SMITH v. MERRIMACK VALLEY CORP (2019)

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

These appeals arise from an action brought by the plaintiff, Steven P. Smith, for sales commissions and bonuses owed to him by his former employer, defendant Merrimack Valley Corp., and its principal, defendant Leonard J. Thomas, Jr. (collectively, MVC). A Superior Court jury awarded damages to Smith for MVC's violations of the Wage Act, G. L. c. 149, § 148,³ and the trial judge awarded attorney's fees and costs, including a sanction for MVC's failure to timely produce critical documents in discovery.

MVC appeals from the principal judgment, raising various trial-related issues, and from the separate judgment awarding attorney's fees and costs. In his cross appeal, Smith challenges how the discovery sanction was fashioned and the award of costs. We affirm.

Discussion. 1. MVC's claims of trial error. “We review a judge's evidentiary rulings on a motion in limine for abuse of discretion.” Commonwealth v. Rosa, 468 Mass. 231, 237 (2014). In the absence of an abuse of discretion or other legal error, we will not disturb a judge's decision on whether to admit evidence. Zucco v. Kane, 439 Mass. 503, 507 (2003). We review jury instructions for error and, if erroneous, whether the error affected the substantial rights of the objecting party. See Beverly v. Bass River Golf Mgt., Inc., 92 Mass. App. Ct. 595, 603 (2018). “An error in jury instructions is not grounds for setting aside a verdict unless the error was prejudicial -- that is, unless the result might have differed absent the error.” Id., quoting Blackstone v. Cashman, 448 Mass. 255, 270 (2007).

a. Exclusion of the settlement agreement. MVC asserts that the trial judge erred by excluding the parties' settlement agreement from evidence. The settlement agreement was the subject of a summary judgment motion and two motions in limine. On appeal, MVC focuses on the trial judge's determination that the settlement agreement was inadmissible because it amounted to an invalid “special contract” exempting MVC from compliance with the Wage Act.

The Wage Act provides that “[n]o person shall by a special contract with an employee or by any other means exempt himself from” the Act. G. L. c. 149, § 148. MVC argues that because the settlement agreement addressed only the amount of the commissions owed to Smith, rather than the timing of payments (thus never depriving Smith of a weekly wage), the agreement does not constitute a “special contract.” We disagree. To the extent MVC withheld commissions beyond the date when “the amount of such commissions, less allowable or authorized deductions, ha[d] been definitely determined and ha[d] become due and payable” to Smith, id., it violated the Wage Act. That is, MVC would be liable whether the commissions it owed were merely late, or were not paid at all. As the settlement agreement purported to limit or immunize MVC from Wage Act liability, it amounted to an impermissible “special contract.” Smith was entitled to present his Wage Act claims to the jury without MVC interposing the improper settlement of the claims as a defense.

Nevertheless, not all “special contracts” of this nature are categorically unenforceable. MVC further contends that the settlement agreement was enforceable as a general release, and that general releases are favored as a matter of public policy. See Crocker v. Townsend Oil Co., 464 Mass. 1, 14 (2010). However, a general release agreement is “enforceable as to the statutorily provided rights and remedies conferred by the Wage Act only if such an agreement is stated in clear and unmistakable terms” and “specifically refer[s] to the rights and claims under the Wage Act that the employee is waiving.” Id. The settlement agreement here contains no such express language. As the settlement agreement does not constitute a valid waiver of Smith's Wage Act claims and is therefore unenforceable, we discern no error of law or abuse of discretion in the judge's decision to exclude it from evidence.

b. Instruction on MVC's commission plan. The Wage Act applies, “so far as apt,” to the payment of commissions once they become “definitely determined” and “due and payable.” G. L. c. 149, § 148. In explaining the meaning of “definitely determined” to the jury, the judge instructed that MVC's compensation plan violated the Wage Act if MVC did not pay Smith the balance it owed him within six days of when the commission became “arithmetically determinable.”⁴ Without citation to any authority, MVC argues that a commission plan providing payment through a weekly draw in lieu of a lump sum does not violate the Wage Act because the commissions become “due and payable” only at the time of the weekly draw (and is even desirable as a matter of public policy). Indeed, the challenged jury instruction removed this defense from the jury's consideration. We need not determine whether payment of commissions by a weekly draw is permissible under the Wage Act, however, because even assuming that the instruction was erroneous, MVC has not shown that it was prejudicial.

MVC asserts that because the jury found for the plaintiff under the Wage Act, but not under the contract, it is “entirely possible that the [j]ury found that only the manner and timing of the payments (weekly draw vs. lump sum) were unlawful.” But nothing in the record suggests that the jury based their damages award on the fact that MVC made late payments. From what we can discern from the record the parties have provided us, the only issue at trial was how much of the commissions owed to Smith had been paid. Both sides agreed that Smith had been paid a total of $ 712,649.60 in commissions over the course of his employment with MVC.⁵ Smith's expert testified that Smith was owed a minimum of $ 380,653.13 more. MVC's expert testified that Smith had earned only $ 647,747.21 in commissions, that is, that MVC had overpaid Smith. Neither side explained in its brief, nor were they able to explain when questioned at oral argument, how the jury arrived at their damages award. Nothing in the record suggests that there was any evidence, or that the jury received any instruction, about how to calculate damages based on how long payments were withheld after they became definitely determinable.⁶ That is, nothing in the record suggests that the verdict was based on the timing of commission payments, as opposed to their nonpayment. As the parties have failed to provide a complete record of the evidence or the judge's instructions, we are in no position to review, much less disturb, the judgment. See Buddy's Inc. v. Saugus, 62 Mass. App. Ct. 256, 264 (2004). In short, MVC has not made a plausible showing that the jury might have reached a different result if the challenged instruction had not been given. See Campbell v. Cape & Islands Healthcare Servs., Inc., 81 Mass. App. Ct. 252, 258-259 (2102); Global Investors Agent Corp. v. National Fire Ins. Co. of Hartford, 76 Mass. App. Ct. 812, 825 (2010).

c. Statute of limitations. MVC challenges the special question that asked the jury to determine the amount of unpaid “man-days sold” bonuses that were “definitely determined and due and payable to Smith on or before January 15, 2012.” MVC contends that by asking the jury to determine damages without a specific start date, the judge allowed the jury to consider unpaid bonuses that may have been due prior to April 15, 2010, the agreed-upon cutoff date under the Wage Act's three-year statute of limitations.

Our review of this claim is again hampered by the deficient record before us. Specifically, MVC provided only a partial transcript of the conference during which the parties and the judge discussed the language of the special questions.⁷ Smith attached to his reply brief some additional pages of the transcript, which appear to show that the April 15, 2010, cutoff date was included in an earlier version of the proposed special questions, and that counsel for MVC expressly agreed to its removal. MVC therefore waived its right to claim error on appeal. See Boston Edison Co. v. Massachusetts Water Resources Auth., 459 Mass. 724, 740 (2011), citing Mass. R. Civ. P. 51 (b), 365 Mass. 816 (1974).

Even if MVC had preserved its rights, the limited record available to us does not demonstrate that the omission of the statute of limitations cutoff date was prejudicial. To the contrary, Smith's expert testified he was “fully paid” as of September 14, 2010, and MVC's expert testified that Smith was credited with $ 32,000 in October 2010, which accounted for “all commissions through 2010.” Based on the record available to us, the evidence suggests that the damages award could not have been based on commissions or bonuses outside of the statute of limitations period.

In summary, MVC has not demonstrated any error of law or abuse of discretion warranting relief from the jury's verdict.

2. MVC's appeal of attorney's fees. A party who prevails in a Wage Act claim is entitled to reasonable attorney's fees and the costs of litigation. Dixon v. Malden, 464 Mass. 446, 453 (2013), citing G. L. c. 149, § 150. Absent legal error, we review an award of attorney's fees and costs for abuse of discretion. See Beninati v. Borghi, 90 Mass. App. Ct. 556, 568 (2016). A trial judge has considerable discretion in awarding attorney's fees under applicable statutes, and when made, the “award is presumed to be right and will not be disturbed without a showing that the fee is excessive.” Keville v. McKeever, 42 Mass. App. Ct. 140, 155–156 (1997). The trial judge “is in the best position to determine how much time was reasonably spent on a case, and the fair value of the attorney's services.” Fontaine v. Ebtec Corp., 415 Mass. 309, 324 (1993).

MVC asserts that the award of $ 499,936.20 in attorney's fees is excessive because it is disproportionate to the $ 52,183.41 (before trebling and interest) awarded by the jury in compensatory damages, reflects an unreasonable amount of time and labor, and is inappropriate for a case that MVC claims was not complex.

The judge issued a detailed decision, reflecting a thorough review of the billing records and other submissions before her. The judge found the hourly rates reasonable, reduced the total fees by twenty percent, and applied other reductions where appropriate. With respect to MVC's concern with proportionality, the judge noted that “some disproportion between the verdict and the fee award is warranted given the work required, and reasonably necessary in light of the extensive and prolonged discovery, motions practice, and length of the jury trial.” See A.C. Vaccaro, Inc. v. Vaccaro, 80 Mass. App. Ct. 635, 643-644 (2011) (attorney's fee award not “excessive by reason of its disproportionality” to total amount of damages where proceedings “encompassed extensive discovery and motion practice, and a five-day jury trial”). We discern no abuse of discretion.

3. Smith's appeal of discovery sanction and award of costs. The trial judge possesses wide discretion in sanctioning a party for discovery violations. See Short v. Marinas USA Ltd. Partnership, 78 Mass. App. Ct. 848, 852-853 (2011). Here, the judge imposed a sanction against MVC for producing thousands of documents on the eve of trial, well after the close of discovery, which were responsive to Smith's document requests and obviously critical to Smith's case. The judge determined that MVC's failure was “egregious and deserving of sanctions.”⁸ Rather than excluding the late-discovered documents or imposing a specific amount to be paid by MVC, the judge ordered MVC to place $ 30,000 in escrow, pending resolution of any appeal, to reimburse Smith for expert fees he incurred as a result of the late production.

Smith takes exception, arguing that the judge later recharacterized the reimbursement as part of the statutorily mandated costs awarded to Smith under the Wage Act. However, as the judge's order makes clear, the sanction was always intended to be a reimbursement of costs incurred, as determined at a later date. Moreover, by ordering the sanction to be held in escrow, the judge reserved a meaningful opportunity for MVC to appeal the order. While we agree that fashioning the sanction in this manner may have diminished its impact, “it is not our province to substitute our judgment for that of the judge.” Short, 78 Mass. App. Ct. at 853.

Smith also challenges the costs awarded for the services of his accounting experts. With respect to Frank Rudewicz, Smith argues that the judge abused her discretion by awarding costs for only the hours Rudewicz spent preparing for and testifying at trial, but not for the time he spent working on the case prior to trial. We discern no abuse of discretion. The $ 7,100 awarded to compensate for Rudewicz's time was in addition to the $ 30,000 sanction, which the judge found reasonable to cover the costs associated with “the preparation of the calculations and expert report as to [Smith's] damages.” Smith makes no reasoned argument, nor does he cite any documents in the record, to show that $ 30,000 was insufficient to cover his pretrial expert costs. Without any basis in the record to support Smith's claim, we will not substitute our judgment for that of the trial judge. See Fitzgibbons's Case, 374 Mass. 633, 640 (1978).

Smith further argues that the judge abused her discretion by reducing Rudewicz's hourly rate -- which he billed variously at $ 400, $ 410, $ 450, and $ 510 -- to $ 250 for trial preparation and $ 300 for time spent in court. Again, the record contains no documentation to support Smith's claim that Rudewicz's services were worth their sticker price, leaving us unable to conclude that the hourly rates the judge did allow were out of line with that of other forensic accountants with similar experience.

Finally, Smith challenges the judge's decision to deny costs altogether as to Brian Peterson. The judge declined to award fees for Peterson's time because Smith “has not provided the court with information regarding Mr. Peterson's credentials and, thus, this court cannot find any basis to award fees for his time.” As we are in the same position as the judge, we have no basis in evidence to determine that she abused her discretion.

Judgments affirmed.

FOOTNOTES

3.   The jury found for MVC on Smith's breach of contract claim.

4.   The judge instructed as follows:“So, what does definitely determined mean? In this case, it means arithmetically determinable when the job is closed and the company has all the profit it needs to determine the net profit of the job.“The Wage Act requires that once the employer has all this information to determine the net profit of the job, the employer is required to determine the commission and pay the employee within six days the commission that he has earned.“To the extent that the commission plan ․ permits the employer to continue only paying the 1,400-dollar draw after the plaintiff's commission is able to be arithmetically determinable, then the commission plan is unenforceable, because it is in violation of the Wage Act.”

5.   Smith's expert testified that Smith had been paid $ 680,649.60, but assumed in MVC's favor that Smith had received a side payment of $ 32,000.

6.   The sparse record before us indicates some recognition that if Smith's commissions were merely delayed, rather than unpaid, his Wage Act damages would be limited to interest lost from the delay. In this regard, Smith's counsel stated, “[W]e haven't sought the interest because they --,” but never completed this thought after the interruption.

7.   We are unable to discern if this omission was inadvertent or intentional; it was nonetheless misleading to the court.

8.   In responding to Smith's claim, MVC argues in passing that its late discovery of 5,500 pages of crucial documentary evidence was “not the product of willful neglect,” but mere “happenstance.” The judge specifically rejected MVC's characterization, finding that “[defendant] Thomas totally failed to make any, let alone sufficient, efforts before claiming [d]efendants had no such documents,” and that his conduct was “intentional” as well as “egregious.” MVC has not shown that this finding was clearly erroneous or that the sanction was an abuse of discretion.