231 Conn. 95 | Conn. | 1994
Lead Opinion
In current economic conditions, corporate downsizing is often accomplished in part by offering severance agreements to corporate employ
The plaintiff, Gladstone Young, brought an action for damages claiming that his employment had been wrongfully terminated by the defendant, Data Switch Corporation. In response to a special defense of release, the plaintiff alleged that he had a right to disaffirm, on the ground of duress, a severance agreement that he and the defendant had executed. A jury returned a general verdict for the plaintiff and awarded him $413,000 in damages. On the defendant’s motion, the trial court set aside the jury verdict. The trial court concluded that the jury verdict could not be sustained because, as a matter of law, the plaintiff had ratified the severance agreement by retaining its benefits and delaying any objection to its validity until sixteen months
The plaintiff appealed from the judgment of the trial court to the Appellate Court, and we transferred the appeal to this court pursuant to Practice Book § 4023 and General Statutes § 51-199 (c). We affirm the judgment of the trial court.
The facts are essentially undisputed. The plaintiff is an electrical engineer who became an employee of the defendant in 1979. Toward the end of 1984, as a result
On July 26,1985, the defendant’s president informed the plaintiff that his employment was being terminated. The plaintiff does not claim that this meeting or its message was in any respect coercive.
The plaintiff’s claim of duress arises instead out of a subsequent letter, dated August 6, 1985, that contained the details of the severance plan that “[the defendant was] prepared to offer” him. That letter referred, in its opening words, to the plaintiff’s having been on “leave effective April 15,1985,” and then offered to retain him on a paid leave of absence “through October 15,1985, so that you may retain your right to exercise a significant amount of company stock options.” The plaintiff had stock options that he would not have been able to exercise if his employment had been terminated on April 15, 1985, rather than on July 26, 1985, as he had expected.
At a meeting held on August 14, 1985, the plaintiff brought his interpretation of this part of the severance offer to the attention of the defendant’s president and explained the importance of the stock options to him. The plaintiff himself testified that, in response, the defendant’s president assured him that, if he signed the release, he would receive his stock.
On August 15,1985, without voicing any further dissatisfaction with its terms, the plaintiff signed the severance agreement, thereby releasing the defendant from all liability arising out of the plaintiff’s employment. On August 21, 1985, the plaintiff received the 40,000 shares to which he was entitled by virtue of his previous stock options,
Subsequent to his execution of the severance agreement, the plaintiff had several further communications with the defendant. Although his first letters indicated
This record categorically establishes that: (1) the only coercive conduct of which the plaintiff complains is the defendant’s alleged threat to deprive the plaintiff of his right to exercise his stock options;
The scope of our review of a trial court’s decision to set aside a jury verdict is limited to a determination of whether the trial court abused its discretion. “We have often held that ‘[t]he decision to set aside the verdict entails the exercise of a broad legal discretion that, in the absence of clear abuse, we shall not disturb. O’Brien v. Seyer, [183 Conn. 199, 208, 439 A.2d 292 (1981)].’ Palomba v. Gray, 208 Conn. 21, 24, 543 A.2d 1331 (1988); American National Fire Ins. Co. v. Schuss, 221 Conn. 768, [774,] 607 A.2d 418 (1992); State v. Hammond, 221 Conn. 264, 270, 604 A.2d 793 (1992). In our review of the exercise of this discretion, we accord great weight to the trial court’s decision; Labatt v. Grunewald, 182 Conn. 236, 240-41, 438 A.2d 85
Although we have no case law that directly discusses whether a party may wait seventeen months to dis-affirm, on the ground of duress, a severance agreement the benefits of which he has retained, the Restatement (Second) of Contracts (1981) contains the applicable principles. Section 381 (1) of the Restatement (Second) provides that “[t]he power of a party to avoid a contract for . . . duress ... is lost if, after the circumstances that made it voidable have ceased to exist, he does not within a reasonable period of time manifest to the other party his intention to avoid it.” As a general matter, comment (a) to § 381 provides that “what time is reasonable depends on all the circumstances, including the extent to which the delay was or was likely to be prejudicial to the other party . . . .’’Comment (a) to § 381 adds, however, that “[o]rdinarily, if the party with the power of avoidance retains during the delay something that he has received from the other party, avoidance will be precluded by the rule stated in § 380.” Section 380 (1) of the Restatement (Second), in turn, provides that “[t]he power of a party to avoid a contract for . . . duress . . . is lost if, after the circumstances that made the contract voidable have ceased to exist, he . . . acts with respect to anything that he has received in a manner inconsistent with dis-affirmance.” Read in its entirety, therefore, the Restatement equates the retention of benefits with
Application of the principles of the Restatement to the uncontroverted facts in this case lends strong support to the judgment of the trial court. The plaintiff nonetheless argues that the trial court abused its discretion in granting the defendant’s motion to set aside the jury verdict. His argument is in two parts. As a general proposition, he relies on cases that have held that the affirmance or disaffirmance of a voidable contract depends on the intent of the person with the power to avoid. More specifically, he maintains that in the circumstances of his case, the jury could reasonably have found that he did not intend to ratify the termination agreement. We disagree.
The plaintiff maintains that the governing principle for analysis of his case is the general principle that ratification of a voidable contract is ordinarily a matter of intent. Russell v. Dean Witter Reynolds, Inc., 200 Conn. 172, 186, 510 A.2d 972 (1986). As the plaintiff acknowledges, however, intent may be inferred from silence as well as from affirmative acts. Hartford Accident & Indemnity Co. v. South Windsor Bank & Trust Co., 171 Conn. 63, 72, 368 A.2d 76 (1976). The question necessarily becomes, therefore, whether the trial court abused its discretion in concluding that, as a matter of law, the plaintiff could no longer disaffirm the severance agreement in this case.
The plaintiff maintains that there was such an abuse of discretion because the plaintiff could not have been expected to decide whether to disaffirm the severance agreement while he was preoccupied with his need to find alternate employment as an engineer. That argument is unpersuasive for three reasons. First, it does not explain why the plaintiff did not raise his claim
The case law in other jurisdictions demonstrates that the dispositive question is not why the plaintiff chose not to disaffirm a contract that is voidable for duress, but whether, once the duress had ceased, he had the opportunity to do so. These cases hold, in accordance with the Restatement, that ratification results, as a matter of law, “if the party who executed the contract under duress accepts the benefits flowing from it or remains silent or acquiesces in the contract for any considerable length of time after opportunity is afforded to annul or avoid it.” Gallon v. Lloyd-Thomas Co., 264 F.2d 821, 826 (8th Cir. 1959) (ten months too long); Abbadessa v. Moore Business Forms, Inc., 987 F.2d 18, 23 (1st Cir. 1993) (five months too long); DiMartino v. Hartford, 636 F. Sup. 1241, 1252 (D. Conn. 1986) (two months too long); Schmalz v. Hardy Salt Co., 739 S.W.2d 765, 767-68 (Mo. App. 1987) (three months too long); Powell v. Oman Construction Co., 25 App. Div. 2d 566, 566, 267 N.Y.S.2d 862 (1966) (eleven months too long); McGee v. Stone, 522 A.2d 211, 214-15 (R.I. 1987) (eighteen months too long); see also 1 E. Farn-
The defendant consistently maintained, in the trial court, that the plaintiff had ratified the severance agreement as a matter of law by accepting its benefits and by allowing seventeen months to pass before raising his claim of coercion. The trial court denied the defendant’s motion for a directed verdict, presumably because it is sound judicial management to allow a case to go to the jury once it has been fully tried. The trial court, however, granted the motion to set aside the verdict for the plaintiff. We conclude that the trial court’s decision was not an abuse of its discretion.
The judgment is affirmed.
In this opinion Borden and Palmer, Js., concurred.
The period of delay was actually seventeen months.
Under the stock option plan, the plaintiff could exercise his vested options only while he was an employee of the defendant or within ninety days of the termination of his employment with the defendant.
On August 6,1985, the plaintiff had exercised his stock options in 40,000 shares by sending a letter and a check in the amount of $33,200.76 to the defendant’s president. The option prices and the share prices were such that the execution of the options on that date would have resulted in a net profit to the plaintiff of $167,000.
The record does not indicate that the delay in receiving the stock caused economic injury to the plaintiff.
These benefits included the following: full salary through December 31, 1985; medical benefits and the use of a car through December 31, 1985; and release of the plaintiff from all liability except for his obligations under certain previously executed noncompetition and nondisclosure agreements. The plaintiff received his final monetary compensation from the defendant on January 29,1986, when he was paid deferred compensation and interest in the amount of $16,500. Because of the extension of his employment through December 31, 1985, the plaintiff was able to exercise options to purchase an additional 8334 shares of stock on October 10, 1985.
In two letters dated September 10,1985, and October 15,1985, the plaintiff wrote to the defendant’s counsel with respect to certain Securities and Exchange Commission documents and to vacation pay; neither letter mentioned coercion or duress. Thereafter, on December 14, 1985, in a letter to the defendant’s chairman, the plaintiff indicated his concern for finding alternate employment but also acknowledged that he did not “wish to hurt [the defendant’s] company which has been good to me . . . .”
The noncompetition clause in the termination agreement cannot serve as an engine of continuing coercive conduct by the defendant because that clause predated the plaintiff’s termination. Thus, it had been a condition of the plaintiff’s employment with the defendant long before any claimed coercion, and the plaintiff has never claimed otherwise.
It is important to note what the plaintiff does not claim. He does not argue that his employment history with the defendant made it coercive for the defendant to terminate him under any and all circumstances. He does not contend that the severance agreement was inherently coercive because it incorporated by reference his prior agreement not to compete with the defendant by undertaking employment with specified competitors. He has
Although the plaintiff testified that he had not consulted with counsel about the termination agreement, he also testified that, in 1979, he had enlisted the support of counsel in order to obtain company stock to which he was entitled by virtue of his employment agreement. No later than April 22, 1986, he again enlisted the support of counsel to challenge the validity of the noncompetition clause in his original employment contract.
Dissenting Opinion
joins, dissenting. This case is not about current economic conditions or whether employers at large are at risk whenever they offer severance agreements to corporate employees. The dispositive issue in this appeal is whether, under the circumstances of this case, the jury could reasonably have found that the plaintiff had not ratified a voidable contract. The majority holds that as a matter of law the power of the party to avoid a contract on the basis of duress is lost when that party accepts the benefits of the contract for four months and delays a total of seventeen months before objecting to its validity. I disagree.
The issues of whether the plaintiff: (1) intended to ratify the agreement by accepting benefits thereunder; and (2) acted reasonably under the circumstances when
On the evidence presented at trial the jury reasonably could have found the following facts. This dispute arises out of the termination of the plaintiffs employment by the defendant, Data Switch Corporation (Data Switch). The plaintiff joined Data Switch in January, 1979, as an electrical engineer. The plaintiff was retained by way of a written agreement with the company’s founder and president, Richard Greene.
As a result of financial difficulties, Data Switch went through a restructuring from the fall of 1984 through the summer of 1985. In April, 1985, Robert Gilbert-son became president and chief executive officer of Data Switch. Shortly thereafter, Gilbertson polled a number of employees in an attempt to ascertain which employees were significant to the success of the company. One outcome of the poll was that Gilbertson asked the plaintiff to take a paid leave of absence beginning on April 15,1985. Subsequently, the plaintiff met with
As of July 26, 1985, the plaintiff held vested rights in 40,000 shares of stock under the company’s stock option plan (plan). Pursuant to the plan, a terminated employee could exercise vested stock options within ninety days after the date of termination, but not thereafter. On August 6,1985, in order to protect his vested rights under the plan, the plaintiff sent to Gilbertson a letter and a check in the amount of $33,200.76, exercising his options. The option prices and the share prices were such that execution of the options on that date would have resulted in a net profit to the plaintiff of $167,000.
On August 10,1985, the plaintiff received from Gil-bertson a letter dated August 6, 1985. In the letter, Gilbertson noted the fact that the plaintiff had been on a leave of absence since April 15, 1985. By the letter, Gilbertson also offered the plaintiff a severance package. The offer consisted of $28,400 representing four months severance pay at the plaintiff’s current annual salary of $85,200, $4916.40 representing three weeks of earned vacation time, and the continuation of both medical benefits and the use of a company car through October 15, 1985. The letter also offered to put the plaintiff on a leave of absence through October 15, 1985 so that he could exercise “a significant amount of company stock options.” In exchange for the severance package, the letter sought a release from any claim that the plaintiff might have had against Data Switch, and an agreement not to work for specified competitors of the company.
Under the terms of the termination agreement, both parties agreed that the plaintiff’s prior employment relationship with Data Switch was terminated as of April 15, 1985. Data Switch further agreed to: (1) pay to the plaintiff his then current salary for the period of July 1, 1985, through December 31, 1985; (2) provide the plaintiff with medical benefits and the use of a company car through December 31,1985; (3) release the plaintiff from all liability except for obligations under certain previously executed noncompetition agreements;
On August 22,1985, the plaintiff received the 40,000 shares of stock on which he previously had attempted to exercise his options and, on October 10, 1985, the plaintiff exercised options on 8334 additional shares of Data Switch stock. He also received the promised salary, the medical benefits and the use of the company car through December 31, 1985.
Subsequent to his termination, the plaintiff conducted an extensive, but fruitless, job search. He testified that he had pursued many leads in his field of expertise, but that any interested parties had been put off by the non-competition and nondisclosure agreements. He also had written a number of letters to Data Switch attempting to reach a friendly agreement regarding the non-competition and nondisclosure agreements.
The jury returned a general verdict for the plaintiff. “[A] general verdict for [the plaintiff] raises a presumption that the jury found every issue in favor of the [the plaintiff]. Alfano v. Insurance Center of Torrington, 203 Conn. 607, 613, 525 A.2d 1338 (1987) . . . .” (Citations omitted; internal quotation marks omitted.) Holbrook v. Casazza, 204 Conn. 336, 345, 528 A.2d 774 (1987), cert. denied, 484 U.S. 1006, 108 S. Ct. 699, 98 L. Ed. 2d 651 (1988). The trial court set aside the verdict solely on the ground that the plaintiff had ratified the contract as a matter of law. No other issue has been
The function of the trial court in setting aside a jury verdict and the role of this court in reviewing that action are well settled. It is within the broad legal discretion of the trial court to set aside a jury verdict that is not supported by the law or evidence. Palomba v. Gray, 208 Conn. 21, 24, 543 A.2d 1331 (1988). The court’s exercise of its discretion is, however, limited by the litigant’s constitutional right to have issues of fact determined by a jury. Ginsberg v. Fusaro, 225 Conn. 420, 425, 623 A.2d 1014 (1993). “The trial court should not set a verdict aside where there was some evidence upon which the jury could reasonably have based its verdict, but should not refuse to set it aside where the manifest injustice of the verdict is so plain and palpable as clearly to denote that some mistake was made by the jury in the application of legal principles, or as to justify the suspicion that [the jurors] or some of them were influenced by prejudice, corruption or partiality.” (Internal quotation marks omitted.) American National Fire Ins. Co. v. Schuss, 221 Conn. 768, 774, 607 A.2d 418 (1992). In reviewing the actions of the trial court, “ ‘we must examine the evidential basis of the verdict itself to determine whether the trial court abused its discretion.’ ” Id., 775. Applying these principles to the facts of this case, I conclude that the trial court abused its discretion by setting aside the jury verdict because there was sufficient evidence in the record to support it.
I agree with the majority opinion that the Restatement (Second) of Contracts contains the relevant principles. I agree that one who wishes to avoid a contract entered into under duress must express the intention
I disagree, however, with the majority’s assertion that the Restatement (Second) of Contracts must be read only to equate the retention of benefits “with ‘delay [that is] prejudicial to the other party.’ ” In my view, § 380 must be read in light of the comments to that section to express the rule that conduct consistent with affirmance results in ratification when it manifests a willingness to affirm the contract. If such conduct otherwise can be explained, it does not necessarily manifest a willingness to affirm the contract. Accordingly, ratification of the contract cannot be presumed as a matter of law.
Comment (a) to § 380 provides that “[a] party who has the power of avoidance may lose it by action that manifests a willingness to go on with the contract.” Comment (b) to § 380 provides that such willingness may be expressed by “the exercise of dominion over what he has received in a manner inconsistent with avoidance of the contract.” Thus, read in conjunction with comments (a) and (b), § 380 allows conduct to evidence affirmance, when such conduct also demonstrates that the party so acting was willing to go on with the contract. If, however, a party can show that
This reading comports with the common understanding that intention is “[a]n essential element in the doctrine of ratification . . . .” Gallon v. Lloyd-Thomas Co., 264 F.2d 821, 826 (8th Cir. 1959). It is axiomatic that one cannot ratify a contract unintentionally. Indeed, we have held, with respect to a contract entered into by an agent without authority, that ratification requires “acceptance of the results of the act with an intent to ratify, and with full knowledge of all the material circumstances.” (Internal quotation marks omitted.) Russell v. Dean Witter Reynolds, Inc., 200 Conn. 172, 185, 510 A.2d 972 (1986); Botticello v. Stefanovicz, 177 Conn. 22, 28, 411 A.2d 16 (1979). Although intent may be inferred from unexplained silence; Hartford Accident & Indemnity Co. v. South Windsor Bank & Trust Co., 171 Conn. 63, 72, 368 A.2d 76 (1976); it need not conclusively be presumed. The question therefore becomes whether the jury reasonably could have found that the plaintiff did not acquiesce in the agreement.
The plaintiff presented evidence at trial from which the jury reasonably could have found that he retained benefits under the termination agreement and did not disaffirm it until January 22, 1987, for reasons other than to ratify or confirm it. The plaintiff testified that his overriding concern during the period subsequent to the signing of the agreement was to find gainful employment. The evidence before the jury included a letter written by the plaintiff to the president of Data Switch in December, 1985, which stated that the
Data Switch counters that two letters sent to the company constituted irrefutable evidence that the plaintiff had acquiesced in the agreement. Specifically, Data Switch argues that the letters do not disaffirm the termination agreement and contain language to the effect that the plaintiff was treated well with respect to the employment relationship. Both letters, however, were requests to the company to release the plaintiff from the noncompetition and nondisclosure agreements in order to facilitate his job search. The jury reasonably could have understood the friendly language in those letters as puffery aimed at initiating negotiations regarding the agreements that stood in the way of his employment search. Moreover, such a finding is consistent with the plaintiff’s claim that he was more concerned with feeding his family and paying his bills than with confronting his former employer.
Moreover, I am not persuaded by the cases from other jurisdictions holding that accepting benefits and not disaffirming for certain periods of time results in ratification as a matter of law. See, e.g., Gallon v. Lloyd-Thomas Co., supra, 264 F.2d 826; Abbadessa v. Moore Business Forms, Inc., 987 F.2d 18, 23 (1st Cir. 1993); DiMartino v. Hartford, 636 F. Sup. 1241, 1252 (D. Conn. 1986); Schmalz v. Hardy Salt Co., 739 S.W.2d 765, 767-68 (Mo. App. 1987); Powell v. Oman Construction Co., 25 App. Div. 2d 566, 566, 267 N.Y.S.2d 862 (1966); McGee v. Stone, 522 A.2d 211, 214-15 (R.I. 1987). Notwithstanding their application of the principles of the Restatement (Second) of Contracts regarding ratification, these cases are dissimilar to the case at hand and ultimately do not bear on the factual claims raised by the plaintiff in this appeal. Each involved a challenge to the plaintiffs claim of duress. In the majority of these cases, the court concluded that there had been no duress. Only thereafter did each of the courts proceed to conclude that the contract in issue had been ratified as a matter of law when the plaintiffs accepted the benefits thereunder before taking action to disaffirm. Additionally, the court in each of these cases failed to discuss any evidence in the record, similar to the evidence in this case, that would justify the delay or the receipt of benefits. Because those cases involved unexplained acceptance of benefits and delay, they are inapplicable to the present case.
Accordingly, I respectfully dissent.
During the period of his employment, the plaintiff also entered into a noncompetition agreement and a nondisclosure agreement with Data Switch. The effect of the agreements was to prohibit the plaintiff from subsequently competing with Data Switch, while in his own or another’s employ, by using any business related information that he had learned or developed while employed by Data Switch.
See footnote 1.
These agreements, in existence during the plaintiff’s employment, were thereafter incorporated by reference into the termination agreement of August 15, 1985.
I am hesitant to support a rule that prompts one to resort immediately to litigation, without the flexibility to first attempt to work things out. Such a rule is particularly harsh in light of the fact that our law also requires that one who challenges a breach of contract must also mitigate damages. Danpar Associates v. Somersville Mills Sales Room, Inc., 182 Conn. 444, 446, 438 A.2d 708 (1980). Here, the plaintiff diligently sought to remedy the situation by engaging in an extensive job search and should not be penalized therefore.
In fact, Data Switch argues in its brief to this court that considerations of prejudice or reliance are irrelevant to the question of whether the plaintiff ratified the contract.
Analogously, we have held in the workers’ compensation area that an employee’s tort claim is not barred by the receipt and retention of benefits under the workers’ compensation system. Suarez v. Dickmont Plastics Corp., 229 Conn. 99, 115-17, 639 A.2d 507 (1994). In that area, we have stated that a strict election system requiring an injured worker to choose between collecting under the workers’ compensation system or under tort law would transform what is a security system for injured workers “into a grandiose sort of double-or-nothing gamble. Such gambles are appealing to those who still think of the judicial process as a glorious game in which formal moves and choices are made at peril, and in which the ultimate result is spectacular victory for one side and utter defeat for the other.” Id., 117, quoting 2A A. Larson, Workmen’s Compensation (1993) § 67.31, p. 12-158.