Francis v. National DME, No. 20120605–CA.

• Court: Court of Appeals of Utah
• Writing for the Court: ROTH, Judge
• Citation: 350 P.3d 615,2015 UT App 119
• Parties: David A. FRANCIS, Plaintiff, Appellee, and Cross-appellant, v. NATIONAL DME, Joseph Cottis, and J. Scott Cottis, Defendants, Appellants, and Cross-appellees.
• Decision Date: 07 May 2015
• Docket Number: No. 20120605–CA.

350 P.3d 615
2015 UT App 119

David A. FRANCIS, Plaintiff, Appellee, and Cross-appellant
v.
NATIONAL DME, Joseph Cottis, and J. Scott Cottis, Defendants, Appellants, and Cross-appellees.

No. 20120605–CA.

Court of Appeals of Utah.

May 7, 2015.
Rehearing Denied Aug. 6, 2015.

350 P.3d 618

Gary R. Guelker and Janet I. Jenson, Salt Lake City, for Appellants.

April L. Hollingsworth and Elizabeth M. Peck, Salt Lake City, for Appellee.

Judge STEPHEN L. ROTH authored this Opinion, in which JUDGE JAMES Z. DAVIS and SENIOR JUDGE RUSSELL W. BENCH concurred.¹

Opinion

ROTH, Judge:

¶ 1 In this employment dispute, National DME, Joseph Cottis, and J. Scott Cottis (collectively, DME) seek appellate review of various rulings made by the trial court. Specifically, DME seeks reversal of the trial court's decisions to deny its motion for a new trial or, alternatively, to reduce the judgment to $9,700; to exclude certain evidence as unduly prejudicial under rule 403 of the Utah Rules of Evidence ; and to award attorney fees and prejudgment interest at the rate of 10% to the plaintiff, David A. Francis. Francis cross-appeals, arguing that the trial court erred by entering a directed verdict that dismissed his counterclaim for intentional interference with economic relations and by denying on hearsay grounds the admission of certain evidence relevant to that counterclaim.

¶ 2 With respect to the issues raised by DME, we reverse the trial court's decision to deny DME's motion to amend the judgment and we reduce the judgment to $9,700. This decision means that we must vacate the award of statutory attorney fees. We affirm, however, the trial court's award of prejudgment interest and its decision to exclude evidence regarding the circumstances of DME's termination of Francis. With respect to the issues raised by Francis on cross-appeal, we affirm the trial court's ruling regarding the exclusion of certain evidence on

350 P.3d 619

hearsay grounds, but we reverse the trial court's ruling as to his counterclaim for intentional interference with economic relations and remand for further proceedings.

BACKGROUND

I. Francis's Employment at DME

¶ 3 DME is a Utah company that sells durable medical equipment such as canes, crutches, splints, wheelchairs, custom braces, sleep therapy oxygen devices, and other breathing equipment. DME sells its products in three ways: an inventory outsourcing program, direct sales to patients, and sales through a website. DME maintains two branches that are responsible for distributing its products, regardless of how they are sold: the Salt Lake branch and the St. George branch.

¶ 4 DME hired Francis as its national sales manager on April 1, 2003. As part of the hiring process, DME provided Francis with an employee handbook. Francis acknowledged receipt of the handbook by signing an “Acknowledgement Form.” Although the Acknowledgement Form does not reference a noncompete agreement, DME's president testified at trial that a noncompete agreement form was included as part of the handbook and that Francis agreed to be bound by the noncompete agreement by signing the Acknowledgement Form. Francis denied that he had ever seen, been presented with, or signed a noncompete agreement.

¶ 5 DME terminated Francis's employment one year later after Francis failed to report to work for three consecutive days. Shortly thereafter, Francis began work at a similar company, BSN Medical, as an independent sales representative. After starting work at BSN, Francis filed a wage claim against DME with the Utah Labor Commission (the Commission) to recover unpaid commissions. The Commission notified DME of the wage claim on June 15, 2004.

¶ 6 In the meantime, DME learned that Francis had begun working for BSN. According to DME, it believed that Francis was bound by a noncompete agreement and therefore instructed its attorney to send Francis a letter alleging that his employment at BSN was “in direct violation” of that agreement. The letter threatened legal action if Francis did not “terminate [his] employment with BSN Medical immediately and provide evidence satisfactory to National DME” that he had ceased competing with it. The letter to Francis was dated June 17, 2004, and was copied to BSN.

¶ 7 After receiving DME's letter, BSN contacted Francis about the alleged noncompete agreement. Francis denied ever signing or agreeing to a noncompete agreement and voiced his belief that the June 17 letter was written in retaliation for his wage claim. On July 14, 2004, BSN formally responded to DME's June 17 letter with a letter of its own to DME, indicating that it had tried unsuccessfully to contact DME's attorney “to discuss [DME's] concerns and the background and documents relating to” Francis's alleged noncompete agreement. Over a month passed without a response from either DME or DME's attorney.

¶ 8 The next communication Francis received regarding the noncompete issue was a voicemail left by Francis's BSN supervisor on August 11, 2004. According to Francis, the supervisor informed him that “because we're going to an employee/employer relationship,” as opposed to having the sales representatives work as independent contractors, “human resources feels like the noncompete agreement precludes my being able to keep you in your territory.” (Emphasis omitted.) The next day, BSN sent Francis a formal termination letter via email.

¶ 9 A week later, on August 19, 2004, DME sent a letter to Francis's BSN supervisor stating that DME had “reached a ‘settlement’ agreement with Dave Francis regarding his employment with BSN” and that DME would not pursue enforcement of the noncompete agreement. By this time, however, BSN had already terminated Francis. Nevertheless, the BSN supervisor forwarded DME's August 19 letter to another BSN representative, stating that “this should close the Dave Francis issue.”

II. Procedural History

¶ 10 After leaving BSN, Francis continued to pursue his wage claim against DME. On

350 P.3d 620

April 6, 2005, he sent a demand letter to DME setting forth a number of claims under federal and state law and offering to settle all of them for $150,000. He specifically addressed the wage claim, stating that DME “still owes Mr. Francis approximately $15,000 in commissions that were owed to him for sales he made while still employed with the company.” The parties were unable to settle the matter, and Francis filed suit against DME and certain individuals associated with DME in federal district court.

¶ 11 In his complaint, Francis set out federal claims under the Americans with Disabilities Act of 1990, the Consolidated Omnibus Budget Reconciliation Act, the Employee Retirement Income Security Act, and the Family Medical Leave Act of 1993. Additionally, Francis alleged several state-law claims, including intentional interference with economic relations, equitable estoppel, and breach of contract. He also requested attorney fees.

¶ 12 DME moved for summary judgment on Francis's claims, and the federal district court granted it in part, dismissing all of Francis's federal claims and his equitable estoppel claim, leaving only his claims for intentional interference with economic relations and breach of contract and his request for attorney fees. The federal court declined to exercise supplemental jurisdiction over the remaining claims and instead dismissed them without prejudice, informing Francis that he was free to refile in state court.

¶ 13 Francis did so on August 5, 2009. Due to the extensive discovery that had already occurred in federal court, the parties agreed to proceed immediately to trial. Several motions in limine were filed ahead of trial, two of which are pertinent to this appeal. In the first, Francis moved to exclude any evidence regarding the circumstances of DME's termination of his employment. The trial court granted the motion, reasoning that the evidence regarding his termination was not relevant and that, even if relevant, it would be substantially more prejudicial than probative under rule 403 of the Utah Rules of Evidence. In the second motion, DME moved to exclude evidence of the voicemail that BSN left for Francis, arguing that Francis's testimony concerning the voicemail would be inadmissible hearsay. The trial court agreed and granted the motion.

¶ 14 At trial, the parties sharply contested the terms of Francis's employment contract with DME. First, Francis testified that in addition to his salary of $60,000 per year plus benefits (which had been paid), DME promised him commissions equal to 4% of the Salt Lake branch's net profits (excluding any profits from oxygen sales). He further testified that DME's president had expressly acknowledged that Francis had earned $15,000 in commissions for the first quarter of his employment. Francis admitted that DME had paid him $5,300 of that amount, $2,300 to cover repairs he had incurred on his truck and another $3,000 to fund Christmas bonuses to DME warehouse employees under Francis's supervision.

¶ 15 DME responded with testimony that it had never agreed to pay Francis commissions in addition to salary and it had never acknowledged owing him $15,000 in commissions for the first quarter of his employment or otherwise. DME did admit,...