Court Opinion

ID: 1001995
Source: CourtListenerOpinion
Date Created: 2013-07-04 18:04:15.114823+00
Date Added: 2024-06-11T11:45:26.670524
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

ROBERT J. KLEIN,
Plaintiff-Appellee,

v.                                                                  No. 99-2492

VIDEO UPDATE, INCORPORATED,
Defendant-Appellant.

Appeal from the United States District Court
for the District of South Carolina, at Greenville.
Margaret B. Seymour, District Judge.
(CA-98-1355-6-21)

Argued: June 8, 2000

Decided: July 10, 2000

Before MURNAGHAN, WILLIAMS, and MICHAEL,
Circuit Judges.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Thomas Louis Stephenson, NEXSEN, PRUET, JACOBS
& POLLARD, L.L.P., Greenville, South Carolina, for Appellant. J.
Theodore Gentry, WYCHE, BURGESS, FREEMAN & PARHAM,
P.A., Greenville, South Carolina, for Appellee. ON BRIEF: Charles
W. Emory, Jr., NEXSEN, PRUET, JACOBS & POLLARD, L.L.P.,
Greenville, South Carolina, for Appellant. Mark W. Bakker,
WYCHE, BURGESS, FREEMAN & PARHAM, P.A., Greenville,
South Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Robert Klein filed a diversity suit in the United States District
Court for the District of South Carolina against Video Update, Inc.
alleging, among other things, that Video Update committed a breach
of contract accompanied by a fraudulent act and violated the South
Carolina Payment of Wages Act by failing to pay him $271,500 due
to him following termination of his employment with Video Update's
predecessor in interest, Moovies, Inc. The jury awarded Klein actual
damages of $306,795 and punitive damages of $1 million on his
common-law claims. In a separate order, the district court concluded
that the sums due to Klein were wages under the South Carolina Pay-
ment of Wages Act (the Act) and that Video Update's failure to pay
those sums violated the Act, warranting an award to Klein of reason-
able attorneys' fees and costs. The district court subsequently denied
Video Update's post-trial motion for judgment as a matter of law on
the jury's verdict and Video Update's post-trial motion to compel
election of remedies. Video Update noted a timely appeal of the dis-
trict court's rulings. Finding no reversible error, we affirm.

I.

After selling his video rental business to Moovies in 1995, Klein
entered into an employment relationship with Moovies. In October
1995, upon his promotion to Executive Vice President of Operations,
he signed an Employment Agreement with Moovies. Klein was sub-
sequently promoted to the position of Chief Operating Officer. In
March 1997, Moovies and Klein entered into negotiations to termi-
nate Klein's employment with Moovies. Because this termination was
without cause, Klein was entitled under his Employment Agreement
to receive, among other things, (1) all unpaid base salary and other
benefits due through the period ending September 30, 1998, the origi-
nal end date for Klein's term of employment with Moovies, and (2)

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one year's additional base salary. Moovies subsequently requested
that Klein accommodate Moovies's desire not to pay Klein in cash by
restructuring the payments due to him. Consequently, Klein and Moo-
vies entered into a Termination Agreement, effective April 1, 1997,
which terminated the Employment Agreement and referenced a Non-
Qualified Stock Option Agreement (the Option Agreement), effective
April 17, 1997, which granted Klein the option to purchase up to
100,000 shares of Moovies common stock at the price of $4.69 per
share.1

Of particular relevance to this case, the Option Agreement pro-
vided for a special one-time election by which Klein could elect to
receive, if the price of the company's common stock was not greater
than the option price of $4.69 per share by at least $2.715, an amount
per each outstanding option equal to the lesser of (1) the option price
plus $2.715 minus the month-end trading price, or (2) $2.715.
According to Klein and his counsel, the purpose of this special one-
time election provision was to ensure that Klein would receive no less
than the $271,500 guaranteed him under the Employment Agreement.
By letter dated February 20, 1998, Klein exercised the one-time spe-
cial election in the Option Agreement. Because the options were not
then "in the money" (i.e., the month-end trading price did not exceed
the option price), the options were cancelled and terminated pursuant
to the Option Agreement for the purpose of calculating the sums due
to Klein. Klein's exercise of the special election obligated Moovies
to pay the sums due to Klein on or before April 30, 1998.

After Klein exercised the special election provision, Moovies
merged with Video Update. By letter dated April 29, 1998, Video
Update informed Klein that, pursuant to its calculations, Klein was
owed $203,625 under the Option Agreement, an amount reflecting the
multiplication of 75,000 cancelled options by $2.715. Video Update
based the number of canceled options upon the exchange rate of .75
Video Update shares for each share of Moovies stock used in the
merger between Moovies and Video Update. Video Update further
_________________________________________________________________
1 The Termination Agreement also entitled Klein to receive, among
other things, the one year's additional base salary due to him under the
terms of the Employment Agreement. The one year's additional base sal-
ary has been paid to Klein and is not in dispute.

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informed Klein that, in order to receive the $203,625 it contended that
Klein was owed under the Option Agreement, Klein would be
required to acknowledge that (1) no "Default" or "Event of Default"
existed under the Option Agreement and related agreements, and (2)
Video Update's calculations were correct. Klein refused to accept
Video Update's conditions and has received no payments under the
Option Agreement. Video Update's Executive Vice President for
Mergers and Acquisitions admitted that Video Update possessed no
evidence on April 29, 1998, that Klein was in default under the Ter-
mination Agreement, that it never possessed any evidence at all that
he violated the noncompete clause of, or did anything wrong under,
the Termination Agreement, and that it never sent Klein any notice
of default contemplated by the Termination Agreement.

On May 12, 1998, Klein filed suit against Video Update in district
court. Klein's complaint asserted claims for breach of contract, breach
of contract accompanied by a fraudulent act, breach of implied cove-
nant of good faith and fair dealing, violation of the South Carolina
Payment of Wages Act, and extortion and economic duress arising
out of Video Update's failure to pay Klein the $271,500 it owed him
under the Option Agreement. After a one-day jury trial on May 24,
1999, the jury returned a verdict for Klein, awarding actual damages
of $306,795 and punitive damages of $1 million. 2 On July 28, 1999,
the district court issued its Findings of Fact, Conclusions of Law, and
Order, whereby it concluded that the sums due to Klein were "wages"
under the Act and that Video Update's failure to pay those sums
within the time period established in the Option Agreement violated
the Act, warranting an award of reasonable attorneys' fees and costs
to Klein as provided by the Act. On July 29, 1999, the district court
entered judgment in favor of Klein for the amount of actual and puni-
tive damages awarded by the jury and for reasonable attorneys' fees
and costs to be determined by the court. By order entered on October
29, 1999, the district court, among other things, denied post-trial
motions filed by Video Update for judgment as a matter of law or a
_________________________________________________________________
2 Prior to trial, Klein withdrew his cause of action for extortion and
economic duress. During the trial, the parties requested that the court
determine separately the issue of whether Video Update violated the
South Carolina Payment of Wages Act. The jury's verdict reflects its
decision with respect to the remaining claims.

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new trial on the jury's verdict finding Video Update liable on Klein's
claim for breach of contract accompanied by a fraudulent act and
awarding Klein punitive damages, denied Video Update's post-trial
motion to compel election of remedies, awarded Klein's counsel
attorneys' fees and costs in the amount of $58,548.29, and awarded
Klein costs in the amount of $5,450.48.

Video Update filed a timely notice of appeal of the district court's
rulings. Before us, Video Update argues that the district court erred
in denying its post-trial motion for judgment as a matter of law on
Klein's claim for breach of contract accompanied by a fraudulent act
because Klein's contentions that Video Update acted fraudulently
when it requested that Klein assent to a lesser sum than he claimed
was owed him and confirm that no event of default had occurred,
even if true, are insufficient under controlling South Carolina prece-
dent to establish that Video Update committed a fraudulent act sepa-
rate and distinct from a breach of contract. In a related vein, Video
Update asserts that the district court erred in letting the issue of puni-
tive damages go to the jury, and, alternatively, erred in failing to over-
turn the jury's award of punitive damages because no jury reasonably
could have concluded, under the clear and convincing standard of
proof for an award of punitive damages, that Video Update acted in
willful, wanton, or reckless disregard of Klein's rights. Video Update
also contends that the district court erred in applying the Act to Video
Update's actions because Klein released all employment and statutory
claims against Video Update when he entered the Termination Agree-
ment, and, alternatively, the sums due to Klein are stock options or
severance payments that are not "recompense for labor rendered" as
wages are defined under the Act. Finally, Video Update argues that
because Klein only suffered the single injury of not receiving the
$271,500 that was owed him under the Termination Agreement, the
district court erred in failing to require Klein to elect between the
remedy provided by his common-law claims and the remedy provided
by his claim under the Act.

II.

This Court reviews a district court's denial of a motion for judg-
ment as a matter of law de novo, viewing the evidence in the light
most favorable to the non-movants. See Chaudhry v. Gallerizzo, 174

                     5
F.3d 394, 404-05 (4th Cir.), cert. denied, 120 S. Ct. 215 (1999).
"Judgment as a matter of law is proper when, without weighing the
credibility of the evidence, there can be but one reasonable conclusion
as to the proper judgment." Id. at 405 (internal quotation marks omit-
ted). This Court reviews a district court's refusal to set aside a jury's
punitive damages award for abuse of discretion. See Mattison v. Dal-
las Carrier Corp., 947 F.2d 95, 100 (4th Cir. 1991). The district
court's conclusion that the payments claimed by Klein are "wages"
under the South Carolina Payment of Wages Act and its conclusion
that Klein did not receive an impermissible double recovery requiring
election of remedies are legal conclusions that this Court reviews de
novo. See Meekins v. United Transp. Union, 946 F.2d 1054, 1057 (4th
Cir. 1991).

We have reviewed the record, briefs, and pertinent case law on this
matter, and we have had the benefit of oral argument. Our careful
review persuades us that the rulings of the district court were correct.
Accordingly, we affirm on the reasoning set forth in the district
court's opinions. See Klein v. Video Update, Inc., No. CA-98-1355-6-
21 (D.S.C. July 28 & Oct. 29, 1999).

AFFIRMED

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