Ballard v. El Dorado Tire Company

• Decision Date: 09 May 1975
• Docket Number: No. 74-2052,74-2052
• Parties: Bill L. BALLARD, Plaintiff-Appellee-Cross Appellant, v. EL DORADO TIRE COMPANY, Defendant-Appellant-Cross Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 901

512 F.2d 901

Bill L. BALLARD, Plaintiff-Appellee-Cross Appellant, v. EL DORADO TIRE COMPANY, Defendant-Appellant-Cross Appellee.

No. 74-2052.

United States Court of Appeals, Fifth Circuit.

May 9, 1975.

Eli H. Subin, Emery H. Rosenbluth, Jr., Orlando, Fla., for defendant-appellant-cross appellee.

J. Thomas Cardwell, George T. Eidson, Jr., Orlando, Fla., for plaintiff-appellee-cross appellant.

Appeals from the United States District Court for the Middle District of Florida.

Before TUTTLE, COLEMAN and SIMPSON, Circuit Judges.

COLEMAN, Circuit Judge.

This diversity action resulted from the allegedly wrongful discharge of plaintiff, Bill L. Ballard, a Florida citizen, by El Dorado Tire Company, a Michigan corporation. The District Court, sitting without a jury, awarded Ballard $46,352.20 in damages.

We affirm the award of damages and remand for further consideration of the other benefits hereinafter discussed.

El Dorado appeals, contending that the District Judge erred in failing to reduce Ballard's damages by the amount he might have earned in other employment during the unexpired term of his contract. Ballard cross appeals, contending that the District Court's calculation of damages erroneously failed to take into account certain fringe benefits due under the employment contract.

The employment contract was executed on May 31, 1969. It called for Ballard, an experienced tire salesman, to work in Orlando, Florida, for a 5 year term as Executive Vice President and General Manager of El Dorado's Florida subsidiary. The contract provided Ballard with generous compensation:

COMPENSATION: BALLARD shall receive a base salary of $18,000.00 per year.... In addition to the base salary, BALLARD shall receive a commission based upon one per cent of the gross sales of the Florida subsidiary corporation .... In addition to the base salary and commission, BALLARD shall receive additional compensation in the form of a credit towards the purchase of stock in the Florida subsidiary company and hereinafter provided.

BENEFITS: EL DORADO will provide BALLARD with a fully paid group life insurance policy in the amount of $20,000.00, payable to such beneficiary as BALLARD may designate and also a fully paid health, accident and hospitalization policy to cover BALLARD and his family. In addition, BALLARD shall be eligible in the thirteenth month of his employment, and thereafter, to participate in the EL DORADO pension fund and to participate in the benefits thereof as provided in EL DORADO's Pension Plan as filed with Internal Revenue Service. At the appropriate time EL DORADO shall furnish BALLARD with a copy of said pension plan. BALLARD's non-contributory portion will be invested by EL DORADO in the pension fund to the extent of twenty per cent of BALLARD's base salary, annually, not including commissions and other forms of compensation.

In addition Ballard was entitled, upon meeting certain conditions, to 20% of the subsidiary stock.

Other relevant contract provisions dealt with termination and non-competition:

TERMINATION: BALLARD may terminate this employment agreement at any time, upon thirty days written notice to EL DORADO. EL DORADO may, at its option, accept any such resignation without said thirty day notice. EL DORADO may terminate this employment agreement for just cause with either thirty days notice or thirty days base salary in lieu of notice. Upon termination of this agreement by either party as provided herein, BALLARD shall promptly account to EL DORADO and/or the Florida subsidiary corporation for all property of EL DORADO and/or its subsidiary corporation in his hands effective as of the termination date. Upon such termination, BALLARD shall no longer be entitled to any salary or benefits except as may be provided herein or except as may be provided in the aforesaid El Dorado Pension Plan.

NON-COMPETITION: BALLARD agrees that upon his voluntary termination of this agreement or upon the expiration of this agreement by the passage of time and the failure of BALLARD to renew the same, he will refrain from, directly or indirectly, carrying on or engaging in the tire business and from soliciting old customers of EL DORADO and/or its Florida subsidiary within the State of Florida for a period of two years, or for so long as EL DORADO and/or its Florida subsidiary continue to engage in the tire business in the State of Florida, if for less than two years. EL DORADO may enforce this agreement by injunction in a court of competent jurisdiction.

This stipulation does not prevail in the event of termination by El Dorado. / s/ H.W.D.

The Ballard-El Dorado relationship was soon jeopardized by negotiations between El Dorado and one of its stockholders, Dodenhoff, who wanted to move to Florida to take over managment of the Florida subsidiary. These negotiations culminated in El Dorado's selling all its stock in the Florida subsidiary to Dodenhoff. The contract of sale was executed on July 11, 1971. The sales price included the 31,000 shares Dodenhoff held in El Dorado.

Ballard filed this action to determine his rights under his employment contract on October 19, 1971.

Upon receiving a copy of the complaint, Dodenhoff wrote Ballard telling him that the filing of suit constituted a "breach of contract" and a "voluntary resignation".

The District Court did not agree with Dodenhoff's assessment. It held El Dorado's sale of the subsidiary constituted a breach of contract, and that holding is not appealed.

El Dorado does appeal the Court's refusal to mitigate Ballard's damages by what he might have earned in other employment.

Ballard cross appeals the Court's holding that he was not entitled to compensation for loss of pension benefits and stock in El Dorado.

I. The El Dorado Appeal-Did the District Court err in failing to mitigate Ballard's damages by the amount he might have earned in other employment?

The District Court found as a fact that Ballard has not sought other employment. ¹ Furthermore, the Court took note of the general principle that an employee's damages will be mitigated by what he could have earned in similar employment. E. g., 11 Williston on Contracts (3rd ed.) § 1358; Lerman v. Fruit Processors, Inc., D.C.Cir., 89 U.S.App.D.C. 188, 191 F.2d 349, citing Rest. Contracts, § 336, cert. denied, 342 U.S. 877, 72 S.Ct. 168, 96 L.Ed.2d 659 (1951); Latimer v. York Cotton Mills, 66 S.Ct. 135, 44 S.E. 559 (1903). The District Court's refusal to allow mitigation was based upon the theory that the burden to prove the existence of similar employment was upon the employer, and that El Dorado had failed to show that similar employment was available.

Our examination of the cases and of other authorities demonstrates that the District Court was correct. The universal rule is that an employee's damages will be mitigated only if the employer proves that similar employment opportunity was available. As explained in Dobbs, Remedies, § 12.25, p. 925:

The recovery is based on contract price, not on the contract price/market value differential so commonly used in sales cases. The employee need only prove the breach and the contract price when he is wrongfully discharged and this will warrant a judgment in his favor for all future installments due him, reduced to present value. If the employee has obtained a substitute job, or could obtain one by reasonable effort, he is chargeable with the income he obtains or could reasonably obtain in this fashion, but only if the employer sustains the burden of proving these facts.

According to the Third Circuit,

" '(T)he plaintiff is prima facie entitled to the stipulated compensation for the whole time. If so, the burden of proof in regard to his employment elsewhere, or his ability to obtain employment, must necessarily rest on the defendant. All evidence in mitigation is for a defendant to give. In its nature it is affirmative, and hence it is for him to prove who asserts it.' " McAleer v. McNally Pittsburg Manufacturing Co., 3 Cir., 1964, 329 F.2d 273, quoting King v. Steiren, 44 Pa. 99.

For an extensive list of cases that have placed the burden to prove that similar employment was available upon the employer, see 11 Williston on Contracts § 1360.

Sensing the weight of authority against its position, El Dorado attempts to escape the burden of proving the existence of similar employment in two ways.

First, it points to the Non-Competition Clause in the contract. El Dorado says that by preventing Ballard from engaging in similar employment, the clause gave rise to a duty to mitigate by seeking any employment. It says, in other words, that the effect of an agreement not to compete in similar work is to change the employee's common law duty to mitigate by seeking similar employment to a duty to mitigate by seeking any employment. Ballard's damages therefore should be mitigated not by what he could have earned in similar employment but by what he could have earned in any employment.

The ready answer to this contention is that there is no such term in the contract. The contract speaks of a negative duty-the duty not to compete with the former employer by seeking similar employment. It does not include an affirmative promise to mitigate damages by seeking dissimilar employment. ²

A second and equally persuasive answer to El Dorado's argument is that the non-competition clause did not govern this termination. By its literal terms, the promise not to compete applied only to a voluntary termination. Ballard's termination was not voluntary. El Dorado's sale of the subsidiary made it impossible for it to perform its promises to Ballard. Ballard was powerless to prevent the contract termination. His employment termination was involuntary; therefore, the contract promise not to seek similar employment did not come into play.

As its next argument for escaping the burden of proving existence of similar employment, El Dorado cites our decision in Nello L. Teer...