Carl M. Hadra v. Herman Blum Consulting Engineers, a Texas Corporation

632 F.2d 1242, 115 L.R.R.M. (BNA) 4880, 1980 U.S. App. LEXIS 11346

• Court: Court of Appeals for the Fifth Circuit
• Decided: December 17, 1980
• Docket: 79-1012
• Status: Published

Opinions

GODBOLD, Circuit Judge:

Plaintiff Hadra recovered on his claim for wrongful discharge by defendant Blum and successfully defended against Blum’s counterclaim alleging fraud by Hadra in the sale of his business to Blum. We find all issues in Hadra’s favor and affirm.

Dealing between Hadra and Blum began in 1972 when Hadra sold his engineering consulting firm in Phoenix, Arizona, to Blum and began working for Blum. In late 1974, under the terms of a new contract, Hadra and his family moved to Tehran, Iran, so that he could manage Blum’s operations in Iran and seek new contracts there for Blum. On July 22, 1975, Blum terminated Hadra’s duties in Iran and offered him a position as a project engineer in Dallas. Hadra rejected this offer, however, and moved his family to Majorca, an island off the coast of Spain. Hadra’s employment contract with Blum expired by its own terms January 31, 1976. Hadra stipulated that he did not begin to look for new employment until his return to the United States in August 1976.

In the first trial of this case the district court directed a partial verdict for Hadra, holding that the statute of limitations had run on Blum’s claim that Hadra fraudulently misrepresented the business prospects of his engineering firm. On the remaining issues the jury found, in response to interrogatories, that Hadra had satisfactorily performed his duties in Iran, that Blum had not reassigned him to Dallas, and that Blum owed Hadra $4,500 for unreimbursed business expenses. Also, to an interrogatory asking the amount of damages suffered by Hadra from Blum’s breach of Hadra’s employment contract, the jury answered “$0.” The district court entered judgment for Hadra in the amount of $24,500, including $4,500 for unreimbursed expenses and $20,-000 for the unpaid balance owed by Blum for Hadra’s engineering firm in Phoenix.

Hadra moved for a new trial, which the district court granted in part, limiting the new trial to the issue of damages that Hadra had suffered through January 1976 because of Blum’s breach of the employment contract. The court held that the award of $0 was inappropriate because the evidence would not support an inference that Hadra reasonably could have mitigated all of his contractual damages.¹

In the second trial the jury found that Hadra had the right to receive $97,205.10 under the terms of his employment contract and that he could not have earned any money in the exercise of reasonable diligence in other employment between July 22, 1975, and January 31, 1976. The district court awarded Hadra $121,705.10, including the contractual damages and the damages awarded in the first trial, plus 6% interest thereafter.

Blum urges first that the district court should not have granted Hadra a new trial on the ground of lack of proof of failure to mitigate. A district court’s ruling on a motion for new trial will usually stand absent an abuse of discretion, but closer scrutiny is required in reviewing a district court’s order granting a new trial on the ground that the jury’s verdict was based on insufficient evidence. See Spurlin v. General Motors Corp., 528 F.2d 612 (5th Cir. 1976); Massey v. Gulf Oil Corp., 508 F.2d 92 (5th Cir. 1975). A new trial is required where there is no evidence supporting the jury’s verdict. See Parker v. Wideman, 380 F.2d 433 (5th Cir. 1967); of. Urti v. Transport Commercial Corp., 479 F.2d 766, 769-70 (5th Cir. 1973); Indamer Corp. v. Crandon, 217 F.2d 391, 393 (5th Cir. 1954) (refusal to order a new trial in such circumstances error of law).

Under Texas law the defendant has the burden of proving the amount of money that a wrongfully discharged employee could have earned in mitigation of damages. See A. J. Foyt Chevrolet, Inc. v. Jacobs, 578 S.W.2d 445, 447 (Tex.Civ.App. 1979); Mr. Eddie’s, Inc. v. Ginsberg, 430 S.W.2d 5, 9 (Tex.Civ.App.1968), writ ref’d n.r.e.. Blum urges that there was evidence supporting an inference that Hadra could have mitigated all damages flowing from the breach of contract. There was no such evidence. There was no substantial evidence of the amount of money that Hadra could have earned; indeed Blum implicitly concedes in its brief that the only evidence of the amount that Hadra could have earned after breach was Hadra’s own testimony that he actually earned a few thousand dollars working as a consultant while he was in Majorca. Our Brother Clark suggests that the district court was in error because of the offer to Hadra of a position as project engineer in Dallas. This argument presupposes that there was evidence on the basis of which the jury could find that the Dallas position was comparable to the job in Iran and that the salary for the Dallas position was at least as great as that for Iran. Blum concedes that the Dallas position entailed less responsibility because it did not carry management duties as did Hadra’s job in Iran. There was no evidence of what the salary would have been for the Dallas job.² Moreover, Blum’s contention that the Dallas offer was evidence relating to mitigation is new on appeal. Its position at trial was it had not breached the employment contract-beeause it had never fired Hadra but merely transferred him by reassigning him to an equivalent position in Dallas and that, under the employment contract, it could do this. The jury rejected this contention. The theory that the offer of the Dallas position was evidence of available post-breach employment to be considered in mitigation of damages was not presented to either judge or jury at the trial. It may not be considered on appeal in the absence of a manifest miscarriage of justice. See Alabama Great Southern Railroad Co. v. Allied Chemical Corp., 501 F.2d 94, 103 (5th Cir. 1974), opinion adopted by court en banc, 509 F.2d 539 (5th Cir. 1975). There is no such injustice here. Thus the offer of a position in Dallas was not evidence tending to discharge Blum’s burden of proving the amount of money that Hadra could have earned.

The district court did not err in granting a new trial only as to damages arising from the breach of the employment contract. Blum urges that the jury in the first trial did not find that Hadra had been wrongfully discharged and, therefore, this issue should have been retried. That jury did find, however, that Hadra has substantially performed his duties in Iran and that Blum had not reassigned him to Dallas. Under Texas law these findings mean that Hadra was wrongfully discharged. See Dixie Glass Co. v. Poliak, 341 S.W.2d 530, 542 (Tex.Civ.App.1960), writ ref’d n.r.e., 347 S.W.2d 596 (Tex.1961) (finding of substantial performance leads to inference of dismissal without good cause).

Blum argues that the issues of wrongful discharge and damages are so interwoven that it was inherently unjust to order a new trial only of the latter. See Gasoline Products Co. v. Champlin Refining Co., 283 U.S. 494, 51 S.Ct. 513, 75 L.Ed. 1188 (1931); Williams v. Slade, 431 F.2d 605, 608-09 (5th Cir. 1970). Blum also suggests that a complete new trial was required because the first jury’s answers were the result of a compromise. See Hatfield v. Seaboard Air Line Railroad Co., 396 F.2d 721 (5th Cir. 1968). Blum, however, points to no circumstances, such as those listed in Hatfield, that indicate the possibility of a compromise verdict and concedes in its brief that jury misconduct was unlikely here. Moreover, the question of whether Hadra was wrongfully terminated is separate from the issues of how much he would have made under his contract and could have made in other reasonably obtainable employment. Thus where, as here, the jury’s findings on questions relating to liability were based on sufficient evidence and made in accordance with law, it was proper to order a new trial only as to damages. See Gasoline Products Co. v. Champlin Refining Co., supra; Edwards v. Sears, Roebuck & Co., 512 F.2d 276, 281-83 (5th Cir. 1975); Parker v. Wideman, supra, 380 F.2d at 437.

Blum challenges the district court’s charge to the jury in the second trial on the issue of mitigation, contending that it was prejudicial error to instruct that: (1) Hadra had a duty, at least for a reasonable time after his discharge, only to seek employment comparable to his previous job; (2) after that time he had to seek and accept any work for which he was qualified; and (3) he was not required to consider opportunities unreasonably distant from his usual place of employment. These limitations are derived from long-standing Texas law and are not error. See, e.g., Kramer v. Wolf Cigar Store Co., 99 Tex. 597, 91 S.W. 775 (1906); San Antonio & A. P. Ry. Co. v. Collins, 61 S.W.2d 84 (Tex.Comm.App.1933); 38 Tex.Jur.2d, Master & Servant § 22. These limitations on the concept of “reasonable diligence” were not eliminated by the more general statements in Dixie Glass and Mr. Eddie’s, supra, where limitations such as these were not at issue. Moreover, the decision in Kramer was by the Texas Supreme Court and not subject to being overruled by Court of Civil Appeals cases cited by appellant.

Under the above instructions the jury necessarily found that the United States (and Texas in particular) is unreasonably distant from the place of employment, or that the Dallas position was not “comparable” to the job in Iran, or it found both. We see no basis on which to predict that Texas would change its law of mitigation and hold that when one has lived in the United States and is employed to work outside the United States and is fired in breach of contract he must, as a matter of law and, without regard to distances involved, mitigate by returning to the United States and accepting employment. Nor can we predict that Texas would amend its mitigation law by holding that for such a person, as a matter of law, salary subject to United States income tax is “comparable” to salary not subject to United States income tax.

Blum asserts that the district court erred in refusing to order remittitur because the parties had stipulated that Hadra’s annual salary in Iran was $50,000. This argument ignores that it was also stipulated that Hadra was to receive $50,000 per year in expenses, Hadra’s wife was to be paid $30,000 annually, and compensation under the employment contract was to be allocated in a manner that minimized Hadra’s tax liability. Reading these stipulations together, the district court correctly held that the jury could reasonably infer that the entire $130,000 due annually under the contract was actually meant to be compensation to Hadra.

The district court did not err in awarding prejudgment interest from the date that the employment contract ended. A. J. Foyt Chevrolet, Inc., supra, recently upheld such an award in a case involving issues of wrongful discharge and mitigation. See also Watkins v. Junker, 90 Tex. 584, 40 S.W. 11 (1897); McDaniel v. Tucker, 520 S.W.2d 543 (Tex.Civ.App.1975); Beck v. Lawler, 422 S.W.2d 816 (Tex.Civ.App.1967), writ ref’d n.r.e. (interest due when “measure of recovery is fixed by the conditions existing at the time the injury is inflicted ... ”); cf. Mr. Eddie’s, Inc. v. Ginsberg, supra (award of prejudgment interest not error in case of wrongful discharge in absence of exception). Winandy Greenhouse Construction, Inc. v. Graham Wholesale Floral, Inc., 456 S.W.2d 470 (Tex.Civ.App. 1970), no writ, and the other cases cited by Blum are distinguishable on their facts and contrary to the weight of Texas authority.

Finally, Blum urges that its claim that Hadra fraudulently misrepresented the business prospects of his Phoenix firm was not barred as a matter of law by the two-year statute of limitations. Mr. Blum, however, stated to the court that he was aware in May 1973 that Hadra’s projections did not seem to be correct and that the firm was not generating as much money as expected. That knowledge should have been enough to cause a reasonably prudent person to inquire further. Thus, the limitations period began to run at that time, see Susanoil, Inc. v. Continental Oil Co., 519 S.W.2d 230, 238 (Tex.Civ.App.1975), writ ref’d n.r.e., and expired long before Blum raised the issue of fraud as either an affirmative defense in February 1976 or a counterclaim in February 1977.

AFFIRMED.

1 . The trial judge explained in his order that there was evidence from which the jury could have inferred that Hadra could have mitigated his damages in part and had failed to do so; but that there was not evidence permitting an inference that he could have totally mitigated and had failed to do so, and that absent such a permissible inference the verdict of zero damages could not stand.

[wjithout analyzing the evidence in detail, it was defendant’s burden, after a showing of contractual breach by defendant, to establish the possibility of mitigation and the amount by which mitigation was possible. The Court feels that the jury, based upon the evidence before them, could have inferred that plaintiff might have mitigated within some time after he was terminated, but could not have inferred that the amount by which he could [have] mitigated would have equaled or exceeded the lower limit of his contractual damages.

2 . Blum argues that the jury reasonably could infer that it would have paid Hadra the same salary he had always received and that there would have been no break in other employment benefits in the Dallas position. This would have been a conclusion based upon speculation rather than evidence, and also would have ignored the revealed differences between compensation for employment in Iran and stateside employment.