Guiliano v. Cleo, Inc.

CourtSupreme Court of Tennessee
Writing for the CourtBARKER; ANDERSON
Citation995 S.W.2d 88
PartiesAnthony P. GUILIANO, Plaintiff/Appellant, v. CLEO, INC., Defendant/Appellee.
Decision Date28 June 1999

Page 88

995 S.W.2d 88
Anthony P. GUILIANO, Plaintiff/Appellant,
v.
CLEO, INC., Defendant/Appellee.
Supreme Court of Tennessee,
at Jackson.
June 28, 1999.

Frank L. Watson, Waring Cox, P.L.C., Memphis, for Petitioner.

James H. Stock, Jr., Christopher E. Moore, Weintraub, Stock, Bennett, Grisham & Underwood, P.C., Memphis, for Respondent.

OPINION

BARKER, J.

We granted this appeal to address the recovery of liquidated damages where a plaintiff/employee alleges that he has been constructively terminated from his employment. The trial court in this case granted summary judgment in favor of the appellant, Anthony P. Guiliano, based upon a finding that he had been constructively terminated from his employment and that he was entitled to recover the remainder of his salary under Paragraph 9 of his employment contract. 1 The Court of Appeals agreed that the appellant had been constructively terminated from his employment, but concluded that he was not entitled to any recovery. The intermediate court held that Paragraph 9 of the contract was a liquidated damages provision that imposed a penalty on the appellee, Cleo, Inc., (Cleo).

Both parties request this Court to determine whether Paragraph 9 of the employment contract contemplates the payment of severance pay or liquidated damages. For the reasons that follow, we conclude that the sums payable pursuant to Paragraph 9 are liquidated damages in the event that Cleo terminated appellant's employment without cause, effectively breaching the contract.

We affirm the trial court's grant of summary judgment for the appellant on the issue of constructive termination. In addition, because we find that the liquidated damages provision was a reasonable estimation of employee damages at the time the parties entered into the contract, we conclude that the appellant is entitled to recover the full amount stipulated in that provision. The judgment of the Court of Appeals is reversed, and the trial court's grant of summary judgment for the appellant is affirmed.

BACKGROUND

The essential facts in this case are undisputed. The appellant had been employed as a director of marketing at Cleo 2

Page 92

for approximately one year when he entered into a written employment contract with the company. The contract was in the form of a letter sent by Michael Pietrangelo who was then the President and Chief Executive Officer of Cleo. The letter agreement stated in pertinent part:

Cleo Inc. and I are very pleased that you have agreed to serve as Vice President, Marketing of Cleo Inc. (the "Company"), a wholly owned subsidiary of Gibson Greetings, Inc. As Vice President, Marketing you will report to the President, and perform those functions currently assigned, which functions and responsibilities can be changed at the discretion of the Company. The following terms and conditions will govern your service to the Company:

1. You will serve the Company on a full-time basis as a senior executive employee, and the company will employ you as such, for a period of three years commencing November 1, 1992 and ending October 31, 1995 unless you are terminated at an earlier date pursuant to Paragraphs 6, 7, or 9 of this Agreement. Your annual salary will be $103, 000, which amount will be reviewed every fifteen months and which may be adjusted from time to time by the Company throughout the term of this Agreement in accordance with the Company's salary administration program. No later than six months prior to expiration of the original term, or any renewal term, of this Agreement, it will be reviewed by the Company for the purpose of deciding whether or not it will be renewed upon its expiration. You will be notified of a decision not to renew. If you are not notified of a decision not to renew, the Agreement will automatically renew from year to year.

....

6. In the event you are unable to perform your duties hereunder due to illness or other incapacity, which incapacity continues for more than six consecutive or nonconsecutive months in any twelve-month period, the Company shall have the right, on not less than 30 days written notice to you, to terminate this Agreement....

7. In the event you voluntarily terminate your employment during the term of this Agreement, or if the Company terminates this Agreement and your employment for cause, your right to all compensation hereunder shall cease as of the date of termination. As used in this Agreement, "cause" shall mean dishonesty, gross negligence, or willful misconduct in the performance of your duties or a willful or material breach of this Agreement. Termination of employment shall terminate this Agreement with the exception of the provisions of Paragraphs 8, 9, 10, and 12.

8. Also in the event you voluntarily terminate your employment hereunder, or in the event the Company terminates this Agreement and your employment for cause, you agree that for a period of two years after such termination, you will not compete, directly or indirectly, with the Company or with any division, subsidiary, or affiliate of the Company or participate as a director, officer, employee, consultant, advisor, partner, or joint venturer in any business engaged in the manufacture or sale of greeting cards, gift wrap, or other products produced by the Company, or any division, subsidiary, or affiliate of the Company, without the Company's prior written consent.

9. In the event the Company terminates this Agreement and your employment without cause, you shall continue to be paid your then current salary from the date of termination through October 31, 1995.

In 1994, Cleo experienced several personnel changes in its upper management. Jack Rohrbach replaced Mr. Pietrangelo as the company's President and Chief Executive

Page 93

Officer and Marc English was later hired as the Senior Vice President of Marketing and "Creative." Mr. Rohrbach stated in his deposition that he began observing the appellant's work performance when he took over as the company president. Based upon his observations, he opined that the appellant had a poor work relationship with his peers and subordinates and that the appellant was not leading the marketing department in a direction best suited for the company. Mr. Rohrbach stated that he hired Mr. English as the new marketing Vice President because Mr. English had more industry experience and a successful track record.

In the Fall of 1994, the appellant received a series of letters from Mr. Rohrbach and Mr. English that diminished his employment responsibilities at Cleo. The first letter, dated September 13, 1994, informed the appellant that his employment contract would not be renewed after its expiration on October 31, 1995. Approximately two weeks later, the appellant received a second letter signed by Mr. Rohrbach that stated in pertinent part:

Effective today and until October 31, 1995, you are relieved of your duties as Vice President Marketing of Cleo Inc. and shall be responsible for such assignments as may be given to you by the President of the Company. During this period, you will remain an employee of the Company and the Company will continue to honor its obligations to you under your employment agreement.

However, you are specifically advised that you shall have no authority to bind, represent or speak for the Company in any manner except as may be stated in writing by the President of the Company.

For all future assignments, you shall be based out of your home.

Should you accept other employment prior to October 31, 1995, all benefits under your employment agreement shall immediately cease. Also, please take note of the confidentiality and non-compete provisions of your employment agreement.

We will be in touch when an appropriate assignment becomes available. In the meantime, should you have any questions or comments, please do not hesitate to contact me.

In November, 1994, the appellant received two additional letters from Cleo informing him that he was no longer authorized to use company credit cards and that he was to return the company cards in his possession. In addition, he was informed that Cleo would no longer answer a telephone line for him. All telephone calls for the appellant were to be screened for personal or business, with the personal calls being directed to appellant's home. Cleo allowed the appellant to retrieve the personal telephone numbers from his office rolodex, but all business numbers were kept exclusively by Cleo as company property.

Following the letter of September 28, 1994, the appellant stayed at his home for three months without receiving a work assignment from Cleo. During that time, Mr. English moved into appellant's old office and assumed the marketing responsibilities previously handled by the appellant. 3 On December 12, 1994, the appellant accepted new employment at Wang's International, Inc. with a starting salary of $110,000 per year. Cleo kept the appellant on the company payroll at $103,000 per year until he began his new employment.

The appellant filed suit against Cleo on January 26, 1995, claiming that the company had constructively terminated his employment without cause and that he was entitled to the remainder of his salary under Paragraph 9 of the employment contract. Cleo responded that its treatment

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of the appellant did not constitute a termination of his employment, but that even if it did, the provision in Paragraph 9 was an unenforceable penalty. Both parties filed motions for summary judgment. After a hearing, the trial court granted summary judgment to the appellant, awarding him $90,125 in salary remaining under his employment contract plus $14,296.54 in prejudgment interest.

On appeal by Cleo, the Court of Appeals affirmed the trial court's conclusion that the appellant was constructively terminated from his employment, but reversed the award of damages. The intermediate court interpreted Paragraph 9 of the employment contract as a provision for liquidated...

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424 practice notes
  • Burlison v. U.S., No. 06-6369.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (6th Circuit)
    • July 17, 2008
    ...are contracts and, therefore, under Tennessee law we apply de novo review regarding their interpretation. See Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn.1999). To interpret the deeds, we begin with their plain language. "If the easement is claimed under a grant, the extent of the easem......
  • In Re Market Center East Retail Property Inc., No. 11-09-11696 SA.
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico
    • August 3, 2010
    ...will be treated as a penalty. 22 Am.Jur.2d Damages § 686 (1988); Restatement (Second) of Contracts § 356 (1979). Guiliano v. Cleo, Inc., 995 S.W.2d 88, 98 (Tenn.1999). The Court assumes that New Mexico would frame a test similar to these, and ask: 1) was the anticipated injury difficult or ......
  • Hodge v. Craig, No. M2009–00930–SC–R11–CV.
    • United States
    • Supreme Court of Tennessee
    • October 1, 2012
    ...Home Fed. Sav. & Loan Ass'n of Nashville, 623 S.W.2d 624, 625 (Tenn.Ct.App.1981), overruled on other grounds by Guiliano v. Cleo, Inc., 995 S.W.2d 88, 100 (Tenn.1999). An issue may be deemed waived, even when it has been specifically raised as an issue, when the brief fails to include an ar......
  • Poole v. Bank, No. W2009–01507–COA–R3–CV.
    • United States
    • Court of Appeals of Tennessee
    • April 8, 2010
    ...such terms as they see fit, even if the bargained-for agreement may seem undesirable to outside observers. See Guiliano v. Cleo, Inc., 995 S.W.2d 88, 100 (Tenn.1999) (citations omitted); Chapman Drug Co. v. Chapman, 207 Tenn. 502, 341 S.W.2d 392, 398 (1960). Courts should, therefore, genera......
  • Request a trial to view additional results
420 cases
  • Burlison v. U.S., No. 06-6369.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (6th Circuit)
    • July 17, 2008
    ...are contracts and, therefore, under Tennessee law we apply de novo review regarding their interpretation. See Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn.1999). To interpret the deeds, we begin with their plain language. "If the easement is claimed under a grant, the extent of the easem......
  • In Re Market Center East Retail Property Inc., No. 11-09-11696 SA.
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico
    • August 3, 2010
    ...will be treated as a penalty. 22 Am.Jur.2d Damages § 686 (1988); Restatement (Second) of Contracts § 356 (1979). Guiliano v. Cleo, Inc., 995 S.W.2d 88, 98 (Tenn.1999). The Court assumes that New Mexico would frame a test similar to these, and ask: 1) was the anticipated injury difficult or ......
  • Hodge v. Craig, No. M2009–00930–SC–R11–CV.
    • United States
    • Supreme Court of Tennessee
    • October 1, 2012
    ...Home Fed. Sav. & Loan Ass'n of Nashville, 623 S.W.2d 624, 625 (Tenn.Ct.App.1981), overruled on other grounds by Guiliano v. Cleo, Inc., 995 S.W.2d 88, 100 (Tenn.1999). An issue may be deemed waived, even when it has been specifically raised as an issue, when the brief fails to include an ar......
  • Poole v. Bank, No. W2009–01507–COA–R3–CV.
    • United States
    • Court of Appeals of Tennessee
    • April 8, 2010
    ...such terms as they see fit, even if the bargained-for agreement may seem undesirable to outside observers. See Guiliano v. Cleo, Inc., 995 S.W.2d 88, 100 (Tenn.1999) (citations omitted); Chapman Drug Co. v. Chapman, 207 Tenn. 502, 341 S.W.2d 392, 398 (1960). Courts should, therefore, genera......
  • Request a trial to view additional results

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