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Bisig v. Time Warner Cable, Inc.

United States Court of Appeals, Sixth Circuit

October 4, 2019

Kenneth Bisig, et al., Plaintiffs-Appellants/Cross-Appellees,
v.
Time Warner Cable, Inc., Defendant-Appellee/Cross-Appellant.

          Argued: January 16, 2019

          Appeal from the United States District Court for the Western District of Kentucky at Louisville. No. 3:14-cv-00036-David J. Hale, District Judge.

         ARGUED:

          Victor B. Maddox, FULTZ MADDOX DICKENS PLC, Louisville, Kentucky, for Appellants/Cross-Appellees.

          C. Celeste Creswell, KABAT CHAPMAN & OZMER LLP, Atlanta, Georgia, for Appellee/Cross-Appellant.

         ON BRIEF:

          Victor B. Maddox, FULTZ MADDOX DICKENS PLC, Louisville, Kentucky, Mary E. Eade, NEMES EADE PLLC, Louisville, Kentucky, for Appellants/Cross-Appellees.

          C. Celeste Creswell, Joseph W. Ozmer II, KABAT CHAPMAN & OZMER LLP, Atlanta, Georgia, Todd B. Logsdon, Megan R. U'Sellis, Raymond C. Haley, FISHER & PHILLIPS LLP, Louisville, Kentucky, for Appellee/Cross-Appellant.

          Before: MERRITT, GIBBONS, and NALBANDIAN, Circuit Judges.

          OPINION

          NALBANDIAN, CIRCUIT JUDGE.

         This case is about promises made, promises broken, and disclaimers signed. And it is a reminder that not every broken promise occasions a legal remedy.

         Plaintiffs[1] sued Time Warner after it allegedly failed to make good on oral promises of continued employment and better pay. The problem for Plaintiffs is that these promises conflicted with written disclaimers that each had signed.[2] Through these disclaimers, Plaintiffs acknowledged they were at-will employees and would remain so unless they entered into written employment agreements. Plaintiffs now appeal the district court's grant of summary judgment to Time Warner on their claims of fraud, negligent misrepresentation, and promissory estoppel. Time Warner cross-appeals the district court's order sanctioning it under Rule 37(c)(1) for its untimely production of documents.

         We affirm the grant of summary judgment and reverse the sanctions.

         I.

         Plaintiffs first worked as "multi-dwelling unit" sales representatives ("MDU Reps") for Insight Communications, Inc., a provider of cable, internet, and phone services. In that role, Plaintiffs sold Insight's services to apartment and condominium complexes in Louisville, Kentucky. It was a privileged role. All other sales representatives were "single-dwelling unit" sales representative ("SDU Reps"). Unlike MDU Reps, SDU Reps had to split their time going door-to-door, selling Insight's services to individual homeowners. These clients were less lucrative for Insight, which generally paid SDU Reps less than MDU Reps.

         But change was coming. In 2011, Time Warner announced it was acquiring Insight. Plaintiffs claim that Time Warner induced them to stay in their jobs even though troubling developments at the company would have otherwise caused them to leave. Among these developments were the "elimination of numerous jobs and whole departments," increased market competition, and customer service issues. (Pls.' Opening Br. at 3-4.) According to Plaintiffs, Time Warner promised them that they would keep their positions and receive better pay (or at least not less pay) while working for Time Warner.

         Time Warner acquired Insight in March 2012, and it allegedly reiterated its promises to Plaintiffs at various meetings it held with them the next year. So Plaintiffs claim they were shocked to learn in October 2013 that their workforce was being cut in half and that they would need to reapply if they wished to keep their positions. Those who could not keep their positions would be offered jobs as "Sweep Representatives," which Plaintiffs regarded as an inferior, less well-paid position. Plaintiffs allege that Time Warner knew these changes would occur, even while it promised Plaintiffs better pay and continued employment.

         Time Warner challenges this narrative by pointing out that it made no changes to Plaintiffs' employment or compensation plan for more than eighteen months after the acquisition. It also notes that Plaintiffs electronically acknowledged and accepted three different at-will employment disclaimers on or before the acquisition date. And it paints a very different picture of what it told Plaintiffs during the meetings it held with them the next year.

         According to Time Warner, it informed Plaintiffs at these meetings that they could lose their jobs and that their compensation could decrease. At a meeting in August 2013, for example, Time Warner provided each Plaintiff a copy of a compensation plan that overhauled how they would earn commission going forward. The plan caused some Plaintiffs to complain that they would make less money and that Time Warner would need to reduce the number of MDU Reps. The plan also contained an at-will disclaimer that reminded Plaintiffs of their at-will status and cautioned that the plan "in no way implie[d] or guarantee[d] continued employment." (See R. 143-3, Commission Plan at PageID #4865.)

         Plaintiffs each eventually quit working for Time Warner after it told them that they would need to reapply to keep their positions. They later filed this lawsuit, alleging that Time Warner had unlawfully broken its promises of better pay and continued employment. Their first amended complaint asserted several claims, including fraud, negligent misrepresentation, and promissory estoppel. Plaintiffs later moved for summary judgment on their promissory-estoppel claim, and Time Warner moved for summary judgment on all of Plaintiffs' claims.

         Plaintiffs then filed a motion for sanctions. Through that motion, Plaintiffs sought to exclude certain documents that, they argued, Time Warner had failed to timely disclose. These documents were Plaintiffs' job offer letters. And they included one of the three types of at-will disclaimers that Plaintiffs electronically acknowledged on or before the acquisition date. Plaintiffs also sought attorneys' fees and expenses as an alternative sanction.

         Although the magistrate judge concluded that the disclosure was untimely, she denied Plaintiffs' motion because she found the belated disclosure harmless. Plaintiffs filed objections to the magistrate judge's decision, and the district court sustained those objections. As a remedy, the district court excluded the documents and awarded Plaintiffs their attorneys' fees and costs related to the sanctions motion. Notwithstanding this order, the district court eventually granted Time Warner summary judgment on all of Plaintiffs' claims.

         Plaintiffs now appeal the district court's grant of summary judgment to Time Warner on their claims of fraud, negligent misrepresentation, and promissory estoppel. And Time Warner cross-appeals the court's sanctions order.

         We first consider Plaintiffs' summary-judgment appeal, which we review de novo. Tysinger v. Police Dep't of Zanesville, 463 F.3d 569, 572 (6th Cir. 2006). Under this standard, we construe all facts and reasonable inferences in Plaintiffs' favor. Id. If genuine issues of material facts remain, then summary judgment was improper. Id.

         II.

         Fraud and Negligent Misrepresentation.

         The district court construed Plaintiffs' complaint as asserting both fraudulent misrepresentation and fraudulent omission. And it granted Time Warner summary judgment on these claims for the same reason it granted Time Warner summary judgment on Plaintiffs' negligent-misrepresentation claim: Plaintiffs had failed to establish that they "reasonably relied" on Time Warner's promises.

         We agree with the parties and the district court that reasonable reliance is an element of both fraudulent and negligent misrepresentation in Kentucky. See Flegles, Inc. v. TruServ Corp., 289 S.W.3d 544, 549 (Ky. 2009); Presnell Const. Managers, Inc. v. EH Const., LLC, 134 S.W.3d 575, 580 (Ky. 2004). But we are less certain that it is an element of fraudulent omission. We put that aside for now, however, and first explain why Plaintiffs cannot establish reasonable reliance and so their claims of negligent and fraudulent misrepresentation must fail.

         In so doing, we rely on the same document that the district court relied on. It was one of the three documents that informed Plaintiffs of their at-will statuses on or before the acquisition date. And it was labeled an "Important Notice." (R. 142-2, Important Notices at PageID #4579- 88.) It stated: "You will be employed on an at-will basis unless you are subject to a written employment agreement signed by a company representative authorized to enter into an employment agreement." Id.

         Each Plaintiff electronically acknowledged "hav[ing] read and accepted the terms" of this notice. Id. And it is undisputed that Plaintiffs did so before they detrimentally relied on Time Warner's alleged promises of continued employment and better pay. So the issue here is whether it was reasonable for Plaintiffs to rely on Time Warner's promises of better pay and continued employment even though they had read and accepted this notice.

         We hold it was not. On this issue, Kentucky law is clear: "[A]s a matter of law, a party may not rely on oral representations that conflict with written disclaimers to the contrary which the complaining party earlier specifically acknowledged in writing." Rivermont Inn, Inc. v. Bass Hotels & Resorts, Inc., 113 S.W.3d 636, 640 (Ky. Ct. App. 2003).

         The facts of Rivermont illustrate its rule (the "Rivermont Rule"). Rivermont Inn ("Rivermont") wished to buy a Holiday Inn from MD Investments ("MD"), but the franchise was not transferrable. Id. at 639. So Rivermont began negotiating with Holiday Inn's parent company ("Holiday") to obtain a franchise license. Id. During the application process, Rivermont proposed a property-improvement plan costing $1.4 million that would involve substantial upgrades to the property. Id. Importantly, it also "acknowledged in writing several times that Holiday [did] not enter into oral agreements 'with respect to licenses or matters pertaining to the granting of a license.'" Id. "The documents further stated that Holiday 'reserve[d] the sole right to approve or disapprove the Application for any reason it [] determine[d].'" Id.

         Three days before the scheduled closing, Rivermont contacted one of Holiday's vice presidents, Judy Bloodworth, and asked whether it should proceed with the closing. Id. According to Rivermont, "Bloodworth told them that licensing would be forthcoming and to close on the property." Id. So Rivermont went through with the closing. Id. After the closing, however, Holiday said it would only approve the franchise if Rivermont agreed to a condition: "[T]he hotel would not be on Holiday's national network until the [property-improvement plan] was completed to Holiday's satisfaction." Id. Rather than accept the condition, Rivermont sued Holiday, alleging fraud and promissory estoppel. See id. The trial court granted summary judgment to Holiday on each of Rivermont's claims, and the Kentucky Court of Appeals affirmed. Id. at 640, 643.

         The Court of Appeals held that Rivermont's fraudulent misrepresentation claim failed for two reasons. First, it held that Rivermont could not establish fraudulent misrepresentation based on all the facts that Rivermont knew before it went through with the closing. Id. at 640. This included the fact that Holiday did not enter into oral agreements about licensing matters as specified in the written disclaimers. Id. For its second reason, the court articulated what we now refer to as the Rivermont Rule. Again, that rule prohibits a party from "rely[ing] on oral representations that conflict with written disclaimers to the contrary which the [] party earlier specifically acknowledged in writing." Id. And the court held that the rule barred Rivermont from relying on Bloodworth's oral representations as a matter of law. Id.

         Here, all the Plaintiffs electronically acknowledged the Important Notice. The only question that remains is whether the Important Notice "conflict[ed]" with Time Warner's oral representations of continued employment and better pay. Id. We have no doubt that it did.

         In Kentucky, at-will employees may be discharged "for good cause, for no cause, or for a cause that some might view as morally indefensible." Firestone Tire & Rubber Co. v. Meadows, 666 S.W.2d 730, 731 (Ky. 1983) (citing Scroghan v. Kraftco Corp., 551 S.W.2d 811 (Ky. Ct. App. 1977); Production Oil Co. v. Johnson, 313 S.W.2d 411 (Ky. Ct. App. 1958)). Only "a narrow public policy exception" applies to this rule: An employee may not be fired "when the discharge is contrary to a fundamental and well-defined public policy as evidenced by existing law." Id. No such policy ...


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