United Parcel Service Co. v. Rickert

• Decision Date: 22 April 1999
• Docket Number: No. 97-SC-715-DG.,No. 98-SC-240-DG.,97-SC-715-DG.,98-SC-240-DG.
• Citation: 996 S.W.2d 464
• Parties: UNITED PARCEL SERVICE COMPANY and United Parcel Service of America, Inc., Appellants, v. John RICKERT, Appellee, and John Rickert, Cross-Appellant, v. United Parcel Service Company and United Parcel Service of America, Inc., Cross-Appellees.
• Court: United States State Supreme Court — District of Kentucky

996 S.W.2d 464

UNITED PARCEL SERVICE COMPANY and United Parcel Service of America, Inc., Appellants, v. John RICKERT, Appellee, and John Rickert, Cross-Appellant, v. United Parcel Service Company and United Parcel Service of America, Inc., Cross-Appellees.

No. 97-SC-715-DG.

No. 98-SC-240-DG.

Supreme Court of Kentucky.

April 22, 1999.

Rehearing Denied August 26, 1999.

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Tony C. Coleman, Westfall, Talbott & Woods, Louisville, KY, D. Patton Pelfrey, Winston E. Miller, Charles E. Allen III, Brown, Todd & Heyburn PLLC, Louisville, KY, for appellants/cross-appellees.

Hollis L. Searcy, Claudia K. Grenough, Louisville, KY, Manley N. Feinberg, John Robert Shelton, Louisville KY, for appellee/cross-appellant.

WINTERSHEIMER, Justice.

This appeal is from a decision of the Court of Appeals which affirmed a circuit court jury verdict which awarded Rickert $746,516 in compensatory damages and $1 million in punitive damages on his claims of fraud and promissory estoppel.

The questions presented are whether Rickert proved as a matter of law fraud by clear and convincing evidence; whether there were material representations that were false; whether the representations were known to be false and made with the intent that they be acted upon by Rickert and whether he did act in reliance thereon; whether the evidence presented at trial could be considered as a basis for liability; whether Rickert suffered damages; whether the evidence warranted punitive damages; whether Rickert proved his promissory estoppel claim and whether the statute of frauds is applicable; and whether the trial court erred in directing a verdict against Rickert on his breach of contract claim.

In 1987, United Parcel Service Company and United Parcel Service of America, Inc., hereinafter referred to as "UPS", decided to change its parcel delivery business by establishing its own airline. The transition from contract air cargo carriers to an internal air transport system was not completed until the end of 1988. UPS ultimately hired 811 pilots. During the transition, UPS expressed its desire to hire pilots who remained throughout that period with its contract carriers, including Orion Air, which employed Rickert. Orion ceased operation after the UPS transition. Rickert, a captain with Orion, was not hired by UPS but did obtain employment in the spring of 1989 in a less lucrative position as a second officer with American Airlines.

In his suit, Rickert alleged damages flowing from the breach of contract, promissory estoppel and fraud by UPS based on promises purportedly made by an unnamed UPS management representative in a September 1987 meeting attended by Rickert and 50 to 75 other Orion pilots. During the three-week jury trial, the evidence presented by each side differed considerably regarding whether employment with UPS was guaranteed to pilots who stayed with Orion throughout the 16-month transition period.

Although UPS obtained a directed verdict regarding the Rickert breach of contract claim, the jury awarded Rickert all the compensatory damages claimed, $425,-160 in lost wages to the January 1995 trial date plus $321,356 in future lost wages plus punitive damages in the amount of $1 million. A divided Court of Appeals panel affirmed the judgment. This Court granted discretionary review.

UPS argues that Rickert failed to prove fraud by clear and convincing evidence because he could not identify the corporate representative who allegedly made the fraudulent misrepresentation and cannot establish the authority of that alleged agent to make an unconditional promise constituting the misrepresentation. They maintain that Rickert may not use posttrial briefing and the appellate process to identify such a corporate representative and establish that person's authority to bind the company when neither the representative nor the theory was presented to the trial jury. They also assert that Rickert may not recover on a claim of fraud or promissory estoppel where his failure to act was not a proximate result of the alleged guarantee of employment. They contend that his claim for damages based on more than one year's employment is barred by the statute of frauds and that Rickert may not recover punitive damages without providing the identity and authority of the alleged corporate representative who acted with fraud, oppression or malice. UPS states that this case involves lawsuits filed by 379 pilots who were not hired by the new airline.

I. Fraud

In a Kentucky action for fraud, the party claiming harm must establish six elements of fraud by clear and convincing evidence as follows: a) material representation b) which is false c) known to be false or made recklessly d) made with inducement to be acted upon e) acted in reliance thereon and f) causing injury. Wahba v. Don Corlett Motors, Inc., Ky.App., 573 S.W.2d 357, 359 (1978).

As noted by the Court of Appeals, such proof may be developed by the character of the testimony, the coherency of the entire case as well as the documents, circumstances and facts presented. See Trustees of the First Christian Church v. Macht, 228 Ky. 628, 631, 15 S.W.2d 509, 510 (1929). Fraud may be established by evidence which is wholly circumstantial. See Grant v. Wrona, Ky.App., 662 S.W.2d 227, 229 (1983); Johnson v. Cormney, Ky. App., 596 S.W.2d 23, 27 (1979). The standard of review of the jury determination can be found in Lewis v. Bledsoe Surface Mining Co., Ky. 798 S.W.2d 459 (1990). The reviewing court must accept the evidence as true, draw all reasonable inferences from it in favor of the claimant, refrain from questioning the credibility of the witnesses of the claimant and refrain from assessing the weight that should be given to any particular item of evidence. Lewis, supra, at 461.

Although Rickert did not specifically identify the individual making the representations at the 1987 meeting, he presented evidence which clearly established that a UPS official was present and addressed the assembled Orion employees, including himself. Circumstantial evidence was introduced from which the jury could believe that the individual in question was Dant, a regional coordinator for UPS. In addition, Rickert presented evidence concerning later communications with UPS which would allow an inference that the alleged representation of employment had been made to him. Rickert testified to the oral promises of employment at the fall meeting. His recollections were clear and he took notes at the meeting concerning seniority and pay which were introduced into evidence. Other witnesses testified that they heard a UPS manager make the same promises at about the same time. UPS challenged the accuracy of the Rickert testimony but made no reference to the other witnesses.

There was also evidence that in July of 1988, Rickert attended an interview with UPS following which he was asked to complete a variety of company personnel documents including a W-4 withholding form. He also took a physical examination.

Although Rickert could not prove that UPS did not intend to hire him individually at the time of the alleged misrepresentation there was significant evidence that UPS did not intend to hire all carrier pilots at the time it made the statement to the assembled Orion personnel. UPS admits that it never intended to hire all carrier flight crew members but claims that it never made a representation to the contrary. Fraud may be committed either by intentionally asserting false information or by willfully failing to disclose the truth. Chamberlain v. National Life & Accident Ins. Co., Ky., 256 Ky. 548, 76 S.W.2d 628, 631 (1934). See also Restatement (Second) of Torts § 529 (1977), which indicates that stating a mere partial truth can be fraudulent if it is materially misleading.

UPS knew that the Orion pilots were extremely concerned about their future after Orion lost its UPS contract. The employees were making career decisions and had the right to and should have been told the complete strategy of the employment situation. UPS defrauded Rickert by intentionally failing to tell him all the material facts of its hiring plan. Rickert did not need to demonstrate that UPS did not intend to hire him as an individual. See generally Restatement (Second) of Torts, § 534 (1977).

In Kentucky, a claimant may establish detrimental reliance in a fraud action when he acts or fails to act due to fraudulent misrepresentations. See Sanford Construction Co. v. S & H Contractors, Inc., Ky., 443 S.W.2d 227, 232 (1969). Rickert presented evidence that his reliance on the representation by UPS caused him not to look for employment with other airlines for the period of time from the 1987 meeting until late 1988, and consequently, he lost seniority and benefits because of his failure to obtain other employment sooner. There was also evidence that during this time period other airlines were hiring pilots. A person is entitled to damages resulting from inaction when an untrue statement is made with the intent to induce that person to refrain from acting so long as it can be demonstrated that the false statement produced the inaction. See generally 37 Am.Jur.2d Fraud and Deceit, § 225 (1969). Here, sufficient evidence was produced to establish a jury question regarding the alleged untrue statements of UPS causing the inaction and the resulting damages. There was evidence presented at trial that indicated the only reason UPS promised Rickert a job was to induce him to fly its planes during the transition period. Cf. H.C. Hanson v. American Natl. Bank & Trust Co., Ky., 865 S.W.2d 302 (1993); Ligon Specialized Hauler, Inc. v. Smith, Ky. App., 691 S.W.2d 902 (1985).

The evidence indicates that Rickert was concerned about his job security at Orion when he learned that UPS was terminating its contract with them. He then began to prepare his resume and circulated it to other airlines. He immediately stopped his...