Cap Gemini America, Inc. v. Judd

• Citation: 597 N.E.2d 1272
• Decision Date: 18 August 1992
• Docket Number: No. 29A02-9010-CV-620,29A02-9010-CV-620
• Parties: 1992-2 Trade Cases P 69,934 CAP GEMINI AMERICA, INC., Appellant-Plaintiff-Counterdefendant, v. Roy A. JUDD & Software Synergy, Inc., Appellees-Defendants-Counterclaimants. 1
• Court: Court of Appeals of Indiana

Page 1272

597 N.E.2d 1272

1992-2 Trade Cases P 69,934

CAP GEMINI AMERICA, INC., Appellant-Plaintiff-Counterdefendant, v. Roy A. JUDD & Software Synergy, Inc.,

Appellees-Defendants-Counterclaimants.

No. 29A02-9010-CV-620. ¹

Court of Appeals of Indiana,

First District.

Aug. 18, 1992.

Henry J. Price, Jennifer L. Graham, Price & Barker, Indianapolis, John D. Proffitt, Campbell Kyle & Proffitt, Carmel, for appellant-plaintiff-counterdefendant.

Jennifer Staton Stoesz, Stoesz & Stoesz, John F. Ittenbach, Sheeks Ittenbach Craig & Gantz, Indianapolis, for appellees-defendants-counterclaimants.

RATLIFF, Chief Judge.

STATEMENT OF THE CASE

Cap Gemini America, Inc. ("CGA") appeals the judgment for Roy A. Judd and Software Synergy, Inc. ("SSI") in CGA's action for breach of covenant not to solicit employees, interference with contractual relationships, breach of fiduciary duty of loyalty, and unfair competition, which also sought preliminary and permanent injunctive relief. CGA also appeals the judgment on the counterclaim in favor of Judd and SSI. We affirm in part and reverse in part.

ISSUES

We consolidate and restate the issues:

1. Did the trial court err in failing to enforce the release in Judd's resignation agreement?

2. Was the parol evidence rule violated when the court permitted oral evidence which contradicted the resignation agreement?

3. Did the court erroneously award tort and punitive damages on the claim for breach of implied covenant of good faith and fair dealing?

4. Did the trial court erroneously conclude that Judd was constructively discharged?

5. Was the expert opinion on damages speculative and insufficient to support the award?

6. Was it error to award damages for waiting time penalties under CAL. LABOR CODE Secs. 202-203?

7. Was the finding of $108,000,000 net assets unsupported by the evidence requiring reversal of the punitive damages award?

8. Did the court err in admitting into evidence consolidated financial statements of the parent corporation?

9. Was Judd's contractual covenant not to solicit employees for one year after termination valid and enforceable?

10. Did the court err in declaring the covenants not to compete of certain employees invalid?

11. Did the trial court abuse its discretion in awarding attorney's fees sanctions?

FACTS

Incorporated in Wisconsin in 1974, CGA later became a wholly owned subsidiary of Cap Gemini Sogeti ("CGS"), an international corporation, in 1981. CGA provides computer software programming and analytical services for clients. Judd was employed as CGA's branch manager in Los Angeles. In 1982, Michel Berty became the president of CGA. At the May 1, 1982 meeting in Milwaukee, Wisconsin, Judd tendered his resignation as the L.A. branch manager because he was "burnt out" managing a branch office. Judd decided to In late summer of 1982, Berty met with John Vann, one of CGA's regional vice presidents, to plan a new development group to be started January 1983, in which Judd was to participate. Vann testified that Berty wanted Judd out of L.A. and in the development group for at least six months so Berty could get rid of him. Berty feared that Judd would compete with CGA in L.A. if he left the company. Berty met with Judd in the fall of 1982 to discuss generally Judd's new position as Director of International Sales. Judd's new position in the development group was officially announced at the October 1982 meeting. Judd began working in his new position in January 1983. Although his new office was located in the corporate offices in Milwaukee, Wisconsin, Judd continued to work based in the L.A. branch office. In April 1983, Judd complained about various problems in his new position regarding communications, definition of his authority, failure to be invited to operating committee meetings, and lack of proper support and tools. Nevertheless, Judd signed an employment agreement on May 25, 1983 for the new position. The agreement provided that it was governed by California law, and at Judd's request, the noncompetition clause was deleted. The agreement contained a nonsolicitation clause and an integration clause.

                remain with CGA, though, because Berty promised him a more important position within CGA later.  In writing, Berty stated to Judd that "if you are successful for the preparation of the new organization of L.A. for 1983, you continue to be in confidence with me, you agree to work as a team under my direct responsibility you will fill another position, more important for 1983, and we will prepare in 7/82."   Record at 3977.  A later memo from Berty put the matter off until September
                

After signing the employment agreement, Judd was prevented from traveling outside of the country and selling to accounts in the midwestern and eastern regions of the U.S. By July, Judd's selling area was reduced to Orange County, California.

Judd tendered his resignation on October 21, 1983. His official termination date was December 8. CGA added a release clause to the resignation agreement, which Judd signed. CGA originally agreed to pay Judd $23,558 as wages for an accrued and earned incentive bonus. Judd began operating his own computer programming and analysis business, SSI, which he had incorporated in August 1983. Judd interviewed some of CGA's Indianapolis employees for positions at SSI. In December 1983, CGA refused to pay Judd's bonus alleging that he breached his duty of loyalty during his employment.

CGA filed suit against Judd on February 2, 1984. The complaint alleged Judd breached the covenant not to solicit CGA employees, interfered with contractual relationships, breached the fiduciary duty of loyalty, and engaged in unfair competition. CGA sought damages and injunctive relief. Judd counterclaimed to recover unpaid wages, plus penalties, and damages for breaches of the employment and resignation agreements. He further alleged a tortious breach of the implied covenant of good faith, wrongful discharge, tortious interference with right to pursue a lawful business, and fraud. He sought compensatory and punitive damages. During the bench trial, Judd also requested bad faith attorney's fees for CGA's obdurate behavior. The trial court entered judgment in favor of Judd on his counterclaim in the amount of $3,000,000, plus $1,000,000 punitive damages, $23,558 for past wages, $15,243.90 as statutory penalties, and $10,000 as bad faith attorney's fees.

Other relevant facts will be presented in our discussion of the issues.

DISCUSSION AND DECISION

Our review of this appeal is limited because special findings of fact and conclusions of law were entered as requested. Therefore, we review whether the evidence supports the findings and the findings support the judgment. United Farm Bureau Mutual Insurance Co. v. Ira (1991), Ind.App., 577 N.E.2d 588, 592, trans. denied. In deciding if the special findings are clearly erroneous, we consider only the evidence which supports the judgment. Id. We will reverse the court's findings only if the record is devoid of facts or inferences supporting the findings. Hunt v. State (1990), Ind.App., 564 N.E.2d 568, 569, trans. denied.

Issue One

CGA contends that the trial court erred in failing to enforce the release in Judd's resignation agreement. Pursuant to our direction on remand, the trial court entered supplemental findings of fact and conclusions of law regarding the release. The trial court refused to enforce the release for several reasons: CGA had unclean hands by its fraudulent conduct in procuring the release and was thereby equitably estopped from raising the affirmative defense of release; CGA failed to prove consideration for the release; and, CGA failed to prove that Judd was fully informed of the ramifications of the release.

CGA correctly relies upon California law as governing the validity of Judd's release. Dohm & Nelke v. Wilson Foods Corp. (1988), Ind.App., 531 N.E.2d 512, 513 (Indiana choice-of-law rule in contract actions is that the law of the state with most intimate contact governs); Utopia Coach, Inc. v. Weatherwax (1978), 177 Ind.App. 321, 326, 379 N.E.2d 518, 522 (where the contract was silent as to which state's law controls, state of principal employment had closest relationship to the contract and that state's law governed substantive issues). The release did not indicate which state's law governed. California had the greatest contact with the parties. Judd was terminating his employment relationship with CGA in California. California recognizes the validity of a release entered into knowingly and voluntarily which discharges a party from any claims. See Edwards v. Comstock Insurance Co. (1988), 205 Cal.App.3d 1164, 1167-68, 252 Cal.Rptr. 807, 809. CGA argues that Judd failed to negate the validity of the release. We disagree.

California law rejects contracts which exempt a party from responsibility for its own fraud, declaring such contracts to be against public policy. CAL.CIV.CODE Sec. 1668 (West 1985). The trial court's determination of fraud, if correct, then supports the court's refusal to enforce the release which would be void as against public policy in California.

The trial court found that CGA committed fraud by offering Judd an illusory position to induce him to withdraw his resignation and sign a new employment agreement when CGA never intended to give Judd a more important position. See Record at 1462. CGA contends that a promise to perform a future act does not constitute fraud because such promise is not a representation of a present, existing fact. See Richard P. v. Vista Del Mar Child Care Service (1980), 106 Cal.App.3d 860, 865, 165 Cal.Rptr. 370, 372. Although this is the general rule, CGA admits that California recognizes certain instances when a promise to do a future act may serve as a basis for a fraud claim. See Appellant's Brief at 33. A promise made with the intention to deceive, to induce a person to enter into a contract, or without any intention of...