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Harrell v. The Farmers Educational Cooperative Union of America

Supreme Court of Montana

December 10, 2013

THURSTON "SONNY" HARRELL, Plaintiff and Appellee,
v.
THE FARMERS EDUCATIONAL COOPERATIVE UNION OF AMERICA, MONTANA DIVISION and ALAN MERRILL, Defendants and Appellants.

Submitted on Briefs: August 28, 2013

APPEAL FROM: District Court of the Eighth Judicial District, In and For the County of Cascade, Cause No. ADV 11-0212 Honorable Thomas M. McKittrick, Presiding Judge.

For Appellants: Antonia P. Marra; Sara R. Sexe; Marra, Sexe, Evenson & Bell, P.C.; Great Falls, Montana.

For Appellee: Elizabeth A. Best; Best Law Offices, P.C.; Great Falls, Montana Lawrence A. Anderson; Attorney at Law, P.C.; Great Falls, Montana.

OPINION

BETH BAKER, Judge.

¶1 The Farmers Educational Cooperative Union of America, Montana Division, commonly known as the Montana Farmers Union (MFU), and Alan Merrill, MFU's president, appeal a jury verdict from the Eighth Judicial District Court, Cascade County, against MFU for wage claims and constructive discharge, and against Merrill individually for interference with Thurston "Sonny" Harrell's employment relationship. The jury awarded Harrell compensatory and punitive damages.

¶2 We restate the issues as follows:

¶3 1. Whether the District Court erred in denying summary judgment on Harrell's wage claims.

¶4 2. Whether the District Court erred in denying judgment as a matter of law on Harrell's claim against Merrill individually.

¶5 3. Whether MFU is entitled to a new trial on Harrell's constructive discharge claim.

¶6 4. Whether punitive damages properly were awarded against MFU.

¶7 We reverse in part, affirm in part, and remand for application of the statutory limit to the punitive damages award.

FACTUAL AND PROCEDURAL BACKGROUND

¶8 Harrell spent many years working for MFU, a farm organization that manages educational programs, youth camps, and lobbying efforts directed toward benefitting the rural farming community. MFU originally hired Harrell as the membership director. He left this position after five years and temporarily moved to Alabama. MFU rehired him as the education director when he returned to Montana in October 2006. Merrill became MFU's president shortly after Harrell rejoined MFU.

¶9 MFU initially classified Harrell's education director position as "exempt, " meaning he was unable to claim overtime pay but earned compensatory time instead. Beginning in April 2010, when an independent accounting firm began handling its payroll, MFU paid Harrell overtime at one and one-half times his hourly pay in any week that he worked over 40 hours. Harrell did not discover the alleged error in his original classification until December 2010, at which time he began requesting that MFU retroactively pay him for all the overtime hours he had worked over the past few years. MFU steadfastly refused and later provided Harrell with a new job description, which was unchanged except that it reflected that the position was now non-exempt.

¶10 Meanwhile, another dispute arose between MFU and Harrell regarding vacation hours. MFU's employee handbook limits the maximum number of vacation hours that an employee can accumulate by permitting employees to accrue only up to "the amount of leave they would earn in 18 months at their current rate of accrual." Instead of using his vacation hours to take time off from work, Harrell had allowed his vacation time to accumulate, anticipating that he would receive payment for the hours upon his retirement. He eventually accrued more hours than permitted by the handbook. On April 30, 2010, MFU notified Harrell that it would not pay him for all the hours of his accrued vacation time since 2007 and subtracted the excess hours from his timesheets. When Harrell asked for reinstatement of and payment for the excess vacation, MFU explained that he was not allowed to earn more vacation hours than the capped amount stated in the MFU handbook.

¶11 Harrell also claimed he was owed wages for performing "extra duties." In 2007, after MFU's executive director Tracy Houck resigned, MFU's management assigned Harrell some of the tasks she previously performed. Harrell estimated that these tasks required one hour of work per day. Harrell testified that Merrill took over some of Houck's tasks as well, such as serving as the liaison between the staff and the board of directors and reviewing budget allocations. As president, Merrill remained in charge of the office, or "at the top of the pyramid, " and all staff reported to him. Merrill assumed the role of managing MFU's day-to-day business and its employees. Harrell repeatedly requested that MFU pay him for doing tasks outside his job description, but MFU did not fill the executive director position or pay Harrell more for assuming the excess workload.

¶12 Merrill wrote a letter to Harrell in February 2011, explaining that MFU's board had determined that Harrell had not performed certain obligations of his position. Shortly after, MFU cut Harrell from full-time to part-time and issued him a new job description that contained substantially the same duties that he already had been performing. MFU explained that its decision to make the education director position part-time was based on the board's understanding that the job duties Harrell actually performed no longer required a full-time position.

¶13 Harrell filed a complaint in the District Court on March 4, 2011. Harrell alleged that he had been classified incorrectly as exempt and that he was thus entitled to 422 hours of overtime pay and penalties. The complaint also alleged that MFU owed him over $4000 for 232.47 vacation hours earned and not paid. Harrell claimed that MFU failed to compensate him for the additional duties he took on after the executive director left. Harrell claimed that Merrill personally interfered with Harrell's contractual or business relations with MFU by making false statements about him to the Board of Directors. Harrell also raised several other claims against Merrill individually based on these same allegations, but dismissed them during trial.

¶14 MFU responded that its decision to make the education director position part-time was not retaliatory, but that Harrell's failure to accomplish tasks assigned to him left him with less to do. MFU based its decision on Harrell's own reports, his letters refusing to do what he was asked by the board, and his opposition to assigned tasks or his failure to complete them in a timely manner. MFU contended that Harrell's position as education director was intended to be an exempt position because it required substantial discretion, such as designing education programs, determining which grants to request, and seasonally supervising other staff to complete the education and camp work. MFU claimed that the education director position was made a non-exempt position when it was determined that Harrell's performance of the position had fewer supervisory responsibilities, in part because of a diminution in educational programs. MFU argued that Harrell was not owed any wages, as he worked no overtime for which he had not already been paid as a nonexempt employee, and that he was not entitled to overtime for the period that he was designated as exempt. With regard to the interference with contract claim, MFU argued that the board had the right to ask Merrill about Harrell's work performance and Merrill had the right and duty to inform the board of his opinion. MFU further claimed that Harrell was not entitled to additional vacation pay because he could not accrue more vacation time than the handbook allowed, and no provision in the handbook provided for payment of vacation in lieu of taking the vacation time except upon resignation or termination. Finally, MFU argued that all of Harrell's claims made pursuant to Montana's wage statutes were barred by the applicable statute of limitations.

¶15 On April 29, 2011, Harrell resigned his employment and amended his complaint to allege constructive discharge under the Wrongful Discharge from Employment Act (WDEA). Harrell alleged that he was forced to quit because MFU increased hostility toward him in the workplace and ostracized him after he asserted his right to be paid for vacation, extra duties, and overtime. MFU also denied this additional claim, maintaining that it paid all of Harrell's remaining wages after his voluntary resignation.

¶16 MFU filed a motion for summary judgment on all claims on July 16, 2012. The District Court denied MFU's motion in a one-sentence order. Before trial, MFU filed a motion in limine seeking to prevent Harrell from introducing evidence concerning a previous case brought by a former employee against MFU. That employee, Katie Kassmier, had alleged constructive discharge based on alleged sexual harassment; she settled her claim in 2007 while represented by the same attorney now representing Harrell.

¶17 During the Kassmier case, Harrell wrote a memo—introduced by MFU during Harrell's trial—to the MFU executive committee outlining his concerns regarding what he perceived to be sexually discriminatory policies that could bear adversely upon MFU in the Kassmier case. While Harrell's direct involvement in that case was limited, MFU did ask Harrell to draft an affidavit supporting its defense. Harrell's initial affidavit, while helpful to MFU, omitted what he believed to be some essential information. On August 13, 2010, Harrell signed a second affidavit that rendered the first affidavit useless to MFU. MFU later entered a confidential settlement following mediation with Kassmier. Harrell claimed that MFU's response to this second affidavit further contributed to an intolerable work environment.

¶18 The court had reserved ruling on the motion in limine when the trial started. Over MFU's objections, the District Court allowed Harrell's counsel to discuss the Kassmier case during her opening statement and to introduce evidence regarding the prior case throughout the trial. Despite expressly avowing to the judge that "I don't want to try to get that in, " Harrell's counsel brought the confidential settlement to the attention of the jury several times, asking one MFU employee, "[Y]ou wouldn't have agreed to pay north of six figures if you didn't think there was risk . . . ?" and asking another, "You wouldn't have paid money if it wasn't meritorious, right?" These references prompted MFU to move for a mistrial, which the District Court denied.

¶19 MFU's counsel also referenced the Kassmier case repeatedly, explaining that they believed they had no choice but to defend against the evidence once it was introduced. MFU denied the sexual harassment allegations involving Kassmier, told the jury in its opening statement that the Human Rights Bureau found no cause to think there was any sexual discrimination against Kassmier, and introduced evidence pertaining to the Kassmier case during the trial.

¶20 The jury returned a special verdict form in all respects favorable to Harrell. The jury found that MFU failed to pay Harrell for overtime, for vacation, and for his work handling the duties formerly assigned to the executive director. The jury found that Merrill interfered with Harrell's employment relationship with MFU and awarded tort damages against Merrill in the amount of $85, 000 for resulting pain and suffering, harm to the ability to enjoy life, and the loss of established course of life. The jury also found that MFU constructively discharged Harrell because he refused to violate the law regarding payment of wages and overtime. It awarded $90, 000 in damages for wrongful termination. The total compensatory award was $232, 439.40. The jury determined that punitive damages were appropriate and the court scheduled a separate hearing on the issue.

¶21 The Kassmier issue reached its apex when Harrell's counsel mentioned the amount of the settlement during her final summation on punitive damages, stating, "Well, when it was Katie Kassmier's turn, [MFU] had $200, 000. You heard Mr. Schlepp tell you that, two hundred thousand bucks that they had to pay her." Mr. Schlepp had denied remembering the Kassmier settlement amount on the witness stand, and the court had overruled MFU's objection to questions about the settlement. Harrell's counsel also stated, "We know that for them $200, 000 is a drop in the bucket."

¶22 The jury returned a punitive damages verdict of $300, 000. The District Court denied MFU's request to apply the three percent limit to the punitive damages award imposed by § 27-1-220(3), MCA, ruling that the Defendants waived the right to present evidence of net worth by not offering that evidence during the punitive damages phase of the trial. Pursuant to the provision for attorney's fees in the wage claim statutes, § 39-3-214, MCA, the District Court also assessed attorney's fees against MFU after the trial. Defendants appealed, alleging many issues of substantial error.

STANDARD OF REVIEW

¶23 We review a district court's decision on a motion for summary judgment de novo. Jensen v. State, 2009 MT 246, ¶ 6, 351 Mont. 443, 214 P.3d 1227. A motion for summary judgment shall be granted if "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." M. R. Civ. P. 56(c).

¶24 This Court reviews a district court's evidentiary rulings "to determine whether the court abused its discretion." Faulconbridge v. State, 2006 MT 198, ¶ 22, 333 Mont. 186, 142 P.3d 777. "A district court abuses its discretion only if it acts arbitrarily without employment of conscientious judgment or exceeds the bounds of reason." Faulconbridge, ¶ 22. We also review for abuse of discretion a district court's decision to deny a motion for a mistrial. Heidt v. Argani, 2009 MT 267, ¶ 10, 352 Mont. 86, 214 P.3d 1255. The decision depends on "whether the party has been denied a fair and impartial trial." Heidt, ¶ 10.

¶25 "We review a district court's conclusions on questions of law to determine if those conclusions are correct." Ammondson v. Northwestern Corp., 2009 MT 331, ¶ 29, 353 Mont. 28, 220 P.3d 1.

DISCUSSION

¶26 1. Whether the District Court erred in denying summary judgment on Harrell's wage claims.

¶27 Harrell set forth three wage claims under the Wage Protection Act, § 39-3-201 et seq., MCA. The wage claims involved his overtime pay, vacation hours, and the "extra duties" he assumed in the absence of an executive director. We conclude that the District Court ...


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