From Casetext: Smarter Legal Research

Schiavi v. AT&T Corp.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION
Aug 15, 2014
DOCKET NO. A-1548-12T4 (N.J. Super. Aug. 15, 2014)

Opinion

DOCKET NO. A-1548-12T4

08-15-2014

MARYLYNN SCHIAVI, Plaintiff-Appellant, v. AT&T CORPORATION, Defendant-Respondent.

MaryLynn Schiavi, appellant, argued the cause pro se. Kristine J. Feher argued the cause for respondent (Greenberg Traurig LLP, attorneys; Ms. Feher and Kristy L. Grazioso, on the brief).


NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Grall, Waugh, and Accurso. On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-3467-06. MaryLynn Schiavi, appellant, argued the cause pro se. Kristine J. Feher argued the cause for respondent (Greenberg Traurig LLP, attorneys; Ms. Feher and Kristy L. Grazioso, on the brief). PER CURIAM

Plaintiff MaryLynn Schiavi appeals the Law Division's November 13, 2012 order entering judgment in the amount of $35,074 in favor of defendant AT&T Corporation and dismissing her claims. We affirm.

I.

We discern the following facts and procedural history from the record on appeal.

AT&T hired Schiavi in 1995 to work in its public relations department. In June 2000, it assigned several employees to work at its Short Hills location on a revenue recovery task force named the "Raiders of the Lost Revenue" (Raiders). While a member of the task force, Schiavi emailed AT&T senior executives, including the chief executive officer, to express her frustration regarding the assignment. A portion of the August 13 email stated: "Hopefully the morale of the Raiders will change over time, but I must tell you many of the faces of my colleagues have been filled with sadness and despair, and several people even mentioned the only option being suicide. And they didn't say this in a joking manner."

Maureen Brennan, AT&T's Human Resources Director, contacted Schiavi and asked her to identify which employees were potentially suicidal. According to Schiavi, Brennan "was very upset about my letter and she said she needed to know the names of the people who mentioned or threatened suicide. And I assured her that no one threatened suicide." However, Brennan testified that Schiavi told her that she "wasn't going to reveal her sources," meaning the names of the individuals who threatened suicide. Brennan testified that Schiavi eventually recanted her original statement and told her that nobody threatened suicide.

Based upon Schiavi's conduct, AT&T determined that Schiavi had violated its code of conduct and that the violation warranted termination. Schiavi was informed that she was being discharged on August 21, 2000. Although AT&T believed that Schiavi's "termination was justified" and that it was under no obligation to give her severance benefits or allow her to resign, it agreed to provide severance pay in exchange for a written agreement fully and finally ending the relationship between AT&T and Schiavi.

During the negotiations for the agreement, Brennan sent an email to Schiavi on September 15, in which she wrote

I am willing to record your separation as a resignation and to refrain from any discussion with employers calling for references about your separation from employment. In addition, although a resignation does not normally allow you to qualify for unemployment compensation, I can agree not to oppose your application for unemployment benefits. We cannot do [a Force Management Plan] because the plan does not contemplate this circumstance, but I am willing to raise the amount of severance offered to 15 weeks to provide you the income while you search for new employment.
Brennan testified that she was "agreeing to . . . convey to any employer that called asking for [reasons] why [Schiavi] left AT&T . . . that she resigned. That was for any employers and, also, offer her the opportunity to tell her colleagues that she resigned." Schiavi reviewed the agreement and executed it on September 19.

As part of the agreement, AT&T promised to pay Schiavi $19,948 in severance, that it would not contest her claim for unemployment benefits, and that it would not disparage her. With respect to her status as resigned, the agreement states: "Employee should direct inquiries from her prospective employers to Maureen Brennan. Ms. Brennan will relay to those prospective employers only that Employee resigned, the dates of Employee's employment, the position(s) held and her salary." The agreement makes no mention of how Brennan's termination status would be coded internally.

In the agreement, Schiavi agreed "that her employment with the Company ended at the close of business on August 21, 2000 . . . and that she will not apply for or seek employment with the Company at any time thereafter." Schiavi understood this to mean that she could not work for AT&T ever again. She also agreed to keep all proprietary information confidential, to refrain from disparaging AT&T, and to keep the agreement itself confidential.

The agreement further provided that, if Schiavi materially breached the agreement's provisions with respect to the confidentiality of the agreement, the confidentiality of proprietary information, or non-disparagement, she would "be required to reimburse AT&T for the payment made pursuant to . . . this Agreement, less one thousand dollars ($1,000)." Additionally, Schiavi gave AT&T a broad release and agreed not to bring a claim against AT&T relating to her employment or its termination. If Schiavi breached those provisions, she was required to return "all consideration" received from the agreement, and pay all "attorneys' fees and costs" related to the lawsuit.

In September 2005, the manager of AT&T's Internet Security News Network (ISNN), posted a listing for a temporary contract assignment with an end date of March 21, 2006. Logistic Solutions, an AT&T contractor, hired Schiavi for the ISNN position on October 13, 2005. As part of her acceptance, Schiavi acknowledged that she "agree[d] to accept a temporary work assignment to AT&T," and that "the work assignment is a temporary one for a defined period of time, the length of which may be increased or decreased." She was engaged to work for the exclusive benefit of AT&T, and was being supervised by AT&T employees. Schiavi commenced work at AT&T's Bedminster office shortly thereafter.

Brennan encountered Schiavi in the Bedminster cafeteria in December 2005, and learned that Schiavi was working at AT&T as the employee of a contractor. Brennan notified Human Resources that Schiavi should not be working at AT&T under the terms of the 2000 agreement. In February 2006, Human Resources informed ISNN that Schiavi must be released because she was ineligible to work at AT&T. On February 22, 2006, Schiavi was informed that her assignment was ending.

In December 2006, Schiavi filed a complaint against AT&T, in which she alleged (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) tortious interference with prospective employment; (4) intentional infliction of emotional distress; (5) fraud; (6) defamation; and (7) respondent superior liability for the intentional and reckless acts of its employees. In February 2007, AT&T filed its answer and counterclaim against Schiavi, alleging that she breached the agreement.

Schiavi subsequently waived her claim for intentional infliction of emotional distress and does not appeal the dismissal of her claims of fraud.

On November 7, 2008, after the close of discovery, AT&T filed a motion for summary judgment on all claims and counterclaims. Schiavi filed a cross-motion for summary judgment on the issue of liability and opposed AT&T's motion as it related to the counterclaim. The motion judge granted AT&T's motion, dismissed Schiavi's complaint in its entirety, and granted AT&T's counterclaim in the amount of $19,948, plus attorney's fees and costs.

On January 23, 2009, Schiavi filed a motion for reconsideration addressing the issue of the damages and attorney's fees awarded to AT&T. On May 12, the same judge modified the damages by reducing it $1000 to $18,948 and denying an award of counsel fees.

Schiavi appealed and AT&T cross-appealed. On April 29, 2011, we reversed, finding that genuine issues of material fact precluded summary judgment. Schiavi v. AT&T Corp., No. A-5003-08 (App. Div. Apr. 29, 2011), certif. denied, 208 N.J. 599 (2011). We dismissed AT&T's cross-appeal as moot and remanded for trial.

Following a six-day trial in May 2012, a unanimous jury found that AT&T did not breach the agreement or the implied covenant of good faith and fair dealing, and did not tortiously interfere with Schiavi's contractual rights. The jury also found that Schiavi breached the agreement and was liable to AT&T for damages.

On May 29, Schiavi filed a motion for judgment notwithstanding the verdict (JNOV) and for a new trial. She argued that she had been improperly barred from making a motion for attorney's fees, that certain evidentiary rulings were improper, and that portions of the jury charge were improper. AT&T filed a cross-motion for entry of judgment in its favor. On November 13, the trial judge entered judgment for AT&T in the amount of $19,948 plus attorney's fees in the amount of $15,126, for a total judgment of $35,074. The record does not contain an order denying Schiavi's motion or explaining the reasons for such denial. This appeal followed.

II.

Schiavi raises the following points on appeal:

In her reply brief, Schiavi raises additional points. We consider only those arguments related to points raised in her initial brief and decline to consider issues raised for the first time in the reply brief. L.J. Zucca, Inc. v. Allen Bros. Wholesale Distribs. Inc., 434 N.J. Super. 60, 87 (App. Div. 2014) (citing Borough of Berlin v. Remington & Vernick Eng'rs., 337 N.J. Super. 590, 596 (App. Div.), certif. denied, 168 N.J. 294 (2001)), certif. denied, ___ N.J. ___ 2014).

POINT I: THE TRIAL COURT ERRED WHEN IT FAILED TO RULE AS A MATTER OF LAW THAT AT&T HAD AN OBLIGATION TO RECORD PLAINTIFF AS RESIGNED.



POINT II: THE TRIAL COURT ERRED BY SUPPRESSING KEY AND RELEVANT EVIDENCE.
POINT III: AT&T WITNESSES DENIED THE MEANING OF THEIR PRIOR WRITTEN COMMUNICATIONS AND WERE ALLOWED TO INTERPRET THE SEPARATION AGREEMENT BASED ON THEIR PERSONAL OPINION.



POINT IV: THE TRIAL COURT'S JURY INSTRUCTIONS ON EXTRINSIC EVIDENCE DEFIED THE APPELLATE COURT'S RULING IN THIS CASE AND MISLED THE JURY.



POINT V: THE TRIAL COURT ERRED WHEN IT FAILED TO INTERPRET PREVIOUSLY ADJUDICATED, UNAMBIGUOUS TERMS OF THE AGREEMENT (PARAGRAPHS 9 AND 10) AND WHEN IT ENFORCED PARAGRAPH 8 WHICH IS AN ILLEGAL PENALTY CLAUSE.


A.

We turn first to Schiavi's argument that the trial judge erred in failing to hold that AT&T breached the parties' agreement. AT&T contends that Schiavi did not properly preserve that issue for appeal and, alternatively, that her claim fails as a matter of law. Although AT&T's argument that the issue was not preserved for appeal has considerable merit, we nevertheless address Schiavi's assertion directly.

In our earlier opinion, we held that

the terms of the Agreement are ambiguous as to whether it was the parties' intent to prohibit Schiavi's future employment by a third party at an AT&T facility. The Agreement provided that Schiavi would "not apply for or seek employment with the Company at any time." Extrinsic evidence should have been permitted here as an interpretative aid to determine whether this provision was intended to address Schiavi's employment by Logistics and AT&T's internal
coding of Schiavi's termination. The correspondence from Brennan, Kirk and Kramer could have established that the parties understood that Schiavi's termination would be recorded as a resignation rather than a termination for cause, and that she was permitted to work for an independent contractor working for AT&T. This interpretation is even supported by the Agreement which provides that AT&T would report Schiavi's termination as a resignation to other prospective employers.



Therefore, the judge misinterpreted the Conway holding, as the extrinsic evidence Schiavi offered was not intended to contradict or enlarge the terms of the writing. Rather, the parol evidence was offered to shed light on the intent of the parties to determine the meaning of the words of the Agreement. See Atl. N. Airlines v. Schwimmer, 12 N.J. 293, 301-02 (1953).



Schiavi also contends that there was sufficient evidence that AT&T breached the Agreement and the implied contractual covenant of good faith and fair dealing. She argues that AT&T, both through its actions and the actions of its employee, Brennan, tortiously interfered with her employment relationship with Logistics. After a review of the proofs, we conclude that there are material issues of fact that preclude summary judgment as to these claims. [Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)]; R. 4:40-2.



Whether AT&T breached the Agreement by requiring that Logistics terminate Schiavi, and disclosing that Schiavi was terminated for cause and was on the Do Not Hire list depends on a jury's resolution of disputed facts. The covenant of good faith and fair dealing is implied in every contract in New
Jersey, and it requires that neither party shall do anything which interferes with the ability of the other party to enjoy the fruits of the contract. Wilson v. Amerada Hess Corp., 168 N.J. 236, 244 (2001). In order to show that the implied covenant of good faith and fair dealing has been breached, a party must establish bad motive. Id. at 251. Summary judgment is inappropriate when parties dispute subjective elements such as intent or motivation. Carmichael v. Bryan, 310 N.J. Super. 34, 47 (App. Div. 1998).



Here, Schiavi alleged that Kirk had interpreted the contract as permitting Schiavi to work for Logistics. Assuming this to be true, Brennan's actions to have Schiavi terminated, included on the Do Not Hire list and coded as terminated for cause, would conflict with AT&T's interpretation of the Agreement. We hold that the veracity of these allegations must be resolved by a jury.



The judge found that Schiavi could not establish that AT&T did not tortiously interfere with Schiavi's contractual rights because Schiavi did not show any evidence that AT&T's conduct was intentional. This finding is based on the judge's conclusion, not on the record, which reveals a dispute on this point. To succeed on a claim for tortious interference, a claimant must have some reasonable expectation of economic advantage and the interference must be malicious and intentional. Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 751 (1989). An action against a company may be maintained pursuant to the doctrine of respondeat superior for the actions of an employee who was acting within the scope of his or her employment when she tortiously interfered with a contract. Id. at 745-46.
[Schiavi, supra, No. A-5003-08 (slip op. at 8-11).]
The question of whether genuine issues of material fact precluded a decision in favor of either party as a matter of law was the subject matter of the first appeal. We held that they did. Consequently, the doctrine of law of the case precluded the trial judge from reaching a different result on remand, absent a significant change in the facts before him not present in this case.

The "law of the case" doctrine embodies "the principle that where there is an unreversed decision of a question of law or fact made during the course of litigation, such decision settles that question for all subsequent stages of the suit." Slowinski v. Valley Nat'l Bank, 264 N.J. Super. 172, 179 (App. Div. 1993) (citations and internal quotation marks omitted). The rule is based on the policy that, when an issue is litigated and decided in a case, that decision should be the end of that issue. Ibid. The doctrine does not apply, however, when there is evidence substantially different from that available at the time of the prior decision or when the issue has not, in fact, been litigated. Sisler v. Gannett Co., 222 N.J. Super. 153, 159 (App. Div. 1987), certif. denied, 110 N.J. 304 (1988). Neither was the case here.

For those reasons, we reject Schiavi's argument that the trial judge erred in refusing to rule in her favor as a matter of law.

B.

We next address the several arguments raised by Schiavi with respect to evidential issues.

Our standard of review for evidential rulings at trial is abuse of discretion. "Trial judges are entrusted with broad discretion in making evidence rulings." State v. Muhammad, 359 N.J. Super. 361, 388 (App. Div.), certif. denied, 178 N.J. 36 (2003). "A reviewing court should overrule a trial court's evidentiary ruling only where a clear error of judgment is established." State v. Loftin, 146 N.J. 295, 357 (1996) (citations and internal quotation marks omitted).

i.

Schiavi argues that her trial counsel should have been permitted to read from documents throughout the trial. AT&T responds that the trial judge did not err in his manner of conducting the trial.

N.J.R.E. 611(a) requires the trial judge to "exercise reasonable control over the mode and order of interrogating witnesses and presenting evidence so as to (1) make the interrogation and presentation effective for the ascertainment of the truth, (2) avoid needless consumption of time, and (3) protect witnesses from harassment or undue embarrassment." A judge's control of the courtroom must be conducted "in a manner that complies with required formality in the taking of evidence and the rendering of findings." N.J. Div. of Youth and Family Servs. v. J.Y., 352 N.J. Super. 245, 264 (App. Div. 2002).

In order to keep the proceedings moving so that "the case [would not] take forever," but to have the evidence presented to the jury in a judicious manner and contemporaneously with the testimony, the trial judge allowed the parties to display documents via video monitor and publish copies of the documents to the jury while witnesses were questioned regarding their content. In fact, it was Schiavi's trial counsel who made that request:

[W]ith one or more of the witnesses that we intend that will be testifying today I'm going to ask them questions about documents that are in evidence or that will be in evidence by the time they're asked to talk about them. I would ask leave to provide individual copies of those exhibits to the jurors so that they can follow along with the questions because I'm going to ask questions about particular lines . . . .
AT&T had no object to that procedure.

The trial judge then precluded both parties from extensive reading of documents into the record because they were in evidence. AT&T was prevented from having the agreement read into the record. Schiavi was prevented from having an email interpreting a prior version of the agreement read into the record. The trial judge's evenly-applied practice of precluding reading from documents in evidence was not an abuse of discretion under the circumstances of this case.

ii.

Having considered Schiavi's remaining evidential issues, we find them to be without merit and not warranting extensive discussion in a written opinion. R. 2:11-3(e)(1)(E). We nevertheless add the following.

Schiavi argues that the judge should have admitted into evidence a press release from the Equal Employment Opportunity Commission (EEOC) and an article from the Wall Street Journal that discussed business customers leaving AT&T. Press releases are routinely considered to "constitute hearsay evidence not admissible under any of the traditional exceptions to the hearsay rule," although courts have used them "as relevant and material aids in ascertaining the meaning of the statutory language." Raybestos-Manhattan, Inc. v. Glaser, 144 N.J. Super. 152, 169-71 (Ch. Div. 1976), aff'd, 156 N.J. Super. 513 (App. Div. 1978). The EEOC press release at issue concerns a settlement that AT&T entered into with retired, former employees in New York and California with respect to age discrimination. In addition to being inadmissible hearsay, the document had no relevance to this case and the prejudice would outweigh any limited relevance it might have. N.J.R.E. 403; N.J.R.E. 404. We reach the same conclusion with respect to the Wall Street Journal article.

The voice message from AT&T attorney Judith Kramer and the file folder with notations, which Schiavi argues should have been admitted, were, at best, of limited relevance to the issues being tried. We find no abuse of the trial judge's broad discretion in his decision to exclude them. There is no basis to conclude that, had they been admitted, the result would have been different.

C.

We turn next to Schiavi's argument that the trial judge gave an erroneous charge. We focus on the charge concerning extrinsic evidence, because we find no merit in Schiavi's contentions that the judge should have given her requested charges rather than the more generalized charge actually given.

Those arguments do not merit discussion in a written opinion. R. 2:11-3(e)(1)(E). No party is entitled to have a jury charged in the party's own words. Kaplan v. Haines, 96 N.J. Super. 242, 251 (App. Div. 1967), aff'd, 51 N.J. 404 (1968), overruled on other grounds, Largey v. Rothman, 110 N.J. 204, 213 (1988).

We have described the standard of review concerning jury charges as follows:

The standard of review for jury charges is well-established. "It is axiomatic that clear and correct jury charges are essential to a fair trial . . . ." Das v. Thani, 171 N.J. 518, 527 (2002). Courts should correctly explain the controlling law in clear and understandable language. Carmona v. Resorts Int'l Hotel, Inc., 189 N.J. 354, 374 (2007); Velazquez v. Portadin, 163 N.J. 677, 688 (2000).



Incorrect jury instructions "are poor candidates for rehabilitation as harmless," and generally are presumed to constitute reversible error. Das, supra, 171 N.J. at 527 (internal quotation marks omitted). In making that assessment, we must consider the jury charge as a whole. Mogull v. CB Commercial Real Estate Grp., Inc., 162 N.J. 449, 464 [(1998)], certif. denied, 165 N.J. 607 (2000).



[Henebema v. S. Jersey Transp. Auth., 430 N.J. Super. 485, 501 (App. Div.) (first alteration in original), certif. granted, 215 N.J. 487 (2013). ]
The trial judge instructed the jury in the following manner regarding extrinsic evidence:
With respect to the claim of breach of contract, the plaintiff has the burden to prove what the parties intended the contract to mean. The contract is to be interpreted so as to give effect [to] the parties' intentions. You cannot make for the parties a better contract than the parties made for themselves. It's the intent, expressed or apparent in the writing that controls.



In deciding what the parties intended, you may consider the relations of the part[ies], the attendant circumstances, and the results that the parties sought to attain. You should consider the wording
that was used in the contract. The terms of the contract generally are to be understood in their plain, ordinary sense. The contract is to be considered as a whole, and its provisions are to be read together. So in interpreting Paragraph 1, of course, you take into account all the other paragraphs of the contract as well and may take into account the conduct of the parties before and after they entered into the contract and any of the other extrinsic evidence that you have heard or will see comprising the testimony of witnesses and the e-mails and other documents.



. . . .



. . . Extrinsic evidence can be helpful to interpret the parties' intentions when entering into the agreement. However, the extrinsic evidence, that is evidence outside the agreement itself, cannot modify, enlarge, or curtail the terms of the actual agreement nor can it change the intention of the parties as expressed in the agreement.
Although not identical, the charge as given was similar to portions of New Jersey's Model Jury Charge for contract interpretation.

However, the judge did not include the model charge's discussion of how the jury is to proceed if it cannot determine the meaning of an ambiguous word or phrase from the intrinsic evidence offered by the parties. The omitted language provides as follows:

If you have considered all of the evidence to ascertain the intentions of the parties and you are still unable to decide what the parties originally intended the
disputed contract language to mean, then that language as it exists should be interpreted against the party who wrote the contract. Although the general rule is that ambiguity in a contract provision should be resolved against the drafter, the ambiguous provision must still be read sensibly and consistent with the expressed intent of the parties.



[Model Jury Charge (Civil), § 4.10H (footnotes omitted).]

The omission of the additional language was not discussed at the charge conference. We note that, in the middle of the charge, counsel for AT&T sought a sidebar conference. The judge stated that he would take objections following completion of the charge. Once the charge ended, the judge saw counsel at sidebar, but the transcript states that this could not be transcribed for reasons that are not explained. There is nothing in the record to suggest that Schiavi's trial counsel raised this issue at sidebar, and she does not assert that he did. "Where there is a failure to object, it may be presumed that the instructions were adequate. . . . [and] that trial counsel perceived no prejudice would result." State v. Morais, 359 N.J. Super. 123, 134-35 (App. Div.) (citation omitted), certif. denied, 177 N.J. 572 (2003).

In addition, there is nothing in the record demonstrating that the omission of the language was specifically raised in Schiavi's post-verdict motion. In fact, the issue is mentioned only in passing in Schiavi's appellate brief and is not the focus of her argument on appeal. Her argument instead is focused on the judge's refusal to use her proposed charge language, which did not include the language at issue.

Having reviewed the charge as a whole in light of the record, we see no reason to reverse. AT&T clearly wanted to sever its relationship with Schiavi, which is why it proposed the severance agreement and included language precluding future employment "with the Company." Clearly, Schiavi's return to an AT&T workplace as a contract worker, rather than an employee, would have been inconsistent with the overall purpose of the agreement as developed at trial. Schiavi acknowledged at trial her understanding "that [she] could never work for AT&T again," and that there was nothing in the agreement that she could "work for AT&T as long as [she was] a contractor" or "a temporary employee."

Although we held in our earlier opinion that there were sufficient issues of fact to warrant a trial so that Schiavi could present her argument that extrinsic evidence demonstrated that she was not precluded from returning as a contract employee, it was her burden to convince the jury on that issue. We see nothing in the record to suggest that the jury was unable to determine the parties' actual intent from the evidence before it.

Consequently, we conclude that any error resulting from the judge's omission of the language was not plain error "clearly capable of producing an unjust result," R. 2:10-2; Das v. Thani, 171 N.J. 518, 530 (2002), or "reversible error where the jury outcome might have been different had the jury been instructed correctly," Velazquez v. Portadin, 163 N.J. 677, 688 (2000).

D.

Finally, Schiavi argues that the trial judge's determination that the agreement's stipulated damage provisions are enforceable was erroneous.

In our earlier opinion, we summarized the difference between stipulated damages and liquidated damages:

There is an important distinction between permissible "liquidated damages" clauses and impermissible "penalty" clauses. Liquidated damages are the amount a party agrees to pay for a breach of contract, based on a good faith estimate of actual damages. Wasserman's, Inc. v. Twp. of Middletown, 137 N.J. 238, 248-49 (1994). Where the amount of liquidated damages is not based on a good faith estimate and acts as a threat of punishment designed to prevent breach, the clause is an unenforceable penalty clause. Ibid. If the damages attributable to a future breach are difficult to accurately estimate, a judge should employ a reasonableness standard to determine whether
the damage clause reasonably reflects the harm caused by the breach. Id. at 250. Because a stipulated damages clause is presumptively reasonable, the "party challenging the clause bears the burden of proving its unreasonableness." MetLife Capital Fin. Corp. v. Washington Ave. Assocs., 159 N.J. 484, 496 (1999).



[Schiavi, supra, No. A-5003-08 (slip op. at 12-13).]

There are two damages clauses in the agreement. Paragraph eight sets damages at the amount paid to Schiavi under the contract, less $1000, in the event she violates the provisions concerning the confidentiality of the agreement, the confidentiality of proprietary information, or non-disparagement. Paragraph eleven governs breaches of paragraphs nine and ten of the agreement, which contain waivers of the right to sue for various claims and a general release, respectively. In the event of such a breach, Schiavi is required to return the funds paid on signing the contract and reimburse any "Releasee" for attorney's fees and costs. After hearing the testimony, the trial judge determined, as a matter of law, that Schiavi had produced no evidence that those damage provisions were unreasonable in the context of this case.

The jury found that Schiavi breached several provisions of the agreement, including those covered by paragraph eleven. As a result, it awarded damages based on the return of the entire payment, without deducting the $1000, plus counsel fees.
--------

A liquidated damages provision may be an appropriate mechanism to remedy a breach of contract where the actual damages flowing from the breach are difficult to measure. Wasserman's Inc. v. Twp. of Middletown, 137 N.J. 238, 248-50 (1994). Such a clause "'must constitute a reasonable forecast of the provable injury resulting from breach; otherwise, the clause will be unenforceable as a penalty and the non-breaching party will be limited to conventional damage measures.'" Id. at 249 (quoting Charles J. Goetz & Robert E. Scott, Liquidated Damages, Penalties and the Just Compensation Principle: Some Notes on an Enforcement Model and a Theory of Efficient Breach, 77 Colum. L. Rev. 554, 554 (1977)). "The amount fixed is unreasonable if it serves not as a pre-estimate of probable actual damages, but rather as 'punishment,' . . . grossly disproportionate to the actual harm sustained." CSFB 2001-CP-4 Princeton Park Corporate Ctr., LLC v. SB Rental I, LLC, 410 N.J. Super. 114, 121 (App. Div. 2009) (quoting Westmount Country Club v. Kameny, 82 N.J. Super. 200, 205 (App. Div. 1964)).

The court will not enforce liquidated damages provisions if they place an unfair penalty on the party that has breached the contract. In Wasserman's, supra, 137 N.J. at 252, the Supreme Court set forth various factors for evaluating whether a liquidated damages provision is enforceable. "Treating reasonableness 'as the touchstone,' [the Court] noted that the difficulty in assessing damages, intention of the parties, the actual damages sustained, and the bargaining power of the parties all affect the validity of a stipulated damages clause." Metlife Capital Fin. Corp. v. Wash. Ave. Assocs., L.P., 159 N.J. 484, 495 (1999) (quoting Wasserman's, supra, 137 N.J. at 250-54).

We find, in the context of this case, nothing in the record to suggest that the damage provisions are unreasonable or grossly disproportionate to the actual harm sustained by AT&T. The trial judge made the same determination after hearing all of the evidence. At the time the agreement was negotiated, AT&T took the position that it was entitled to terminate Schiavi for cause and without severance pay. Nevertheless, in order to ensure a clean break with no residual claims or litigation, it agreed to give her severance pay in return for certain promises, including the promise not to return to the company or file suit. By breaching the contract, Schiavi deprived AT&T of the benefit of its agreement, and we see nothing unreasonable in the requirement that she forfeit the severance pay she received in return for the promises she breached.

The attorney's fees provision is not a liquidated damages provision in that the fees are determined at the time of suit and are based on the fees actually incurred. Such a provision is not prohibited in a contract such as this, although they generally occur in the context of commercial agreements. Cohen v. Fair Lawn Dairies, Inc., 86 N.J. Super. 206, 214-16 (App. Div.), aff'd, 44 N.J. 450 (1965). We find no reason to find the shifting of counsel fees unreasonable in this case, inasmuch as one of the goals of the agreement from AT&T's point of view was to avoid the expense of litigation.

Affirmed.

I hereby certify that the foregoing is a true copy of the original on file in my office.

CLERK OF THE APPELLATE DIVISION


Summaries of

Schiavi v. AT&T Corp.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION
Aug 15, 2014
DOCKET NO. A-1548-12T4 (N.J. Super. Aug. 15, 2014)
Case details for

Schiavi v. AT&T Corp.

Case Details

Full title:MARYLYNN SCHIAVI, Plaintiff-Appellant, v. AT&T CORPORATION…

Court:SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION

Date published: Aug 15, 2014

Citations

DOCKET NO. A-1548-12T4 (N.J. Super. Aug. 15, 2014)