McConkey v. Aon Corp.

• Decision Date: 23 July 2002
• Parties: Philip J. McCONKEY, Plaintiff-Respondent/Cross-Appellant, v. AON CORPORATION and Alexander & Alexander Services, Inc., Defendants-Appellants/Cross-Respondents.
• Court: New Jersey Superior Court

804 A.2d 572

354 N.J. Super. 25

Philip J. McCONKEY, Plaintiff-Respondent/Cross-Appellant, v. AON CORPORATION and Alexander & Alexander Services, Inc., Defendants-Appellants/Cross-Respondents.

Superior Court of New Jersey, Appellate Division.

Argued January 8, 2002.

Decided July 23, 2002.

Carter G. Phillips, of the Illinois bar, admitted pro hac vice, argued the cause for appellants/cross-respondents (Pitney, Hardin, Kipp & Szuch, Morristown, and Davis Carr and Daniel D. Kasten, Chicago, IL, attorneys; Frederick L. Whitmer, Morristown, and Mr. Carr, on the brief).

Neil Mullin argued the cause for respondent/cross-appellant (Smith Mullin and Kleinbard, Bell & Brecker, attorneys, Montclair; Mr. Mullin and Steven J. Engelmyer, Philadelphia, PA, on the brief).

Before Judges EICHEN, LINTNER and PARKER. The opinion of the court was delivered by EICHEN, J.A.D

Plaintiff Philip J. McConkey brought this action alleging that in 1996 he was fraudulently induced by defendant Alexander & Alexander Services, Inc. (A & A), an international insurance brokerage company to leave his position with Ross & Company (Ross), an insurance brokerage company in Montclair, to accept a position at A & A as its Director of Insurance Services Practice for Greater New York. Seven months later, A & A was acquired by defendant Aon Corporation (Aon).¹ A short time later, plaintiff was terminated. Plaintiff sought to recover compensatory and punitive damages from A & A, Frank Zarb, A & A's former Chairman of the Board and Chief Executive Officer, and Aon.²

The case was tried to a jury which found defendants liable in fraud and awarded plaintiff $2,638,000 in past economic damages, $400,000 in future economic damages, $2,000,000 for emotional distress, and $5,000,000 in punitive damages. The trial judge granted defendants' motion for judgment notwithstanding the verdict (JNOV) with respect to the emotional distress damage award. The judge also ordered a new trial on past economic damages subject to an offer of remittitur to $663,000 for those damages, which plaintiff accepted, leaving in place a total award of $6,063,000.

Defendants appeal asserting that the judge erred in (1) not dismissing the fraud claim; (2) allowing plaintiff to rely on benefit-of-the-bargain damages; and (3) upholding the jury verdict on punitive damages.

Plaintiff cross-appeals contending that (1) the judge misapplied the standard applicable to a motion for a new trial in reducing the past economic damages; and (2) the judge erred in granting a JNOV on plaintiff's emotional distress damages.

Preliminarily, we are obliged to point out our limited role on review of a jury's verdict: It is to accept as true all evidence supporting the verdict and to draw all reasonable inferences in its favor wherever reasonable minds could differ. Harper-Lawrence, Inc. v. United Merchants & Mfrs., Inc., 261 N.J.Super. 554, 559, 619 A.2d 623 (App.Div.1993) (citing Dolson v. Anastasia, 55 N.J. 2, 5, 258 A.2d 706 (1969)). With that principle in mind, these are the relevant facts.

Plaintiff is a former New York Giants professional football player and graduate of the United States Naval Academy. His high profile, as well as his work as a television football commentator, helped plaintiff form contacts in the business community. After he retired from football, at the end of the 1989 football season, plaintiff took a training course, passed the test to sell insurance, and took a position with Ross.

Toward the end of 1995, A & A began to aggressively pursue plaintiff in an effort to recruit him. At that time, A & A was the second largest insurance brokerage firm in the United States; Aon was the fifth largest.³

While working for Ross, plaintiff had created a substantial "book of business,"⁴ and his future at Ross was promising, with ownership of a portion of Ross a real possibility.

In November 1995, Rick Bernard from Risk and Insurance Resources, Inc., an executive recruiting firm, told plaintiff that a large insurance brokerage company, later identified as A & A, had expressed interest in hiring him. Although McConkey told Bernard he was not interested, Bernard and John Dougan, Bernard's boss, called McConkey numerous times during the end of 1995 and early 1996 urging him to consider the opportunity. In 1996, after McConkey became aware that A & A wanted him to run A & A's greater New York division in the "middle market area,"⁵ his interest grew. However, McConkey had concerns about rumors that A & A might be acquired by another insurance brokerage firm, which he raised with the recruiter Dougan.

Dougan spoke with Larry Burk, who was then the president and CEO of the North American operations of A & A, and Burk told Dougan that Frank Zarb, A & A's Chairman of the Board, and Elliot Cooperstone, former A & A Operating Officer, had told him on many occasions that A & A was absolutely not going to be sold to another company. In March 1996, Burk met with McConkey and McConkey reiterated his concerns regarding the rumors that A & A might be taken over. Burk responded that the rumors were not true, insisting that A & A was "the predator and not the prey," implying that A & A was the one buying companies and was not going to be bought. According to Burk,⁶ during A & A's efforts to recruit McConkey, he, as well as Zarb and Cooperstone, assured plaintiff that the plan was not to sell A & A and repeated the mantra that A & A was "the predator, not the prey." Indeed, Burk told plaintiff that A & A desired to purchase Ross if acceptable terms could be worked out. Despite these assurances, plaintiff was still concerned about the rumors and wanted to see Zarb to obtain his assurances regarding these rumors. Zarb had become A & A's Chairman of the Board in June 1994.

On April 17, 1996, plaintiff met with Zarb in Zarb's office in the company's New York headquarters, and told him about his rising status at Ross, his "ownership potential" there, and that he was "worried" about the rumors that A & A was seeking to sell itself or merge with another company in a way that would alter the structure of the company. Specifically, plaintiff asked Zarb if there were "any facts" at all, "if there was a scintilla of evidence of truth to these rumors."

Plaintiff testified that Zarb responded: "those rumors are started by our competition to bring us down. They are totally unfounded. We're the predator and not the prey. We're going to grow this business and become number one again and a leader in the industry." In addition, Zarb told McConkey A & A wanted plaintiff's region to grow by $30 to $50 million. Satisfied with Zarb's assurances, plaintiff decided to accept the position. Plaintiff stated that he "[a]bsolutely" relied on what Zarb told him in deciding to take a position with A & A.

Zarb stated in a deposition that he had no recollection of ever speaking to plaintiff personally or on the telephone. However, at trial, Zarb acknowledged that he might have met with plaintiff and made comments during their brief meeting because those days a lot of people asked questions about A & A's corporate strategy.

In a letter dated May 3, 1996, Burk offered McConkey the position of "Director of Insurance Services Practice for Greater New York" with A & A, and plaintiff signed the letter confirming his acceptance. In accordance with the letter, McConkey's compensation included a base monthly salary of $17,500, a "normal" benefits package, and eligibility for participation in an annual incentive plan and a long-term incentive plan. A & A used a figure of 20% of base salary to calculate benefits, so on an annual basis, base salary and benefits had the value of $252,000 per year. Under the annual incentive plan, plaintiff's target was $100,000, pro-rated based upon the date of employment. The letter explains:

This target is based upon the achievement of specified objectives which will be formalized as soon as possible after your start date. The components in your incentive plan will include, but not necessarily be limited to, Revenue Growth, Profit and certain Recruitment Targets. Bonus payouts are subject to approval by the Management Committee and/or Board of Directors. According to the A & A Inc. Incentive Plan the bonus payout will be 15% in 2 year restricted A & A stock and 85% in cash.⁷

On May 15, 1996, McConkey started working for A & A.

Under the long-term incentive plan covering the period of 1996 through 1999, the letter provides:

The plan hurdle is to achieve at least $5 million of operating income over the period. If we achieve that level, you will earn 6% of the operating income produced. If we achieve $5.5 million of operating income, you will earn 8% of the operating income. And if we achieve $6.5 million or more of operating income, you will earn 10%. These figures are based on the assumption that you can grow the current $6.7 million base of business to $13 million in 1999 along with a steady improvement in margin up to 20% in 1999.

McConkey calculated that if those targets were reached, he would have received a lump sum of $3 to $5 million at the end of 1999. Like Zarb, Dougan stated that Burk told him that A & A was looking to grow the middle market in the greater New York region by $30 to $50 million. However, Ed Kiessling, plaintiff's supervisor at A & A, stated that the projected growth of $30 to $50 million was intended for all greater New York operations, not just plaintiff's middle market segment.

McConkey understood that he was an at-will employee who could be fired at any time and that nothing in the letter or documents created an employment contract or fixed term of employment. However, he assumed that if he did his job, he would not be fired. He was thirty-eight years old when hired and hoped to stay with A & A for the rest of his working career. He believed that A & A viewed him as a long-term employee because the May 3, 1996 letter included long-term compensation through 1999.

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