Murcott v. Best Western Intern., Inc.

• Decision Date: 31 August 2000
• Docket Number: No. 1 CA-CV 99-0494.,1 CA-CV 99-0494.
• Citation: 9 P.3d 1088,198 Ariz. 349
• Parties: Brian MURCOTT and Mary Murcott, husband and wife, Plaintiffs-Appellees, Cross Appellants, v. BEST WESTERN INTERNATIONAL, INC., an Arizona corporation; Mark T. Brown, Loren H. Unruh, Rodger Mathis and David L. Huff, Sr., Defendants-Appellants, Cross Appellees.
• Court: Arizona Court of Appeals

9 P.3d 1088

198 Ariz. 349

Brian MURCOTT and Mary Murcott, husband and wife, Plaintiffs-Appellees, Cross Appellants, v. BEST WESTERN INTERNATIONAL, INC., an Arizona corporation; Mark T. Brown, Loren H. Unruh, Rodger Mathis and David L. Huff, Sr., Defendants-Appellants, Cross Appellees.

No. -0494.

Court of Appeals of Arizona, Division 1, Department E.

August 31, 2000.

As Amended October 16, 2000.

Schleier, Jellison & Schleier, P.C. By Tod F. Schleier, Bradley H. Schleier and Galbut & Conant By Paul A. Conant, Phoenix, Attorneys for Plaintiffs-Appellees, Cross Appellants.

Gust Rosenfeld, P.L.C. By Richard A. Segal, Phoenix, and Ross, Dixon & Bell, L.L.P. By Lewis K. Loss, Terrence R. McInnis, Andrea R. Tebbets, Washington, D.C., Attorneys for Defendants-Appellants, Cross Appellees.

OPINION

GERBER, Judge.

¶ 1 Brian Murcott filed an action for wrongful discharge against his former employer, Best Western International, Inc., and four individuals serving as company directors at the time of the discharge: Mark T. Brown, Rodger Mathis, Loren H. Unruh, and David L. Huff. Best Western moved for a directed verdict on liability and on a claim for punitive damages. The trial court denied the motion as to liability and directed a verdict in favor of Best Western on the punitive damages claim.

¶ 2 After the jury found in Murcott's favor, Best Western filed an unsuccessful motion for judgment notwithstanding the verdict, or as it is now termed in revised Rule 50, Arizona Rules of Civil Procedure, judgment as a matter of law ("JMOL"). Best Western now appeals from the denial of the JMOL motion, and Murcott cross-appeals from the directed verdict on punitive damages. We have jurisdiction over both appeals. See Ariz.Rev.Stat. Ann. ("A.R.S.") section 12-2101(B)(1994). The issues raised generally involve the interplay between "whistle-blowing" and at-will discharge.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Factual Background

1. The Parties

¶ 3 Best Western is an Arizona non-profit corporation. Instead of stockholders, it has members who are independent owners and/or operators of its hotels and motels.

¶ 4 During 1994 and 1995, when the events giving rise to this lawsuit occurred, Best Western's seven-member board of directors consisted of the four individual defendants (Brown served as Chairman of the board during 1995), plus three persons not named in this suit: Don Seaton, Fred Walter, and Steve Vande Berg. Murcott joined the company in 1989 as Vice President of Membership Development and Quality Assurance. He did not have a written employment contract and served at the pleasure of the board as an at-will employee.

2. Best Western's Membership Application Process

¶ 5 The board was charged with electing property owners and operators to membership. It met about ten times each year to review and vote on applications. In-house staff would submit a report on each applicant's ownership and management, location, market, facilities and service. Such reports included a non-binding recommendation. Board members also would provide input after visiting applicant properties.

¶ 6 According to Murcott, numerous factors entered into the staff's evaluation whether an applicant would be a good candidate for membership, including the property's appearance, its location, the applicant's experience and whether Best Western was already sufficiently represented in the relevant market. Murcott stated that "the overriding concept" of the application review process was "to decide what is in the best interests of the association as a whole."

3. The Seven Contested Applications

¶ 7 At trial, Murcott identified seven instances during 1994-95 in which he disagreed, on anti-trust grounds, with the Board's handling of an actual or prospective application. These instances are described below.

a. Valle, Arizona (Grand Canyon Motel)

¶ 8 In March 1994, the Grand Canyon Motel in Valle, Arizona applied for membership. Best Western already had a member hotel in the Grand Canyon area, the Grand Canyon Squire Inn. During the course of Best Western's evaluation of the Grand Canyon Motel's application, defendant Brown personally inspected the applicant's property and met with the applicant and the existing Best Western member in the area.

¶ 9 Best Western staff had recommended a "conditional approval" of the Grand Canyon Motel's application, but at the board meeting at which the application was considered, Brown expressed concerns regarding "points about the [applicant's] property that he didn't like." After consideration, the board voted to reject the Grand Canyon Motel application.

¶ 10 Murcott claimed at trial that he had "serious concerns" regarding defendant Brown's actions in connection with the application. He expressed these concerns to Best Western's legal counsel. Specifically, Murcott believed that Brown departed from company policy when he visited the hotel and met with the existing competing member. He testified that he raised objections with Brown regarding the perceived departure from Best Western's policies at a board meeting at which he also stated that this departure from company policies could "possibly lead to an antitrust lawsuit." The board denied the application based on Brown's motion.

b. Portland, Maine (Sonesta Hotel)

¶ 11 In August 1994, the Sonesta Hotel in Portland, Maine expressed interest in membership in Best Western. Before the application process got underway, Murcott and defendant Huff visited the hotel to evaluate it. During this visit, both Murcott and Huff met with the owner of the existing Best Western hotel in Portland, who was also a Best Western "governor" for the region.

¶ 12 While Murcott was impressed by the applicant's property, Huff had a negative reaction. According to Murcott, Huff criticized the hotel because it had a number of undersized rooms, rented some rooms on a permanent basis to residents and was near an X-rated movie theater. Murcott also asserted that Huff was concerned with the hotel's impact on another nearby Best Western property. Huff told Murcott that he would not support the application and that he should discourage the hotel from continuing the application process so as not to waste its time. According to Murcott, Huff also stated, "Well, let's say I'm protecting the member." Murcott thereafter advised the applicant that its efforts were futile. The hotel did not pursue the application.

¶ 13 Murcott testified that, in his opinion, Huff's meeting with the existing member in Portland "was outside of the [company's] guidelines." He stated, "I'm not sure that I said anything to him" about the possible violation of company guidelines. When asked whether he had raised any objection to Huff's conduct, Murcott said, "[n]ot in so many words, no," instead expressing his concerns by "long pauses in my conversation and probably the tone of my voice."

c. Romulus, Michigan (Holiday Inn)

¶ 14 Sometime in 1994, a Holiday Inn in Romulus, Michigan expressed interest in switching its affiliation to Best Western. Recognizing that a new Best Western had just recently opened in the same area, the local director of membership development asked Murcott whether he should even bother pursuing the Holiday Inn. Murcott testified that he advised Huff of the situation, and Huff said that they should give the new Best Western in the area "a year or two to get that operation up and running." Accordingly, Murcott advised the local director of membership not to pursue the prospect, and the Holiday Inn declined to file a formal application.

¶ 15 Murcott testified that he never raised any objections regarding these circumstances to Huff or anyone else, explaining, "I didn't see any point in that [i.e., in expressing concern or agitation over Huff's actions]." He testified on cross-examination, "I didn't object in terms of expressing it and putting it into words." Instead, he claims that he "sighed," that there were "pauses in the conversation," that the "tone of [his] voice was resigned," and that he believed these non-verbal cues conveyed his purported concerns to Huff.

¶ 16 Murcott also complained about a potential antitrust law violation to Best Western's outside legal counsel, Kenneth Sundlof, who at trial recalled a discussion with Murcott of antitrust concepts. Specifically, they addressed the possibility that a rejected applicant who met the company's requirements could claim that the company had attempted to protect the business of an existing member in violation of antitrust law.

d. Page, Arizona

¶ 17 Sometime in 1994, two applications for Best Western memberships were submitted in Page, Arizona. One application came from the "Weston family," owners of existing Best Western hotels in Page, and another from J.J. Wang. Wang's application was approved by the board; the Weston application was denied. In November 1994, Wang advised Best Western that he was having drainage problems with the proposed site and that he intended to construct his new hotel across the street.

¶ 18 Brown then reopened consideration of the Weston application. Murcott testified that he believed Brown was being swayed by contacts with the Weston family and that this behavior was unfair to Wang. Murcott recalled meeting with Brown in November 1994 to express his objections to the lobbying efforts, telling Brown that his actions were "immoral" and "illegal." Brown admitted at trial that it was possible that Murcott told him that Wang might pursue an antitrust claim.

¶ 19 In January 1995, the board discussed both the Weston and Wang applications. Murcott testified at trial that he reiterated his objections at the board meeting, stating that there was no basis to deny the Wang application. Board member Seaton admitted that Murcott expressed concern that Best Western risked running afoul of federal and state antitrust laws.

¶ 20 The board approved the Weston application in a 4-3 vote. Thereafter, Wang's attorney sent a letter to...