John Luscko v. Southern Container Corp , 408 F. App'x 631 ( 2010 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 10-1249
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JOHN LUSCKO,
Appellant
v.
SOUTHERN CONTAINER CORP.;
STEVEN HILL
____________
On Appeal from the United States District Court
for the District of New Jersey
(Civ. No. 06-3896)
District Judge: Hon. William H. Walls
Submitted November 17, 2010
Before: BARRY, CHAGARES, and VANASKIE, Circuit Judges.
(Filed: November 30, 2010)
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OPINION OF THE COURT
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CHAGARES, Circuit Judge.
John Luscko appeals the District Court’s grant of summary judgment on his claims
that his employer, Southern Container Corp., committed fraud, constructively discharged
him, breached his employment contract, and discriminated against him. For the reasons
that follow, we will affirm the judgment of the District Court.
I.
We write for the parties’ benefit and recite only the facts essential to our
disposition. John Luscko, a salesperson in the box industry, began his employment with
Regal Corrugated Box Co. (“Regal”) in 1989, receiving a five-percent commission on his
sales. When the owner of Regal passed away in 2004 and the company began to
experience financial problems, Luscko decided to explore employment opportunities at
Southern Container Corp. (“Southern”). According to Luscko, he remained at Regal
when Southern balked at his request to remain at a five-percent commission rate. In
2005, however, Regal was sold to Southern through an asset purchase agreement.
As part of the sale, Southern acquired the Regal business and accounts. The asset
purchase agreement provided for an initial payment as well as payments based on a
percentage of Southern’s sales to former Regal accounts. In the agreement, Southern
invited four individuals of Regal’s sale staff, including Luscko, to enter into employment
contracts whereby Southern promised to maintain their five-percent commission rates for
three years. Hesitant to commit to employment at Southern, Luscko signed the contract
after his fears were minimized by the statements of Southern’s executive vice-president,
Steven Hill. Hill stated that Luscko would be treated “exactly” like at Regal, that he
would personally take care of any problems Luscko had, that Luscko’s accounts were
“good” and “important” to Southern, and that the transition would be smooth. Hill
believed that Southern could easily absorb the plants and services of Regal and that,
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ultimately for Luscko, employment at Southern would be better than at Regal. According
to Luscko, Hill during this discussion about his employment inquired whether Luscko felt
too old to sustain his then-level of productivity.
Luscko’s employment agreement permitted him to continue to sell to his former
Regal accounts in addition to any newly established accounts, provided Luscko was in
compliance with Southern’s policies in regards to price, terms, charges, deliveries, and
products offered. Southern was expressly given absolute discretion to refuse to accept
any orders or ship any products. In return, Luscko was provided with a commission rate
of five percent for all sales on prior accounts. The employment contract explicitly stated
that the contract constituted the entire agreement between the parties and that there were
no other agreements or representations made with respect to the contract. Without
discussing the arrangement with Southern, Luscko signed the contract without reading it.
Despite all intentions, the transition period for Southern was difficult. Southern
had unexpected delays due to problems transferring data from Regal to Southern,
inefficiencies at Regal’s plants, and acts of sabotage against machinery at Regal’s sites.
This mayhem caused Southern’s business and employees to suffer tremendously. During
this transition, Southern failed to process submitted orders or to make timely or accurate
deliveries of orders. Luscko complained that during this period, Southern set onerous
credit terms on his accounts, failed to provide him with commission statements,
converted some of his accounts to house accounts, and provided poor customer service to
his clients and to him. Southern admits that the transition was a nightmare, and while
problems were eventually resolved, it cost Southern lost accounts and sales.
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As a result of this chaotic transition, Luscko’s sales on his primary accounts
decreased and so did his commissions. Southern was unable to provide support to
Luscko for any of his new accounts as it was struggling with its current business. By
April 2006, Luscko’s sales had dropped from $5.5 million to $400,000, and his
commissions had been reduced to $20,000 from $275,000. Luscko never lodged any
complaints with Southern. However, on April 19, 2006, Luscko quit without notice. No
one was hired to replace Luscko.
On June 29, 2006, Luscko filed suit in the Superior Court of New Jersey. On
August 17, 2006, Southern removed the action to the District Court. The District Court
on December 23, 2009 granted Southern’s summary judgment motion. On January 20,
2010, Luscko filed a notice of appeal.
II.
The District Court had diversity jurisdiction pursuant to 28 U.S.C. § 1332 and we
have appellate jurisdiction pursuant to 28 U.S.C. § 1291. Our review of the District
Court’s grant of summary judgment is plenary, and we apply the same legal standard as it
should have. Vitalo v. Cabot Corp., 399 F.3d 536, 542 (3d Cir. 2005). A party is entitled
to summary judgment “if the pleadings, the discovery and disclosure materials on file,
and any affidavits show that there is no genuine issue as to any material fact and that the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). In conducting
our analysis, we must view the record in the light most favorable to Luscko, and must
draw all reasonable inferences in his favor. See Vitalo, 399 F.3d at 542; Fed. R. Civ. P.
56(c). To defeat summary judgment, however, Luscko must “produce admissible
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evidence containing ‘specific facts showing that there is a genuine issue for trial.’”
Vitalo, 399 F.3d at 542 (quoting Fed. R. Civ. P. 56(e)). 1
III.
Luscko contends that Southern’s service problems during its transition period were
calculated actions intended to avoid making future payments to Regal in accordance with
the asset purchase agreement. He alleges that Southern was only interested in eliminating
Regal as a competitor and never had any intention of promoting and preserving Regal
accounts. Further, Luscko believes that Southern purposely delayed his orders and ruined
his accounts in an effort to deprive him of his commission and Regal of future payments.
As a result, Luscko maintains that Southern committed fraud, constructively discharged
him, breached his employment contract, and discriminated against him.
A.
Luscko alleges that Southern, through Hill, fraudulently induced him into signing
his employment agreement. In New Jersey, to sustain a claim for fraud, a plaintiff must
show that the defendant made (1) a material misrepresentation of present existing or past
fact, (2) with knowledge of its falsity, (3) made for the purpose of inducing the plaintiff
to rely on it, and (4) which results in plaintiff’s reasonable reliance. Lightning Lube v.
Witco Corp., 4 F.3d 1153, 1182 (3d Cir. 1993) (citing Jewish Ctr. of Sussex County v.
Whale, 432 A.2d 521, 524 (N.J. 1981)). A plaintiff seeking monetary damages must also
show that the defendant acted with scienter. Id.1
The parties do not dispute that New Jersey law applies in this diversity action and we
agree with the District Court that New Jersey law governs this dispute.
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As a general rule, fraudulent inducement cannot be predicated upon
representations which involve things to be done in the future. Anderson v. Modica, 73
A.2d 49, 53 (N.J. 1950). However, “where a promise is given and the promisor knows at
the time of promising that he has no intention of fulfilling it, the promise will constitute a
misstatement of present fact and may support an allegation of fraud.” Lo Bosco v. Kure
Eng’g, 891 F. Supp. 1020, 1031 (D.N.J. 1995) (citing Phoenix Techs., Inc. v. TRW, Inc.,
834 F. Supp. 148, 152 (E.D. Pa. 1993), and Notch View Assocs. v. Smith, 615 A.2d 676,
682 (N.J. Law Div. 1992)). Intention may be derived from circumstantial evidence such
as utter recklessness and implausibility of the statement in light of subsequent acts and
events, a showing that the promisor’s intention to perform was dependent upon
contingencies only known to him, or evidence showing at the time of the promise that the
promisor could not or would not fulfill the promise. Ocean Cape Hotel Corp. v.
Masefield Corp., 164 A.2d 607, 613 (N.J. Super. Ct. App. Div. 1960). Mere non-
performance of a promise is insufficient to show that a promisor had the requisite intent
not to perform. Notch View Assocs., 615 A.2d at 682 (citing Ocean Cape Hotel Corp.,
164 A.2d at 614).
Luscko alleges that that Hill made two future promises which induced him to sign
his employment contract: (1) Hill stated that the Regal accounts were “good” and
“important” to Southern; and (2) Hill was silent as to his accounts’ credit terms, quantity
limits and delivery dates. In making such claims, Luscko, however, has failed to provide
evidence that Hill had no intention of fulfilling his promises at the time they were made.
Luscko only points to the problems encountered during the transition period and his
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unsubstantiated theory regarding Southern’s ultimate intent without identifying any facts
showing Hill knew of the subsequent problems that Southern would endure or that in fact
Luscko’s accounts were not “good” or “important” to Southern. The evidence shows that
the transition period for the two companies was extremely difficult and that such
challenges were unexpected to Southern. Further, it is unclear how Hill’s silence on the
credit terms, quantity limits, and delivery dates could constitute an affirmative promise
by Hill, particularly in light of the fact that the express terms of the employment contract
provided Southern with the ultimate discretion in those areas. Hence, there is no
evidence in the record to show that Hill made a material misrepresentation of present
existing or past fact which he knew to be false to induce Lusko to sign his employment
contract.
B.
In addition to his allegations of fraud, Luscko maintains that Southern
constructively discharged him by interfering with his accounts. To prevail on a claim for
constructive discharge, a plaintiff must show that the “employer knowingly permitted
conditions of discrimination in employment so intolerable that a reasonable person
subject to them would resign.” Muench v. Twp. of Haddon, 605 A.2d 242, 249 (N.J.
Super. Ct. App. Div. 1992) (citing Goss v. Exxon Office Sys. Co., 747 F.2d 885, 888 (3d
Cir. 1984)). A plaintiff must support a claim for unlawful retaliation or other violation of
public policy before he can maintain a claim for constructive discharge. Gallo v.
Princeton Univ., 656 A.2d 1267, 1276 (N.J. Super. Ct. App. Div. 1995). Additionally, an
employee has an “obligation to do what is necessary and reasonable in order to remain
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employed rather than simply quit.” Shepherd v. Hunterdon Developmental Ctr., 803
A.2d 611, 627 (N.J. 2002).
Luscko argues that Southern created unreasonable wage restrictions in violation of
N.J. Stat. Ann. § 34:11-56a3 and that his unreasonable wage was a condition so
“intolerable” that he was forced to resign. We find this argument unpersuasive because
Luscko’s wage as a salesperson was not oppressive or unreasonable nor has Luscko
provided evidence that Southern knowingly permitted his reduction in wage so as to
make the conditions intolerable. The evidence does show that the unforeseen difficulties
during the transition period caused all the Regal salespeople to experience sharp declines
in sales and revenues as Southern struggled to execute orders properly. However, there is
no evidence that Southern knowingly permitted these conditions so as to affect Luscko’s
wages and to force his resignation. In fact, the decline in sales revenues was limited to
the transition period and the record indicates that Southern worked diligently to remedy
the problem. Hence, Luscko has not satisfied the elements of a constructive discharge
claim to survive summary judgment.
C.
Luscko also alleges that Southern breached his employment contract because he
was unable to enjoy the fruits of his contract due to Southern’s failure to support his sales
efforts. To sustain a breach of contract claim, a party must show that (1) a valid contract
exists between the plaintiff and the defendant, (2) the defendant breached the contract,
and (3) the plaintiff incurred damages as result of the breach. Video Pipeline, Inc. v.
Buena Vista Home Entm’t, Inc., 275 F. Supp. 2d 543, 566 (D.N.J. 2003) (citing Coyle v.
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Englander’s, 488 A.2d 1083, 1088 (N.J. Super. Ct. App. Div. 1985)). A contract is
considered breached “where one party to a contract, by prevention or hindrance makes it
impossible for the other to carry out the terms [of the contract].” Wolf v. Marlton Corp.,
154 A.2d 625, 628 (N.J. Super. Ct. App. Div. 1959) (citation omitted). Additionally, a
contract is considered breached when a party breaches the implied covenant of good faith
and fair dealing by engaging in acts in bad faith or inequitable conduct in the
performance of a contractual obligation. Black Horse Lane Assoc., L.P. v. Dow Chem.
Corp., 228 F.3d 275, 288 (3d Cir. 2000).
Luscko argues that his employment contract as a whole was breached because he
was prevented from making sales. However, after reviewing the provisions of the
contract and its overall purpose, we conclude that Luscko was not prevented from making
sales during this time period, but that due to the difficult transition period, sales were
restricted or delayed as permitted by the terms of his contract with Southern. As part of
the agreement, Luscko agreed to comply with Southern’s policies in regards to price,
terms, charges, deliveries and products offered, and gave Southern absolute discretion in
regards to accepting and shipping any orders. The employment agreement did not
obligate Southern to make deliveries or process orders within a certain time frame in
order to promote Luscko’s sales. Furthermore, no evidence has been provided that
Southern acted in bad faith or with an improper motive to deprive him of the fruits of his
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employment agreement. As such, Southern did not breach its employment contract with
Luscko. 2
IV.
Accordingly, we will affirm the District Court’s grant of summary judgment to
Southern.
2
Luscko also raises a claim that Southern discriminated against him due to his age. We
reject this argument outright. The record is devoid of evidence that age played a role in
or motivated changes to his employment or that younger salespeople were treated more
favorably than Luscko. Beyond an allegation by Luscko that Hill inquired about whether
he was “getting too old” before he signed his employment contract, there is no evidence
that his age was a factor in any aspect of his employment with Southern.
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