Paolella v. Browning Ferris Inc ( 1998 )

Opinions of the United
1998 Decisions States Court of Appeals
for the Third Circuit
10-13-1998
Paolella v. Browning Ferris Inc
Precedential or Non-Precedential:
Docket 97-1599
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Filed October 13, 1998
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 97-1599
MICHAEL PAOLELLA
v.
BROWNING-FERRIS, INC.,
Appellant
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 94-cv-07364)
Argued June 4, 1998
Before: SCIRICA, NYGAARD and SEITZ*, Circuit Judges
(Filed October 13, 1998)
DAVID H. MARION, ESQUIRE
(ARGUED)
JOHN E. CARUSO, ESQUIRE
HOWARD J. BASHMAN, ESQUIRE
Montgomery, McCracken, Walker
& Rhoads
123 South Broad Street
Philadelphia, Pennsylvania 19109
Attorneys for Appellant
_________________________________________________________________
*Judge Seitz heard argument in this matter but was unable to clear
the opinion due to illness.
ARLIN M. ADAMS, ESQUIRE
(ARGUED)
NANCY WINKELMAN, ESQUIRE
Schnader, Harrison, Segal
& Lewis
1600 Market Street, Suite 3600
Philadelphia, Pennsylvania 19103
Attorneys for Appellee
OPINION OF THE COURT
SCIRICA, Circuit Judge.
In this diversity action, we are asked to predict certain
parameters of the employment-at-will doctrine under
Delaware law. Relying on the "public policy exception" to
the doctrine, plaintiff claimed he was unlawfully terminated
for protesting his employer's illegal billing scheme. After a
jury rendered a verdict for plaintiff, defendant employer
moved for judgment as a matter of law or, in the
alternative, a new trial. The district court denied both
motions. Paolella v. Browning-Ferris, Inc., 973 F. Supp. 508,
510 (E.D. Pa. 1997). We will affirm.
I.
In October 1989, Michael Paolella began working as a
sales supervisor for Browning-Ferris, Inc. in its office in
King of Prussia, Pennsylvania. In February 1990, Paolella
was promoted to sales supervisor and transferred to BFI's
Wilmington, Delaware division. His responsibilities included
servicing existing commercial waste disposal accounts and
obtaining new business for BFI. Paolella soon developed
and instituted a marketing plan which resulted in
increased profits for the Delaware division. At the start of
the next fiscal year, October 1, 1990, Paolella was promoted
to sales manager.
BFI's customer relationships were governed by service
agreements, which usually ran for a three year term and
provided for a flat monthly billing rate. Although the
2
customer was only informed of the bottom line figure, the
billing rate was actually comprised of two separate
components: a service fee, representing the cost of
collecting and transporting the trash to the landfill each
week, and a disposal fee, representing the cost of dumping
the trash at the landfill. While the monthly rate was based
on the volume of the customer's trash, measured in cubic
yards, the state-run landfill charged BFI based on the
weight of the trash dumped. Consequently, BFI based the
disposal portion of its contract price on an average weight
of 90 pounds per cubic yard. The service agreements
allowed BFI to increase the monthly rate in three ways:
1) BFI could pass along state increases in dumping costs at
the landfill; 2) BFI could impose cost-of-living increases on
the service fee; or 3) BFI could increase the rate in other
situations, provided it gave the customer 30 days advance
notice and received customer consent.1
In late 1991, the Delaware Solid Waste Authority
announced plans to increase landfill disposal rates by 25%,
effective July 1, 1992. Ronald Hanley, BFI's Delaware
District manager, discussed the rate increase at a January
1992 sales meeting, and announced two changes in BFI's
billing procedures. First, he unveiled a new invoicing
system to begin February 1, 1992, whereby customer
invoices would display both the disposal fee and the service
fee. This would allow customers to see that the impending
25% fee increase was the result of the state's increased
disposal fees, rather than an increase in BFI's service
charges.
According to Paolella, Hanley also announced a plan to
increase the disposal fee artificially by assigning a new
average weight of 120 pounds per cubic yard, and
decreasing the service fee by a corresponding amount. The
initial result of this modification was that the customer
would continue to pay the same flat monthly fee. But once
the state imposed 25% increase in dumping costs took
effect, BFI would earn additional profits because that
_________________________________________________________________
1. Explicit, written consent was not required. The agreement provided a
"[c]ustomer's consent may be evidenced by the practices and action of
the parties." App. at 788.
3
increase would be applied to the artificially inflated average
weight of 120 pounds per cubic yard. While the total
amount of the increase would be disclosed under the new
billing system, the customer would assume the full increase
was attributable to the state imposed increase in disposal
charges.
Acknowledging he did not object to the plan at the
meeting, Paolella testified at trial that he subsequently
raised concerns about the legality of the rate increase with
Hanley at least twice weekly, from January through April
1992, during their daily commute. Paolella also testified he
raised similar concerns with Fred Snyder, BFI's vice-
president for the Atlantic region, during a private meeting
in April 1992.2 According to Paolella, both men dismissed
his protests, and Snyder advised Paolella to do as Hanley
instructed.3 Despite his objections, in June 1992 Paolella
complied with instructions to draft a letter to all BFI
customers advising them of the 25% increase.4 He also
negotiated contracts with customers based on the new
rates.
Paolella testified that, in November 1992, a customer,
Edwin DeSeta, advised him that a BFI competitor had
offered a better rate. After a weight study of DeSeta's trash
indicated that it weighed much less than the average weight
of 120 pounds per cubic yard, Paolella asked Hanley if BFI
_________________________________________________________________
2. Both Snyder and Hanley testified that Paolella did not lodge any
objections with them. App. at 353 (Snyder); App. at 526-27 (Hanley).
3. The day after this discussion with Snyder, Hanley instructed Paolella
not to send a previously approved mass mailing informing customers
they could reduce their disposal costs by increased recycling. According
to Paolella, Hanley's explanation for the decision to cancel the mailing
was that "you [Paolella] don't work the BFI way."
4. The notice explained the impending rate hike as follows:
Effective July 1, 1992 there will be an increase in the fees that
the
Delaware Solid Waste Authority charges for all solid waste disposal
at its landfill.
Therefore, BFI must increase its charge for solid waste removal.
This
will take effect with our July 1992 invoicing.
App. at 805.
4
could reduce DeSeta's rate. According to Paolella and his
subordinate, Geoffrey Schenck, Hanley instructed them to
inform DeSeta that his trash weighed 120 pounds and the
rate could not be reduced. Paolella then instructed Schenck
to explain this to DeSeta. Paolella testified he complied
because he feared losing his job. One month later, Paolella
was replaced by Stephen Stanko as sales manager. Despite
not having received any prior written warning or other
indication that his performance was unsatisfactory, Paolella
was demoted to sales representative.
Paolella also testified to two other instances of fraudulent
billing by BFI. First, Paolella testified that in 1993 he
discovered BFI had increased its weight disposal fee for
Dempsey's Diner, claiming the average weight of Dempsey's
trash was 200 pounds. Although Dempsey's contract did
not permit BFI to increase its fees based on an increase in
the trash weight, Dempsey's agreed to pay the higher rate
if BFI could substantiate the weight increase. According to
Paolella, Stanko directed Paolella to prepare three false
weight tickets. Paolella testified he did as directed because
he feared repercussions if he disobeyed.
Second, Paolella testified that he learned BFI was
continuing to bill Fayva Shoes, although Fayva had stopped
using BFI's services some months earlier. When Paolella
suggested to Hanley that Fayva should receive a credit for
the overpayments, Hanley told him, "as long as they keep
paying us, you keep billing them."
In late 1993, the tension between Paolella and BFI
reached a breaking point. On August 27, 1993, Paolella
sent BFI a certified letter concerning unpaid commissions
he claimed BFI owed him. On September 24, 1993, BFI
sent Paolella a written warning about his performance. On
December 2, 1993, Paolella sent BFI another letter about
the commissions. BFI replied by sending Paolella another
warning on December 23, 1993. Paolella then sent BFI two
more letters on December 30, 1993. In one of them,
Paolella warned BFI to "immediately cease all illegal
activities," a statement he claimed referred to Hanley's
fraudulent billing scheme. On January 17, 1994, BFI
terminated Paolella for "poor performance."
5
II.
On December 6, 1994, Paolella filed a complaint against
BFI and its parent company, Browning-Ferris Industries,
Inc., alleging wrongful discharge.5 After a four day trial, the
jury returned a verdict for the plaintiff and awarded
$732,000 in damages. At the court's request, the jury
specified that $135,000 represented back pay, while the
remaining $597,000 constituted front pay. BFI filed a
renewed motion for judgment as a matter of law and, in the
alternative, a motion for a new trial.6 As noted, the district
court denied both motions.
III.
The district court examined Delaware case law to
determine whether whistleblowing employees were entitled
to protection under the public policy exception to the
employment-at-will doctrine. Finding no cases directly on
point, the court predicted whether the Delaware Supreme
Court would afford such protection. Based primarily on its
interpretation of the Delaware Supreme Court's decision in
E.I. Dupont de Nemours and Co. v. Pressman, 679 A.2d 436(Del. 1996), the district court held Delaware would extend
the protection of the public policy exception to an employee
who "blew the whistle" on an employer's illegal (as opposed
to merely questionable) conduct. Paolella, 973 F. Supp. at
512.
The court then examined whether there was sufficient
evidence to support the jury's finding that BFI had engaged
in illegal activity. Citing Paolella's testimony concerning
Hanley's creation of the fraudulent billing scheme, Hanley's
instructions to lie to customer DeSeta, Stanko's
instructions to fabricate weight tickets, and the
corroboration of much of Paolella's testimony by Schenck,
_________________________________________________________________
5. The claims against Browning-Ferris Industries, Inc. were dismissed for
lack of personal jurisdiction.
6. BFI also moved the district court to amend the judgment to indicate
the jury's apportionment of the verdict to front pay and back pay. The
district court granted that motion, and none of the parties has appealed
this determination.
6
the court concluded the evidence was sufficient. The court
also found the public policy exception could still apply even
if Paolella participated in the unlawful activity: "[t]o
preclude even a penny of recovery to a whistleblower
plaintiff because that plaintiff had some slight participation
in that wrongdoing would be a disincentive to rooting out
corruption, and would mute more than a few whistles." Id.Drawing an analogy to the concept of comparative fault in
negligence, the district court held that, although the
Delaware courts would not create an absolute bar to
recovery, some reduction in the jury verdict was
appropriate because of Paolella's participation. 7
Consequently, the court ordered a remittitur of $132,000.
The district court also rejected BFI's argument that there
was insufficient evidence of causation because considerable
time had elapsed between Paolella's complaints and his
termination. Although BFI contended the letters sent by
Paolella did not address the fraudulent billing scheme, the
court found the jury could have reasonably concluded the
reference to "illegal activity" in Paolella's December 30,
1993 letter was part of his protests to BFI. Because BFI
terminated Paolella less than a month after receiving the
letter, the court concluded that causation was adequately
proven.
With respect to the motion for a new trial, the court
rejected the argument that its charge improperly instructed
the jury on the issue of reliance. In particular, BFI claimed
the charge allowed the jury to infer that BFI's customers
relied on the alleged misrepresentations, despite the
absence of any direct testimony from BFI's customers.
According to BFI, this relieved Paolella of his burden of
proving reliance, and placed the onus on BFI to disprove
that its customers relied on the alleged misrepresentations.
The court disagreed, holding the charge instructed the jury
_________________________________________________________________
7. The court rejected Paolella's argument that no reduction in the
damage award was warranted because he was "coerced" into
participating because he feared losing his job: "[t]hat one needs money,
that one will suffer economic hardship if one does not play along with a
scheme to skim from one's customers, has never been a defense to
fraud." Paolella, 973 F. Supp. at 513.
7
that it could infer customer reliance on BFI's statements "if
there were sufficient circumstances to permit that inference
to be drawn." Id. at 514. The court reasoned that, despite
the absence of direct customer testimony, the jury could
reasonably infer that a customer would not accept an
unwarranted price increase if it were fully informed of the
basis for that increase. Id. at 514 ("It is a matter of common
sense, and of general knowledge of human nature, that
people are not inclined knowingly to consent to being
economically gouged.").
IV.
BFI appeals on several grounds. First, BFI contends the
district court misinterpreted Delaware case law and
improperly extended the scope of the "public policy
exception" to include situations where the employee was
directly involved in the allegedly illegal activity. Second, BFI
argues that, regardless whether an employee's involvement
bars his recovery, this case does not fit within the
parameters of the public policy exception because Paolella
was not responsible for the allegedly unlawful activity, and
did not produce sufficient evidence at trial, in particular
testimony from BFI's customers, to prove that BFI's
conduct was illegal. Third, BFI contends Paolella failed to
prove his opposition to BFI's billing scheme was the cause
of his termination. Finally, BFI claims the court erred when
it found sufficient evidence to support the jury award, and
contests the court's application of comparative fault
principles in the context of a wrongful discharge action.
We exercise plenary review of the district court's denial of
a motion for judgment as a matter of law, Lightning Lube,
Inc. v. Witco Corp., 4 F.3d 1153, 1166 (3d Cir. 1993), as
well as its predictions applying state law. Staff Builders of
Phila., Inc. v. Koschitzki, 989 F.2d 692, 694 (3d Cir. 1993).
A motion for judgment as a matter of law should be granted
only if, "viewing all the evidence . . . in the light most
favorable to the party opposing the motion, no jury could
decide in that party's favor." Walter v. Holiday Inns, Inc.,
985 F.2d 1232, 1238 (3d Cir. 1993) (citation omitted).
We review the district court's denial of a motion for a new
trial for abuse of discretion, "unless the court's denial of the
8
motion is based on the application of a legal precept, in
which case the standard of review is plenary." Rotondo v.
Keene Corp., 956 F.2d 436, 438 (3d Cir. 1992). A question
of fact concerning the new trial motion is reviewed for clear
error. United States v. Perdomo, 929 F.2d 967, 969 (3d Cir.
1991). The district court's grant of remittitur is also
reviewed for abuse of discretion. Dunn v. Hovic, 1 F.3d
1362, 1364 (3d Cir.), modified on other grounds, 13 F.3d 58(3d Cir.), cert. denied, 510 U.S. 1031 (1993). Finally, we
review BFI's challenge to the amount of the jury award to
determine if "the verdict is ``so grossly excessive as to shock
the judicial conscience.' " Gumbs v. Pueblo Int'l Inc., 823
F.2d 768, 771 (3d Cir. 1987) (citations omitted).
V.
A district court exercising diversity jurisdiction must
apply the substantive law of the state whose law governs
the action. Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358,
1373 n.15 (3d Cir. 1996) (citing Erie R.R. Co. v. Tompkins,
304 U.S. 64, 78 (1938)). "When the state's highest court
has not addressed the precise question presented, a federal
court must predict how the state's highest court would
resolve the issue." Id. Absent a definitive statement of the
applicable law by the state's highest court, a district court
may also consider the decisions of state intermediate
appellate courts in order to facilitate its prediction. Rolick v.
Collins Pine Co., 925 F.2d 661, 664 (3d Cir. 1991), cert.
denied, 507 U.S. 973 (1993).
A.
1.
The employment-at-will doctrine "has a long history in
Delaware and the United States." E.I. Dupont de Nemours
and Co. v. Pressman, 679 A.2d 436, 440 (Del. 1996). Under
the doctrine, there is a "heavy presumption that a contract
for employment, unless otherwise expressly stated, is at-
will in nature, with duration indefinite." Merrill v. Crothall-
American, Inc., 606 A.2d. 96, 102 (Del. 1992). But the
doctrine is not entirely unfettered, and courts have
9
demonstrated a willingness to "impos[e] constraints on an
expansive interpretation of employers' prerogatives under at
will employment contracts . . . ." Shearin v. E.F. Hutton
Group, Inc., 652 A.2d 578, 586 (Del. Ch. 1994). In
particular, Delaware courts have established two distinct
limitations on the employment-at-will doctrine, one
grounded in contract, the other in public policy.
The contractual limitation adopted by the Delaware
Supreme Court in Merrill, based on an implied covenant of
good faith and fair dealing, bars termination in cases of
fraud, deceit or misrepresentation by the employer. 606
A.2d at 101-02. Although the facts of that case did not
require the court to address the availability of other
exceptions to the at-will doctrine, the court noted that, in
certain circumstances, "some other public policy [may be]
implicated" by an employee's termination. Id. at 102.
The Delaware Court of Chancery later applied this "public
policy" exception in the case of an in-house attorney who
was allegedly fired for attempting to expose various abuses
by her employer's corporate parent. See Shearin v. E.F.
Hutton Group, Inc., 652 A.2d 578, 586 (Del. Ch. 1994).
Delving into uncharted territory, the Chancellor held that
an at-will employee may state a valid claim for breach of
her employment contract where her termination was in
violation of a "specific, articulated public policy." Id. But the
court held this exception was limited in two respects.
"[E]mployees who seek protection from firing on the basis
that their actions were protected by a public policy, must
assert a public interest recognized by some legislative,
administrative or judicial authority, and the employee must
occupy a position with responsibility for that particular
interest." Id. at 587-88.
The Delaware Supreme Court again took up the public
policy exception in Pressman. In that case, plaintiff
Pressman discovered that his superior, Pensak, was serving
as a technical adviser to a medical imaging technology
company, a position Pressman feared created a conflict of
interest. Pressman alleged that, after confronting his
superior, Pensak engaged in a retaliatory campaign to have
him fired. Defendant DuPont contended that the
employment-at-will doctrine barred Pressman's suit. While
10
the court's analysis focused primarily on the applicability of
the covenant of good faith and fair dealing set forth in
Merrill, it also examined the public policy exception to the
at-will doctrine, but concluded that Pressman's claim did
not satisfy the requirements established in Shearin.
The central question raised here is whether Delaware
would apply the public policy exception in a situation where
the employee has participated in the employer's illegal
activity. BFI argues that, under Delaware law, the public
policy exception to the employment-at-will doctrine is
narrow. In addition to the limitations prescribed by Shearin,
BFI contends that Pressman limits the application of the
exception to those cases in which the employee refuses to
participate in the illegal activity.
We disagree. We do not believe Pressman adds a "non-
participation" requirement to the public policy exception
delineated in Shearin. Although the Pressman court quoted
approvingly from Shearin, noting the limitations set forth, it
did not address whether an employee's participation would
prevent his recovery for wrongful discharge.8
_________________________________________________________________
8. BFI argues that Pressman "emphasized, by its own description, that
the exception will only protect employees who refuse to participate in
unlawful conduct." BFI Brief at 15 (citing Pressman, 679 A.2d at 441-42
& n.13). That "description" appears to be the parenthetical description of
a Superior Court case cited in a Pressman footnote, in which the
Delaware Supreme Court described the Superior Court's holding with the
phrase "refusing to commit crime." Pressman, 679 A.2d at 442 n.13
(citing Henze v. Alloy Surfaces Co., Inc., C.A. No. 91C-06-20, 1992 WL
51861, Bifferato, J. (Del Super. Ct., March 16, 1992)). BFI interprets
this
to mean the public policy exception only applies if the employee refuses
to participate in the employer's criminal act.
We disagree with BFI's interpretation. The Delaware Supreme Court
cited that case for the proposition that "[t]he Superior Court has . . .
permitted an exception to the at-will rule for public policy." Pressman,
679 A.2d at 442 n.13. The use of the phrase "refusing to commit crime"
is a description of the factual premise of the case, and cannot be read
to limit an employee's recovery to instances where the employee
refrained from participating in its employer's unlawful activity. Any
doubt as to the weight to be afforded this parenthetical description can
be eliminated by consideration of the next Superior Court case in that
citation string, which is described with the phrase "refusing to take
polygraph."
11
Despite the absence of explicit language in Pressman
adopting this "non-participation" requirement, BFI presses
its argument by noting that none of the "plaintiffs in the
cases cited as authority in Pressman would have stated a
valid cause of action under the public policy exception had
he or she not refused to violate the law." BFI Brief at 18.
But, once again, these cases give no indication that the
application of the public policy exception turned on the
employee's refusal to violate the law. BFI has cited no case
in which a Delaware court has refused to apply the public
policy exception because an employee was involved in the
illegal activity at the direction of its employer. Since neither
Pressman nor Shearin conditioned the applicability of the
public policy exception on the employee's abstention from
the employer's wrongdoing, we believe the district court's
prediction of Delaware law is correct. As the district court
noted, "[i]n the real world, it is a fact that not every
observer of less-than-licit conduct is a third party, coyly
standing an innocent and proper distance away from the
misdeeds." Paolella, 973 F. Supp. at 512. Although the
exceptions to the at-will doctrine are to be narrowly drawn,
the policy reasons for protecting whistleblowers remain
whether or not the employee can avoid involvement in the
illegal activity. For these reasons, we do not believe a non-
participation requirement is mandated by Delaware law.
2.
BFI also contends the public policy exception does not
apply to the facts of this case. As noted in Shearin, an
employee seeking protection from the public policy
exception "must assert a public interest recognized by some
legislative, administrative or judicial authority, and must
occupy a position with responsibility for that particular
interest." 652 A.2d at 587-88. According to BFI, Paolella's
complaints did not address a specific public interest, and
even if so, he was not in a position of responsibility to
warrant the protection of the public policy exception. BFI
maintains that "Pressman authoritatively establishes that
questioning the propriety of the employer's business
practices . . . ``does not rise to the level of a legally
cognizable public policy exception.' " BFI Brief at 14. Under
12
this view, Paolella's private objections to Hanley and Snyder
do not bring his termination within the scope of the
exception.
In Pressman, the court found the employee's claim that
he was fired for questioning the propriety of his superior's
business practices was outside the purview of the public
policy exception. 679 A.2d at 442 (holding that "Pressman's
claim cannot fit within the public policy category since he
does not identify an explicit and recognizable public
policy."). In particular, the court noted that " ``[e]mployees
who uncover and blow the whistle on questionable internal
financial and business practices [absent illegality] have won
no support from the courts.' " 679 A.2d 436, 442 (alteration
in original) (quoting Holloway & Leech, Employment
Termination: Rights and Remedies 180 (2d ed. 1993)).
Consequently, it appears that Delaware will not invoke the
public policy exception absent some illegal act by the
employer.
Once that limitation is understood, Pressman can be
distinguished on its facts. The plaintiff in Pressman
questioned the ethical propriety of his superior's
relationship with a client of the company. By contrast,
Paolella contended that his employers' billing scheme was
illegally designed to defraud BFI's customers by leading
them to believe the increase in their monthly fees was due
solely to a state imposed increase in BFI's dumping costs
and was therefore authorized under the terms of the service
agreements. Thus, while both Paolella and Pressman
questioned the propriety of their employer's business
practices, Paolella raised legal, as opposed to ethical,
concerns about his employer's conduct.
BFI also claims the public policy exception is inapplicable
because Paolella did not have responsibility for the
company's billing policies. We disagree. As the record
shows, Paolella was a sales manager at the time of the
allegedly unlawful billing practices and was responsible for
negotiating service contracts, billing BFI's customers, and
handling customer complaints. Although the case law does
not elucidate the level of "responsibility" an employee must
have in order to qualify under the public policy exception,
we believe Paolella's position as sales manager puts him in
13
a position of responsibility sufficient to invoke its
protection.
Consequently, we believe the district court, in predicting
Delaware law, correctly found the public policy exception
applicable under the facts of this case.
B.
BFI's contends that, even if the public policy exception
applies, the evidence was insufficient to support a finding
that its conduct was illegal. Consistent with its
interpretation of Delaware law, the district court charged
the jury that, in order to find for Paolella, it must find BFI
had violated Delaware's theft by false pretenses statute.
That statute provides:
A person commits theft when, with the intent
prescribed in S 841 of this title [to deprive another
person of property or to appropriate another person's
property], the person obtains property of another
person by intentionally creating or reinforcing a false
impression as to a present or past fact, or by
preventing the other person from acquiring information
which would adversely affect the other person's
judgment of a transaction.
11 Del. Code S 843 (1998). The district court held there was
sufficient evidence to allow a jury to find BFI violated the
theft by false pretenses statute because BFI "had obtained
greater fees, the property of others, by creating a false
impression that the rate increase reflected higher landfill
costs alone." Paolella, 973 F. Supp. at 511.
On appeal, BFI maintains the actions alleged by Paolella
did not violate Delaware law.9 BFI contends that it did not
_________________________________________________________________
9. BFI urges us to find that its actions were not illegal as a matter of
law,
reasoning that our decision in Clark v. Modern Group Ltd., 9 F.3d 321(3d Cir. 1993), allows a court to "resolve as a matter of law whether a
certain course of conduct to which an employee has objected is illegal."
BFI Brief at 29. Clark is inapplicable here. In Clark, the sole issue was
the legal question whether the tax laws required inclusion of certain
excess expense reimbursements on employees' W-2 forms. There were no
14
mislead its customers because the bottom line rate it
charged was fully disclosed to BFI's customers, and that
the invoices it prepared indicated the rate increase was not
due solely to the landfill charge increase. BFI also asserts
that "no customer appeared to testify that he was under a
false impression, or was prevented from acquiring
information which would adversely affect his judgment of
his transaction with BFI." BFI Brief at 23. Consequently,
BFI contends that the evidence does not support afinding
that it violated Delaware's theft by false pretenses statute.
We disagree. Viewing all of the evidence presented in the
light most favorable to Paolella, we do not believe "the
record is critically deficient of that quantum of evidence
from which a jury could have rationally reached its verdict."
Swineford v. Snyder County, 15 F.3d 1258, 1265 (3d Cir.
1994). Although Paolella did not offer the testimony of
customers claiming they were deceived, we do not believe
the absence of such testimony is fatal.10 As noted, there
_________________________________________________________________
factual disputes. As Clark noted, however, "a decision on the legality or
illegality of a particular act often requires a resolution of disputed
issues
of fact . . . ." 9 F.3d at 333. In this instance, the determination of
whether BFI violated 11 Del. Code S 843 necessarily turns on certain
factual issues relating to BFI's conduct and the jury's evaluation of the
relevant testimony. Consequently, we decline to determine this question
as a matter of law.
10. On appeal, BFI once more raises the argument that Paolella failed to
meet his burden of demonstrating BFI's customers relied on the alleged
misrepresentations because he presented no customer testimony at trial.
BFI reasons that, absent direct evidence of reliance, Paolella cannot
prove a violation of 11 Del. Code S 843. In particular, BFI maintains the
jury charge "on a theory of a lack of informed consent allowed the jury
to believe that without any customer testimony it could infer an
[unlawful] act," effectively reversing the burden of proof on the issue of
reliance. BFI Brief at 31.
We do not believe the jury charge on the issue of reliance was an
abuse of the court's discretion. The court's charge set out the arguments
offered by both sides, and informed the jury that they should apply
common sense and their own experience to the evidence and testimony
presented at trial. We do not believe that allowing the jury to draw
reasonable inferences shifted the burden of proof to BFI. To the contrary,
Paolella had the burden of demonstrating that BFI made false
representations to its customers regarding the nature of the impending
price increase.
15
was testimony concerning Hanley's creation of the
fraudulent billing scheme, Hanley's instructions to both
Paolella and Schenck to lie to DeSeta, and the fabrication
of the weight tickets for Dempsey's Diner. In addition,
Paolella testified that he sent each customer, at BFI's
direction, a memorandum stating that BFI was increasing
its charges for solid waste disposal as a result of the
Delaware Solid Waste Authority's increased charges to BFI.
Taken together, we believe the jury could have reasonably
concluded that BFI intentionally created a false impression
among its customers that the price increase was solely the
result of the state imposed increase in BFI's dumping costs.
C.
BFI also contends its actions did not violate the statute
because it was within its contractual rights to raise the
disposal fee. According to BFI, the agreements
"unambiguously placed the burden of objecting to a rate
adjustment on the customer, and expressly advised
customers that their consent could be inferred from their
conduct." BFI Brief at 33. Consequently, BFI argues the
failure of the customers to object indicates their consent to
the price increase. In the alternative, BFI argues that while
its conduct may amount to a breach of contract, this does
not constitute an illegal act that would trigger the
protection of the public policy exception.
We do not believe that BFI's actions can only be classified
as a breach of contract. As the district court noted, a
breach of contract can be accompanied by other actions
that violate the law. That BFI's actions may constitute a
breach of its service agreements does not preclude afinding
that its accompanying actions violated Delaware's theft by
false pretenses statute. In this instance, it is BFI's alleged
misrepresentations to its customers, rather than its breach
of the service agreements, which serve as the basis for a
finding that BFI violated Delaware's theft by false pretenses
statute.
We also disagree with BFI's argument that its July 1992
fee increase was permissible under the service agreements.
As noted, BFI's service agreements allowed for three
16
categories of rate increases. The first two, which did not
require customer consent, allowed BFI to raise its rates in
order to pass along state imposed increases in dumping
costs and to impose cost-of-living increases. The third
category allowed BFI to raise its fees for any other reason,
provided it gives the customer 30 days advance notice and
received customer consent. But customer silence cannot
constitute customer consent when the July 1992 rate
increase was not solely attributable to the state-imposed
increase in BFI's dumping costs.11
Because the jury found that BFI intentionally misled its
customers as to the basis for the fee increase, and because
we believe the evidence offered at trial was sufficient to
support such a finding, we reject BFI's arguments.
D.
Claiming twenty months passed between Paolella's last
complaint in April 1992 and his termination, BFI contends
Paolella failed to satisfy his burden of demonstrating that
his complaints of illegality were the cause of his
termination. Furthermore, BFI contends it had good cause
to terminate Paolella, citing his inadequate performance in
1993 and the hostile attitude displayed in his letters to
Stanko and Hanley.
BFI's contention that twenty months passed between
Paolella's last complaint and his termination in January
1994 turns on its interpretation of the correspondence sent
by Paolella in December 1993. Paolella claims that his
December 30, 1993 letter, in which he demanded BFI
"immediately cease all illegal activities," was a direct
reference to BFI's fraudulent billing scheme, and his
termination less than three weeks later is sufficient support
for the jury's finding of causation. BFI contends that the
"illegal activities" must refer to the alleged withholding of
Paolella's commissions.12 We disagree. In light of Paolella's
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11. We also disagree with BFI's unsupported contention that it obtained
its customers' "voluntary, informed consent" to raise its fees at the time
the service agreements were signed.
12. BFI contends that, because the letter was unambiguous, we should
determine its meaning as a matter of law. BFI Brief at 35 (citing Western
17
repeated complaints about BFI's billing scheme, the
reference to "illegal activities" could reasonably be
interpreted as a reference to either BFI's billing scheme or
its withholding of Paolella's commissions. The issue was
properly left to the jury. See Williamson v. Consolidated Rail
Corp., 926 F.2d 1344, 1353 (3d Cir. 1991) ("New trials
because the verdict is against the weight of the evidence are
proper only when the record shows that the jury's verdict
resulted in a miscarriage of justice or where the verdict, on
the record, cries out to be overturned or shocks our
conscience.")
BFI also claims it had good cause for terminating
Paolella, noting Paolella conceded "the only reasons
provided to him at the January 17, 1994 meeting as the
reason for his discharge were his poor performance and
attitude . . . [and therefore] established as a matter of law
BFI's justification for terminating him for insubordination."
BFI Brief at 38. That an employer did not provide bad faith
or discriminatory reasons for an employee's termination
does not insulate the employer from liability "as a matter of
law." Consequently, BFI's argument is reduced to an attack
on the weight the jury accorded the evidence. While
acknowledging "BFI presented a good deal of evidence to
the effect that Mr. Paolella was a worthy candidate for being
sacked," the district court found there was sufficient
evidence to support the jury's findings. Paolella, 973 F.
Supp. at 515. We agree. Viewing the evidence in the light
most favorable to the verdict winner, we do not believe BFI
has shown that no rational jury could have found for
Paolella.
E.
BFI contends there was insufficient evidence to support
the jury award of $597,000 in front pay, and contends that
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United Life Assurance Co. v. Hayden, 64 F.3d 833, 837 (3d Cir. 1995)).
But Western United Life addressed a court's obligation to construe an
unambiguous contract as a matter of law. The document at issue here
was a letter, rather than a legally enforceable agreement. More
importantly, we believe the December 30, 1993 letter was not
unambiguous. This was a jury issue.
18
such an exorbitant award "may be indicative of passion and
prejudice." BFI Brief at 43. In addition, BFI objects to the
district court's application of a "comparative fault" theory,
contending that, even if the court were correct, it should
have submitted the calculation of comparative fault to the
jury.
With respect to the size of the jury award, BFI notes that
Paolella did not offer expert actuarial testimony to support
his claim, and contends the size of the award demonstrates
the jury ignored the district court's charge.13 According to
BFI, the front pay award is more than 17 times the
difference between Paolella's highest annual salary and the
$20,000 he earned the year after his termination, and is
therefore "contrary to right reason."
We disagree. The amount of the jury award in this
instance does not shock the conscience. In addition, we do
not believe the absence of expert testimony renders the jury
calculation improper. Paolella presented evidence that his
salary at BFI from 1991 through 1993 ranged from $45,000
to $53,000 and that his earnings in 1995 were $20,000.
Based on this information, the jury could reasonably
calculate a front pay award according to the district court's
instructions.14 Consequently, we do not believe the evidence
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13. BFI takes no exception to the jury charge with respect to damage
calculation. The court charged the jury:
If you determine to award damages to plaintiff, it is not
appropriate
to merely award pay until such time as plaintiff qualifies for a
pension or otherwise might be expected to retire. Such an award in
pay to a 51 year old employee is unwarranted, because of future
uncertainties, and you must act cautiously in considering an award
of front pay for a long period of time. You must consider other
factors such as the availability of employment opportunities, the
period within which one by reasonable efforts may become
reemployed, the employee's work and life expectancy, and discount
tables to determine the present value of future damages, and other
factors that are pertinent to a prospective damage award. If you
find
that plaintiff failed to present testimony and evidence regarding
those factors, you should not award him front pay for an extended
period of time.
App. at 696-97.
14. Assuming a fourteen year work expectancy, the front pay award
averages out to an annual income of $ 42,642, afigure that falls between
the highest salary Paolella had earned (over $50,000) and the $20,000
he reportedly earned the year following his termination.
19
is insufficient to support the award, or that the jury's
calculation is improper.
With respect to calculation of an appropriate remittitur,
BFI contends there was no basis to conclude the Delaware
courts would apply comparative negligence principles in
this situation, and that even if those principles applied
here, the jury, rather than the court, should have
determined the degree of fault attributable to both parties.
We do not believe the court's analysis was an abuse of
discretion.15 We note the district court did not actually
apply comparative negligence principles to calculate the
remittitur, and did not attempt to allocate degrees of fault
between the parties. The district court reasoned that, much
as a plaintiff in a negligence action should not be rewarded
if he is partly at fault, an employee who participates in an
illegal activity on behalf of his employer ought not receive
the full benefit from his action for wrongful discharge.
Consequently, the court concluded that the jury award
would shock the conscience of the court unless it was
reduced appropriately. We see no abuse of discretion here.
VI.
For the foregoing reasons, we will affirm the district
court's denial of defendant's motion for judgment as a
matter of law and its motion for a new trial.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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15. BFI also contends the district court's analogy to comparative
negligence was an improper basis for the court's conclusion that an
employee may recover for wrongful discharge under the public policy
exception even if the employee is engaged in the illegal activity. For the
reasons discussed supra, we believe the district court correctly predicted
the Delaware courts would allow an employee to recover in such a case,
and consequently need not address this argument.
20