Hodge v. Evans Financial Corp.

• Court: U.S. Court of Appeals — District of Columbia Circuit
• Writing for the Court: Before WALD, Chief Judge, ROBINSON, Circuit Judge, and MacKINNON; WALD; MacKINNON
• Citation: Hodge v. Evans Financial Corp., 823 F.2d 559, 262 U.S.App.D.C. 151 (D.C. Cir. 1987)
• Decision Date: 02 July 1987
• Docket Number: No. 84-5224,84-5224
• Parties: , 107 Lab.Cas. P 55,823, 2 Indiv.Empl.Rts.Cas. 395 Albert Z. HODGE v. EVANS FINANCIAL CORPORATION, Appellant.

Page 559

823 F.2d 559

262 U.S.App.D.C. 151, 107 Lab.Cas. P 55,823,

2 Indiv.Empl.Rts.Cas. 395

Albert Z. HODGE v. EVANS FINANCIAL CORPORATION, Appellant.

No. 84-5224.

United States Court of Appeals District of Columbia Circuit.

Argued Jan. 11, 1985.

Decided on Rehearing July 2, 1987.

Appeal from the United States District Court for the District of Columbia (Civil Action No. 81-02726).

Lee A. Rau, with whom Daniel A. Maser and Loren Kieve, Washington, D.C., were on the brief, for appellant.

Albert Z. Hodge, pro se, with whom Gary Ethan Klein, Washington, D.C., was on the brief, for appellee.

Before WALD, Chief Judge, ROBINSON, Circuit Judge, and MacKINNON, Senior Circuit Judge.

Opinion for the Court filed by Chief Judge WALD.

Opinion dissenting in part and concurring in part filed by Senior Circuit Judge MacKINNON.

WALD, Chief Judge:

After a jury verdict awarding appellee Albert Z. Hodge $175,000 for breach of an employment contract, appellant Evans Financial Corporation ("Evans") seeks review of the District Court's denial of its motions for judgment n.o.v. and a new trial. Hodge claimed that he had been discharged from his position as general counsel of Evans in violation of an oral agreement by Evans to employ him permanently. The District Court denied Evans' motion for a directed verdict and refused to instruct the jury on the statute of frauds defense asserted by Evans. Following the jury's verdict, Evans' motions for judgment n.o.v. and new trial were also denied. In this appeal, Evans again argues that the oral employment contract is unenforceable under the District of Columbia statute of frauds and makes several other objections to the jury's verdict. Although we reject most of these challenges, we agree with Evans that the trial court erred in allowing Hodge to present to the jury evidence concerning two items of damages to which he was not entitled. We therefore affirm the judgment of the District Court on condition that the appellee remit the portion of the award which might be attributable to those items. ¹

I. BACKGROUND

On two occasions in 1980, Hodge met with Jon Tilley, president and chief operating officer of Evans Financial Corporation, to discuss Hodge's possible employment by Evans. Hodge was at that time assistant counsel and assistant secretary of Mellon National Corporation and Mellon Bank of Pittsburgh. According to Hodge's trial testimony, Tilley asked Hodge at the second meeting what his conditions were for accepting employment with Evans. Hodge replied, "No. 1, the job must be permanent. Because of my age, I have a great fear about going back into the marketplace again. I want to be here until I retire." Trial Transcript ("Tr.") at 109. Hodge testified that Tilley's response was "I accept that condition." Tr. at 110. Hodge subsequently accepted an offer of employment as vice president and general counsel of Evans. He moved from Pittsburgh to Washington, D.C. in September, 1980, and worked for Evans from that time until he was fired by Tilley on May 7, 1981.

Hodge then brought this diversity action in the District Court, alleging that his termination violated Evans' promise of permanent employment. The District Court initially granted summary judgment for Evans, ruling that all employment contracts for an indefinite period of time are terminable at will as a matter of law. Hodge v. Evans Financial Corp., No. 81-2726, slip op. at 6-7 (D.D.C. Apr. 15, 1982). This court reversed and held that "[t]hough the classic assumption of the law is that the parties intend a contract of indefinite term to be terminable at will, basic principles of contract law inform us that the parties can contract otherwise." Hodge v. Evans Financial Corp., 707 F.2d 1566, 1568 (D.C.Cir.1983). The court concluded that Hodge was entitled to an opportunity to demonstrate that the employment contract between Evans and Hodge was intended to be of indefinite duration and terminable only for cause and remanded to the District Court. Id. at 1570. The case was then tried to a jury, which found for the plaintiff and awarded him $175,000 in damages.

II. ANALYSIS

A. Enforceability of the Agreement Under the District of Columbia Statute of Frauds

Evans argues that the oral employment agreement between Evans and Hodge is unenforceable under the statute of frauds as enacted in the District of Columbia, which provides, in relevant part, that:

An action may not be brought ... upon an agreement that is not to be performed within one year from the making thereof, unless the agreement upon which the action is brought, or a memorandum or note thereof, is in writing ... and signed by the party to be charged therewith or a person authorized by him.

D.C.Code Sec. 28-3502. Because the agreement here contemplated long-term employment for a number of years, Evans argues that the statute requires it to have been in writing in order to be enforceable.

Despite its sweeping terms, the one-year provision of the statute has long been construed narrowly and literally. Under the prevailing interpretation, the enforceability of a contract under the statute does not depend on the actual course of subsequent events or on the expectations of the parties. Instead, the statute applies only to those contracts whose performance could not possibly or conceivably be completed within one year. The statute of frauds is thus inapplicable if, at the time the contract is formed, any contingent event could complete the terms of the contract within one year. See, e.g., Restatement (Second) of Contracts Sec. 130 comment a (1979); 2 Corbin on Contracts Sec. 445, at 542-43 (1950 & Supp. 1984) ("It makes no difference how improbable it is that the condition will occur within a year; if there is any possibility that it may so happen, the statutory provision is not applicable."); 3 Williston on Contracts Sec. 495, at 577-83 (3d ed. 1960) (same).

This interpretation of the statute has been adopted by the District of Columbia courts. The District of Columbia Court of Appeals recently stated that if a contract is "by its terms capable, possible, or susceptible of performance within one year, the statute of frauds does not apply and an oral agreement may suffice." Launay v. Launay, Inc., 497 A.2d 443, 449 n. 4 (D.C.1985) (citing Snyder v. Hillegeist, 246 F.2d 649, 651 (D.C.Cir.1957)); see also Coan v. Orsinger, 265 F.2d 575, 578 (D.C.Cir.1959) ("If the contingency which fulfills and completes the terms of the contract happens or could possibly happen within a year, the contract is not within the statute.").

Hodge argues that, under this interpretation of the statute of frauds, a permanent or lifetime employment contract does not fall within the statute because it is capable of full performance within one year if the employee were to die within the period. Hodge's view of the statute's applicability to lifetime or permanent employment contracts has, in fact, been accepted by an overwhelming majority of courts and commentators. See Restatement (Second) of Contracts Sec. 130 illustration 2 (1979) ("A orally promises to work for B, and B promises to employ A during A's life at a stated salary. The promises are not within the one-year provision of the Statute, since A's life may terminate within a year."); Restatement (First) of Contracts Sec. 198 illustration 2 (1930) (same); Restatement (Second) of Agency Sec. 414 comment a (1958) (same); 2 Corbin on Contracts Sec. 446, at 549 & n. 35 (1950 and Supp.1984) ("A contract for 'permanent' employment is not within the one-year clause for the reason that such a contract will be fully performed, according to its terms, upon the death of the employee."); E. Farnsworth, Contracts Sec. 6.4, at 394 (1982) (same); 3 Williston on Contracts Sec. 495, at 579-81 & n. 8 (3d ed. 1960) (same); 72 Am.Jur.2d Statute of Frauds Sec. 42 (1974 & Supp.1984) ("It is a well-settled general rule that a contract ... to employ one for the duration of his life [or] a contract to give one 'permanent' employment ... is not within [the statute] for the reason that contracts of this description are deemed possible of performance within one year from their formation, since, for example, the employee may die within that period.") (footnotes omitted).

Although the local courts have not directly spoken on the applicability of the statute to permanent employment contracts, the vast majority of the state courts faced with this issue have squarely and unequivocally held that contracts such as Hodge's fall outside the statute. ² As a diversity court, we must make a conscientious attempt to predict whether local courts would accept the prevailing view of the statute of frauds in light of the relevant indications in local law and elsewhere. See generally 19 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure Sec. 4507 (1982). In Cooper v. Saunders-Hunt, 365 A.2d 626, 629 (D.C.1976), the highest local court adhered to the conventional, narrow interpretation of the one-year provision by concluding that an indefinite oral partnership agreement does not fall within the statute. See id. ("An oral partnership agreement [for an indefinite period of time] would not run afoul of the Statute of Frauds, since no term of years was ever fixed by the agreement and therefore it was capable of performance within one year.") (citing Snyder, 246 F.2d at 651). This court has also recognized, albeit in dicta, that employment contracts of an uncertain or permanent duration are excluded from the statute. See Farrow v. Cahill, 663 F.2d 201, 207 n. 29 (D.C.Cir.1980) ("[A] promise to serve as an employee as long as the employee lives ... is ... clearly outside the Statute.") (discussing Williston). In sum, the prevailing view is that Hodge's permanent employment contract is not barred by the statute of frauds, and there is no reason to believe that the District of Columbia courts would depart from the conventional interpretation of the statute in this case.

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