Feb. 11, 2011
Henry C. Suominen, Jr. v. Goodman Industrial Equities Management Group, LLC, & Others
Docket No. 09-P-1896.
Massachusetts Appellate Court
Labor, Contract, Joint and Several Obligation, Failure to Pay Wages.
The plaintiff was employed as the construction manager of defendant’s real estate development firm (GIE). He was fired in 2004 and filed an action against defendant and its principal, Steven E. Goodman. He alleged that Goodman broke a promise to pay plaintiff compensation in addition to his salary. The jury ruled in the plaintiff’s favor on some of his claims and the trial judge awarded him $1,729,243.01 in regard to his promissory estoppel claim. On appeal the defendants argued that the trial judge should not have allowed the promissory estoppel claim to go to the jury and also that his instructions were in error. Goodman also said there was not a basis to hold him personally liable. On cross-appeal the plaintiff said that the trial judge erred in granting a directed verdict as to one of his claims and that the defendants’ appeal was not timely. The verdict was affirmed in part and vacated in part. The trial judge correctly ruled on the directed verdict but a material omission in the jury instructions entitled the defendants to a new trial.
Facts
Goodman and GIE redeveloped existing, run-down industrial properties either for sale or retention by the company. The plaintiff began working for Goodman in 1999 and became a “construction manager” later that year, overseeing most of the projects. His starting salary was $100,000, which was $35,000 less than his prior job; however, he agreed with this because he could share in the “upside” of the projects on which he worked. The plaintiff and Goodman were supposed to work out a profit-sharing plan, but nothing was resolved before the plaintiff began working.
By 2000 Goodman’s lawyer was drafting “equity sharing agreements” for the plaintiff’s projects. Under these, the plaintiff and GIE’s chief financial officer were to have a percentage of the “promote” (a profit that developers can receive in addition to the return on any equity invested) that each of the projects realized. However, the percentage allotted to the plaintiff was left blank on the drafts. Goodman said he was willing to give the plaintiff and CFO 35% of the promote and that he did not mind how it was split between them. It was agreed that the plaintiff would take 23.33% of the overall promote. When the plaintiff reported this to Goodman, they had a “semi-congratulatory sort of thing.” However, later that year, Goodman declined to sign the documents, stating that doing so would require him to amend financial disclosure documents that he had just filed. However, he told the plaintiff that their deal was still in effect. Goodman's lawyer claimed that Goodman never signed any equity sharing agreement with the plaintiff, nor that he ever planned to do so. The plaintiff was not informed of this change in plan.
In 2001, Goodman refinanced some property in Milford, which created a large cash inflow. He gave the plaintiff 23.33% of the money. On several other occasions, Goodman had operating promotes distributed to himself, the CFO and the plaintiff. However, during the next couple of years there were no profitable projects and so no money was made above base salary. Noticing this, the plaintiff asked for a raise, with his annual salary now $225,000 (but with no compensation received from the equity-sharing agreement). He understood the deal to still be in place, however.
When Goodman and the plaintiff met in 2004 to discuss the compensation agreement, Goodman relayed that they met to discuss the plaintiff’s job performance, while the plaintiff said the meeting was about the compensation owed. Goodman then had the CFO draft a history of the equity sharing issues, which was backdated to make it look like the document had been drafted three years earlier. Four months later, Goodman fired the plaintiff. They created a transition period in which the plaintiff worked as a consultant for his most recent annual salary. Less than a month later, Goodman fired him entirely and refused to pay the plaintiff for work done as a consultant.
The plaintiff sought damages both for the period that he was employed and for the time he was a consultant. His principal theory was that he had entered into a binding contract for the promised compensation with both GIE and Goodman personally. The defendants argued that there was no meeting of the minds and that the plaintiff was being given a discretionary bonus, if anything. The jury rejected the plaintiff’s contract claims but ruled in his favor on the fall-back theory of promissory estoppel. They found he was denied a share of the promote on eight projects for total damages of $1,711,005.87. The trial judge determined that the defendants should face joint and several liability for those damages.
Issue 1: Did the Court have jurisdiction over the appeal?
The defendants filed their notice to appeal late because of a significant personal crisis. The motion judge found excusable neglect and denied the plaintiff’s motion to dismiss the appeal. The motion judge’s ruling was sound, as significant personal crises can allow for latitude.
Issue 2: Was the plaintiff’s reliance detrimental?
The defendants argued that in the plaintiff’s promissory estoppel claim, there was no detrimental reliance on his part. First, they claimed that the judge erred by not separately charging the jury on detriment and second, that the evidence of detriment was insufficient as a matter of law.
Regarding the first question, the appellate court disagreed with the trial judge, who eliminated the separate detriment question for fear the jurors would become confused. The plaintiff’s continuing his employment with GIE was not sufficient by itself to establish his detriment as a matter of law. Given the circumstances of the case, the jury could have found, if asked, that the plaintiff did not suffer detriment from continuing to work for the defendant without receiving the additional payments he had been promised.
As for the second question, the defendants claimed that an employee cannot prove detriment based only on continued employment unless he provides evidence of specific job opportunities he declined, economic harm, or that he accepted additional duties or responsibilities in reliance. Hall v. Horizon Microwave Inc., 24 Mass.App.Ct. 84 (1987). The appellate court, however, found that the plaintiff did present evidence of detriment. The defendants were not entitled to judgment as a matter of law.
Issue 3: Was Goodman personally liable?
The plaintiff claimed that Goodman was directly liable because he made his promises of additional payment while acting in a personal capacity. The jury never resolved what role Goodman was playing when he made those promises to the plaintiff. This question thus fell to the trial judge to resolve, which occurred when he determined that Goodman was acting in a personal capacity. There was no error.
Issue 4: Were the plaintiff’s shares covered under the Massachusetts Wage Act?
The plaintiff claimed that his share was “due and payable” to him under the Massachusetts Wage Act, G.L. c. 149, § 148 the day he was fired. He said that they were commissions and thus covered under the statute, but the judge refused to let this go to the jury because he did not consider them “commissions.” There was no error here and the judge properly dismissed this claim.
The judgment was vacated to the extent that it ordered GIE and Goodman jointly and severally to pay $1,711,005.87. Retrial was necessary on the issue of whether the plaintiff’s continuing his employment at GIE in reliance on Goodman’s promises was to his detriment.
Judgment affirmed in all other respects and remanded.
–Prepared by JWK.
