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Gonten v. Research Systems Corp.

July 26, 1984

MICHAEL VON GONTEN, PLAINTIFF-APPELLEE, CROSS-APPELLANT,
v.
RESEARCH SYSTEMS CORPORATION, DEFENDANT-APPELLANT, CROSS-APPELLEE



Appeal from the United States District Court for the Southern District of Indiana, Evansville Division. No. 80 C 216 -- Gene E. Brooks, Judge.

Wood and Cudahy, Circuit Judges, and Nichols,*fn* Senior Circuit Judge.

Author: Nichols

NICHOLS, Senior Circuit Judge.

Defendant below appeals from a judgment which the United States District Court for the Southern District of Indiana entered on March 11, 1983, on a jury verdict awarding plaintiff $61,375 for damages resulting from a breach of plaintiff's employment contract. Plaintiff below cross-appeals, alleging that the district court erred in granting defendant's motion for a directed verdict as to plaintiff's claim for punitive damages. We affirm.

I

Defendant Research Systems Corporation (RSC) is a market research firm located in Evansville, Indiana. RSC provides its clients, who are mostly manufacturers of packaged goods, with marketability estimates of their new products and copy testing services for their television commercials. To provide these services, RSC uses research models and sophisticated formulae for analyzing consumer behavior.

Plaintiff Michael von Gonten (von Gonten) was RSC's senior vice-president and director of Client Service and Basic Research. On April 27, 1979, he entered with RSC into a one-year written Employment Agreement (the contract) which provided, inter alia, for automatic one-year renewal unless either party notified the other in a writing sent by registered or certified mail not less than 6 months before the desired termination date.

In July 1979, RSC's chairman, Reginald Colliere, sent by certified mail a letter to von Gonten, stating that he wanted to review and revise von Gonten's contract before January 1980. Collier explained that he sent the letter by certified mail because the "contract required" it. While this notice could have been read as notice that the contract was not to be renewed, or would be renewed only on renegotiated terms, it seems nobody so construed it until RSC, far too late, did so in briefing this appeal.

Because of this letter, and also because of increasing job dissatisfaction, von Gonten hired in January 1980 an executive search firm which arranged for a meeting between him and the president of an RSC competitor, the Bases Division of Burke Marketing Service, Inc. (BMSI) of Cincinnati, Ohio. Von Gonten extensively and secretly interviewed with BMSI during the last week of March and the first week of April 1980.

In early April, Collier sent to the president of RSC, Margaret Blair, a handwritten note about a "Supplement or Addendum" to von Gonten's contract, which Blair gave to von Gonten on April 9, 1980. The note stated, among other things, that von Gonten's contract for the 1979-1980 year would have a ceiling of $90,000 total compensation, including base salary. Von Gonten's compensation for the fiscal year ending October 1, 1979, had consisted of a $58,500 base salary and a $12,600 "incentive bonus." As this was a thin year for RSC, von Gonten would have done much better in a good year, which it was anticipated the next would be.

On May 9, 1980, von Gonten sent to Blair via registered mail, as the contract required, a letter of resignation. Although the letter did not specify its effective date, von Gonten indicated in a handwritten not to Blair, dated May 14, 1980, that he intended to live up to the letter of the contract, i.e., to serve for 6 months from the notice date. Blair, concerned about allowing von Gonten to have access to sensitive information, clients, and projects while becoming an employee of a competitor, asked him to work at home while completing his assigned projects.

On July 25, 1980, Blair sent von Gonten a letter terminating his employment:

For various reasons of which you are aware, including but not limited to the fact that you are going to work for the Bases Division of Burke, we hereby terminate your employment immediately.

Until this point, von Gonten had received all compensation due to him. Afterwards, however, RSC withheld von Gonten's final paycheck as a set-off for $7,500 advanced to him against his second year bonus, and it refused to pay von ...


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