Migliore v. Nu Flow Holdings CA4/1 (2014) · DecisionDepot
Migliore v. Nu Flow Holdings CA4/1
California Court of Appeal Feb 14, 2014 No. D061109Unpublished
Filed 2/14/14 Migliore v. Nu Flow Holdings CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
JOHN A. MIGLIORE, D061109
Plaintiff and Appellant,
v. (Super. Ct. No. 37-2008-00094969- CU-WT-CTL) NU FLOW HOLDINGS, INC. et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of San Diego County, Joel M.
Pressman, Judge. Affirmed.
Robert R. Massey for Plaintiff and Appellant.
Higgs, Fletcher & Mack, John Morris, Victoria E. Fuller, Paul J. Pfingst for
Defendants and Respondents.
Plaintiff and appellant John A. Migliore, an attorney, sued his former employer,
defendants and respondents Nu Flow Holdings, Inc., Nu Flow America, Inc., and Nu
Flow Technologies (2000), Inc. as well as Nu Flow principals Cameron Manners and
Steve Howe (collectively Nu Flow) for wrongful termination and other causes of action,
alleging Nu Flow failed to give him promised stock and forced his resignation. After the
trial court granted nonsuit on Migliore's causes of action for breach of employment
contract/constructive discharge and breach of the implied covenant of good faith and fair
dealing, the jury returned a special verdict in Nu Flow's favor on Migliore's remaining
causes of action for breach of oral contract and fraud. Migliore appeals from the
judgment, contending the trial court erred by (1) granting Nu Flow's motion for nonsuit;
(2) excluding Migliore's testimony relating to the accuracy of his deposition testimony;
and (3) ordering Migliore to modify his proposed special verdict form. Migliore argues
the court's errors, even if independently harmless, were cumulatively prejudicial. We
affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND1
In 2005, Nu Flow America, Inc. hired Migliore as its full-time in-house counsel,
primarily to oversee anticipated litigation with one of Nu Flow's competitors, Ace
DuraFlo. At the time, Migliore was a private civil practitioner who had previously done
legal work for Nu Flow America, Inc, Nu Flow Technologies (2000), Inc. and some
1 Migliore's claims of breach of oral contract and fraud were the subject of conflicting trial testimony. Because Migliore does not challenge the sufficiency of the evidence to support the jury's special verdicts in Nu Flow's favor, we are entitled to state the facts in the light most favorable to those verdicts, resolving all conflicts and indulging all reasonable inferences to support the judgment. (Green Wood Industrial Co. v. Forceman Intern. Development Group, Inc. (2007) 156 Cal.App.4th 766, 770, fn. 2; Blanks v. Seyfarth Shaw LLP (2009) 171 Cal.App.4th 336, 346, fn. 2.) 2
Howe family members. Manners and Howe, respectively Nu Flow's chief executive
officer and executive vice-president, discussed Migliore's benefits and agreed he was to
receive a yearly salary of $175,000. At the time he was hired, Migliore's terms of
compensation were not set out in writing. The remaining terms of Migliore 's
employment were subject to conflicting trial testimony. According to Howe, he and
Migliore negotiated a deal in which Migliore would receive a 2.5 percent interest in the
company, in some form of trading media. Migliore asserted he requested 2.5 percent
ownership of the company and Manners and Howe agreed, telling him that when they
formed Nu Flow Holdings, Inc. he would get actual stock, not stock options. Migliore
testified he understood he would get the stock and "wouldn't have to do anything else."
He claimed Manners and Howe knew he had closed his office based on that
understanding.
By 2006, Nu Flow was defending potentially company-ending litigation with Ace
DuraFlo and taking in investors to fund Nu Flow's growth as well as the litigation. In
October 2006, Nu Flow approved a stock option plan for employees, including Migliore,
who was designated to receive an option for 250,000 common shares of Nu Flow
Holdings, Inc. Migliore had helped prepare the document creating the new stock (a share
purchase agreement) and signed an opinion letter regarding its provisions. However, he
believed he had an oral contract with Manners and Howe that he would receive 2.5
percent of the company in "non-dilutable" shares. Though he stated that contract was
created as of January 2007, Migliore did not document that agreement in January,
February or March 2007, and he never confirmed or recorded the agreement in writing.
3
In April 2007, Migliore was granted 250,000 fully vested stock options in Nu
Flow Holdings, Inc. at an exercise price of $1.70. At the time, that was equivalent to 2.5
percent of the total outstanding shares of the business. Migliore did not protest or file
anything in writing during his employment or up to the time of trial stating that that was
not their agreement.
Migliore and other Nu Flow employees eventually became aware they would be
signing an acknowledgement of receipt of an employee handbook. In August 2007,
Migliore signed the acknowledgement, entitled "Receipt of Employee Handbook and
Employment At-Will Statement" (some capitalization omitted), which stated in part:
"I . . . understand that no department head, supervisor, or any other employee of Nu Flow
America, except the board of directors, has the authority to enter into any agreement for
employment for any specified period of time or to make any agreement contrary to the at -
will relationship described above. I acknowledge that Nu Flow America may modify or
rescind any policies, practices or benefits described in the Employee Handbook, other
than the employment at-will policy, at any time without prior notice to me. [¶] I
understand and agree that my employment with Nu Flow America is at-will, and can be
terminated with or without cause or notice. I further understand and agree that Nu Flow
America retains sole discretion to modify the terms and conditions of employment. This
is the entire agreement between Nu Flow America and me on these issues, and it cannot
be modified except by a new agreement, in writing and signed by an officer of Nu Flow
America."
4
In the summer of 2007, Manners was busy reporting to the board and preparing
reports to investors, and dealing with the Ace DuraFlo litigation. In late September
2007, Manners and Howe left the country for a combined offsite investor
meeting/vacation, and appointed Migliore vice-president of Nu Flow America, Inc. and
Nu Flow Technologies 2000, Inc. Manners and Howe returned to the office in mid-
October 2007. In late October 2007, a series of wildfires occurred in San Diego County,
and Migliore did not work on October 22, 2007, or October 23, 2007. On October 25,
2007, approximately 30 files were transferred out of Nu Flow's legal department to its
national sales manager. On October 28, 2007, Migliore e-mailed Manners and Howe
asking them to finalize the paperwork on his stock. He wrote: "Although my options are
already granted through all the previous paperwork on the subject, I would like to
formalize everything, including our agreement in January that they would ultimately be at
not [sic] cost to me." Manners did not recall getting the e-mail, which was sent via
"Yahoo," and he testified such e-mails usually went into a spam file.
About a week later, Migliore handed Manners a letter of resignation stating that
the attorney-client relationship had eroded over the past several months, and had so
broken down Migliore was required to leave Nu Flow. He did not speak with Howe
about his resignation beforehand and Howe did not know why Migliore left; Migliore and
Howe did not speak again until Migliore sued Nu Flow. At the time, there were three
Ace DuraFlo cases pending in two different courts and a pending summary judgment
motion. Howe was required to substitute new counsel into the Ace DuraFlo litigation.
5
Migliore sued Nu Flow in October 2008, and weeks later filed a first amended
complaint alleging causes of action for age discrimination, breach of
contract/constructive termination, negligent and intentional interference with economic
relationship, breach of the covenant of good faith and fair dealing, unjust enrichment, and
fraud. In part, Migliore alleged that as consideration for him giving up his practice, Nu
Flow offered him a salary and an approximately two-to-three percent shareholder interest
in the company. He further alleged that in January 2007, Nu Flow confirmed his
entitlement to 250,000 shares of stock at no out-of-pocket cost to him, but as part of the
compensation package as an inducement to leave his practice and for his continued
employment with Nu Flow. In his second cause of action for "breach of employment
[his] employment arbitrarily, capriciously and without just cause. Nu Flow accomplished
this constructive termination by taking away the tools with which Migliore was to
perform his duties—his files, as alleged above . . . and stopped communicating with him.
Nu Flow has breached its contract of employment with Migliore. Said breach has caused
damage to plaintiff in that he has been deprived of the benefits of his employment
agreement, including the ongoing salary, insurance benefits, plus periodic pay raises and
bonuses, and including the stock he was promised." (Some capitalization omitted.) The
matter proceeded to a jury trial after Migliore dismissed his claims for age discrimination
and unjust enrichment.
Trial in Migliore's action began in August 2011 on the operative pleading,
Migliore's first amended complaint. After the close of Migliore's case, Nu Flow orally
6
moved for nonsuit. During arguments on the motion, Migliore's counsel argued he had
pleaded and proved that Migliore's termination violated public policy. Nu Flow's counsel
responded by pointing out Nu Flow had been sued in contract, not tort; counsel argued
Migliore had in any event not proven any such claim. The trial court, reasoning
Migliore's employment was at-will and integrated into the written contract, entered
nonsuit on Migliore's second cause of action for breach of contract/constructive
discharge, third and fourth causes of action for negligent and intentional interference with
economic relationship, and fifth cause of action for breach of the implied covenant of
good faith and fair dealing.2
The next day, Migliore filed a second amended complaint including causes of
action for fraud and breach of an oral contract to give Migliore 2.5 percent of Nu Flow
Holdings, Inc. in the form of stock. The case went to the jury only on Migliore 's causes
of action for breach of oral contract, intentional misrepresentation and negligent
misrepresentation. After Nu Flow completed its case, the jury returned a special verdict
in Nu Flow's favor. The court entered judgment accordingly.
2 Following counsel's arguments on the nonsuit motion, the court stated: "Well, I'll tell you that based upon the—the evidence that has been presented, it is clear to this court that at all times, this was an at-will employment, and it was integrated into the written contract. And that's clear. [¶] And the tortious aspect of the breach of employment contract, constructive termination—there has not been any evidence that's credible to this court or to any trier of fact that would move this case forward to jury. . . . The allegations that have been made relative to the promise of stock or stock option have been raised but certainly have not met this court's burden of proof to move forward. I think that counsel is correct. And I have read the—I believe it's the Haggard [v. Kimberly Quality Care, Inc. (1995) 39 Cal.App.4th 508 (Haggard)] case. . . . [¶] . . . And this case is on all fours with that." 7
Migliore appeals from the judgment.
DISCUSSION
I. Migliore's Claim for Constructive Discharge in Violation of Public Policy
Migliore contends the trial court erred by granting Nu Flow's motion for nonsuit
on his claim for constructive discharge. Migliore does not recite the evidence in hi s favor
on this point, he merely summarizes the trial court's reasoning, seeks to distinguish
Haggard, supra, 39 Cal.App.4th 508 on which the court relied in its ruling, and argues
the court usurped the role of the jury.3 Migliore further argues that Nu Flow violated two
public policy interests that "preempt" the at-will nature of his employment, namely, Nu
Flow assertedly (1) placed him in a position where he was required to resign or else
violate California State Bar Rules of Professional Conduct (rule references are to these
rules) and (2) forced him out to avoid issuing him his promised stock.
3 We reject Migliore's cursory argument that the court usurped the jury's function. He maintains that because the terms of "the contract" were in dispute, presumably referring to his oral employment contract, the determination of the contract's terms and their meaning was a question of fact rather than law. For this proposition, which is not further explained, Migliore cites Warner Construction Corp. v. City of Los Angeles (1970) 2 Cal.3d 285 and Aronowicz v. Nalley's, Inc. (1972) 30 Cal.App.3d 27, 49-50, neither of which involve employment contracts. In Warner Construction, the court explained that if the interpretation of a contract depends on the credibility of extrinsic evidence, the question of credibility is properly for the jury. (Warner Construction, 2 Cal.3d at p. 291.) In Aronowicz, the parties had presented conflicting evidence as the meaning of a termination clause in a distribution agreement, and the Court of Appeal held it was proper for the clause's meaning to be the subject of testimony and for the jury to decide whether the agreement was properly terminated. (Aronowicz, 30 Cal.App.3d at pp. 49-51.) In connection with this argument, Migliore does not describe what conflicting extrinsic evidence should have been presented to the jury as to the terms of his employment. Nor does Migliore explain the relevance or consequence of the jury's determination that the parties did not enter into an oral contract for the promise of stock. We do not address the contention further. 8
In response, Nu Flow points out that Migliore had asserted only contract claims
based on a theory of constructive discharge, not tort claims for wrongful discharge in
violation of public policy. It acknowledges that Migliore had submitted a second
amended complaint including such a cause of action, but points out the trial court found
there was no "credible" evidence to support it. Nu Flow characterizes the trial court's
ruling as not granting nonsuit on that cause of action, but denying leave to amend to
assert it, requiring us to apply a deferential abuse of discretion standard.
We agree with Nu Flow that the trial court's order must be reviewed for abuse of
discretion. The court's later comments reveal that it permitted Migliore to file a second
amended complaint only to "track what the evidence showed." Thus, the order in effect
denied Migliore's midtrial request to amend to conform to proof so as to set forth a cause
of action for wrongful constructive discharge in violation of public policy, a decision we
review for abuse of discretion. (Code Civ. Proc., § 473, subd. (a)(1); Trafton v.
1378.) It is immaterial that the court stated there was no credible evidence to support
such a claim; we review the correctness of a trial court's result, not its rationale. (Howard
v. Thrifty Drug & Discount Stores (1995) 10 Cal.4th 424, 443; [" 'We uphold judgments
if they are correct for any reason, "regardless of the correctness of the grounds upon
which the court reached its conclusion." ' "]; Davey v. Southern Pacific Co. (1897) 116
Cal. 325, 329 ["[A] ruling or decision, itself correct in law, will not be disturbed on
appeal merely because given for a wrong reason."].)
9
" ' "[T]he allowance of amendments to conform to the proof rests largely in the
discretion of the trial court and its determination will not be disturbed on appeal unless it
clearly appears that such discretion has been abused. . . . Such amendments have been
allowed with great liberality 'and no abuse of discretion is shown unless by permitting
the amendment new and substantially different issues are introduced in the case or the
rights of the adverse party prejudiced . . . .' . . ." Conversely, " 'amendments of
pleadings to conform to the proofs should not be allowed when they raise new issues not
included in the original pleadings and upon which the adverse party had no opportunity
to defend . . . .' " ' " (Duchrow v. Forrest, supra, 215 Cal.App.4th at p. 1378.)
" ' "The cases on amending pleadings during trial suggest trial courts should be
guided by two general principles: (1) whether facts or legal theories are being changed
and (2) whether the opposing party will be prejudiced by the proposed amendment.
Frequently, each principle represents a different side of the same coin: If new facts are
being alleged, prejudice may easily result because of the inability of the other party to
investigate the validity of the factual allegations while engaged in trial or to call rebuttal
witnesses. If the same set of facts supports merely a different theory . . . no prejudice can
result." . . . "The basic rule applicable to amendments to conform to proof is that the
amended pleading must be based upon the same general set of facts as those upon which
the cause of action or defense as originally pleaded was grounded." ' " (Duchrow v.
Forrest, supra, 215 Cal.App.4th at p. 1378.)
10
"[I]n ruling on a motion to amend a complaint to conform to proof, 'the court
is usually guided by whether: [¶] . . . there is a reasonable excuse for the delay . . . ; [¶]
. . . the change relates to the facts or only to legal theories; and [¶] . . . the opposing party
will be prejudiced by the amendment.' " (Duchrow v. Forrest, supra, 215 Cal.App.4th at
pp. 1378-1379.)
The trial court's decision was not a manifest abuse of its broad discretion for
several reasons. First, Migliore, who originally filed his first amended complaint in
November 2008, waited until August 24, 2011, to present his second amended complaint,
well over two and one-half years later, on the fourth day of an approximately four and a
half-day jury trial.4 We acknowledge that "[c]ourts must apply a policy of liberality in
permitting amendments at any stage of the proceeding, including during trial, when no
prejudice to the opposing party is shown. [Citation.] 'However, " 'even if a good
amendment is proposed in proper form, unwarranted delay in presenting it may—of
itself—be a valid reason for denial.' " ' " (P&D Consultants, Inc. v. City of Carlsbad
(2010) 190 Cal.App.4th 1332, 1345; see also Magpali v. Farmers Group, Inc. (1996) 48
Cal.App.4th 471, 488 ["Where the trial date is set, the jury is about to be impaneled,
counsel, the parties, the trial court, and the witnesses have blocked the time, and the only
way to avoid prejudice to the opposing party is to continue the trial date to allow further
discovery, refusal of leave to amend cannot be an abuse of discretion."].) As in Duchrow
4 The court ruled on pretrial evidentiary motions on August 16, 2011, and the actual commencement of trial was August 17, 2011. (Evid. Code, § 12, subd. (b)(1) [commencement of trial when "the first witness is sworn or the first exhibit is admitted into evidence"].) Trial took place on August 17, 18, 22 (for a half day), 23 and 24. 11
v. Forrest, supra, 215 Cal.App.4th at page 1379, in which the plaintiff waited more than
two years to amend his complaint to change the theory of liability, and did so on the
fourth day of a five-day trial, Migliore's amendment was offered after a long unexplained
delay, and with lack of diligence. On that ground alone, the court did not err in its ruling.
Second, Migliore's asserted public policy-based cause of action required Migliore
to change his theory from a contract breach to a tort, requiring him to demonstrate that
Manners or Howe were on notice that they were violating a public policy that was
delineated in constitutional or statutory provisions. (Silo v. CHW Med. Found. (2002) 27
Cal.4th 1097, 1104.) 5 And, Migliore was required to prove the policy was " ' "public" in
that it "affects society at large" rather than the individual, . . . articulated at the time of
5 "Apart from the terms of an express or implied employment contract, an employer has no right to terminate employment for a reason that contravenes fundamental public policy as expressed in a constitutional or statutory provision. [Citation.] An actual or constructive discharge in violation of fundamental public policy gives rise to a tort action in favor of the terminated employee." (Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, 1252 (Turner), overruled on another ground in Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 498.) In Silo v. CHW Med. Found., supra, 27 Cal.4th 1097, our high court explained the foundations of the public policy-based exception to the at-will employment rule: " '[W]hile an at-will employee may be terminated for no reason, or for an arbitrary or irrational reason, there can be no right to terminate for an unlawful reason or a purpose that contravenes fundamental public policy.' [Citations.] We have held that this public policy exception to the at-will employment rule must be based on policies 'carefully tethered to fundamental policies that are delineated in constitutional or statutory provisions . . . .' [Citation.] This requirement 'grew from our belief that " 'public policy' as a concept is notoriously resistant to precise definition, and that courts should venture into this area, if at all, with great care and due deference to the judgment of the legislative branch" in order to avoid judicial policymaking.' [Citation.] It also serves the function of ensuring that employers are on notice concerning the public policies they are charged with violating. 'The employer is bound, at a minimum, to know the fundamental public policies of the state and nation as expressed in their constitutions and statutes . . . .' " (Id. at p. 1104.) 12
discharge, and . . ." 'fundamental' " and " 'substantial.' " ' " (Ibid.; Ross v. RagingWire
Telecommunications, Inc. (2008) 42 Cal.4th 920, 942.)
But Migliore never pleaded the statutory or constitutional public policy bases for
these claims, and the amendment would have involved factual determinations that were
not included in the original pleadings. Thus, allowing Migliore to amend would have
eliminated Nu Flow's opportunity to adequately defend the allegation that such rule
violations occurred, or prove the policies asserted were not predicated on duties that
would benefit the public at large. (Accord, Duchrow v. Forrest, supra, 215 Cal.App.4th
at p. 1380 [amendment during trial improper where " ' "new and substantially different
issues [were] introduced in the case" ' "].)
For example, to support his theory of wrongful constructive discharge to avoid
violating attorney rules of professional conduct, Migliore seeks to argue that the rules of
professional conduct, which bind all attorneys, required him to terminate his employment
with Nu Flow. Specifically, Migliore points to rule 3-700(B)(2), under which an attorney
who represents a client in one matter shall withdraw from that employment, if the
attorney "knows or should know that continued employment will result in violation of
these rules," and rule 3-500, which requires an attorney to "keep a client reasonably
informed about significant developments relating to the employment or representation,
including promptly complying with reasonable requests for information and copies of
significant documents when necessary to keep the client so informed." According to
Migliore, these provisions were violated by evidence he was "completely ignored" by Nu
Flow, "essentially leading to a refusal on Defendants' part to communicate with [him] in
13
any fashion" due to his repeated requests that Nu Flow grant him his 2.5 percent stock
ownership interest. He argues that for him to stay on as Nu Flow's general counsel, he
would have been put in the position of having to violate ethical mandates as it was
"impossible" for him to keep his client reasonably informed of Nu Flow's ongoing
business. Migliore has not shown Nu Flow was given the opportunity to conduct
discovery on, or rebut, such allegations before trial.
Even had the trial court permitted Migliore to amend his complaint, but granted a
nonsuit on such a claim, we would uphold it on the ground the policy on which Migliore
relied, ethical standards requiring an attorney to keep his or her client re asonably
informed, is predicated on a duty inuring to the individual client, not one that would
benefit the public at large. Nothing in Migliore's cited authority—General Dynamics
Corp. v. Superior Court (1994) 7 Cal.4th 1164—holds to the contrary. The court in
General Dynamics, reviewing a demurrer sustained without leave to amend, merely
issued a limited holding: that an in-house counsel may maintain a retaliatory discharge
claim against his or her employer to the same extent as a nonattorney employee under
circumscribed circumstances, including where the attorney insists on adhering to
mandatory ethical norms or refuses to violate them. (Id. at pp. 1169, 1181-1182, 1189-
1192.) In doing so, the court emphasized that "[s]ome (but not all) . . . professional
norms incorporate important public values." (Id. at p. 1181, italics omitted and added.)
Specifically, the court stated "attorneys should be accorded a retaliatory discharge
remedy in those instances in which mandatory ethical norms embodied in the Rules of
Professional Conduct collide with illegitimate demands of the employer and the attorney
14
insists on adhering to his or her clear professional duty." (Id. at p. 1186.) The court
specifically referred to counsel's duty to "not be a party to the commission of a crime,
destroy evidence or suborn perjury." (Ibid.) An attorney's duty to keep his or her own
client informed is not comparable.
As for Migliore's asserted public policy-based wrongful discharge cause of action
relating to Nu Flow's asserted failure to pay him stock as wages,6 Migliore contends he
presented evidence that the assertedly promised 2.5 percent stock ownership interest
qualified as wages under the relevant Labor Code provisions. According to Migliore, his
circumstances are like those in Schachter v. Citigroup (2009) 47 Cal.4th 610. Migliore
characterizes the California Supreme Court in Schachter as holding that restricted stocks
constitute wages under the Labor Code. We disagree.
6 "An employer who fails to pay an employee his or her wages, or engages in unlawful wage deductions, violates public policy." (Sciborski v. Pacific Bell Directory (2012) 205 Cal.App.4th 1152, 1174; see Pineda v. Bank of America, N.A. (2010) 50 Cal.4th 1389, 1400 [" '[T]he public policy in favor of full and prompt payment of an employee's earned wages is fundamental and well-established.' "]; Henry M. Lee Law Corp. v. Superior Court (2012) 204 Cal.App.4th 1375, 1388.) This court explained in Sciborski: "Labor Code section 221 prohibits an employer from deducting amounts from an employee's wages, even as a set-off for amounts clearly owed by the employee. [Citation.] This prohibition reflects 'California's strong public policy favoring the protection of employees' wages,' including amounts earned through commissions on sales. [Citation.] Labor Code section 221's rights are nonnegotiable and cannot be waived by the parties. [Citation.] 'By enacting [Labor Code] section 221 . . . the Legislature has prohibited employers from using self-help to take back any part of "wages theretofore paid" to the employee, except in very narrowly defined circumstances provided by statute.' " (Sciborski, 205 Cal.App.4th at p. 1166.) " ' "[W]ages" ' are defined to include 'all amounts for labor performed by employees . . . whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.' " (Ibid., quoting Lab. Code, § 200, italics omitted.) 15
Schachter involved a voluntary employee incentive compensation plan that
awarded employees shares of restricted company stock at a reduced price " 'in lieu of
cash payment of a percentage of the employee's annual compensation,' " which would
only fully vest with the employee after two years. (Schachter v. Citigroup, supra, 47
Cal.4th at pp. 613, 614-615.) Employees who resigned or were terminated for cause
before their restricted shares vested would forfeit the stock and that portion of cash
compensation they directed be paid in the form of the stock. (Id. at pp. 613, 615.) The
question considered by the California Supreme Court was whether that forfeiture
provision violated Labor Code sections requiring employees be paid all earned, unpaid
wages upon termination or resignation, and prohibiting agreements to the contrary.
(Ibid.) It held the forfeiture provision did not violate the Labor Code because no earned,
unpaid wages remained outstanding upon termination according to the terms of the
incentive plan. (Ibid.) In Schachter, though the court construed the term wages broadly
to include incentive compensation such as bonuses and profit-sharing plans (id. at p.
618), neither the plaintiff nor defendant in that case disputed that the cash compensation
and the restricted stock constituted wages, and in dicta, the court agreed that "the shares
of restricted stock issued to [plaintiff] also constituted a wage." (Id. at p. 619.)
Here, Migliore's purported cause of action required him to present evidence that he
and Nu Flow reached an agreement not only to provide him stock, but that the stock was
part of his compensation package. Any claim that Nu Flow violated a fundamental
public policy in failing to issue stock as compensation would have to be premised on the
jury finding that Nu Flow and Migliore reached such an agreement in the first place. But
16
in its special verdict, the jury answered "no" to the question: "Did . . . Migliore and
Nuflow Holdings, Inc. enter into an oral contract for the promise of stock?" (Some
capitalization omitted.)
Thus, Migliore cannot demonstrate prejudice, even assuming error. Migliore must
affirmatively show prejudice resulting from an error by the trial court and demonstrate a
reasonable probability of a more favorable outcome absent the error to justify rever sal.
(Cal. Const., art. VI, § 13; Code Civ. Proc., § 475; People v. Watson (1956) 46 Cal.2d
818, 836; Waller v. TJD, Inc. (1993) 12 Cal.App.4th 830, 833.) In view of the jury's
special verdict finding Migliore and Nu Flow did not enter into such a contract, Migliore
cannot show he was prejudiced by any error of the trial court in either granting nonsuit
on, or denying him leave to amend his complaint to state, a cause of action for
constructive termination in violation of public policy for failing to issue stock as
promised compensation.
II. Nonsuit was Properly Granted in Any Event on Migliore's Cause of Action for Breach
of Employment Contract/Constructive Discharge
A. Review Standards
Code of Civil Procedure section 581c, permits a defendant to move for a judgment
of nonsuit after the presentation of the plaintiff's evidence. (Code Civ. Proc., § 581c,
subd. (a).) The motion is in effect a demurrer to the evidence; conceding the truth of the
plaintiff's facts and arguing they are not sufficient as a matter of law to sustain his or her
case. (Alpert v. Villa Romano Homeowners Assn. (2000) 81 Cal.App.4th 1320, 1328.)
17
" 'A defendant is entitled to nonsuit if the trial court determines the evidence presented by
the plaintiff is insufficient as a matter of law to permit a jury to find in her favor. The
court may not weigh the evidence or consider the credibility of witnesses. Instead, it
must accept the evidence most favorable to the plaintiff as true and disregard conflicting
evidence. The plaintiff's evidence must be given all the value to which it is legally
entitled, including every legitimate inference that may be drawn in the plaintiff's favor.
A mere "scintilla of evidence" is not enough, however. There must be substantial
evidence creating a conflict for the jury to resolve. In reviewing a grant of nonsuit, we
follow the same rules requiring the evidence to be evaluated in the light most favorable to
the plaintiff and least favorable to the defendant. All presumptions, inferences, and
doubts are resolved against the defendant. We may not affirm, unless judgment for the
defendant is required as a matter of law.' " (Allgoewer v. City of Tracy (2012) 207
Cal.App.4th 755, 761.)
B. Migliore's Employment Was At-Will As a Matter of Law
"An at-will employment may be ended by either party 'at any time without cause,'
for any or no reason, and subject to no procedure except the statutory requirement of
notice." (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 335.) Here, there is no
dispute that in August 2007, Migliore executed a writing stating that his employment
with Nu Flow America was at will, and containing a provision that the document was to
be the "entire agreement between Nu Flow America and [Migliore] on these issues" and
could not be modified "except by a new agreement, in writing and signed by an officer of
Nu Flow America."
18
Migliore concedes that he did not claim at trial (and he does not claim on appeal)
that he had an implied in fact contract to terminate for good cause; he asserts his sole
theory at trial was that he was constructively terminated in violation of public policy. In
arguing nonsuit was inappropriate on that claim, Migliore argues that, unlike the plaintiff
in Haggard, supra, 39 Cal.App.4th 508, he had no written employment agreement
preceding the August 2007 document; he characterizes the August 2007 writing as a
standardized form "receipt," and points out it did not state his salary, benefits or position.
He argues: "Hence, despite the termination-at-will provision in the Receipt, other factors
indicate that the Receipt was not intended to be the entire employment agreement
between the parties. As such, the court's reliance on the Receipt to deny the existence of
an implied contract as to the 'stock' was misplaced."
The question in connection with the court's grant of nonsuit on Migliore's
wrongful constructive discharge claim is not whether there was an implied agreement as
to issuance of stock, but whether the August 2007 writing was integrated as to that term
of Migliore's employment so as to supersede any such agreement. Whether an agreement
is an integration is a question of law. (Haggard, supra, 39 Cal.App.4th at p. 517.) As
Haggard explains, an integration " 'may be partial, as well as complete; that is, the parties
may intend that a writing finally and completely express certain terms of their agreement
rather than the agreement in its entirety.' [Citations.] If only part of the agreement is
integrated, the parol evidence rule applies to that part." (Ibid.)
We conclude, as a matter of law, that the August 2007 agreement is integrated as
to the terms contained within that document, namely, the at-will nature of Migliore's
19
employment and grounds for his termination. By signing the document, Migliore agreed
to both the at-will termination clause and the integration provision, and that document
superceded all other agreements on the grounds for his termination. (Accord, Haggard,
supra, 39 Cal.App.4th at pp. 518-519.) Based on the at-will nature of Migliore's
employment, Migliore's claim that Nu Flow breached his contract of employment failed
as a matter of law.
C. Migliore's Evidence was Insufficient as a Matter of Law to Maintain a Constructive
Discharge Cause of Action
To support a cause of action for constructive discharge, "an employee
must . . . prove . . . that the employer either intentionally created or knowingly permitted
working conditions that were so intolerable or aggravated at the time of the employee 's
resignation that a reasonable employer would realize that a reasonable person in the
employee's position would be compelled to resign." (Turner, supra, 7 Cal.4th at p.
1251.) "[T]he focus in a constructive discharge case is the employer's knowledge and
conduct in forcing the employee to resign in light of the intolerable working conditions."
(Ibid.) Migliore must present evidence that (1) the working conditions at the time of his
resignation were so intolerable or aggravated that (2) a reasonable person in his position
would have been compelled to resign, and (3) Nu Flow either intentionally created or
knowingly permitted the intolerable working conditions. (See Turner, at pp. 1246-1250.)
Accepting Migliore's evidence and construing the remaining evidence in his favor,
it shows that in the summer of 2007, Migliore noticed a "marked drop" in the level and
frequency of communication between him, Manners and Howe regarding legal matters in
20
which he previously would have been involved. Migliore felt he was being eliminated
from the company, even while he had a lot of work to do. Manners and Howe stopped
coming to him for advice; the communication had stopped, and Migliore was not keeping
them informed as to what was happening and why. For example, Nu Flow stopped
having weekly legal meetings in about August 2007; Manners and Howe told Migliore
they were too busy and the meetings were not needed. In another instance, Migliore was
meeting with Manners regarding a settlement conference, and when Migliore tried to
explain what to do, Manners cut him off, saying, "I know how to handle it" and walked
out. During his last week of work at Nu Flow, Manners, Manners's wife, and Howe
walked by his office without saying anything as if Migliore was not inside it. Migliore
felt he was not given the opportunity to communicate with the principals and put in a
position making it impossible to advise them. According to him, it would not have been
fair to them or him to continue, as the principals did not know what they were doing
legally even though they still considered themselves represented by general counsel, and
he could not put himself ethically in the position of having a "fake attorney-client
relationship."
We cannot say the above-summarized evidence is sufficient to support a claim for
constructive discharge. In order to amount to a constructive discharge, working
conditions or the employer's actions "must be unusually 'aggravated' or amount to a
'continuous pattern' before the situation will be deemed intolerable." (Turner, supra,
7 Cal.4th at p. 1247, italics added.) They must be "so unusually adverse that a reasonable
employee in plaintiff's position ' " 'would have felt compelled to resign.' " ' " (Ibid.)
21
"[T]he employee's resignation must be employer-coerced, not caused by the voluntary
action of the employee or by conditions or matters beyond the employer's reasonable
control." (Id. at p. 1248.) Under this test, "the proper focus is on the working conditions
themselves, not on the plaintiff's subjective reaction to those conditions." (Gibson v.
ARO Corp. (1995) 32 Cal.App.4th 1628, 1636.) And, the employee's resignation
must be more than "simply one rational option for the employee." (Turner, supra,
7 Cal.4th at p. 1246.) Because all jobs have frustrations, challenges and disappointments,
" ' "[a]n employee may not be unreasonably sensitive to his [or her] working environment
. . . ." ' " (Id. at p. 1247.)
Migliore's evidence is not that he was prevented entirely from e-mailing Manners
and Howe or giving necessary legal advice to them, indeed, he testified he was capable of
sending e-mails to them as late as October 28, 2007, days before he resigned. Evidence
that Manners declined to listen to Migliore on one occasion, and that the communication
among the principals was reduced in general, may have subjectively made Migliore feel
unwanted or unable to do his job, but that is not the standard; such circumstances simply
are not the sort of "extraordinary and egregious" (Turner, supra, 7 Cal.4th at p. 1246,
italics added) working conditions that would overcome the normal motivation of a
competent, diligent, and reasonable employee to remain on the job. (Ibid.) Quitting
under these circumstances, in our view, was a rational option for Migliore, but it was not
coerced or compelled by the acts or inactions of Manner and Howe.
Further, Migliore did not present any evidence that he complained to Manner or
Howe that they would not listen to him, or that they were aware, before Migliore
22
resigned, that Migliore felt he could no longer properly communicate with or advise
them. He first communicated the perceived fatal break down in their attorney-client
relationship in his letter of resignation. As for the element of deliberately creating or
knowingly permitting the intolerable working conditions, "the requisite knowledge or
intent must exist on the part of either the employer or those persons who effectively
represent the employer, i.e., its officers, directors, managing agents, or supervisory
employees." (Turner, supra, 7 Cal.4th at p. 1251.) The employer "must be aware of the
impact of the events on the employee, not merely of the fact that the event or conduct
occurred." (Gibson v. ARO Corp., supra, 32 Cal.App.4th at p. 1640.) This simply
reflects the reasoning of Turner, in which the court explained, "By requiring employees
to notify someone in a position of authority of their plight, we permit employers unaware
of any wrongdoing to correct a potentially destructive situation." (Turner, at p. 1250.)
The absence of such evidence rendered nonsuit proper on that ground alone.
III. Exclusion of Migliore's Testimony
At trial, Nu Flow introduced evidence that at the time of his deposition, Migliore
believed Manners and Howe acted in good faith in their employment negotiations; that
they did not lie, trick or deceive him when they offered him 2.5 percent of the company.
Migliore testified on cross-examination, however, that he had received new information
that caused him to change his mind. During Migliore's redirect examination, Migliore
testified he had had a recent conversation with Eric Palmer, Nu Flow's chief financial
officer at the time of Migliore's resignation, which caused him to change the opinion he
had given in his deposition. Without objection, Migliore explained that Palmer gave him
23
information that related back to when Palmer was Nu Flow's chief financial officer.
Counsel tried to elicit what Palmer told Migliore, but the trial court sustained a hearsay
objection to the evidence, ruling the statement was not coming in for Migliore 's state of
mind.
Migliore contends the trial court abused its discretion when it excluded his
testimony about that conversation. Relying on Evidence Code section 1250 7 and
Holland v. Union Pacific Railroad Co. (2007) 154 Cal.App.4th 940, he maintains the
evidence did not go to the truth of the matter asserted, but was relevant to why Migliore
had a different state of mind after talking to Palmer. Migliore argues exclusion of the
evidence was an abuse of discretion and prejudiced him because he was not able to
reconcile his trial testimony with his deposition answers. In response, Nu Flow argues
Migliore's reaction to Palmer's statement was "utterly irrelevant" to the action, and thus
the state of mind exception did not make Palmer's statements admissible.
It appears Migliore sought to admit the proffered evidence for nonhearsay use, that
is, Migliore did not seek to introduce Palmer's statement for the truth of what Palmer
7 Migliore's reliance on Evidence Code section 1250 is unavailing. That section, which defines the present state of mind hearsay exception, reads in part: "(a) . . . [E]vidence of a statement of the declarant's then existing state of mind, emotion, or physical sensation . . . is not made inadmissible by the hearsay rule when: [¶] (1) The evidence is offered to prove the declarant's state of mind . . . at that time or at any other time when it is itself an issue in the action; or [¶] (2) The evidence is offered to prove or explain acts or conduct of the declarant." (Italics added.) An essential requirement of the statute is that the declarant's mental state or conduct be "itself an issue in the action." (See People v. Riccardi (2012) 54 Cal.4th 758, 814.) Of course, here, it was not the declarant's—Palmer's—state of mind at issue in the case; Migliore sought to introduce Palmer's out-of-court statement to show how it changed his own prior opinion about Manner's and Howe's good faith in negotiating with him. 24
said, but to prove the impact it had on the hearer, Migliore. (Accord, Holland v. Union
Pacific Railroad Co., supra, 154 Cal.App.4th at p. 947.) Nevertheless, we conclude
Migliore's counsel did not make an offer of proof as to the substance of the evidence
sufficient for this court to consider the claim of error.
Outside the jury's presence, counsel addressed the matter to the court as follows:
"[Migliore's counsel]: Well, there is the issue that Mr. Pfingst [Nu Flow's counsel]
brought up when he asked what Mr. Migliore's belief was when he testified in his
deposition that he didn't think that—at the time the representation of 2.5 percent was
made, that he was being tricked or lied to. [¶] And then Mr. Pfingst says, 'You still
believe that?' [¶] Mr. Migliore said, 'No.' [¶] And he said, 'Why not?' [¶] He said, 'I
learned new information.' [¶] Now, Mr. Pfingst didn't ask what information it was. The
information would be hearsay because it's a state-of-mind exception for—to explain why
Mr. Migliore changed his mind. It doesn't go to the truth of the matter asserted. It just
goes to an explanation of why Mr. Migliore has a different state of mind now after
talking to Eric Palmer. [¶] So I think the door was opened up when Mr. Pfingst asked
him, 'What changed your mind?' [¶] So if we're talking about his mind, we should
continue that line of thought.
"Mr. Pfingst: I never asked, 'What changed your mind?' I just impeached him
with his prior testimony.
"The Court: It's—and Mr. Palmer is coming in to testify?
"[Migliore's counsel]: I don't expect we're going to have time to call him. I don't
know if the defense plans to call him.
25
"Mr. Pfingst: He lives in Canada.
"The Court: Well, then if he's not coming, it's hearsay, and it's not coming in for
state of mind. [¶] Okay. What else?
"[Migliore's counsel]: Uh—
"The Court: Good.
"[Migliore's counsel]: Yeah. Nothing at this time, your honor."
A judgment shall not be reversed by reason of erroneous exclusion of evidence
unless a miscarriage of justice is shown and it appears of record that "[t]he substance,
purpose, and relevance of the excluded evidence was made known to the court by the
questions asked, an offer of proof, or by any other means." (Evid. Code, § 354, subd.
(a).) " 'The substance of evidence to be set forth in a valid offer of proof means the
testimony of specific witnesses, writings, material objects, or other things presented to
the senses, to be introduced to prove the existence or nonexistence of a fact in issue.' "
(In re Mark C. (1992) 7 Cal.App.4th 433, 444.) "Failure to make an adequate offer of
proof precludes consideration of the alleged error on appeal." (Ibid.)
At no point did Migliore's counsel identify or suggest what Palmer actually said to
Migliore. "An offer of proof must consist of material that is admissible, it must be
specific in indicating the purpose of the testimony, the name of the witness and the
content of the answer to be elicited." (In re Mark C., supra, 7 Cal.App.4th at p. 445;
Semsch v. Henry Mayo Newhall Memorial Hospital (1985) 171 Cal.App.3d 162, 167,
disagreed with on other grounds in Atkins v. Strayhorn (1990) 223 Cal.App.3d 1380,
1393, fn. 6.) The offer of proof " 'must set forth the actual evidence to be produced and
26
not merely the facts or issues to be addressed and argued.' " (People v. Brady (2005) 129
Cal.App.4th 1314, 1332, italics added; see also Semsch, at p. 168 [offer of proof of
witness testimony must give "the precise testimony to be offered"]; United Sav. & Loan
Assn. v. Reeder Dev. Corp. (1976) 57 Cal.App.3d 282, 294 ["An offer of proof that sets
forth the substance of facts to be proved does not comply with Evidence Code section
354, subdivision (a), since facts do not constitute evidence."].)
While Migliore's counsel may have explained the purpose and relevance of the
evidence to the court, he did not set out the substance of the information. (See In re
Mark C., supra, 7 Cal.App.4th at p. 445 ["The burden was on [the proponent] to make
known to the court the substance, purpose, and relevance of the evidence."]; Evid. Code,
§§ 354, subd. (a), 403, subd. (a), 801, subd. (b).) "Before an appellate court can
knowledgeably rule upon an evidentiary issue presented, it must have an adequate record
before it to determine if an error was made. For this purpose, we are limited to reviewing
the matters appearing in the record." (In re Mark C., at p. 445.) For the foregoing
reasons, including the uncertainty in the record concerning the nature of the proffered
evidence, we are unable to consider the argument and will not reverse the judgment on
Migliore's stated ground.
IV. Special Verdict Form
A. Background
Before the case went to the jury, the trial court expressed concern with the special
verdict form as to Migliore's cause of action for breach of oral contract, observing that
the second amended complaint referred to a promise to give stock, not stock options,
27
whereas Migliore's proposed verdict form read " 'stock or options.' " It asked Migliore's
counsel to amend the verdict form so that it referred only to stock. Migliore 's counsel
objected, stating the evidence showed that stock, on the one hand, and stock options
without any cost or "strike price," on the other, were essentially the same. After the court
issued its order, Migliore's counsel clarified: "Just so that we're clear, that won't preclude
us, either side, from arguing that stock is tantamount or equivalent to options without a
strike price?" The court responded: "No, you can—you can argue whatever you want. I
just want the jury to be clear that—what we're talking about here." With that
understanding, Migliore's counsel agreed to correct the verdict form. And, during closing
arguments, he argued to the jury that "a stock option with no strike price is just like a
stock. No difference."
B. Contentions
Migliore contends that, despite a "plethora of undisputed evidence that [he] was
promised stock 'options,' " the trial court erred as a matter of law by refusing to permit the
phrase "stock options" to be included on the special verdict form. Migliore baldly
asserts, "The trial court's ruling was prejudicial." On this point, Migliore only raises the
other asserted errors, arguing they were cumulatively prejudicial. He states: "It is not
unreasonable to infer this case could have gone the other way, but for the court's errors.
Despite the multiple errors, one juror thought Nu Flow had entered into an oral
agreement with Migliore for the promise of stock." Migliore argues the jury verdict was
"nullified" through the cumulatively prejudicial errors.
28
In response, Nu Flow points out the evidence was undisputed that Migliore was
entitled to participate in its stock option plan before he resigned. It argues, however, that
Migliore conceded at trial that he had no intention of exercising any stock options offered
by Nu Flow because his claim then was that he was entitled to shares of stock outright,
not options. Nu Flow states that the overwhelming evidence was that Nu Flow could not
offer Migliore stock options without any requirement that he pay the appropriate strike
price, and thus the court did not err by finding Migliore's proposed verdict form
misleading and inaccurate.
C. Migliore Has Not Demonstrated Error or Prejudice
Under Code of Civil Procedure section 624, a special verdict form presents to the
jury each ultimate fact in the case, such that the trial court's role in implementing it is
only to draw from the jury's conclusions any remaining required conclusions of law.
(Falls v. Superior Court (1987) 194 Cal.App.3d 851, 854-855.) "The special verdict
must present the conclusions of fact as established by the evidence, and not the evidence
to prove them; and those conclusions of fact must be so presented as that nothing shall
remain to the Court but to draw from them conclusions of law." (Code Civ. Proc.,
§ 624.) An appellate court reviews de novo the issue of whether a special verdict form is
a correct statement of the law which it is intended to apply. (See Wilson v. Ritto (2003)
105 Cal.App.4th 361, 366.)
We assess Migliore's challenge under settled review standards: As the appellant,
Migliore bears the burden of showing not only error, but that prejudice was suffered due
to the error. (9 Witkin, Cal. Procedure (5th ed. 2008) Appeal,
29
§§ 416, 417, pp. 475-476; Code Civ. Proc., § 475 [disregard of nonprejudicial error-
presumption against prejudice]; see Bly-Magee v. Budget Rent-A-Car Corp. (1994) 24
Cal.App.4th 318, 325-326 [no error or consequent prejudice where trial court refused to
use defendant's proposed verdict form but used one in which nonparties subject to some
percentage of fault were identified as "other persons" rather than three identified nonparty
deputy sheriffs; verdict form was not confusing or ambiguous and could not have
reasonably misled the jury].)
Migliore has not shown error. The question in the verdict form, consistent with
Migliore's operative second amended complaint, called for the ultimate fact of whether
there was an oral agreement for stock; it was not required to call out additional
evidentiary facts as to whether the stock was promised by way of options. (See Falls v.
Superior Court, supra, 194 Cal.App.3d at pp. 854-855; 7 Witkin, Cal. Procedure (5th ed.
2008) Trial, § 346, p. 404.)
Further, Migliore's cursory prejudice arguments do not provide sufficient ground
to reverse the judgment, even assuming some error in the court's order to modify the
verdict form. We cannot say that due to the form of the special verdict, the jury was
confused, mislead, or unable to consider Migliore's theory. Counsel had every
opportunity to, and in fact did, focus the jury's attention on the evidence that a stock
option without a strike price and an outright grant of stock were one and the same thing.
Nor has Migliore shown that had the verdict form contained the term "stock options," it is
reasonably probable the jury would have reached a different result. The mere fact one
juror believed Nu Flow had entered into an oral agreement for the promise of stock,
30
without more, does not establish a likelihood that the other jurors would have found such
an agreement had been reached as to stock options at no cost to Migliore.
Having concluded Migliore's claims present either no error or no resulting
prejudice, we reject his claim of cumulative error.
DISPOSITION
The judgment is affirmed.
O'ROURKE, J.
WE CONCUR:
McCONNELL, P. J.
HUFFMAN, J.
31
AI Brief
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Holding. The court affirmed the judgment, holding that the trial court did not abuse its discretion in denying the plaintiff's mid-trial request to amend his complaint to add a cause of action for constructive discharge in violation of public policy. The court further determined that the plaintiff's reliance on attorney ethical rules and wage-related statutes did not establish a fundamental public policy sufficient to support a tort claim for wrongful discharge.
Issues
Did the trial court abuse its discretion by denying the plaintiff's mid-trial motion to amend his complaint to add a cause of action for constructive discharge in violation of public policy?
Did the trial court err in granting nonsuit on the plaintiff's contract-based claims?
Did the trial court err in its evidentiary rulings and instructions regarding the special verdict form?
Disposition. Affirmed.
Quotations verified verbatim against the opinion
“Migliore's amendment was offered after a long unexplained delay, and with lack of diligence. On that ground alone, the court did not err in its ruling.”