Ettenson v. Burke

• Citation: 130 N.M. 67,2001 NMCA 3,17 P.3d 440
• Decision Date: 07 December 2000
• Docket Number: No. 19953.,19953.
• Parties: Robert H. ETTENSON, Plaintiff-Appellee/Cross-Appellant, v. Lawrence J. BURKE and Mariah Media, Inc., a Delaware corporation, Defendants-Appellants/Cross-Appellees.
• Court: Court of Appeals of New Mexico

17 P.3d 440

130 N.M. 67

2001 NMCA 3

Robert H. ETTENSON, Plaintiff-Appellee/Cross-Appellant, v. Lawrence J. BURKE and Mariah Media, Inc., a Delaware corporation, Defendants-Appellants/Cross-Appellees.

No. 19953.

Court of Appeals of New Mexico.

December 7, 2000.

Certiorari Denied January 19, 2001.

Jack N. Hardwick, Sommer, Fox, Udall, Othmer, Hardwick & Wise, P.A., Santa Fe, NM, for Appellee/Cross-Appellant.

Owen C. Rouse III, Frank T. Herdman, Rubin, Katz, Salazar, Alley & Rouse, a Professional Corporation, Santa Fe, NM, for Appellants/Cross-Appellees.

Certiorari Denied, No. 26,739, January 19, 2001.

OPINION

BOSSON, Judge.

{1} A fired corporate officer sued both his employer and his chief executive officer, who was the controlling shareholder of the corporation and his immediate supervisor, for damages arising from his termination. The lawsuit alleges a potpourri of creative legal theories sounding in both tort and implied contract. As a matter of first impression under New Mexico law, we hold that an employee can sue his supervisor, individually, for the tort of interference with contractual relations, meaning contractual obligations owed by the corporation to the employee, and that this tort can provide the foundation for a civil conspiracy action. We also explain why the instruction submitted to the jury for this claim was fatally flawed. Further, we decide under Illinois law that this employee had an actionable claim against the corporation for breach of an implied contract of employment. After discussing these and other theories of relief raised by the parties, including counterclaims, we affirm in part, reverse in part, and remand for a new trial.

BACKGROUND

{2} Plaintiff, Robert Ettenson, was the associate publisher of Outside Magazine. He began working for Outside Magazine in 1985, and from then until 1994, he worked at the corporate headquarters in Chicago, Illinois. Outside Magazine is owned and published by Mariah Media, Inc.(Mariah). Ettenson's supervisor at Mariah was Lawrence J. Burke, president and chief executive officer of the corporation, who also owned 93 percent of Mariah's stock.

{3} In the early 1990's, Burke decided to move Mariah's headquarters from Chicago to Santa Fe. The move concerned Ettenson, who was worried about being removed from Chicago, a commercial hub in the advertising world. Anxious that he would be at a competitive disadvantage if he moved to Santa Fe, Ettenson shared his concerns with Burke, and he requested to remain with the company in Chicago. Burke assured Ettenson he would be taken care of if he moved to Santa Fe along with the rest of Mariah's management.

{4} Between the time Burke announced the transition to Santa Fe and the time the move actually took place, other publishers approached Ettenson with lucrative job opportunities. Invariably, Ettenson informed Burke of these offers, and the two would discuss them together. One such job offer caused Ettenson to request a $30,000 salary increase from Burke to stay with Mariah, and Burke agreed in exchange for Ettenson tearing up the offer. That event prompted Burke, in April 1991, to issue Ettenson special non-voting stock in Mariah (hereinafter "phantom stock") with the idea that Ettenson would redeem the phantom stock at a sizeable gain when Burke sold Mariah sometime in the future. Burke's purpose in issuing the stock was to provide Ettenson with an incentive to remain with Mariah and not worry about annual salary increases. Both Burke and other Mariah officers repeatedly referred to the phantom stock as the source of Ettenson's future financial security.

{5} The move to Santa Fe also made Ettenson anxious about his future employment prospects if he were to lose his job. Burke reassured Ettenson that his concerns were unfounded because when he sold the magazine, they would both retire millionaires, and Ettenson would not have to worry anymore about work. In other conversations with Ettenson, Burke represented that his job with Mariah was "secure," and that Ettenson was part of the Outside family, as evidenced by Burke awarding him the phantom stock in Mariah.

{6} None of these verbal representations were reduced to writing, and Ettenson never had a written contract of employment with Mariah. In May 1994, Ettenson moved to Santa Fe. Despite the assurances of secure, long-term employment, on August 2, 1995, Burke summoned Ettenson into his Santa Fe office and summarily fired him.

{7} Ettenson was devastated by the termination. Under the terms of his stock agreement, title to the phantom stock reverted to Mariah, and Ettenson was entitled to be paid no more than book value for his vested shares, payable over a two-year period. Burke fired Ettenson at a time when he was incurring substantial personal expenditures. His wedding was to take place the following month and included nearly one hundred invitees. He was in the midst of constructing a new house. In short, Ettenson was caught in a vulnerable financial position. He alleges that the timing of his termination was no coincidence; it was part of a strategy of economic coercion. Burke was trying to squeeze him financially and force him to waive whatever legal claims he had arising out of the termination.

{8} According to Ettenson, Burke implemented his strategy in various ways. Two days after firing Ettenson, Burke caused Mariah to deliver a check to Ettenson that included compensation for his unpaid wages, accrued vacation, and eight weeks of severance pay, along with a "Termination Agreement Letter." When Ettenson asked Mariah officers about the legal effect of cashing the check, he was told that acceptance of the check would be construed as a release of all legal claims against Mariah. Despite needing the money, Ettenson refused to waive his legal claims, and returned the check. On September 5, 1995, Mariah finally paid Ettenson his final wages without conditions, approximately four weeks past the five-day limit prescribed by statute. See NMSA 1978, § 50-4-4(A) (1975). Ettenson still has not received any severance pay.

{9} To redress his summary termination and lack of severance compensation, Ettenson sued both Mariah and Burke asserting seven causes of action. Ettenson sued Mariah for breach of an implied contract of employment and for breach of an implied contract for severance pay, which the district court rejected on summary judgment. Ettenson also sued Burke individually for orchestrating a civil conspiracy to coerce him into waiving his suit against Mariah. Mariah counterclaimed, alleging lost advertising revenues and improper billing attributable to Ettenson. After a trial, the jury returned a verdict for Ettenson on two counts: civil conspiracy and breach of an implied contract for severance pay. Ettenson was awarded $23,076.92 against the corporation for failure to pay his implied severance contract, and $725,000 against Burke individually on the civil conspiracy count. The jury rejected Mariah's counterclaim. All parties appeal.

DISCUSSION

{10} Ettenson, Burke, and Mariah each appeal separate rulings of the district court on a variety of grounds. We consider the parties's arguments in order of their relative importance to the resolution of this case.

Civil Conspiracy

{11} The jury awarded Ettenson $725,000 against Burke, individually, on his civil conspiracy charge. The jury apportioned $125,000 of the verdict as emotional damages and $600,000 as punitive damages. Those damages were assessed against Burke for his role in wrongfully inducing Mariah to breach its implied contract for severance pay and to withhold Ettenson's final pay past the statutorily prescribed due date, five days after termination. See § 50-4-4(A). Burke asserts eight points of error against the civil conspiracy verdict, which we reclassify into three groups. First, he challenges the theory of civil conspiracy and particularly a civil conspiracy to commit the tort of interference with contractual relations, arguing that it cannot apply to the facts of this case. Second, Burke maintains that the jury instruction on civil conspiracy and contractual interference was fatally defective. And third, Burke argues that the jury instructions impermissibly allowed for emotional and punitive damages, and failed to establish a causal connection between the conspiracy and the limited injuries for which Ettenson would be entitled to compensation. We disagree with Burke and concur with Ettenson on the first and third points of error. However, Burke persuades us as to the second argument regarding the flawed jury instruction, and accordingly, we reverse and remand for new proceedings consistent with this opinion.

The Legal Sufficiency of the Civil Conspiracy Claim

{12} To establish Burke's liability for a civil conspiracy, Ettenson needed to demonstrate "(1) that a conspiracy between two or more individuals existed; (2) that specific wrongful acts were carried out by the defendants pursuant to the conspiracy; and (3) that the plaintiff was damaged as a result of such acts." Silva v. Town of Springer, 1996-NMCA-022, ¶ 25, 121 N.M. 428, 912 P.2d 304. Unlike a conspiracy in the criminal context, a civil conspiracy by itself is not actionable, nor does it provide an independent basis for liability "`unless a civil action in damages would lie against one of the conspirators.'" Armijo v. National Sur. Corp., 58 N.M. 166, 178, 268 P.2d 339, 347 (1954) (quoting Pullen v. Headberg, 53 Colo. 502, 127 P. 954, 955 (1912)). A civil conspiracy must actually involve an independent, unlawful act that causes harm—something that would give rise to a civil action on its own. See Las Luminarias of the New Mexico Council of the Blind v. Isengard, 92 N.M. 297, 300, 587 P.2d 444, 447 (Ct.App.1978)

. Our case law describes civil conspiracy as achieving an unlawful purpose or using an unlawful means to achieve a lawful goal. See id. The purpose of a civil conspiracy claim is to impute liability to...