This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2000).
IN COURT OF APPEALS
Jeffrey A.Z. Hilligoss,
Cargill, Incorporated, et al.,
Affirmed in part and remanded in part
Hennepin County District Court
File No. CT98015574
Lawrence P. Schaefer, Sara L. Madsen, Sprenger & Lang, PLLC, 325 Ridgewood Avenue, Minneapolis, MN 55403 (for respondent
George G. Eck, David J. Lauth, Holly S. A. Eng, Dorsey & Whitney LLP, Pillsbury Center South, Suite 1300, 220 South Sixth Street, Minneapolis, MN 55402 (for appellants)
Considered and decided by Shumaker, Presiding Judge, Hanson, Judge, and Parker, Judge.
Appellants Cargill Incorporated and Cargill Financial Services Corporation contend that the district court erred in denying their motions for judgment notwithstanding the verdict and alternatively for a new trial, and dismissing their counterclaim for fraud and misrepresentation on summary judgment. By notice of review, respondent Jeffrey Hilligoss contends that the court erred in dismissing his defamation claim on summary judgment and reducing the stipulated damages on its own motion. Because the court did not err when it granted summary judgment and denied appellants’ posttrial motions, we affirm in part. Because the court has issued conflicting judgments on the amount of damages, we remand for clarification.
Hilligoss was a high level executive at Cargill who managed an investment strategy of securing loans, owned by Granite Finance Corporation, in the subprime automobile loan industry. Cargill recruited Hilligoss to develop this investment strategy in 1991. Before deciding to secure Granite’s loans, various employees who reported to Hilligoss did “due diligence” work to determine the risks involved with this strategy, and Hilligoss ultimately recommended that Cargill pursue it.
Hilligoss approved taking a promissory note from Granite for $2.9 million when Granite did not have the cash to pay fees that were due to Cargill. In accordance with general accounting principles, this “subdebt” was listed as profit because it was an amount of money Cargill expected to receive at some future time. At the same time, Hilligoss did not recommend that Cargill take a “reserve” (set aside money as an expected loss) to cover this amount because it did not appear to Hilligoss and others that Granite would be unable to repay the note. At the end of Cargill’s fiscal year 1996, Cargill awarded Hilligoss a $900,000 bonus. For bonuses exceeding $500,000, Cargill would pay out the bonus over five years.
Cargill lost $30-$40 million on the Granite investment strategy when consumers defaulted on the underlying automobile loans. Cargill eventually formed a subsidiary called Maxim Financial Services Corporation to foreclose on Granite. Cargill appointed Hilligoss the President and CEO of Maxim and it was his responsibility to try to stop the losses and turn the company around.
Cargill terminated Hilligoss in September 1997, stating the termination was for cause. Under the bonus plan, employees terminated for cause forfeited the deferred portion of their bonuses, and Cargill stated that it terminated Hilligoss for (1) managing investments that lost “tens of millions of dollars”; (2) engaging in a conflict of interest; (3) failing to meet standards; (4) failing to follow reasonable instructions of supervisors; (5) failing to appraise risks associated with investments; and (6) failing to timely advise Cargill of Granite/Maxim losses. Hilligoss sued Cargill for the unpaid portion of his bonus.
At trial, Hilligoss presented evidence and testimony that the stated reasons did not conform to Cargill’s actions at the time. For example, Cargill promoted Hilligoss, gave him stock options and another bonus, identified him as a key employee who had great potential, and made him CEO of Maxim. Hilligoss also used Cargill’s policies to cast doubt on Cargill’s stated reasons for terminating him. The jury found that Cargill did not terminate Hilligoss for cause, and the court awarded damages to Hilligoss based on the parties’ stipulation.
Cargill filed posttrial motions for judgment notwithstanding the verdict and alternatively for a new trial. The court denied the motions and vacated sua sponte the unexercised stock options portion of the damages award. Cargill appealed from the order denying its posttrial motions and filed a separate appeal from the judgment denying its posttrial motions and the order dismissing its counterclaim on summary judgment. By notice of review, Hilligoss appealed the court’s dismissal of his defamation claim on summary judgment. This court consolidated the appeals.
Appellants contend that the court should have granted their motion for judgment notwithstanding the verdict (JNOV) because no reasonable juror could have found that appellants did not discharge respondent for cause. We review the denial of a motion for JNOV de novo. Pouliot v. Fitzsimmons, 582 N.W.2d 221, 224 (Minn. 1998). Where the district court denied JNOV, the reviewing court must affirm the denial “if, in the record, there is any competent evidence reasonably tending to sustain the verdict.” Id. (quotation omitted). The jury returned a special verdict finding that appellant “prove[d] by a preponderance of the evidence that Cargill did not have cause to terminate his employment.”
Evidence sustains the verdict. Respondent presented evidence to cast doubt on the six reasons enumerated for his termination and cast general doubt over the whole process by pointing out numerous instances where appellants failed to follow their own guidelines for termination. The jury evidently resolved the conflicting evidence in respondent’s favor, and the decision reflects the jury’s determination of credibility. See State v. Hansen, 173 Minn. 158, 162, 217 N.W. 146, 148 (1927) (stating that to preserve the integrity of a jury trial, “the credibility of witnesses should be left entirely to the jury” (quotation omitted)).
Because the district court has the
discretion to grant a new trial, we will not disturb the decision “absent a
clear abuse of that discretion.” Halla Nursery, Inc. v. Baumann-Furrie &
Co., 454 N.W.2d 905, 910 (Minn. 1990) (citation omitted). Where the district court exercised no
discretion and ordered a new trial because of an error of law
but instead based its order
upon an error of law, however, a de novo standard of review
applies. Id. “On appeal from a
denial of a motion for a new trial, the verdict must stand unless it is
manifestly and palpably contrary to the evidence, viewed in a light most
favorable to the verdict.” ZumBerge v. Northern States Power Co.,
481 N.W.2d 103, 110 (Minn. App. 1992) (citation omitted), review denied (Minn. Apr. 29, 1992). Appellants contend that the district court erred by excluding
evidence that respondent competed against them after his termination, refusing
to have the jury answer a special verdict question about whether respondent was
terminated because of a reduction in force, and in instructing the jury upon
a. Evidence of Competition
The district court properly disallowed evidence of competition. Appellants’ termination letter indicated that it would not pay the bonus because respondent was terminated for cause, not because respondent competed against appellants. Moreover, respondent produced evidence of appellants’ interpretation of their own agreement that stated the noncompete restriction applied only if respondent resigned, not if they terminated him for cause; thus, evidence of competition is irrelevant because repondent did not resign. In addition, the district court disallowed the evidence because the noncompete provision was “so broad as to be unenforceable.”
Appellants contend that the court failed to distinguish between noncompete agreements that prohibit an employee from working and forfeiture provisions. The two provisions are different but the Minnesota Supreme Court has ruled “the purpose of both arrangements is the same.” Harris v. Bolin, 310 Minn. 391, 394 n.3, 247 N.W.2d 600, 603 n.3 (1976). They are to “be enforced only when they are found to be reasonable in scope after balancing the interests of the employer and employee.” Id. Thus, the supreme court upheld the decision not to enforce the forfeiture provision of a profit sharing plan because the provision was “broader than necessary to protect the legitimate interest of the employer and is not reasonably limited as to time and territory.” Id. at 395, 247 N.W.2d at 603. The district court did not err in finding the noncompete provision to be overly broad.
Moreover, the court did not abuse discretion by failing to modify and enforce the forfeiture provision to the extent reasonable under the particular facts of the case by using the “blue pencil doctrine.” Courts have discretion to use the blue pencil doctrine to fashion appropriate injunctive relief, and appellate courts will not disturb such a ruling unless the district court clearly abused that discretion. Klick v. Crosstown State Bank, 372 N.W.2d 85, 88-89 (Minn. App. 1985). Appellants did not seek an injunction and we find no abuse of discretion in the district court’s refusal to apply the blue-pencil doctrine.
b. Reduction in Force
Appellants also claim prejudice from the district court’s refusal to have the jury answer a special verdict question that asked whether respondent proved he was terminated because of a reduction in force. We find no error in the district court’s determination that respondent had to prove only that he was not terminated for cause in order to prove eligibility for the bonus and that he did not need to prove appellants’ true motive for terminating him.
c. Jury Instruction
Finally, appellants contend that the district court erred when instructing the jury on cause. District courts are afforded considerable discretion in selecting the language of jury instructions. Alholm v. Wilt, 394 N.W.2d 488, 490 (Minn. 1986). Denial of a requested instruction is not grounds for a new trial if the instruction correctly states the applicable law. State Bank v. Stoeckmann, 417 N.W.2d 113, 116 (Minn. App. 1987), review denied (Minn. Feb. 17, 1988). We find that the instruction adequately states the law, represented each party’s position to the jury, and was within the court’s discretion.
The district court combined both parties’ suggested definitions of cause and appellants object to the portion of the instruction that states: “A termination is for cause if Plaintiff breached the standards of job performance that the Defendant established and uniformly applied.” This statement comes directly from the approved civil jury instructions on termination for good cause. See 4 Minnesota Practice, CIVJIG 55.50 (1999). Although appellants contend that the good-cause standard should not be applied to this case, appellants used a “just cause” definition, and in the context of employment terminations, “good cause,” “just cause,” and “cause” are interchangeable. See Black’s Law Dictionary 213 (7th ed. 1999) (defining cause).
“On an appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the lower courts erred in their application of the law.” State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990) (citation omitted). “On appeal, the reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted.” Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted). “[T]he party resisting summary judgment must do more than rest on mere averments.” DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn. 1997). Both parties contend that the court erred in dismissing their claims on summary judgment.
Appellants contend that the district court erred in dismissing their counterclaim on summary judgment. To establish an intentional-misrepresentation claim, a plaintiff must prove that the defendant intentionally misrepresented a material past or present fact susceptible of knowledge, knowing the representation was false. Davis v. Re-Trac Mfg. Corp.,276 Minn. 116, 117, 149 N.W.2d 37, 38-39 (1967). A plaintiff must also prove that he or she justifiably relied on the defendant’s misrepresentations to his or her detriment. Id.
The district court found that respondent’s actions did not amount to false representations and that appellants did not reasonably rely on respondent’s representations to their detriment. We find no error in the court’s determination or its characterization of appellants’ executives as “sophisticated money men.” Moreover, the jury’s conclusion that appellants did not terminate respondent for cause indicates that it rejected appellants’ evidence that might have established fraud.
Respondent contends that the court erred in dismissing his defamation claim. The allegedly defamatory statement was that respondent engaged in a conflict of interest. The elements of a defamation claim are (1) a false statement; (2) communication to a third party; and (3) resulting harm to the plaintiff’s reputation and standing in the community. Stuempges v. Parke, Davis & Co., 297 N.W.2d 252, 255 (Minn. 1980). False statements about a person’s business, trade, or professional conduct are defamatory per se, and actual harm need not be proved. Id. at 255. But Minnesota law recognizes a qualified privilege for statements “made upon a proper occasion, from a proper motive, and * * * based upon reasonable or probable cause.” Id. at 256-57; see Smits v. Wal-Mart Stores, Inc., 525 N.W.2d 554, 557 (Minn. App. 1994), review denied (Minn. Feb. 14, 1995). A qualified privilege can be lost if it is abused, and plaintiff has the burden to prove malice. Stuempges, 297 N.W.2d at 257. The initial determination of whether a statement is privileged is a question of law for the district court to determine and is subject to de novo review; whether the privilege was abused is a fact question for the jury to determine. Lewis v. Equitable Life Assurance Soc’y, 389 N.W.2d 876, 890 (Minn. 1986).
The court found that the allegedly defamatory statements were protected by a qualified privilege and respondent presented “no evidence of actual malice” to overcome the privilege. The statement was made among appellants’ executives as they decided whether to terminate respondent. Respondent did not allege that these executives published the statement in another context or outside the company. Thus, the court did not err in finding the statement to be subject to the qualified privilege. Because respondent did not allege malice or facts amounting to malice, there was no fact question for the jury to resolve.
Nevertheless, respondent contends instead that the statement is not qualifiedly privileged because it had no reasonable basis; Hilligoss asserts that appellants took no steps to verify whether he indeed engaged in a conflict of interest. As appellants point out, even statements that later prove to be false can have a reasonable basis, and we find that appellants had a reasonable basis to infer (whether correct or not) that respondent was engaging in a conflict of interest.
Respondent contends that the court erred when it vacated, on its own motion, part of the damages award that represented the value of the lost stock options. The parties stipulated to damages and read the stipulation on the record. In its discretion, the court decreased the damages award because it found that recovery contravened the plain language of the stock option plan. But, as respondent points out, the court’s last order for judgment, dated April 11, 2001, appears to include the stock option portion of the damages award. We remand for the district court to clarify the amount of the award.
Affirmed in part and remanded in part.
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.