Henry C. Suominen, Jr. vs. Goodman Industrial Equities Management Group, LLC, & others
Case Details
- Citation
- 78 Mass. App. Ct. 723
- Procedural Posture — the stage the case had reached
- appeal
- State
- Massachusetts
- Circuit
- 1st Circuit
Related Laws
No specific laws identified for this ruling.
Claim Types
Outcome
Jury found for plaintiff on promissory estoppel claim, awarding $1,729,243.01 in damages, but appellate court reversed and remanded for new trial due to omission of jury instruction on the 'detriment' element of promissory estoppel.
Excerpt
Henry C. Suominen, Jr. vs. Goodman Industrial Equities Management Group, LLC, & others. No. 09-P-1896. Suffolk. October 14, 2010. February 11, 2011. Present: Lenk, Smith, & Milkey, JJ. Labor, Wages, Failure to pay wages. Contract, Employment, Promissory estoppel. Practice, Civil, Notice of appeal, Instructions to jury, Directed verdict, Judgment notwithstanding verdict, Special verdict. Joint and Several Obligation. In a civil action, a Superior Court judge did not abuse her discretion in denying a motion to dismiss an appeal for failure timely to pay a docketing fee, on the ground of excusable neglect by counsel. [730-731] At the trial of a civil action alleging, inter alia, promissory estoppel, the judge erred in declining to instruct the jury on the element of detriment; therefore, the defendants were entitled to a new trial. [731-733] At the trial of a civil action alleging, inter alia, promissory estoppel, the defendants were not entitled to judgment in their favor as a matter of law, and the judge did not err in denying the defendants’ motion for judgment notwithstanding the verdict, where the plaintiff presented sufficient evidence of detriment to send the case to the jury. [733-734] At the trial of a civil action alleging, inter alia, promissory estoppel, in which neither the jury instructions on that claim nor the special questions on the verdict form drew a distinction between the liability of the defendants (the employer real estate development firm and its principal) and at which the jury found for the plaintiff employee, the judge did not clearly err in his implicit finding, under Mass.R.Civ.P. 49(a), that the employer’s principal was acting in a personal capacity when he made his promises to the employee. [734-736] At the trial of a civil action, the judge correctly dismissed the plaintiff employee’s claim that the failure of the defendants (the employer real estate development firm and its principal) to pay him amounts he claimed to be owed as a share of the “promote” (i.e., a type of profit enjoyed by a real estate developer) at the time he was fired constituted a violation of the Wage Act, G. L. c. 149, § 148, where such promote payments were not commissions within the meaning of the Wage Act, regardless of whether they were due and payable at the time the plaintiff was fired. [737-738] Civil action commenced in the Superior Court Department on May 3, 2005. The case was tried before Ralph D. Gants, J., and a motion to dismiss an appeal was heard by Margaret R. Hinkle, J. Ronald M. Jacobs for the plaintiff. Tyler E. Chapman for Goodman Industrial Equities Management Group, LLC, & another. Steven E. Goodman was a codefendant. The following defendants were joined solely on reach and apply claims: AG/GFI Winston-Salem, LLC; GFI Commerce, LLC; GFI Merrimack, LLC; GFI Littleton, LLC; AG/GFI Hampstead, Inc.; AG/GFI Duncan, LLC; AG/GFI Bradford, LLC; GFI Westminster Square, LLC; GFI Ayer, LLC; GFI Milford, LLC; GFI Tyngsboro, LLC; GFI Telluride, LLC; GFI Bedford, LLC; CB/GFI Salem, LLC; CB/GFI Littleton, LLC; GFI Auburn, LLC; and AG/GFI Worcester, LLC. Milkey, J. The plaintiff, Henry C. Suominen, Jr., was employed as the construction manager of defendant Goodman Industrial Equities Management Group, LLC (GIE), a small real estate development firm. In that position, he enjoyed an annual salary of $225,000. After he was fired in 2004, Suominen filed an action against GIE and its principal, defendant Steven E. Goodman, alleging that Goodman had broken a promise to pay him certain compensation in addition to his salary. Following a seven-day trial in Superior Court, the jury ruled in Suominen’s favor on some of his claims, including one based on promissory estoppel. The trial judge entered judgment awarding him a total of $1,729,243.01 in damages, the overwhelming bulk of which rested on the promissory estoppel claim. On appeal, the defendants argue that the trial judge should not have allowed that claim to go to the jury, and that, in any event, the judge’s instructions on the claim were erroneous. Defendant Goodman also argues that there was insufficient basis for his being held personally liable. By way of cross appeal, Suominen claims that the trial judge erred in granting a directed verdict as to one of his other claims. He also argues that the defendants’ appeal is not properly before us because of their failure — without sufficient excuse — to make timely payment of a docketing fee. We affirm in part and reverse in part. Specifically, we conclude that the judge correctly ruled on the directed verdict (and other) motions, but that a material omission in the jury instructions entitles the defendants to a new trial. Background. 1. The defendants’ business. Goodman is a real estate developer who focused on the redevelopment of existing, run-down industrial properties. Each targeted property was acquired by a deal-specific limited liability company that Goodman created solely for that purpose (referred to at trial as a “deal company” or “deal entity”). Although the deal entity purchased the property, the actual redevelopment work there was done by GIE, the limited liability company that Goodman had set up as his over-all real estate management company. That work included rehabilitating the buildings for a new use, securing permits for that use, and the like. Some of the projects were sold after they were redeveloped, while others were retained. 2. Suominen’s hiring. Suominen began working for Goodman as a consultant in February of 1999, and he became GIE’s “construction manager” in June of that year. In that position, Suominen oversaw the day-to-day redevelopment work of many, but not all, of Goodman’s projects. His initial starting salary at GIE was $100,000, which was $35,000 less than his most recent prior job. He was willing to accept the reduced salary because of the potential that he could share in the “upside” of the projects on which he worked. Before Suominen had been hired, Goodman had committed to working out some kind of profit-sharing plan with him, although the details of such a scheme had not been resolved before Suominen started work. 3. The parties’ negotiations. By the end of 1999, the parties were well along toward working out such profit-sharing details, with the discussions having evolved in the context of the specific development projects on which Suominen was working at the time. In fact, by January of 2000, the discussions had progressed to the point that Goodman directed his lawyer to draft “equity sharing agreements” for these projects. Under those drafts, Suominen and David Heller, GIE’s chief financial officer, were to receive a percentage of the “promote” that each of the projects realized (if any). As the testimony at trial revealed, “promote” (also known as a “promoted interest”) is a term of art used in the real estate development field. It refers to a species of profit that developers can enjoy — in addition to the return on any equity they invested — if their projects become extremely successful. What portion of profit, if any, is to go to the developer as a “promote” is determined by agreement between the developer and investors at the start of a development deal. Not every real estate development deal is structured so as to include a “promote”; in some cases, a developer’s potential profit comes only from return on equity or the payment of a separate “development fee.” In the January, 2000, drafts, the precise percentage of the promote that was to go to Suominen was left blank. Shortly thereafter, however, Goodman informed Suominen that he was willing to part with thirty-five percent of his promote, and that he did not care how Suominen and Heller split it. Suominen and Heller quickly agreed between themselves that Suominen should take two-thirds of their joint share, or a resulting 23.33% of the over-all promote. Suominen reported this back to Goodman, and they had what Suominen variously characterized as a “nod of the head,” a “handshake round,” and a “semi-congratulatory type of thing.” At this point (early 2000), Suominen believed he had reached a full agreement under which he would receive a 23.33% share of the promote that otherwise would have gone to Goodman. He viewed his promised share of the promote, and not his salary, as his “primary expectation of compensation,” and he testified that he “would have left” his employment had he learned that his understanding of what he was to receive was incorrect. At the end of 2000, Suominen had the 23.33% figure inserted into the draft documents for two then-current projects. He also modified the documents in a few other respects. For example, he added his own signature line, and he inserted a provision clarifying that the agreement would survive his termination or death. Suominen in fact signed his modified drafts, and he presented them to Goodman for his signature in December of 2000. Goodman declined to sign the documents, claiming that his doing so would require him to amend certain financial disclosure documents he had just filed. He confirmed with Suom-inen, however, that their deal was still on. In March of 2001, Goodman’s attorney forwarded to the parties a draft generic version of an equity sharing agreement that could be tailored for any specific deal (or at least those that were structured to include a promote). Moreover, the following month, Goodman acknowledged at a deposition in a separate action that Suominen and Heller had “an expectation when [Goodman did] a deal they’ll get a part of it,” and that they had an “interest” in thirty-five percent of the promote on particular projects. Goodman never signed any equity sharing agreement with Suominen. In fact, his attorney testified that, at an unspecified time, Goodman informed him that he was no longer interested in pursuing such an agreement. According to the attorney, Goodman decided that such an arrangement was too constraining. However, Goodman never informed Suominen of his change in plan. 4. The Milford distributions. In April of 2001, Goodman refinanced property in Milford that one of his deal companies owned. This resulted in a large inflow of cash (presumably because the redevelopment work that had been done at the property added significant value). He had twenty-five percent of those proceeds invested in GIE, and in May of 2000, he had the remainder distributed to himself, Suominen, and Heller. Suominen was given 23.33% of the money distributed. On several later occasions, Goodman had operating profits from the Milford project distributed to himself, Suominen, and Heller. On those occasions, Suominen again received 23.33% of the distributions. 5. The events of 2002 and 2003. As a result of the Milford distributions, Suominen in 2001 earned approximately $60,000 above his baseline salary of $100,000. In 2002, however, there were no projects that had reached the point of generating distributions. Feeling strapped for cash, Suominen asked Goodman to raise his salary to $225,000, and Goodman agreed. In 2003, various projects were at the point of completion, prompting Heller, who as previously noted served as GIE’s chief financial officer, to ask Suominen if his profit-sharing arrangement with Goodman was still in place. Suominen understood that it was, but no compensation above his increased salary was forthcoming even as deals began closing. 6. Suominen’s firing. On March 18, 2004, Suominen and Goodman finally met to discuss Suominen’s compensation. They testified to markedly different versions of the meeting. In Goodman’s version, the meeting was primarily focused on concerns he claims to have had at the time regarding Suominen’s performance. In Suominen’s version, the meeting was primarily focused on the compensation that Goodman owed, with Goodman testing out various arguments about how the money might not be due. Shortly thereafter, Goodman had Heller draft a history of the equity sharing issues, which he had Heller backdate to make it appear as if the document had been drafted on January 1, 2003. On July 12, 2004, Goodman fired Suominen at a face-to-face meeting. At the meeting, they discussed a transition period in which Suominen could continue to work on some of the existing projects, although not as an employee. Suominen did in fact continue to work under the belief that he would be compensated for such work as a consultant at the rate of his most recent annual salary. By electronic mail message (e-mail) sent on August 5, 2004, Goodman directed Suominen not to do any additional work, and he refused to pay Suominen for the work that Suominen had done after the date he had been fired. 7. Suominen’s claims and the jury’s special verdict. Suom-inen brought an action in Superior Court seeking damages both for the period that he was a salaried employee and for the brief period he worked as a consultant after being fired. Only the claims covering the former period remain live, and among those, the only ones still in play relate to Goodman’s promise to pay Suominen a 23.33% share of the promote. At trial, Suominen’s principal theory of recovery was that he had entered into a binding contract for the promised compensation with both GIE and Goodman personally. The defendants argued to the jury that no such promise had ever been made, and that Goodman at most had led Suominen to believe that a discretionary bonus might come his way. The defendants also argued that, in any event, there was never a “meeting of the minds,” because any agreement would have to be on a deal-specific basis (given that the amount of the promote, or even whether a deal included any promote, varied by the deal). They further argued that Goodman would never have agreed to give Suominen a set percentage of profits on those deals that made money, without Suominen having to share in the losses of those deals that lost money. For whatever reason, the jury rejected Suominen’s contract claims. However, the jury ruled in Suominen’s favor on his fail-back theory of promissory estoppel. Specifically, the jury answered “yes” to all of the following special verdict questions: “Did Goodman promise or represent to Suominen that he would receive 23.33 percent of the ‘promote’ on any development projects? “Did he make this promise or representation with the intent of inducing Suominen to continue his employment at GIE or with the reasonable expectation that it would induce him to continue such employment? “Did Suominen rely on this promise or representation by continuing his employment at GIE? “Did Suominen act reasonably in relying on this promise or representation?” Over the defendants’ protest, the jury were not separately asked to determine whether Suominen suffered detriment from relying on Goodman’s promise. The jury found that Suominen was unlawfully denied a share of the promote on eight projects, for total promissory estoppel damages of $1,216,623 (with prejudgment interest, $1,711,005. 87). The trial judge eventually concluded that the defendants each should face joint and several liability for those damages, and he entered a judgment to that effect on September 25, 2008. How the judge came to this conclusion, and other facts relevant to the parties’ particular claims, are developed further below as the issues arise. Discussion. 1. Jurisdiction over the defendants’ appeal. Before reaching the merits of the defendants’ arguments, we must decide whether those arguments are properly before us. The defendants filed a notice of appeal on October 9, 2008, and Suominen filed a cross appeal two weeks later. Once the parties received notice of the assembly of the record, Suominen, but not the defendants, timely paid a docketing fee. See Mass.R.A.P. 10(a)(1), as amended, 435 Mass. 1601 (2001) (generally requiring payment of docketing fee within ten days of receipt of notice of assembly of record). Some five days after the payment period had run, Suominen filed a motion to dismiss the defendants’ appeal in Superior Court pursuant to Mass.RA.P. 10(c), as amended, 417 Mass. 1602 (1994). In the defendants’ opposition to the motion and at a hearing on the motion, the lawyer who was serving as the lead on the case at the time sought to explain his neglect. Specifically, he documented how his failure to pay the docketing fee was caused by a significant personal crisis that temporarily had rendered him unable to function and, in his words, “a catatonic zombie.” Based on this showing, the motion judge (who was not the trial judge) found “excusable neglect,” and she denied the motion to dismiss. Suominen challenges that ruling in his cross-appeal. We see no good reason to repeat the details of the personal crisis that counsel faced. Instead, we find it sufficient to state that the appellate rales are not so unforgiving as to render the motion judge’s conclusion that the neglect here was “excusable” an abuse of her discretion. We proceed then to a discussion of the defendants’ claims. 2. The merits of the defendants’ appeal, a. Detriment. The defendants focus on Suominen’s promissory estoppel claim, the foundation of almost all of the damages assessed against them. Reduced to basic terms, promissory estoppel “consists simply of a promise that becomes enforceable because of the promisee’s reasonable and detrimental reliance.” Rooney v. Paul D. Osborne Desk Co., 38 Mass. App. Ct. 82, 83 (1995). The defendants focus principally on whether any reliance was “detrimental,” something that the Supreme Judicial Court recently reaffirmed was a separate element of a promissory estoppel claim. Anza-lone v. Administrative Office of the Trial Ct., 457 Mass. 647, 661 (2010), citing Sullivan v. Chief Justice for Admn. & Mgmt. of the Trial Ct., 448 Mass. 15, 27-28 (2006). The defendants claim two different sorts of errors related to detriment. First, they argue that the judge erred by not separately charging the jury on detriment and by not having them determine whether this element was present. Second, they argue that the evidence of detriment was insufficient as matter of law, and that the judge therefore erred in not granting their motion for directed verdict. We address these claims in that order. (i) Jury instructions. The jury were specifically asked whether, and did find that, Suominen continued his employment at GIF in reliance on Goodman’s promises. The judge had initially intended to charge the jury with answering an additional special question: whether Suominen had “suffered some detriment, that is, some financial injury as a result of relying on this promise or misrepresentation. ” However, at the charge conference, the judge decided to eliminate that separate question, citing the potential for jury confusion that including the question might cause. In the judge’s view, the question was unnecessary, because if the jury determined that Suominen continued his employment in reliance on the promise, this by itself established sufficient detriment as matter of law. After the charge was given, the defendants renewed their objection to the absence of an instruction or special question on detriment. We disagree with the trial judge’s conclusion that Suominen’s continuing his employment was sufficient by itself to establish his detriment as matter of law. In our view, the judge erred by conflating continued employment — the action Suominen took in reliance on the promises — and detriment. That this was error is best illustrated by reference to the facts. Although Suominen began his employment at GIE in 1999 at a salary somewhat below the one at his most recent earlier employment, he earned compensation above that level in 2001 as a result of the Milford distributions. Then, in late 2002, Suominen requested and received a 125% raise, putting his base salary at a level at almost twice what he was making before joining GIE. He also never alleged that he forwent any other job opportunities or business ventures by staying with
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