McGarrity v. Berlin Metals, Inc.

• Decision Date: 06 August 2002
• Docket Number: No. 45A03-0109-CV-303.,45A03-0109-CV-303.
• Citation: 774 N.E.2d 71
• Parties: John P. McGARRITY, Appellant-Plaintiff, v. BERLIN METALS, INC. and Melvin R. Berlin, Appellees-Defendants.
• Court: Indiana Appellate Court

774 N.E.2d 71

John P. McGARRITY, Appellant-Plaintiff, v. BERLIN METALS, INC. and Melvin R. Berlin, Appellees-Defendants.¹

No. 45A03-0109-CV-303.

Court of Appeals of Indiana.

August 6, 2002.

Gary K. Matthews, Enslen Enslen & Matthews, Hammond, IN, Attorney for Appellant.

Robert L. Byman, Jenner & Block, Chicago, IL, David C. Jensen, Scott B. Cockrum, Eichhorn & Eichhorn, Hammond, IN, Attorneys for Appellees.

OPINION

KIRSCH, Judge.

With the sole exception of the war on terrorism, no issue dominates current thought more than the corporate and accountancy ethical scandals which have rocked our country. Insider trading, overstated corporate earnings, shredded documents, and a host of related issues dominate the national news, business journals, and law reviews. It is within this societal framework that the case now before us for decision must be judged.

It arises from a suit John P. McGarrity brought against Berlin Metals, Inc. ("BMI") and Melvin R. Berlin alleging wrongful termination and breach of contract. After his presentation of evidence, the trial court granted the defendants' judgment on the evidence on the wrongful termination claim, allowing the jury to decide McGarrity's breach of contract claim. McGarrity now appeals, raising the following restated issues:

I. Does Indiana law recognize a tort claim for wrongful termination where a corporate financial officer is discharged for refusing to certify false financial and tax records?

II. Whether the trial court erred in excluding BMI's property tax returns for 1997 through 2000.

III. Whether the trial court erred in refusing to instruct the jury on the definition of "good cause" for terminating employment.

We reverse.

FACTS AND PROCEDURAL HISTORY

In 1993 and 1994, BMI was experiencing financial problems and began a search for an accomplished chief financial officer (CFO). At the advice of a corporate consultant, Berlin, acting on behalf of BMI, contacted McGarrity, interviewed him, and offered him the position. In interviews and dinner meetings between Berlin and his wife and McGarrity and his wife, the McGarritys sought assurances that, if McGarrity left his current position and joined BMI, which would require the family to relocate, the employment arrangement would be permanent. Berlin assured them that his company's employees left employment only of their own accord.

In May 1994, McGarrity began employment with BMI. The CFO position required McGarrity to manage relationships with lenders, creditors, suppliers, and customers. In addition, McGarrity managed the company's accounting system, produced daily reports, and produced budgets and forecasts. One important aspect of McGarrity's position was producing certified monthly financial statements. Through McGarrity's efforts, BMI obtained increasingly large amounts of loans which the company used as operating funds. However, the lender's willingness to grant the loans was contingent upon timely production of certified financial statements reflecting BMI's economic position.

Shortly after McGarrity began his employment, BMI's 1993 business personal property tax return was audited. In preparation for and during the course of the audit, McGarrity discovered a potential problem with the manner in which BMI had classified its inventory. Specifically, BMI classified the bulk of its inventory as finished goods so that they would qualify for the interstate commerce exemption from the personal property tax. McGarrity believed that this classification was inappropriate and that ninety to ninety-five percent of the inventory was raw material subject to full taxation. McGarrity also learned that his predecessor, Patrick Soukup, had disagreed with Berlin on this issue and as a result had refused to sign the return and was eventually terminated. As a result of this audit, BMI was assessed $94,000 in additional tax liability. McGarrity negotiated with the State for a reduction in interest and penalties associated with the underpayment. McGarrity informed Berlin that while he encouraged undertaking legal tax avoidance measures, he would not participate in any dishonesty to reduce BMI's tax liability.

Berlin and other corporate officers decided in late 1994 to terminate McGarrity's employment.² However, they did not communicate this fact to McGarrity and began to search for his replacement. McGarrity and Berlin continued to clash regarding the personal property tax assessment classifications. For the 1996 assessment, McGarrity suggested that BMI move some of its inventory out of Indiana on March 1, 1996 to avoid the property tax, but he and Berlin continued to disagree. Berlin eventually replaced McGarrity on the return preparation assignment with an outside consultant, Edward Krusa, and ordered McGarrity to visit an out-of-state business location on the assessment date. When McGarrity inquired as to what figure to show as the company's tax liability in its accounting records and certified monthly financial statements, Berlin told McGarrity a figure to use. Berlin, however, failed or refused to show McGarrity a copy of the filed property tax return to verify the figure. McGarrity also discovered that BMI had not moved the bulk of the inventory to Illinois on the assessment date as it represented and had created false bills of lading and false entries in the company's inventory tracking system to make it appear as though the Indiana warehouse held less inventory than it actually did. In August, McGarrity obtained a copy of the return from the tax assessor's office. Based on McGarrity's calculations, BMI's reported tax liability was at least $66,000 too low. McGarrity was trying to determine how to correct this discrepancy with the State and with BMI's financial records when in October 1996, BMI terminated him.

McGarrity brought suit against Berlin and BMI for wrongful termination, claiming that he was fired for failing to comply with BMI's scheme to defraud the State and its lenders by misclassifying and misrepresenting the location of inventory. He also sought punitive damages. In addition, McGarrity's complaint included a count in which he alleged that BMI breached a contract to provide him with employment until his retirement.

At the jury trial, McGarrity sought to introduce BMI's property tax returns for 1997 through 2000, but the trial court refused to admit them, ruling that they were not relevant. At the close of McGarrity's presentation of evidence, BMI and Berlin moved for a judgment on the evidence. The trial court granted the motion with regard to the wrongful termination claim and allowed the breach of contract claim to be decided by the jury. The jury returned a verdict in favor of BMI. McGarrity now appeals.

DISCUSSION AND DECISION

I. Wrongful termination claim

McGarrity first argues that the trial court erred in granting a judgment on the evidence on his claim for wrongful termination and his concomitant demand for punitive damages. Motions for judgment on the evidence (directed verdict) are governed by Indiana Trial Rule 50. Hoosier Ins. Co. v. North South Trucking Supplies, Inc., 684 N.E.2d 1164, 1168 (Ind. Ct.App.1997). Pursuant to that rule, a judgment on the evidence is proper only when there is a total absence of evidence in favor of the non-moving party, that is, the evidence is without conflict and is susceptible of only one inference and that inference is in favor of the movant. Ross v. Lowe, 619 N.E.2d 911, 914 (Ind.1993); Hoosier Ins. Co.,684 N.E.2d at 1168; Hampton v. Moistner, 654 N.E.2d 1191, 1193 (Ind.Ct.App.1995); Teitge v. Remy Constr. Co., Inc., 526 N.E.2d 1008, 1010 (Ind.Ct.App.1988). The trial court must view the evidence in the light most favorable to the non-moving party, and if there is any evidence of probative value or reasonable inference therefrom which supports that party's claim, or if the evidence conflicts such that reasonable minds might draw differing conclusions, judgment on the evidence is inappropriate. Ross, 619 N.E.2d at 914; Keith v. Mendus, 661 N.E.2d 26, 35 (Ind.Ct.App.1996),trans. denied; Teitge, 526 N.E.2d at 1010. The court may not substitute its judgment for that of the jury on questions of fact nor grant the motion because the evidence decidedly preponderates in favor of the moving party. Hoosier Ins. Co.,684 N.E.2d at 1168.

In reviewing the grant of judgment on the evidence, this court also considers only the evidence and reasonable inferences most favorable to the non-moving party. Ross, 619 N.E.2d at 914. We examine the evidence and the reasonable inferences most favorable to the plaintiff from a quantitative as well as a qualitative perspective. Hampton, 654 N.E.2d at 1193. Quantitatively, evidence may fail only where there is none at all. Id. Qualitatively, however, it fails when it cannot be said reasonably that the intended inference may logically be drawn therefrom. Id. The failure of an inference may occur as a matter of law when the intended inference can rest on no more than speculation or conjecture. Id.

McGarrity claims that his employment was terminated for refusing to be a party to an illegal, fraudulent scheme of underreporting tax liability. Absent a set term of employment, an employment relationship is at will. Indianapolis Osteopathic Hosp., Inc. v. Jones, 669 N.E.2d 431, 433 (Ind.Ct.App.1996); Haas Carriage, Inc. v. Berna, 651 N.E.2d 284, 288 (Ind.Ct.App.1995). However, our supreme court has recognized some limited exceptions to the employment at will doctrine. Haas Carriage, 651 N.E.2d at 288. For instance, courts recognize a cause of action for retaliatory discharge when an employee is discharged solely for exercising a statutorily conferred right. Frampton v. Central Indiana Gas Co., 260 Ind. 249, 252, 297 N.E.2d 425, 428 (1973). Also, an at will employee allegedly fired for refusing to commit an unlawful act for which he would be personally liable may bring a cause of action for wrongful discharge. Haas Carriage,...