Stockman v. Oakcrest Dental Center, P.C.

• Decision Date: 16 March 2007
• Docket Number: No. 05-1518.,05-1518.
• Citation: 480 F.3d 791
• Parties: Samuel David STOCKMAN, D.D.S., Plaintiff-Appellee, v. OAKCREST DENTAL CENTER, P.C., Louis E. Leonor, D.D.S., Individually, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

480 F.3d 791

Samuel David STOCKMAN, D.D.S., Plaintiff-Appellee, v. OAKCREST DENTAL CENTER, P.C., Louis E. Leonor, D.D.S., Individually, Defendants-Appellants.

No. 05-1518.

United States Court of Appeals, Sixth Circuit.

Argued: June 6, 2006.

Decided and Filed: March 16, 2007.

ARGUED:

David T. Croall, Porter, Wright, Morris & Arthur, Cincinnati, Ohio, for Appellants. E. Michael Morris, Morris & Doherty, Birmingham, Michigan, for Appellee.

ON BRIEF:

David T. Croall, Porter, Wright, Morris & Arthur, Cincinnati, Ohio, Clinton Meyering, Calligaro & Meyering, Taylor, Michigan, for Appellants. E. Michael Morris, Morris & Doherty, Birmingham, Michigan, for Appellee.

Before: SILER, CLAY, and McKEAGUE, Circuit Judges.

CLAY, J. (pp. 806-15), delivered a separate dissenting opinion.

OPINION

SILER, Circuit Judge.

Defendants Oakcrest Dental Center ("Oakcrest") and Dr. Louis Leonor appeal a judgment of $479,491.63 in favor of Plaintiff Dr. Samuel Stockman. Defendants allege several trial errors including the erroneous admission of a settlement offer in violation of FED. R. EVID. 408. Because we agree that the district court abused its discretion in admitting the settlement offer and the record demonstrates substantial prejudice, we REVERSE the judgment and REMAND to the district court for a new trial.

I.

In late 1999, Dr. Stockman agreed to sell his dental practice of over forty years to Dr. Leonor and Oakcrest. The sale was completed in January 2000. Pursuant to a side agreement, Dr. Leonor hired Dr. Stockman to work as a dentist at Oakcrest. Dr. Leonor's goal was to use this as an opportunity to attract and retain Dr. Stockman's patients. The parties set no time limit or date of termination. Dr. Stockman began working at Oakcrest four days per week in December 1999, and Oakcrest sent out mailers announcing the move and invited his old patients to remain with him at his new location. Few ever came.

When he began working in 1999, Dr. Stockman had opted to be paid $32.00 per hour rather than receive a percentage of his production. In 2001, Dr. Leonor agreed to increase Dr. Stockman's hourly pay to $35.00 per hour and gave Dr. Stockman additional benefits, including malpractice insurance, paid vacations, and some days off. Not long after, Dr. Stockman asked for a raise to $55.00 per hour because that was the average pay for dentists in the locale. Dr. Leonor rejected the amount because, he claimed, Dr. Stockman was not producing and billing the average amount. It is disputed whether this reason was communicated to Dr. Stockman, though he stated he "had the impression that Dr. Leonor could not afford" to give him a raise. At the time, only one other dentist, Dr. Macunivich ("Dr.Mac"), was being paid $55.00 per hour. But his pay was recalculated every year based upon his prior year's production.

In October 2001, because of his low revenue production, Dr. Stockman's work week was scaled back from four days to three. Dr. Leonor wanted to give the chair occupied by Dr. Stockman to a higher revenue-producing dentist. He hired two other dentists, Drs. Lavasseur and Long, who were both in their thirties. However, neither lasted at Oakcrest very long.

By early June 2002, Dr. Leonor reduced Dr. Stockman's days from three to two, citing Dr. Stockman's continued low production. Dr. Stockman went home that day claiming he was ill. Dr. Leonor called his home and spoke to Mrs. Stockman who informed Dr. Leonor that Dr. Stockman was in bed with flu-like symptoms. Dr. Leonor expressed his relief that Dr. Stockman had not suffered a heart attack.

At the time, Drs. Mac and Bailey had produced between 50 per cent and almost 200 per cent more revenue over the same period, even adjusting for the reduced hours. Based upon this information, Dr. Leonor concluded that Dr. Stockman ought to be terminated. Dr. Leonor claimed that he did not have the heart to terminate Dr. Stockman himself because he "liked the guy a lot," and had someone else inform Dr. Stockman upon his return to the office. Dr. Leonor hired Dr. Don Bui, 33, to replace Dr. Stockman.

Dr. Stockman filed suit in the Eastern District of Michigan in February 2003,¹ alleging violation of the Age Discrimination and Employment Act (the "ADEA"), 29 U.S.C. § 621 et seq., and the Michigan Elliott-Larsen Civil Rights Act (the "ELCRA"), MICH. L. ANN. § 37.2201, et seq. He alleged that he was 73 years old at the time and was subject to disparate treatment because of his age. He alleged he was afforded fewer operatories (rooms in which to do dental work); he was not given a dedicated and competent dental assistant; and new patients who required more expensive treatments were steered away from him, thus reducing his potential to generate more revenue per patient-hour. He also alleged that on three occasions, culminating in a Christmas party in 1999 right after he joined Oakcrest, Dr. Leonor asked whether Dr. Stockman realized he "[was] the oldest dentist" at Oakcrest. Dr. Stockman also cited Dr. Leonor's criticism of certain of his dental practices because they were older methods.

Two years later and a few weeks before trial, attorneys for Dr. Leonor and Oakcrest sent the following letter to Dr. Stockman's attorneys:

Dear Ms. Adams:

I have been authorized by my client to extend an offer of reinstatement of employment to Dr. Stockman.

The specifics of the offer are as follows: Dr. Stockman would be rehired as an associate dentist under the terms of his prior employment. His responsibilities would be identical to those of his prior employment as would be his benefits. Based upon Dr. Stockman's testimony in his deposition (see page 96 of the transcript) we will compensate him on a percentage-based pay plan.

Further, my client is amenable to conducting whatever meetings may be necessary between Dr. Stockman and office staff to address any concerns that Dr. Stockman may have a smooth transition to his return to his employment. My client wishes to convey that, despite its respectful disagreement with Dr. Stockman's claims of age discrimination, there is no animosity toward Dr. Stockman and that every effort will be made to assure professional and hospitable working conditions in the future.

My client would be willing to have Dr. Stockman work immediately.

Please discuss this offer with your client and advise us of his position as soon as possible.

Two days later, Dr. Stockman's attorneys responded:

Dear Mr. Chiasson:

This letter is for settlement purposes only and is in response to the offer of reinstatement set forth in your letter of June 9, 2004.

Dr. Stockman accepts the offer of reinstatement, which he understands to be unconditional. Your letter states that Dr. Stockman's responsibilities "... would be identical to those of his prior employment, as would be his benefits." However, your letter then modifies the prior terms of Dr. Stockman's employment by proposing to pay Dr. Stockman ". . . on a percentage-based pay plan."

Dr. Stockman will accept a percentage-based pay plan, namely 40%, as indicated on pages 94-96 of his deposition testimony. Also, to avoid any misunderstandings, we refer you to the terms of employment contained in the April 5, 2001 Application for Employment. For your convenience, we enclose a copy of that document.

We note that the offer of reinstatement is accepted based on those terms of Dr. Stockman's prior employment which included four days or 32 hours per week of work. As you know, we have contended that the reduction of Dr. Stockman's hours and/or days was discriminatory. Hence, the offer is accepted based on the presumption that Dr. Stockman will be guaranteed his original terms of employment, except for the hourly rate of pay.

Next, your letter does not address other conditions of Dr. Stockman's employment which we have contended were discriminatory. By way of example, Dr. Stockman should have the same number of operatories available to him as the younger dentists at Oakcrest; and should have an experienced assistant available to him. Nevertheless, Dr. Stockman has accepted the offer of reinstatement, even if he is only granted one operatory; and even if he is not given an experienced assistant. However, unless such conditions are changed, the discriminatory workplace conditions would remain an issue in the case.

Next, as you know, the offer of reinstatement does not resolve all claims in the case. Among other things, Dr. Stockman is still eligible for back-pay, emotional anguish damages, liquidated damages and attorneys' fees and costs. Of course, we will remain open to discussing settlement of all claims at any time. However, such discussions remain separate and apart from your offer of reinstatement which has been accepted by this letter.

Dr. Stockman has a pre-planned visit with his son's family beginning June 21 st, but will be available to begin working on June 28th. Please advise whether Dr. Stockman should call the Oakcrest office manager to arrange recommencing work.

(Together, "the Letters"). Believing that Dr. Stockman's reply was a rejection and counteroffer, Defendants withdrew their offer of reinstatement and Dr. Stockman sought to enforce the contract. The district court refused to enforce the contract because (1) the offer was clearly an offer of reinstatement in exchange for settlement of the entire action, and (2) Dr. Stockman's letter was a rejection and counteroffer.² However, the district court denied Defendants' motion to have the document precluded from being admitted into evidence at trial under FED.R.EVID. 408. The district court ruled that the Letters were admissible under Rule 408's "another purpose" exception, and that they could be read into evidence if Defendants presented evidence that Dr. Stockman failed to mitigate his damages.

At trial, Defendants cross-examined Dr. Stockman about job offers he received and refused in the months following his termination. The Letters were then read into the record over...