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PEPE v. RIVAL CO.
December 15, 1999
PATRICK PEPE, PLAINTIFF,
RIVAL COMPANY, A CORPORATION DEFENDANT.
The opinion of the court was delivered by: Lechner, District Judge.
Plaintiff, Patrick Pepe ("Pepe") filed a complaint in the Superior
Court of New Jersey, Law Division, Union County (the "Complaint"),
against the defendant, the Rival Company ("Rival"), alleging age
discrimination under the New Jersey Law Against Discrimination (the
"NJLAD"), N.J.S.A., 10:5-1, et seq., breach of an express and/or an
implied employment contract and breach of the covenants of good faith and
fair dealing. Rival filed a notice of removal (the "Notice of Removal")
pursuant to 28 U.S.C. § 1446 (a); diversity
jurisdiction was asserted pursuant to 28 U.S.C. § 1332
Currently before the Court is a motion for summary judgment (the
"Motion for Summary Judgment"), filed by Rival.*fn1 For the reasons set
out below, the Motion for Summary Judgment is granted.
Pepe resides in New Jersey. See Complaint; Notice of Removal ¶ 3.
Pepe was employed by Rival from 1989 to 1998. See Complaint, First Count
¶ 1; Plaintiff's Rule 56.1 Statement ¶¶ 1, 62. Pepe was initially
employed as a district sales manager ("District Sales Manager") and was
later promoted to senior district sales manager ("Senior District Sales
Manager") in the Rival Kitchen Sales Organization (the "Kitchen Sales
Organization").*fn2 See Complaint, First Count ¶ 1; Plaintiff's Rule
56.1 Statement ¶¶ 1, 62.
Rival is a Delaware corporation with its principal place of business in
Missouri. See Notice of Removal ¶ 4. Rival sells various product
lines, including a line of kitchen appliance. See Moving Brief at 1.
Rival sells its product lines to retail customers which include
department stores, distributors and certain national stores such as
Wall-Mart K-Mart and Target. See Deposition of Mark Bittner ("Bittner
Dep.") at 175.
Pepe contends Rival is liable under the NJLAD, because his termination
was allegedly motivated by age. See Complaint, First Count ¶¶ 11, 13.
Pepe also alleges Rival is liable for breach of either an express and/or
implied employment contract based upon his membership in a so-called
Secular Trust (the "Secular Trust"), a pension plan offered to select
Rival employees, and/or an employment handbook Rival sent to him the
beginning of his employment. See id. at Second Count, ¶¶ 3, 4.
Finally, Pepe alleges Rival breached covenants
of good faith and fair dealing in connection with his alleged employment
contract See id. at Third Count, ¶ 2.
2. Initial Employment with Rival
In 1989, Pepe joined Rival as a District Sales Manager responsible for
a territory which included New York, New Jersey and parts of New England
(the "New York Territory"). See Pepe Cert. ¶ 1. Upon commencing
employment at Rival, Pepe did not sign an employment contract. See
Deposition of Patrick Pepe ("Pepe Dep.") at 191; Defendant's Rule 56.1
Statement ¶ 2.
Once Pepe began his employment, Rival sent a copy of The Rival Company
Sales, Administrative & Clerical Associates Handbook (the "Rival
Associate Handbook") to his home in New Jersey. See Pepe Cert. ¶ 45.
Pepe stated he relied on the Rival Associate Handbook "as outlining
company policy." Id. at ¶ 48. However, after receiving the Rival
Associate Handbook, Pepe stated he reviewed the portions "which seemed
important." Id. at ¶ 46. Pepe stated he reviewed "portions relating
to performance and benefits." Id.
The Rival Associate Handbook included a section titled the Associate
Handbook Statement ("Associate Handbook Statement"). See Rival Associate
Handbook at 2. Appearing on page two of the Rival Associate Handbook
following a message from the President of Rival, the Table of Contents
and the Company Mission Statement, the Associate Handbook Statement
This Rival Associate Handbook is by no means intended
to cover every facet of the Associate-Employer
relationship. Regardless of the manner or duration of
the Associate's compensation, nothing contained herein
shall create employment for a definite term and the
statements made herein are simply general statements
of THE RIVAL COMPANY ("THE COMPANY") policy. Without
prior notice and at any time for any reason, the
Company specifically reserves the right to:
1. MODIFY THESE POLICIES,
2. APPLY THEM IN A MANNER THAT RETAINS DISCRETION IN
THE COMPANY, OR
3. REFRAIN FROM APPLYING THESE POLICIES
Associates may terminate their employment without
prior notice at any time for any reason, The Company
may do the same. All oral statements made at any time
regarding employment and any written employment
rules, statements, policies or Rival Associate
Handbooks of any form or nature issued prior to this
manual are hereby revoked. The Company's policies may
not be changed except in writing by the President of
Id. (emphasis added). Pepe admitted he did not read the Rival Associate
Handbook Statement; he stated that nothing about the page "made it seem
any more important than the first few pages that went before it." Pepe
Cert. at ¶ 47.
Pepe asserts he interpreted the Rival Associate Handbook as "containing
promises of the company with respect to many things including promotion,
transfer, corrective action, and termination." Id. The Promotions and
Transfers section of the Rival Associate Handbook reads:
It is the policy of The Rival Company to fill
vacancies wherever possible by transfer or
promotions. The best qualified individual will be
selected. Primary consideration will be given to
qualified associates when trying to fill vacancies.
• Those who apply will be considered on the
basis of ability, experience, overall job
performance and attendance. Screening interviews
will be done by the Personnel Manager with the
interviewing supervisor making the final
• If there are no qualified applicants for the
job within Rival, it will be filled by other
means. The Personnel Department will notify all
applicants when a position has been filled.
Rival Associate Handbook at 17.
The Corrective Action Procedure section of the Rival Associate Handbook
From time to time, problems arise that relate to
attendance, work performance or disruptive behavior.
Every associate will be given the opportunity to
correct such problems. Corrective actions will follow
a 3-step plan:
Your supervisor will counsel you about the problem.
They [sic] will work with you to correct the problem.
This will be considered your "Verbal Warning." If the
problem is corrected nothing further will be said. It
will not be held against you in any way.
Step # 2 — Written Warning
Should the problem continue, your supervisor will
counsel you again. They [sic] will put a statement of
the problem in written form, a copy of which will go
to your personnel file. Receipt of a written warning
automatically places you on thirty (30) days
probation. Your signature is required on this form as
acknowledgment that you have read and understand the
form. If the problem continues, the supervisor is
required to move you to Step #3.
To insure fair play, no terminations under this policy
are permitted without the approval of the department
head. No one will be terminated without every possible
assistance and fair warning.
Id. at 20. Pepe argues, based upon the Corrective Action Procedures
listed in the Rival Associate Handbook, he had an implied employment
contract that he would not be terminated without cause. See Opposition
Brief at 35. Further, Pepe states no one at Rival ever told him he was an
at-will employee. See Pepe Cert. ¶ 48. Nevertheless, at page two of
the Rival Associate Handbook it is clearly, plainly stated that:
. . . [N]othing contained herein shall create
employment for a definite term Associates may
terminate their employment without prior notice at any
time for any reason, The Company may do the same.
Rival Associate Handbook at 2.
In 1992, Pepe was promoted to Senior District Salts Manager. See id. at
¶ 4. The Senior District Sales Manager position involved "supervising
a [D]istrict [S]ales [M]anager, selling Rival's products, increasing the
number of customers and sales volume in the territory, implementing
pricing and advertising programs that were approved by senior management,
controlling find administering the advertising budget," communicating
with the home office and maintaining good customer relations for Rival in
the New York Territory. Id. at ¶ 5.
During the first eight years of his tenure at Rival, Pepe was
supervised and reviewed by Karl Zehner ("Zehner"). See Plaintiff's Rule
56.1 Statement at ¶ 14. Zenner testified that he received "a lot of
feedback" from Pepe and probably spoke to him every day. Zehner Dep. at
36. Zehner also testified that Pepe expanded both the volume of sales and
the customer base of the New York Territory. See Zehner Dep. 32; see
also Pepe Cert. ¶ 8.
Under the heading "Teamwork" the 1996 Bonus Review stated:
Pat did a fair job on teamwork goal with Federated.
Communication better at end of the year, but needs
much improvement with other associates calling on
Federated. Pat must focus on reestablishing Rival as
[sic] major vendor for Federated.
Zehner described advertising administration as an area from which
District Sales Managers "could make contributions to profitability of the
company." Zehner Dep. at 30. Zehner complimented Pepe on advertising
administration and commented, that during his last few years at Rival,
Pepe "was under budget" for New York Territory advertising. Id. Pepe
contends Cindy Francis ("Francis"), Director of Advertising, consistently
complimented him on his advertising administration. See Pepe Cert. ¶¶
According to Manning, Pepe turned in the worst performance of all Rival
District Sales Managers in advertising administration. See Manning Dep.
at 108-109. When asked about administration skills in general, Manning
described Pepe as "not somebody that you'd count on." Id. In addition,
various other members of Rival senior management criticized Pepe
concerning his administrative and communication skills. See Deposition of
Stanley Biggs ("Biggs Dep.") at 75-86 (discussing Pepe's deficient
computer skills and Pepe's failure to respond to administrative inquiries
from Francis and himself); Francis Dep. at 9-12, 47-54 (noting that Pepe
did not timely cancel his "ad reqs" and had a greater problem with
administrative issues than other Rival salespeople).
In 1996 Pepe was invited to participate in the Secular Trust, a pension
plan established for highly compensated Rival personnel. See Pepe Cert.
9155; Manning Dep. at 78-79; Biggs Dep. at 87. Rival made a contribution
to the Secular Trust for each plan participant equal to twelve percent of
his or her yearly salary. See Pepe Cert. ¶ 55.
Pepe argues his inclusion in the Secular Trust ensured his employment
with Rival until his retirement. See Opposition Brief at 37; see also
Pepe Cert. ¶ 57; Pepe Dep. at 307. Pepe asserts Manning told him
inclusion in the Secular Trust guaranteed "a comfortable retirement from
Rival." Pepe Cert, ¶ 56. Pepe also asserts William Endres
("Endres"), then the Vice President of Sales, described the Secular Tust
as a "great experience" and told Pepe "[y]ou have a long and enhanced
opportunity until retirement to be here." Pepe Dep; at 307.
The Secular Trust Agreement (the "Secular Trust Agreement"), which Pepe
asserts provided an express or implied employment contract, does not
contain any assurances concerning employment at Rival. See Secular Trust
Agreement; see also Manning Dep. at 80; Biggs Dep. at 87. On the first
page, the Secular Trust Agreement identifies its purpose — to act as
a retirement plan. See Secular Trust Agreement at 1. In the definition
section, the Secular Trust Agreement defines a "Terminated Participant"
as "a person who has been a Participant, but whose employment has been
terminated other than by death." See id. at 8.
Except as limited by Sections 5.4 and 5.5, whenever
the Trustee is directed, pursuant to this Agreement,
to make a distribution, the distribution may be made
as soon thereafter as practicable, but in no event
later than the 60th day after the close of the Plan
Year in which the latest of the following events
occurs: (a) the date on which the Participant attains
the earlier age of 65 or the Normal Retirement Age
specified herein; (b) the 10th anniversary of the year
the Participant commenced participation in the Plan;
or (c) the date the Participant terminates his or her
service with the Company.
The Secular Trust Agreement also has a choice of law provision titled
"Governing Law." Id. at 22. The choice of law provision states: "To the
extent not preempted by the Employee Retirement Income Security Act, this
Trust Agreement and the Trusts created herein shall be construed,
regulated and administered under the laws of the State of Missouri. . .
Pepe admitted no member of Rival management told him participation in
the Secular Trust would guarantee his employment until retirement. See
Pepe Dep. at 306. Pepe further admitted he did not read the terms of the
Secular Trust Agreement until after he was terminated. See id. at
185-186, 189-190. Pepe also admitted he knew at least one member of the
Secular Trust, Endres (Vice President of Sales), who was fired by Rival.
See id. at 190. When asked during his deposition if he believed his
inclusion in the Secular Trust meant he could not be fired "[u]nder all
circumstances," Pepe answered:
Well, I don't think anybody, anyone would think
under all circumstances. I would think if I continued
to perform my duties as I've been in the past and
planned on continuing to do in the future and
continued to get good job reviews and perform as I was
performing, then I would be there [at Rival] until
6. Changes in Rival Management
Zehner voluntarily resigned from Rival on 25 October 1997; at that time
Witter and Scott Royal-Ferris ("Royal-Ferris"), took over the
responsibility of supervising both Pepe and Philip Pruner, the District
Sales Manager for the Ohio territory. See Plaintiff's Rule 56.1 Statement
¶¶ 20-21. About two weeks later, in early November 1997, Royal-Ferris
informed Pepe of his intention to terminate Thomas Frain ("Frain"), The
District Sales Manager whom Pepe supervised. See id. at ¶ 22.
Pepe complained about the change because the New York Territory always
had been covered by at least two District Sales Managers. See id. at
¶¶ 23-24; see also Pepe Cert. ¶ 34. In addition, Frain had been
responsible for calling on most of the smaller retailers, which allowed
Pepe to focus his efforts on the larger accounts in the territory,
including I. Lehrhoff & Company ("Lehrhoff"). See Plaintiff's Rule 56.1
Statement ¶ 22; see also Pepe Cert. ¶ 34. On 5 December 1997,
Frain was terminated and Pepe became responsible for the New York
Territory. See Plaintiff's Rule 56.1 Statement ¶¶ 25-26.
Pepe argues the termination of Frain was part of a scheme "to expose
him" and "lead to his termination." Id. at ¶ 27 (citing Witter Dep.
at 99); see also Opposition Brief at 5. Accurately stated, Witter
testified the decision to fire Frain was motivated by three factors
— (1) the declining sales volume in the New York Territory no
longer supported both positions, (2) Rival management did not believe
"they were getting the most out of [Frain]" and (3) Royal-Ferris wanted
to show Pepe was working only for Lehrhoff and to "uncover a lot that
[Pepe] was not doing." Witter Dep. at 99. Witter further testified the
change was not designed to make Pepe fail, but
rather "to see how [Pepe would) respond to the bigger challenge" of
calling on other customers in the New York Territory. Id.
Pepe states that after the firing of Frain, Stan Biggs ("Biggs"),
Vice-President and Treasurer of Rival, and Witter began "harassing him
with questions and criticizing him" regarding various aspects of his
advertising administration. Pepe Cert. ¶ 18; Plaintiff's Rule 56.1
Statement ¶ 28.
Following Zehner's departure, members of Rival management began to
question Pepe about the New York Territory advertising. See, e.g., Biggs
Dep. at 82-86; Witter Dep. at 39. Biggs requested Pepe start following
company policy by submitting dealer debits, documentation which proves
that an advertisement has been run. See Biggs Dep. at 82-84. In
addition, Witter and Biggs both questioned the practice Pepe employed of
allocating advertising money from smaller accounts to Lehrhoff. See id.
at 85-86; see also Witter Dep. at 39 ("[t]here were some questions about
the advertising of the New York market.").
Biggs and other members of Rival senior management thought Pepe was
focusing on one particular account, the Lehrhoff account, to the
exclusion of other accounts in the New York Territory. See Biggs Dep. at
89; Deposition of William Yager ("Yager Dep.") at 23-24. William Yager
("Yager"), President and Chief Operating Officer of Rival, testified he
believed Pepe was "working" for Lehrhoff. See Yager Dep. at 23. Biggs
stated he believed Pepe was loyal to Lehrhoff and not Rival. See Biggs
Dep. at 89.
Biggs testified Pepe had shown Arthur Lehrhoff, the Chief Executive
Officer of Lehrhoff, a confidential internal pricing memorandum,
addressing "special deals" on pricing. See id. Pepe argues he did not
give the confidential memorandum to anyone at Lehrhoff. See Plaintiff's
Rule 56.1 Statement ¶ 47. Pepe offered the testimony of Arthur
Lehrhoff, who stated he took the memorandum from Pepe's desk. See
Lehrhoff Cert. ¶ 9.
Pepe contends the criticism concerning his advertising administration
represented a departure from previously accepted practices at Rival. See
Pepe Cert. ¶¶ 21, 24. Specifically, Pepe argues his continued receipt
of the maximum advertising bonus and comments by his previous
supervisor, Zehner, demonstrate his skill in advertising administration.
See Opposition Brief at 2; Pepe Cert ¶ 25; see also Zehner Dep. at
30. Further, Pepe argues that he was consistently under budget and
received compliments concerning his advertising administration. See
Opposition Brief at 2-3; Pepe Cert ¶ 25.
On 1 April 1998, Mark Bittner ("Bittner") was hired by Rival as the
Vice President of Sales. See Bittner Dep. at 37. Before joining Rival,
Bittner had reorganized the sales organization of thirteen other
companies. See id. at 158. At the outset, it is important to recognize
that Pepe has failed to offer any evidence, or even argue, Bittner had
any motivation to harm Pepe or otherwise terminate him for Rival other
than for legitimate, non-discriminatory business reasons.
During his first few weeks of employment, Bittner reviewed the existing
sales structure and determined a reorganization would benefit Rival. See
id. at 46, 119-120. Bittner believed Rival should focus more on national
accounts. See id. at 48. Specifically, Bittner believed Rival would
achieve greater sales by replacing the District Sales Manager positions
with outside sales representative agencies which would be paid only for
the sales they generated. See id. at 176-719. Bittner planned "to
eliminate all of the direct selling positions that did not entail
national accounts." See id. at 49. Bittner presented his ideas to Yager
and Manning, both of whom agreed with his proposed reorganization (the
"Reorganization"). See id. at 46-48; Yager Dep. at 15-16, 20.
does not contest the fact that the Reorganization occurred.
During the decision-making stage of the Reorganization, Bittner
questioned the strength of three markets, those covered by Pepe (then age
47), Paul Curlett ("Curlett") (then age 57) and Phil Lapenta ("Lapenta")
(then age 35). See Bittner Dep. at 136; Butler Cert. ¶ 2. He
recommended terminating all three employees based on the decline in
revenue in all three territories. See Bittner Dep. at 136.
Yager and Manning agreed with Bittner's assessment of Pepe and
Lapenta, but disagreed concerning Curlett. See Yager Dep. 16-17, 23-24,
33; Manning Dep. at 33. Yager believed Curlett should not be terminated
because Curlett "deserved a chance to be accountable in the future." Id.
at 16-17. Manning felt that Curlett should be retained because companies
in his territory had "disappeared" and many "key accounts . . . were no
longer in business." Manning Dep. at 34. Manning did not know enough to
judge Bittner's evaluation of Lapenta.*fn3 See id. at 37-38. As a result
of the Reorganization, all seven District Sales Manager positions were
replaced with outside sales representative agencies. See Bittner Dep. at
49. These outside sales representative agencies handle the customers
previously serviced by the District Sales Managers. See id. This
replacement decreased Rival's costs because, unlike the District Sales
Managers, the outside sales representative agencies were not on Rival's
payroll. See id. at 178-179.
8. Regional Sales Manager Position
The Reorganization eliminated all of the District Sales Manager, Field
Sales Manager and the National Account Manager positions at Rival and
created the new Regional Sales Manager positions. See Bittner Dep. at
47-49. Bittner explained that there was a "world of difference" between
the District sales Manager position and the Regional Sales Manager
position. Id. at 167.
The Regional Sales Manager job was not a selling position. See id. The
Regional Sales Manager position was supervisory in nature, involving the
hiring and overseeing of outside sales representative agencies. See id.
at 164; see also Pruner Dep. at 118. Customer contact, which represented
a significant portion of the District Sales Managers' time would be
primarily handled by outside sales representative agencies. See
Defendant's Rule 56.1 Statement ¶ 48; Bittner Dep. at 174; Manning
Dep. at 107. The Militti Group and Synergy Sales were retained to call on
customers in areas covered by the New York Territory. See Defendant's
Rule 56.1 Statement ¶ 48; Bittner Dep. at 174; Manning Dep. at 107.
Regional Sales Managers covered a more extensive area than District
Sales Managers. See Bittner Dep. at 164; see also Pruner Dep. at 118. For
example, the Regional Sales Manager position, which Pepe claims he should
have been appointed to, supervised accounts in Michigan, Ohio,
Pennsylvania, New York, New Jersey, Vermont, New Hampshire,
Massachusetts, Connecticut, Rhode Island and the PHD national account
(the "East Territory") (the "East Regional Sales Manager"). See Bittner
Dep. at 164; see also Pruner Dep. at 118.
9. Selection of a Regional Sales Manager
Bittner testified he considered every District Sales Manager, including
Pepe, for the new positions created by the Reorganization. See Bittner
Dep. at 120. According to Bittner, he placed "the best people in the best
jobs." See id. Bittner did not, however, seek applications for the new
Regional Sales Manager positions. See id. In fact, neither Pepe nor any
of the other District Sales Managers applied for, or were aware of, the
new positions prior to implementation of the Reorganization. See, e.g.,
Pruner Dep. at 117-118.
To select the most qualified people, Bittner asked Witter, based upon
his experience as their supervisor, to rank the District Sales Managers.
See Bittner Dep. at 96. Bittner testified:
I asked Tom Witter to rank his direct reports. And I
wanted to see the best and I wanted to see the worst
and I wanted him to rank them in terms of all
qualifications of the job and contributions and
strategic thinking and planning and promotional
activity and general management characteristics. And
he ranked his direct reports.
Id. Witter testified he considered the candidates and ranked the District
Sales Managers based upon his "perception of the sales job" done by each
of them. See Witter Dep. at 37. As part of his rankings, Witter
considered both the District Sales Managers responsiveness to, and
communications with, the home office. See id.
Witter ranked Pruner as the best candidate of the seven District Sales
Managers. See id. Specifically, Witter testified the principal reason he
ranked Pruner first was because of "his aggressiveness' and his
thoroughness in communication." Witter Dep. at 38. Pepe was ranked "dead
last as the weakest member of the sales team." Bittner Dep. at 98. Based
in part on these rankings, Bittner placed Pruner in the Regional Sales
Manager position overseeing the East Territory. See id. In addition,
Bittner testified he also considered the fact that no one he spoke with
had anything negative to say about Pruner's work performance; as well, no
one with whom he spoke had anything positive to say about Pepe's work.
See id. 112-113.
Witter explained several of the reasons for his negative evaluation of
Pepe. See Witter Dep. at 38-39. The primary reasons for ranking Pepe last
were: (1) Pepe was very difficult to reach by phone and (2) "he didn't
have much computer training" and despite several offers to take classes
in Kansas City, Pepe never scheduled an appointment. See id. at 38. The
secondary reasons for ranking Pepe last included: (1) Pepe did not
respond punctually to e-mails, (2) Pepe was unprepared for a sales
presentation Witter attended, (3) Pepe did not adequately focus on, and
even ignored, various accounts in his territory, (4) Pepe did not know
how to get to an account on Long Island and (5) Pepe did not cancel "ad
reqs" on time, but only canceled them at the end of the fiscal year to
come in under budget. See id. at 38-39.
10. Pepe's Allegations of Age Discrimination
Pepe testified he was denied the Regional Sales Manager position for
the East Territory based upon his age. See Pepe Dep. at 166. At the time
of the Reorganization, Pruner was 31 years old and Pepe was 47 years
old. See Butler Cert. ¶ 2. The difference in his and Pruner's age is
the only evidence Pepe provides of the alleged discrimination.
Pepe testified Rival discriminated against him by failing to appoint
him to the Regional Sales Manager position held by Pruner. See Pepe Dep.
at 392. Comparing himself and Pruner, Pepe testified he should have been
appointed to the East Regional Sales Manager position
based on my experience with the, my experience within
The Rival Company, within New York, New Jersey, New
England territory that [Pruner] covers, my experience
versus, which was a lot more, versus his less
experience, my ability to, my seniority versus a lot
less seniority in knowing the company. My rapport and
my knowledge of the New York customers. My being a
team leader at Federated. My getting a great job
review for great performance in the New York ...