LORRAINE K. DOYLE, Plaintiff v. ASHEVILLE ORTHOPAEDIC ASSOCIATES, P.A., Defendant
Case Details
- Citation
- 148 N.C. App. 173
- Judge(s)
- Judges WALKER and THOMAS concur.
- Procedural Posture — the stage the case had reached
- appeal
- State
- North Carolina
- Circuit
- 4th Circuit
Related Laws
No specific laws identified for this ruling.
Claim Types
Outcome
The appellate court reversed the trial court's judgment awarding the plaintiff damages for constructive discharge under her employment contract, holding that the evidence failed to demonstrate the employer deliberately made working conditions intolerable to force her resignation.
Excerpt
LORRAINE K. DOYLE, Plaintiff v. ASHEVILLE ORTHOPAEDIC ASSOCIATES, P.A., Defendant No. COA01-159 (Filed 28 December 2001) Employer and Employee— employment contract — termination provision — constructive discharge The trial court erred in a breach of contract action by allowing recovery for plaintiff doctor for constructive discharge from employment based on the termination provision of plaintiff’s employment contract, because: (1) the jury found that neither party breached the employment contract, and the evidence does not show that defendant employer deliberately made plaintiff’s working conditions intolerable; (2) plaintiff does not allege in her complaint that she was constructively terminated based on intolerable working conditions, nor does she set forth any instances that would support stating that she was terminated based on intolerable working conditions; and (3) there is no evidence that the alleged conditions were deliberately created in an attempt to force plaintiff to terminate her employment. Appeal by defendant from judgment entered 11 April 2000 and order entered 11 May 2000 by Judge James U. Downs in Superior Court, Buncombe County. Heard in the Court of Appeals 5 December 2001. Adams Hendon Carson Crow & Saenger, P.A., by George W. Saenger and Joy Gragg, for plaintiff-appellee. McGuire, Wood & Bissette, P.A., by Joseph P. McGuire, for defendant-appellant. WYNN, Judge. In this appeal Asheville Orthopaedic Associates, P.A., argues that the trial court erred in submitting issues to the jury and allowing recovery to Dr. Lorraine K. Doyle for constructive discharge from employment. Asheville Orthopaedics correctly points out that North Carolina has not explicitly recognized constructive discharge in the context of employment as an independent basis for recovery. Indeed, in Wagoner v. Elkin City Schools’ Board of Education this Court held: Assuming that plaintiff was wrongfully constructively discharged, she is nonetheless not entitled to assert the tort of wrongful discharge because the tort of wrongful discharge arises only in the context of employees at will. See Coman v. Thomas Mfg. Co., 325 N.C. 172, 381 S.E.2d 445 (1989); Sides, 74 N.C. App. 331, 328 S.E.2d 818. Breach of contract is the proper claim for a wrongful discharged employee who is employed for a definite term or an employee subject to discharge only for “just cause.” 113 N.C. App. 579, 588, 440 S.E.2d 119, 125, disc. review denied, 336 N.C. 615, 447 S.E.2d 414 (1994). However, Dr. Doyle responds that she did not claim damages arising under the independent action of constructive discharge based on a violation of public policy which applies to employees at will. Rather, Dr. Doyle asserts that her claim arises under her employment contract with Asheville Orthopaedic. She points out that her employment contract provided for damages to be paid to her in the event that Asheville Orthopaedic terminated her involuntarily. She alleges that despite the fact that she resigned from her employment, her resignation was procured by Asheville Orthopaedic’s conduct which amounted to constructive discharge. Dr. Doyle is a board certified orthopaedic surgeon, who after signing an employment contract with Asheville Orthopaedics started working on 3 October 1988. The employment contract provided that Dr. Doyle would receive basic compensation in the amount of $80,000 during her first contract year, the same basic compensation of $80,000 plus one-half of her productivity during her second contract year, and compensation based on her productivity during her third and subsequent contract years, with her compensation based on productivity to “be calculated in the same manner as is applicable to all other physician employees of the Employer.” Regarding termination, the employment contract under paragraph 12 a. provided that: The Employee may terminate this Contract only after having given a preliminary written notice to terminate twelve (12) months before the effective termination date, followed by a final written resignation six (6) months before said termination date. Subject to paragraph 12 c., the Employer may terminate this Contract only after having given written notice at least six (6) months before the effective termination date. The Employer will not terminate this Agreement unless such action has' been approved by a majority vote of all members of the Board of Directors who are then actively practicing medicine for the Employer. The Contract of Employment further provided that: Upon termination pursuant to paragraph 12 a., Employee shall be paid only: (i) the Basic Benefits set forth herein, reduced by 1/25 for each year of service with the Employer less than twenty-five (25) years; and (ii) his Basic Compensation without any further Productivity Compensation. At a meeting on 11 October 1995, the Board of Directors for Asheville Orthopaedics considered Dr. Doyle’s deficit, how she could repay that deficit and the viability of her continuing in the practice. After the meeting, Linda Stein Murphy, the business manager, informed Dr. Doyle that the Board of Directors had decided that it could not go on paying someone who was not producing. Later that same day, Ms. Murphy met with two of the partner doctors, who decided that Dr. Doyle would not receive a paycheck or disability payment; Medical Mutual would be called about the cost of tail coverage for Dr. Doyle, which is the amount required to be paid to cover a doctor who leaves a practice in the event that any claims arise subsequent to the doctor’s departure; Dr. Doyle should cancel some of her vacation and not attend a professional meeting in February; and the credit card limit for all of the physicians would be reduced from $5,000 to $500. The next day, Ms. Murphy met with Dr. Doyle and told her that she would not receive any pay. After discussing with Ms. Murphy whether there would be a problem if she left at the end of December, Dr. Doyle sent a letter dated 30 November 1995 stating that she intended to withdraw from the partnership and her last day would be 31 December 1995. Following a trial, the jury considered and decided on the following issues: 1. Did the defendant breach the employment agreement? ANSWER: NO 2. What answer of damages is the plaintiff entitled to recover from the defendant? ANSWER: _ 3. Did the defendant constructively terminate the employment of the plaintiff? ANSWER: YES 4. What amount of damages, if any is the plaintiff entitled to recover from the defendant? ANSWER: $14,752 5. Did the plaintiff breach the employment contract? ANSWER: NO 6. What amount of damages is the defendant entitled to recover from the plaintiff? ANSWER: _ Accordingly, the trial court entered judgment on the jury’s finding of constructive discharge in the amount of $14,447.30, plus prejudgment interest from 1 January 1996 and court costs. On appeal, Dr. Doyle disavows that she seeks relief under a claim of constructive discharge in violation of public policy which arises only in the context of employees at will. She asserts instead that her claim of constructive discharge arose in the context of deciding whether she was entitled to termination payments under the contract. We recognize the viability of her claim in the context of interpreting whether constructive termination by her employer triggered the termination payment provision of the employment contract. In general, evidence establishing constructive discharge “must demonstrate that the employer deliberately made working conditions intolerable and thereby forced [the plaintiff ] to quit.” Graham v. Hardee’s Food System, Inc., 121 N.C. App. 382, 385, 465 S.E.2d 558 (1996) (citing E.E.O.C. v. Clay Printing Co., 955 F.2d 936, 944 (4th Cir. 1992)). “Deliberateness exists only if the actions complained of ‘were intended by the employer as an effort to force the employee to quit.’ ” Id. (Citations omitted). In this case, the jury found that neither Asheville Orthopaedics nor Dr. Doyle breached the employment contract. Thus, to show that her employer constructively discharged her and thereby triggered the payment provision of the employment contract, Dr. Doyle must point to evidence, other than that showing a breach of contract, which demonstrates that Asheville Orthopaedics deliberately made her working conditions intolerable. The record shows that Dr. Doyle’s evidence of constructive discharge consisted of her allegations that she received limited referrals of hand patients from Asheville Orthopaedics’ other physicians. However, the record also shows that Dr. Doyle did receive some hand patient referrals and was offered to serve as back-up on call. Dr. Doyle also points to Asheville Orthopaedics’ adoption of a different compensation formula in November 1994 which allocated overhead in a detrimental impact on her income. However, this change occurred during a period when Asheville Orthopaedics experienced a financial crunch and considered ways to hold costs down and encourage production. Additionally, Dr. Doyle, aboard member, voted on the modified compensation formula. Also, the record shows that Asheville Orthopaedics approved Dr. Doyle as a shareholder and in later years elected her to serve in various offices including secretary, treasurer and vice-president. This evidence falls short of showing that Asheville Orthopaedics deliberately made Dr. Doyle’s working conditions intolerable. Moreover, we note that in her Complaint, Dr. Doyle does not allege that she was constructively terminated because of intolerable working conditions nor does she set forth any instances that would support stating that she was terminated because of intolerable working conditions. After a careful review of the record, we can find no evidence that the alleged conditions were deliberately created in an attempt to force Dr. Doyle to terminate her employment. In the absence of facts, other than those showing a breach of contract, to support Dr. Doyle’s claim for páyment under the termination provision of her employment contract that she was constructively discharged, we must reverse the judgment. Reversed. Judges WALKER and THOMAS concur.
Similar Rulings
VINCENT BURLEY, Employee, Plaintiff v. U.S. FOODS, INC., EMPLOYER, and INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, Carrier and GALLAGHER BASSETT SERVICES, INC., Third Party Administrator, Defendants No. COA13-860 Filed 1 April 2014 Workers’ Compensation — subject matter jurisdiction — contract modification — last act analysis The Industrial Commission erred in a workers’ compensation case by concluding that it did not have subject matter jurisdiction. A modification to plaintiff employee’s contract was approved by defendant U.S. Foods Inc. in Charlotte. N.C.G.S. § 97-36 extended subject matter jurisdiction to plaintiff’s claim since the final binding act occurred in North Carolina. Judge DILLON dissenting. Appeal by plaintiff from opinion and award entered 28 June 2013 by the North Carolina Industrial Commission. Heard in the Court of Appeals 12 December 2013. The Sumwalt Law Finn, by Vernon Sumwalt, Mark T. Sumwalt, and Lauren Hester, for Plaintiff-Appellant. McAngus, Goudelock & Courie, P.L.L.C., by Raymond J. Williams, III, for Defendants-Appellees. HUNTER, JR., Robert N., Judge. Vincent Burley (“Plaintiff’) appeals from the 28 June 2013 opinion and award of the Full Commission of the North Carolina Industrial Commission (the “Commission”), which concluded that the Commission did not have subject matter jurisdiction to hear Plaintiffs claim. Plaintiff argues the Commission had subject matter jurisdiction because a modification to his contract was approved by defendant U.S. Foods Inc. (“U.S. Foods”) in Charlotte. We agree and reverse the Commission’s opinion and award. I. Facts & Procedural History On 8 July 2011, Plaintiff filed a claim for benefits with the Commission seeking compensation for a back injury suffered while working for U.S. Foods as a truck driver. U.S. Foods denied that North Carolina has jurisdiction over Plaintiff’s claim, but admitted liability under the Georgia Workers’ Compensation Act and is. currently paying Plaintiff disability compensation under Georgia law. The matter came on for a hearing before Deputy Commissioner Philip A. Baddour, III (“Dep. Comm. Baddour”) on 17 April 2012 and a written order was filed oh 13 December 2012. The evidence presented at the hearing tended to show the following facts. Plaintiff is a resident of Augusta, Georgia and was a 39-year-old truck driver at the time of his 13 December 2012 hearing before the Commission. In 1993, Plaintiff graduated from truck driving school in Charleston, South Carolina, and obtained his commercial driving license from this course of study. Plaintiff has been a truck driver since graduating from this program. U.S. Foods supplies and delivers food to restaurants, schools, sports venues, hotels, and many other types of businesses. U.S. Foods operates many distribution centers nationwide to supply “hundreds of thousands of customers” with its food products. Plaintiff testified that U.S. Foods hired him as a delivery truck driver in May 2000. Plaintiff completed his initial hiring paperwork, including a driver’s application, medical exam, and written driving exam, in Fort Mill, South Carolina. Plaintiff completed additional pre-hiring paperwork, including a road-test in Columbia, South Carolina and a drug-screening in Georgia. After completing his initial paperwork, U.S. Foods offered Plaintiff employment, and Plaintiff accepted the written offer. Plaintiff signed this paperwork in Fort Mill, South Carolina and was employed at-will. Plaintiff drove a planned route as part of his employment. The route was concentrated around the Augusta area, with stops in Georgia and South Carolina. Plaintiffs truck and trailer were stowed every day at a drop yard in Augusta. Plaintiffs route did not involve travel in North Carolina nor was his truck ever dropped in North Carolina. U.S. Foods merged with another company, PYA Monarch, and the Columbia drop yard, where Plaintiff was assigned, was dissolved in 2002. Plaintiff testified that U.S. Foods offered to transfer supervision of his employment to either their Charlotte division or their Lexington, South Carolina division after the merger. Plaintiff chose to work for the Charlotte division because U.S. Foods arranged for his loaded delivery truck to be delivered near his Augusta home. Had Plaintiff chosen the Lexington division, he would have been required to drive his personal vehicle to retrieve his loaded truck in Lexington. Plaintiffs transfer to the Charlotte division was thereafter approved by U.S. Foods’s human resources department in Charlotte. Plaintiffs job title and responsibilities did not change after he was transferred to the Charlotte division from the Columbia division. Plaintiff stated that he was working the “same job, just a different division,” although Plaintiff made deliveries to different customers and drove a different route. Plaintiff was also switched from an hourly weight-based pay system to a component pay system. As a result, Plaintiff saw his pay increase from $400 to $500 a week under the weight-based system to between $900 and $1,400 per week under the component system. Plaintiff worked continuously for U.S. Foods for nine years, was never terminated or laid off, and never completed re-hiring paperwork during this period. Plaintiff injured Ms back on 23 September 2009 while lifting a case of liquid milk during a delivery to a Some Drive-In in Evans, Georgia. U.S. Foods terminated Plaintiff’s employment on 1 October 2009. U.S. Foods’s Charlotte division Transportation Manager Alton Abernathy (“Mr. Abernathy”) also testified at the 17 April 2012 hearing. Mr. Abernathy stated that upon the merger of U.S. Foods and PYA Monarch, U.S. Foods “went to all the drivers [in the Columbia drop yard] that were being displaced . .. and offered them jobs” if they transferred branches. If Plaintiff rejected the transfer, he would have received a severance package. Mr. Abernathy further described the different pay systems between the Charlotte and Columbia divisions: Plaintiff’s component pay system paid his commission on “pieces and stops and miles with a base and safety pay” rather than Plaintiff’s prior pay system, which was based on weight carried. Mr. Abernathy also described the Charlotte division’s accommodations for its drivers, noting that the branch delivered drivers’ loads to fifteen different sites, including Plaintiff’s drop site in Augusta. Plaintiff’s transfer was approved and signed by three individuals: Doug Jolly, U.S. Foods’s Transportation Manager at its Fort Mill division; Kim DaM, a human resources officer at U.S. Foods; and Mel Smith, who provided final approval from the human resources department. U.S. Food’s human resources department has been located in Charlotte smee 4 December 2000, and both Kim DaM and Mel Smith worked m the Charlotte office. Lastly, U.S. Foods’s Human Resources Coordinator, Rebecca Reed (“Ms. Reed”), testified at the hearing. Ms. Reed discussed the terms of Plaintiff’s mitial hiring contract, notmg that U.S. Foods could modify the terms of Plaintiff’s employment under the contract. After hearing the foregoing evidence, Dep. Comm. Baddour concluded that the a modified contract does not constitute a contract “made” m North Carolma for purposes of the relevant jurisdiction granting statute, N.C. Gen. Stat. § 97-36 (2013). Dep. Comm. Baddour also concluded that the final act to create Plaintiff’s employment contract did not occur m North Carolina. Accordingly, Dep. Comm. Baddour ordered that Plaintiff’s claim be denied for lack of subject matter jurisdiction. Plaintiff appealed to the Commission on 13 December 2012. The Commission heard the case on 22 May 2013 and issued an opmion and order on 28 June 2013 affirming Dep. Comm. Baddour’s order. Plaintiff timely filed written notice of appeal with tMs Court on 2 July 2013. II. Jurisdiction & Standard of Review Plaintiffs appeal from the Commission’s opinion and award lies of right to this Court pursuant to N.C. Gen. Stat. § 7A~29(a) (2013). Accord N.C. Gen. Stat. § 97-86 (2013). The only issue on appeal is whether the Industrial Commission had subject matter jurisdiction over Plaintiffs claim. At present, whether the Commission has subject matter jurisdiction over Plaintiff’s case depends on whether a contract for employment was consummated in North Carolina pursuant to N.C. Gen. Stat. § 97-36. See Parker v. Thompson-Arthur Paving Co., 100 N.C. App. 367, 369, 396 S.E.2d 626, 628 (1990) (“The jurisdiction of the Industrial Commission is limited by statute.”). Plaintiff argues that (i) because U.S. Foods’s Charlotte division approved Plaintiff’s transfer to oversight by the Charlotte division from the Columbia division, Plaintiffs contract was modified and (ii) because the “last act” of approving the modification occurred in Charlotte, the contract of employment was made in North Carolina. “Appellate review of an award from the Industrial Commission is generally limited to two issues: (i) whether the findings of fact are supported by competent evidence, and (ii) whether the conclusions of law are justified by the findings of fact.” Chambers v. Transit Mgmt., 360 N.C. 609, 611, 636 S.E.2d 563, 555 (2006). “However, as to ajurisdictional question, this Court is not bound by the findings of fact of the lower tribunal. This Court has the duty to make its own independent facts as to jurisdiction.” Lentz v. Phil’s Toy Store,_N.C. App._,_, 747 S.E.2d 127, 130 (2013); see also Lucas v. Li’l Gen. Stores, 289 N.C. 212, 218, 221 S.E.2d 257, 261 (1976). The Commission concluded as amatter of law that Plaintiffs contract was not modified and that the last act necessary to create Plaintiffs original contract was made out of state, depriving the Industrial Commission of subject matter jurisdiction to hear Plaintiff’s case. “Conclusions of law by the Industrial Commission are reviewable de novo by this Court.” Bond v. Foster Masonry, Inc., 139 N.C. App. 123, 127, 532 S.E.2d 583, 585 (2000). “Under a de novo review, the court considers the matter anew and freely substitutes its own judgment for that of the lower tribunal.” Craig v. New Hanover Cnty. Bd. of Educ., 363 N.C. 334, 337, 678 S.E.2d 351, 354 (2009) (quotation marks and citation omitted). III. Analysis a. Contract Modification Under Section 97-36 A contract modification is not explicitly referenced in Section 97-36, which grants the Commission subject matter jurisdiction over certain accidents that occur out of state. N.C. Gen. § 97-36 provides [w]here an accident happens while the employee is employed elsewhere than in this State and the accident is one which would entitle him or his dependents or next of kin to compensation if it had happened in this State, then the employee or his dependents or next of kin shall be entitled to compensation (i) if the contract of employment was made in this State. Plaintiff argues that common law rules concerning modifications of contract apply. See Lineberry v. Town of Mebane, 219 N.C. 257, 258, 13 S.E.2d 429, 430 (1941) (“The common law, to the extent therein provided, is modified. Except as so modified it still prevails.”); N.C. Gen. Stat. § 4-1 (2013) (declaring portions of the common law not in conflict with the general statutes remain in full force). We agree with Plaintiff and have consistently applied common law rules of contract to claims filed under the Workers’ Compensation Act. See, e.g., Hollowell v. N.C. Dep’t of Conservation & Devel., 206 N.C. 206, 208, 173 S.E. 603, 604 (1934); Hojnacki v. Last Rebel Trucking, Inc., 201 N.C. App. 726, 689 S.E.2d 601, 2010 WL 10963 at *3-4 (2010) (unpublished) (applying common law principles of contract law, such as offer and acceptance, to a claim filed under the Workers’ Compensation Act). This Court has held that a lapse in employment and subsequent rehiring via a “last act” made in North Carolina created a contract that was “made” in North Carolina for jurisdictional purposes under Section 97-36. Baker v. Chizek Transp., Inc., 210 N.C. App. 490, 711 S.E.2d 207, 2011 WL 904271 at *4-5 (2011) (unpublished). Similarly, under the common law of contracts, a modification to the terms of a contract may create a new underlying contract that was “made” in North Carolina. See, e.g., Spartan Leasing Inc. v. Pollard, 101 N.C. App. 450, 457, 400 S.E.2d 476, 480 (1991) (holding that an addendum letter was a new contract because it modified a prior lease agreement). Section 97-36 also employs the phrase “employment contract,” which encompasses a broader scope of employment than “contract of hire,” a phrase that covers only the initial hiring of an individual. Compare N.C. Gen. Stat. § 97-36 with N.C. Gen. Stat. § 97-2(2) (2013) (using “contract of hire”). This broader expanse includes a contract modification, providing a basis for a contract being “made” in North Carolina under Section 97-36. The dissent cites Larson’s Workers’ Compensation Law § 143.03(4) (2011) for the proposition that when “a contract has achieved an identifiable situs, that situs is not changed merely because the contract is modified in another state.” While we acknowledge that Larson’s is a learned treatise in this field, we must construe Section 97-36 using the long-standing canons of construction in this state which require a plain language approach to interpreting Section 97-36. This Court’s precedent identifies that a modified contract containing the required formation elements is a new contract. See, e.g., NRC Golf Course, LLC v. JMR Golf LLC,_N.C. App._,_, 731 S.E.2d 474, 480 (2012) (“Parties to a contract may agree to change its terms; but the new agreement, to be effective, must contain the elements necessary to the formation of a contract.” (emphasis added)). Like other newly formed contracts, a modified contract may be made in this state. The General Assembly crafted Section 97-36 with a full view that the phrase “employment contract” contemplated both contracts of hire as well as modifications of existing contracts which, by long-standing precedent, are new agreements. See id,.; compare N.C. Gen. Stat. § 97-36 with N.C. Gen. Stat. § 97-2(2) (using “contract of hire”). As such, we do not interject our own view of the legislature’s intended meaning and instead apply existing precedent and the plain language of Section 97-36 to this question of first impression. See Correll v. Div. of Soc. Servs., 332 N.C. 141, 144, 418 S.E.2d 232, 235 (1992) (“The legislative purpose of a statute is first ascertained by examining the statute’s plain language.”). Further, while the Larson’s passage cites other state court decisions for the notion that a situs is not changed by contract modification, other jurisdictions have recognized explicitly that a contract modified within state borders confers jurisdiction. See, e.g., Kilburn v. Grande Corp., 287 F.2d 371, 373-74 (5th Cir. 1961) (holding that Louisiana had jurisdiction over a modified contract of employment where the original employment contract was formed in Texas, but additional consideration for employment was negotiated in Louisiana); Kuzel v. Aetna Ins. Co., 650 S.W.2d 193, 195-96 (Tex. App. 1983) (holding Maryland had jurisdiction where the original contract of hire was formed in Texas, but a later contract modification was agreed to in Maryland). The Commission held that modification of an existing contract does not fall within the scope of a contract “made” in Section 97-36. The lack of a bar against such use, this Court’s precedents recognizing common law contract principles, and use of the phrase “employment contract” in Section 97-36 require a different result. Accordingly, a modification of an employment contract may be a proper basis to find a contract is “made” within North Carolina under Section 97-36. b. Whether Plaintiff’s Contract was Modified Our next inquiry is whether Plaintiff’s contract was actually modified under common law contract principles. The same tests for formation of contract apply to whether a modified contract is enforceable. NRC Golf Course, _N.C. App. at_, 731 S.E.2d at 480 (“Parties to a contract may agree to change its terms; but the new agreement, to be effective, must contain the elements necessary to the formation of a contract.” (quotation marks and citation omitted)); Corbin v. Langdon, 23 N.C. App. 21, 26, 208 S.E.2d 251, 254 (1974). The three requisite elements to form an enforceable contract are offer, acceptance, and consideration. Cap Care Grp., Inc. v. McDonald, 149 N.C. App. 817, 822, 561 S.E.2d 578, 582 (2002). Consequently, we must consider whether each element exists to determine whether a modified employment contract was formed between Plaintiff and U.S. Foods. “It is essential to the formation of any contract that there be mutual assent of both parties to the terms of the agreement so as to establish a meeting of the minds.” Harrison v. Wal-Mart Stores, Inc., 170 N.C. App. 545, 550, 613 S.E.2d 322, 327 (2005) (quotation marks and citation omitted); see also Wooten v. S.R. Biggs Drug Co., 169 N.C. 64, 68, 85 S.E. 140, 142 (1915) (holding that “the one thing without which a contract cannot be made ... is the assent of the parties to the agreement, the meeting of the minds upon a definite proposition”). As such, a contract modification must also have an offer of modified terms and acceptance on those terms. Corbin, 23 N.C. App. at 26, 208 S.E.2d at 255. At-will contracts may also be modified by the parties to form a new contract. Arndt v. First Union Nat. Bank, 170 N.C. App. 518, 526, 613 S.E.2d 274, 280 (2005) (“The employer, in an at will relationship, can modify, unilaterally the future compensation to be paid to an employee. If the employer modifies the terms of an [employee] at will; and, the employee knows of the change, the employee is deemed to have acquiesced to the modified terms, if he continues the employment relationship.”). Here, Mr. Abernathy testified that the company met with displaced drivers after its merger with PYA Monarch. Mr. Abernathy said the company offered its displaced drivers jobs with the subsuming branches. U.S. Foods extended its offer for its employees to transfer branches at a company safety meeting in Charlotte. The alternative to transferring branches was to receive a severance package from U.S. Foods. Thus, Plaintiff had a choice: he could accept a transfer or he could cease employment and receive a severance package. This fundamental choice qualifies as a new offer under the traditional definition of a contract. Plaintiff accepted the offer. At the Charlotte meeting where his new terms of employment were proposed, Plaintiff negotiated the details of his transfer with his supervisor. Specifically, Plaintiff requested that his trailers be dropped near his home in Augusta. Plaintiff also completed paperwork at the Charlotte safety meeting to accept the transfer, although U.S. Foods’s Charlotte human resources department had to approve the transfer before it was “official.” From the foregoing, it is clear Plaintiff accepted a new offer modifying his existing at-will employment agreement. Finally, there must also be consideration in support of the modified contract. Clifford v. River Bend Plantation, Inc., 312 N.C. 460, 466, 323 S.E.2d 23, 27 (1984) (“It is established law that an agreement to modify the terms of a contract must be based on new consideration or on evidence that one party intentionally induced the other party’s detrimental reliance.” (citation and quotation marks omitted)). “Consideration sufficient enough to support a contract consists of any benefit, right, or interest bestowed upon the promisor, or any forbearance, detriment, or loss undertaken by the promisee.” Fairfield Harbour Prop. Owners Ass’n, Inc. v. Midsouth Golf, LLC, 215 N.C. App. 66, 75, 715 S.E.2d 273, 282 (2011) (quotation marks and citation omitted). This Court does not typically consider the adequacy of consideration, as “inadequate consideration, as opposed to the lack of consideration, is
SIU S. TONG, et al., Plaintiffs v. DAVID DUNN, TIMOTHY KRONGARD, ED MASI, SOPHIA WONG and JANET WYLIE, Defendants No. COA12-1261 Filed 17 December 2013 1. Appeal and Error — motion to dismiss appeal — denied Defendants’ motion to dismiss the appeal under Hill v. West, 177 N.C. App. 132, was denied by the Court of Appeals. Hill has been repeatedly limited to its specific, unusual facts, which were not present here. 2. Collateral Estoppel and Res Judicata — claim splitting— federal and state actions — separate wrongs The trial court erred in an action by the founder of a company arising from a merger by concluding that the doctrines of claim-splitting and res judicata applied. A separate wrong was asserted in the federal action and in this case; plaintiff’s claims in the federal action involved claims arising out of his position as an employee while the current action involved a wrong inflicted upon plaintiff in his capacity as a common shareholder. Appeal by plaintiff from order entered 25 May 2012 by Judge James L. Gale in Orange County Superior Court. Heard in the Court of Appeals 9 April 2013. Poyner Spruill LLP, by Steven B. Epstein and Andrew H. Erteschik, for plaintiff-appellant. Kilpatrick Townsend & Stockton LLP, by John M. Moye, for defendants-appeUees. GEER, Judge. Plaintiff Siu S. Tong appeals from an order granting judgment on the pleadings to defendants David Dunn, Timothy Krongard, Ed Masi, Sophia Wong, and Janet Wylie on Mr. Tong’s claim for breach of fiduciary duty. Defendants contended and the trial court agreed that Mr. Tong’s claim in this case was barred by res judicata because the claim in this case arose from the same set of operative facts as the claims in Mr. Tong’s earlier employment action. We hold that the order is contrary to our Supreme Court’s holding in Bockweg v. Anderson, 333 N.C. 486, 428 S.E.2d 157 (1993), and, therefore, reverse and remand. Facts Mr. Tong was the founder of Engineous Software, Inc. (“Engineous”). During the events that gave rise to this action, Mr. Tong continued to be a key employee of Engineous, a common shareholder of Engineous, and a member of the Board of Directors of Engineous elected to represent the common shareholders. The common shareholders collectively owned a minority interest in the company. In Spring 2006, the Engineous Board of Directors, amajority of which were preferred shareholders, hired Wachovia Bank to explore opportunities to sell Engineous. Ultimately, Dassault Systems S.A. (“Dassault”) offered $35-40 million for Engineous. Although Mr. Tong believed that Dassault’s offer was not in the best interests of the common shareholders, the Board ultimately agreed to a merger with Dassault in which Dassault acquired Engineous for approximately $40 million and merged Engineous into ENG Acquisition, Inc. (“ENG”), a wholly-owned subsidiary of Dassault. On 11 July 2011, Mr. Tong filed suit in Wake County Superior Court against Dassault, Engineous, Dassault Systemes Simulia K.K. formerly known as Engineous Japan, Inc., Janet Wylie, Edward Masi, Tim Krongard, David Dunn, Sophia Wong, and Charles Johnson. This action was ultimately removed to federal court (“the federal action”). In an amended complaint, Mr. Tong alleged that the individual defendants knew that the proposed merger agreement between Engineous and Dassault made Mr. Tong’s continued employment a condition of Dassault purchasing Engineous. On 10 June 2008, however, Mr. Tong resigned from the Engineous Board of Directors because of his concerns regarding the manner in which the proposed sale of Engineous to Dassault would affect the common shareholders. On 13 June 2008, three days before the execution of the merger agreement, Engineous, acting through defendant Krongard with the knowledge and consent of the other individual defendants (all of whom were members of Engineous’ Board of Directors), promised Mr. Tong a payment of at least $300,000.00 (the “carve-out payment”) if he would execute an employment agreement agreeing to continue to work for Dassault after the merger. The amended complaint alleged that Mr. Krongard knew that Mr. Tong would have to also sign a release agreement in order to receive the carve-out payment, but Mr. Krongard intentionally or negligently, with the knowledge and consent of the other individual defendants, failed to inform Mr. Tong of that requirement. Mr. Tong asserted that Mr. Krongard’s offer of the carve-out payment without mention of the required release was intended to fraudulently induce Mr. Tong into signing an employment agreement with Dassault. Further, Mr. Tong alleged that Engineous and the individual defendants knew that he would likely exercise his rights as a minority shareholder to challenge the sale. On 16 June 2008, Mr. Tong signed the employment agreement with Dassault. On the same day, after Mr. Tong signed the employment agreement, Engineous and Dassault signed the merger agreement. The merger agreement required that Mr. Tong, as well as certain other Engineous employees, have active and valid employment agreements with Dassault at the time the merger closed in order for the deal to be consummated. On 8 July 2008, the shareholders approved the merger agreement. Mr. Tong did not vote in favor of the merger agreement and preserved his rights as a common shareholder to object to the merger. On 14 July 2008, however, defendant Janet Wylie, the CEO of Engineous, notified Mr. Tong for the first time that in order to receive the $300,000.00 carve-out payment, he would have to sign a release extinguishing any claims he had as a common shareholder to challenge the sale of Engineous. Because Mr. Tong refused to sign the release, he was not paid the $300,000.00 carve-out payment. On 21 July 2008, the merger closed and other Engineous executives who had signed employment contracts and releases were paid the promised carve-out payments. The federal amended complaint further alleged that Mr. Tong complied with his employment agreement by commencing work for Dassault. Mr. Tong alleged, however, that Dassault breached the employment agreement by not paying him performance bonuses and by undermining Mr. Tong’s ability to earn compensation specified in the agreement as part of an incentive plan. The amended complaint alleged that Dassault terminated Mr. Tong’s employment on 13 January 2010, but refused, in breach of the terms of the employment agreement, to pay reasonable business expenses and severance pay. Dassault also failed to pay a Japanese retirement allowance that Mr. Tong alleged was due for his service as a director of Engineous Japan, Inc. Mr. Tong asserted claims in the federal action against the individual defendants (defendants Krongard, Wylie, Masi, Dunn, Wong, and Johnson) and Engineous for fraudulent inducement and negligent misrepresentation based on Mr. Tong’s having been induced to sign the employment agreement in exchange for $300,000.00 without being told that receipt of the sum was conditioned on his signing a release of his claims as a common shareholder. Mr. Tong also alleged a claim for breach of contract against Engineous for failure to pay the $300,000.00 and against Dassault for tortious interference with the agreement to pay Mr. Tong $300,000.00. In addition, Mr. Tong sued Dassault for breach of the employment agreement, violation of the North Carolina Wage and Hour Act, and breach of contract and/or quantum meruit for failure to pay the Japanese retirement allowance. Mr. Tong stated in his amended complaint that he consented to arbitrate the claims brought against Dassault for breach of contract and violation of the Wage and Hour Act. On 20 July 2011, 10 days after he filed his first lawsuit, Mr. Tong and 47 other plaintiffs, all common shareholders of Engineous, filed this action in Orange County Superior Court against individual defendants David Dunn, Timothy Krongard, Ed Masi, Sophia Wong, and Janet Wylie, all of whom were preferred shareholders of Engineous and members of Engineous’ Board of Directors. Also joined as a defendant was ENG in its own capacity and as the successor to Engineous. The Orange County Superior Court complaint alleged that the individual defendants owed the common shareholders a fiduciary duty, which included a duty to maximize the value to all shareholders, including the common shareholders, in connection with Dassault’s acquisition of Engineous. The complaint alleged that “[t]he Individual Defendants breached these duties by knowingly and recklessly placing their own interests above those of all shareholders, self-dealing, and failing to adequately oversee the Engineous[] officers, failing to maximize the value of the sale of Engineous, thereby actually and proximately causing Mr. Tong and the other Common Shareholders to suffer damages in an amount to be proven at trial.” The complaint further asserted a claim for aiding and abetting these breaches of fiduciary duty against ENG. In support of these claims, plaintiffs alleged that Mr. Tong agreed to work with Mr. Krongard and Wachovia Bank to explore opportunities to sell Engineous. Although Mr. Tong’s efforts resulted in four well-known potential buyers expressing interest, with two of them entering a bidding process, the board of directors cut off Mr. Tong’s interactions with the potential buyers. The complaint further alleged that during board meetings, statements were made reflecting that certain board members were placing their own interests ahead of the common shareholders. Mr. Tong refused to sign board minutes for one of the key board meetings because, the complaint alleged, of “the omission of many statements and the failure to acknowledge the apparent agreement between the preferred board members that their individual interests should and would drive the decision making process going forward (casting aside the common shareholders’ interests).” The board and Engineous’ executive management then attempted to block Mr. Tong’s interaction with the potential buyer, Dassault, so as to limit the flow of information to Mr. Tong and the other common shareholders. Although board members recognized that Engineous was not in a strong position to sell and although Mr. Tong urged the board to wait until after the roll out of Engineous’ new enterprise product because it would likely significantly improve the company’s sale value, the board refused to wait. The board members justified that refusal by expressing concern about a potential cash flow shortage in the future, and yet awarded substantial executive bonuses to company officers, including the individual defendants. The complaint further alleged that the preferred stock board members, including the individual defendants, voted to set aside funds to reward employees and executives who supported the merger that favored preferred shareholders and to buy general releases from certain key employees. Dassault initially made an offer of $35 million to $40 million for Engineous. Mr. Dunn, a member of the board representing preferred shareholders, proposed that the board accept the sale price, while Mr. Tong proposed that the board wait for a competing offer from Siemens. Mr. Tong expected that an additional bidder would offer a higher price. The complaint alleged that the board, however, showed little interest in attempting to negotiate a higher sale price, but rather were more interested in proceeding to a closing that would benefit the preferred shareholders. The complaint alleged that Mr. Krongard stated that particular terms offered by Dassault -- including the speed at which the preferred shareholders would collect the sale proceeds, the size of the escrow, and the timing of the closing - were of paramount importance. Those terms did not, however, assist the common shareholders or protect the value of the common shareholders’ interests in Engineous. In addition, according to the complaint, throughout the merger and acquisition process, the individual defendants Ms. Wylie and Mr. Krongard interfered with Mr. Tong’s right, as a director representing common shareholders and as a common shareholder himself, to interact with participants and gather information about ongoing developments. Dassault acquired Engineous by merger with ENG for approximately $40 million. The complaint alleged that several board members made false representations to common shareholders to represent that the deal accorded with their fiduciary responsibilities when, in fact, the individual defendants “were considering their own self-interest first.” The complaint also asserted that had defendants acted in accord with their fiduciary responsibilities, the ultimate valuation of Engineous would have been higher which would have benefitted the common shareholders. Further, according to the complaint, “in closing this transaction in the manner described above, and as they did, the Defendants were not acting in the best interests of the Company and all its shareholders, but rather in their own self-interest, causing harm to Mr. Tong and the Common Shareholders.” As relief, the Orange County complaint sought a declaration that the Engineous board’s actions constituted breaches of fiduciary duty. The complaint also sought compensatory damages suffered as a result of defendants’ wrongdoing. The individual defendants filed an answer dated 19 September 2011. Defendant ENG filed a motion to dismiss pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure on 29 September 2011. In the federal action, on 7 October 2011, Mr. Tong filed a stipulation of dismissal with prejudice of his claims against Engineous and the individual defendants for fraudulent inducement to contract and negligent misrepresentation, as well as his claims against Engineous for breach of contract and against Dassault for tortious interference with the contract to pay the carve-out payment. On 24 October 2011, the individual defendants in the Orange County action filed an amended answer adding an affirmative defense that “[p]laintiff Tong’s claims against the Individual Defendants are barred by the doctrines of res judicata and claim splitting, given that Plaintiff Tong filed a prior action against the Individual Defendants . . . and that action was dismissed with prejudice.” The answer contended that “[u] nder the doctrines of res judicata and claim splitting, the prior disposition of the Federal Action operates as a bar on Plaintiff Tong’s present action against the Individual Defendants, and thus Plaintiff Tong’s claims are subject to dismissal as a matter of law.” The individual defendants then moved for judgment on the pleadings as to Mr. Tong’s claims on 30 November 2011. The trial court granted ENG’s motion to dismiss on 26 March 2012. On 25 May 2012, the trial court also granted the individual defendants’ motion for judgment on the pleadings as to Mr. Tong’s claims. The court concluded “that issues Tong now seeks to litigate in the Present Action were raised by the pleadings in the [federal action] and res judicata applies. Rather than asserting different injuries arising from independent successive acts, Tong complains that Individual Defendants set out on a concerted course of action designed to complete the Merger, including buying Tong’s consent through false pretenses and at the same time extinguishing the rights of common shareholders, including Tong’s. While other shareholders . . . were not party to the [federal action] and are not then subject to res judicata, Tong’s claims are barred by his dismissal of the [federal action] with prejudice.” On 5 August 2012, the remaining plaintiffs other than Mr. Tong filed a notice of voluntary dismissal without prejudice. Mr. Tong filed a notice of appeal from the order granting judgment on the pleadings on 7 August 2012. Motion to Dismiss Anneal We first address defendants’ motion to dismiss Mr. Tong’s appeal. Defendants contend that this Court must dismiss the appeal under Hill v. West, 177 N.C. App. 132, 627 S.E.2d 662 (2006). This Court has, however, repeatedly limited Hill to the specific, unusual facts present in that case. The circumstances present in Hill are not found in this case and, therefore, Hill is not controlling here. In Hill, the plaintiffs filed a negligence action arising out of a traffic accident. Id. at 133,627 S.E.2d at 662-63. The trial court entered an order granting two defendants’ Rule 12(b)(6) motion to dismiss and a subsequent order granting summary judgment to three other defendants, with claims against one defendant remaining unresolved. Id. at 133-34, 627 S.E.2d at 663. This Court dismissed the plaintiffs’ appeal from the partial summary judgment order as interlocutory, noting in addition that the plaintiffs had failed to include a statement of grounds for appellate review in violation of the Rules of Appellate Procedure. Id. at 133, 627 S.E.2d at 663. On remand, the trial court entered a consent order that purported to be a voluntary dismissal pursuant to Rule 41(a)(1) of the Rules of Civil Procedure of the claims against the remaining defendant. Hill, 177 N.C. App. at 135, 627 S.E.2d at 664. The order, however, included a special provision stating that the trial court “ ‘specifically order[ed], with the consent of all parties, that if this case is remanded for trial, all claims against [the remaining defendant] may be reinstated as the Plaintiffs deem necessary and that the prior dismissals without prejudice will not be pled as a bar to said claims.’ ” Id. In other words, contrary to Rule 41(a)(1), the claims against the remaining defendant could be reinstated at any time without regard to the one-year limitation contained in Rule 41(a)(1). When the plaintiffs then appealed the summary judgment order a second time, this Court first noted that the plaintiffs had again violated the Rules of Appellate Procedure by failing to include a statement of the grounds for appellate review. Hill, 177 N.C. App. at 134, 627 S.E.2d at 633. Relying on Viar v. N.C. Dep’t of Transp., 359 N.C. 400, 402, 610 S.E.2d 360, 361 (2005), the Court found no basis for suspending the Rules of Appellate Procedure under Rule 2. Hill, 177 N.C. App. at 134, 627 S.E.2d at 663-64. The Court then pointed out, in addition, that the unique consent order was a “manipulation of] the Rules of Civil Procedure in an attempt to appeal the 2003 summary judgment that otherwise would not be appealable” and was not a final judgment within the meaning of Rule 54 of the Rules of Civil Procedure. Id. at 135, 627 S.E.2d at 664. Based on both the appellate rules violation and the attempt to manipulate the Rules of Civil Procedure, this Court dismissed the second appeal. Id. at 136, 627 S.E.2d at 664. In subsequent cases, this Court has declined to dismiss appeals under Hill under circumstances identical to those in this case. In Curl v. Am. Multimedia, Inc., 187 N.C. App. 649, 654, 654 S.E.2d 76, 80 (2007), this Court limited Hill’s holding “to the facts of that case,” noting that “Hill did not attempt to distinguish its holding from the significant body of case law holding contra” and that “the holding in Hill was apparently based in part on the appellants’ ‘manipulative’ behavior and failure to follow the Rules of Appellate Procedure[.]” See also Goodman v. Holmes & McLaurin Attorneys at Law, 192 N.C. App. 467, 472, 665 S.E.2d 526, 530 (2008) (declining to dismiss appeal based on Hill even though appeal followed voluntary dismissal without prejudice of claims surviving trial court’s order because plaintiff followed Rules of Appellate Procedure). This Court also rejected an identical argument based on Hill in Duval v. OM Hospitality, LLC, 186 N.C. App. 390, 651 S.E.2d 261 (2007). This Court explained: “The stipulation of dismissal did not contain any additional language purporting to give plaintiff any time beyond that permitted by Rule 41(a)(1) to pursue her claim against Days Inn. The procedural posture of this case does not
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