Wittekamp v. Gulf & Western, Inc.

Citation991 F.2d 1137
Decision Date22 April 1993
Docket NumberNo. 92-3428,92-3428
Parties16 Employee Benefits Cas. 2073 John N. WITTEKAMP, v. GULF & WESTERN, INC.; Gulf & Western Industries, Inc.; Gulf & Western Manufacturing Co.; and Wickes Manufacturing John N. Wittekamp, Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Louis M. Tarasi, Jr. (Argued), Joseph J. Hinchliffe, Tarasi & Johnson, Pittsburgh, PA, for appellant.

Michael A. Cardozo (Argued), Marc J. Goldstein, Adrienne B. Koch, Proskauer Rose Goetz & Mendelsohn, New York City, H. Woodruff Turner, Scott S. Small, Kirkpatrick & Lockhart, Pittsburgh, PA, for appellees.

BEFORE: BECKER and GREENBERG, Circuit Judges, and ROBINSON, District Judge. *

OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. BACKGROUND

Appellant John N. Wittekamp brought this suit in state court to recover damages for alleged misrepresentations by appellees Gulf & Western, Inc., Gulf & Western Industries, Inc., Gulf & Western Manufacturing Co., and Wickes Manufacturing (collectively referred to as Gulf & Western), arising from his employment by and subsequent purchase of one of Gulf & Western's corporate divisions. Gulf & Western timely removed the matter to the district court on the basis of diversity of citizenship. Wittekamp now appeals from a judgment of July 24, 1992, in favor of Gulf & Western entered in part on its motion for a judgment and in part on a jury verdict. We will affirm. 1

The relevant facts as developed at trial are as follows. In 1982, Wittekamp relinquished his position as Chief Executive Officer and Chairman of the Board of a fire truck manufacturing company in western New York to become President of the Macintosh-Hemphill division of Gulf & Western (Mac-Hemp). Subsequently, in April 1983, representatives of Gulf & Western contacted him about purchasing Mac-Hemp. Wittekamp and Edward B. Hirschberg, one of Gulf & Western's Vice-Presidents, then began negotiations for this purchase. On October 17, 1983, Wittekamp acquired Mac-Hemp in a leveraged buyout through his solely owned corporation that he formed for the transaction. Under the purchase agreement, Wittekamp assumed certain obligations of Gulf & Western including the then-current collective bargaining agreements with the United Steelworkers of America (USW), which required Mac-Hemp to provide group health insurance for retired employees. At the closing, a Memorandum of Understanding between Wittekamp and the USW confirmed this transfer of the obligation for the group health insurance.

From 1984 to 1987, following Wittekamp's purchase of Mac-Hemp, its financial position grew progressively worse. In early 1987, to stem his losses, Wittekamp gave notice to the retired employees that their group health insurance was being terminated. On March 22, 1987, the retirees commenced a putative class action in the United States District Court for the Western District of Pennsylvania against Mac-Hemp and Gulf & Western seeking restoration of their group health insurance, or damages for its wrongful cancellation in violation of the collective bargaining agreement (Wernert case). Gulf & Western partially settled the Wernert case by agreeing to share the cost of group insurance with employees who retired before the sale of Mac-Hemp to Wittekamp. Mac-Hemp subsequently filed for bankruptcy in July 1987, and thus the Wernert case was stayed as to it. Insofar as we are aware, no court has determined whether Mac-Hemp could terminate the benefits. 2

Wittekamp, who perceived that he had been injured by misrepresentations made by Gulf & Western, then commenced this action in the Court of Common Pleas of Allegheny County, Pennsylvania. On March 8, 1989, Gulf & Western removed the case to the United States District Court for the Western District of Pennsylvania.

In his complaint, Wittekamp alleged that Gulf & Western failed to disclose Mac-Hemp's precarious financial condition before hiring him. He further contended that he acquired Mac-Hemp in the belief that he could cancel the group health insurance for retired steelworkers when the USW collective bargaining agreement expired, that Gulf & Western knowingly failed to tell him at the time of the purchase that such benefits were not cancellable because they had already had vested, and that but for his inability to terminate these benefits without controversy, he would not have suffered the consequences of Mac-Hemp's 1987 business failure and bankruptcy. 3 Accordingly, his complaint asserted two distinct causes of actions for fraud, 4 one based upon Gulf & Western's fraudulently inducing him to leave his previous position to join Mac-Hemp and one based on Gulf & Western's persuading him to buy Mac-Hemp once he became its president. 5

At trial, Wittekamp focused his theory of fraud on several documents. The first was Paragraph 6M and Exhibit K of the October 17, 1983 Purchase Agreement, which purported to provide a "true and complete list" of all the contractual obligations exceeding $5,000 which Wittekamp would have to assume upon his purchase of Mac-Hemp. Wittekamp argued that this list misled him because it did not mention the group health plan for the retirees--an omission which, he claimed, led him to believe that these benefits had not vested and were terminable. Gulf & Western responded that Exhibit K listed the group health plan under Items 4(A) and 4(b). Gulf & Western also contended that inasmuch as Exhibit K was only a list, the omission of an indication of whether the retirees' group health benefits were vested was not material to its purpose.

Wittekamp also introduced Exhibit 98, a booklet entitled "Program of Hospital and Physicians Services Benefits for Eligible Pensioners and Surviving Spouses Not Eligible for Medicare." The booklet, which bore an "effective date" of November 1, 1975, was annexed to a December 2, 1975 letter from Mac-Hemp's Supervisor of Personnel Administration to a USW insurance department employee. It described health insurance benefits covering persons who had not reached the age of Medicare eligibility. More importantly, Exhibit 98 included a two-page unsigned document entitled "Pensioners and Surviving Spouses Health Insurance Agreement," which stated that the insurance coverage would not terminate for individuals who retired while the agreement was in effect and who were not yet eligible for Medicare. Wittekamp pointed to Exhibit 98 as evidence that retiree group health insurance at Mac-Hemp already had vested when he purchased Mac-Hemp in October 1983 and that Gulf & Western knew this. Because Gulf & Western had not shown the document to Wittekamp prior to the discovery in this action, he contended that in 1983 Gulf & Western deliberately had hidden it from him to prevent him from learning that the benefits had vested.

Five Gulf & Western officers and attorneys who took part in the Mac-Hemp sale testified that they never saw Exhibit 98 prior to the 1983 sale, or even after that, until it was located in Gulf & Western's files during discovery in this action. They also testified that the USW and Mac-Hemp never executed the agreement within Exhibit 98. Indeed, Wittekamp presented no evidence that the document contained in Exhibit 98 ever became a binding contract between the USW and Gulf & Western.

Wittekamp produced Exhibit 621 as his third item of documentary evidence. This exhibit was an internal Gulf & Western accounting report prepared before the sale containing the statement that "[b]uyer will assume the union contract, including retiree medical of approximately $11,100,." Wittekamp argued that this $11.1 million figure indicated that the retiree group health insurance was not cancellable, because $11.1 million far exceeded the $300,000 annual insurance premium cost, and that Gulf & Western deliberately did not disclose this document to him before the purchase. Rudolph Hertlein, a vice-president of Gulf & Western, denied that the $11.1 million figure reflected a belief by Gulf & Western that the benefits had vested. Rather, he claimed that the figure represented only a hypothetical calculation for an unlikely scenario in which Mac-Hemp would cease to operate and all the workers would retire simultaneously.

In addition to offering these documents relating to alleged nondisclosures by Gulf & Western, Wittekamp testified on cross-examination that he asked Hertlein and Charles Lewis, a Gulf & Western attorney, just before the completion of the sale, whether retiree group insurance had "vested" and they said no. On appeal, Gulf & Western contends that this testimony did not create an issue of fact for the jury because upon further cross-examination Wittekamp retracted this statement.

Finally, Wittekamp presented his own testimony and that of two of his former attorneys about 1987 discussions between Wittekamp and Gulf & Western's trial attorneys concerning the merits of the retirees' claims in the Wernert case. Wittekamp and his former attorneys testified that Gulf & Western's attorneys told them in 1987 that they knew of no documents that specifically provided that retiree benefits were vested. At trial, Wittekamp sought to use this testimony to advance a claim of fraud occurring in 1987; namely, that Gulf & Western sought to prevent him from discovering that it had not told him in 1983 that the benefits had vested.

Gulf & Western moved, both after Wittekamp rested and at the close of all the evidence, for judgment as a matter of law, pursuant to Fed.R.Civ.P. 50(a). 6 The district court denied the motion as to Wittekamp's claim concerning the fraudulent inducement by Gulf & Western to hire him at Mac-Hemp. The court, however, did grant the motion with respect to the other claims.

In regard to the fraud claim for the sale of the company in 1983, the district court stated that the crucial issue was not whether the benefits had vested--Gulf & Western conceded at trial that they probably had vested by 1983--but whether...

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