resignation. Urban also recognized that Sawheny could face personal conflicts managing a company competing with his wife's uncle, Sehgal, and thus Urban decided to remove India from the countries within Pioneer's Asia/Pacific region. Sawheny agreed that he would go to India for three weeks to put his personal affairs in order and then he and his family would move to the Philippines where he would work as POC's Regional Director for the Asia/Pacific Region. Once again, Urban told Sawheny not to have any contact with Sehgal. Sehgal had, on March 19, already contacted Sawheny at Sawheny's hotel in Des Moines. Despite Urban's admonitions, Sawheny continued to speak with Sehgal about how Sehgal planned to handle PSCL.

Sawheny's resignation as PSCL President was approved at a PSCL board meeting on March 31, 1988. In the meantime, Sehgal was orchestrating the handling of PSCL affairs through his sister, Kapoor. She scheduled a second meeting of the board to be chaired by Sehgal. While in India at Urban's request, Mishra learned that Sawheny planned to attend this rival board meeting. Upon learning of this from Mishra, Urban told Mishra to have Sawheny call him. Sawheny did not contact Urban. On April 14, Sawheny went to the PSCL offices to attend the board meeting, where he was confronted by Mishra and employees loyal to Pioneer. When asked whether he was joining Sehgal or remaining loyal to Pioneer, Sawheny refused to answer, thereby implying that he had decided to switch loyalties and work with Sehgal. Pioneer's legal counsel in India obtained an ex parte injunction barring the April 14 PSCL board meeting. The injunction was served on Sehgal moments before the meeting, which then did not take place. After Urban had heard what transpired, he concluded that Sawheny was no longer loyal to Pioneer, but instead was working with Sehgal to free PSCL from Pioneer's control. On April 15, a termination letter was drafted and sent to Sawheny, who claims not to have received it. Without a POC job,...