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Lying to disabled is misrepresentation

By: dmc-admin//February 25, 2004//

Lying to disabled is misrepresentation

By: dmc-admin//February 25, 2004//

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Peterson

“There were multiple opportunities for someone to tell Betterman the truth, yet no one did. The jury could have reasonably found that, under the circumstances, Fleming’s representations were outrageous.”

Hon. Gregory A. Peterson
Wisconsin Court of Appeals

Punitive damages were properly awarded to an employee on leave who was told he had a job waiting when he got better, but who had actually been terminated, the Wisconsin Court of Appeals held on Feb. 17.

Duane D. Betterman worked for Fleming Companies, Inc., for more than 31 years. In February 1997, he suffered a mental breakdown at work, and was diagnosed with a major depressive disorder and anxiety related to his job.

Fleming’s human resources manager, Susan Morrison, sent Betterman forms to fill out for leave under the Family and Medical Leave Act (FMLA), and helped him fill out the forms.

The forms stated Fleming’s leave policy that after FMLA leave was exhausted, an employee could go on paid medical leave for approximately 14 weeks. Then the employee could either go back to work or resign and receive long-term disability benefits. MetLife, Fleming’s disability insurance carrier, would provide the long-term disability benefits.

Under Fleming’s policy, the employee would be terminated if he or she did not return to work immediately following the leave of absence. However, Morrison never told Betterman that he would be resigning by doing so.

On April 1, 1997, Fleming sent Betterman a letter stating that long-term disability benefits would begin on Aug. 21, 1997. This is the day Fleming considered Betterman’s employment to be terminated, pursuant to its policy.

After Betterman’s breakdown, he went to Fleming several times, and had conversations with Morrison and others, but no one ever told him that he was terminated.

Instead, they told him that when he was better, he could return to work.

In November 1997, Betterman decided to take funds out of his 401(k) but the fund manager told him he could not withdraw funds because Fleming notified the fund that Betterman was terminated. Consequently, Betterman could only take all the money out of his 401(k) or none at all.

Betterman then called Morrison, who assured him that he was not terminated and that she would take care of the problem. Betterman contacted the fund several times and was told each time that he was terminated. Eventually, Betterman rolled his 401(k) over into a different account.

In April 1998, MetLife notified Betterman that his disability benefits would terminate on May 21. Betterman went to Fleming to see about returning to work. Morrison told him he would need a letter from a doctor authorizing his return to work. Betterman’s psychologist, Dr. Ellen Halverson, wrote a letter stating that Betterman could return to work with limitations.

Instead of being returned to work, however, Betterman received a letter from Fleming that stated he had not been an employee since August 21, 1997, pursuant to Fleming’s leave policy.

In June 1999, Betterman began looking for other work, and started working in a grocery store in July. His long-term disability benefits terminated in August 1999.

Betterman sued Fleming for discrimination, intentional misrepresentation and promissory estoppel. The jury found that Fleming did not discriminate against Betterman, but that Fleming did intentionally misrepresent to Betterman that he could return to work.

What the court held

Case: Duane D. Betterman v. Fleming Companies, Inc., No. 02-2617.

Issue: When an employee on leave was not told he was fired, but was told there was a job waiting when he got better, can he sue the employer for intentional misrepresentation?

How are damages calculated?

Holding: Yes. Once the employee is terminated, he is no longer an employee, and is thus, not limited to contract remedies.

Damages are calculated using the benefit of the bargain rule — the difference between the represented value and the actual value.

Counsel: Eric J. Magnuson, Minneapolis, MN; Daniel Q. Poretti, Minneapolis, MN, for appellant; Kyle H. Torvinen, Superior; Kristin Watson, Superior; Tony Breidenbach, Superior, for respondents.

The jury concluded that Fleming made an express promise to Betterman that he would be employed at Fleming, that Fleming acted with malice or intentionally disregarded Betterman’s rights, and awarded Betterman punitive damages of $300,000. Pursuant to a stipulation, the court conducted a bench trial on compensatory damages, and awarded $255,666 for loss of wages, loss of social security benefits, loss of investment income and loss of health insurance benefits.

Fleming appealed, but the court of appeals affirmed in a decision by Judge Gregory A. Peterson.

Employment

The court first held that Betterman could sue for intentional misrepresentation, and was not limited to contract remedies by the decisions in Tatge v. Chambers & Owen, Inc., 219 Wis. 2d 99, 579 N.W.2d 217 (1998), and Mackenzie v. Miller Brewing Co., 2001 WI 23, 241 Wis. 2d 700, 623 N.W.2d 739.

In Tatge, the court held that an employee fired for refusing to sign a noncompete agreement, even though he was told there would be no consequence if he refused to sign, could only sue for breach of an employment contract, not misrepresentation.

In Mackenzie, an employee was told that the employer’s reorganization would not affect his position grade level, when, in fact, he was downgraded. Following Tatge, the Supreme Court held, “no duty to refrain from misrepresentation exists independently of the performance of the at-will employment contract,” Mackenzie, 241 Wis. 2d 700, par. 15, and denied Mackenzie’s misrepresentation claim.

The court of appeals distinguished Tatge and Mackenzie, however, because, in those cases, the misrepresentations were made while Tatge and Mackenzie were still employed by their respective employers, while the misrepresentations made to Betterman were made after he was terminated.

The court concluded, “the rule barring intentional misrepresentation claims where there is an at-will contract does not apply when there is no employment relationship.”

The court found Betterman’s case closer to that in Hartwig v. Bitter, 29 Wis. 2d 653, 139 N.W.2d 644 (1966), in which an employer made misrepresentations in order to induce prospective employees to work for the employer, and the Supreme Court allowed an intentional misrepresentation claim, because no employment relationship existed at the time of the misrepresentations.

Intentional Misrepresentation

The court also held that all the elements of intentional misrepresentation were satisfied: (1) the statement of fact must be false; (2) the statement must be made with the intent to defraud and for the purpose of inducing the other party to act; and (3) the other party must rely on the false statement to his or her detriment. First Credit Corp. v. Myricks, 41 Wis. 2d 146, 149, 163 N.W.2d 1 (1968).

The court concluded the statements that Betterman was not terminated were false and were made with intent to deceive Betterman.

Fleming argued that the supervisors were merely concerned with Betterman’s well-being, and thus no statements were made with any intent to deceive Betterman.

However, because they knew the statements were untrue, the court concluded that intent can be inferred.

The court further concluded that Betterman detrimentally relied on the misstatements. Although Betterman did not turn down other employment because of the statements, his therapy was all geared toward returning to work, and Betterman spent money remodeling his deck in reliance on the assertions that had a job waiting for him.

Benefit of the Bargain

The court also held the trial court’s award of compensatory damages proper.

The measure of damages for intentional misrepresentation is the benefit of the bargain, and under that rule, a plaintiff is entitled to damages equivalent to what the he would have received if the representation had been true.

Accordingly, damages were properly based on Betterman’s wage loss.

In addition, this amount was properly not reduced by disability payments pursuant to he collateral source rule. The court concluded, “Here, the disability benefits were part of Betterman’s compensation. As the circuit court stated, the benefit was ‘part of an overall benefit package which was part of his salary which was intended to attract qualified people to this position.’ Thus, the fact that Fleming paid the premium on the MetLife disability policy is only important insofar as it represented part of Betterman’s compensation.”

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Wisconsin Court of Appeals

Related Article

Case Analysis

The court also upheld the award of damages for lost investment income and reduced social security benefits from retiring at 62 instead of 65, finding, “had Betterman been able to return to work at Fleming, he would have continued investing in his 401(k) and received a return on that investment. Therefore, the lost income was a direct result of Fleming’s misrepresentations.”

The court added, “if Betterman had returned to work at Fleming, he would not have had to take his social security payments early. This was again a result of Fleming’s misrepresentations that Betterman had a job waiting for him.”

Punitive Damages

Finally, the court upheld the award of punitive damages, citing, “(1) evil intent deserving of punishment or of something in the nature of special ill-will; or (2) wanton disregard of duty; or (3) gross or outrageous conduct,” Trinity Evangelical Church v. Tower Ins. Co., 2003 WI 46, par. 45, 261 Wis. 2d 333, 661 N.W.2d 789.

The court concluded, “There were multiple opportunities for someone to tell Betterman the truth, yet no one did. The jury could have reasonably found that, under the circumstances, Fleming’s representations were outrageous.”

Accordingly, the court affirmed.

Click here for Case Analysis.

David Ziemer can be reached by email.

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