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PANCZA v. REMCO BABY

April 18, 1991

JOSEPH PANCZA, JR., AND JANE PANCZA, PLAINTIFFS,
v.
REMCO BABY, INC., AND AZRAK-HAMWAY, INC., DEFENDANTS.



The opinion of the court was delivered by: Lifland, District Judge.

  OPINION

Plaintiff Joseph Pancza ("Pancza") sues defendants Remco Baby, Inc. and Azrak-Hamway, Inc. ("Remco") for breach of contract and in tort. All claims arise out of the termination of Pancza's employment by defendants. Plaintiff Jane Pancza sues for loss of consortium. Defendants move for summary judgment on all claims.

BACKGROUND

Remco is a New York corporation which was established in 1988 to enter the infant toy market. Azrak-Hamway, Inc. is a New York corporation owned by the principals of Remco, Marvin Azrak and Ezra Hamway.

Pancza alleges breach of contract, fraud, tortious interference with contract, defamation, intentional infliction of emotional distress, negligent infliction of emotional distress, breach of an implied covenant of good faith and fair dealing and promissory estoppel.

Between 1986 and November 1988, Pancza was the Director of Sales in the Personal Care Division at Marcal Paper Mills in New Jersey. Prior to his employment with Marcal, Pancza was the Director of National Accounts for Johnson & Johnson Child Development Products. At Johnson & Johnson, Pancza was responsible for the development of infant toys, and made sales presentations to head buyers of national accounts.

Pancza was recommended to Cook's agent, David Schwanz, by someone in the toy business. See Schwanz Dep. at 6. Schwanz contacted Pancza in relation to the position, and Pancza indicated his interest. Schwanz thereupon recommended to Remco that it interview Pancza. Remco did so, in New York, on September 1, 1988. It is undisputed that all interviews took place in New York. In numerous interviews, Pancza and Remco's principals reviewed Pancza's contacts in the infant toy business acquired as a result of his prior employment at Johnson & Johnson in the area of child development products. See Pancza Dep. at 64:5-7, 20-21, 65:20-23. In his third interview, Pancza provided Remco with the names of buyers with whom he did business while employed at Johnson & Johnson, as well as the names of the accounts he was responsible for and a list of "rep organizations" used by Pancza. See Plaintiff's Statement of Undisputed Facts at ¶ 12. During the course of the interviewing process, Pancza was asked to submit a plan for marketing Remco's products, which he submitted in outline form. See Defendants' Exhibit C.

In early November 1988, Remco offered Pancza the National Sales Manager position. It is undisputed that no written contract of employment was executed at any time. See Pancza Dep. at 86:10-15. While in Count Two of his complaint Pancza alleges that he "understood" that he would receive a written contract upon commencement of his employment, Pancza points to no facts to support this claim and in fact admits that no one told him this. See Pancza Dep. at 214:1-4 and 213:19-25. Remco informed Pancza that it would evaluate his performance at the 90-day mark, prior to payment of Cook's placement fee.*fn1 See Pancza Dep. at 181. Pancza admitted that he "assumed" that he would be evaluated on his performance, but that the basis for the evaluation was not specifically discussed. See Pancza Dep. at 181. Pancza admitted that upon commencing his employment, he was told by Neil Flint, Vice-President of Remco, to set up appointments with his contacts in the infant toy industry. See Pancza Dep. at 96:20-25. (Flint and Pancza shared an office at Remco). Remco asserts that it became apparent to Flint after a few days that Pancza did not know buyers in the toy industry, contrary to his representations to Remco in his interview. See Flint Dep. at 34-35 and 81-82. After Flint met with Remco's principals and advised them that Pancza had misrepresented his contacts in the industry, the decision was made to terminate Pancza.*fn2 See Flint Dep. at 29:15-25. In his deposition, Pancza conceded that he did not know numerous buyers in the infant-toy business. See Pancza Dep. at 120-121, 125, 128, 137-138, 149-151, 164-167. Thereafter, Remco notified Cook that Pancza had been terminated for misrepresenting his contacts with buyers in the infant-toy industry. See Schwanz Dep. at 10:13-19.

DISCUSSION

Choice-Of-Law

Remco asserts that New York law applies, since New York has the most significant contacts with the parties and the transaction. Remco points to the facts that it is incorporated in New York, the interviews occurred in New York, Pancza's work was performed in New York and the alleged tortious acts occurred in New York.

A federal court must apply the conflict of laws principles of the forum state. Rohm & Haas Co. v. Adco Chemical Co., 689 F.2d 424, 429 (3d Cir. 1982), citing Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941). Therefore, New Jersey conflict of laws principles will determine which law governs Pancza's contract and tort claims.

Contract Claim. The New Jersey Supreme Court has adopted the Restatement standard (significant contacts) to determine which law governs contract claims. State Farm Mut. Auto. Ins. Co. v. Estate of Simmons, 84 N.J. 28, 34, 417 A.2d 488 (1980). As articulated by the Third Circuit in Rohm & Haas, New Jersey looks to the jurisdiction "having the most significant relation and closest contacts with the occurrence and the parties". Rohm & Haas, 689 F.2d at 429.

In applying this standard to the insurance contract in State Farm, the New Jersey Supreme Court balanced the factors which it considered inherent in the significant relationship test (the domicile of the parties, the place of contracting, the place of performance, and the location of the subject matter) against the reasonable expectations of the contracting parties and the governmental and legislative interests of each interested state.

The Court noted that the prior choice of law rule, place of contracting, still had meaning, since the rule furnishes certainty and consistency in the choice of law. Id. 84 N.J. at 37, 417 A.2d 488. However, the Court cautioned against granting this rule controlling effect, holding that a court should also consider the relationship of each state with the parties and the transaction. Id.

The following facts are undisputed and constitute significant contacts with New York: Pancza's oral employment contract was formed in New York; the contract was to be performed in New York; the alleged breach of contract occurred in New York; and the defendants are incorporated in, and conduct their business from, New York. New Jersey's only contact is Pancza's residence in New Jersey.*fn3 While Pancza points to receiving telephone calls from Cook in New Jersey as another New Jersey contact, this is only because of his residence in New Jersey. With respect to an employment contract, New York has far more significant contacts than New Jersey. Thus, in accordance with New Jersey's choice-of-law rule governing contract claims, New York has the most significant relation and closest contacts with Pancza's employment and breach of contract claim. Therefore, New York law applies to Pancza's breach of contract claim.

Tort Claims. In tort cases, New Jersey has adopted a governmental-interest analysis in choice-of-law questions. Veazey v. Doremus, 103 N.J. 244, 248, 510 A.2d 1187 (1986); Barco Auto Leasing Corp. v. Holt, 228 N.J. Super. 77, 548 A.2d 1161 (App. Div. 1988). The court must determine the state which has the greatest interest in applying its law to the particular issue. The first step involves determining whether there is a conflict in the law of the interested states. This analysis is performed on an issue-by-issue basis. Veazey, 103 N.J. at 248, 510 A.2d 1187.

If a conflict exists, the court must identify the governmental policies underlying the law of each state, and how they are affected by each state's contacts with the case and the parties. If a state's contacts are unrelated to the policies underlying the law, then the state lacks an interest in applying its law. Veazey, 103 N.J. at 248, 510 A.2d 1187. The qualitative nature of the contacts is the touchstone for deciding which law applies. Id.

There is conflict between New Jersey law and New York law as to the issues in this case. New York presumes an at-will employment relationship absent an explicit agreement, and precludes claims for wrongful discharge couched in terms of tortious infliction of emotional distress. Buffolino v. Long Island Sav. Bank, FSB, 126 A.D.2d 508, 510 N.Y.S.2d 628, 630 (App. Div. 1987). The Buffolino court stated that a plaintiff could not "evade" the at-will contract rule by claiming tortious infliction of emotional distress. Id. New Jersey permits a claim of intentional infliction of emotional distress arising out of an employment context for outrageous conduct, and permits a cause of action for negligent infliction of emotional distress where it is reasonably foreseeable that the tortious conduct will cause genuine and substantial emotional distress or mental harm to average persons. A tortious interference with contract claim under New York law requires a plaintiff to establish intentional and improper interference with a contract with a third party. Intentional interference with contract or with future contractual relations is actionable in New Jersey, even for at-will employees. In New Jersey and New York, an employer has qualified immunity for defamatory statements made in the course of recommendations. Rogozinski v. Airstream by Angell, 152 N.J. Super. 133, 154, 377 A.2d 807 (Law Div. 1977); Payne v. Kathryn Beich & Nestle, 697 F. Supp. 612, 615 (E.D.N.Y. 1988). Thus, New Jersey law concerning Pancza's emotional distress and to a lesser extent concerning interference with contract claims conflicts with New York law.

Pursuant to Veazey, the next step is identification of the governmental policies underlying the law of each state and how those policies are affected by each state's contacts with the litigation and the parties. In Veazey, a Florida plaintiff sued his wife and the other driver for personal injuries sustained in an automobile accident which occurred in New Jersey. In applying the governmental interest test, the New Jersey Supreme Court reviewed the governmental policies behind each state's law. Florida provided interspousal immunity, the purpose of which was to foster marital harmony. Id. 103 N.J. at 249, 510 A.2d 1187. New Jersey's interest was highway safety. The court noted that application of interspousal immunity would not affect New Jersey's interest in highway safety. Id.

Next, the court examined the contacts of each state to the cause of action. Florida's contacts were directly related to interspousal immunity, since the couple were domiciled in Florida. Id. at 251, 510 A.2d 1187. New Jersey's contacts were as the forum state, and as the situs of the accident, which were unrelated to the issue of immunity. Id. at 250, 510 A.2d 1187. Therefore, the court concluded that Florida law governed the tort action.

In this action, application of New Jersey law would clearly undercut New York's limitations on an employee's ability to sue for tortious conduct relating to discharge from employment. New York has an interest in governing employment relations, as does New Jersey. However, New Jersey's interest in compensating tort victims generally does not outweigh New York's specific interest in governing its employment relations, especially in light of the fact that New York has the relevant contacts to the employment relation and the alleged tort emanating therefrom. New York is the situs of the alleged tort, the situs of the employment and the state of incorporation and situs of the defendant-employer. New Jersey's only contact is as the domicile of the plaintiff, the alleged ...


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