William Giacone v. Virtual Officeware

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________

No. 15-1940
_______________

WILLIAM GIACONE

v.

VIRTUAL OFFICEWARE, LLC;
DAVID HAREL,
Appellants
_______________

On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil No. 2-13-cv-01558)
District Judge: Hon. Arthur J. Schwab
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Argued January 20, 2016

BEFORE: FISHER, CHAGARES AND COWEN, Circuit Judges

(Opinion Filed: March 1, 2016)

Richard L. Heppner, Jr., Esq.
Kim M. Watterson, Esq. (Argued)
Reed Smith
225 Fifth Avenue
Suite 1200
Pittsburgh, PA 15222

Counsel for Appellants

Joseph R. Lawrence, Esq.
Jordan L. Strassburger, Esq. (Argued)
Strassburger, McKenna, Gutnick & Gefsky
444 Liberty Avenue
Suite 2200, Four Gateway Center
Pittsburgh, PA 15222

Counsel for Appellee
______________

OPINION*
_____________

COWEN, Circuit Judge.

Defendants Virtual Officeware, LLC (“VOW”) and David Harel appeal from the

judgment entered by the United States District Court for the Western District of

Pennsylvania in favor of Plaintiff William Giacone. We will affirm.

I.

Giacone, a former regional sales manager and minority shareholder, claimed that

VOW and Harel (VOW’s President) breached his employment agreement (“Employment

Agreement”) and sought to recover unpaid wages under the Pennsylvania Wage Payment

and Collection Law (“WPCL”). Defendants filed counterclaims alleging that it was

Giacone who breached the parties’ contract.

The District Court conducted a bifurcated bench trial. In its liability ruling, “the

Court [found] in favor of Plaintiff on Plaintiff’s breach of contract Claim against

Defendants; and in favor of Plaintiff on Defendants’ Counterclaim for breach of

restrictive covenants.” Giacone v. Virtual Officeware, LLC, No. 13CV1558, 2014 WL

*
This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7, does not
constitute binding precedent.
2
7070205, at *17 (W.D. Pa. Dec. 12, 2014) (“Giacone I”) (footnote omitted). It

subsequently explained that “judgment will be entered in favor of Plaintiff and against

Defendants on Plaintiff’s claim for breach of contract under the WPCL for a total of

$1,104,839.” Giacone v. Virtual Officeware, LLC, No. 13CV1558, 2015 WL 1405429,

at *10 (W.D. Pa. Mar. 26, 2015) (“Giacone II”). Judgment was also entered in favor of

Giacone on the counterclaims (with the exception of the claim for breach of covenant

where there was no harm and no damages), and the District Court refused to award

attorney’s fees to Defendants. “Plaintiff, on the other hand, is entitled to reasonable

attorney’s fees under the WPCL.”1 Id. In both its liability and damages rulings, the

District Court consistently found Giacone’s testimony to be more credible than the

testimony offered by Defendants—especially Harel.

II.

Defendants vigorously challenge the District Court’s findings of fact and

conclusions of law.2 Having considered the governing legal principles, the evidence

1
The District Court subsequently awarded Giacone $257,400 for his attorney’s
fees.
2
The District Court had subject matter jurisdiction pursuant to 28 U.S.C. § 1332.
We have appellate jurisdiction under 28 U.S.C. § 1291.

After a bench trial, this Court reviews a district court’s factual findings for clear
error and its legal conclusions de novo. See, e.g., McCutcheon v. Am.’s Servicing Co.,
560 F.3d 143, 147 (3d Cir. 2009). A finding of fact is clearly erroneous when, even
though there may be evidence to support it, the reviewing court is left with the definite
and firm conviction that a mistake has been committed. See, e.g., Estate of Spear v.
Comm’r, 41 F.3d 103, 114-15 (3d Cir. 1994). “We will not reverse as long as the District
Court’s account of the evidence is ‘plausible in light of the record,’ even if convinced
that we ‘would have weighed the evidence differently.’” Karkkainen v. Kovalchuk, 445
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presented, and the parties’ various arguments, we do not believe the District Court

committed a reversible error in this proceeding.

According to the District Court, Giacone proved that Defendants materially

breached the Employment Agreement by taking away his guaranteed compensation as

well as his status as a senior executive. Defendants insist that no changes to his

employment had been made at the time he resigned and that, in any event, the

Employment Agreement allows for these changes. However, the District Court—after

presiding over this bench trial—appropriately determined that Giacone was more credible

than Harel. In turn, it properly considered the documentary evidence, which indicated

that Defendants implemented the changes. For instance, Harel’s June 14, 2013 e-mail to

VOW’s Board stated that a proposed $66,000 payment to Giacone was “in consideration

for the sources of income that [sic] taken out from his employment terms; his book of

business selling to existing install base, sales manager’s overrides, annual increases, auto

allowances, employee bonus, and manager bonuses.” (JA908.) On June 28, 2013, a

memorandum was sent to the sales staff (including Giacone) summarizing “the revised

commission policy”—which “started on June 3, 2013.” (JA954.) In addition,

“Defendants’ positions at trial fluctuated on the issue of why their actions did not

constitute a breach of the Employment Agreement.” Giacone I, 2014 WL 7070205, at

*2. “[W]hy would Defendants intensively labor to modify the existing contract if the

restructuring changes were allowed/proper under the existing Employment Agreement?”

F.3d 280, 289 (3d Cir. 2006) (quoting Anderson v. City of Bessemer, 470 U.S. 564, 574
4
Id. We conclude that, even if this Court would have weighed the evidence in the record

differently, “the District Court’s account of the evidence is ‘plausible in light of the

record.’” Karkkainen, 445 F.3d at 289 (quoting Anderson, 470 U.S. at 574).

Similarly, the District Court appropriately determined that Defendants failed to

provide full compensation for the commissions Giacone earned on “ASP” (or

“Application Service Provider”) contracts under Schedule A of the Employment

Agreement. Schedule A sets forth the following formula for determining his ASP

commissions: “(Term) X (Monthly Fees) X (Commission Rate).” (JA888.) Section 3(b)

of the Employment Agreement provides that, “[i]n addition to the Base Salary, the

Company shall pay Employee a bonus and commission as set forth on Schedule A, as

computed under the Company’s policy on the date hereof (‘Additional Compensation’).”

(JA878.) It is uncontested that VOW’s predecessor (“Virtual Officeware, Inc.,” or

“VOI”) used a twelve-month multiplier (as opposed to a multiplier based on the term of

the contract). However, “Schedule A was specifically referenced and incorporated into

the Employment Agreement,” and Section 3(b) “unambiguously spelled out the

requirement that Defendants pay a bonus and commissions as set forth in Schedule A.”

Giacone I, 2014 WL 7070205, at *4. We further note that the Employment Agreement

itself refers to “the Company’s policy,” and “Company” is expressly defined in the

contract as VOW—not VOI. The parties thereby intended to pay Giacone under VOW’s

policy, i.e., the commission calculated under the formula set forth on the schedule

(1985)).
5
attached to—and expressly referenced in—the Employment Agreement.

Defendants also take issue with the District Court’s repudiation finding.

According to the District Court, Defendants’ conduct over the course of the lengthy and

detailed negotiations between the parties, the definitive statements in Harel’s July 3, 2013

email, and the compensation structure set forth in the June 28, 2013 memorandum led

Giacone to reach the reasonable conclusion that his Employment Agreement would never

be respected. In his e-mail, Harel rejected Giacone’s request for a $95,000 bonus

(explaining that “[t]he remaining term on the contract today is 18 months, and we are

replacing them with a new 18 months contract”) as well as a new commission sheet

(claiming that he “will not have this colossal mess every time we add a product to our

pricelist or change the commission model on a product”). (JA973.) Given the evidence

presented at the bench trial, we do not believe that the District Court committed

reversible error by crediting Giacone’s belief that his Employment Agreement would

never be respected.

Giacone purportedly invoked Section 4(c) of the Employment Agreement,

providing for “Termination for Good Reason by Employee.” This subsection specifically

defines a “good reason” termination as:

a termination by Employee of his employment with the Company, by
written notice to the Company specifying in reasonable detail the
circumstances claimed to provide the basis for such termination, within 20
days following the occurrence, without Employee’s consent, of any of the
following events and the failure of the Company to correct the
circumstances set forth in Employee’s notice of termination within 5 days
of receipt of such notice: (i) the assignment to Employee of duties that are
not consistent with the duties provided for in Section 2(b) or (ii) a reduction

6
 in the rate of Employee’s Base Salary, or (iii) a material breach by the
Company of this Agreement.

(JA879.) Section 4(e) specifies that any termination shall be communicated by “a written

Notice of Termination,” i.e., “a notice stating that Employee’s employment with

Company has been or will be terminated and the specific provisions of this Section 4

under which such termination is being effected.” (JA880.) In Section 7(i), the

Employment Agreement provides for notice to be, inter alia: “(i) in writing, (ii) delivered

personally, by courier service or by certified mail, first-class postage prepaid and return

receipt requested, [and] (iii) deemed to have been received on the date of delivery or, if

so mailed, on the third business day after the mailing thereof[.]” (JA885.) According to

Defendants, the letter from Giacone’s attorney to Harel—sent by e-mail at 6:20 p.m. on

Wednesday, July 3, 2013, and by regular mail—did not fulfill these notice requirements.

The contents of the July 3, 2013 letter adequately “stat[ed] that Employee’s

employment . . . has been or will be terminated and the specific provisions of this Section

4 under which such termination is being effected” (JA880) and “specif[ied] in reasonable

detail the circumstances claimed to provide the basis for such termination” (JA879). As

the District Court noted, “[i]t was not ‘vague’ as Defendants continually represented to

the Court during the trial of this matter.” Giacone I, 2014 WL 7070205, at *16. On the

contrary, “the letter was quite detailed.” Id. The letter expressly stated that it “must

serve as a notice of termination pursuant to Section 4 of the Employment Agreement to

be effective if the existing Employment Agreement terms are not respected/restored by

July 8, 2013.” (JA1039-JA1040.) It obviously did not implicate “Termination Due to

7
Death or Disability” under Section 4(a) or “Termination by the Company for Cause”

under Section 4(b). (JA878-JA879.) While Section 4(d) permits “Voluntary

Termination” (JA879), the letter referred to a five-day period to cure (implicated by

Section 4(c)—and not by Section 4(d)). Referring to the ASP commissions, the attorney

went on to complain about modifications that removed Giacone from an executive level

position and changed the existing commission structure. As a result, the District Court

found it unbelievable that Defendants lacked actual notice or did not understand their

alleged breaches of the Employment Agreement. Given the evidence in the record and

the District Court’s own credibility assessments, this finding of fact was not clearly

erroneous.

Acknowledging that “the manner in which the notice . . . was delivered did not

fully comport with the terms of the contract,” the District Court determined that

Defendants had timely and actual notice of Plaintiff’s position regarding his view of the

breaches [through] the intense ‘modification’ negotiations, and had an opportunity to

cure.” Giacone I, 2014 WL 7070205, at *2. The “delivery method” requirement exists

to ensure that “Virtual Officeware receives the notice.” (Appellants’ Reply Brief at 13.)

It did (and, in fact, it appears that the notice, sent by e-mail, was received immediately).

While Giacone submitted his resignation on July 8, 2013 (and accepted another position

on July 10, 2013), VOW had (at the very least) until July 11, 2013 to cure (i.e., mailed

notice is deemed to have been received on the third business day, and VOW has five days

from receipt of the notice to correct). However, “Defendants were in contact continually

8
over the weekend.” Giacone I, 2014 WL 7070205, at *16. As Giacone aptly puts it,

“[a]ll hands were on deck” even though it was the July Fourth weekend. (Appellee’s

Brief at 28.) In turn, Defendants did not object to the July 3, 2013 letter, ask for more

information, or express any confusion regarding its contents. See, e.g., Accu-Weather,

Inc. v. Prospect Commc’ns, Inc., 644 A.2d 1251, 1254-55 (Pa. Super. Ct. 1994) (“Upon

receiving CRB’s alleged notice of termination on February 20, 1991, Accu-Weather

responded, in writing, unequivocally rejecting the notice and clearly setting forth the

conditions under which the agreement could be terminated.”). According to Defendants,

the cure (if needed) was provided when Harel called Giacone on the evening of July 8,

2013 to accept his terms and e-mailed him the following day to communicate this

acceptance. Nevertheless, Harel’s e-mail did not expressly refer to Giacone’s status as a

senior executive, the commission schedule, or the ASP contracts. In fact, Defendants

continue to argue that, on the one hand, they never changed the terms of Giacone’s

employment and, on the other hand, the Employment Agreement allows them to make

these changes. Simply put, giving Defendants more time to cure would have been

pointless.

We refuse to vacate merely because the letter (which was clearly received by

Defendants) was sent by e-mail and regular mail or because Defendants (who still insist

that they never breached the Employment Agreement in the first place) should have been

given a few more days in which to offer a cure. “When a party has honestly and

faithfully performed all material elements of its obligation under a contract, but has failed

9
to fulfill certain technical obligations, causing no serious detriment to the injured party, it

would be odious and inequitable to compel forfeiture of the entire contract.” Barraclough

v. Atl. Refining Co., 326 A.2d 477, 480 (Pa. Super. Ct. 1974). Even if this doctrine of

substantial performance does not apply, see, e.g., Keystone Dedicated Logistics, Inc. v.

JGB Enters., Inc., 77 A.3d 1, 8 (Pa. Super. Ct. 2013) (stating that conditions precedent to

contract termination must be strictly fulfilled), we believe that the requirements for

equitable estoppel were satisfied in this case, see, e.g., Liberty Prop. Trust v. Day-Timers,

Inc., 815 A.2d 1045, 1050 (Pa. Super. Ct. 2003) (“[Equitable estoppel] ‘arises when one

by his acts, representations, or admissions, or by his silence when he ought to speak out,

intentionally or through culpable negligence induces another to believe certain facts to

exist and such other rightfully relies and acts on such belief, so that he will be prejudiced

if the former is permitted to deny the existence of such facts.’” (quoting In re Estate of

Tallarico, 228 A.2d 736, 741 (Pa. 1967))).

The Employment Agreement provides that, in the event of a “good reason”

termination, VOW shall pay Giacone:

his full Base Salary, Additional Compensation and all other compensation
earned through the Date of Termination, all Base Salary, Additional
Compensation and all other compensation expected to be earned through
the end of the remaining Employment Period, and Company shall be liable
for all damages caused by said termination.

(JA880.) VOW further agreed to pay for his medical, dental, hospital, and disability

coverage for a period of twelve months after termination.

The District Court did not commit reversible error in its calculation of damages.

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Defendants challenge the inclusion of “‘imminent’ commissions in his income for the

first 6.5 months of 2013,” even though “both Giacone and Virtual Officeware’s account

supervisor testified that many of those commissions were not payable when Giacone

resigned.” (Appellants’ Brief at 55 (citations omitted) (footnote omitted).) They

nevertheless admit that “the good reason provision requires payment of expected

earnings.” (Appellants’ Reply Brief at 29.) The District Court, in turn, appropriately

found that Giacone would have closed these deals if he had remained with the company,

and it then reasonably relied on these “imminent commissions” as well as the

commissions that he had already been paid (or should have been paid under Schedule A)

to ascertain what he would have earned for the remainder of the contractual term. In

addition, the District Court properly relied on Giacone’s submission under Federal Rule

of Evidence 1006 for the insurance calculation, and the Employment Agreement itself

provides for “four (4) weeks of paid vacation on an annualized basis and sick days, in

accordance with the Company’s applicable policies.” (JA878.)

According to the District Court, “[t]he monies owed to Plaintiff pursuant to

4(g)(ii) of the Employment Agreement constitute ‘wages’ under the WPCL.” Giacone II,

2015 WL 1405429, at *6 (citing 43 Pa. Stat. and Cons. Stat. § 260.5(a); Shaer v.

Orthopaedic Surgeons of Cent. Pa., Ltd., 938 A.2d 457, 464 (Pa. Super. Ct. 2007)).

Defendants argue that so-called “good reason payments” are not wages because they are

contingent on satisfying the conditions precedent set forth in the Employment Agreement

and include compensation expected to be earned. It is undisputed that wages “include

11
‘all earnings of an employe [sic]’ as well as fringe benefits or wage supplements’

(defined as ‘guaranteed pay’ and ‘any other amount to be paid pursuant to an agreement

to the employee’).” (Appellants’ Brief at 57-58 (quoting 43 Pa. Stat. and Cons. Stat. §

260.2a).) Like the District Court, we conclude that the monies owed to Giacone

constitute wages under this statutory scheme because the terms of the Employment

Agreement guarantee payment upon termination. After all, the WPCL, which was

enacted to make employees whole, must be liberally construed. See, e.g., Braun v. Wal-

Mart Stores, Inc., 24 A.3d 875, 960 (Pa. Super. Ct. 2011), aff’d, 106 A.3d 656 (Pa. 2014)

(per curiam), petition for cert. filed, 83 U.S.L.W. 3747 (U.S. Mar. 13, 2015) (No. 14-

1124); Oberneder v. Link Computer Corp., 674 A.2d 720, 722 (Pa. Super. Ct. 1996),

aff’d, 696 A.2d 148 (Pa. 1997). In the event of a termination for good reason, the parties’

contract specifically requires VOW pay “all Base Salary, Additional Compensation and

all other compensation expected to be earned through the end of the remaining

Employment Period.” (JA880.) See, e.g., Shaer, 938 A.2d at 464 (“In exchange for this

additional service during this ninety-day period of time in question, Dr. Shaer would be

guaranteed salary and benefits during the transitional time period. Thus, there was a

contractual arrangement, and OSCP’s breach of that contract led, in the language of the

WPCL, to a wrongful withholding of an ‘amount to be paid pursuant to an agreement to

the employee.’ 43 P.S. § 260.2a.”).

The WPCL provides for the award of liquidated damages where, inter alia, there is

“no good faith contest or dispute of any wage claim.” 43 Pa. Stat. and Cons. Stat. §

12
260.10. While Defendants contend that they acted in good faith, an employer must

establish its good faith through clear and convincing evidence. See, e.g., Braun, 24 A.3d

at 963-64. Given this heavy burden, we do not believe that the District Court committed

reversible error by finding that they lacked a good faith basis to withhold payment.

III.

For the foregoing reasons, we will affirm the judgment of the District Court.

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