Court Rejects Claims for Unpaid Commissions When Details Were Never Agreed

Last month, the Montgomery County Court of Appeals affirmed an employer’s summary judgment on a claim for unpaid sales commissions.  Brown v. Fukuvi USA Inc., 2022-Ohio-1608.  The plaintiff alleged that he had been verbally promised sales commissions before accepting the job in 2006.  His offer letter – which he signed -- said that a commission structure would be discussed later,  and it was.  However, they could never come to an agreement on a salary and commission structure.  Instead, the employer kept his salary in place and eventually raised it several times before he finally sued in 2019.  The courts found that there was never a meeting of the minds or agreement on the details of a commission structure and, therefore, the employer was not obligated to pay any commissions. 

To be enforceable, contracts must be definite and certain.  An agreement to agree is only enforceable if it is sufficiently definite to be enforced. “When the terms of a contract are not sufficiently definite, the contract is unenforceable.  . . . ‘The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.’ ””  The plaintiff’s offer letter offered a salary until 2007 and then a reduced salary with a commission – the details of which were to be discussed.  The details were never mutually agreed to and his salary remained unchanged.   “[N]o specific amount of commission or bonus was outlined. Furthermore, details were to be discussed at some future date, with no indication of what those details would be.”

The plaintiff

contends that he was told when he signed the Offer Letter that “his commission structure would operate in the same manner as the prior sale representative, which was a percentage on sales over an initial threshold or goal.”  . . . However, taking this statement at face value, it was made by a [HR] person who lacked authority to authorize payment of commissions; it was also inconsistent with the letter, which said that details would be discussed later. When “later” came, [the company president] elected not to pay commissions due to the severe financial position of the company, and this was communicated to [him]. At that point, if [he] were dissatisfied with the situation, he could have left the company. Instead, he chose to stay. Notably, his salary was not decreased to the considerably lower level mentioned in the Offer Letter.

“Here, the parties may have envisioned a commission and bonus structure, but the details were left to future discussion. Consequently, there was no enforceable promise.”

The court refused to find enforceable details from a commission policy document which the plaintiff had found in his predecessor’s files and which he claims had been referenced during his employment discussions.  The court refused to incorporate them into the offer letter without more evidence.  There was no evidence that the company had provided the policy to the plaintiff during their negotiations or were part of or intended to be part of his offer letter.  The document did not even indicate who prepared it.

The Court also rejected his claims for promissory estoppel, negligent and fraudulent misrepresentations and unjust enrichment on the grounds that they were time barred by the then six-year (and now four-year) statute of limitations.  It rejected his argument that the failure to pay commissions constituted a continuing violation because (1) the Supreme Court of Ohio had taken the position that courts are reluctant to apply this doctrine outside the civil rights context; (2) “continuing violations are distinguished from ‘continuing effects of prior violations’; in this context, ‘ “ ‘ “[a] continuing violation is occasioned by continual unlawful acts, not continual ill effects from an original violation” ’ ” ’ ”; and (3) the lack of authority in Ohio extending this doctrine to breach of contract cases.

The  Court also rejected his equitable estoppel claim because none of his allegations were sufficient to show that the company prevented him from filing suit earlier.   Indeed, a person of reasonable intelligence would have been on notice years earlier of his need to file suit. 

Finally, the plaintiff could not show that he had not been paid his wages under Ohio’s prompt payment act because there was no underlying obligation to pay him commissions.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Franklin County Court Rejects Plaintiff’s Reliance on Error in Emailed Negotiations

Earlier this month, the Franklin County Court of Appeals affirmed an employer’s summary judgment on an employee’s breach of contract and promissory estoppel claims based on emailed negotiations over her severance pay when the emails contemplated a final, signed agreement which was never executed by the parties.  Watson v. Franklin University, 2019-Ohio-2929.  The plaintiff requested 18 months instead of the offered 6 months of severance pay and the employer initially appeared to agree in an email, which was corrected later that same afternoon to change the date from 2014 from 2015.  Because the plaintiff sought 18 months of severance pay, this implicated the statute of frauds because performance would last more than one year and the requirement for a signed agreement could not be satisfied through promissory estoppel.  Further, the plaintiff could not show justifiable reliance on an email which agreed to the 18 months of severance when the email was corrected later that same afternoon to change the date from 2015 to 2014 and the parties never signed a formal severance agreement.  There was no evidence that she relied on the morning email to her detriment by rejecting job offers in reliance on the morning email before it was corrected.  Accordingly, she could not prove a valid claim for promissory estoppel.


According to the Court’s opinion, the plaintiff was hired in 2011 and was notified that her job was being eliminated and her employment terminated on November 13, 2013.  She was offered 6 months of severance, contingent on signing an agreement and release of claims and on a reduction in the severance pay if and when she obtained other employment. She had previously negotiated a severance agreement in connection with a prior job and had retained an attorney to advise her.   She countered a couple of weeks later requesting 18 months of severance that would not be reduced if and when she obtained another job.  After speaking with the employer on December 3, the employer emailed her that same morning confirming their conversation about severance pay through May 2015 without being reduced by other employment. A formal agreement was to follow with the new terms.   Later that same afternoon, the employer emailed her to explain that it had misread the dates and that it was only willing to pay severance through May 2014 – i.e., six months.   It sent her the formal agreement to sign, but she refused to sign it because it only promised six months of severance pay. 

She brought suit for claims of breach of contract, breach of the covenant of good faith and fair dealing and promissory estoppel.  The trial court granted summary judgment on the first two claims prior to discovery and on the promissory estoppel claim after discovery.   She appealed.


The Court agreed that the statute of frauds applied to an agreement to make installment payments for more than a year and would have applied to the parties’ severance pay agreement.   The plaintiff attempted to argue that the emails exchanged discussing the terms of the severance agreement satisfied the statute of frauds and indicated the employer’s initial agreement with her demand.  However, “that e-mails purporting to reference an agreement or some aspect of an agreement are not sufficient to satisfy the statutory requirement for a signed agreement as provided for in R.C. 1335.05.”  Further, the emails reflected that both parties anticipated the signing of a formal agreement and were not relying on the emails as the contract. “Where the evidence establishes that it was the expectation of all parties that no meeting of the minds would occur absent a final written agreement signed by all the parties, no party can base a legal claim on communications or correspondence that comprise the interim negotiations.”   This is particularly true when the negotiating parties are sophisticated in terms of education, experience and advice of counsel.  Finally, the Court refused to use promissory estoppel to satisfy the statute of frauds.


The Court also affirmed dismissal of the promissory estoppel claim on the basis that she could not show that she  reasonably relied or detrimentally relied on the employer’s morning email appearing to agree to the 18 months of severance.  In order to prove a promissory estoppel claim, the plaintiff must show, among other things, that she relied to her detriment on the false promise and that her reliance was reasonable.  In this case, however, “'[i]f a written agreement is contemplated, reliance upon statements made before an agreement is signed will be unreasonable as a matter of law, particularly when sophisticated business parties are involved in the negotiations.”  In light of her experience, she was considered to be a sophisticated party.  Further, the evidence showed that the plaintiff never changed her position, let alone relied to her detriment, on the morning email appearing to agree to the 18 months of severance before that misunderstanding was clarified in writing in the afternoon.


NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit Affirms Employee’s ERISA Summary Judgment for Promissory Estoppel, Breach of Fiduciary Duty and Anti-Cutback Violation

[Editor's Note: The Sixth Circuit in October subsequently upgraded its Deschamps opinion  to Recommended for Full-Text publication].

This morning, the Sixth Circuit Court of Appeals affirmed summary judgment for an employee on three ERISA claims after the defendant pension plan reduced his pension credits for the 10 years that he worked for the defendant employer in Canada.  Deschamps v. Bridgestone of Americas, Inc. Salaried Employees Pension Plan, No. 15-6112 (6^th Cir. 9-12-16).  The plaintiff had refused to accept the transfer to the U.S. in 1993 unless he was given pension credit for his prior 10 years in Canada.   The HR and plant managers confirmed with corporate HQ that he would receive that pension credit, which was also included on all of his pension written and online pension summaries until 2010, when the employer reinterpreted the terms of the plan and reduced the pension credits previously awarded to him and other expatriate transfers.  He appealed internally with the Plan, but his appeals were denied and the lawsuit followed.  The Court of Appeals agreed that the undisputed issues of fact in the record confirmed that the employer had been grossly negligent, breached its fiduciary duty and violated the anti-cutback rules in leading him to believe that he would receive the pension credit and then revoking those credits more than 17 years after his transfer and after he rejected two job offers from a competitor (which subsequently went bankrupt).   The employer’s convoluted interpretation of the definition of “supervisor” (which was not otherwise defined in the plan) to exclude the plaintiff (who was an hourly maintenance manager) contributed to the Court’s decision.

According to the Court’s opinion, the plaintiff sought and received assurances from the U.S. plant and human resources managers that they had checked with their corporate office and he would receive pension credit for his 10 years working in Canada if he were to transfer to the U.S. facility in 1993 as the plant maintenance manager. (The retired corporate actuary, however, denied ever approving this information).  For his first 16 years of employment, his online and written pension summaries also listed his 1983 seniority date.  Granted, most (if not all) of these documents stated that they were only estimates and that the actual Plan document governed his eligibility for benefits.  In 2010, the company sought to correct the misapplication of the seniority dates for employees who transferred from outside the U.S. and deducted those 10 years from the plaintiff’s pension accrual.  He appealed internally, but the Plan denied his appeal on the grounds that he was not eligible because he had not been salaried or a “supervisor.”  “Supervisor” was not defined in the Plan or SPD, but the Plan defined it to exclude non-exempt managers like him.  The plaintiff brought suit against the Plan, his employer and its parent company alleging promissory estoppel under 29 U.S.C. § 1132(a)(3), breach of fiduciary duty pursuant to 29 U.S.C. § 1104, and an anti-cutback violation pursuant to 29 U.S.C. §1054(g). The trial court granted him summary judgment on all three claims.  The employer, parent and Plan appealed.

Plaintiffs have a long burden of proof when it comes to promissory estopped claims.  They must show:

(1) conduct or language amounting to a representation of material fact; (2) awareness of the true facts by the party to be estopped; (3) an intention on the part of the party to be estopped that the representation be acted on, or conduct toward the party asserting the estoppel such that the latter has a right to believe that the former’s conduct is so intended; (4) unawareness of the true facts by the party asserting the estoppel; and (5) detrimental and justifiable reliance by the party asserting estoppel on the representation. . . . In the case  of an unambiguous pension plan, the plaintiff must also prove three additional elements: “[(6)] a  written representation; [(7)] plan provisions which, although unambiguous, did not allow for  individual calculation of benefits; and [(8)] extraordinary circumstances in which the balance of equities strongly favors the application of estoppel.”

The Court found that the terms of the Plan were ambiguous because of how it interpreted “foremen” and “supervisors” to exclude non-salaried managers like the Plaintiff when those terms were not defined within the Plan itself.   Further, the defendants conceded that the plaintiff could prove elements (1), (3) and (4).

The defendants attempted to dispute that the Plaintiff could prove that the defendants were aware of the “true facts” because he did not inquire of the corporate HQ pension officials himself, but instead, relied on the plant managers to contact corporate HQ for him.  The Court described this element to require the plaintiff to show “either intended deception or such gross negligence as to amount to constructive fraud.”  The Court construed prior precedent and found that the employer was grossly negligent in assuring the plaintiff for 16 years that he would receive the pension credit and not attempting to correct that mistake (if it was a mistake) shortly after making it in response to his specific inquiries.  Further, the plaintiff could not be held responsible for earlier realizing the mistake in light of the convoluted interpretation of “supervisor” which the Plan adopted (to exclude managers).  Thus, the Court found that the employer could be found liable for “constructive fraud.”

The employer also disputed whether the plaintiff could prove that he detrimentally relied upon the employer’s assurances.  In particular, the plaintiff had rejected attractive job offers from a competitor which subsequently went bankrupt and laid off thousands of employees.   The Court rejected the employer’s argument because there was no evidence that the plaintiff would definitely have been laid off by the competitor.   In addition, there was no legal requirement that the competing job offer be economically better, as long as it was an opportunity which the plaintiff rejected in reliance on his employer’s representations about his pension status.   Further, the plaintiff’s reliance for 16 years on the employer’s written and oral (mis)representation were reasonable when he rejected the competitor’s offer of a higher salary.

As for the breach of fiduciary duty claims, the plaintiff was required to show

(1) Bridgestone acted in a fiduciary capacity in making misrepresentations to Deschamps, (2) those misrepresentations were material, and (3) Deschamps detrimentally relied on the misrepresentations. . . . The second element [was] not disputed. 

The disputed issue was whether the employer was a fiduciary:

A fiduciary is defined by ERISA to include a corporation10 who “exercises any discretionary authority or discretionary control respecting management of [a] plan” or “has any discretionary authority or discretionary responsibility in the administration of such plan.” 29 U.S.C. § 1002(21)(A).  In determining whether a corporation is a fiduciary, rather than looking to the formal title, we use a functional approach, looking to whether it acts in a fiduciary capacity with respect to the conduct at issue.

 While making business decisions which have a collateral effect on employee benefits (such as terminating a plan), processing claims, applying eligibility rules or calculating benefits are not fiduciary  functions, explaining the terms of the plan, and conveying information about likely future plan benefits are fiduciary functions.  Accordingly, in this case, conveying information to the Plaintiff about receiving pension credits and the likely benefits he would receive in the future were fiduciary functions.  The Court also found that the plant and HR managers had apparent authority to bind the employer: “Bridgestone acted as a fiduciary when it, through its agents with apparent authority, misrepresented to Deschamps the status of his pension benefits.”

The employer disputed that it had ever construed the Plan to cover the plaintiff, and, therefore, could not have violated the anti-cutback provisions when in 2010 it retracted his credit for the 10 years he worked in Canada between 1983 and 1993.  It construed the contrary assurances to the plaintiff as a “clerical error.”

ERISA prohibits plan amendments that decrease a participant’s accrued benefits, with two exceptions that do not apply here.  29 U.S.C. § 1054(g).  At issue is whether we look to the text of the Plan or the administrator’s interpretation of the Plan in determining if Deschamps accrued a benefit prior to 1993.  

In essence, an employer can illegally cut-back benefits if it changes or reinterprets the terms of the plan to reduce benefits that a plaintiff reasonably believed provided higher benefits based on a different and plausible interpretation of the plan.

As discussed above, the text of the Plan is at worst ambiguous, but at best, favors Deschamps’s argument that he was a covered employee in 1983 under the classification of  “supervisor.”  It is not untenable that Deschamps, in his capacity as a maintenance manager, was a supervisor under the language of the Plan.  Further, it is undisputed that as a result of the [2010] change in the interpretation of this provision that excluded foreign employees from being classified as covered employees, Deschamps’s benefits were decreased. Therefore, Deschamps has established an anti-cutback violation . . .

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Be Careful What You Do Not Say: Ohio Appeals Court Reverses Employer's Summary Judgment on Promissory Estoppel Claim

Earlier this month, the Jefferson County Court of Appeals reversed an employer’s summary judgment on an employee’s claim that the employer should be estopped from terminating her after its CEO had earlier implicitly consented to her living arrangements before she moved in with her boyfriend in reliance on that acquiescence. Trehar v. Brightway Ctr., 2015-Ohio-4144.  Even though the employer’s handbook contained a strong and standard employment-at-will disclaimer, the Court observed that promissory estoppel constitutes an exception to employment at will.  In addition, the CEO’s silent acquiescence to her announcement about moving in with her boyfriend constituted consent where he otherwise had a duty to speak against it if he intended to terminate her employment on that basis.   His subjective intent on the issue is not controlling if a reasonable employee would have interpreted his silence as consent.  Moreover, even if the employer were estopped from terminating the plaintiff for moving in with her boyfriend after the CEO had consented to it, her employment would otherwise remain at will.

According to the Court’s opinion, the plaintiff worked for a Christian non-profit organization.  The plaintiff testified that she informed the CEO that she planned to move in with her boyfriend in a month and he congratulated her.  He later approved her absence from a work-related event in order to help her boyfriend move into their new home.  About two weeks later, the subject came up during a work lunch. (The CEO claimed that this was the first he learned of her living arrangements.  He claimed that he only knew that the boyfriend was moving, but there were emails to him about her moving as well, etc.).    A month later, the Board of Trustees suspended her for a month with pay while she considered whether to move out or get married.  When she did not move out or get married, her employment was terminated at the end of the month and she brought suit asserting that the employer should be estopped from terminating her for living with her boyfriend out of wedlock when she had relied to her detriment on the CEO’s prior representations. 

The Company’s employee handbook contained a standard employment-at-will disclaimer that an employee can be terminated at any time and for any reason regardless of any policies or verbal statements to the contrary.  It also provided that only written agreements signed by the CEO can modify at-will employment.  The Court noted that this would not affect her promissory estoppel claim:

 The handbook does little more than re-emphasize that [the plaintiff] was an employee-at will. And an exception can be made to employment at-will by means of promissory estoppel. Moreover, if in fact promissory estoppel exists in this case it would not alter [her] status as an employee at-will in all other respects. [The employer] could still fire her for any other reason.

The Court distinguished this case from the typical one where a plaintiff relies on compliments about job performance or discussions of career development to infer a promise of continued employment.  Without “clear, unambiguous promises of continued employment,” a plaintiff cannot rely on the doctrine of promissory estoppel to preclude an employer from terminating her under any circumstances.  

In this case, however, there is evidence [the CEO] silently assented to [the plaintiff] moving in with her boyfriend and his silence can be construed as a promise that no adverse employment action would come as a result of her move. Other cases have stated that silence can be sufficient to establish a promissory estoppel claim.

Furthermore, even though the plaintiff did not explicitly seek the CEO’s permission and he did not specifically state to her that she would not be terminated for moving in with her boyfriend, his silent acquiescence to her news constituted sufficient consent on which she could base a promissory estoppel claim:

Promissory or equitable estoppel arises when “ * * * ‘one, by his acts, representations, or admissions, or by his silence when he ought to speak out, intentionally or through culpable negligence induces another to believe certain facts to exist, and such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts.

In other words,

In essence, the expression of estoppel in the form of a rule is that one party will not be permitted to deny that which, by his words, his acts, or his silence (when there was an obligation to speak), he has induced a second party reasonably and in good faith to assume and rely upon to that party's prejudice or pecuniary disadvantage.

While a jury may reach different inferences and evaluate the parties’ credibility, at this point a material factual dispute on these issues precluded a summary judgment.

It is possible that these actions and inactions might be construed as a promise that [the plaintiff] would not be fired for her cohabitation and that [she] relied on [the CEO’s] silence on the issue. Reasonable people could conclude that if [he] intended that [her] cohabitation would result in her termination, he should have spoken.

In a promissory estoppel claim, the employer’s subjective interpretation of the alleged promise does not control. Mers at 104-105. Instead, “the employer's representation is to be determined by what the ‘promisor should reasonably expect’ the employee to believe the promise means if expected action or forbearance results.” (Emphasis sic.); Id. at 105. Assuming as true that [the plaintiff] told her boss she was going to move in with her boyfriend and he congratulated her instead of objecting to the move or advising her she could suffer adverse employment consequences, it may be construed as reasonable for her to believe she would not be fired for cohabitating with her boyfriend.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Ohio Appeals Court: Death and Taxes May Be Certain, but the Timing Alone is Too Indefinite to Form a Binding Promise.

Last month, the Franklin County Court of Appeals affirmed summary judgment against a former corporate officer who had been promised employment for the life by the majority shareholder. Steele v. Mara Enterprises, Inc., No. 2009-Ohio-5716. In that case, the plaintiff worked his way up to become president of the corporation. When the founder died, his widow inherited his majority interest and eventually transferred her ownership to a trust. She promised him that he would keep his job as long as she was alive and in reliance on this promise, he turned down two offers of employment. Nonetheless, the Court found her promise to be too indefinite to support a promissory estoppel claim.

According to the Court’s opinion, after many years of employment, membership on the Board of Directors and the purchase of one share in the corporation, the plaintiff was fired after the Board all voted to resign and the new Board was elected. The Court found the verbal promises of employment for the lifetime of the majority shareholder to be too indefinite to be legally binding:

Death, although inevitable, is unpredictable. A future event that, by its very nature, could occur in ten minutes or ten years is too indefinite to constitute a "specific term" for purposes of promissory estoppel. Such statements are, at best, discussions of "possible future career developments and opportunities." . . . . Similarly, here, Laverne Hill's statements were tied to her own death and, as a result, suffered the same deficiency as those "promises" made in Callander: they fail to unambiguously promise continued employment for a specific period of time. Indeed, the statements lacked specificity in other aspects. The statements never included a discussion of job title, job responsibilities, compensation, or contingencies in the event the business closed or Laverne Hill decided to part with her ownership interest before her death. The complete lack of details suggests Laverne Hill's statements were anything but clear and unambiguous promises of continued employment. . . . .

In any event, even if the promise were sufficiently unambiguous, the Court questioned whether a majority shareholder could bind the corporation since she was not an officer, did not make these promises in a meeting of the Board members, was never ratified by the Board and never reduced to writing. On the contrary, the Employee Handbook (created by the plaintiff) provided that all employees were employed at will unless given a written contract.

Finally, the Court rejected the breach of fiduciary duty claim by a minority shareholder because the duty is owed by the majority shareholder (who was not named as a defendant) and not the corporation (who was the only named defendant).

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/10/2009/2009-ohio-5716.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Franklin County Appeals Court: Nothing is Reasonably Reliable In a RIF or Public Litigation.

Last month, the Franklin County Court of Appeals affirmed the dismissal of a defamation and wrongful discharge suit brought by the former head of security for Capital University whose job was eliminated in 2006 during a budget crisis. Woods v. Capital Univ., No. 2009-Ohio-5672. Although the 54-year old plaintiff had been told in writing during his exit interview that his performance played no role in the elimination of his position (and he had received nothing but promotions prior to his termination), the university’s attorney was quoted in two local newspapers as attributing part of the termination decision to “job performance issues.” His responsibilities were divided and his public safety management responsibilities were given to a 28-year old safety officer. Nonetheless, the Court affirmed dismissal because the allegedly defamatory statements related to a matter of public concern, which required proof of actual damages or actual malice, and the redistribution of duties to existing employees cannot support an inference of age discrimination. Finally, his promissory estoppel claims were dismissed because the three verbal promises of continued employment were contracted by the terms of his written contract with the university.

According to the Court’s opinion, the plaintiff was eight years away from retiring from another college when he was hired by Capital to reorganize its public safety department. When he expressed reluctance to leave a secure position so close to his retirement age – particularly with friction that was likely to develop during the planned reorganization, he was assured by the VP/Treasurer that he would be employed at least eight years to retire at Capital. However, his offer letter only promised one year of employment. He was promoted the following year and given two more one-year appointments. When rumors surfaced about a possible budget deficit, he again sought reassurance about his job security and was again assured by the VP/Treasurer that his job was safe. When the VP/Treasurer was then fired, he sought and obtained similar assurance from the President, who then shortly thereafter left.

When an impending $12.5M deficit was revealed, a committee examined all positions and recommended the elimination of 72 positions, including that of the plaintiff. His termination letter informed him that his job was eliminated because of the budget difficulties and not because of his job performance. His public safety duties were reassigned to a 28-year old officer and his auxiliary duties to other employees. He then filed a lawsuit for $4.6M against Capital for age discrimination and promissory estoppel. The lawsuit received publicity in the local media and Capital’s attorney was quoted in two newspapers as stating that the plaintiff had been let go because of the budget difficulties and “job performance issues.” The plaintiff amended his claims to include the allegedly defamatory statements by the attorney. The trial court granted summary judgment to the defendants and the plaintiff appealed.

Defamation Claim

The Court of Appeals addressed the defamation claim first and found the attorney’s statement about the plaintiff being fired in part because of his job performance to be defamatory on its face (or defamation per se) since it had the tendency to hurt plaintiff’s career and ability to find another job. The Court rejected the defense attempt to

characterize this statement as vague and contend that if it is defamatory at all, it is only defamatory per quod. We disagree. No employer fires an employee for good job performance. The only reasonable reading of [the attorney’s] statement is that Capital terminated [the plaintiff’s] employment for two reasons, and one of those reasons was [the plaintiff’s] poor job performance. Thus, the statement in and of itself tends to injure [the plaintiff] in his occupation as any employer would hesitate before hiring a potential employee who underperformed in his previous job. Such a statement is defamatory per se.

Typically, damages in such situations are presumed without proof or pleading. However, in this case, the Court found the statement to also have limited protection from the First Amendment. Because the plaintiff worked for a private college, he was not a general public figure. Moreover, the fact that he filed a lawsuit – by itself – did not render him a limited purpose public figure. However, the fact that he sought $4.6M in damages from a significant private institution which was having very public budget difficulties rendered the issue of the reduction in force and his lawsuit a matter of public concern – as evidenced by the significant media coverage. Therefore, the claim was governed by the United States Supreme Court’s decision in Gertz v. Robert Welch, Inc. (1974), 418 U.S. 323, 345-46, which concluded that:

in such cases, the states could define for themselves an appropriate standard of liability, so long as they did not impose liability without fault. Gertz, 418 U.S. at 347. Subsequently, Ohio adopted the ordinary negligence standard as the standard of liability for actions involving a private individual defamed in a statement about a matter of public concern. Landsdowne v. Beacon Journal Publishing Co. (1987), 32 Ohio.St.3d 176, 180. In addition to requiring an element of fault, the Gertz court also limited the type of damages recoverable in defamation cases involving private individuals and statements regarding a matter of public concern. Given the constitutional command of the First Amendment, . . . the states could no longer permit recovery of presumed or punitive damages, at least when liability was not based upon a showing of actual malice. Gertz, 418 U.S. at 349, . . . Thus, in Ohio, a plaintiff must prove either: (1) ordinary negligence and actual injury, in which case he can receive damages for the actual harm inflicted; or (2) actual malice, in which case he is entitled to presumed damages.

Thus, the plaintiff was required to show actual malice or actual injury (i.e., “out-of-pocket loss, impairment of reputation and standing in the community, personal humiliation, and mental anguish and suffering”). However, the plaintiff’s testimony that he felt that his job hunt was impaired by “google searches” of the attorney’s statement was too speculative to support proof of actual injury. Moreover, he failed to introduce any evidence that the attorney knew that his statement was false at the time it was made. Therefore, summary judgment on his defamation claim was upheld.

Retaliation

The plaintiff also claimed that the attorney’s defamatory statement was made in retaliation for the plaintiff’s consultation with an attorney following his termination. However, the Court refused to infer causation (i.e., the defamatory statement from the consultation with counsel) based on the passage of two months between the demand letter from the plaintiff’s attorney and the newspaper accounts repeating the defamatory statement. Because there was no other evidence of causation or proving a link between the two events, the Court affirmed summary judgment.

Age Discrimination

Typically, a discrimination claim requires that the plaintiff show that he was replaced by someone outside the protected class. The Court noted that this is extremely difficult, if not impossible, to show when the plaintiff was fired in a reduction in force:

When a discharge results from a work force reduction, an employee is not replaced, instead his position is eliminated. Barnes v. GenCorp Inc. (C.A.6, 1990), 896 F.2d 1457, 1465. Logically, then, a plaintiff discharged as part of a work force reduction cannot offer evidence that he was replaced by a substantially younger person to satisfy the fourth element of the prima facie case. Moreover, even if such a plaintiff demonstrates that his discharge permitted the retention of substantially younger persons, no inference of discriminatory intent can be drawn. Id. In the context of a work force reduction, the discharge of the plaintiff and retention of a substantially younger employee is not "inherently suspicious" because a work force reduction invariably entails the discharge of some older employees and the retention of some younger employees. Brocklehurst v. PPG Industries, Inc. (C.A.6, 1997), 123 F.3d 890, 896. Permitting an inference of intentional discrimination to arise from the retention of younger employees "would allow every person age 40-and-over to establish a prima facie case of age discrimination if he or she was discharged as part of a work force reduction." Barnes at 1465.

{¶57} Consequently, when a plaintiff's position is eliminated as part of a work force reduction, courts modify the fourth element of the prima facie case to require the plaintiff to " 'com[e] forward with additional evidence, be it direct, circumstantial, or statistical, to establish that age was a factor in the termination.' " Kundtz v. AT & T Solutions, Inc., 10th Dist. No. 05AP-1045, 2007-Ohio-1462, ¶21 . . . The purpose of this modified requirement is to ensure that, in work force reduction cases, the plaintiff has presented evidence to show that there is a chance that the work force reduction is not the reason for the termination. Asmo v. Keane, Inc. (C.A.6, 2006), 471 F.3d 588, 593 . . .

Nonetheless, the plaintiff can also show discrimination if he was in fact replaced instead his duties being eliminated, consolidated or distributed among a number of different people:

An employee is not eliminated as part of a work force reduction when he or she is replaced after his or her discharge. However, a person is not replaced when another employee is assigned to perform the plaintiff's duties in addition to other duties, or when the work is redistributed among other existing employees already performing related work. A person is replaced only when another employee is hired or reassigned to perform the plaintiff's duties.

In this case, the plaintiff’s 2004 promotion involved him assuming certain duties outside the public safety department. When his position was eliminated in 2006, those duties were reassigned and only his public safety duties were given to the 28-year old officer. The reassignment of his auxiliary duties were more than cosmetic or superficial duties. Thus, there was sufficient evidence to show that his position was eliminated and his duties distributed in a genuine reduction in force. Therefore, without additional evidence or direct evidence of age discrimination, summary judgment on this claim was affirmed.

Promissory Estoppel.

Plaintiff brought this claim based on the three separate promises of job security which he received both before and after he was hired by Capital. As explained by the Court:

Promissory estoppel provides an equitable remedy for a breach of an oral promise, absent a signed agreement. Olympic Holding Co. v. ACE Ltd., 122 Ohio.St.3d 89, 2009-Ohio-2057, ¶40. In order to succeed on a claim for promissory estoppel: "The party claiming the estoppel must have relied on conduct of an adversary in such a manner as to change his position for the worse and that reliance must have been reasonable in that the party claiming estoppel did not know and could not have known that its adversary's conduct was misleading." . . . The elements necessary to prove a claim for promissory estoppel are: (1) a clear, unambiguous promise, (2) the person to whom the promise is made relies on the promise, (3) reliance on the promise is reasonable and foreseeable, and (4) the person claiming reliance is injured as a result of reliance on the promise.

The fatal flaw in his argument, however, is that he signed written contracts which promised him only employment for a year at a time. Therefore, his reliance on the oral promises was not reasonable under the circumstances:

[C]ourts cannot enforce an oral promise in preference to a signed writing that pertains to exactly the same subject matter, but has different terms. Ed Schory & Sons at 440. Thus, "[p]romissory estoppel does not apply to oral statements made prior to the written contract, where the contract covers the same subject matter.

The Court rejected the plaintiff’s argument that his employment letters were not binding contracts, but only acknowledgment of certain terms. The Court also rejected the argument that the plaintiff’s reliance on promises made during the budget crises were reasonable under the circumstances. In any event, the plaintiff did not provide any evidence that he relied on the promises to his detriment since there was not evidence that he rejected a job offer in reliance on the promises. On the contrary, despite the promises being made to him during the budget crises, he promptly began searching for another job and submitting his resume to other employers.

Insomniacs can read the full opinion at http://www.sconet.state.oh.us/rod/docs/pdf/10/2009/2009-ohio-5672.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit Reinstates Trade Secret Claim By Lowering Evidentiary Burden for Small Companies.

Last week, the Sixth Circuit reinstated a trade secret claim by lowering the evidentiary burden for small companies who have to show the existence of a statutory trade secret. Niemi v. NHK Spring Co., 07-3536 (6th Cir. 9/19/08). In that case, the plaintiff father-son partnership created “machines and tools to manufacture stabilizer bars for automobiles,” and often conducted business on a handshake. Despite not having written confidentiality agreements, the Court held that a dispute of material fact existed as to whether the plaintiff had taken reasonable steps under the circumstances to protect the secrecy of its alleged trade secret and remanded the case to be decided by a jury.

The plaintiff signed a standard purchase order with the defendant which contained “a statement of standard terms and conditions providing that ‘no other or different terms or conditions shall apply to this order unless specifically agreed to in writing’” by the buyer. The plaintiff company did not insist on a written confidentiality agreement protecting the exclusivity of their designs or processes because he claimed that the defendant buyer assured him “that the new method ‘would remain confidential’ even before he disclosed it. and because plaintiff trusted the defendant-buyer for being “honorable people of integrity I’ve dealt with for thirty years.” A few years later, the plaintiff claimed that the defendant-buyer asked for a written exclusivity agreement (and promise not to share the design with other manufacturers) and he signed the agreement in exchange for a verbal assurance that he would continue to be the exclusive designer of the defendant company and would also receive the opportunity to bid on design work for the defendant’s parent company. A few years later, the plaintiff learned that a new engineering manager at the defendant company was using other designers (in violation of the verbal exclusivity agreement) and sharing details of the trade secret design (in violation of the verbal confidentiality agreement). When the dispute could not be resolved, the plaintiff brought suit for, among other things, violation of Ohio’s trade secret statute and promissory estoppel.

Under the Ohio statute, “trade secret” means “information, including the whole or any portion or phase of any scientific or technical information, design, process, procedure, formula, pattern, compilation, program, device, method, technique, or improvement, or any business information or plans, financial information, or listing of names, addresses, or telephone numbers, that satisfies both of the following: (1) It derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. (2) It is the subject of efforts that are reasonable under the circumstances to maintain its secrecy” It is the second prong of the test which was at issue in the litigation.

While the district court did not believe that the plaintiff took reasonable efforts to protect the secrecy of its designs, the Sixth Circuit found there to be a disputed issue of fact on that issue. In particular, the plaintiff presented evidence that “he maintained complete control over his drawings and blueprints for the new manufacturing process in a secret, locked location in his house . . .. [and] did not disclose them to anyone other than his son and partner . . . , and agents of [defendant]—and to them only after receiving assurances of confidentiality.” Moreover, “[w]hen drawings were transported to and from [defendant’s] place of business in Toledo, they were always personally hand-delivered either by [plaintiff] or his son or by [defendant’s] personnel, who were required to sign for them. . . . No trade secret information was ever communicated by [plaintiff] via electronic media. . . . In addition, [plaintiff] was well aware of the security measures consistently employed by [defendant] at its facility.” The plaintiff also produced evidence “that he created standardized drawings of standardized manufacturing machine parts. This enabled [defendant] to order the fabrication of different tools by different manufacturing or ‘build’ shops without needing to disclose the complete set of prints to any one shop, thereby preserving the secrecy of the trade secret method.” Importantly for the Court, although the defendant attempted to minimize the importance of these facts, it did not present any evidence to refute or contradict them. When the defendant argued that plaintiff was careless in not marking the drawings “confidential,” the plaintiff explained that it was not necessary since no individual drawing alone disclosed the entire process. “Hence, this standardizing technique is said to represent a reasonable and effective effort to preserve secrecy even without labeling the individual drawings ‘confidential.’”

In addition, the plaintiff produced “deposition testimony detailing the conversation he had with [defendant’s manager] in 1993 or ‘94, when he remembers signing the exclusivity agreement and [the manager] reportedly assured him that [defendant] would continue to direct its design needs to him as long as he maintained the secrecy of his new method” In turn, the manager “testified that he is unaware of any such written agreement and he doesn’t recall agreeing that [plaintiff] would be [defendant’s] exclusive designer. However, [the manager] acknowledged that [plaintiff] had been [defendant’s] ‘primary, if not exclusive designer.’ Hence, although [the manager’s] testimony does not directly corroborate [plaintiff’s evidence] that there was an exclusivity agreement, his recollection of the parties’ relationship and course of dealing from 1991 to 1997 affords de facto corroboration.”

The plaintiff also produced expert testimony that “that it is customary in the automotive industry for small companies such [plaintiff] to rely on oral assurances of confidentiality regarding proprietary information when dealing with large automotive companies. . . . . Absent such evidence of customary practice in the industry, reliance on an oral promise could well be deemed not to represent a ‘reasonable effort’ to maintain secrecy.”

The plaintiff also argued that the Sixth Circuit should follow the Seventh Circuit opinion in Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714 (7th Cir. 2003) applying Illinois’ version of the Uniform Trade Secrets Act (with an identical definition of trade secret). “Learning Curve teaches simply that whether efforts taken to maintain the secrecy of a trade secret are reasonable under the circumstances depends on the circumstances; that what is reasonable for a small company may be different from what is reasonable for a large company; and that the determination ordinarily represents a question for the jury. Id. at 724-25. The court observed that “only in an extreme case can what is a ‘reasonable’ precaution be determined as a matter of law, because the answer depends on a balancing of costs and benefits that will vary from case to case.” Id. at 725.” In that case, the “court upheld the jury’s verdict based on evidence of an oral confidentiality agreement, coupled with evidence that oral confidentiality agreements were customarily relied on. Id. at 725-26. The court readily acknowledged that PlayWood could and should have done more to protect its secret, but concluded the evidence was sufficient for the jury to determine that PlayWood, the smaller and less sophisticated of the parties, took reasonable precautions under the circumstances. Id.”

In short, the Court concluded that, “except where the evidentiary showing of reasonable efforts could not conceivably support a judgment in favor of the plaintiff, the reasonableness of the efforts is a question for the trier of fact. Because, depending on the credibility of the witnesses, it is conceivable, based on the present record, that a reasonable jury could find that [plaintiff’s] efforts to maintain the secrecy of his trade secret were reasonable, in light of his long term relationship with [defendant] and the relative sophistication of the parties, we conclude that the district court’s summary judgment ruling on the claim for misappropriation of trade secret was in error.”

The Court also found that the plaintiff’s promissory estoppel claim should survive summary judgment and be resolved by a jury.

Insomniacs can read the full decision at http://www.ca6.uscourts.gov/opinions.pdf/08a0349p-06.pdf.


NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.