Jerry Ross v. Garner Printing Co. ( 2002 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 01-1178
___________
Jerry Ross, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* Southern District of Iowa.
Garner Printing Company, *
*
Appellant. *
___________
Submitted: November 15, 2001
Filed: April 16, 2002
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Before LOKEN, HEANEY, and RILEY, Circuit Judges.
___________
RILEY, Circuit Judge.
Jerry Ross (Ross) sued his former employer, Garner Printing Company (Garner
Printing), for retaliation and breach of contract and won a $250,000 jury verdict on
his breach of contract claim. The district court1 denied Garner Printing's motion for
a new trial. Garner Printing now appeals, arguing that the district court erred in
instructing the jury, in excluding evidence that Ross tried to bribe a witness, and in
communicating with the jury during deliberations. We affirm.
1
The Honorable Charles R. Wolle, United States District Judge for the
Southern District of Iowa.
I. BACKGROUND
Ross was a long-time employee of Garner Printing in Des Moines, Iowa. He
started as a pressman in 1961 and worked his way up to production manager. In
1978, along with several of his co-workers, Ross became a part owner of Garner
Printing. In July 1996, when Garner Printing was sold to Consolidated Graphics Inc.,
Ross sold his stake in the company but remained to work as a production manager.
In conjunction with the sale in 1996, Ross negotiated a five-year employment
agreement with Garner Printing which provided that he could only be terminated for
cause. If Ross were terminated for reasons other than cause, the employment
agreement entitled him "to payment of all compensation remaining under the terms
of employment under this Agreement payable monthly as though still employed." As
part of the agreement, Ross agreed not to compete with Garner Printing for
approximately five and a half years after the sale.
In July 1998, Ross was fired by Garner Printing. In February 1999, Ross filed
this lawsuit, alleging that he was fired in retaliation for reporting that a female co-
worker was being sexually harassed and that he was fired without cause in violation
of his written employment contract. The district court held a trial on Ross's claims
in October 2000.
At trial, Ross offered evidence that Garner Printing fired him for reporting the
sexual harassment of a co-worker and that Garner Printing did not have cause to
dismiss him. Ross also testified that, after he was fired, he spent six months sending
resumes to out-of-state printers, but did not find work. Garner Printing offered
evidence of "a great demand for printing executives" nationally, but no evidence of
specific jobs that would have been available to Ross.
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Garner Printing also defended its decision to fire Ross, arguing that Ross
provided cause for the dismissal by disparaging its executives and encouraging other
employees to leave Garner Printing and work for rival printers. While Garner
Printing had some evidence of misconduct prior to firing Ross, its strongest evidence
was gathered after Ross had been fired. During an investigation of Ross's claim that
a co-worker was being sexually harassed, Garner Printing allegedly learned that Ross
had been actively diverting business to other printers. It also received information
from Tim Nevins (Nevins), another employee, who said that Ross once took a
confidential document from the company president's desk and provided it to him for
use by the labor union. Nevins testified that he destroyed the document without
showing it to anyone.
The trial began on Thursday, October 12, 2000. At the end of the day on
Friday, October 13, during Ross's case-in-chief, Garner Printing's lawyer asked Ross
if he had offered Nevins $20,000 to take a vacation during the trial. Ross denied the
suggestion and moved to exclude any evidence of the alleged incident. The district
court granted the motion, pending an offer of proof by Garner Printing. The offer of
proof was made on Thursday, October 19. According to the offer of proof, Ross
offered Nevins the bribe in February 2000, but Nevins did not tell anyone about it
until the Monday before trial. The district court found the evidence had unfairly
surprised Ross and excluded it from the trial.
At a conference with counsel after the close of all the evidence, the trial judge
informed counsel that he would give the following jury instruction on Ross's breach
of contract claim:
To recover from Garner Printing for breach of contract, plaintiff
must prove all of the following propositions:
i. Garner Printing breached the contract.
ii. The breach of the contract caused plaintiff to sustain damages.
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iii. The amount of the damage.
If plaintiff has failed to prove any of these propositions, he is not
entitled to damages on this theory of recovery. If plaintiff has proved all
of these propositions, plaintiff is entitled to damages in some amount on
this claim of contract breach.
The district court's general damages instruction, which was also discussed at the
instruction conference, told the jurors that Ross did not have any duty to mitigate
damages on his breach of contract claim. The trial judge also informed counsel that
he would not give any instruction on the significance of evidence of misconduct
Garner Printing discovered after it fired Ross.
Counsel for Garner Printing raised several objections to the court's proposed
instructions, including the following three objections. First, counsel objected to the
lack of a specific instruction on after-acquired evidence of misconduct. Second,
counsel objected to the lack of an instruction informing the jury that Ross had to
perform his obligations under the contract. Third, counsel objected to the court's
failure to instruct the jury that Ross had a duty to mitigate damages on his breach of
contract claim. Garner Printing proposed specific instructions, in writing, on all of
these issues. The trial judge overruled Garner Printing's objections, but said he would
allow counsel to use after-acquired evidence in his closing argument. Garner Printing
did not renew its objections at any time after the judge instructed the jury.
The jury retired to deliberate in the afternoon of Thursday, October 19. On
Friday, the jury submitted several written questions to the district court. The jury's
first question concerned the court's general damages instruction. The district court
proposed a written answer to the jury's question on damages. Neither party objected
to the court's proposed response, but Garner Printing requested a supplemental
instruction on after-acquired evidence of misconduct. The court declined to give such
a supplemental instruction and gave the jury its answer.
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At 3:15 p.m. on Friday, the jury submitted two more written questions to the
district court:
When the first breach by either party occurs in this contract, does
that mean that the contract can no longer be used for legal reasons?
Ref: Employment & Non Competition Agreement
If and when a contract is broken is it null and void?
At 3:45 p.m., after conferring with counsel for both parties, the district court
answered the jury's second round of questions. The court informed the jurors, in
writing, they "should consider the circumstances and nature of any 'first breach' of a
contract" and "[w]hether a contract is null and void after a party has breached the
contract depends on the circumstances and nature of the breach." Neither party
objected to the district court's response.
At approximately 4:05 p.m., the jury wrote the following note to the district
court:
At what point do we determine an adequate conclusion can't be met?
We have agreed on 2 of 3 points but have problem [sic] on the last issue.
We have one person who would be a hardship [sic] to come back
another day.
After conferring with counsel, the district judge brought the jurors into the courtroom
and asked which juror had the hardship. Three jurors said that they would have
problems returning on Monday morning. The judge then told the jurors to return to
their deliberations while he discussed the matter with counsel.
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After discussing the issue with counsel, the judge sent the jury a written note
reading, "At 4:55 p.m., if you have not returned verdicts on all issues, I will call you
into the courtroom and visit further with you." The jury was called into the
courtroom at 4:55 p.m., where the foreperson informed the court that the jury had
resolved question one (discrimination) and question six (breach of contract), but not
question seven (damages for breach of contract).2 The judge again sent the jurors out
of the courtroom. A little while later, he called them back to say that they would
continue their deliberations on Monday morning. At that point, the jurors asked to
have ten more minutes to return a verdict.
The judge granted their request, and, at 5:30 p.m., the jury returned with a
verdict for Garner Printing on Ross's retaliation claim and a $250,000 verdict against
Garner Printing on Ross's breach of contract claim. Garner Printing filed a motion
for new trial, which the district court denied.
On appeal, Garner Printing raises five arguments in support of a new trial.
Garner Printing's first three arguments concern the jury instructions. Garner Printing
claims that the district court erred (1) in failing to instruct the jury on the significance
of "after-acquired" evidence of misconduct by Ross, (2) in failing to instruct the jury
that performance under the contract by Ross was an essential element of his breach
of contract claim, and (3) in instructing the jury that Ross did not have to mitigate
damages with respect to his breach of contract claim. Garner Printing also claims that
the district court erred in excluding the evidence of Ross's alleged attempted bribe
and in the court's communications with the jury.
2
The jury did not answer questions two through five, which were special
interrogatories concerning Ross's failed claim of retaliation.
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II. DISCUSSION
A district court's denial of a motion for new trial is reviewed for abuse of
discretion. Phillips v. Collings, 256 F.3d 843, 851 (8th Cir. 2001).
A. Instructional Issues
A trial court has substantial discretion in drafting jury instructions. Appellate
review of a district court's jury instructions "is limited to whether the instructions,
viewed on the whole, fairly and adequately represent the evidence and applicable law
in light of the issues presented to the jury in a particular case." Omega Healthcare
Investors, Inc. v. Lantis Enters., Inc., 256 F.3d 774, 776 (8th Cir. 2001) (quoting
Oriental Trading Co. v. Firetti, 236 F.3d 938, 946-47 (8th Cir. 2001)). Even an
erroneous jury instruction does not warrant reversal, unless it affected the substantial
rights of the parties. Martin v. Wal-Mart Stores, Inc., 183 F.3d 770, 773 (8th Cir.
1999).
We consider Garner Printing's arguments on the jury instructions even though
Garner Printing did not properly object to those instructions. Rule 51of the Federal
Rules of Civil Procedure requires a party to object to the court's instructions after the
instructions are read to the jury, but before the jury retires to deliberate. See Barton
v. Columbia Mut. Cas. Ins. Co., 930 F.2d 1337, 1341 (8th Cir. 1991); 9 Moore's
Federal Practice, § 51.12[1][b] (3d ed. 2001). Garner Printing did not renew its
objections immediately after the jury had been instructed. Nevertheless, it submitted
proposed instructions in writing and raised its objections during a conference at the
close of the evidence. After reviewing the record, we are convinced that the district
court understood that Garner Printing intended to preserve its objections for appeal,
despite Garner Printing's failure to comply with Rule 51, and so we address the merits
of those objections. See Wheeling Pittsburgh Steel Corp. v. Beelman River
Terminals, Inc., 254 F.3d 706, 711-12 (8th Cir. 2001); Meitz v. Garrison, 413 F.2d
895, 899 (8th Cir. 1969).
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1. After-acquired evidence.
The district court arguably erred in overruling Garner Printing's request for an
instruction on after-acquired evidence of misconduct by Ross. "A party is entitled to
an instruction reflecting that party's theory of the case if the instruction is legally
correct and there is evidence to support it." Gray v. Bicknell, 86 F.3d 1472, 1485 (8th
Cir. 1996). Garner Printing asked the court to instruct the jury that when an employee
gives cause for his dismissal, the employer is not liable for breach of contract, even
if the employer did not discover the relevant misconduct until after it fired the
employee. This is the law in many jurisdictions, see O'Day v. McDonnell Douglas
Helicopter Co., 959 P.2d 792, 795-96 (Ariz. 1998); Restatement (Second) of
Contracts, § 237, cmt. c, illus. 8 (1979), and the parties apparently agree that the rule
applies under Iowa law.3 There was also evidence to support the instruction. Garner
Printing's investigation after Ross was fired revealed evidence Ross had been
diverting business to rival printers and had attempted to provide a confidential
management document to the company's labor union. The jury could have found this
conduct justified Ross's dismissal.
3
In his brief, Ross states that "[t]here is no question that evidence of breach or
cause discovered or acquired at any time is relevant to prove cause." Although Ross's
employment agreement provided that it was governed by Texas law, both parties
treated Ross's claims as though they were governed by Iowa law. The Iowa Supreme
Court has not expressly adopted the after-acquired evidence doctrine as outlined in
the Restatement (Second) of Contracts, but it has adopted a variant of the doctrine for
use in the context of employment discrimination. See Walters v. United States
Gypsum Co., 537 N.W.2d 708, 709-11 (Iowa 1995) (citing McKennon v. Nashville
Banner Publ'g Co., 513 U.S. 352, 360-61 (1995)). Similarly, the Texas Supreme
Court has held, in a retaliatory discharge case, that after-acquired evidence of
misconduct that is by itself sufficient to warrant termination "bars reinstatement and
recovery of actual damages for the period after the employer discovered the grounds
for termination." Trico Tech. Corp. v. Montiel, 949 S.W.2d 308, 312 (Tex. 1997).
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However, the jury could just as easily have reached the same conclusion under
the instructions that were actually given. As Ross points out, Garner Printing was
free to argue, and the jury was free to consider, after-acquired evidence of
misconduct. There is no indication that the jury failed to consider the after-acquired
evidence.4 More importantly, as we discuss below, Garner Printing had the benefit
of an instruction that, in contrast to its own proposed instructions and the governing
law, incorrectly placed the burden of proof solely on Ross. Thus, Garner Printing had
the benefit of using Ross's alleged misconduct without the burden of proving its
affirmative defense that Ross's dismissal was justified. Under these circumstances,
we find no prejudice to Garner Printing's substantial rights.
2. Ross's duty of performance.
Garner Printing argues that Ross should have been given the burden of proving
his dismissal was without cause. Ordinarily, a plaintiff claiming a breach of contract
bears the burden of proving that he performed his obligations under the contract. See
Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224 (Iowa 1998).
However, in a case arising under a "for cause" employment contract, it is generally
held that the employer has the burden of proving cause for termination. See W.
Distrib. Co. v. Diodosio, 841 P.2d 1053, 1059 (Colo. 1992).
The Iowa Supreme Court has implicitly endorsed this approach. In Wolfe v.
Graether, 389 N.W.2d 643 (Iowa 1986), the court wrote that, under an employment
contract for a fixed period of time, "the employer may not discharge an employee
prior to the stated time unless cause is shown based upon the employee's failure to
perform in accordance with the contract of hire or there is some reason for discharge
expressly provided in the contract." Id. at 652 (citing Allen v. Highway Equip. Co.,
239 N.W.2d 135, 140 (Iowa 1976)). The Iowa Supreme Court's formulation, which
4
The jury's questions to the court, which concerned damages, did not involve
Garner Printing's liability on the breach of contract claim.
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requires a showing of employee misconduct, suggests the burden of proving
misconduct rests with the employer and the employee does not have the burden of
showing his conduct was unobjectionable. Cf. Diodosio, 841 P.2d at 1059 n.3
(holding that plaintiff-employees "had no burden to prove that their discharge was
without cause because 'discharge without cause' is merely the converse of 'good cause
for discharge' which . . . is an affirmative defense to a claim for breach of an
employment contract").
The Iowa Civil Jury Instructions reflect the burden-shifting approach the
supreme court implicitly adopted in Wolfe. On a claim under a contract of
employment for a definite time, the relevant pattern jury instruction does not require
the employee to prove he performed his obligations under the contract. See Iowa
Civil Jury Instruction 3110.1. Instead, the pattern instruction allows the employer to
assert an affirmative defense, which presumably includes the defense that the
employee gave good cause for his dismissal. See id. Of course, the defendant
employer has the burden of proving its affirmative defense. See Gaston v. Finch, 72
N.W.2d 507, 510 (Iowa 1955).
In this case, the issues of Ross's performance under the contract were identical
to whether Garner Printing had cause to fire him. The shortcomings in performance
that Garner Printing attributes to Ross – "flagrant neglect of work and gross
misconduct" – are the same types of alleged misconduct Garner Printing should have
had the burden of proving to a jury. Ross did not have the burden of proof on these
issues, and the district court did not err in refusing to tell the jury he did.
3. Mitigation of damages.
We find no reversible error in the district court's instruction that Ross had no
duty to mitigate damages on his breach of contract claim. Depending on the
jurisdiction, a plaintiff is not ordinarily required to mitigate liquidated damages. See
Musman v. Modern Deb, Inc., 377 N.Y.S.2d 17, 19 (N.Y. App. Div. 1975). Under
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Ross's employment contract, termination without cause entitled him "to payment of
all compensation remaining under the terms of employment under this Agreement
payable monthly as though still employed." The district court construed this
provision as a liquidated damages clause and relied on the clause in refusing to
require mitigation of damages. Garner Printing has not advanced any argument in
relation to liquidated damages clauses. For example, it does not claim that Iowa
requires mitigation of damages under such clauses or that awarding damages under
this clause would impose a penalty. See Lake River Corp. v. Carborundum Co., 769
F.2d 1284, 1291-92 (7th Cir. 1985). We find that Garner Printing has waived any
legal arguments that might have merit with respect to this instruction.
Even if we were to find error in the district court's damages instruction, there
is no indication that it prejudiced Garner Printing. The damages awarded by the jury
were less than those provided for in the employment contract and closely resemble
what Ross would have earned during the period of time he was contractually
obligated not to compete with Garner Printing. Because it appears that the jury did
reduce Ross's damages, we cannot find that Garner Printing's substantial rights were
prejudiced by the failure to give an instruction requiring mitigation.
B. Evidence of the Attempted Bribe
A "district court has broad discretion to exclude evidence not disclosed in
compliance with its pretrial orders." Nichols v. American Nat'l Ins. Co., 154 F.3d
875, 889 (8th Cir. 1998). The district court excluded Nevins's testimony about Ross's
alleged attempt to bribe him on the grounds of unfair surprise, stating that the
"information should have been disclosed as soon as [defense counsel] knew about it."
Garner Printing's attempt to use Nevins's testimony about the attempted bribe
was not in accordance with the district court's final pretrial order. A pretrial order
"measures the dimensions of a lawsuit," and "a party may not offer evidence or
advance theories during trial which violate the terms of a pretrial order." Anderson
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v. Genuine Parts Co., Inc., 128 F.3d 1267, 1271 (8th Cir. 1997) (internal citations
omitted). The pretrial order entered by the district court covered the subject matter
of witness testimony. In particular, it included a summary of Nevins's testimony
which said nothing about Ross attempting to bribe Nevins.
Garner Printing purportedly did not learn about Nevins's account of the
attempted bribe until after the pretrial order was entered. However, at the point
Nevins disclosed his allegation, Garner Printing should have moved to modify the
pretrial order. See Fed. R. Civ. P. 16(e). Instead, it kept the new testimony secret and
waited until a crucial moment, the cross-examination of Ross, to drop its bombshell.
Under these circumstances, the district court did not abuse its discretion in excluding
the evidence on the grounds of unfair surprise.
C. Communications With the Jury
Garner Printing argues that the district court's communications with the jurors
coerced them into awarding an excessive amount of damages. See Williams v.
Fermenta Animal Health Co., 984 F.2d 261, 263-64 (8th Cir. 1993). Garner Printing
theorizes that the district court coerced the jurors into the award of damages by telling
them they would have to return to deliberate on Monday morning.
Garner Printing's failure to object in a timely manner to the district court's
communications with the jury "indicates that the potential for coercion argued now
was not apparent to one on the spot." United States v. Hiland, 909 F.2d 1114, 1137-
38 (8th Cir. 1990). Even in hindsight, it is difficult to say with any sense of certainty
that the court's communications coerced the jury into reaching a verdict. There is no
indication that the judge directed his statements at holdout jurors, and the award of
$250,000 was reasonable. Considering these circumstances, we find the jurors were
not coerced by the district court's communications with them.
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III. CONCLUSION
The district court's jury instructions, although erroneous, did not prejudice
Garner Printing's substantial rights, and the district court acted within its discretion
in excluding Tim Nevins's testimony about the attempted bribe and in communicating
with the jury. Accordingly, we affirm the judgment of the district court.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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