Frankson v. Design Space Intern.

• Decision Date: 21 January 1986
• Docket Number: No. C5-85-708,C5-85-708
• Citation: 380 N.W.2d 560
• Parties: David FRANKSON, Respondent, v. DESIGN SPACE INTERNATIONAL, et al., Appellants.
• Court: Minnesota Court of Appeals

Page 560

380 N.W.2d 560

David FRANKSON, Respondent, v. DESIGN SPACE INTERNATIONAL, et al., Appellants.

No. C5-85-708.

Court of Appeals of Minnesota.

Jan. 21, 1986.

Certification Granted Feb. 19, 1986.

Syllabus by the Court

1. Communication of defamatory matter among corporate officers and employees constitutes publication of the defamation.

2. The evidence, including the contrast between respondent's excellent sales record and appellant's assertion that respondent was terminated due to a failure to increase sales, supports the jury's finding of actual malice.

3. General damages are presumed when statements are defamatory per se. The amount of the damage award was within the jury's discretion.

4. Punitive damages are recoverable in cases of defamation per se without proof of actual damages. The jury's award reflects statutory factors used in measuring punitive damage awards, particularly appellant's awareness of the excessiveness of the defamatory statement and appellant's financial condition.

5. The trial court's evidentiary rulings were not in error.

6. Because appellant did not present any evidence in support of its counterclaims, the trial court did not err in directing a verdict for respondent on those claims.

Wellington H. Law, Christopher S. Hayhoe, Paul C. Wolf, Edina, for respondent.

Allen I. Saeks, James V. Roth, Minneapolis, for appellants.

Heard, considered and decided by the court en banc consisting of POPOVICH, C.J., and PARKER, FOLEY, WOZNIAK, LANSING, HUSPENI and CRIPPEN, JJ.

OPINION

CRIPPEN, Judge.

Respondent David Frankson, an employee of appellant Design Space International (DSI) since 1974, was discharged by DSI on November 17, 1980. Frankson subsequently sued appellant for defamation, termination in breach of an employment contract, and unpaid salary and commissions. DSI counterclaimed, alleging that Frankson breached covenants not to compete and not to divulge trade secrets and claiming Frankson engaged in unfair competition and deceptive trade practices.

At the close of the evidence at trial, the judge directed a verdict for Frankson on all counterclaims. The trial court jury found that Frankson was employed at will and that DSI did not breach employment agreements in determining Frankson's compensation or terminating his employment. However, the jury found that Frankson was entitled to receive $28,196.27 for the reasonable value of his services in excess of salary and commissions already paid.

The jury also found that statements contained in Frankson's termination letter were untrue and made with actual malice. The jury awarded $70,000 in damages resulting from the defamation and an additional $125,000 in punitive damages.

DSI appeals from the judgment based on the jury's verdict and from the trial court's directed verdict on DSI's counterclaims. We affirm. For reasons noted in our opinion, we certify the case to the supreme court.

FACTS

Frankson began working for DSI in 1974. DSI sells and leases modular units and trailers for use as offices and living quarters, primarily for on-site construction projects. Frankson's employment was governed by a series of written contracts. These contracts were for the term of employment and one year thereafter; Frankson and other employees typically signed new contracts only when given pay raises or duty changes. The contract of the parties in effect when DSI terminated Frankson in November 1980 was dated February 1, 1980.

When Frankson signed the February 1980 contract, he was moving into the job of Major Projects Manager, but he retained the title of Branch Sales Manager. DSI had not yet found a replacement for him in the Branch Sales Manager position. The contract states Frankson was both Branch Sales Manager and Major Projects Sales Representative.

In addition to his salary, Frankson earned sales commissions. The terms governing commissions were contained in a separate document entitled "Compensation Plan" and are not set out in the employment agreement of February 1980. The Compensation Plans were revised annually. They contained the following clause:

The maximum cumulative commission payable for one or more contracts with one customer, during the fiscal year, shall not exceed $5,000.

In September 1979, Frankson signed a statement indicating that he had reviewed and accepted his latest Compensation Plan. However, Frankson typed in his own exception to the Plan and requested that DSI's president acknowledge the exception by signing and returning the document. The exception was a waiver of the $5000 limit noted above. DSI's president, Ray Wooldridge, never signed or returned the document.

The job of Major Projects Manager was a promotion for Frankson. The Major Projects program was aimed at larger sales and lease contracts, specifically those exceeding $100,000 or those involving in excess of 25 units per year. It also included federal government contracts and contracts involving exportation of units outside the United States. Frankson was concerned about the limit on his commissions per customer because a major project typically involved only one customer but could include several large contracts and could require most of his time. Frankson testified that he signed the 1979 Plan because at the time he was not yet into the Major Projects program. Anticipating his advancement, he added the exception requesting the waiver of the $5000 limit.

Frankson discussed the issue with his supervisor, company Vice President William Lindelow, who reassured him that a new Compensation Plan for major projects would have a much higher limit or no limit at all.

In May 1980, a new employment agreement and a Compensation Plan for Major Projects was distributed to Frankson. The Compensation Plan contained no limit on commissions earned. However, that Plan never took effect because two days after Frankson received it he was directed to return the new documents unsigned. Apparently, the Compensation Plan had gone out prior to approval by DSI's president.

Frankson received a revised Compensation Plan on July 31, 1980. This Plan was to cover August 1, 1980 through July 31, 1981. The Plan contained a $10,000 limit on commissions earned through sales to a single customer. Frankson signed the Plan on August 6, 1980.

Frankson was unhappy about the $10,000 limit on commissions and again talked to Lindelow about it. Frankson had been working on a major project with a customer named Montana Power and had sold $2,319,627 in contracts to them during the six months before he received the Compensation Plan containing the $10,000 limit. He had not consummated many other contracts during this period, so he was concerned about receiving "full" commissions on his sales to Montana Power. Lindelow testified he cautioned Frankson "many times" about putting all his efforts into the Montana Power project and that Wooldridge would decide the amount of commission that Frankson would be paid.

Lindelow advised Frankson to prepare a memo showing his sales made to Montana Power and the commissions payable on those sales. When Lindelow received the memo in late August 1980, he wrote "OK to pay" on it, signed it, and forwarded it to Ray Wooldridge. Wooldridge did not agree to pay the full commission, which totaled $28,196.27.

The DSI compensation committee discussed the commission dispute and proposed to pay Frankson $10,000, $5000 more than the limit DSI proposed for Frankson's September 1979 Compensation Plan. Major Projects sales personnel had in the past operated under compensation plans that differed from the standard plan and Frankson had been in Major Projects full time since early 1980. Frankson refused to accept the $10,000 when it was tendered to him.

On November 17, 1980, Lindelow and DSI's personnel manager, Edward Burns, went to Frankson's office and presented him with a letter of termination. The letter gave the reason for discharge as "failure to increase business as a Major Projects Sales Representative." The letter was dictated by Burns, typed by his secretary, placed in Frankson's personnel file, and also distributed to Lindelow and Wooldridge. Frankson then brought suit against DSI.

At trial, Frankson presented quarterly sales performance statistics showing that he was first among Major Projects Managers in September 1980. He presented evidence that had his sales figures been included in the quarterly figures for the quarter ending in October 1980, he would have again been first, with sales of 71,120 square feet. The second place person sold only 15,532 square feet. As of September 1980, Frankson also showed that he was first in sales for 1980 through September, and that he had an outstanding sales record when he was Branch Sales Manager.

Besides evidence of his past sales achievements, Frankson presented evidence of the sales projects he worked on in 1980. He submitted a list of 10 projects he was working on in February 1980. He listed four other projects that he worked on in the summer of 1980. He testified that he attended sales conventions and trade shows to get leads for potential sales.

DSI presented some testimony to refute Frankson's evidence about his performance record. Lindelow testified that Frankson's sales for the third quarter of 1980 were all from the large Montana Power contract. He stated that the Montana Power transaction had actually taken place five months before the sales figures were released, so the figures did not reflect Frankson's performance in the months immediately before his termination. He testified that in the fiscal year beginning September 1980, Frankson had no sales.

After leaving DSI, Frankson did not look for another sales job, but he started his own business in early 1981. The business, called Space Mobile and Modular Structures, is similar in nature to DSI. Their size and financial bases are, however, dissimilar. Frankson, who started with $5000, has not earned a profit in his business. He operates the...