Meaney v. Connecticut Hospital Assn., Inc., (SC 15895)

• Court: Supreme Court of Connecticut
• Citation: 735 A.2d 813,250 Conn. 500
• Decision Date: 31 August 1999
• Docket Number: (SC 15895)
• Parties: EDWARD F. MEANEY III v. CONNECTICUT HOSPITAL ASSOCIATION, INC., ET AL.

250 Conn. 500
735 A.2d 813

EDWARD F. MEANEY III
v.
CONNECTICUT HOSPITAL ASSOCIATION, INC., ET AL

(SC 15895)

Supreme Court of Connecticut.

Argued June 3, 1999.

Officially released August 31, 1999.

Callahan, C. J., and Berdon, Palmer, McDonald and Peters, JS.

250 Conn. 501

Mark R. Kravitz, with whom were David J. O'Callaghan and, on the brief, Peter M. Wendzel and Jennifer D. Jackson, for the appellants (named defendant et al.)

John Rose, Jr., with whom was Scott A. Bennett, for the appellee (plaintiff).

Everett E. Newton, Cynthia L. Amara, Loretta M. Smith and Janet C. Spegele filed a brief for the Connecticut Business and Industry Association as amicus curiae.

Opinion

PETERS, J.

The dispositive issue in this appeal is whether, as a result of unconsummated negotiations for incentive compensation to supplement the salary and benefits provided by an enforceable employment contract, an employee may recover damages pursuant to a claim in restitution for unjust enrichment. The issue is not whether the employee has a contract claim for the payment of a reasonable incentive bonus, but whether, in the absence of such a contract, the employee has a right to recover the amount by which his services benefited his employer. This is an issue of first impression for the appellate courts of this state. We conclude that the employee does not have a right of recovery under the circumstances of this case.

The plaintiff, Edward F. Meaney III, brought an action in seven counts against four defendants. The two corporate defendants are the Connecticut Hospital Association, Inc. (Association), and CHA Insurance Services,

250 Conn. 502

Inc. (CHAIS), an affiliate of the Association that is engaged in the business of selling insurance. The plaintiff also named as defendants two individuals, Dennis P. May and Donald A. Berkowitz, who were the president and a senior employee, respectively, of the Association and officers of several of its affiliates

At trial, the plaintiff's principal allegations were that the individual defendants intentionally had made misrepresentations that had induced him to agree to the terms of a written employment contract that did not include incentive compensation¹ and that the corporate defendants wrongfully had discharged him in breach of his contract and in violation of public policy.² The plaintiff was able to prove none of these allegations.³ He did not allege that the defendants, in breach of their contract obligations to him, had failed to pay him incentive compensation in addition to his designated salary and benefits.

The plaintiffs final allegation, in count seven of the complaint, was that, regardless of his other claims for recovery, he was entitled to recover damages from the corporate defendants for unjust enrichment premised upon an implied promise to pay the plaintiff a fair value for the services he had rendered. There is no question

250 Conn. 503

that the plaintiff was paid the salary and benefits to which he was entitled pursuant to his employment contract. The plaintiff claimed that, in addition, he was entitled to recover such fair value because the defendants had agreed to supplement his salary with incentive compensation and had failed to do so. On this count, the jury awarded the plaintiff $710,901

The trial court denied the motion of the corporate defendants to set aside the jury verdict on count seven, for judgment notwithstanding the verdict, for a new trial and for remittitur of damages. The defendants have appealed from the judgment rendered in favor of the plaintiff on this count.⁴ We reverse the judgment of the trial court.

I

Many of the facts are undisputed. The plaintiff is a licensed insurance agent who began his employment with the defendants on January 15, 1991. In accordance with a letter that Berkowitz sent on December 17, 1990, and that the plaintiff signed, he was hired as the director of insurance services at CHAIS at an annual salary of $65,000 plus fringe benefits. The salary was $10,000 more than the plaintiff had been earning at his prior position, and $21,000 more than he had been earning one year earlier. The letter referred to an enclosed employment application, which the plaintiff also signed. The application described his employment as being "at-will" and expressly superseded any oral representations that might have accompanied the plaintiff's employment.

Although the plaintiff's initial employment contract did not contain any provision for bonuses or incentive

250 Conn. 504

pay, he had expressed an interest in that form of compensation from the outset. The plaintiff was hired to improve the profitability of CHAIS, an Association affiliate that, since 1981, had operated a workers' compensation trust (trust) that offered workers' compensation insurance to Association member hospitals. The plaintiff expected to be paid a bonus in addition to his salary, not initially, but at some undefined subsequent date when he had succeeded in turning the trust around.

The Association management recognized the value of the plaintiff's entrepreneurial contributions in making the trust more profitable than it had been in the years immediately preceding his employment. In 1991, six months after he had started to work, the defendants increased his salary by $4000; in 1993, the defendants raised his salary by an additional $2800. As a result, before the plaintiffs discharge, he was earning $72,800 a year, a sum considerably in excess of any salary that he had earned previously.

The Association's management also recognized that the plaintiffs services warranted consideration of incentive compensation for him. During 1992, the second year of the plaintiff's employment, under his leadership, the operation of the CHAIS trust was becoming financially more successful. In the spring of that year, Berkowitz wrote May: "I do think we need to sit down with [the plaintiff] to discuss some incentive program.... [H]e is a most valuable and productive employee and we at [the Association] should do everything we can, within reason, to retain him." Later in 1992, May tendered to the plaintiff a proposal for incentive pay, which would have increased the plaintiffs annual compensation from salary and commissions to approximately $100,000, starting January 1, 1993. The plaintiff did not accept this proposal. In January, 1993, the plaintiff tendered an alternate proposal for his future compensation, under which he would immediately have

250 Conn. 505

received an increase in his base salary, without commission, to $110,000, and would in addition have become eligible for commissions, not for earnings stemming from CHAIS' trust business, but from other Association enterprises with which he had become involved. Like the proposal tendered by the defendants, the plaintiff's proposed incentive pay plan would have become effective on January 1, 1993. The plaintiff's proposal also included a number of other suggestions about the operations of CHAIS and the possible terms of a noncompete clause that was not then a part of his employment contract. The defendants did not accept the plaintiffs proposal.

In the early months of 1993, the parties continued to discuss their respective proposals for incentive pay for the plaintiff. While the parties were engaged in these discussions, the defendants increased the plaintiff's salary by $2800. Having come to no agreement, the parties decided to ask an outside consultant to evaluate the compensation picture, without binding themselves to accept whatever proposal the consultant might make. Although the plaintiff suggested a number of possible consultants, the defendants chose instead to engage the services of Kenn R. Allen, the president of the Meadowbrook Agency in Detroit, Michigan.

Allen's report, issued on May 9, 1993, was very critical of the plaintiffs work for CHAIS. In the report, Allen found fault with the plaintiffs management style and attributed his financial success with the trust to "competitive pricing." This negative report was a contributing factor in the defendants' termination of the plaintiffs employment on May 27, 1993. The terms of the plaintiffs employment contract permitted the defendants to discharge him at will.

The only evidence of the value of the services rendered by the plaintiff was the testimony of his expert

250 Conn. 506

witness, Karen A. Murphy, the president of Stamford Financial Group. Testifying over the objection of the defendants, Murphy stated that, in 1995, two years after the plaintiffs discharge, the value that the defendants' insurance operations received directly from the plaintiff's contribution was between $2,200,000 and $5,100,000. She also testified that, if the plaintiff's compensation were compared to that earned by employees at other insurance agencies, the plaintiff had been underpaid by $336,000 over the entire course of his employment by the defendants. That undercompensation principally was due, in her view, to the defendants' failure to pay the plaintiff a bonus equaling 25 percent of the profits that the defendants had earned from trust revenues.

The trial court instructed the jury, with respect to count seven,⁵ that, if it found that the plaintiff had been

250 Conn. 507

promised a bonus or incentive compensation in addition to a salary for his services, the jury might make an award to him for "a sum representing reasonable incentive compensation...." In determining the amount of such an award, the jury was told that it might "consider the earnings realized by the defendants, as a result of the plaintiff's services...." Although the court cautioned the jury against assigning all of an employer's profits to an employee, it did not further narrow the jury's discretion to determine the amount by which the defendants had been benefited by the plaintiffs services.

The jury awarded the plaintiff damages of $710,901. Neither the plaintiff nor the trial court has articulated the manner in...