Opinion
B155737.
10-15-2003
KARL J. REEB, Cross-complainant and Appellant, v. AIRTOUCH COMMUNICATIONS, INC. et al., Cross-defendant and Appellant.
Orrick, Herrington & Sutcliffe, Gregory L. Evans, Jeffrey D. Wohl and Linda J. Gulledge for Appellants AirTouch Communications, Inc., AirTouch PCS, Inc., and AirTouch Communications Severance Plan. Gillespie, Rozen & Watsky, Hal K. Gillespie, Matthew T. Slimp; Zarate & Vega, and Mario D. Vega, for Appellant Karl J. Reeb.
AirTouch Communications, Inc., AirTouch PCS, Inc., and AirTouch Communications Severance Plan (AirTouch) appeal a judgment on a jury verdict awarding $3.8 million to Karl J. Reeb (Reeb) on his claim for long-term incentive compensation, and a bench trial award of $120,000 in severance pay on Reebs ERISA claim. AirTouch contends the oral contract upon which Reeb recovered incentive compensation was not supported by sufficient evidence and is barred by the statute of limitations and the statute of frauds. AirTouch further contends that on the oral contract claim, the trial court erred in giving certain jury instructions, used the wrong measure of damages, and erroneously awarded Reeb pre-judgment interest. On Reebs ERISA claim, AirTouch contends the evidence does not support a finding Reeb was terminated and that the trial court improperly overturned the plan administrators decision to deny benefits. Reeb cross-appeals, contending the trial court erred in refusing to permit him to amend his first amended complaint to add a claim for fraud. We affirm the judgment.
FACTUAL BACKGROUND AN PROCEDURAL HISTORY
1. Introduction.
Reeb, an experienced human resources executive with AirTouch at its San Francisco Bay area offices, was recruited in mid-1995 to set up the human resources department at PCS PrimeCo (PrimeCo), a partnership between AirTouch, Bell Atlantic, and other telecommunications companies located in the Dallas/Forth Worth area. At AirTouch, Reeb participated in AirTouchs long-term incentive plan (LTIP), under which he received stock options for AirTouch stock. Because PrimeCo did not have an LTIP in place at the time of his recruitment, Reeb asked whether such a plan would be instituted and whether it would equate with AirTouchs LTIP. After being urged to sign a "Secondment Agreement" regarding his employment with PrimeCo, which provided he would no longer participate in AirTouchs LTIP, Reeb was assured nonetheless that the PrimeCo LTIP would be as good as the AirTouch plan, i.e., that he would be "kept whole" and would "not lose out" by going to PrimeCo. The PrimeCo LTIP instituted in April 1996 was a cash-based plan with a cap on the benefits. Later, when AirTouch merged with Vodafone in 1998, the value of AirTouch stock skyrocketed.
In mid-1999, AirTouch merged with Bell Atlantic and sent Reeb a letter on September 1, 1999, informing him that his position would be eliminated as of November 1, 1999. Reeb obtained a position with another employer in October 1999, but before he could inform PrimeCo, he was advised that his position at PrimeCo would not be terminated after all. Because a voluntary departure would mean the loss of his severance benefits, Reeb requested that AirTouch honor its September 1, 1999 letter terminating him. AirTouch refused, and refused to pay his severance benefits.
2. Reebs Recruitment and Tenure at PrimeCo.
Reeb started working for AirTouch in May 1989 as general manager of human resources for the cellular division in Irvine, California. In June 1991 Reeb moved to AirTouchs San Francisco Bay area offices to work as the Director of Compensation Benefits. Reeb made approximately $100,000 per year, plus a 25 percent incentive bonus and stock options.
George Schmitt had been the executive vice president of the international division of AirTouch, and had started up AirTouchs German operations. In 1994, he was the president and CEO of PrimeCo. Schmitt had been "seconded" to PrimeCo, meaning that he worked for AirTouch but had to take direction from the board of directors of PrimeCo.
In early 1995, Reeb had a conversation with Schmitt in the elevator in which Schmitt asked Reeb to join him at PrimeCo. The headquarters of PrimeCo was in West Lake, Texas, which is between Dallas and Fort Worth. Schmitt told Reeb he would remain an AirTouch employee and remain on AirTouchs payroll, but that he would be loaned out, or "seconded," to Prime Co. Reeb told Schmitt he was happy living with his family in the San Francisco Bay area.
In April 1995, Schmitt approached Reeb again, and again asked him if he wanted to join PrimeCo. Schmitt told Reeb that with respect to the incentive plan, Reeb would "be kept whole" even if he joined PrimeCo. Schmitt was interested in Reeb because he had a good background in human resources.
Reeb and his wife visited Texas in late May. They looked at the location of the new PrimeCo headquarters. Afterwards, in June 1995, Reeb spoke to Schmitt. Reeb indicated he would be interested, and Schmitt asked him to sign a "seconded" letter. Again, Schmitt told Reeb, "youre gonna be kept whole. Youre not going to lose out." There was no other discussion.
Schmitt observed that Reeb, like everyone else, was concerned that there would be a plan to take care of things like stock options that had been part of the compensation package at AirTouch. Schmitt told all prospective employees that they would either be part of their home plan, or a plan would be developed for PrimeCo, which, because there was no stock involved, would be a "Black-Scholes" model in which they would get phantom stock in lieu of stock options. A "Black-Scholes" model would take into account the fact that PrimeCo was a riskier company than AirTouch. Schmitt would have told anyone he spoke to about moving to PrimeCo that they would be "kept roughly whole for what they would have gotten and they shouldnt worry about whether they would get more staying home or going to PrimeCo . . . in terms of salaries and benefits." Schmitt told prospective "secondees" that depending upon the companys discretion, and how PrimeCos stock option and long-term incentive plan was formed, they would "either pick up their home companys stuff if PrimeCo couldnt as a partnership agree on what was going to happen or they would get the PrimeCo developed plan." At the time these statements were made to Reeb, Schmitt had already discussed it with the board of PrimeCo and "had their concurrence there would be an incentive plan that would one way or the other take care of the people they were sending me." When he told prospective secondees that they would be kept whole, he meant they would be kept whole either by AirTouch or their home company, which in Reebs case, was AirTouch.
Black-Scholes is an economic formula to determine the net present value of a stock to aid in the calculation of the expected value of a given share of stock.
Schmitt recalled Reeb asking him on several occasions how the long-term incentive plan at PrimeCo would work. Schmitt did not having anything to do with the LTIP at PrimeCo. His expectation, however, was that "there would be an LTIP plan set up there and that it would be a PrimeCo plan, and that on the day it was established, it would roughly make things even for everybody, and from that point on, all the people at PrimeCo who were covered by that plan would be paid however that went." Schmitt intended that Reeb would be kept whole prior to the time the PrimeCo plan was implemented; from that point on, Reeb would "live or die" by the PrimeCo plan. However, "you dont put an LTIP in and then cap it, at least not in my experience; so that may be something my successor would have done because he was from Bell Atlantic and theyre that kind of a company. AirTouch was not that kind of a company, nor do I run that kind of a company."
Reeb does not recall Schmitt mentioning "Black-Scholes." Reeb did not ask Schmitt to put his statements that Reeb would be "kept whole" in writing because he trusted him. Furthermore, Reeb believed that if he had asked Schmitt to put it in writing, Schmitt would not have felt that Reeb trusted him. Reeb expected to work with Schmitt when he got to Dallas.
Reeb signed a Secondment Agreement on June 28, 1995. The Secondment Agreement provided that Reeb would be the Director of Human Resources at PrimeCo commencing July 1, 1995, at an annual salary of $105,000, with a short-term incentive of 25 percent of his annualized salary. The Secondment Agreement further provided (at the third bullet point), that "PCS PrimeCo intends to develop a long-term incentive plan, but eligibility criteria and the other terms of the plan have not yet been determined. If you are eligible to participate in the PCS PrimeCo long-term incentive plan, you will be notified of the plan provisions once they have been finalized. . . . [¶] These incentive opportunities are provided by PCS PrimeCo in lieu of AirTouchs short- and long-term incentive programs and will be prorated from the start of your assignment. All future compensation actions while on this assignment will be at the discretion of PrimeCo. . . . As stated above, while at PCS PrimeCo, you shall no longer be eligible for incentives under AirTouchs short- and long-term incentive programs."
When he received the Secondment Agreement, Reeb did not immediately sign it because he wanted to "confirm some elements" in it. The letter had been prepared by an administrative person within Reebs department. Reeb was concerned with the third bullet point under the "Compensation" section of the Secondment Agreement, which contained provisions relating to the LTIP at PrimeCo. Reeb knew that PrimeCo did not yet have a LTIP. Nothing in the Secondment Agreement indicated that the LTIP at PrimeCo would be a cash-based plan. Reeb called Schmitt about the Secondment Agreement and told him "regarding the long-term incentive plan . . . as Ive looked at this, I just wanna make clear that we all understand what you and I talked about. And [Schmitt] said, `just sign the agreement. I told you youre gonna be kept whole. Told you — youre not gonna lose out." Reeb signed the Secondment Agreement. Reeb looked for a "zipper clause" (integration clause) in the document, and if such a clause had been the Secondment Agreement, he would not have signed it.
Reeb believed that "I was moving to an organization that did not have a long-term incentive plan. Once the plan was developed, that would be in the PrimeCo plan. The provision that I had with George Schmitt was that I would be kept whole and would not lose out." Reeb understood he would no longer be under the AirTouch LTIP.
Reeb did not believe the PrimeCo LTIP would replace the agreement he had with Schmitt. He did not believe that the Secondment Agreement contradicted the terms of his agreement with Schmitt. Instead, he believed that the Secondment Agreement did not contain all of the terms of his agreement. Reeb did not tell anyone about the agreement with Schmitt until "days before he walked out of the door at PrimeCo" in 1999.
At PrimeCo, Reeb was responsible for compensation benefits assistance. He helped employees with their problems with benefits and compensation. PrimeCo had approximately 3,500 employees, and there were about 30 to 35 seconded employees from AirTouch working at PrimeCo.
Reeb worked on the PrimeCo LTIP as part of his job duties. A performance appraisal of Reebs job performance for the period July 1, 1995, through December 31, 1995, included a description of his position responsibilities, including "Develop[ing] a Long Term Incentive Plan. . . . [Reeb chose] a consultant to assist in designing a PCS PrimeCo long-term plan. In a very short time frame Karl selected a consultant that has gained the confidence of the Executive Committee. A first draft of the plan was presented to the Executive Committee and we are on track to gain approval at the next Executive Committee meeting on April 10, 1996. . . . In 1996 Karl will bring the design phase to completion, gain approval from the Executive Committee and develop a process to administer the plan. Karl will also be responsible for rolling out the employee communication program for the long-term incentive plan as well as the profit sharing plan for all employees. This process needs to be aggressively managed to ensure timely completion and communication to the employees."
Plan Design alternatives provided for "phantom stock," and a performance-based cash plan. Reeb recognized that the advantages of a stock plan were unlimited upside potential, while a performance-based, capped cash plan would have less risk, less reward. They considered using phantom stock for the plan, but did not. In spite of the fact he was working on the plan, Reeb never drafted anything for the PrimeCo LTIP which would put a guarantee into the plan by AirTouch as to the value of the plan; nor did he include a provision that the value of the PrimeCo LTIP should be guaranteed by AirTouch. At the time the PrimeCo LTIP went into effect in April 1996, Reeb was aware that the PrimeCo LTIP did not provide for the same potential upside as the AirTouch LTIP.
Jeffrey D. Schultz was the Executive Director of Compensation at AirTouch. Schultz understood the PrimeCo plan to be a cash-based plan. If PrimeCo peformed up to a target, executives would receive a grant of a fixed amount of money. If the goals were exceeded, they would receive more money. In late 1995, the seconded AirTouch employees were given a grant because the PrimeCo plan was not yet in place. This grant also consisted of stock options from AirTouch, so the seconded employees in effect got two grants.
In approximately March 1996, Reeb learned that the PrimeCo LTIP would be cash-based and capped at two times annual salary. Reeb knew that it had a potential ceiling on the return under the plan. The executive committee of PrimeCo made this decision; Reeb was not on this committee. The employees of PrimeCo were disturbed there was no plan in place. They could not have a stock option plan because PrimeCo was not a publicly traded company, and the other option was the "phantom stock arrangement."
Reeb knew that phantom stock was a surrogate for stock. Units of phantom stock are created to measure the performance of the business. This creates "an opportunity to really assess the value creation of the business. In a cash plan, you can create measures that can help replicate them." But a cash plan does not encompass all of the things that could possibly influence the business. The downside of phantom stock is that it is very difficult to explain, and difficult to get the partners to agree on the value of the business. A third party would be needed to value the business.
Schmitt left PrimeCo September 25, 1995. After he left, he was replaced by Ben Scott, a seconded employee from Bell Atlantic. Scott left PrimeCo in August 1997, and McAdam, an AirTouch employee, replaced him. McAdam knew that AirTouch seconded employees had been covered by an LTIP at AirTouch. McAdam wrote to Jeff Schultz on May 7, 1996, that a grant of stock options to AirTouch employees would allow such employees "to diversify their risk across two LTIP plans." McAdam interpreted it as providing a bridge for employees who did not have an LTIP plan in place at PrimeCo, so they would have a benefit until the PrimeCo LTIP was in place.
In a memo to Schultz dated May 7, 1996, McAdam stated that senior management at AirTouch had requested a one-time grant of stock options for seconded employees at PrimeCo for 1996. "This grant was requested because it was strongly believed that PCS would not have an LTIP plan available to employees until late 1996 at the earliest, and that a grant of options was therefore necessary in order to treat seconded employees equitably."
Because the employees were disgruntled because no plan was in place, it was more expedient to put a cash plan in place. The plan at AirTouch did not have a cap on it, but the plan at PrimeCo did. The cap in and of itself did not cause Reeb to lose money. Indeed, when the PrimeCo LTIP was instituted he was not concerned because "there was no disparity or difference between the two plans, the value of the two plans." Even when Lowell McAdam became CEO of PrimeCo in 1996 or 1997, because the value of the two plans was still about the same, Reeb was not concerned. He did not say anything to McAdam. Reeb did not say anything to McAdam until October 1999.
The Vodafone merger was announced in late 1998 or early 1999. During mid-1999, McAdam had numerous conversations with seconded AirTouch employees regarding the price of AirTouch stock and the disparity between the AirTouch plan and the PrimeCo plan. Reeb asked if the AirTouch seconded employees might receive stock or some other compensation to address the disparity between the two plans. McAdam told Reeb and other AirTouch seconded employees that the compensation package was clear when they agreed to be seconded to PrimeCo, and that they did not have a right to negotiate at that point.
McAdam was not aware of any guarantees to seconded employees that they would not "lose out" if they went to PrimeCo. In late 1999, Terry Kramer, the vice president of human resources at AirTouch, asked Schultz to prepare an analysis comparing the value of the AirTouch plan to the PrimeCo plan. The value of the AirTouch grant was somewhat greater than the PrimeCo grant. He used the Black-Scholes methodology to value the options. AirTouch did not take any action as a result of Schultzs analysis.
During 1998, the PrimeCo plan did not have a payout. Reeb never said to anyone at this time that he needed to be "kept whole." Reeb never said anything to anyone about his agreement with Schmitt. However, in late 1998 or early 1999, Vodaphone made a bid to purchase AirTouch. This drove up the price of AirTouch stock. At that point, it "started to raise the flag" to Reeb that there was an issue.
In December 1998, Reeb raised the issue of the difference between the AirTouch plan and the PrimeCo plan with McAdam. Reeb was receiving a lot of calls from people who had been seconded to PrimeCo about the rise in AirTouch stock. Reeb agreed to be the "voice" for seconded AirTouch employees on the issue. Reeb spoke to McAdam, but did not get an answer until October 1999. Reeb had not told McAdam what Schmitt had promised, and did not do so until October 1999. Reeb explained that the "issues were already presented" in a manner that included all AirTouch employees.
2. Reebs Termination from PrimeCo.
In the summer of 1999 Reeb became concerned that he might be laid off. Bell Atlantic had made it known that it intended to leave the PrimeCo partnership because Vodafone was finalizing its purchase of AirTouch, and the partnership agreement permitted a partner to withdraw if another partner was acquired. Reeb was concerned because the PrimeCo entity was going to be disbanded, leaving him with no position. Reeb was contacted by numerous headhunters during this period (summer 1999) although he was not actively looking for a job.
Around this time, on September 1, 1999, Kramer sent Reeb a letter (exh. 78). Kramer informed Reeb that as a result of the Vodafone acquisition of AirTouch, certain positions would be eliminated in a restructuring. Reebs employment with PrimeCo would terminate as of November 1, 1999. However, "in the event the merger does not close prior to this date, your termination date will change to one day following the closing date of the merger. In order to ease your transition, the Company has designated you as a Participant in the AirTouch Communications Severance Plan (the `Plan)."
A similar letter was sent to six to 10 other employees. If the corporate restructuring mentioned in the letter did not take place, they would not have let Reeb go. However, at the time the letter was sent, the merger had already occurred.
Reeb understood the letter to mean that the merger had already taken place and that his position was being eliminated. At the time, Reeb had only heard rumors about the Bell Atlantic/AirTouch merger. Reeb started to look for another job. He spoke to Jeffrey Schultz of AirTouch, the executive director of executive compensation, but the conversation did not lead anywhere. Schultz told Reeb he could not be sure he would have a position available at AirTouch because Bell Atlantic and AirTouch were considering pulling all of their cellular operations together.
On October 22, 1999, Kramer again wrote Reeb (exh. 80). However, this time, Kramer wanted Reeb to remain with PrimeCo. Kramer advised Reeb that "the transfer of PrimeCos assets and operational control to the partners is not taking place in light of the recently-announced merger between Vodafone AirTouch and Bell Atlantic. As a result, the scope of positions to be eliminated [] that was earlier anticipated has been significantly diminished, as PrimeCo will continue its operations. Since your position is not being eliminated, your services are still needed. Therefore, we are withdrawing all prior letters relating to your termination of secondment to PrimeCo and/or employment with AirTouch."
Kramer sent this letter to let Reeb know that the restructuring had not taken place as planned, and that they needed him to stay with the business. Kramer intended the letter to be a withdrawal of Reebs termination even though he understood Reebs letter of October 27, 1999, to be asking for termination from AirTouch/PrimeCo and for Kramers original letter to be honored. Kramer had never heard of the agreement between Schmitt and Reeb that Reeb would be "kept whole."
When he received Kramers October 22, 1999 letter, Reeb went to speak to McAdam. McAdam told Reeb that he "did not know this was coming," apparently referring to the merger. Reeb wrote to Kramer on October 27, 1999 (exh. 82), advising Kramer that "[i]t appears you are attempting to retain my employment services for an undetermined period of time beyond my previously established termination date of November 1, 1999. . . . I have several concerns regarding your October 22, 1999 letter, including: [& para;] 1. I do not agree that you can simply unilaterally withdraw my termination date and my eligibility for severance benefits on that date. My termination date and severance benefit eligibility was clearly communicated to me. I have prudently acted upon those communications as I assumed that you would have anticipated. [¶] 2. . . . It is my understanding that I am the only non-executive AirTouch secondee and/or PrimeCo employee who has received such a letter attempting to unilaterally withdraw the written notice of termination. All other non-executive AirTouch secondees and PrimeCo employees who received termination notices were afforded the opportunity to accept November 1, 1999, as their final date of employment or establish a mutually agreed upon extension with a future date of termination. [¶] In the spirit of equitable and consistent treatment of employees, I respectfully request that you please honor the representations you made in your written notice of termination to me on September 1, 1999."
Reeb understood the September 1, 1999 letter to mean that he was terminated, as he was an "at-will" employee. Reeb intended his October 27, 1999 letter to inform Kramer that he viewed the October 22, 1999 letter as an attempt to revoke his termination and deny him the benefits to which he would be entitled.
In late October 1999, McAdam asked Reeb what it was going to take to get him to stay with PrimeCo. Reeb informed McAdam that if his deal with Schmitt was honored with respect to him and all other seconded AirTouch employees, he would stay. McAdam told Reeb that he had already gotten a final answer on that question, and the answer was "no" and that "you people in Texas are the biggest bunch of whiners." At this time, the difference under the AirTouch plan and the PrimeCo plan was about $3.4 million. Reeb did not expect to be covered by the AirTouch LTIP. Rather, he expected that he would be "made whole."
Kramer left Reeb a voice mail message that Reeb received on November 1, 1999, wherein Kramer stated that "the decision weve rendered still stands. Consider this as a vote of confidence that we still need your services here at AirTouch."
On November 3, 1999, Pam Day, the vice president of human resources, wrote to Reeb to advise him that "[d]uring the processing of your termination Employment Profile, it came to my attention that it was incorrectly prepared in several ways. Specifically, the termination code was identified as an involuntary Reduction in Force based on notice given 9-1-99 by the company. Since your job was ultimately not eliminated and you were not therefore displaced, your departure should have been characterized as a voluntary termination."
The "AirTouch Communications Severance Plan," was for the stated purpose of providing "for the payment of Severance Benefits to certain Eligible Employees of the Participating Entities whose employment is involuntarily terminated for reasons other than cause or disability." Exceptions to the payment of benefits included those employees who voluntarily left their employ. Reeb did not sign the "Severance Agreement and Release" (exh. 78) because the Severance Agreement provided that it should not be signed before the employees last day of employment, and prior to that time, Reeb was informed that he would not be getting severance pay.
Reeb exercised his AirTouch stock options on November 1, 1999; otherwise, they would expire. Although he made money selling the stock, Reebs loss as a result of going to PrimeCo, rather than staying at AirTouch, was $3,399,134. Reeb did not remain at PrimeCo, instead leaving on November 11, 1999. He had not received any job assurances from PrimeCo, and in fact had accepted employment elsewhere.
3. Proceedings in the Trial Court.
On March 31, 2000, AirTouch filed a complaint for declaratory relief against Reeb, seeking a judicial determination of the parties rights and obligations under the Secondment Agreement. On May 26, 2000, Reeb filed a cross-complaint for damages against AirTouch. Reebs First Amended Cross-Complaint, the operative pleading, contained claims for (1) quasi-contract, (2) breach of oral contract, (3) breach of the covenant of good faith and fair dealing, and (4) violation of ERISA for AirTouchs failure to pay severance benefits. AirTouch voluntarily dismissed its complaint without prejudice on June 5, 2001.
Prior to trial, AirTouch moved for summary judgment on the grounds that the statute of limitations barred Reebs claims for breach of oral contract and because the terms of the oral contract contradicted the terms of the written Secondment Agreement. The trial court denied AirTouchs motion. AirTouch moved in limine to exclude any extrinsic evidence of the oral contract on the grounds that the contradicted the express terms of the written Secondment Agreement. AirTouch also sought an in limine ruling for a court trial of the severance benefits claim first, before the remaining claims were tried before a jury. The trial court denied these motions.
Reeb moved to amend his cross-complaint to add a claim based upon fraud. Reeb contended that at Schmitts deposition, Schmitt testified that the "keep whole" promise was only intended to be in effect until PrimeCo implemented its own plan; after that, Reeb would "live or die" based upon PrimeCos performance. Reeb contended Schmitt fraudulently concealed this information from him, thus forming the basis for an action sounding in fraud. Reebs motion to amend was filed three months after AirTouch filed its summary judgment motion and four months after Schmitts deposition. In their papers filed with the court in connection with the summary judgment motion, both parties referred extensively to Schmitts deposition testimony.
At the hearing, the court expressed concern with the fact that Reeb knew about Schmitts testimony and its significance prior to the summary judgment motion. Reeb contended that the import of what Schmitt was saying at his deposition did not "jump out" at him until later. Reeb advised the court that he would not be opposed to a continuance of the trial. The court found prejudice to AirTouch in permitting the amendment because additional discovery would be required as a result of the amendment, and that the trial had already been continued two times. Furthermore, although it found no bad faith on Reebs part in making the motion, the trial court denied Reebs motion on the basis it was untimely and trial was approaching.
Reebs cross-complaint on his LTIP claims was tried before a jury, which was requested to render an advisory verdict on the question of whether Reeb was terminated or whether he resigned his position. The jury found that Reeb was terminated, filling out the verdict form with four exclamation points. The jury also awarded Reeb $3,819,247 in damages on his LTIP claims.
The court held a bench trial on Reebs ERISA claim, finding that Reeb was entitled to $119,779.35 in severance benefits on the basis that AirTouch had terminated Reeb. AirTouch appeals the judgment entered August 21, 2002, and Reeb cross-appeals.
AirTouchs appeal was filed eight months before the trial court entered judgment. The premature notice of appeal is construed to be from the subsequent judgment. (Cal. Rules of Court, rule (2)(d)(2).) Reeb argues that AirTouch did not perfect its appeal because it did not appeal the general verdict in Reebs favor on the cause of action for breach of the covenant of good faith and fair dealing. We reject this argument. The verdict on the causes of action is merged into the judgment, making an appeal from the judgment an appeal relating to all causes of action. (See, ONeil v. General Security Corp. (1992) 4 Cal.App.4th 587, 602 [all causes of action arising from same obligation are merged into judgment].)
DISCUSSION
I. LTIP ISSUES.
A. Reebs Claims Are Not Barred by the Statute of Frauds Because Schmitts Promise Could Have Been Performed Within One Year.
AirTouch contends that Schmitts "keep whole" statements were not capable of performance within one year and therefore the oral agreement is within the statute of frauds. The very first opportunity for performance of the "keep whole" agreement was upon the first annual payout under a PrimeCo LTIP, and at the time of the promises, PrimeCo did not have an LTIP in place. AirTouch further contends that although this argument was not raised at trial, it may raise it on appeal because it presents a question of law to be applied to undisputed facts. Thus, accepting the "keep whole" promises as true, the statute of frauds defense may be applied as a matter of law.
Reeb argues that AirTouch waived the defense by failing to raise it at trial. In any event, because performance of Schmitts "keep whole" promise was possible within one year, the oral contract was not within the statute. Reeb points to several possible factual scenarios which were within the ambit of the agreement: Reeb was an at-will employee, and could have been terminated within a year; the PrimeCo joint partnership could have been dissolved within a year; Reeb could have gone back to AirTouch; AirTouch and PrimeCo could have established plans that were equivalent; or AirTouch could have issued stock options that vested immediately and which PrimeCo could have matched with cash value.
1. AirTouch May Raise This Argument for the First Time on Appeal.
In general, new theories may not be raised on appeal. An exception to this general rule is that a new theory pertaining only to questions of law applied to undisputed facts may be raised for the first time on appeal. In that situation, there is no unfairness to the opposing party, because they are not deprived of an opportunity to litigate facts relevant to the issue. (Yeap v. Leake (1997) 60 Cal.App.4th 591, 599, fn. 6.) However, if the new theory encompasses a fact situation that is open to controversy or was not put in issue at trial, the exception does not apply. (Richmond v. Dart Industries, Inc. (1987) 196 Cal.App.3d 869, 879.) In such case, the opposing party did not have an opportunity to present necessary evidence relating to the new theory. (Id. at p. 880.) Whether to apply the exception is entirely within the appellate courts discretion. (Resolution Trust Corp. v. Winslow (1992) 9 Cal.App.4th 1799, 1810.)
The rule limiting review based upon principles of estoppel or waiver is based upon the rationale that the parties cannot assert error for which they bear some responsibility. Waiver may occur by failure to take proper action in the trial court to avoid or cure the error. (Telles Transport, Inc. v. Workers Comp. Appeals Bd. (2001) 92 Cal.App.4th 1159, 1167.) The waiver rule differs from the failure to assert a theory of liability or defense in the trial court because in the case of waiver, an error has occurred in the trial court which was ignored or unremedied, while in the case of a new theory on appeal, no such error has occurred in the trial court. Therefore, to read the waiver doctrine to apply to any new theory raised on appeal (which, by definition, would not be raised below) would engulf the exception to the rule that no new theories may be raised on appeal. We therefore find no waiver.
Instead, we find that the necessary factual predicate to application of the bar of the statute of frauds is essentially undisputed: In June 1995, Schmitt promised Reeb he would be "kept whole" and would "not lose out" by going to PrimeCo. (Indeed, we could not apply the statute as AirTouch requests without assuming the factual predicate of a promise was true.) Only a legal question remains whether such promise could be performed within a year. Therefore, we will consider this new issue on appeal.
2. The Statute of Frauds Does Not Apply.
An agreement which by its terms cannot be performed within one year comes within the statute of frauds. (Civ. Code, § 1624, subd. (a); Munoz v. Kaiser Steel Corp. (1984) 156 Cal.App.3d 965, 971.) Only those contracts which expressly exclude performance within one year are unenforceable unless in writing. If it is merely unlikely that the contract will not be performed within one year, the statute does not apply. (White Lighting Co. v. Wolfson (1968) 68 Cal.2d 336, 343.)
The terms of the oral agreement are simple: Reeb would be "kept whole" and would "not lose out." There is nothing express in this agreement that performance could not possibly occur within the year of the agreements making. As Reebs hypothetical factual scenarios demonstrate, although unlikely, the agreement could have been performed within a year. The fact that at the time of the Schmitts promises there was no LTIP in place at PrimeCo does not render performance impossible within one year. AirTouchs arguments based upon unlikeliness of performance do not bring the agreement within the statute.
B. Reebs Claims Are Not Barred by the Two-Year Statute of Limitations on Oral Contracts Because the Contract Was Breached When the Value of AirTouch Stock Rose Dramatically, Making The Plans Unequal.
AirTouch argues that Schmitts alleged oral promises were breached not later than April 1996 when the PrimeCo LTIP was instituted as a cash-based, capped LTIP, more than two years before Reeb commenced his action. (Code Civ. Proc., § 339, subd. (1).) Because the PrimeCo LTIP necessarily did not match the benefits of the AirTouch LTIP, Schmitts alleged oral promises were breached at that time. AirTouch argues that the infliction of actual and appreciable harm, however uncertain in amount, will commence the statute of limitations. (See, e.g., Davies v. Krasna (1975) 14 Cal.3d 502, 514.) Furthermore, once a breach has occurred, any delay in the accrual of damages does not suspend the statute of limitations; Reebs argument that the statute did not run until December 1998 when the price of AirTouch stock rose mistakenly equates breach of contract with damages flowing from that breach. (See, e.g., Waxman v. Citizens Nat. Trust & Sav. Bk. (1954) 123 Cal.App.2d 145, 149.)
1. AirTouch May Raise This Argument On Appeal.
Reeb contends AirTouch waived any statute of limitations defense by its failure to raise it in the trial court. As discussed in section I.A.1, above, new arguments may be raised on appeal where they only require the application of law to undisputed facts. Here, the essential facts are undisputed: An LTIP was instituted in April 1996 that was cash-based and capped; in December 1998; the price of AirTouch stock rose dramatically; and in April 2000, Reeb filed his cross-complaint. On these undisputed facts, we must decide when the two-year statute of limitations for oral contracts began to run.
2. Breach Occurred When Reeb Suffered Damages, i.e., Was Not "Kept Whole."
Code of Civil Procedure section 399, subdivision (1) provides that "an action upon a contract, obligation or liability not founded upon an instrument of writing" must be brought within two years. (Code Civ. Proc., § 339, subd. (1); Slavin v. Trout (1993) 18 Cal.App.4th 1536, 1539.) A cause of action for breach of contract accrues at the time of breach, which then starts the limitations period running. (Whorton v. Dillingham (1988) 202 Cal.App.3d 447, 456.) "There can be no actual breach of a contract until the time specified therein for performance has arrived." (Taylor v. Johnston (1975) 15 Cal.3d 130, 137.) The statute begins to run at this time regardless of whether any damage is apparent or whether the injured party knows of the right to sue. (Niles v. Louis H. Rapoport & Sons (1942) 53 Cal.App.2d 644, 651.) The harshness of this rule has been criticized, and to avoid its harshness, the plaintiff may invoke the discovery rule. (Seelenfreund v. Terminix of Northern Cal., Inc. (1978) 84 Cal.App.3d 133, 137-138 [applying discovery rule to accrual of cause of action for breach of contract]; Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 614 [statute commences running when plaintiff "possesses a true cause of action, i.e., where events have developed to a point where the plaintiff is entitled to a legal remedy, not merely a symbolic judgment such as an award of nominal damages."].)
Reebs cause of action accrued when the covenants of the oral agreement — that he would be "kept whole" and would "not lose out" — were breached. This occurred when Reeb was not "kept whole," i.e., he received less under the PrimeCo plan than he would have received under the AirTouch plan. Thus, in Reebs case, pursuant to the express terms of the contract, damages and breach coincided when the value of the AirTouch stock went up.
The fact that the PrimeCo plan was a capped, cash-based plan does not change this result, as the PrimeCo plan did not "necessarily" provide for lesser benefits. Had AirTouch stock remained roughly equivalent to the value of the PrimeCo plan, Reeb would still have been "kept whole" and would not have "lost out." Reebs claim for breach is not that he would have received specific benefits, i.e., stock options, but that he would be "kept whole," and "would not lose out." Thus, any argument that breach occurred when he was covered by an LTIP that "necessarily" did not equate with the AirTouch stock plan is without merit. In summary, the essence of Schmitts promises was that Reeb would not monetarily suffer for having taken the position at PrimeCo. This did not occur, and this promise was not kept, until AirTouch stock dramatically increased in value.
C. The Trial Court Did Not Erroneously Admit Evidence.
1. Evidence of the "Keep-Whole" LTIP Promises Were Not Contrary to the Specific Terms of the Secondment Agreement.
AirTouch argues that the trial court erred in permitting the jury to hear evidence of Schmitts keep-whole promises, because such promises contradicted the express terms of the partially integrated Secondment Agreement. AirTouch points out that at trial, Reeb acknowledged that he was no longer going to be covered by the AirTouch plan and that he might "lose out" at PrimeCo. Yet, Reeb contends that under the Secondment Agreement, he was merely waiving his right to participate in an AirTouch LTIP but was not foregoing his right to receive benefits equal to the AirTouch LTIP. AirTouch contends this argument contradicts the express terms of the Secondment Agreement. (See, e.g., Esbensen v. Userware Internat., Inc. (1992) 11 Cal.App.4th 631, 637, fn. 3 (hereafter Esbensen).) We disagree.
The parol evidence rule prohibits the introduction of extrinsic evidence to vary or contradict the terms of an integrated writing. (Code Civ. Proc., § 1856.) The parol evidence rule is based upon the rationale that the written instrument embodies the agreement of the parties. (Tahoe National Bank v. Phillips (1971) 4 Cal.3d 11, 22-23.) In applying the rule, courts employ a two-step process to determine whether: (1) the writing is an integration, and (2) the agreement is susceptible of the meaning proffered — in other words, is the collateral agreement consistent with the written agreement? (Gerdlund v. Electronic Dispensers International (1987) 190 Cal.App.3d 263, 270.) A determination whether the parol evidence doctrine applies is purely a question of law as long as there are no evidentiary conflicts. (EPA Real Estate Partnership v. Kang (1992) 12 Cal.App.4th 171, 176.) In the instant case, the parties do not dispute whether "keep whole" assurances were made; they only dispute the legal import of those assurances.
Code of Civil Procedure section 1856 provides that "Terms set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement." (Code Civ. Proc., § 1856, subd. (a).)
With respect to the first step of the analysis, "integration" is the extent to which a writing constitutes the final expression of the parties agreement. (Esbensen, supra, 11 Cal.App.4th at p. 636.) Whether a contract is integrated depends upon the parties intent. (Wagner v. Glendale Adventist Medical Center (1989) 216 Cal.App.3d 1379, 1385-1386.) It also depends upon whether the written agreement appears to be complete on its face; whether the agreement contains an integration clause; and whether the alleged oral understanding on the subject matter at issue might naturally be made as a separate agreement. (Masterson v. Sine (1968) 68 Cal.2d 222, 225-226; Esbensen, supra, 11 Cal.App.4th at p. 637, fn. 3.)
If "following negotiations the parties execute a written agreement, that agreement is at least `partially integrated and parol evidence cannot be admitted to contradict the terms agreed to in the writing." (Esbensen, supra, 11 Cal.App.4th at p. 637.) Where the agreement is partially integrated, as here, parol evidence may not be offered to contradict the terms of the partially integrated agreement. (Esbensen, supra, 11 Cal.App.4th at p. 638.) However, evidence of a contemporaneous oral agreement collateral to, and not inconsistent with, a written contract may be admissible "where the latter is either incomplete or silent on the subject, and the circumstances justify an inference that it was not intended to constitute a final inclusive statement of the transaction." (Ellis v. Klaff (1950) 96 Cal.App.2d 471, 476.)
With respect to the second step of the analysis, we consider whether the terms of the agreement which Reeb seeks to establish (that he would be kept "keep whole") are consistent with the terms of the Secondment Agreement. If they are consistent, the Secondment Agreement only reflects a partial integration of the understanding of the parties. In such case, parol evidence is admissible to establish the "keep whole" agreement. (Sapin v. Security First National Bank (1966) 243 Cal.App.2d 201, 204.) If inconsistent with the terms of the Secondment Agreement, the Secondment Agreement may not be supplemented, varied, or contradicted with evidence of the "keep whole" agreement. (Sapin v. Security First National Bank, supra, at p. 204;Coast Bank v. Holmes (1971) 19 Cal.App.3d 581, 591.)
Here, the Secondment Agreement was concededly a partially integrated instrument. The fact that Reeb would no longer be covered by the AirTouch LTIP is not inconsistent with an agreement that he would be kept whole. Reeb need not have been covered by the AirTouch plan to receive its equivalent. Reeb could be covered under a PrimeCo plan that equaled the AirTouch plan, a superior plan at PrimeCo, or an inferior plan at PrimeCo (the latter of which in fact occurred); nonetheless, pursuant to the terms of the oral agreement, Reeb would receive would he would have received if he had remained at AirTouch. The "keep whole" agreement is of the kind that "naturally" would not be added to an employment agreement; it was the sort of "slap on the back" understanding that is often made when deals are sealed. AirTouch can point to no inconsistency between the "keep whole" agreement and the Secondment Agreement; rather, AirTouch impliedly relies on the subsequent fact that the PrimeCo LTIP was inferior to the AirTouch LTIP to establish that, "of course," an entitlement under an inferior plan contradicted what Reeb was promised.
2. Evidence of Whether Reeb Quit or Was Fired Is Irrelevant to Liability on His LTIP Claims, But Did Not Unduly Prejudice the Jury.
AirTouch argues that the trial court erroneously admitted evidence on whether Reeb was terminated or voluntarily left PrimeCo during the jury phase of the trial. Such evidence prejudicially inflamed the jury, as evidenced by exclamation points on the verdict form, which indicated the jury found AirTouch had not dealt consistently with Reeb concerning his continued employment. This emotional reaction spilled over into the jurys consideration of whether AirTouch similarly failed to fairly deal with Reeb with respect to his incentive compensation claims, although the two issues were not related. Whether or not termination was relevant to damages (i.e., how many stock options Reeb would have received in either case) does not alleviate the problem because the trial court necessarily should have tried Reebs equitable (ERISA) claim first in any event, precluding the termination issue from reaching the jury. (A-C Co. v. Security Pacific Nat. Bank (1985) 173 Cal.App.3d 462.) Reeb counters that the issue of termination was relevant to a determination of damages, but does not explain why. However, Reeb further argues that AirTouch waived its "equity first" claim by failing to demand the ERISA be tried first in the trial court, and that AirTouch has no concrete evidence of jury prejudice, as it has failed to submit any affidavit testimony from the jury.
Under Evidence Code section 352, "[t]he court in its discretion may exclude evidence if its probative value is substantially outweighed by the probability that its admission will (a) necessitate undue consumption of time or (b) create substantial danger of undue prejudice, of confusing the issues, or of misleading the jury." Prejudice under Evidence Code section 352 arises where evidence "which uniquely tends to evoke an emotional bias against [a party] as an individual and which has very little effect on the issues" is admitted. (People v. Coddington (2000) 23 Cal.4th 529, 588.) Prejudicial evidence is evidence which is more than damaging to a partys case; it is evidence which inflames the passions of the jury and causes the jury to decide the case on an improper basis. (Vorse v. Sarasy (1997) 53 Cal.App.4th 998, 1009.) "[E]vidence should be excluded as unduly prejudicial when it is of such nature as to inflame the emotions of the jury, motivating them to use the information, not to logically evaluate the point upon which it is relevant, but to reward or punish one side because of the jurors emotional reaction. In such a circumstance, the evidence is unduly prejudicial because of the substantial likelihood the jury will use it for an illegitimate purpose." (Ibid.)
Here, the evidence of Reebs termination was not related to the issue of whether Schmitts keep-whole promise meant that Reeb would have received incentive compensation equal to the AirTouch plan although he was no longer covered by that plan. Reebs termination from AirTouch had nothing to do with his failure to receive parity with the AirTouch plan or Schmitts promises; rather, it had to do with AirTouchs propensity for merging with other companies and downsizing. The dramatic rise in AirTouch stock had nothing to do with any allegedly underhanded conduct by AirTouch in terminating Reeb and then adopting the position he left voluntarily.
Our inquiry does not end there, however, for the erroneous admission of the evidence itself must have been prejudicial, i.e. affected the outcome of the jury verdict. Reversal is mandated only where it is reasonably probable a result more favorable to the defendant would have been obtained if the evidence had not been admitted. (People v. Scheer (1998) 68 Cal.App.4th 1009, 1018-1019.)
We find no such prejudice. The remoteness of these two issues indicates that it is not likely the jury confused them and used one issue as a tool to decide the other issue. On the other hand, the verdict form could indicate that the jury felt that the issue was not even a close factual issue, i.e., why was AirTouch even bothering to contest that Reeb was terminated, when it was so obvious to the jury?
(a) AirTouchs "Equity First" Argument is Without Merit.[]
AirTouch also makes this argument in connection with its contention that.
When a case involves both legal and equitable issues, the court may, in its discretion, decide the equitable issues first. If the decision as to the equitable issues is dispositive of the legal issues, a jury trial as to the legal issues is obviated. (Jaffee v. Albertson Co. (1966) 243 Cal.App.2d 592, 609-610.) However, if the case is not resolved in the equity phase, a jury trial on the remaining issues follows. (Ibid.) A jury may also be used for advisory verdicts as to questions of fact, but it is the duty of the trial court to make its own independent findings and to adopt or reject the findings of the jury, as it deems proper. (De Arellanes v. Arellanes (1907) 151 Cal. 443, 449.)
We can discern no requirement that equitable issues be tried first. Rather, the rule is one of "normal" practice. (See, 3 Witkin, California Evidence (4th ed. 2000), § 45, p. 78; Raedeke v. Gibraltar Sav. & Loan Assn. (1974) 10 Cal.3d 665, 671; Walton v. Walton (1995) 31 Cal.App.4th 277, 293.) Here, the court submitted the question of termination to the jury in an advisory fashion, and then made its own factual determination; as discussed infra, the giving of a quasi-contract claim did not confuse the jury. We therefore do not see how failure to try the equitable issues first prejudiced AirTouch. A resolution of neither of these equitable issues first would have affected Reebs legal claims.
D. The Trial Court Did Not Error in Giving Certain Jury Instructions.
1. AirTouchs Instruction No. 1 on Civil Code Section 1625.
AirTouch argues that the trial courts refusal to give AirTouchs proposed special instruction No. 1, a verbatim statement of Civil Code section 1625, resulted in the jury being misinstructed on the "keep whole" agreement which was outside of the Secondment Agreement. At trial, Reeb testified that he knew he was no longer eligible to receive compensation under the AirTouch LTIP once he went to PrimeCo. and that the agreement with Schmitt was an additional term of the Secondment Agreement. Because evidence of the keep whole agreement contradicted the terms of the Secondment Agreement, the evidence of the keep whole agreement should have been excluded. (Esbensen, supra, 11 Cal.App.4th at p. 637.) Reeb cannot contend that the "keep whole" agreement was a "stand alone" agreement outside the scope of Civil Code section 1625. Therefore, because his testimony and other evidence supported AirTouchs legal theory that Reeb should not have been able to introduce evidence of the keep whole agreement because it contradicted the express terms of the Secondment Agreement, the jury should have been given special instruction No. 1. (Barouh v. Haberman (1994) 26 Cal.App.4th 40, 47.)
We disagree. Under Civil Code section 1625, "[t]he execution of a contract in writing, whether the law requires it to be written or not, supercedes all the negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument." However, the rule that a written agreement supersedes prior or contemporaneous negotiations or stipulations is inapplicable to a collateral agreement on which the instrument is silent and which does not purport to affect terms of the written instrument. (Quality Bldg. & Sec. Co. v. Bledsoe (1932) 125 Cal.App. 493, 500-501; Greathouse v. Daleno (1922) 57 Cal.App. 187, 190.) Where it is contended that there is an additional or collateral agreement to a written document, the trial court must examine the collateral agreement itself to determine whether the parties intended the writing to serve as the exclusive embodiment of their agreement, thus precluding admission of the additional or collateral agreement. (Salyer Grain & Milling Co. v. Henson (1970) 13 Cal.App.3d 493, 501-502.)
As discussed above, in part C.1, evidence of the "keep whole" agreement was not inconsistent with the express terms of the Secondment Agreement. At the time of the Secondment Agreement, the PrimeCo LTIP had not been instituted and its terms were unknown. In addition, although Reeb was to be covered by the PrimeCo LTIP and would no longer be covered by the AirTouch LTIP, this fact alone does not contradict an agreement to otherwise keep Reeb whole. Keeping Reeb whole is not inconsistent with his being covered by another compensation plan. The apparent contradiction only arose when the PrimeCo LTIP was instituted and the AirTouch stock skyrocketed. Thus, the evidence would not have been excludable as parol evidence and the trial court did not err in refusing the instruction.
2. No Error in Giving Reebs Quasi-Contract Claim to the Jury, and Misinstruction on that Claim.
AirTouch contends the trial court erred in submitting instructions to the jury on a theory of quasi-contract at the same time it instructed the jury on Reebs contract theories. AirTouch argues that where a plaintiffs remedies at law are adequate to redress his alleged injuries, an action based upon quasi-contract is inappropriate. Because Reebs claims for compensation under the LTIP were governed by an express agreement, quasi-contract was not proper. (California Medical Assn. v. Aetna U.S. Healthcare of California, Inc. (2002) 94 Cal.App.4th 151, 172.) Furthermore, even if the trial court dismissed Reebs quasi-contract claim, it should have resolved this claim first, rather than submitting it to the jury. The "equity first" rule requires the trial court to resolve equitable issues before submitting legal claims to the jury. (See, e.g., A-C Co., Inc. v. Security Pacific National Bank, supra, 173 Cal.App.3d at p. 473.) Furthermore, AirTouch complains that the instruction given bore more resemblance to the doctrine of promissory estoppel, and no instruction was given concerning the measure of unjust enrichment.
AirTouch also makes the "equity first" argument in connection with his argument in C.2 that the trial court erroneously admitted evidence that he was terminated. For simplicity, we discussed the argument in that section, supra.
There is no theory of inherent prejudice from instructional error in civil cases. (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 573-580.) Instead, instructional error requires reversal only "`where it seems probable that the error `prejudicially affected the verdict." (Id. at p. 580.) We therefore consider not only the nature of the error, "including its natural and probable effect on a partys ability to place his full case before the jury," but the likelihood of actual prejudice as reflected in the individual trial record, taking into account "(1) the state of the evidence, (2) the effect of other instructions, (3) the effect of counsels arguments, and (4) any indications by the jury itself that it was misled." (Id. at pp. 580-581.) Applying this analysis, we conclude defendant has failed to demonstrate a miscarriage of justice arose from the erroneous instruction.
A contract is either express or implied. (Civ. Code, §§ 1619, 1620.) "An express contract is one, the terms of which are stated in words," (Civ. Code, § 1620) while "[a]n implied contract is one, the existence and terms of which are manifested by conduct." (Civ. Code, § 1621.) An express contract is one in which the obligations of the parties are governed by the express intent of the parties, either written or oral. An implied-in-fact contract is one in which the intent of the parties is not expressed but is inferred from the facts and circumstances surrounding the transaction. The gist of the obligation, although implied, is nonetheless dependent upon intent. (County of Santa Clara v. Robbiano (1960) 180 Cal.App.2d 845, 847-848.) Quasi-contract is one form of implied contract, and the right to quasi-contractual recovery is based upon unjust enrichment. A party receiving a benefit they may not rightly retain has been unjustly enriched; therefore, the quasi-contract is an obligation created in law and is intended to restore the aggrieved party to the position he or she was in before the benefit was conferred. (County of Santa Clara v. Robbiano, supra, at p. 847-848; see also Desny v. Wilder (1956) 46 Cal.2d 715, 734; 1 Witkin, Summary of California Law (9th ed. 1987) § 91, p. 122.)
However, as a matter of law, a quasi-contract action for unjust enrichment does not lie where, as here, express binding agreements exist and define the parties rights. (Eisenberg v. Alameda Newspapers, Inc. (1999) 74 Cal.App.4th 1359, 1387; Lance Camper Manufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal.App.4th 194, 203.) "When parties have an actual contract covering a subject, a court cannot — even under the guise of equity jurisprudence — substitute the courts own concepts of fairness regarding that subject in place of the parties own contract." (Hedging Concepts, Inc. v. First Alliance Mortgage Corp. (1996) 41 Cal.App.4th 1410, 1420, fn. omitted.)
Quasi-contracts and express contracts are therefore mutually exclusive. There can be one, but not the other, based upon any given set of facts. The facts in the instant case establish the existence of an express, oral contract. The terms were clear. Thus, there is no need for equity to impose an obligation on AirTouch to pay restitution to Reeb, and we agree that the instruction was superfluous at the very least.
However, any error in giving the instruction is harmless and is not grounds for reversal. (People v. Watson (1956) 46 Cal.2d 818, 836.) Had the jury concluded that Reeb was entitled to restitution for a benefit conferred (i.e., going to Texas) it would not have awarded him a sum that is clearly based upon the lost stock options. The verdict demonstrates the jury found the existence of an express contract, which, as discussed above, is supported by the facts.
E. Sufficient Evidence Supports A Finding of an Enforceable "Keep Whole" Agreement Outside of the Secondment Agreement.
AirTouch contends that insufficient evidence supports a finding of an enforceable "keep whole" agreement to pay Reeb compensation above and beyond that which he would receive under the PrimeCo LTIP. The terms of the alleged "keep whole" agreement are too vague and lack material detail: the parties did not discuss the terms of the agreement; whether AirTouch or PrimeCo would be responsible to keep Reeb whole; how Reeb would be kept whole; or what being "kept whole" would precisely entail. Under Civil Code section 1649 (ambiguous promise must be interpreted in sense in which promisee understood it), Reeb could only have understood Schmitts promise to mean that during the time that the PrimeCo LTIP was not in place, AirTouch would make sure that Reeb received incentive compensation that was roughly comparable to what he would have received had he remained at AirTouch. Schmitt in fact testified that once the PrimeCo LTIP was established, Reeb would "live or die" based on that plan. Indeed, during the delay before the PrimeCo LTIP was instituted, AirTouch provided stock options comparable to the AirTouch LTIP. However, according to Reeb, he understood that for an indefinite period of time, AirTouch would provide Reeb with LTIP benefits equal to those at AirTouch.
If a contract is so uncertain and indefinite in its terms that the intention of the parties in material particulars cannot be ascertained, the contract is unenforceable. (Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 761, 770 (hereafter Ladas).) "[A] promise must be definite enough that a court can determine the scope of the duty and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages. [Citations.]" (Ibid. ) The terms of a contract are reasonably certain if they provide a basis for determining breach and for fashioning an appropriate remedy. (Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 811.)
In Ladas, the plaintiffs were insurance sales representatives of the defendant automobile association. They signed an agreement providing that they would be paid in accordance with a separate compensation plan, which plan reserved the right to the defendant to make changes in the commission structure. (Ladas, supra, 19 Cal.App.4th at p. 766.) The defendant company used a "unit value system" of compensation, which was revised several times during plaintiffs tenure with the company. In 1987, however, plaintiffs contended their level of compensation began to fall below that of other sales representatives in the industry. Plaintiffs sought damages based upon a partially oral and partially written agreement to keep them "in parity" with others similarly situated in the industry. The defendant company sought to exclude extrinsic evidence of any such parity agreement outside the scope of the written employment documentation. (Id. at pp. 766-768.) The court found the alleged duty to pay parity was "vague." "An amorphous promise to `consider what employees at other companies are earning cannot rise to the level of a contractual duty. . . . By what standard would a court or a jury determine that the [employer] failed to meet its obligations to `consider commissions earned by competitors? What would be the relevant market on which such a duty would be predicated? . . . All insurers in the state? Eighty companies nationwide? How would `damages be calculated? By totaling up all yearly commissions earned by other agents, averaging them and subtracting the difference?" (Id. at p. 771.)
In Peterson Development Co. v. Torrey Pines Bank (1991) 233 Cal.App.3d 103, a builder sued a lender seeking to enforce a commitment to provide lending, relying on a letter of commitment. However, the letter did not specify the identity of the borrower, the loan amount, the percentage of the purchase price, interest rates, or repayment terms. (Id. at p. 115.) "These material contractual terms of the letter of commitment are so broadly defined that they do not appear to be capable of being made certain; on this record, no binding agreement could have been reached to supply permanent financing on mutually agreed-upon terms. . . . No enforceable contract to provide permanent financing is created by this document." (Ibid. )
In contrast, in Holmes v. Lerner (1999) 74 Cal.App.4th 442, the court upheld an agreement against vagueness challenges where the agreement provided that two women would take an idea for a cosmetic product, reduce it to concrete form, form a company, and hire employees. They agreed that "`[w]e will do everything," and "`[i]ts going to be our baby, and were going to work on it together." (Id. at pp. 458-459.) The plaintiff participated in board meetings, worked for a year without pay, and oversaw the warehouse. She was later frozen out of the business, and her agreement with the other woman renounced. The court found that "[t]he agreement that was made and the subsequent acts of the parties supply sufficient certainty to determine the existence of a breach and a remedy." (Id. at p. 459, fn. omitted.)
We disagree that there is insufficient evidence to support a finding of a "keep whole" agreement. When an appellate court reviews a challenge to a verdict, we apply the deferential substantial evidence standard of review. We resolve all conflicts in the evidence in favor of the prevailing party, and we draw all reasonable inferences in a manner that upholds the verdict. (Holmes v. Lerner, supra, 74 Cal.App.4th at p. 445.) It is not our task to weigh conflicts and disputes in the evidence; that is the province of the factfinder. Our authority begins and ends with a determination of whether, on the entire record, there is any "substantial" evidence, contradicted or uncontradicted, which will support the judgment. (Grappo v. Coventry Financial Corp. (1991) 235 Cal.App.3d 496, 506-507.)
While we agree the terms of the "keep whole" agreement that Reeb would be "kept whole" and "would not lose out" are very broad, they provide sufficient certainty for determining breach and assessing damages. The jury determined that "keep whole" meant that Reeb would receive what he would have received under the AirTouch LTIP had he remained at AirTouch; and that the measure of damages was the stock options that would have been granted to him had he remained at AirTouch. Holmes is more analogous to the instant case than Ladas and Peterson Development, which are distinguishable. There, the material terms of the contract were so vague a court was without power to enforce them in any reasonable fashion. The agreement of the parties could not be determined from a promise to "consider" what others made; nor could a loan be found in a simple promise to lend money.
Here, Reebs testimony supports an interpretation that Schmitts promises were that a PrimeCo LTIP would be instituted that would be as good as the LTIP at AirTouch, or that if it was not, AirTouch would ensure that Reeb received the equivalent even though he was no longer covered by the AirTouch plan. Whether Reeb was a seasoned human resources executive who knew that LTIP compensation is the subject of detailed discussion, planning, and documentation and therefore Schmitt had no reason to believe that Reeb would understand his words as a separate oral agreement for an equivalent LTIP, as AirTouch argues, does not change this result. Nor does the fact that, as AirTouch argues, "Schmitt could not have understood or expected that Reeb disregarded the express terms of the Secondment Agreement and believed that he was a party to a separate and conflicting oral agreement." Ample evidence was introduced at trial concerning the parties intentions and understandings. The jury chose to believe Reebs version of events, which as discussed above, was sufficient to support a finding of an oral agreement.[]
Indeed, AirTouchs argument could also have been framed as an interpretation issue: the meaning of key terms "keep whole" and "not lose out" were ambiguous in the context of Reebs employment at PrimeCo. Under such a theory, the analysis is two-fold. First, the question of ambiguity is a question of law; if the court determines a contract is ambiguous, a party is entitled to introduce extrinsic evidence to aid the interpretation of the contract. (Appleton v. Waessil (1994) 27 Cal.App.4th 551, 554-555; Pacific Gas & Electric Co. v. Zuckerman (1987) 189 Cal.App.3d 1113, 1140-1141.) Thus, although the interpretation of a contract is normally solely a judicial function, where it turns on the credibility of conflicting extrinsic evidence, it is for the trier of fact to determine the meaning of language in the contract. (Morey v. Vannucci (1998) 64 Cal.App.4 904, 912-913.) Although ambiguity and interpretation were not expressly raised as issues in the instant case, it is clear the jury accepted Reebs version of the meaning of the "keep whole" agreement. Because substantial evidence supports this interpretation, we will not overturn it on appeal.
F. Sufficient Evidence Supports Damages.
1. The Dramatic Gain in AirTouch Stock Was Not Unforeseeable.
AirTouch argues that Reebs damages should have been limited to those damages that were reasonably foreseeable at the time of the oral promise. Reeb failed to introduce any evidence from which the jury could infer that the dramatic gain in AirTouch shares was foreseeable; that Schmitt or Reeb had reason to anticipate such an increase; or that the merger with Vodafone would occur. (See, e.g., Brandon & Tibbs v. George Kevorkian Accountancy Corp. (1990) 226 Cal.App.3d 442, 456; Oracle Corp. v. Falotti (N.D. Cal. 2001) 187 F.Supp.2d 1184; Greene v. Safeway Stores, Inc. (10th Cir. 2000) 210 F.3d 1237.)
Under the rule of Hadley v. Baxendale (1854) 156 Eng. Rep. 145, damages sought for breach of contract must be those naturally arising from the breach or foreseeable to the parties. Damages caused by special circumstances are not recoverable unless the circumstances were known or should have been known to the breaching party at the time of the contract. (Civ. Code, § 3300; Brandon & Tibbs v. George Kevorkian Accountancy Corp., supra, 226 Cal.App.3d at pp. 455-456.) Any damages sought must have been caused by the breach. (Vu v. California Commerce Club, Inc. (1997) 58 Cal.App.4th 229.)
Civil Code section 3300 provides that the measure of contract damages is the amount that will compensate the aggrieved party for all the detriment proximately caused by breach or that in the ordinary course of things would be likely to result from it. Civil Code section 3300 incorporates the foreseeability test of Hadley v. Baxendale (1854) 9 Ex. 341. (Hunt Bros. Co. v. San Lorenzo etc. (1906) 150 Cal. 51, 56.)
"Damages are awarded in an action for breach of contract to give the injured party the benefit of his bargain and insofar as possible to place him in the same position he would have been in had the promisor performed the contract. [Citations.] Damages must be reasonable, however, and the promisor is not required to compensate the injured party for injuries that he had no reason to foresee as the probable result of his breach when he made the contract. [Citations.]" (Coughlin v. Blair (1953) 41 Cal.2d 587, 603.) The rationale is that a party cannot and does not assume limitless liability for all consequences of a breach, and that at the time of contracting must be advised of the facts concerning special harm which might result therefrom in order to determine whether he should accept the risk of contracting. (1 Witkin, Summary of California Law (9th ed. 1987) § 815, p. 733.)
However, the rule only requires reason to foresee, not actual foresight. "It does not require that the defendant should have had the resulting injury actually in contemplation or should have promised either impliedly or expressly to pay therefor in case of breach. . . . If, because of his own education, training, and information, he had reason to foresee the probable existence of such circumstances, the judgment for compensatory damages measured by the extent of such injury will be given against him." (Brandon & Tibbs v. George Kevorkian Accountancy Corp., supra, 226 Cal.App.3d at p. 458.)
Here, AirTouch cannot complain that it had no idea the stock would dramatically rise. Schmitt was an educated member of the corporate elite. He should have known that stocks go up, stocks go down — sometimes for no reason at all. Mergers occur in the corporate world with regularity; such mergers cause stock prices to go up and down. These facts were not unforeseeable to AirTouch or Schmitt.
Nor do AirTouchs cases aid the analysis because, for example, Oracle Corp v. Falotti, supra, 187 F. Supp.2d 1184 does not stand for the proposition that, as AirTouch claims in its opening brief, "damages measured by unrealized appreciation of market value of stock options are not appropriate awarded as contract damages." Oracle Corp. did not consider whether the increasing value of stock options was an appropriate measure of damages. Instead, Oracle dealt with whether contractually the plaintiff was entitled to stock options at all given his termination date and whether such stock options were incentive compensation or wages. (Id. at pp. 1199-1200.) Furthermore, as AirTouch concedes, Greene v. Safeway Stores, Inc., supra, 210 F.3d 1237 held that unrealized gains in stock options were appropriate damages under the ADEA because one of the purposes of damages under the ADEA was to make the plaintiff whole. (Id. at pp. 1243-1244.) By analogy, because one of the purposes of contract law is to given the plaintiff the benefit of the bargain, unrealized gains on stock options are an appropriate measure of damages under contract law as well.
2. Reebs Lay Testimony Supports $3.8 Million in Damages.
AirTouch argues that Reebs lay testimony does not support the damages awarded because Reeb incorrectly assumed the market value of AirTouch stock options on November 1, 1999 was the measure of damages. AirTouch contends this is without merit because as discussed above, the Hadley v. Baxendale rule precludes using such inflated stock value as the measure of damages. Second, AirTouch argues that there is no evidence in the record to support Reebs assumption that his employee grade would be changed from E-9 to E-10. This assumption is crucial in determining the number of stock options which Reeb would have been entitled. Reeb points out that the evidence amply supports a finding that Reeb was at least a level E-10 employee, if not an F level employee, more than supporting the award of damages.
We find no merit to AirTouchs arguments. First, its attack on Reebs testimony is merely a reprise of the Hadley v. Baxendale foreseeability argument. Second, AirTouch does not explain how the difference in pay grade would have affected damages, and we will not make the parties arguments for them on appeal. Furthermore, a finding Reeb was at a pay-grade of at least level E-10 is supported by the evidence. Although Schultz testified that it was perhaps not likely that Reeb would have made pay grade "E-10," the jury before it had Exhibit 83, Reebs Employment Profile, signed by his supervisor, which showed him as having attained level F as of November 1, 1999. Although the evidence is in conflict on this issue, it constitutes sufficient evidence to support Reebs damages.
3. No Error in Failing to Exclude Pre-Judgment Interest Because Damages Were Capable of Being Made Certain By Calculation.
Reeb argues that the trial court failed to instruct the jury to disregard pre-judgment interest from the award because the amount of damages was in dispute and depended upon a judicial determination based upon conflicting evidence. (Civ. Code, § 3287, subd. (a); Polster v. Swing (1985) 164 Cal.App.3d 427, 434.) Here, Reeb sought damages based upon "several broad assumptions about the amount and value of stock options he would have received under three AirTouch stock option grants" and therefore his claim could not be determined by a fixed standard. First, Reeb assumed he would have received a fixed number of shares; Reeb assumed he would have been placed in a position rated "E-10," rather than "E-9;" Reeb assumed all options were exercised on November 1, 1999; Reebs damages could not be ascertained with reference to a readily ascertainable market value (Reeb should have used the Black-Scholes method); and Reeb did not provide any accounting or invoice to AirTouch prior to trial.
Prejudgment interest is intended to make the plaintiff whole "for the accrual of wealth which could have been produced during the period of loss." (Cassinos v. Union Oil Co. (1993) 14 Cal.App.4th 1770, 1790.) Prejudgment interest may be awarded where "damages [are] certain, or capable of being made certain by calculation," and the right to recover such damages is vested in the plaintiff on a particular day. (Civ. Code, § 3287, subd. (a).) The test of certainty is whether the defendant actually knows the amount owed or could have computed the amount from reasonably available information. (Childrens Hospital & Medical Center. v. Bonta (2002) 97 Cal.App.4th 740, 774; Wisper Corp. v. California Commerce Bank (1996) 49 Cal.App.4th 948, 960.) The policy behind the requirement of certainty is so "that in situations where the defendant could have timely paid [the amount demanded] and has thus deprived the plaintiff of the economic benefit of those funds, the defendant should therefore compensate with appropriate interest." (Wisper Corp. v. California Commerce Bank, supra, 49 Cal.App.4th at p. 962.)
Amounts recoverable as wrongfully withheld payments of salary or pensions are damages within the meaning of Civil Code section 3287, subdivision (a). (Olson v. Cory (1983) 35 Cal.3d 390, 402, see also Sanders v. City of Los Angeles (1970) 3 Cal.3d 252, 262-263; Benson v. City of Los Angeles (1963) 60 Cal.2d 355, 365-366.) Any disparity in the size of the ultimate damage award and the amount pleaded also guides the analysis. A large disparity militates against an award of damages; a small disparity tends to show that the damages were certain or capable of calculation. (Wisper Corp. v. California Commerce Bank, supra , 49 Cal.App.4th at 961; see Stein v. Southern Cal. Edison Co. (1992) 7 Cal.App.4th 565, 573.)
Here, the damages were capable of being made certain. AirTouch could easily calculate the amount of stock options Reeb would have received had he remained at AirTouch; the value of those stock options on any particular date; and the value to be realized from an exercise of those options. This conclusion is further supported by the fact that Reebs Status Conference Questionnaire stated he suffered approximately $ 4 million in damages, and the jury ultimately awarded an amount very close to that figure.
II. REEBS CLAIM TO BENEFITS UNDER THE SEVERANCE PLAN IS NOT BARRED BY THE DOCTRINE OF ELECTION OF REMEDIES.
A. Reebs Claim Is Not Barred By The Doctrine Of Election Of Remedies.
Airtouch contends that The AirTouch Severance Plan provided that a plan participant would not be eligible for severance benefits unless he waived every claim he had in connection with his employment at AirTouch by executing a release. Therefore, by pursuing his claims under the LTIP plan through his cross-complaint in this action, Reeb disqualified himself from receiving benefits under the Severance Plan. Furthermore, merely because AirTouch revoked its notice of termination, thereby impliedly indicating a release of claims would not be appropriate, does not waive the release requirement. Such argument confuses the requirement that Reeb substantively forego benefits under the plan if he pursued employment claims with the formal requirement that he execute a release. Because the terms of the Severance Plan control entitlement to benefits, the doctrine of election of remedies has no application and Reeb must substantively release AirTouch before he can receive severance benefits.
Reeb contends it would have been a futile act for him to sign the release, because by his last day of employment, Reeb had been told he would not receive severance pay. Furthermore, Reeb contends that AirTouch makes a "meritless election of remedies" argument that ignores the very cases AirTouch relies on. Reeb never had a choice between severance benefits and pursuit of his employment claims because AirTouch refused to pay him severance benefits. In addition, an employer may not require a beneficiary to waive its entitlement to money that it is in fact owed.
AirTouch contends the doctrine of election of remedies has no potential application here. We disagree and therefore analyze the issue. Under the doctrine of election of remedies, a plaintiff may not pursue more than one inconsistent remedy arising out of the same set of facts. (3 Witkin, California Procedure (4th ed. 1996), Actions § 174, p. 243-244.) The doctrine is founded on principles of estoppel, i.e., "a change in remedies does not bring about an election of remedies unless the changes involves a prejudice to the opposing party." (Commercial Centre R. Co. v. Superior Ct. (1936) 7 Cal. 2d. 121, 129.)
The doctrine is inapplicable where no real choice exists because only one remedy is available at the time of action. (Capogeannis v. Superior Court (1993) 12 Cal.App.4th 668, 684.) It is also inapplicable where the alternative remedies are not actually inconsistent. (3 Witkin, California Procedure, (4th ed. 1996), Actions § 188, p. 259.) "The doctrine of election presupposes that a party pursuing both remedies is occupying inconsistent positions. It does not apply where he may legally pursue both alternatively or concurrently, and there are no facts to raise an estoppel." (Ibid.)
These latter two principles guide the analysis in the instant case. First, at the time Reeb commenced this action, executing any release would have been a futile act because AirTouch considered that the had voluntarily left his position at PrimeCo and had indicated that benefits under the Severance Plan would not be forthcoming. Thus, by in effect forcing Reeb to an election, AirTouch cannot claim he somehow breached the contractual release requirement of the Severance Plan and thereby benefit by its own wrongful act. Second, the two remedies are not inconsistent. Reebs entitlement to incentive compensation differs from his entitlement to severance pay. Whether or not Reeb quit or was terminated, he was entitled to the stock options.
Thus, we need not consider whether inclusion of such a release in a severance plan is proper. (See, Harlan v. Sohio Petroleum Co. (N.D. Cal. 1988) 677 F.Supp. 1021, 1026-1027 [holding release of present and past claims as condition of receipt of severance benefits did not violate ERISA].)
B. The Factual Finding that Reeb was Terminated is Not Erroneous.
AirTouch contends the trial courts decision is based upon the unsupported finding that AirTouch actually terminated Reeb, i.e., an employer cannot rescind a notice of future termination. AirTouch contends a notice of termination is effective only when it takes place, not when an employer gives advance notice of the event. (Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 491.) The September 1, 1999 notice provided that Reeb would not be terminated until November 1, 1999, and Reeb remained a PrimeCo employee until November 1, 1999. The Severance Plan provided that "[t]o maintain eligibility to receive Severance Benefits under the Plan after being designated a Participant, an Eligible Employee must remain on the job until his or her scheduled termination date." Reeb, in making the decision to quit, left voluntarily.
Reeb contends that an employee is legally discharged on the date that he receives definite notice of termination. (See, e.g., Cooper v. Neiman Marcus Group (9th Cir. 1997) 125 F.3d 786, 790-791; Smith v. United Parcel Service of America, Inc. (2d Cir. 1995) 65 F.3d 266, 268.) Furthermore, an employee who tenders a resignation may revoke the resignation prior to the employers acceptance. (Mahoney v. Board of Trustees (1985) 168 Cal.App.3d 789, 799-800.) Reeb argues similar principles apply here: Reeb "accepted" AirTouchs termination letter as of October 21, 1997, when he accepted employment elsewhere.
Reebs arguments are closer to the mark. Formation of a contract requires the mutual assent of both parties. (1 Witkin, Summary of California Law (9th ed. 1987), Contracts, § 128, p. 153.) In addition, "termination" of a contract occurs in the absence of breach where either party, pursuant to a power created by the agreement or by law, puts an end to the contract. All executory obligations are discharged, but rights based upon prior breach are retained. (Grant v. The Aerodraulics Co. (1949) 91 Cal.App.2d 68, 75.)
Under principles of labor and contract law, Reebs employment was at-will, terminable at any time by either party. (Labor Code, § 2922.[]) Kramers September 1, 1999 letter constituted notice that Reebs at-will employment contract would terminate effective November 1, 1999. It did not require an acceptance, nor did it contain any conditional language setting forth contingencies which would render the termination inapplicable. The September 1, 1999 letter provided no events which would as a matter of contract revoke the termination. Thus, Reebs termination was complete upon receipt of the September 1, 1999 letter. Therefore, in order to withdraw this termination, AirTouch not only had to revoke the termination, but Reeb had to accept the revocation. The fact that Reeb told AirTouch he was leaving to work for another company after receipt of AirTouchs retraction of his termination notice does not change this result. He had still been terminated; he was merely informing AirTouch in effect that he was not accepting its offer to remain with it. Without a meeting of the minds, there was no mutual assent to a new or continued employment contract. Because this did not occur, the termination was not revoked and Reeb was terminated.
Labor Code section 2922 provides, "An employment, having no specified term, may be terminated at the will of either party on notice to the other. Employment for a specified term means an employment for a period greater than one month."
AirTouchs authority is misplaced. For example, Romano v. Rockwell Internat., Inc. does not stand for the proposition that a termination is effective only when it takes place, not when an employer gives advance notice. Romano discussed whether such advance notice constituted anticipatory breach of the employment agreement under the facts of that case, entitling the employee to bring immediate suit. (Romano v. Rockwell Internat., Inc., supra, 14 Cal.4th at pp. 490-491.)
C. The Trial Court Could Overturn the Plan Administrators Decision.
AirTouch contends that the ERISA plan administrators decision cannot be reversed absent an abuse of discretion, i.e., a showing that the decision was arbitrary and capricious. Such a finding is not supported by the evidence, which shows that the plan administrator made its decision based upon a finding Reeb was terminated. (Kearney v. Standard Ins. Co. (9th Cir. 1999) 175 F.3d 1084, 1090; Thomas v. Oregon Fruit Products Co. (9th Cir. 2000) 228 F.3d 991, 996.) AirTouch contends it may raise this purely legal issue on appeal, even though the trial court declined to hear it in post-trial motion on the grounds it had not been previously raised. (Hoffman-Haag v. Transamerica Ins. Co. (1991) 1 Cal.App.4th 10, 15-16.)
The applicable standard of review requires us to examine the plan language to determine whether the plan administrator is in fact vested with discretion. (Firestone Tire & Rubber Co. v. Bruch (1989) 489 U.S. 101, 111.) Such discretion would be indicated by language that the plan administrator has the power to construe uncertain terms or that eligibility determinations are to be given deference. (Ibid. ) Firestone further held that a denial of benefits is reviewed de novo unless the plan language indicates the administrator has discretionary power. (Firestone Tire & Rubber Co. v. Bruch, supra, at p. 115; Kearney v. Standard Ins. Co., supra, 175 F.3d at pp. 1088-1089.) Therefore, because AirTouch has not pointed to any language indicating that the plan administrator is vested with discretion, and we do not make the parties arguments on appeal for them, we presume the default standard of review, which is de novo.
AirTouch points to Kramers September 1, 1999 letter, AirTouchs October 22, 1999 letter, Reebs October 27, 1999 letter, and Kramer and McAdams conversations with Reeb during this time period in support of its contention that a determination that Reeb voluntarily left PrimeCo was not arbitrary and capricious. However, because our standard of review is de novo, we start with the fact that both the jury and the court rejected such a factual finding, instead concluding that Reeb was terminated. Because a finding of termination is the core basis for granting benefits, we conclude that the trial court properly overturned the plan administrators ruling based upon its finding of termination.
Because we resolve this issue against AirTouch, whether or not the issue may be raised before this court is of no import. Perhaps if the issue had been raised in a timely fashion in the trial court, the trial court could have examined relevant plan language to determine whether deference was appropriate.
III. REEBS CROSS-APPEAL TO PERMIT AMENDMENT TO STATE A CLAIM FOR FRAUD.
Reeb argues that the trial court abused its discretion in refusing to permit him to amend his cross-complaint to add a claim for fraud. Reeb contends such fraud claim was compulsory because it arose out of the same transactions or occurrences governing his contractual cross-claims, and the trial court was therefore required to grant his motion. (Code Civ. Proc., § 426.50.) In the instant action, Reeb had no evidence of fraudulent intent until after he commenced discovery and discovered that Schmitts promises were made with the belief that Reeb would only be kept whole until a PrimeCo plan was in place, at which time Reeb would "live or die" according to PrimeCos performance. Reeb contends the trial courts denial of his motion was an abuse of discretion, and absent a finding of bad faith, the trial court was obligated to grant his motion; furthermore, any concerns about delay could have been mitigated by a continuance of the trial. (See Silver Organizations Ltd. v. Frank (1990) 217 Cal.App.3d 94, 99.)
Denial of a motion for amendment of pleadings is reviewed under the abuse of discretion standard. The courts discretion is usually liberally exercised to permit amendment of pleadings. (Code of Civ. Proc., § 473, subd. (a)(1); Mabie v. Hyatt (1998) 61 Cal.App.4th 581, 596.) "If a motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend; and, where the refusal also results in a party being deprived of the right to assert a meritorious cause of action or a meritorious defense, it is not only error but an abuse of discretion." (Morgan v. Superior Court (1959) 172 Cal.App.2d 527, 530.) If, however, the party seeking the amendment has unnecessarily delayed, and the delay prejudices the opposing party, the trial court has discretion to deny amendment. (Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 490.)
Here, the two key issues are timeliness and prejudice. It took almost four months and a summary judgment motion focusing extensively on Schmitts deposition testimony for any purported fraud to "jump out" at Reeb. The case was on the eve of trial; two continuances had already occurred. There is nothing in this record even remotely suggesting an abuse of discretion. (See, e.g., Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 486-488 [prejudice exists where amendment sought on eve of trial and would require expenditure of additional costs and additional discovery].)
Reebs argument that the cross-complaint was compulsory is irrelevant. The issue of whether a claim is compulsory or permissive has to do with principles of res judicata and collateral estoppel, not amendment.
DISPOSITION
The judgment of the superior court is affirmed. Appellant Reeb is to recover his costs on appeal.
We concur: PERLUSS, P. J. JOHNSON, J.