Fields v. Thompson Printing Co

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
3-31-2004
Fields v. Thompson Printing Co
Precedential or Non-Precedential: Precedential
Docket No. 02-2763
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PRECEDENTIAL (Filed March 31, 2004)
UNITED STATES
COURT OF APPEALS Anthony F. M alanga, Jr. [ARGUED]
FOR THE THIRD CIRCUIT Gaccione, Pomaco & Malanga
524 Union Avenue
P.O. Box 96
Nos. 02-2763 and 02-2764 Belleville, NJ 07109
Counsel for Appellants/Cross Appellees
GERALD E. FIELDS Noel E. Schablik [ARGUED]
20 Waterview Boulevard, 3rd Floor
v. Parsippany, NJ 07054
Counsel for Appellee/Cross Appellant
THOMPSON PRINTING
COMPANY, INC.;
GILBERT M. THOMPSON,
Appellants No. 02-2763 OPINION OF THE COURT
GERALD E. FIELDS,
RENDELL, Circuit Judge.
Appellant No. 02-2764
These appeals come to us from the
v. District Court’s order enforcing the
language of an employment contract,
THOMPSON PRINTING CO; rejecting Thompson Printing Company’s
GILBERT M. THOMPSON (“TPC”) entreaties that doing so would
violate implied covenants and public
policy. The District Court granted partial
Appeals from the United States summary judgment in favor of the
District Court for the employee, Gerald Fields (“Fields”). Both
District of New Jersey defendants, TPC and its CEO, Gilbert M.
(D.C. Civil No. 99-cv-03743) Thompson (“Thompson”), appeal. For the
District Judge: Honorable reasons that follow, we will affirm in part,
Alfred M. Wolin and reverse and remand in part.
I. The Factual Situation
Argued November 18, 2003 TPC is a closely held corporation.
Thompson owned 80 of the 100
Before: RENDELL, BARRY and outstanding shares, and Fields owned the
CHERTOFF, Circuit Judges. remaining 20. Fields started working for
TPC in 1955 at age 13. On May 7, 1990, contractual benefits in the event of Fields’s
he entered into a four-page Employment voluntary termination:
Contract with TPC. It provided that Fields
If during the term of this Contract, Jerry
was to have the “designated titles” of Vice
[Fields] voluntarily terminates his
President and Chief Operations Officer,
employment with Thompson [Printing
and that he was to “perform the duties
Company], then it is understood by and
attendant thereto.” The agreement defined
between the parties hereto that the salary
the term of employment as continuing until
compensation, employment benefits, and
June 14, 2000, and detailed compensation
all retirement benefits shall cease as of the
and other benefits to which Fields would
date of the termination.
be entitled in exchange for his services.1 It
also provided for annual raises of ten
percent each year during the 10-year term,
It also contained a broad non-forfeiture
and, further, that in the event of
clause in favor of Fields:
Thompson’s death, Fields’s salary would
be doubled within 30 days. The Contract This Contract shall be non-terminable by
gave TPC the right to discontinue the Thompson [Printing Company]. In the
event Thompson [Printing Company] shall
terminate the employment of Jerry
1 [Fields], all of the benefits as contained
The Contract provided Fields with a
herein shall continue in accordance with
starting annual salary of $131,000,
the terms and provisions of this
inclusion in any and all employee benefit
Agreement.
programs and packages, annual vacation
leave, a credit card for his use, a new car -
“a Cadillac or the equivalent at [Fields’s]
The Contract did not differentiate between
choice” - every four years, a second
termination with or without cause,
vehicle (every time TPC provided Fields
providing for continuation of the benefits
with a new car, the old vehicle which was
simply if TPC “shall terminate” Fields.
being replaced would become the second
vehicle), death benefits for Fields’s wife in On August 11, 1997, three female
the event that he died prior to retirement, employees made allegations to Thompson,
and retirement benefits. Commencing then CEO, that Fields, by now titled TPC’s
after the ten-year term, his retirement President, had sexually harassed them by
benefits included a $2,000/week payment, creating a hostile work environment. On
the continued use of the credit card, the August 13, Thompson telephoned Fields,
continued use of the two cars (with a new who was vacationing with his family, and
car every sixth year, instead of every fired him. TPC refused to pay Fields any
fourth year), and continued medical f u r t h e r c o m pe nsation und er th e
benefits with the premiums to be paid by Employment Contract after that date.
TPC.
2
The three female employees filed a “ e n t i r e c o n t r o v e r s y ” d o c tr i n e.
lawsuit, Zarillo v. Thompson Printing Co., Furthermore, they claimed that Fields had
L-9076-97, in the Superior Court of New breached the Employment Contract by
Jersey against TPC, Fields, Thompson and engaging in acts of sexual harassment,
another supervisor. No findings were terminating Fields’s rights, as well as their
made since the claims were settled without obligations, under the Contract.
any admission of wrongdoing by any of
The parties then filed cross motions
the defendants.
for summary judgment. Defendants’
While the Zarillo lawsuit was still Statement of Uncontested M aterial Facts
pending, Fields commenced a civil action d e t a il e d the alleg atio ns of the
against TPC and Thompson in the United Zarillo plaintiffs.2 Defendants argued that
States District Court for the District of by his actions Fields had breached the
New Jersey. He asserted a federal claim Employment Contract, forfeiting his rights
under the Employment Retirement Income under the agreement and warranting the
Security Act (“ERISA”), 29 U.S.C. § 1001 entry of summary judgment in their favor.
et seq., contending that the retirement However, Fields claimed that not only
benefits specified in the Employment were the facts in dispute, but they were not
Contract were protected by ERISA, and material to the resolution of his claims
that TPC’s failure to pay those benefits because the Employment Contract
violated the statute. In addition, he sought guaranteed that if he was terminated by
reinstatement of his salary and benefits,
including some that had accrued prior to
2
his termination and had never been paid, One employee claimed that Fields had
under a variety of state law theories, grabbed her buttocks on one occasion and
including the New Jersey Wage Law, N.J. attempted to touch her breast on another,
Stat. Ann. § 34:11-4.3, breach of contract, and had repeatedly made lewd and
unjust enrichment, conversion, quantum sexually suggestive comments. Several
meruit, and breach of the covenant of good incidents were specifically outlined, such
faith and fair dealing. He also asserted a as Fields’s request, during the company’s
minority shareholder oppression claim search for a part-time receptionist, to let
under N.J. Stat. Ann. § 14A:12-C-7(1)(c), him know if any of the applicants had big
arguing that his rights as a minority breasts so that he could come out to look.
shareholder had been violated by Another plaintiff alleged that Fields
Thompson’s actions. repeatedly told her to wear short skirts, one
time going so far as to draw a line on a
Thompson and TPC replied,
wall and say, “I don’t want your skirt to be
denying Fields’s allegations and claiming
below that line.” She also claimed that
that Fields’s ERISA claim was barred by
Fields attempted to pull up her skirt on at
29 U.S.C. § 1003(b), and that his state law
least two occasions.
claims were barred by New Jersey’s
3
TPC, his benefits were to continue. District Court’s order granting partial
summary judgment. They essentially raise
The District Court granted Fields’s
three issues, namely, whether the Court
summary judgment motion with regards to
erred in determining 1) that Fields’s suit
his ERISA, New Jersey Wage Law, breach
was not barred by the entire controversy
of contract, unjust enrichment and
doctrine; 2) that TPC was obligated to pay
quantum meruit claims, but denied the
Fields the compensation; and, 3) that
motion with respect to the oppression
Thompson should be held personally
claim. The Court held that the entire
liable. Fields cross-appeals the District
controversy doctrine was inapplicable as
Court’s determination that he was not
“the validity of the sexual harassment
entitled to attorneys’ fees under ERISA,
claims [was] entirely immaterial to the
contending that its analysis was flawed,
adjudication of the parties’ rights and
based on existing case precedent.
obligations under the Employment
Agreement.” It then determined that, Our review of an order granting
under the plain language of the Contract’s summary judgment is plenary. Morton
non-forfeiture clause, Fields was entitled Int’l, Inc. v. A.E. Staley Mfg. Co., 343
to both retirement and pre-retirement F.3d 669, 679 (3d Cir. 2003). Under
benefits, rejecting defendants’ arguments Federal Rule of Civil Procedure 56(c),
that enforcing the agreement would violate summary judgment is proper where no
public policy or that Fields had breached genuine issue of material fact exists, and
the agreement. It also held Thompson the moving party is entitled to judgment as
jointly and severally liable based on its a matter of law. Celotex Corp. v. Catrett,
view that Thompson had not drawn any 477 U.S. 317, 322-23 (1986). In
distinction between himself and TPC, so determining whether a dispute regarding a
both were liable. Subsequently, Fields material fact exists, we draw all reasonable
dismissed the oppression claim, and the inferences in favor of the non-moving
parties agreed upon the amount of party. Morton, 343 F.3d at 680.
compensation due under the Contract, but
reserved the right to appeal the District
Court’s ruling. A. The Entire Controversy Doctrine
The District Court had jurisdiction We first address defendants’
over Fields’s ERISA claim pursuant to 29 argument that the New Jersey entire
U.S.C. § 1132, and over the state law controversy doctrine required Fields to
claims pursuant to 28 U.S.C. § 1367. We bring his claims against TPC and
have appellate jurisdiction under 28 U.S.C. Thompson as cross-claims in the Zarillo
§ 1291. sexual harassment action, and that because
he did not do so, application of the
II. Discussion
doctrine results in the preclusion of those
TPC and Thompson now appeal the claims.
4
The entire controversy doctrine is applies to “virtually all causes, claims, and
currently codified in Rule 4:30A of the defenses relating to a controversy between
New Jersey Rules of Civil Procedure, the parties engaged in litigation.” Cogdell
which provides that “[n]on-joinder of v. Hospital Center, 560 A.2d 1169, 1173
claims or parties required to be joined by (N.J. 1989).
the entire controversy doctrine shall result
The New Jersey Supreme Court has
in the preclusion of the omitted claims to
stated that “[i]n determining whether
the extent required by the entire
successive claims constitute one
controversy doctrine.” The doctrine
controversy for purposes of the doctrine,
“seeks to assure that all aspects of a legal
the central consideration is whether the
dispute occur in a single lawsuit.” Olds v.
claims . . . arise from related facts or the
Donnelly, 696 A.2d 633, 637 (N.J. 1997).
same transaction or series of transactions.”
Its purposes “are threefold: (1) to
DiTrolio v. Antiles, 662 A.2d 494, 502
encourage the comprehensive and
(N.J. 1995). Thus, we must determine
conclusive determination of a legal
whether the facts giving rise to Fields’s
controversy; (2) to achieve party fairness,
claims against TPC and Thompson also
including both parties before the court as
gave rise to the Zarillo plaintiffs’ claims
well as prospective parties; and (3) to
against TPC, Thompson and Fields in the
promote judicial economy and efficiency
earlier action. TPC urges that absent the
by avoiding fragmented, multiple and
alleged behavior at the center of the sexual
duplicative litigation.” Mystic Isle Dev.
harassment claims, Fields would not have
Corp. v. Perskie & Nehmad, 662 A.2d 523been terminated and he would not have
(N.J. 1995). The doctrine is essentially a
brought suit against TPC and Thompson.
rule of mandatory joinder of claims and
While this is no doubt true, the causal
parties, which precludes non-joined claims
relationship between the two sets of claims
from being brought at a later date. We
is not conclusive under New Jersey law.
have characterized it as “New Jersey’s
Rather, “[t]he issue is, basically, whether
specific, and idiosyncratic, application of
a sufficient commonality of facts
traditional res judicata principles.”
undergirds each set of claims to constitute
Rycoline Prods., Inc. v. C & W Unlimited,
essentially a single controversy that should
109 F.3d 883, 886 (3d Cir. 1997). Over
be the subject of only one litigation.”
the years, New Jersey courts have
DiTrolio, 662 A.2d at 497.
extended the doctrine to related claims,
defenses, counterclaims and cross-claims. Here, no such “commonality of
See Massari v. Einsiedler, 78 A.2d 572 facts” exists, as the facts requiring
(N.J. 1951) (defenses); Ajamian v. determination in Fields’s ERISA and
Schlanger, 103 A.2d 9 (N.J.), cert. denied, breach of contract action are quite separate
348 U.S. 835 (1954) (related claims); from the facts that would have been
Vacca v. Stika, 122 A.2d 619 (N.J. 1956) determined in the Zarillo action. There,
(counterclaims). Thus, the doctrine the plaintiffs blamed TPC for the
5
d i s criminatory and hostile work would bar the suit to enforce the
conditions, and the Superior Court was Employment Contract on the theory that a
interested in the nature of the work “comprehensive determination” should
environment and what TPC did to address have been sought in the Zarillo litigation.
the female employees’ complaints, while,
Our decision in Fornarotto v.
in the instant case, we are interested in the
American Waterworks Co., 144 F.3d 276language of the Employment Contract and
(3d Cir. 1998) is also instructive. There,
the parties’ rights and obligations under
Fornarotto, an employee of a subsidiary of
that Contract and ERISA.3 Cases in which
A m e r i c a n W a te rw o r k s C o m p a n y
the New Jersey courts have applied the
(“AWC”), was struck by an automobile
entire controversy doctrine to bar a second
driven by Chiapetta, also an employee of
suit have been characterized by some
the AW C subsidiary. Id. at 277. In 1990,
duplication of proof. For instance, in
Fornarotto filed a personal injury suit
DiTrolio, the second action was found to
against the AWC subsidiary and Chiapetta,
“require[] the production of substantially
who he claimed had been acting in the
the same evidence that would be adduced
course of his employment. Id. Fornarotto
in the first action.” Id. at 507. And, in
attempted to return to work, but
Mystic Isle, forcing the two claims to be
complications from his injuries eventually
brought at the same time “would have
forced him from the job. In 1995, he filed
resulted in a more comprehensive
a complaint against AW C under the civil
determination of the underlying legal
enforcement provisions of ERISA, seeking
controversy.” 662 A.2d at 531. New
disability benefits. Id. at 278. In 1996,
Jersey’s application o f the entire
Fornarotto settled the personal injury suit.
controversy doctrine “emphasize[s] the
Id. Shortly thereafter, the defendants in
essential unfairness of forcing parties and
the ERISA suit moved for, and the district
courts to rerun a course previously run.”
court granted, summary judgment on the
Joel v. Morrocco, 688 A.2d 1036, 1040
ground that the ERISA claim arose from
(N.J. 1997). Here, given that two different
the same set of facts as the personal injury
sets of facts are relevant to the two
claim and was therefore barred by the New
different types of claims, there is no reason
Jersey entire controversy doctrine. Id.to believe that the New Jersey courts
We reversed, holding that the
personal injury suit and the disability suit
3 did not turn on the same transactional
The specific claims in the Zarillo suit
facts. Id. at 280. While the injuries
include: discrimination under federal and
suffered were relevant to both suits, the
state law, constructive discharge, assault
issue of Chiapetta’s negligence and the
and battery, intentional infliction of
issue of the employer’s obligation to pay
emotional distress, breach of contract
disability benefits under a pension plan
based on a handbook and policy, breach of
“[did] not rise to the level of ‘commonality
implied covenants, and loss of consortium.
6
of facts’ necessary to trigger the entire fairness.” Fornarotto, 144 F.3d at 282; see
controversy doctrine.” Id. (citing Joel, also DiTrolio, 662 A.2d at 505 (“The
688 A.2d 1036). Thus, we held that, “[t]he polestar of the application of the rule is
two claims are separate and distinct, and judicial fairness.”); Cogdell, 560 A.2d at
failure to join them does not require a 1177 (“Party fairness is critical in the
‘rerun’ of the preceding litigation nor does application of the doctrine.”).
this allow Fornarotto to ‘seek two bites at
Specifically, in applying the entire
the apple.’” Id.controversy doctrine, “[f]airness is . . . a
Similarly, the Zarillo plaintiffs’ protective concept that focuses primarily
sexual harassment claims against TPC, on whether defendants would be in a better
Thompson and Fields, and Fields’s position to defend themselves if the claims
contract claims against TPC and had been raised and asserted in the first
Thompson do not constitute one litigation.” DiTrolio, 662 A.2d at 505. “A
controversy under the doctrine. There is key determination is w hether ‘the
no “rerun” here, as the question of TPC’s defendants are now disadvantaged because
obligation to Fields under the Employment they were not parties to the first
Contract is a matter of contract law and litigation.’” Fornarotto, 144 F.3d at 282
turns on contractual language and (quoting DiTrolio, 662 A.2d at 505).
principles, while the Zarillo litigation Here, TPC was a party to the first
involved claims of harassment and hostile litigation, and is not disadvantaged now on
work environment that implicated certain that basis. Furthermore, nothing occurred
duties and potential liability on the part of during the Zarillo lawsuit or since its
the defendants. Because the two sets of settlement that would affect TPC’s or
claims involve vastly different legal issues, Thompson’s ability to defend themselves
and the resolution of those legal issues in the instant case. The main elements
turns upon different sets of facts, the upon which the instant controversy turns -
relationship between the two suits is “too the contractual language and TPC’s
attenuated to hold that both actions arise actions - remain constant and unexplored.
from a ‘commonality of facts.’” Id. As a result, we can fathom no reason why
TPC and Thompson would have been
Furthermore, even in the event that
better able to defend themselves from
Fields’s claims against TPC and
Fields’s ERISA and breach of contract
Thompson could be said to be part of the
claims had he raised them in the earlier
same controversy giving rise to the Zarillo
action.
claims, basic notions of fairness would
prevent us from applying the doctrine here. In addition to examining the effect
“Despite the doctrine’s apparent rigidity, upon the defendants, “[f]airness to the
New Jersey courts have clearly stated that plaintiff must also be considered.” Joel,
it is not to be applied in a rigid manner 688 A.2d at 1038. The New Jersey courts
divorced from concepts of equity and have stated that “[c]hief among the
7
equitable considerations determining the contention that the District Court erred in
doctrine’s applicability ‘is the full and fair determining that TPC violated its
opportunity of the party sought to be obligations under ERISA 5 and the terms of
precluded in the second action to have the Employment Contract when it refused
raised the claim there asserted in the to pay Fields compensation or benefits
original action.’” Illiano v. Seaview after August 13, 1997. They argue that, in
Orthopedics, 690 A.2d 662, 666 (N.J. light of Fields’s alleged acts of sexual
Super. Ct. App. Div. 1997) (citation harassment, it would violate public policy
omitted). The issue is whether, to enforce the agreement. In the
considering what was at stake in the alternative, they argue that Fields’s alleged
Zarillo action, it is “reasonable as a matter acts breached the agreement, terminating
of practical jurisprudence” to require
Fields to have sued his co-defendants in
the same case. Id. We do not think such a 5
Fields’s retirement benefits, as
requirement would be reasonable here.
specified in the Employment Contract,
Forcing Fields to bring his claim as a
constitute a so-called “Top Hat” plan.
cross-claim against TPC in the Zarillo
“Top Hat plans are clearly subject to
action would not have aided the Zarillo
ERISA.” Kemmerer v. ICI Americas, Inc.,
plaintiffs’ case in any way. In fact, it
70 F.3d 281, 286 (3d Cir. 1995). A
would have complicated the matter, and
participant in a “Top Hat” plan may bring
perhaps even jeopardized settlement. This
a civil action “to recover benefits due to
not a situation where Fields withheld his
him under the terms if his plan, to enforce
claims relevant to the Zarillo action “for
his rights under the terms of the plan, or to
strategic reasons,” seeking “two bites at
clarify his rights to future benefits under
the apple.” Id. at 1041. Thus, the entire
the terms of the plan.” 29 U.S.C. §
controversy doctrine does not apply, and
1132(a)(1)(B). In such situations, “breach
Fields’s claims are not precluded by his
of contract principles, applied as a matter
failure to bring them in the earlier action.4
of federal common law, govern disputes
arising out of the plan documents.”
Kemmerer, 70 F.3d at 287. Thus, we
B. TPC’s Obligation to Fields
apply federal common law to determine
Second, we examine defendants’ TPC’s obligation to Fields with respect to
his retirement benefits. However, we
apply New Jersey law to determine TPC’s
4
This might be a closer question if TPC obligation to Fields with respect to his pre-
intended to offer proof of the alleged retirement compensation and benefits. As
incidents of sexual harassment. However, both bodies of law compel the same result
it has maintained that its right to terminate (and since the parties did not distinguish
Fields is clear based on the allegations between the two sets of benefits), we
made against him. combine the discussion of the two claims.
8
TPC’s obligation to continue to pay him.6 considerations of supposed public
Both of these arguments essentially urge interests.’” Grace, 461 U.S. at 766. In
us to look past the plain language of a New Jersey, for example, courts have
relatively straightforward contract. Given declined to enforce contracts that violate
the fact pattern before us, we will decline statutes, promote crime, interfere with the
to do so. administration of justice, encourage
divorce, violate public morality or restrain
It is axiomatic that a court may
trade. Saxon Constr. & Mgmt. Corp v.
refuse to enforce a contract that violates
Masterclean of North Carolina, Inc., 641
public policy. See W.R. Grace & Co. v.
A.2d 1056, 1058 (N.J. Super. Ct. App.
Local 759, 461 U.S. 757, 766 (1983)
Div. 1994).
(citing Hurd v. Hodge, 334 U.S. 24, 34-35
(1948)). “A promise is unenforceable if Here, the defendants argue that
the interest in its enforcement is enforcement of the Employment Contract
outweighed in the circumstances by a a n d c o m pe n s a t io n o f F i e ld s
public policy harmed by enforcement of notwithstanding his alleged behavior
the agreement.” Town of Newton v. violates the clear public policy against
Rumery, 480 U.S. 386, 392 (1987). “Such sexual harassment of both the United
a public policy, however, must be well- States, as embodied in Title VII of the
defined and dominant, and is to be Civil Rights Act of 1964, 42 U.S.C. §
ascertained ‘by reference to the laws and 2000e-2(a)(1), and the state of New Jersey,
legal precedents and not from general as embodied in the New Jersey Law
Against Discrimination, N.J. Stat. Ann. §
10:5-12. The defendants cite Stroehmann
6
Fields has requested that the sections of Bakeries, Inc. v. Local 776, 969 F.2d 1436defendants’ brief arguing these points be (3d Cir. 1992), in which this Court held
stricken because they misrepresent facts that an arbitrator’s order to reinstate an
contained in the record. Specifically, employee accused of sexual harassment,
Fields argues that in these sections without a determina tion tha t the
defendants, rather than acknowledging that harassment did not occur, violated public
Fields faced allegations of sexual policy. “There is a well-defined and
harassment, instead use language that dominant public policy concerning sexual
assumes Fields did, in fact, commit acts of harassment in the workplace which can be
sexual harassment. He contends that this ascertained by reference to law and legal
is a deliberate attempt to mislead the court. precedent.” Id. at 1441.
However, defendants’ statement of facts
However, Stroehmann is clearly
clearly states that acts of sexual
distinguishable from the case at hand.
harassment were merely alleged. Anyone
Unlike the arbitrator’s order there, the
reading the brief as a whole would
E m p l o ym e n t C o n t r a c t d o e s n o t
understand that the acts were alleged and
“undermine[] the employer’s ability to
not proven. We see no reason to strike.
9
fulfill its obligation to prevent and Fields relies on Aramony v. United
sanction sexual harassment in the Way Replacement Benefit Plan, 191 F.3d
workplace.” Id. at 1442. Enforcement of 140 (3d Cir. 1999), and we find it to be
the Contract does not require TPC to hire more persuasive considering the fact
or reinstate someone who may have pattern before us. United Way terminated
engaged in acts of sexual harassment, Aramony, its CEO, after discovering that
which may violate the policy against he had engaged in fraud. Id. at 143. After
“perpetuating a hostile and offensive work his conviction, United Way chose to deny
environment.” Id. at 1443. Nor does the him the pension benefits he was due under
Contract impinge on TPC’s ability to the organization’s retirement plan. Id.
police the work environment and to Aramony filed suit to regain them. Id. On
prevent sexual discrimination. Rather, it appeal, we affirmed the trial court’s ruling
requires TPC to pay certain sums if they that Aramony was entitled to the benefits
terminated Fields, ostensibly for any because the retirement benefit plan
reason, including improper and offensive contained no felony forfeiture provision.
conduct. Had TPC intended to avoid this Id. at 149-150. “The signed plan simply
result, they could have bargained for a does not include a felony forfeiture
limiting provision in the contract. But the exception to its otherwise sweeping non-
absence of such a provision, owing to forfeiture clause. There is no basis upon
TPC’s failure, does not “perpetuate a which to read one into the contract.” Id.
hostile and offensive work environment.”
Here, Fields’s Employment
Id. The principles of public policy simply
Contract, like the documentation in
do not reach that far. 7
Aramony, does not include any conduct-
related exception to its non-forfeiture
clause. TPC asks us to save it from its
7
Our decision in Stroehmann is own failure to include such a forfeiture
distinguishable for two additional reasons. clause. Doing so would essentially force
First, Stroehmann involved the review of us to read clauses thought desirable from a
an arbitrator’s exercise of discretion, rather policy standpoint into every employment
than the application of a straightforward contract. This we cannot do. Employers
contract clause. Second, the Stroehmann may legitimately offer compensation and
court, while holding that reinstatement was benefits that can be taken away only for
violative of public policy, specifically specific reasons, or that cannot be taken
noted that the arbitrator could have away at all, in order to lure or reward
concluded that a lesser punishment than employees. The absence of a forfeiture
termination was appropriate. Similarly, clause here suggests that this may well
here, TPC could have retained the benefits have been what was intended. As long as
it was due under the Employment Contract
by continuing Fields’s employment and
taking less drastic steps to remedy whatever problem was found to exist.
10
the enforcement of the promise itself is not careful look at defendants’ argument is
violative of public policy, we will not deny necessary.
the parties the bargained-for relief. The
Every contract in New Jersey does
fact that it could be said to have public
contain an implied covenant of good faith
policy implications is not enough. We find
and fair dealing. See R.J. Gaydos Ins.
the payment of the bargained-for
Agency, Inc. v. Nat’l Consumer Ins. Co.,
compensation does not violate public
773 A.2d 1132, 1145 (N.J. 2001); Wilson
policy.
v. Amerada Hess Corp., 773 A.2d 1121,
It should also be noted at this 1126 (N.J. 2001); Sons of Thunder, Inc. v.
juncture that even were we inclined to look Borden, Inc., 690 A.2d 575, 587 (N.J.
with disfavor on the rights of a harassing 1997); Pickett v. Lloyd’s, 621 A.2d 445,
executive to continue to rece ive 450 (N.J. 199 3); Onderdonk v.
compensation in this situation, there has Presbyterian Homes, 425 A.2d 1057, 1063
been no finding that Fields was in fact (N.J. 1981); Bak-A-Lum Corp. v. Alcoa
guilty of harassment. Clearly, any Bldg. Prods., Inc., 351 A.2d 349, 352 (N.J.
consideration of TPC’s claim that it was 1976); Association Group Life, Inc. v.
entitled not to compensate Fields because Catholic War Veterans, 293 A.2d 382, 384
of his conduct would have to be based on (N.J. 1972); Palisades Properties, Inc. v.
a finding that his behavior did rise to a Brunetti, 207 A.2d 522 (N.J. 1965). We
level that had policy and contract have previously noted the New Jersey
implications. And, defendants have made courts’ adherence to this view. See
no claim that they need an opportunity to Emerson Radio Corp. v. Orion Sales Inc,
prove that Fields did behave in such a 253 F.3d 159, 170 (3d Cir. 2001) (stating
manner, apparently resting on the principle that New Jersey courts recognize an
that the allegations to that effect supported implied covenant of good faith and fair
a denial of compensation. dealing). Under the implied covenant of
good faith and fair dealing, neither party
Defendants’ other argument is that,
shall do anything which will have the
based on the allegations, Fields breached
effect of destroying or injuring the right of
the Employment Contract, giving TPC the
the other party to receive the fruits of the
right to discontinue payment of the
contract. R.J. Gaydos Ins. Agency, 773
contractual benefits. The District Court
A.2d at 1146; 13 Williston on Contracts §
dismissed this line of reasoning out of
38:15 (4th ed. 2000).
hand, concluding that TPC “was not
deprived of the fruits of the Employment In addition, every employee owes a
Agreement,” and that “the implied duty duty of loyalty to their employer. Cameco,
defendants posit is trumped by the Inc. v. Gedicke, 724 A.2d 783, 789 (N.J.
language of the parties’ agreement.” 1999). The duty of loyalty “consists of
However, while we agree with the District certain very basic and common sense
Court’s ultimate conclusion, a more obligations.” Lamorte Burns & Co. v.
11
Walters, 770 A.2d 1158, 1168 (N.J. 2001). the Vice President of TPC, and that he did
This duty usually arises in situations where so until the day that he was terminated, by
an employee has assisted a competitor of which time he had been named President
the employer or engaged in self-dealing. of the company. He cites authority for the
See Cameco, 724 A.2d at 789. However, proposition that courts are obligated to
it is also phrased more generally. “An enforce contracts as they are made by the
employee must not while employed act parties and not to create additional terms
contrary to the employer’s interest.” out of thin air. See, e.g., Marchak v.
Lamorte Burns & Co., 770 A.2d at 1168. Claridge Commons, Inc., 633 A.2d 531(N.J. 1993). However, “[i]mplied
covenants are as effective components of
Defendants argue that Fields
an agreement as those covenants that are
breached the implied covenant of good
express,” and “a party’s performance
faith and fair dealing inherent in the
under a contract may breach [an] implied
Employment Contract and the duty of
covenant even though that performance
loyalty inherent in his relationship with
does not violate a pertinent express term.”
TPC, based on the employees’ allegations
Wilson, 773 A.2d at 1126. See also
of sexual harassment. These allegations,
Emerson, 253 F.3d at 170 (stating that
they contend, destroyed TPC’s ability to
New Jersey law holds that a party to a
reap to the benefits to which it was entitled
contract can breach the implied duty of
under the Employment Contract - namely,
good faith even if that party abides by the
Fields’s services for ten years - by making
express and unambiguous terms of that
it impossible for them to continue to
contract); Sons of Thunder, 690 A.2d at
employ him. In light of his breach and
588 (noting favorably that other courts
failure of performance, they maintain that
have stated that a party can violate the
they have the right to not perform their
implied covenant of good faith and fair
part. 8
dealing without violating an express term
Fields argues that the only of the contract).
affirmative obligation that he had under
Further, an employee may violate
the agreement was to perform the duties of
the implied covenant of good faith and fair
dealing even while performing his or her
listed job duties to perfection. And we can
8
TPC has also framed this argument as imagine circumstances in which an
Fields having, by his conduct, “voluntarily employee who has committed acts of
terminated” his position, relieving TPC of sexual harassment could be deemed to
the responsibility to compensate him under have breached this implied covenant.
the specific term of the Contract that so However, while the “principle of fair
provides. However, the pleadings did not dealing pervades all of [New Jersey]
rely on this theory and we find it contract law . . . [t]hat principle will not
unnecessary to engage in this analysis.
12
alter the terms of a written agreement.” words, if TPC should fire him, it must still
Rudbart v. North Jersey District Water pay him. There is no differentiation
Supply Comm’n, 605 A.2d 681, 692 (N.J. between termination with cause and
1992). “The implied duty of good faith termination without cause; Fields’s
and fair dealing does not operate to alter benefits are to continue in any event.
the clear terms of an agreement and may Thus, under the express terms of the
not be invoked to preclude a party from agreement, Fields has a right to benefits
exercising its express rights under such an even in the event that he is terminated for
agreement.” Fleming Cos., Inc. v. cause.
Thriftway Medford Lakes, Inc., 913 F.
Defendants’ argument urges us to
Supp. 837, 846 (D.N.J. 1995) (citing
treat Fields’s alleged behavior - behavior
Glenfed Fin. Corp. v. Penick Corp., 647
that could give rise to termination for
A.2d 852, 858 (N.J. Super. Ct. App. Div.
cause - as a breach of the implied covenant
1994)). So, where the terms of a contract
of good faith and fair dealing. However,
are not specific, the implied covenant of
whether he breached this covenant, giving
good faith and fair dealing may fill in the
rise to a clear right to terminate him, is not
gaps where necessary to give efficacy to
the issue. The fact remains that even if he
the contract as written. But where the
committed the alleged acts and the
terms of the parties’ contract are clear, the
termination was justified, the express
implied covenant of good faith and fair
terms state that if he is terminated, benefits
dealing will not override the contract’s
will continue. We cannot read the implied
express language.
covenant of good faith and fair dealing to
Here, the Employment Contract essentially alter the terms of the Contract,
specifically provides: enabling TPC to discontinue Fields’s
benefits in the event that he was
This Contract shall be non-terminable by
terminated for cause. Because TPC did
Thompson [Printing Company]. In the
not include a proviso that it would not
event Thompson [Printing Company] shall
have to continue Fields’s benefits in the
terminate the employment of Jerry
event he was terminated even for cause,
[Fields], all of the benefits as contained
we will not read that language into the
herein shall continue in accordance with
Contract.
the terms and provisions of this
Agreement. Defendants argue that the New
Jersey courts have relieved an employer of
the duty of strict performance of an
This provision not only prohibits TPC employment contract when the employee
from terminating the Contract but it has engaged in misconduct, relying on
provides further that if it should McGarry v. St. Anthony of Padua Roman
“terminate” Fields’s “em ployment,” Catholic Church, 704 A.2d 1353 (N.J.
Fields’s benefits will continue. In other Super. Ct. App. Div. 1997). There,
13
McGarry had entered into an employment For one thing, the court clearly viewed the
contract with St. Anthony’s. Id. at 1354. criminal nature of McGarry’s acts to be
The contract required the church to give critical to its analysis. Furthermore, the
McGarry notice of termination at least 30 issue in McGarry was whether the
days in advance of termination and to termination was justified based on breach
continue to pay him during the 30-day of an implied covenant. Id. The court
period if it did not wish him to work held that is was. Id. Here, the issue is not
during that period. Id. at 1355. Three whether termination was appropriate or
months after starting work, McGarry was called for, but rather, if termination occurs,
arrested in the parking lot of the church for what happens to Fields’s benefits. Unlike
receiving shipments of illegal steroids and McGarry, here the Contract speaks
he admitted that he had been using the specifically to that issue. Thus, we will
church property to receive other affirm the District Court’s conclusion that
shipments. Id. Upon learning of the TPC’s failure to pay the required
arrest, the church terminated M cGarry, compensation constituted a breach of the
instructed him to stay off church grounds employment agreement and its obligations
and refused to pay him, even under the 30- under ERISA, and that Fields is entitled to
day notice requirement. Id. McGarry filed all of the compensation and benefits that
suit, contending that he had been he was due under the plain meaning of the
wrongfully terminated and argued that he Contract. 9
was entitled to 30 days’ pay because the
church had failed to follow the 30-day
notice requirement. Id. at 1356. 9
TPC argues that it has no obligation to
The New Jersey Superior Court pay Fields’s “Top Hat” retirement benefits
found that “even where . . . the employee because it has no unencumbered assets,
performs the duties contracted for and that, in the event that Fields contests
satisfactorily, criminal activity by the its claim that it has no unencumbered
employee can justify his discharge for assets, the case must be remanded to make
breach of an employment contract.” Id. at such a determination. We find this
1357. As a result, St. Anthony’s “had position to be meritless. “Top Hat” plans
good cause to terminate the employment are treated like unilateral contracts.
contract by virtue of [McGarry’s] breach Goldstein v. Johnson & Johnson, 251 F.3d
of the implied covenant of good faith and 433, 442 (3d Cir. 2001). According to
fair dealing.” Id. Furthermore, McGarry “unilateral contract principles, once the
was “not . . . allowed to recover employee performs, the offer becomes
termination pay under the termination irrevocable, the contract is completed, and
clause of the breached contract.” Id. at the employer is required to comply with its
1358. Howev er, Mc Garry is side of the bargain.” Kemmerer, 70 F.3d
distinguishable from the instant situation. at 287. Thus, TPC became obligated to
pay Fields retirement benefits on his first
14
C. Thompson’s Personal Liability its motion, and identifying those portions
of ‘the pleadings, depositions, answers to
Finally, we consider defendants’
interrogatories, and admissions on file,
argument that the District Court erred
together with the affidavits, if any,’ which
when it imposed personal joint and several
it believes demonstrate the absence of a
liability on Thompson. The Court’s order
genuine issue of material fact.” Celotex,
stated:
477 U.S. at 323. In order to be entitled to
Finally, because defendants have not judgment against Thompson, Fields had to
argued what if any distinction should be aver, and demonstrate he could prove,
drawn between defendant Thompson sufficient facts to support liability against
Printing and defendant Gilbert M. Thompson under ERISA and under state
Thompson with respect to their liability to law.
Fields, the Order shall not differentiate
So, while the District Court placed
between them and they shall be jointly and
the onus on the defendants to distinguish
severally liable for the relief granted by
the liability of TPC from Thompson, it was
this Court’s Order of Partial Summary
really Fields’s burden to not only plead,
Judgment.
but also to prove, that he was entitled to
judgment as a matter of law against
Thompson. Thompson was the CEO of
As a preliminary matter, Fields
TPC, and the corporate officer responsible
contends that Thompson has waived this
for terminating Fields and discontinuing
issue through his failure to raise it at the
his benefits. The pleadings allege
trial level. However, while Thompson
generally that he violated fiduciary duties
clearly could have raised a genuine issue
owed to Fields under ERISA, and that he
of material fact to avoid personal liability,
and TPC breached the Contract by refusing
the threshold burden was on Fields, who
to pay Fields salary and benefits after
brought the claim against Thompson, to
Fields’s termination. But, these pleadings
plead and prove undisputed facts that
fall short of alleging, let alone
warranted an imposition of liability against
establishing, a basis for personal liability
Thompson personally as a matter of law.
against a corporate officer, on any of the
“A party seeking summary judgment
claims at issue.
always bears the initial responsibility of
informing the district court of the basis for With regards to the ERISA claim,
the parties have stipulated that Fields’s
post-employment benefits plan is a “Top
Hat” plan. “Top Hat” plans are “unique
day of work under the Contract. Only
animal[s] under ERISA’s provisions.”
Fields’s voluntary termination could end
Goldstein v. Johnson & Johnson, 251 F.3d
that obligation. Whether or not TPC has
433, 442 (3d Cir. 2001). Because “these
unencumbered assets has no bearing on the
plans are intended to compensate only
question of its duty to pay.
15
highly-paid executives, and . . . such Id. (citing Welch v. Bancorp Mgmt.
employees are in a strong bargaining Advisor, Inc., 675 P.2d 172, 178 (Or.
position relative to their employers,” they 1983)).
are free from some of the requirements
Thus, Thompson can be held personally
that are imposed upon most ERISA plans
liable only if Fields alleges and proves that
in order to protect those employees
Thompson was not acting with the intent
covered by such plans. Id. Specifically,
to benefit TPC when he refused to pay
“Top Hat” plans are not subject to
Fields the benefits and compensation that
ERISA’s requirements for vesting and
were due u nder the em ployment
funding, see 29 U.S.C. §§ 1051(2);
agreement. See also Law of Corp.
1081(a), and the administrators of these
Officers and Dir., § 3:30 (2004) (“[A]
plans are not subject to ERISA’s fiduciary
corporate officer or director is not
requirements. See 29 U.S.C. §§ 1051(2),
personally liable for . . . inducing the
1081(a), 1101(a). Thus, Thompson did not
breach of a corporate contract, provided
have a fiduciary duty with respect to
the officer or director acts in good faith
Fields’s “Top Hat” plan, and may not be
and for the benefit of the corporation.”);
held personally liable for any violations of
3A W. Fletcher, Cyclopedia of the Law of
ERISA with respect to that plan.
Private Corporations § 1158.10 (2002).
With respect to the breach of Fields has failed to make such an
contract claim, New Jersey law provides allegation, let alone present proof of facts
that “an officer who causes his corporation necessary to impose officer liability.
to breach a contract for what he conceives Fields’s motion for summary judgment is
to be in the best interest of the corporation not accompanied by any evidence that
does not thereby incur personal liability.” could provide a basis for a finding that
Zeiger v. Wilf, 755 A.2d 608, 622 (N.J. Thompson acted in bad faith. The
Super. Ct. App. Div. 2000). In Zeiger, the Statement of Facts that Fields filed in
New Jersey Superior Court cited with support of his motion for summary
approval Oregon’s test for determining judgment contains facts about Fields’s
whether an officer has acted in the best employment history with TPC, the
interest of the corporation. Id. at 623. The company’s termination of Fields, and its
test asks failure to pay him salary and benefits after
that termination. However, nowhere does
whether the agent acts within the scope of
it state any facts that would support
his authority, and with the intent to benefit
Thompson’s being held personally liable.
the principal. When this test is met an
In fact, the only specific allegations
agent is not liable to a third party for
relating to Thompson were in connection
intentional interference with contract even
with the ERISA claim, dealt with above,
if the agent acts with ‘mixed motives’ to
and the minority oppression claim, which
benefit himself or another principal as
was withdrawn before this appeal. As a
well.
16
result, the imposition of personal liability with the following statement:
and judgment against Thompson was
Plaintiff has requested attorney’s fees
improper, and that portion of the District
which are available pursuant to our
Court’s opinion will be reversed.
discretion under 29 U.S.C. § 1132(g)(1).
We will deny that request. Colt has
neither acted in bad faith, nor pressed a
D. Cross-Appeal of Attorneys’ Fees
clearly meritless position.
On cross-appeal, Fields challenges
the District Court’s decision not to grant
him attorneys’ fees. ERISA provides that Id. We noted there that “the district court
“the court in its discretion may allow considered factors one and five of the
reasonable attorney’s fees and costs of Ursic catechism, but did so without
action to either party.” 29 U.S.C. § analysis or articulation of its reasons.
1132(g)(1). We have set forth five policy Moreover, the district court’s opinion
factors for a district court to consider in [was] silent with respect to the other Ursic
determining whether to award fees: (1) the factors.” Id. at 1012. Thus, we were
offending parties’ culpability or bad faith;
hampered in our review function because
(2) the ability of the offending parties to
the district court failed to enunciate the
satisfy an award of attorney’ fees; (3) the
reasons for the conclusions it reached in
deterrent effect of an award of attorneys’
denying . . . attorneys’ fees, and
fees; (4) the benefit conferred upon
additionally [had] utterly failed to
members of the pension plan as a whole;
recognize, analyze, explain or enunciate
and (5) the relative merits of the parties’
conclusions concerning the other Ursic
positions. Ursic v. Bethlehem Mines, 719
factors which it was required to consider.
F.2d 670, 673 (3d Cir. 1983). In Anthuis
v. Colt Indus. Operating Corp., 971 F.2d
999, 1011 (3d Cir. 1992), we reiterated
Id. As a result, we remanded the issue to
that “we regard our requirement that
the district court for further consideration.
district courts consider and analyze these
factors as a mandatory requirement.” See Here, the District Court denied
also McPherson v. Employees’ Pension Fields’s request for attorneys’ fees by
Plan of Am. Re-Insurance Co., 33 F.3d stating:
253, 254 (3d Cir. 1994). We require such
The statute provides that fees may be
an analysis “in order that we may
awarded to a prevailing litigant upon a
intelligently review the judgments reached
showing, inter alia, of culpability or bad
by those courts.” Anthuis, 971 F.2d at
faith of the party in violation of the statute.
1011.
29 U.S.C. § 1132(g)(1). Plaintiff’s
In Anthuis, the district court had showing on this motion falls well short of
denied a party’s request for attorney’s fees establishing this peculiarly fact-sensitive
17
element beyond any reasonable dispute. on which the district court relied when it
exercised its discretion.” Id. Here, the
District Court did err in not providing an
Fields contends that this statement adequate basis for its reasoning under
provides insufficient reasoning for the Ursic. Accordingly, we will vacate its
court to have ruled on the issue of fees. ruling in this regard and remand this issue
Inasmuch as it is nearly identical to the for further consideration.
statement deemed insufficient in Anthuis,
III.
we agree. The District Court did not
mention four of the Ursic factors, much For all of the reasons above, we
less analyze them in a rigorous fashion. A will affirm the order of the District Court
conclusory statement that one of the insofar as it authorizes judgment against
factors has not been fulfilled is not enough TPC, reverse the order of the District
to discharge the District Court’s Court insofar as it authorizes judgment
responsibility to explain its reasoning. In against Thompson, and vacate and remand
addition, the Ursic factors are not to District Court for further proceedings
requirements in the sense that a party must with respect to the issue of the award of
demonstrate all of them in order to warrant attorneys’ fees.
an award of attorney’s fees, but rather they
are elements a court must consider in
exercising its discretion. Even if the
District Court’s analysis of the first factor
was sufficient - which it was not - it was
obliged to examine the remaining factors
as well.
Although we find the District
Court’s explanation wanting, we cannot, as
Fields asks, conclude that the court abused
its discretion in denying the fees. While
he urges that we should examine the
record ourselves and draw our own
conclusions regarding the propriety of
awarding attorneys’ fees, “the function of
analyzing and balancing [the Ursic]
considerations is not ours to undertake.”
Anthuis, 971 F.3d at 1012. We may
review a district court’s decision regarding
fees and costs “only when we know the
reasons for, and the basis of, those factors
18