Rymal v. Baergen

• Decision Date: 18 August 2004
• Docket Number: Docket No. 248124.,Docket No. 243795
• Citation: 686 N.W.2d 241,262 Mich.App. 274
• Parties: Penny RYMAL, Plaintiff, v. Herman BAERGEN and MTD Systems, Inc., Defendants-Appellees, and Clark Products, Inc., and Clark Foodservice, Inc., Defendants-Appellants. Penny Rymal, Plaintiff-Appellant, v. Herman Baergen and MTD Systems, Inc., Defendants-Appellees, and Clark Products, Inc., and Clark Foodservice, Inc., Defendants.
• Court: Court of Appeal of Michigan — District of US

686 N.W.2d 241

262 Mich.App. 274

Penny RYMAL, Plaintiff, v. Herman BAERGEN and MTD Systems, Inc., Defendants-Appellees, and Clark Products, Inc., and Clark Foodservice, Inc., Defendants-Appellants.

Penny Rymal, Plaintiff-Appellant, v. Herman Baergen and MTD Systems, Inc., Defendants-Appellees, and Clark Products, Inc., and Clark Foodservice, Inc., Defendants.

Docket Nos. 243795, 248124.

Court of Appeals of Michigan.

Submitted March 9, 2004, at Detroit.

Decided June 8, 2004, at 9:05 a.m.

Released for Publication August 18, 2004.

Mazur, Morgan, Meyers & Kittel, PLLC (by Linda M. Galante and Courtney E. Morgan, Jr.), Dearborn, for Penny Rymal.

Vercruysse, Murray & Calzone, P.C. (by Daniel J. Bernard and Susan Hartmus Hiser), Franklin, for Herman Baergen and MTD Systems, Inc.

Butzel Long, P.C. (by Marcia L. Proctor) and Kienbaum, Opperwall, Hardy & Pelton, P.L.C. (by Elizabeth Hardy and Robert Bruce Brown), Detroit, Birmingham, for Clark Products, Inc., and Clark Foodservice, Inc.

Before: KELLY, P.J., and MURPHY and NEFF, JJ.

MURPHY, J.

In Docket No. 248124, plaintiff appeals as of right the trial court's order granting summary disposition in favor of defendants Herman Baergen and MTD Systems, Inc., with respect to plaintiff's claims of sexual harassment and retaliation in the workplace brought pursuant to the Civil Rights Act (CRA), MCL 37.2101 et seq.¹ In Docket No. 243795, defendants Clark Products, Inc., and Clark Foodservice, Inc., (hereinafter collectively referred to as Clark) appeal by leave granted an order disqualifying Clark's counsel for a conflict of interest. Because there exists genuine issues of material fact in regard to all of plaintiff's claims against defendants Baergen and MTD, and because Baergen can be held individually liable solely for the retaliation claim in spite of this Court's decision in Jager v. Nationwide Truck Brokers, Inc., 252 Mich.App. 464, 652 N.W.2d 503 (2002), we affirm in part and reverse in part the grant of summary disposition in Docket No. 248124 and remand for further proceedings. Because there was a lack of evidence showing a conflict of interest or improper use of confidential information requiring disqualification, and because Baergen expressly consented to counsel's continued participation should a conflict be discovered, we reverse the order disqualifying Clark's counsel in Docket No. 243795.

I. FACTUAL ALLEGATIONS and PROCEDURAL HISTORY

A. Plaintiff's Complaint

On July 26, 2001, plaintiff filed a two-count complaint against all defendants. The complaint alleged that plaintiff commenced her employment with Clark in 1983 as an accounts receivable manager. She later became an office manager, assistant division manager, acting division manager, and subsequently, in 1993, a sales manager. Baergen was an employee-supervisor of Clark having authority over plaintiff. During plaintiff's and Baergen's tenure with Clark, they formed MTD Systems, which plaintiff refers to as her employer, along with Clark. MTD is in the business of picking up movies from distribution points and delivering the movies to various theaters.

Plaintiff alleged that in October 1999, Baergen propositioned plaintiff to have a sexual relationship, and she declined. Shortly thereafter, Baergen asked plaintiff to sign a noncompete agreement that would reflect a promise not to engage in any business that was competitive with Clark. Plaintiff alleged that the request was an act of harassment and was made because of plaintiff's refusal to comply with Baergen's sexual advances. Plaintiff did not sign the noncompete agreement.

Further, plaintiff averred that, beginning in November 1999, Baergen started reassigning plaintiff's duties to other persons. These duties included creation of advertisements, approval of vacation requests, and assignment of new account leads to sales people. Additionally, plaintiff alleged that Baergen removed her as liaison to several customers, thereby interfering with sales commissions, questioned her about her work hours, and pressured plaintiff to relinquish her management position. Moreover, Baergen became verbally abusive and once became so enraged, because he thought plaintiff was on the phone too long, that he punched a wall in plaintiff's office, requiring him to seek medical attention. Plaintiff averred that Baergen started accusing her of having sexual relations with customers to obtain their business, and that she spent her lunch hours having sex with various men.

The complaint alleged that in January 2000, plaintiff demanded a sales review and a formal description of her job duties and responsibilities in response to a complaint that she was inadequately performing, but Baergen refused. It was asserted that plaintiff contacted a Clark executive about her ongoing problems with Baergen and that the executive promised to, but did not, meet with plaintiff. After this failed attempt by plaintiff to rectify the situation, Baergen refused to pay an expense voucher for plaintiff and removed her expense account entirely. Her duties were lowered to those of an administrator. Plaintiff additionally averred that the claimed reasons for these actions were that, on March 1, 2000, she had been demoted to a sales person. In July 2000, Baergen informed plaintiff that the sales manager job was given to a male. Plaintiff alleged that she left her employment on July 27, 2000, as she had been constructively discharged. We note that with respect to the alleged retaliatory actions, discriminatory practices, and other events, plaintiff's complaint does not distinguish whether the actions were in the context of her employment with Clark or MTD Systems.

Count I of the complaint, which is fairly cursory, asserted a cause of action predicated on the CRA. The count provided, in relevant part:

22. Plaintiff was sexually harassed and retaliated against by defendants' agent and employee, Defendant Baergen, throughout the course of her employment.

23. This sexual harassment and retaliation included, but is not limited to, unwelcome comments and conduct of an offensive and sexual nature directed at plaintiff, the creation of a hostile work environment, as described herein[,] and constructively terminating plaintiff's employment and withholding pay commissions due to her, based on her refusal to engage in a sexual relationship ....

Count II of the complaint alleged violations of the SRCA for outstanding sales commissions due and owed plaintiff by Clark and MTD.

B. Proceedings Concerning Attorney Disqualification

Before Baergen and MTD filed an answer to the complaint, and fast approaching the deadline for answering, the law firm serving as counsel for Clark contacted Baergen and asked him whether he wished for Clark's counsel to file an answer on his and MTD's behalf with the understanding that the appearance would initially be limited to filing an answer and affirmative defenses. Counsel also informed Baergen that continued representation would be conditioned on an opportunity to determine to its satisfaction that no conflict of interest existed between Clark and Baergen and MTD. Counsel also indicated that while there did not initially appear to be a conflict, if a conflict were revealed through discovery, counsel for Clark would have to cease representation of Baergen and MTD. Counsel required that Baergen agree that if a conflict were discovered, counsel could continue to represent Clark notwithstanding that Baergen may have shared information subject to the attorney-client privilege. Baergen signed a letter setting forth all of the conditions noted above, acknowledging acceptance of the law firm's representation under the terms described. Clark's counsel then filed an answer and affirmative defenses on behalf of Baergen and MTD in late August 2001.

A few days later, in early September 2001, Clark's CEO met with Baergen and counsel law firm, and during a discussion of the nature of MTD's business and Baergen's and plaintiff's involvement with the business, it was determined that a conflict of interest existed. Baergen was excused from the meeting, and after it had concluded counsel informed him that the law firm was withdrawing representation of Baergen and MTD. Baergen obtained new counsel for himself and MTD, and an order for substitution of counsel was entered on October 10, 2001. In December 2001, Clark terminated Baergen's employment on the basis of Baergen's involvement with MTD.

In July 2002, after the conclusion of plaintiff's and Baergen's depositions, Clark filed a motion for leave to add a counterclaim against plaintiff and a cross-claim against Baergen and MTD. The proposed claims related to Baergen and MTD, which closely mimicked the proposed claims against plaintiff, included breach of implied contract, breach of fiduciary duty, usurpation of corporate business opportunity, tortious interference with business relations or reasonable business expectations, silent fraud, and civil conspiracy. These causes of action were predicated on allegations that, in 1989, Baergen was approached about the film distribution idea while he was working in his capacity as a manager for Clark, that Baergen did not tell Clark superiors about the opportunity, that Baergen, without authority, declined the opportunity on behalf of Clark, and that Baergen thereafter, acting in concert with plaintiff, took advantage of the opportunity and formed and began operating MTD to distribute films. Clark alleged that in 1990, Baergen registered MTD as a Michigan corporation. Clark further averred that Baergen and plaintiff, at times, used "on the clock" employees of Clark to conduct MTD business without corporate approval from Clark and utilized Clark's petty cash fund in operating MTD. Clark was adamant that the allegations supporting the proposed cross-claim arose through knowledge solely derived from the depositions of plaintiff and Baergen, which occurred after counsel terminated representation...