Capital Health Management Group v. Hartley

689 S.E.2d 107

301 Ga. App. 812

CAPITAL HEALTH MANAGEMENT GROUP, INC. v. HARTLEY.

No. A09A2045.

Court of Appeals of Georgia.

December 30, 2009.

Heyman & Sizemore, William B. Brown, Atlanta, for appellant.

Doffermyre, Shields, Canfield, Knowles & Devine, David Scott Hagy, Sheryl Lucine McCalla, Atlanta, for appellee.

BERNES, Judge.

Deborah Moss Hartley brought this action for breach of contract against her former employer, Capital Health Management Group, Inc., alleging that she was wrongfully denied payment of certain stock appreciation rights under a deferred compensation agreement entered into as part of her employment.¹ The trial court concluded that the agreement gave Capital Health discretionary decision-making authority, but that a genuine issue of material fact existed over whether the decision to deny payment to Hartley was made in good faith and involved the exercise of honest judgment. The case proceeded to trial, the jury returned a verdict in favor of Hartley, and Hartley was awarded breach of contract damages, prejudgment interest, and attorney fees and expenses under OCGA § 13-6-11. Following the denial of its motion for judgment notwithstanding the verdict (j.n.o.v.) or for a new trial, Capital Health appeals, contending that (1) the issue of whether it abused its discretionary decision-making authority was a legal question for the trial court to resolve rather than a factual question for the jury; (2) the trial court should have found as a matter of law that Capital Health's decision to deny payment to Hartley was made in good faith and involved the exercise of honest judgment; (3) the trial court erred in admitting testimony concerning a telephone conversation between Hartley and the president of Capital Health that occurred after her termination; and (4) there was insufficient evidence of bad faith to support an attorney fee award under OCGA § 13-6-11. For the reasons discussed below, we affirm.²

Following a jury trial, we construe the evidence in the light most favorable to the verdict. Dept. of Transp. v. Hardin-Sunbelt, 266 Ga.App. 139, 140, 596 S.E.2d 397 (2004). So viewed, the evidence showed that Capital Health was a private corporation that provided management services to home healthcare agencies, principally in the southeast United States. In December 1997, Capital Health hired Hartley as a regional director of operations. Two years later, she was promoted to the position of regional vice president of operations. During her tenure at Capital Health, Hartley consistently received good performance reviews.

The Stock Appreciation Rights Agreement. As part of her employment with Capital Health, Hartley entered into a "Stock Appreciation Rights Agreement" (the "Agreement"). The Agreement stated that its purpose was "to provide [Hartley] with an incentive to promote the growth and profitability of [Capital Health] using deferred compensation." In order to create such an incentive, the Agreement provided that Hartley was to be paid the value of 60,000 shares of Capital Health stock upon the sale of all or substantially all of the common stock owned by Capital Health, if she was still employed by Capital Health at the time of the sale, or if she had been terminated "as a result of" death, retirement, or disability.

There also were provisions addressing the administration of the Agreement. The Agreement provided:

This Agreement shall be administered by the Compensation Committee of the Board of Directors of [Capital Health] or, if there is no Compensation Committee, by the Board of Directors (as the case may be, the "Committee"). The Committee shall have the authority to interpret this Agreement and to adopt and revise such policies, rules and regulations that it determines in its sole discretion, to be necessary or advisable for the administration of this Agreement. Determinations by the Committee shall be made by majority vote and shall be final and binding on all parties with respect to all matters relating to this Agreement.³

The Agreement further specified that "disability" for purposes of termination would be "determined in the sole discretion of the Committee."

In addition, the "Miscellaneous Provisions" of the Agreement stated that

[t]he Agreement shall at all times be entirely unfunded, and [Capital Health] shall have no obligation to segregate any assets ... for payment of any benefits hereunder. [Hartley] shall not have any interest in any particular assets of [Capital Health] by reason of the right to receive a benefit under this Agreement and shall have only the rights of a general unsecured creditor of [Capital Health] with respect to any rights under the Agreement.

Finally, the Agreement specified that it should be construed and governed by Georgia law.

Hartley's Medical Condition and Termination. In June 2000, Hartley began experiencing severe fatigue and headaches that made it difficult for her to work. She was diagnosed with fibromyalgia and informed Capital Health of her diagnosis.⁴ Her medical condition continued to deteriorate, and beginning in the fall of 2000, she was unable to continue performing her job responsibilities. From September 2000 through November 2000, Hartley was absent from her employment due to her health and took eight of the twelve weeks of medical leave allowed to her under the Family Medical Leave Act of 1993, 29 USC § 2601 et seq. ("FMLA"). In order to obtain leave authorized by the FMLA, Hartley submitted a physician's certification stating that she had been diagnosed with fibromyalgia of "indefinite" duration. Hartley also applied for and received benefits under Capital Health's short-term disability policy during this eight-week period. While on medical leave, Hartley kept Capital Health fully apprised of her medical condition.

Hartley returned to work briefly in late November 2000, but by January 2001, she was unable to carry out her job responsibilities because of her medical condition. Hartley again received short-term disability benefits and took medical leave under the FMLA after submitting a new physician's certification. Hartley gave Capital Health weekly updates about her medical condition during this period of time.

Hartley ultimately informed personnel from Capital Health's human resources department in January 2001 that she would not be able to return to work due to her fibromyalgia. They advised her to apply for long-term disability benefits and assisted her in the application process. At the same time, however, Hartley was informed in a telephone conversation with the human resources department that her FMLA medical leave was set to expire on February 1, 2001, and that Capital Health would not offer her any additional medical leave beyond what was allowed to her under federal law.

On January 29, 2001, Capital Health received a new physician's FMLA certification stating that the duration of Hartley's fibromyalgia was "unknown: 3 years." After receiving the new physician's certification, human resources personnel from Capital Health called Hartley later that day, advised her that Capital Health had received the certification, and informed her that she would be receiving a termination letter. Hartley testified that she was told at that time "that I was going to be terminated due to my disability."

Shortly thereafter, Hartley received a termination letter. The letter confirmed that Hartley would be terminated if she did not return to work when her FMLA medical leave expired on February 1, 2001. Capital Health thanked Hartley for her contributions to the company and "wish[ed][her] improved health in the future."

When Hartley did not return to work on February 1, 2001, she was terminated from her position of regional vice president of operations. Business records introduced at trial reflected that Capital Health told its disability insurer that Hartley had been terminated "given her end of FMLA leave and the dr. cert."

The Sale of Capital Health's Common Stock. In June 2005, all of the common stock of Capital Health was sold to another company. Capital Health did not notify Hartley of the sale, and Hartley was not paid the value of 60,000 shares of Capital Health stock upon the sale of the common stock. The value of the stock at the time of the sale was $343,861.

When the stock sale occurred, Capital Health had three shareholders. Any money from the stock sale not paid to Capital Health employees in stock appreciation rights was to be paid to the three shareholders. At least one of the shareholders, who also served as the president and chief executive officer ("CEO") of Capital Health, approved the recommendation to terminate Hartley and was actively involved in the board of director's decision to deny her payment of her stock appreciation rights.

The Litigation. After learning of the stock sale, Hartley commenced this breach of contract action against Capital Health, alleging that she was entitled to payment of her stock appreciation rights under the Agreement because she had been terminated as a result of disability. Hartley also sought attorney fees and expenses under OCGA § 13-6-11 because Capital Health allegedly had acted in bad faith, had been stubbornly litigious, and had caused her unnecessary trouble and expense.

Capital Health answered and, following discovery, moved for summary judgment on the ground that Hartley was not terminated as a result of a disability as a matter of law. Capital Health asserted that Hartley had been terminated as the result of a corporate reorganization rather than as result of a disability. Concluding that genuine issues of material fact remained, the trial court denied the motion.

Capital Health later moved for partial summary judgment on the issue of whether the Agreement gave it discretionary decisionmaking authority. According to Capital Health, its decision to deny Hartley payment under the Agreement had to be upheld so long as the decision was made in good faith and...