Court Opinion

ID: 994789
Source: CourtListenerOpinion
Date Created: 2013-07-04 00:28:17.90529+00
Date Added: 2024-06-11T09:11:19.572421
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

HENRY J. BALEVIC,
Plaintiff-Appellant,

v.
                                                                      No. 96-1813
NICHOLAS WEHRMANN, JR.; JIM D.
WALLER; ITHACA INDUSTRIES, a
Delaware Corporation,
Defendants-Appellees.

Appeal from the United States District Court
for the Western District of North Carolina, at Statesville.
Richard L. Voorhees, Chief District Judge.
(CA-93-57-5-V)

Argued: December 4, 1997

Decided: May 1, 1998

Before NIEMEYER, Circuit Judge, WILSON,
Chief United States District Judge for the Western District of
Virginia, sitting by designation, and JONES, United States District
Judge for the Western District of Virginia, sitting by designation.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Vance Barron, Jr., Greensboro, North Carolina, for
Appellant. John Michael Logsdon, MCELWEE & MCELWEE, North
Wilkesboro, North Carolina, for Appellees. ON BRIEF: William H.
McElwee, III, MCELWEE & MCELWEE, North Wilkesboro, North
Carolina, for Appellees.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Henry J. Balevic ("Balevic"), the former director of security for
Ithaca Industries, Inc. ("Ithaca"), appeals the district court's entry of
summary judgment for Ithaca, its president and chief executive offi-
cer, Jim D. Waller ("Waller"), and its executive vice-president, Nich-
olas J. Wehrmann, Jr. ("Wehrmann"), in Balevic's diversity action for
wrongful discharge, tortious interference with contract, and breach of
two shareholders' agreements. We affirm.

I.

Ithaca is a large textile manufacturing company. It has more than
twenty manufacturing facilities in North Carolina, South Carolina,
and Georgia, four regional distribution centers, and more than eight
thousand employees. Ithaca employed Balevic, a Georgia resident, as
its director of security from January, 1986 until August, 1992. In
August 1992, following Balevic's acrimonious investigation of Tony
Hall, Ithaca's plant manager in Edison, Georgia, Waller, Ithaca's
president and chief executive officer, summoned Balevic to his office
in North Carolina and discharged him.

According to Balevic, the investigation resulted from allegations
that Tony Hall, the son of one of Ithaca's vice-presidents, Frank Hall,
had smoked marijuana with employees at Ithaca's plant in Alma,
Georgia. Balevic investigated the allegation but found no proof. Ith-
aca nevertheless tested Tony Hall for drug use in November of 1991
and January of 1992, and both tests were negative. Despite the nega-

                     2
tive test results, Balevic continued his aggressive investigation into
Tony Hall's activities.1 In 1992, Ithaca transferred Tony Hall to the
position of plant manager in Edison, Georgia. Balevic then arranged
for the placement of an undercover agent in the Edison plant to spy
on him. Upon learning that Balevic had been in contact with the chief
of the Edison police department and that Balevic had placed an under-
cover agent in the plant, Tony Hall contacted his father, who com-
plained to Waller about Balevic's conduct. Frank Hall also called
Wehrmann, who, in addition to being Ithaca's executive vice-
president, is the son of Nicholas J. Wehrmann, Sr., the chairman of
Ithaca's board of directors.2

Wehrmann agreed to travel to Edison along with Steve Propst, Ith-
aca's director of human resources, to investigate Balevic's actions.
While in Edison, Wehrmann and Propst spoke with several persons
involved in Balevic's Edison investigations, including the Edison
police chief and the undercover agent, Dallas Henry. Henry told
Propst and Wehrmann that Balevic had referred to the Hall family as
"lowlifes" and "thieves," that Balevic had said that Tony Hall and his
brother were dealing drugs at Ithaca's plants, and that Balevic had
employed him to "watch" Tony Hall. Henry noted, however, that he
had never seen any of the wrongdoing that Balevic had alleged. After
returning with Wehrmann to North Carolina, Propst phoned Waller
and told him what he had learned. As a result, Waller called Balevic,
told him to cease his investigation, and to report to him in Wilkes-
boro, North Carolina the following week. At the meeting the follow-
ing week, which Balevic surreptitiously recorded, Waller expressed
concern that Balevic had "people spying on each other" and had used
"strong arm tactics" and as a result, employees no longer felt comfort-
_________________________________________________________________
1 Waller asserts in an affidavit that he told Balevic after the negative
drug tests to stop investigating Tony Hall absent further evidence or
reports of drug use by Hall. Balevic has controverted that assertion under
oath. As we are reviewing the district court's grant of summary judg-
ment, we must accept as true Balevic's version of this disputed fact.
2 In the course of performing his duties as director of corporate secur-
ity, Balevic also alleges that he received information that Wehrmann was
involved in illegal drug use and the diversion of corporate property.
Balevic states that he reported Wehrmann's alleged misconduct to Wal-
ler.

                    3
able confiding in Balevic. Waller told Balevic that he had spoken with
a number of people that had no reason to be vindictive and that
Balevic had "hurt [himself] enough" that he could no longer be effec-
tive. Waller then fired him.

When fired, Balevic had 1,250 shares of Ithaca stock pursuant to
two shareholders' agreements. A thousand of those shares were "pro-
tected shares." The shareholders' agreements provided that Ithaca
could notify Balevic within ninety days of his termination that it
intended to repurchase Balevic's protected shares at book value. Ith-
aca gave the required notice and paid Balevic book value -- $65.95
per share.

The shareholders' agreements also provided that if Ithaca merged
"into another corporation" within six months of a share repurchase,
Ithaca would pay the shareholder any difference between the repur-
chase price per share and the merger price per share. In December of
1992, less than six months from Balevic's firing, a transaction
occurred in which Ithaca Merger, Inc. ("Ithaca Merger") merged into
Ithaca, the shareholders of Ithaca exchanged their shares for shares of
a holding company, Ithaca Holdings, Inc. ("Ithaca Holdings"), and
Ithaca became a wholly owned subsidiary of Ithaca Holdings. Each
share of Ithaca Holdings had a value of $125.

II.

Balevic, an at-will employee, contends that Ithaca, in contravention
of North Carolina's public policy, terminated him for investigating
Ithaca's plant manager in Edison, Georgia for suspected drug offenses
in Georgia. The district court applied Georgia law based on the "most
significant relationship" choice of law test. Since Georgia does not
recognize public policy exceptions to the employment at-will doc-
trine, the court rejected the claim. The district court also concluded
that even if it applied North Carolina law, North Carolina had no pub-
lic policy that encouraged employees to investigate one another at
company expense. We accept, without deciding, Balevic's contention
that North Carolina law applies. We affirm, nevertheless, because we
readily agree that Balevic's claim is not an exception to North Caroli-
na's employment at-will doctrine.

                    4
North Carolina law prohibits employers from firing at-will employ-
ees for reasons that violate public policy. Coman v. Thomas Mfg. Co.,
381 S.E.2d 445, 447 (N.C. 1989). The Supreme Court of North Caro-
lina in Coman held that:

         [W]hile there may be a right to terminate a contract at will
         for no reason, or for an arbitrary or irrational reason, there
         can be no right to terminate such a contract for an unlawful
         reason or purpose that contravenes public policy. A different
         interpretation would encourage and sanction lawlessness,
         which law by its very nature is designed to discourage and
         prevent.

Id. (approving and adopting this language contained in Sides v. Duke
Univ., 328 S.E.2d 818, 826 (N.C. Ct. App. 1985)). The court noted
that "[p]ublic policy has been defined as the principle of law which
holds that no citizen can lawfully do that which has a tendency to be
injurious to the public or against the public good." Id. at 447 n.2.
Although the Supreme Court of North Carolina has refused to give a
more precise definition of public policy, see Amos v. Oakdale Knit-
ting Co., 416 S.E.2d 166, 169 n.1 (N.C. 1992), 3 one point is clear. The
"narrow exceptions" to North Carolina's employment at-will doctrine
are "grounded in considerations of public policy designed either to
prohibit status-based discrimination or to insure the integrity of the
judicial process or the enforcement of the law." Kurtzman v. Applied
Analytical Indus., Inc., 493 S.E.2d 420, 423 (N.C. 1997). We find
none of those considerations even remotely at play here.

There is absolutely no evidence to suggest, and Balevic does not
claim, that Waller discharged him for reporting criminal violations.
Instead he claims Waller discharged him for investigating another
employee. We find no public policy or interest of North Carolina
_________________________________________________________________
3 Although it may be tempting to refine [this] definition of "public pol-
          icy" in order to formulate a more precise and exact definition, we
          decline to do so. Any attempt to make the definition more precise
          would inevitably lead to at least as many questions as answers. True
          to the common law tradition, we allow this still evolving area of the
          law to mature slowly, deciding each case on the facts before us.

Amos, 416 S.E.2d at 169 n.1.

                    5
implicated when a corporate employee is discharged for investigating
another corporate employee, let alone for investigating an employee
in another state on suspicion that the employee under investigation
might have violated another state's drug laws. We also note that if
Balevic's conduct were as Propst reported to Waller, a report with
some credibility given that Balevic surreptitiously recorded Waller,
Balevic invaded privacies, sullied reputations, generously hurled
accusations and possibly subjected Ithaca to liability. No public pol-
icy required Ithaca to fund his activities. The Supreme Court of North
Carolina has cautioned that additional exceptions to its employment
at-will doctrine "demand careful consideration and should be adopted
only with substantial justification grounded in compelling consider-
ations of public policy." Id. We would be ignoring that caution if we
were to proclaim the public policy exception Balevic urges. We hold,
therefore, that Balevic has failed to state a claim for discharge in vio-
lation of North Carolina's public policy.

III.

Balevic claims that Waller and Wehrmann intentionally interfered
with his employment contract with Ithaca. The district court found
that Balevic had failed to show that Wehrmann interfered. The district
court also concluded that Waller was a party to Balevic's contract
and, therefore, could not be liable for intentional interference. We
conclude, albeit on slightly different grounds, that the district court
properly granted summary judgment against Balevic. At best, Balevic
showed only that Wehrmann accurately communicated, or caused the
accurate communication of, information to Waller, a corporate supe-
rior, who then acted on that information. Balevic, therefore, failed to
overcome the presumption that Wehrmann and Waller acted in Itha-
ca's best interests.

In North Carolina, to establish the tort of intentional interference
with contract, a plaintiff must prove (1) the existence of a valid con-
tract between the plaintiff and a third party, (2) that the defendant had
knowledge of this contract, (3) that the defendant intentionally
induced the third party not to perform the contract, (4) that the defen-
dant acted without justification, and (5) that the defendant's act
caused the plaintiff damages. Childress v. Abeles, 84 S.E.2d 176, 181-
82 (N.C. 1954). Although the Supreme Court of North Carolina has

                     6
held that corporate officials may be liable for interfering with a con-
tract between the corporation and its employees, see Embree Constr.
Group, Inc. v. Rafcor, Inc., 411 S.E.2d 916, 924 ( N.C. 1992); Wilson
v. McClenny, 136 S.E.2d 569, 578 (N.C. 1964), corporate officials
retain a qualified privilege to "interfere" in this context. See Embree,
411 S.E.2d at 924. This qualified privilege rests upon the presumption
that corporate officials act in the best interests of the corporation. Id.
at 925. The presumption that these acts "are in the corporation's inter-
est and thus justified is overcome when the means or the officer's
motives are improper." Id. at 924. However, a corporate official may
be held liable only "where his acts involve individual and separate
torts distinguishable from acts solely [sic] on his employer's behalf
or where his acts are performed in his own interest and adverse to that
of his firm." Wilson, 136 S.E.2d at 578 (citations omitted).

Wehrmann was Ithaca's executive vice-president and second high-
est ranking corporate officer. He had direct supervisory authority over
Frank and Tony Hall, the latter of whom was the target of Balevic's
investigation. Wehrmann clearly acted within the scope of his author-
ity when he traveled to Edison in response to the Halls' complaints
about Balevic's perceived over zealous investigatory efforts directed
at Tony Hall and when he discussed his concerns about Balevic's
conduct with Propst. Indeed, we find it wholly incompatible with the
proper functioning of a corporation to remove a high ranking corpo-
rate official from discourse concerning the employment-related con-
duct of a corporate employee. But this is precisely what we would be
doing if we were to pierce Wehrmann's qualified privilege because
he contributed to the accurate reporting of information to Waller. We,
therefore, conclude that Balevic has failed to overcome the presump-
tion that Wehrmann acted in Ithaca's best interests. It follows that
Wehrmann is not liable for tortious interference with Balevic's con-
tract of employment.

Balevic's claim against Waller fails for similar reasons. Waller is
the president and highest ranking officer of Ithaca and had direct
supervisory authority over Balevic. Waller terminated Balevic after
Propst informed Waller of what he had learned during his trip to Edi-
son. Balevic has suggested, but had no evidence to prove, that Waller
terminated him for reasons unrelated to these reports. We thus find
that Balevic has failed to overcome the presumption that Waller acted

                     7
properly when he discharged Balevic. We affirm, therefore, the dis-
trict court's grant of summary judgment in favor of Waller on this claim.4

IV.

As his final claim, Balevic contends that Ithaca breached his share-
holders' agreements.5 Balevic argues that his right to receive a higher
price for the shares of his repurchased protected stock was triggered
by the merger following his termination. Balevic alleges that Ithaca
acquired an outside company, Bestform Foundations, Inc., through a
reverse triangular merger involving Ithaca, Ithaca Holdings, and Ith-
aca Merger, and that this transaction triggered his right to the higher
share price. Ithaca responds that the transaction was simply a reorga-
nization into a holding company structure and that Ithaca Merger
merged into Ithaca; Ithaca did not merge into Ithaca Merger. The dis-
trict court found that the plain language of the agreements required
Ithaca to pay Balevic the higher price only in the event that Ithaca
merged into another company, not the converse, and that the uncon-
_________________________________________________________________
4 The district court granted summary judgment on Balevic's claim
against Waller on the ground that Waller was a "party" to the contract
and a party to a contract cannot be liable for tortiously interfering with
that contract. We find it unnecessary to reach the issue.
5 The language of Balevic's "Bonus Stock Restriction Agreement,"
signed by Balevic on January 22, 1988, reads as follows:

          [I]f at the time of any repurchase of Shares pursuant to this sen-
          tence there exists no public trading market for the Common
          Stock, but within six months thereafter Ithaca merges into
          another corporation or sells all or substantially all of its assets
          and the consideration received by the stockholders of Ithaca
          exceeds on a per share basis the price received on a per share
          basis by the Bonus Employee for the Protected Shares, then the
          Bonus Employee shall receive in respect of the Protected Shares
          the difference between such per share consideration and the per
          share price received by the Bonus Employee for the Protected
          Shares.

The language of Balevic's "Common Stock Subscription and Repurchase
Agreement," signed by Balevic the same date, contains identical lan-
guage, with the exception that the term "Purchaser" is substituted for
"Bonus Employee."

                    8
tradicted evidence showed, in fact, that Ithaca Merger had merged
into Ithaca. The district court, therefore, granted summary judgment
in favor of Ithaca. We agree and affirm.

Delaware law, which the parties agree applies, mandates that courts
interpreting contracts accord words their "plain, ordinary meaning."
Gertrude L.Q. v. Stephen P.Q., 466 A.2d 1213, 1217 (Del. 1983).
"[I]f a writing is plain or clear on its face, there is no room for inter-
pretation, construction, or a search for the intent of the parties." Klair
v. Reese, 531 A.2d 219, 223 (Del. 1987). While extrinsic evidence
under Delaware law is admissible to assist in interpreting ambiguous
contract terms, see Pellaton v. Bank of New York , 492 A.2d 473, 478
(Del. 1991), such evidence may not be used to create an ambiguity.
See Eagle Industries, Inc. v. Devilbiss Health Care, Inc., 702 A.2d
1228, 1232 (Del. 1997). Furthermore, "[c]ourts will not torture con-
tractual terms to impart ambiguity where ordinary meaning leaves no
room for uncertainty." Rhone-Poulenc Basic Chemicals Co. v. Ameri-
can Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992). Finally,
Delaware law will not supply missing terms of a contract. Conner v.
Phoenix Steel Corp., 249 A.2d 866, 868 (Del. 1969).

We find that the phrase "merges into," in the context of Balevic's
shareholders' agreements, is not ambiguous, and agree with the dis-
trict court that the plain meaning of this phrase does not encompass
the transaction in which Ithaca was involved following the repurchase
of Balevic's protected stock.6 The word "into" is defined as "[a] prep-
osition signifying to the inside of; within. It expresses entrance, or a
passage from the outside of a thing to its interior . . . ." Black's Law
Dictionary 822 (6th ed. 1990); see also Webster's New World
Dictionary 708 (Third College ed. 1988) (defining "into" as meaning
"from the outside to the inside of; toward and within").7 The language
of Balevic's stock agreements provided that Balevic's right to a
_________________________________________________________________
6 As we find that the phrase "merges into" is unambiguous, we may not
consider the parol evidence submitted by the parties regarding the
phrase's meaning. See Pellaton, 92 A.2d at 478.
7 We note that Delaware courts"have relied upon dictionary definitions
to assist in construing the ordinary meaning of words." Vitalink Phar-
macy Services, Inc. v. Grancare, Inc., No. 15744, 1997 WL 458494, at
*7 (Del. Ch. Aug. 7, 1997).

                     9
higher stock price would be triggered in the event Ithaca "merges
into" another corporation. A review of language used in Delaware
statutes and case law indicates that the phrase"merge into" refers
most often to the movement of a disappearing corporation into an
entity retaining its corporate identity. See, e.g., Del. Code Ann. tit. 8,
§ 505(c) (corporation finance tax) ("Any refund due to a corporation
which has merged into another Delaware domestic corporation shall
be credited to the surviving Delaware corporation.") (emphasis
added); Sterling v. Mayflower Hotel Corp., 93 A.2d 107, 108 (Del.
1952) ("A formal agreement of merger was entered into on March 14,
1952, providing for the merger of Mayflower (the constituent corpo-
ration) into Hilton (the surviving corporation) . . . ."). When placed
in context, therefore, the phrase "merges into" in Balevic's sharehold-
ers' agreements refers only to transactions in which Ithaca, as the dis-
appearing entity, loses its corporate structure by merging into an
entity that retains its corporate identity. In the transaction that tran-
spired after the protected stock repurchase, however, Ithaca did not
disappear or move "to the inside" of another corporation. Rather, Ith-
aca remained as the surviving entity.

Our interpretation of the stock agreements' language is in accord
with the conclusions of courts addressing factually similar situations.
In Glinert v. Wickes Cos., No. Civ. A. 10407, 1990 WL 34703 (Del.
Ch. March 27, 1990), a Delaware court, interpreting a contract under
California law, found that a merger in which the subject corporation
had been the surviving entity did not implicate a contract provision
allowing for the exercise of stock warrants in the event the corpora-
tion merged "into" another corporation.8 In Kirschner Bros. Oil, Inc.
v. Natomas Co., 229 Cal. Rptr. 899 (Cal. Ct. App. 1986), Diamond
Shamrock Corp. ("Diamond") executed a plan to acquire Natomas Co.
("Natomas"). Natomas' certificate of determination required a major-
ity vote of its holders of preferred stock in order to approve "the con-
solidation or merger of [Natomas] into any other corporation." Id. at
791-92. The court held that the provision was inapplicable because,
although Natomas had been the target corporation, Natomas had
_________________________________________________________________
8 The Glinert court presumably based its ruling on California law, as
the court stated that the subject warrant agreements were governed by
California law. See Glinert, 1990 WL 34703, at *5. The court, however,
did not specifically cite California precedent in support of its interpreta-
tion of the agreements' language. See id. at *7.

                     10
remained intact as a corporate entity and the provision applied "on its
face to a merger of Natomas into another corporation." Id. at 792
(emphasis added).9

For the foregoing reasons, we find that the transaction in which Ith-
aca Merger merged into Ithaca did not trigger Balevic's right under
the shareholders' agreements to receive a higher price for the shares
of his protected stock.

V.

For the reasons stated above, the judgment of the district court is
affirmed.

AFFIRMED
_________________________________________________________________

9 Although it is quite possible, as Balevic has argued, that the economic
effect would have been the same or similar had Ithaca merged "into" Ith-
aca Merger, we may not disregard the express language of Balevic's
stock agreements to focus on the ultimate economic effect of the merger.
In this regard, Rothschild Int'l Corp. v. Liggett Group, Inc., 474 A.2d
133 (Del. 1984), is instructive. In Rothschild , Liggett Group, Inc.'s (Lig-
gett) certificate of incorporation provided that the holders of 7% pre-
ferred stock would be paid par value in "the event of any liquidation of
the assets of the Corporation." Id. at 136. Another corporation later
acquired Liggett via a reverse cash-out merger in which Liggett retained
its corporate structure. Id. at 138-39. The plaintiff, a holder of 7% pre-
ferred stock, argued that it was entitled to the par value of its stock
because "the economic effect of the merger was a liquidation of Liggett's
assets `just as if [Liggett] were sold piece meal to [the acquiring corpora-
tion].'" Id. at 136. The court defined "liquidation" as "the `winding up
of the affairs of the corporation by getting in its assets, settling with cred-
itors and debtors and apportioning the amount of profit and loss.'" Id.
(quoting W. Fletcher, Corporation's § 7968 (1979)). The court found
that Liggett's merger did not constitute a liquidation, noting that
"[c]learly the directors and shareholders of Liggett determined that the
company should be integrated with GM, not that the corporate assets be
liquidated on a `piece-meal' basis. . . . [W]e must construe Liggett's liq-
uidation provision as written and conclude that the reverse cash-out
merger of Liggett did not accomplish a `liquidation' of Liggett's assets."
Id. (emphasis added). Thus, the Delaware court looked to the literal
nature of the transaction, not its economic effect. Similarly, we look to
the literal nature of the transaction, not to its economic effect.

                     11