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Andrews v. Cross Atlantic Capital Partners, Inc.

Superior Court of Pennsylvania

March 21, 2017

NICHOLAS D. ANDREWS Appellant
v.
CROSS ATLANTIC CAPITAL PARTNERS, INC. NICHOLAS D. ANDREWS Appellant
v.
DONALD R. CALDWELL NICHOLAS D. ANDREWS
v.
CROSS ATLANTIC CAPITAL PARTNERS, INC. Appellant NICHOLAS D. ANDREWS
v.
DONALD R. CALDWELL Appellant NICHOLAS D. ANDREWS Appellant
v.
CROSS ATLANTIC CAPITAL PARTNERS, INC. NICHOLAS D. ANDREWS Appellant
v.
DONALD R. CALDWELL

         Appeal from the Judgment May 22, 2014 In the Court of Common Pleas of Chester County Civil Division at No(s): 2011-06164, 2011-09776-CT, 2011-06164, 2011-06164-CT

          BEFORE: FORD ELLIOTT, P.J.E., BENDER, P.J.E., BOWES, J., PANELLA, J., SHOGAN, J., LAZARUS, J., OLSON, J., OTT, J., and DUBOW, J.

          OPINION

          LAZARUS, J.

         Cross Atlantic Capital Partners, Inc., and Donald R. Caldwell[1](collectively Defendants) appeal and Nicholas D. Andrews (Andrews) cross-appeals from the judgment, entered in the Court of Common Pleas of Chester County, following a jury verdict in favor of Andrews in the amount of $742, 221.45[2] in damages, $216, 268.75 in prejudgment interest, and $303, 127.50 in attorneys' fees under the Wage Payment and Collection Law (WPCL).[3] After careful review, we affirm in part, reverse in part and remand for calculation of liquidated damages.

         We take the underlying facts and procedural history in this matter from the trial court's prior opinions and our review of the certified record.

Cross Atlantic is a corporation in the business of recruiting individual investors, institutional investors, and mutual fund managers who are seeking investment opportunities. These investors enter into a partnership agreement with Cross Atlantic[, ] who holds the investors' funds and then uses those funds to invest in start-up companies. The partnership agreement between Cross Atlantic and the investors states how to disburse the investors' funds, any returns, fees, costs, etc., including the payment of any management fees due to Cross Atlantic.
Andrews worked for Cross Atlantic from the summer of 1999 through the summer of 2000. Cross Atlantic's [President] at the time, Glenn Rieger, hired Andrews to find, negotiate, and manage investments for Cross Atlantic. The ultimate goal was to sell the investments at a price that was sufficient to repay the investors their funds and to allow both the investors and Cross Atlantic to realize a profit. During his employment with Cross Atlantic, Andrews did not have a written employment agreement, as is customary in the industry. Compensation is deferred until the investment funds become sufficiently profitable to make corporate distributions. However, Andrews'[] employment ended before his funds made any corporate distributions. Therefore, on July 5, 2000, the parties entered into the [s]eparation [a]greement. Paragraph 5 of the [s]eparation [a]greement ("[p]aragraph 5") stated how and when Andrews was to be compensated.

         Trial Court Opinion, 1/16/15, at 2-3. Paragraph 5 of the parties' agreement states:

By the end of this Severance Period, you will have vested one year of service towards 1.0% of carried interest[4] in Cross Atlantic Technology Fund, L.P. and 0.5% carried interest in The Co-Investment 2000 Fund, L.P. Therefore, you will receive 0.2% and 0.1% carried interest as your earned and vested carry in Cross Atlantic Technology Fund, L.P. and The Co-Investment 2000 Fund, L.P., respectively. In addition, as special consideration for your effort put forth on GAIN Capital, we will offer you a full 1.0% and 0.5% carried interest on that particular transaction to be earned, paid and distributed at such time that the distribution is made to all other Limited Partners of the funds. Distributions of your participation in these carried interests will be in all cases identical to what you would have received if still employed by the funds.

         Andrews/Cross Atlantic Separation Agreement ("Agreement"), 7/5/00, at ¶ 5 (emphasis added). In exchange for the benefits under the separation agreement, Andrews agreed to enter into one-year non-compete and non- solicitation agreements, as well as a release of any claims he might have against Cross Atlantic. Cross Atlantic paid Andrews' three months of additional salary, as per the Agreement, as well as a bonus, and continued Andrews' health care and dental benefits for an additional three months.

         On September 3, 2003, Andrews read a press release indicating that a number of GAIN shareholders had sold a significant portion of their shares. The following day, Andrews sent Cross Atlantic's Chief Financial Officer (CFO) Brian Adamsky an email asking whether the Technology Fund was among those shareholders. Adamsky emailed Cross Atlantic's President, Glenn Rieger, about Andrews' query and told him to respond to Andrews. Over the next few days, an email exchange occurred between Andrews and Rieger. Rieger ultimately told Andrews that the Technology Fund had sold $1.1 million worth of its shares in GAIN and, that under the Agreement, Andrews was not entitled to any compensation.

         In February 2011, after he had repeatedly asked Defendants about information on the status of GAIN and Cross Atlantic, Andrews received an email from Adamsky providing him with the requested financial data. On September 2, 2011, Andrews filed two separate complaints, [5] one against Cross Atlantic for breach of contract and violations of the WPCL, and one against Caldwell, personally, under the WPCL. Defendants specifically denied that any distributions or other transactions had been made to investors that would trigger payment to Andrews under paragraph 5 of the Agreement. See Defendants' Answer with New Matter, 10/14/11, at ¶ 9. Defendants also raised, among other legal theories, the statute of limitations as a defense to the action, claiming that Andrews "knew or should have known that he had the claims asserted in the Complaint against Defendant[s] several years ago." Id. at ¶ 32.

         In August 2013, the court held a five-day jury trial. After Andrews rested his case, the trial court granted Defendants' motion for nonsuit as to the payment that became due in September 2003, finding that the applicable statute of limitations barred Andrews' right to recover. However, the court denied Defendants' motion for nonsuit as to payments due after 2003.

         Following trial, the jury returned a verdict in favor of Andrews, [6] finding Cross Atlantic breached the parties' separation agreement and awarding him $742, 221.45 in damages[7] under the WPCL.[8] The verdict included a finding that Defendants did not act in good faith when they failed to distribute Andrews' severance pay according to the Agreement. Jury Verdict Slip, 8/30/13, at 6, 8. On September 9, 2013, Defendants filed a joint post-trial motion; that same day, Andrews filed a motion to mold the verdict to include pre-judgment interest, post-judgment interest, and liquidated damages under section 260.10 of the WPCL. Andrews also filed a petition for attorneys' fees and costs in connection with his successful WPCL claims.

         On December 19, 2013, the trial court denied Defendants' post-trial motions and granted Andrews' motion in part, awarding him pre-judgment interest in the amount of $216, 268.75, and denied the motion in part with respect to his request for liquidated damages. The court denied, without prejudice, Andrews' request for post-judgment interest. On May 5, 2014, the trial court granted Andrews' request for attorneys' fees, awarding him $303, 127.50, but denied his request for expert fees and out-of-pocket costs. On May 22, 2014, the Prothonotary entered judgment on the jury's verdict. See Pa.R.C.P. 227.4.

         On June 3, 2014, Andrews filed a notice of appeal from the court's May 5, 2014 order denying his petition for expert fees and out-of-pocket costs under the WPCL. On June 18, 2014, Defendants filed a notice of appeal from the August 30, 2013 jury verdict, the court's December 19, 2013 order denying their post-trial motions and granting Andrews' petition for pre-judgment interest, the court's May 5, 2014 order awarding Andrews' attorneys' fees, and the court's final May 22, 2014 judgment.[9] On June 25, 2014, Andrews filed a notice of cross-appeal challenging the court's May 5, 2014 order as well as the court's December 13, 2014 order denying his request for liquidated damages. This appeal and cross-appeal follow.

         On appeal, Defendants raise the following issues for our consideration:

(1) Did [D]efendants' absolute and unequivocal repudiation of its alleged obligations under a separation agreement start the accrual of the limitations period on [P]laintiff's entire cause of action under the agreement, including for future payments allegedly due under the agreement?
(2) Did payments that allegedly became due to plaintiff under a separation agreement negotiated and executed two months after the termination of [P]laintiff's employment; that were not earned by [P]laintiff during his employment; and that were allegedly given to [P]laintiff in exchange for entering into a non-compete agreement, constitute "wages" under Pennsylvania's Wage Payment and Collection Law?
(3) Was [P]laintiff's interpretation of paragraph 5 of the separation agreement unreasonable as a matter of law when, among other things, his interpretation was irreconcilable with the paragraph's last sentence, required the assignment of two different meanings to the same term, and was inconsistent with the very relief he sought?

         Defendants' Appeal

         In their first issue on appeal, Defendants claim that the trial court improperly denied their motion for nonsuit because Andrews' entire cause of action was barred by the statute of limitations. Specifically, Defendants assert that because they had "absolutely and unequivocally repudiated" their contractual obligations under the Agreement in September 2003, and, consequently, would never agree to pay Andrews any "deal specific" carried interest, Andrews could have brought suit for breach of contract at that time.

         We find this claim waived. In their Pa.R.A.P. 1925(b) concise statement of matters complained of on appeal, Defendants fail to list the legal theory of "absolute and unequivocal repudiation" of the parties' Agreement in support of their statute of limitations argument. As a result, the trial court did not address this claim in its Rule 1925(a) opinion. While Defendants did include this issue in their post-trial motion, our appellate rules are clear that "[i]ssues not included in the [Rule 1925(b)] Statement . . . are waived." Pa.R.A.P. 1925(b)(iv).[10]

         However, even if we were to find this claim preserved on appeal, Defendants would not be entitled to relief. Under Pennsylvania law, anticipatory repudiation or breach requires "an absolute and unequivocal refusal to perform or a distinct and positive statement of an inability to do so." Harrison v. Cabot Oil & Gas Corp., 110 A.3d 178, 184 (Pa. 2015) (quoting McClelland, supra at 200). Here, the trial court recognized that the parties disagreed over the interpretation of paragraph 5 of the Agreement. In fact, in their Rule 1925(b) statement, Defendants aver that "[t]he evidence established that Defendants had an honest disagreement with Plaintiff's interpretation of the third sentence of paragraph 5 of the Separation Agreement[.]" Defendants' Rule 1925(b) Statement, 7/15/14, at 7 ¶(4)(a). We fail to equate an honest disagreement over the language of an agreement with an "absolute and unequivocal refusal to perform." See Restatement of Contracts, Second, § 250 (Comment (b)) ("[R]epudiation is a statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages for total breach[.]").

         In their next claim on appeal, Defendants assert that any monies promised to Andrews under the parties' Agreement were not compensation for employment but, rather, consideration for agreeing to enter into a non-compete agreement. Therefore, Defendants claim that this amount is not considered "wages"[11] that Andrews earned while employed by Defendants and, as a result, his WPCL claim must fail. We find this claim waived as well.

         At trial and in their post-trial motions, Defendants put forth a different legal argument to support their claim that the monies owed under the Agreement were not considered "wages" under the WPCL. Specifically, at trial and post-trial, Defendants posited that the payments due under the Agreement were not an obligation of Cross Atlantic, but rather monies that would come from Andrews' carried interest in the Fund itself. Therefore, because the payments were not coming from his employer, they are not wages under the WPCL. See 43 Pa.C.S.A. § 260.3 (under WPCL every employer is required to pay wages within certain periods of time).

         Because Defendants' argument on appeal advances a different legal theory than that offered at trial and post-trial, we find this claim waived on appeal. See Estate of Witthoeft v. Kiskaddon, 733 A.2d 623, 630 n.8 (Pa. 1999) (holding that appellant waived legal theory raised for first time on appeal to Superior Court); see also Pa.R.A.P. 302.

         In their final claim on appeal, Defendants contend that Andrews' interpretation of the "carried interest" language in the third sentence of paragraph 5 of the Agreement (as it relates to GAIN) is internally inconsistent with both the term as used in the rest of the paragraph and the relief he sought. Specifically, Defendants disagree with Andrews' testimony that the parties intended the carried interest in GAIN to differ from the Fund-leveled carried interests.

         "[T]he interpretation of the terms of a contract is a question of law for which our standard of review is de novo, and our scope of review is plenary." McMullen v. Kutz, 985 A.2d 769, 773 (Pa. 2009) (citation omitted). Furthermore, it is well-established that:

[w]hen the parties have reduced their agreement to writing, the writing is to be taken to be the final expression of their intention. Where the contract evidences care in its preparation, it will be presumed that its words were employed deliberately and with intention. In determining what the parties intended by their contract, the law must look to what they clearly expressed. Courts in interpreting a contract do not assume that its language was chosen carelessly. Neither can it be assumed that the parties were ignorant of the meaning of the language employed.

Steuart v. McChesney, 444 A.2d 659, 662 (Pa. 1982) (citations and quotation marks omitted). Moreover,

[c]ontractual language is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense. That is not a question to be resolved in a vacuum. Rather, contractual terms are ambiguous if they are subject to more than one reasonable interpretation when applied to a particular set of facts. A court will not, however, distort the meaning of the language or resort to a strained contrivance in order to find an ambiguity.

Madison Construction Co. v. The Harleysville Mut. Ins. Co., 735 A.2d 100, 106 (Pa. 1999).

         Defendants claim that the trial court erroneously concluded that the Agreement's language was ambiguous on its face and that "the phrase 'carried interest'[12] in sentence 3 could mean either carried interest in its usual sense or 'deal-specific' carried interest in GAIN." Defendants' Substituted En Banc Brief, at 58. Defendants contend that under the Agreement they would never pay Andrews deal-specific carried interest, but that they "left open the possibility that it might one day pay Andrews a different kind of carried interest (that is, fund-level carried interest)."[13] Id. at 47.

         The polestar of our inquiry, therefore, is the relevant language of the parties' Agreement, which states:

By the end of this Severance Period, you will have vested one year of service towards 1.0% of carried interest in Cross Atlantic Technology Fund, L.P. and 0.5% carried interest in The Co-Investment 2000 Fund, L.P. Therefore, you will receive 0.2% and 0.1% carried interest as your earned and vested carry in Cross Atlantic Technology Fund, L.P. and The Co-Investment 2000 Fund, L.P., respectively. In addition, as special consideration for your effort put forth on GAIN Capital, we will offer you a full 1.0% and 0.5% carried interest on that particular transaction to be earned, paid and distributed at such time that the distribution is made to all other Limited Partners of the funds. Distributions of your participation in these carried interests will be in all cases identical to what you would have received if still employed by the funds.

         Andrews-Cross Atlantic Separation Agreement ("Agreement"), 7/5/00, at ¶ 5 (emphasis added).

         Defendants assert that the above-bolded language in the Agreement clearly shows that they intended Andrews to receive the same kind of carried interest that he would have received had he remained at Cross Atlantic, i.e., "carried interest." Defendants also posit that Andrews' interpretation gives the same phrase "carried interest" different meanings among the individual sentences of paragraph 5 of the Agreement.

         We recognize that the Agreement does not define the term "carried interest." Therefore, by inserting the term "as special consideration" in the third sentence of paragraph 5, it is reasonable to find the subsequent term "carried interest" ambiguous when viewed in the context of the remainder of the paragraph and in particular use of that term in sentences one and two. Accordingly, we can look to the parties' intent in drafting paragraph 5 of the Agreement. The trial court's conclusion that the parties intended to treat the carried interest and distribution manner in sentence three differently from those in sentences one and two of paragraph 5 is not only reasonable, but probable. We find, therefore, that the trial court properly declined to enter judgment in Defendants' favor on this issue.

         Andrews' Cross Appeal

         On cross-appeal, Andrews claims that the court improperly denied his request for liquidated damages under section 260.10 of the WPCL. Specifically, he asserts that he is entitled to statutory liquidated damages when the jury determined that Defendants did not establish a good faith dispute to his requested wage payment.[14] Moreover, Andrews posits that an award of pre-judgment interest and an award of liquidated damages are not mutually exclusive remedies for a successful breach of contract plaintiff and that they "are not intended to compensate for the same loss." Cross-Appellant's Brief, at 74.[15] We agree.[16]

         Instantly, the trial court awarded Andrews more than $200, 000 in pre-judgment interest on his breach of contract claim against Cross Atlantic. However, the trial court denied Andrews' request for liquidated damages under the WPCL finding that if it awarded those damages, in addition to pre-judgment interest, Andrews would face a "windfall."

         Under the WPCL, a party is entitled to liquidated damages:

Where wages remain unpaid for thirty days beyond the regularly scheduled payday, or, in the case where no regularly scheduled payday is applicable, for sixty days beyond the filing by the employe of a proper claim or for sixty days beyond the date of the agreement, award or other act making wages payable, or where shortages in the wage payments made exceed five percent (5%) of the gross wages payable on any two regularly scheduled paydays in the same calendar quarter, and no good faith contest or dispute of any wage claim including the good faith assertion of a right of set-off or counter-claim exists accounting for such non-payment, the employe shall be entitled to claim, in addition, as liquidated damages an amount equal to twenty-five percent (25%) of the total amount of wages due, or five hundred dollars ($ 500), whichever is greater.

43 P.S. § 260.10 (emphasis added). The proper interpretation of section 260.10 is a question of law for which our standard of review is de novo and our scope of review is plenary. Krebs v. United Refining Co. of Pennsylvania, 893 A.2d 776, 787 (Pa. Super. 2006).

         The underlying purpose and intent of the WPCL is to remove some of the obstacles employees face in litigation by providing them with a statutory remedy of an employer's breach of its contractual obligation to pay wages. See Laborers Combined Funds v. Mattei, 518 A.2d 1296 (Pa. Super. 1986) (emphasis in original); compare 43 P.S. § 260.1 (WPCL authorizes legal action to collect contractually agreed upon wages) with 43 P.S. §§ 333.101 (Pennsylvania's Minimum Wage Act authorizes legal action to collect employees' statutorily guaranteed wages). "The WPCL does not create an employee's substantive right to compensation; rather, it only establishes a statutory vehicle to enforce payment of wages and compensation to which an employee is otherwise entitled by the terms of an agreement." Scungio Borst & Assocs. v. 410 Schurs Lane Dev., LLC, 106 A.3d 103, 109 (Pa. Super. 2014) (en banc). Therefore, the right to recover wages "earned" by employees upon separation from employment under the WPCL is a statutory remedy which supplements rather than supplants a common law action for breach of contract. 43 P.S. § 260.9a(a); Laborers Combined Fund, supra at 1299.

         In Thomas Jefferson Univ. v. Wapner, 903 A.2d 565 (Pa. Super. 2006), our Court noted that:

The WPCL is not only a vehicle for recovery of unpaid wages; it also provides for damages in the event an employer withholds compensation in the absence of good faith. Thus, if for instance an employer withholds wages based on a dispute with the employee that would result in a set-off, the employer's reliance on the set-off must be held in good-faith. Otherwise, the employee is entitled to additional, liquidated damages pursuant to the statute[.]

Id. at 574 (emphasis added). Good faith, under section 260.10, must be proven by the employer by clear and convincing evidence. Id. Cf. Oberneder v. Link Computer Copr., 674 A.2d 720 (Pa. Super. 1995), aff'd, 696 A.2d 148 (Pa. 1997) (by contrast, WPCL attorneys' fees provision, section 260.9a(f) not conditioned upon finding of bad faith by employer and fees are mandatory for successful plaintiff).

         Instantly, the trial court relied upon Signora v. Liberty Travel, 886 A.2d 284, 298 (Pa. Super. 2005), to support its decision to deny Andrews' request for liquidated damages. In Signora, a jury awarded the plaintiff overtime pay and interest, in addition to punitive damages and compensatory damages on her wrongful termination claim. The trial court refused to instruct the jury on the issue of liquidated damages under the WPCL.[17] On cross-appeal, the plaintiff argued that she was entitled to both pre-judgment interest pursuant to the WPCL and Pennsylvania's Minimum Wage Act (PMWA) and liquidated damages under the WPCL. Ultimately the Signora court concluded that the trial court properly restricted the plaintiff's right to recover only interest under the PMWA. In so holding, the Court noted that "the [WPCL's] provision for liquidated damages applies to instances where interest is not separately awardable" and that because the plaintiff was entitled to interest, "the additional award of liquidated damages would constitute dual payment, or a windfall." Id.

         In Frederich v. U.S. Computer Sys., Inc., 1995 U.S. Dist. LEXIS 9791 (E.D. Pa. July 10, 1995), the case relied upon by the Signora Court, plaintiffs sought both interest on the back pay awarded under the PMWA and liquidated damages under the WPCL.[18] Because the PMWA is silent on the issue of interest, the court looked to provisions of the Fair Labor Standards Act (FLSA)[19] to analyze whether interest on unpaid overtime wages was recoverable under the PMWA. The court recognized that the case involved "the interplay between recoveries available under the WPCL and PMWA[, ]" id. at *3, and noted that the issue had not yet been decided by the Pennsylvania Supreme Court. Quoting a United States Supreme Court decision, Brooklyn Savings Bank v. O'Neil, 324 U.S. 697');">324 U.S. 697 (1945), the Frederich Court stated, "the liquidated damages provision [of the FLSA] is not penal in nature but constitutes compensation for the retention of a workman's pay which might result in damages too obscure and difficult of proof for estimate other than by liquidated damages." Brooklyn, 324 U.S. at 707. The Court found that it would be inconsistent to allow an employee to recover basic statutory wage and liquidated damages under section 16(b) of the FLSA, with interest, "in view of the fact that interest is customarily allowed as compensation for delay in payment." Id. at 716.[20]

         In Braun v. Wal-Mart Stores, Inc., 24 A.3d 875 (Pa. Super. 2011), aff'd, 106 A.3d 656 (Pa. 2014), [21] our Court also addressed the liquidated damages provision of the WPCL, stating:

Pennsylvania courts have . . . acknowledged the compensatory purpose of the WPCL's liquidated damages provision. The Signora Court, for example, adopted the rationale of Friedrich [v. U.S. Computer Sys., Inc., [] 1995 U.S. Dist. LEXIS 9791 (E.D. Pa. July 10, 1995], which relied on Brooklyn Sav. Bank[v. O'Neil, 324 U.S. 697');">324 U.S. 697 [] (1945)], and concluded that "both the liquidated damages and pre-judgment interest are intended to compensate for the loss of use of the proper amount of wages payable" and such damages are not "punitive in nature." Signora, [at] 296; see also Oberneder v. Link Computer Corp., [] 674 A.2d 720, 722 (Pa. Super. 1996) ("Oberneder I") (noting "the primary goal of the WPCL is to make whole again[] employees ...

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