Tom S. ANDERSON, Petitioner, Appellant, v. MEDTRONIC, INC., Respondent.
No. C5-84-1119.
Supreme Court of Minnesota.
Feb. 28, 1986.
512
Terrence M. Frote, Kristin L. Arneson, Minneapolis, for respondent.
AMDAHL, Chief Justice.
This case involves a dispute between plaintiff and his former employer, Medtronic, Inc., over plaintiff‘s entitlement to a management incentive bonus for his last year of work with the company. A jury found that Medtronic had acted in bad faith in withholding the bonus from plaintiff. The trial court awarded $10,891 in damages plus interest and penalties under
Plaintiff began working for Medtronic in 1970 as a sales representative. After sev
5. Competitive Employment
(a) During my employment, I will not plan, organize or engage in any business competitive with any product or service marketed or planned for marketing by the Company or conspire with others to do so.
(b) For 360 days after termination of my employment with the Company, I will not attempt to divert any Company business by soliciting, contacting, or communicating with any customers for the Company‘s products with whom I, or employees under my supervision, had contact during the year preceding termination of my employment.
At the same time, Medtronic initiated a management incentive bonus plan designed to pay high-level employees yearly bonuses based upon the company‘s profitability and the employee‘s individual performance. Plaintiff was invited to participate in this plan in both fiscal years 1978 and 1979. In 1979, plaintiff was eligible for a maximum bonus of 24% of his annual salary with 75% of the bonus contingent upon the company‘s earnings and 25% based on plaintiff‘s individual work performance. Medtronic reached its corporate goal and it did not refute plaintiff‘s testimony that he achieved his individual goals. Therefore, if he was entitled to the bonus at all, he would receive the full 24% amount.
In early or mid-1978, plaintiff became dissatisfied with his position as Director of New Ventures. He spoke with his superiors George Heenan and two other company officers about his frustration and they suggested that he apply for certain openings within Medtronic. Plaintiff either was not interested in the positions available or his applications were turned down. His unit personnel manager, Linda Medin, suggested he contact an executive recruiter. In
On March 31, 1979, Heenan told plaintiff that his position as Director of New Ventures was being eliminated effective May 1, 1979. On April 2, plaintiff again met with Heenan and Medin at which time Heenan outlined plaintiff‘s termination package. He explained that the termination would be treated as a job elimination, plaintiff would receive a 30-day notice, and he would be entitled to his management incentive bonus.
On April 9, plaintiff met with Hermann and began to negotiate in earnest about the position with ELA Medical. Since he was still employed with Medtronic, plaintiff became concerned that he may have a conflict of interest and he notified an attorney in Medtronic‘s legal department. The attorney advised plaintiff to tell this to his supervisor. Plaintiff then explained his situation to a superior who advised him to leave the office until plaintiff could decide what he would do. In late April, Heenan met with plaintiff and urged him not to accept a position with a competitor. He later sent a letter to plaintiff which outlined the terms of the termination package including his entitlement to the incentive bonus. This letter added a condition not previously discussed: “The above terms assume that you will not take a position which would be a violation of your employment agreement.” This was the first indication to plaintiff that Medtronic might withhold his bonus; however, since he had not worked in Medtronic‘s pacemaker division for well over 12 months, he was not concerned that he would be violating the employee agreement should he accept the ELA position.
On June 4, 1979, plaintiff accepted Hermann‘s offer. He was later told that Medtronic‘s president had decided not to award him the incentive bonus since plaintiff had taken a job with a competitor and the president believed this was a violation of the employee agreement. Medtronic‘s position is that since plaintiff terminated his position at Medtronic before the end of the fiscal year, his entitlement to the bonus was discretionary with the president of the company.1 Plaintiff, however, claims that he was not terminated before the end of the fiscal year and he did not violate the employee agreement by accepting the job offer from ELA Medical.
Plaintiff sued Medtronic for breach of contract and for violation of
The jury found that plaintiff made no misrepresentation regarding becoming employed with a competitor and that Medtronic did act in bad faith in refusing to pay plaintiff‘s bonus. The trial court entered judgment for plaintiff in the amount of $10,891 in damages plus interest and penalties under
1. At the close of the evidence, the trial court submitted the following interrogatory to the jury: “Did Medtronic act in bad faith by not paying Tom Anderson his Incentive Plan claim?” The Court of Appeals held that the trial court‘s action constituted prejudicial error. While we agree that it was error to submit this issue to the jury, we disagree with the Court of Appeals’ assessment that the error was so prejudicial as to warrant a new trial.
The trial court could have had one of two purposes in mind by submitting this issue to the jury, both of which involve a decision of whether to award attorney fees. The first purpose would be for a determination of good faith under
Upon motion of a party, the court in its discretion may award to that party costs, disbursements, reasonable attorney fees and witness fees if the party or attorney against whom costs, disbursements, reasonable attorney fees and witness fees are charged acted in bad faith; asserted a claim or defense knowing it to be frivolous; asserted an unfounded position solely to delay the ordinary course of the proceedings or to harass; or committed a fraud upon the court.
The existence of bad faith is a fact issue, Cherne Industrial, Inc. v. Grounds and Associates, 278 N.W.2d 81, 97 (Minn.1979); however, it is an issue which must be decided by the trial court, not the jury. Id. Section 549.21 is a statutory codification of the common law rule that attorney fees are recoverable where the unsuccessful party has acted in bad faith, vexatiously, or for oppressive reasons. Barr/Nelson, Inc. v. Tonto‘s, Inc., 336 N.W.2d 46, 53 (Minn.1983). This rule applies only to situations in which a party acts in bad faith with respect to the litigation itself as opposed to bad faith in the underlying action which is the basis of the suit. See id.; Minnesota-Iowa Television Co. v. Watonwan T.V. Improvement Association, 294 N.W.2d 297, 311 (Minn.1980). Thus, the statute is intended to punish individuals who abuse the legal process to harass opponents or delay resolution of a dispute.
The question submitted to the jury in this case concerned Medtronic‘s bad faith refusal to pay plaintiff a bonus. It did not address any bad faith Medtronic may have exercised in the litigation itself. Thus, this cannot even be characterized as an interrogatory to an advisory jury. The question did not address the proper subject matter for purposes of applying
The only other justification for submitting this interrogatory to the jury would be for the purpose of applying
[I]f the employer disputes the amount of wages or commissions claimed by such employee under the provisions of this section or section 181.13, and the employer in such case makes a legal tender of the amount which he in good faith claims to be due, he shall not be liable for any sum greater than the amount so tendered and interest thereon at the legal rate, unless, in an action brought in a court having jurisdiction, such employee recovers a greater sum than the amount so tendered with such interest thereon; and if, in such suit, the employee fails to recover a greater sum than that so tendered, with interest as aforesaid, he shall pay the cost of such suit, otherwise the cost thereof shall be paid by the employer * * *.
We agree with Medtronic. An employer‘s liability for the cost of the suit depends not on its good faith or bad faith, but rather on whether it tendered a sufficient amount to a plaintiff suing under the chapter. The issue of Medtronic‘s bad faith is immaterial for purposes of
2. The next issue raised is whether the phrase “cost of such suit” as used in
The general rule, known as the American Rule, is that attorney fees are not recoverable in litigation unless there is a specific contract or statute authorizing such a recovery. Barr/Nelson, 336 N.W.2d at 53. Where Minnesota statutes authorize fees, language such as “attorney fees” or “counsel fees” is employed. E.g.,
It is clear, however, that the phrase “cost of such suit” comprehends something more than mere “costs and disbursements.”
3. The final issue raised by plaintiff is whether this construction of
In cases involving challenges based upon equal protection, the general rule is that legislation is presumed to be valid and will be sustained if the classification drawn by the statute is rationally related to a legitimate state interest. City of Cleburne v. Cleburne Living Center, — U.S. —, 105 S.Ct. 3249, 3254, 87 L.Ed.2d 313 (1985). More specifically, social and economic legislation which does not employ suspect classifications or impinge on fundamental rights carries with it a presumption of rationality that can only be overcome by a clear showing of arbitrariness and irrationality. Hodel v. Indiana, 452 U.S. 314, 331-332, 101 S.Ct. 2376, 2386-2387, 69 L.Ed.2d 40 (1981). This legislation is valid “unless the varying treatment of different groups or persons is so unrelated to the achievement of any combination of legitimate purposes that [a court] can only conclude that the legislature‘s actions were irrational.” Vance v. Bradley, 440 U.S. 93, 97, 99 S.Ct. 939, 942-943, 59 L.Ed.2d 171 (1979). In addition, a state does not violate the equal protection clause simply because the classification is imperfect or where the classification “is not made with mathematical nicety or because in practice it results in some inequity.” Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 78, 31 S.Ct. 337, 340, 55 L.Ed. 369 (1911). Thus, the constitution presumes that even improvident decisions will be rectified eventually through the democratic process. Cleburne, 105 S.Ct. at 3254.
The legal relationship of an employer and an independent contractor differs from that of an employer and a salaried employee. We can perceive no valid reason why the legislature could not legislate different conditions for regulating prompt payment of compensation for the respective members of two different groups. Accordingly, we hold that the legislation has a rational basis and does not constitute a denial of equal protection.
Affirmed in part and reversed in part.
KELLEY, J., concurs in part, dissents in part.
KELLEY, Justice (concurring in part, dissenting in part).
Although I concur in parts 2 and 3 of the majority decision, I must respectfully dissent from part 1.
I agree with the majority‘s conclusion that it was error to submit the “bad faith” issue to the jury. As the majority clearly explains, no legitimate reason existed justifying the submission. I do part company with the majority when it finds no prejudice in the submission. My reading of the record leads me to concur with the court of appeals in its holding “that the question concerning bad faith and the correlative instruction prejudiced Medtronic by focusing the jury‘s attention on an irrelevant and perhaps highly charged emotional issue. Its effect is an improper impression on the jury. The jury, in a sense, was allowed to decide only if Medtronic committed active fraud and if Medtronic acted in bad faith. A new trial is required.” Anderson v. Medtronic, 365 N.W.2d 364, 367 (Minn.App.1985).
Notes
Following termination during a Plan Year for any reason other than death, disability, or normal or early retirement, a Participant‘s eligibility to receive an award for that Plan Year will be determined solely at the discretion of the President.