Weisman v. Connors

• Decision Date: 01 September 1987
• Docket Number: No. 34,34
• Citation: 540 A.2d 783,312 Md. 428
• Parties: Frederick R. WEISMAN et al. v. Arthur B. CONNORS. ,
• Court: Maryland Court of Appeals

Page 428

312 Md. 428

540 A.2d 783

Frederick R. WEISMAN et al. v. Arthur B. CONNORS.

No. 34, Sept. Term, 1987.

Court of Appeals of Maryland.

May 4, 1988.

Motion for Reconsideration Granted May 27, 1988.

Paul F. Strain (Benjamin R. Civiletti, J. Phillip Jordon, Christopher R. Mellott and Venable, Baetjer & Howard, and Oscar S. Gray, on the brief), Baltimore, for appellants.

George Beall and Kristine A. Crosswhite (Miles & Stockbridge, on the brief), Baltimore, for appellee.

Argued before MURPHY, C.J., and ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS and BLACKWELL, JJ.

MURPHY, Chief Judge.

This case primarily concerns the tort of negligent misrepresentation alleged to have arisen from the factual matrix of an arm's length negotiation of an employment contract.

I

In early April 1981 Arthur Connors and Frederick Weisman, who were previously unknown to each other, met for breakfast at Weisman's townhouse in New York City. Connors at that time was a fifty-six year old vice president of Ford Motor Company, one of about forty vice presidents in Ford's worldwide operations. A veteran of thirty-two years of service with Ford, he directed a staff of sixty and drew an annual salary of approximately $140,000. In addition, he received many substantial non-salary benefits, including annual bonuses averaging about 62% of his salary, participation in a stock option plan involving 12,000 shares of Ford stock, a special savings plan where Ford matched a percentage of deferred compensation, and a pension plan that permitted him to retire at 60% of salary. Connors was provided by Ford with two company cars; Ford also paid Connors' country club membership and the premiums on a $200,000 life insurance policy.

Weisman, a successful entrepreneur, was the sole owner of Frederick Weisman Company (FWC), a holding company whose chief component was Mid-Atlantic Toyota (MAT), a major Toyota distributorship. The two men met to discuss the possibility of Connors' working for FWC as executive vice president. This meeting began a chain of events that led to an employment relationship between Connors and Weisman, to the breakdown of that relationship, and finally to a law suit filed by Connors against Weisman and FWC on November 30, 1983 in the Circuit Court for Anne Arundel County. Connors' complaint contained four counts: (1) breach of a written contract by FWC; (2) breach of an oral contract by Weisman individually; (3) negligent misrepresentation by Weisman and FWC; and (4) fraud by Weisman and FWC.

Averments in Connors' complaint, upon which evidence was adduced at the ensuing four-week jury trial, disclosed that Connors and Weisman had been brought together largely through the efforts of Korn/Ferry, an executive recruiting firm--a "headhunter" agency--employed by Weisman. Connors testified that he was basically content with his lot at Ford but, enticed by Korn/Ferry's representations of the executive vice president position at FWC, decided "[i]f single happy, double happy's got to be better," and reluctantly agreed to meet with Weisman. A representative of Korn/Ferry, on the other hand, testified that from the very first contact Connors expressed restlessness and discontent with his work at Ford. At that time, Ford was suffering the second of three consecutive years of billion dollar losses, causing among other effects a reduction in Connors' staff from about 100 in 1977 to 60 in 1981. In a letter Connors wrote to Ford in December 1982 he stated that his decision to leave was made prior to seeking any outside employment and was due to a feeling that because of recent staff and policy changes at Ford he "could not contribute to the limit of [his] experience." Connors, however, testified that Ford's financial woes were not a significant factor in his decision to depart because the company's planners were confident Ford would return to profitability by 1983 (which in fact occurred).

In his complaint Connors alleged that at the April 1981 breakfast meeting in New York Weisman made a number of representations concerning the executive vice president position and FWC, leading Connors to believe that FWC was on the verge of a significant lateral expansion of its automotive division into related fields such as automobile rental, insurance, and financing; that as executive vice president he would have an equity participation in this expansion and that the value of these ownership interests would more than offset the benefits which Connors would sacrifice by leaving Ford; that MAT was a stable franchise; that Weisman's relationship with Robert McCurry, who was then general manager of MAT, was basically amicable though beset with communication problems; and that as executive vice president Connors would have broad executive responsibilities, would report only to Weisman, and would not be required to perform the duties of general manager. Believing these representations, favorably impressed by other aspects of FWC, and finding Weisman to be "an absolutely charming person," Connors began to give serious thought to accepting the FWC position. Doubts, however, remained, chiefly concerning the substantial non-salary financial benefits Connors would lose by leaving Ford.

In mid-April 1981 a second meeting took place, this time in California. Al Toffel, a Weisman consultant, was present along with Weisman and Connors. Connors testified that during the two days of this meeting, the earlier representations were reiterated and expanded upon. According to Connors, he repeatedly voiced his concerns about financial loss from leaving Ford, and each time Weisman responded with assurances such as "we'll handle it," "that's not a problem," "my intent is that you'll be better off if you join me than if you stayed at Ford." Salary was not specifically discussed because, Connors testified, salary was for him a secondary consideration: the prospect of equity participation was the real lure.

Following the California meeting several telephone conversations occurred between Connors, Toffel, and David Smith, a vice president of Korn/Ferry, as Connors neared commitment on taking the FWC position. On May 1, Smith sent Connors a letter setting forth the various matters discussed in regard to Connors' employment and stating that Weisman and Toffel had agreed to them. Included in the letter were some, but not all, of the representations made at the New York and California meetings. Connors showed this letter to his family lawyer, who cautioned that it was "pretty general" and "loose," especially with respect to equity participation; Connors opined in response that because of the uncertainty attending Weisman's expansion projects it did not seem possible to express the terms more concretely. The terms in this letter, with a few changes and additions, were incorporated into a three-year employment contract drafted by another attorney employed by Connors. This contract was executed by both parties on May 5 and Connors began work on June 1.

Under the contract's provisions, FWC agreed to employ Connors as Executive Vice President for a term of three years, commencing June 1, 1981. The contract specified that "it is expected" that Connors would "have broad responsibility for the entire operations of the Company's Automotive Division, including Mid-Atlantic Toyota," three other subsidiaries, and "related operations," with the general managers of these operations reporting to him. The "basic salary" to be received by Connors was $200,000 per year. Paragraph 3 of the agreement provided for a flat $50,000 bonus at the end of FWC's current fiscal year and, further, at the end of each subsequent fiscal year,

"a bonus to be determined in accordance with a formula to be agreed to between you and the Company prior to the beginning of each such fiscal year. It is anticipated that your bonus target will be $100,000.00 per year. You will also be eligible for consideration of additional merit bonuses, as may be awarded from time to time by the Company in its sole discretion."

Other pertinent provisions in the contract stated:

"4. You will have a vested participation in those future ventures of the Company where you will have operating responsibility. The vested participation for each new venture will be negotiated separately.

5. Two (2) years after the Commencement Date, you and the Company will consider extending the term of your employment for an additional two (2) years upon such terms and conditions as may be mutually agreed upon; if such extension is agreed upon, the term of this agreement shall be five (5) years from the Commencement Date.

....

7. On or before the Commencement Date, the Company shall purchase, for its own account, 2,300 shares of the common stock of Ford Motor Company. The Company shall forthwith transfer full ownership of such stock to you upon the execution of an extension agreement under paragraph 5 above.

8. On the Commencement Date, and on each anniversary thereof during the term of your employment, the Company shall pay the insurance premium in connection with a $200,000.00 limited payment, full life insurance policy designed to be paid up in ten (10) equal annual installments. Such life insurance policy shall be owned by you and your assigns and the beneficiary thereof shall be your wife or such other person or persons as you may from time to time designate."

During his first days on the job, Connors discovered that Weisman's relations with both Toyota Motors (for which MAT was a regional distributor) and McCurry were troubled, and had been for some time. The two problems were interrelated. McCurry, a former Chrysler vice president, highly regarded in the automobile industry for his ability to sell cars, had become general manager of MAT in late 1979, bringing with him a cadre of former Chrysler executives. At that time (unknown to McCurry) MAT had received official notification from Toyota Motors that its sales performance was...