William Giacone v. Virtual Officeware, et al

Filing

NOT PRECEDENTIAL OPINION Coram: FISHER, CHAGARES and COWEN, Circuit Judges. Total Pages: 13. Judge: COWEN Authoring.

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NOT PRECEDENTIAL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
_______________
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

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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.
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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
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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)).
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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
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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
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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

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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

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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

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‘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. WalMart 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. 141124); 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. §

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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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