Donovan v . Castle Springs CV-01-413-M 12/20/02 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

William J. Donovan, I I I , Plaintiff

v. Civil N o . 01-413-M Opinion N o .

Castle Springs, LLC, Defendant

O R D E R

In this action, which has been removed from the Carroll

County Superior Court, William J . Donovan, I I I (“Donovan”) has

sued Castle Springs, L L C (“Castle Springs”) in five counts,

asserting: ( 1 ) an overtime wage claim under N . H . R E V . STAT. A N N . §§

279, et seq. (Count I ) ; ( 2 ) a claim under the federal Fair Labor

Standards Act ( “ F L S A ” ) , 29 U . S . C . § 2 0 1 , et seq. (Count I I ) ; ( 3 )

breach of contract (Count I I I ) ; ( 4 ) promissory estoppel (Count

I V ) ; and ( 5 ) breach of the covenant of good faith and fair

dealing implicit in all New Hampshire contracts (Count V ) .

Before the court is Castle Springs’ motion for summary judgment

on Counts I , I I I , I V , and V , and for partial summary judgment on

Count I I . Donovan objects, but in doing s o , he seeks voluntarily

dismissal of Count I . For the reasons given below, Castle Springs’ motion for partial summary judgment is granted in part

and denied in part.

Standard of Review

Summary judgment is appropriate when the record reveals “no

genuine issue as to any material fact and . . . the moving party

is entitled to a judgment as a matter of law.” FED. R . CIV. P .

56(c). “To determine whether these criteria have been met, a

court must pierce the boilerplate of the pleadings and carefully

review the parties’ submissions to ascertain whether they reveal

a trialworthy issue as to any material fact.” Perez v . Volvo Car

Corp.,

(1st Cir. 2001) (citing Grant’s Dairy-

Me., L L C v . Comm’r of M e . Dep’t of Agric., Food & Rural Res.,

, 14 (1st Cir. 2000)).

Not every factual dispute is sufficient to thwart summary judgment; the contested fact must be “material” and the dispute over it must be “genuine.” In this regard, “material” means that a contested fact has the potential to change the outcome of the suit under the governing law if the dispute over it is resolved favorably to the nonmovant. By like token, “genuine” means that the evidence about the fact is such that a reasonable jury could resolve the point in favor of the nonmoving party.

2 Navarro v . Pfizer Corp.,

0 , 93-94 (1st Cir. 2001)

(quoting McCarthy v . Northwest Airlines, Inc.,

(1st Cir. 1995)).

In defending against a motion for summary judgment, “[t]he

non-movant may not rely on allegations in its pleadings, but must

set forth specific facts indicating a genuine issue for trial.”

Geffon v . Micrion Corp.,

9 , 34 (1st Cir. 2001) (citing

Lucia v . Prospect S t . High Income Portfolio, Inc.,

7 0 ,

174 (1st Cir. 1994)). When ruling upon a party’s motion for

summary judgment, the court must “scrutinize the summary judgment

record ‘in the light most hospitable to the party opposing

summary judgment, indulging all reasonable inferences in that

party’s favor.’” Navarro, 261 F.3d at 94 (quoting Griggs-Ryan v .

Smith,

1 2 , 115 (1st Cir. 1990)).

Factual Background

The facts of this case, viewed in the light most favorable

to Donovan, as the non-moving party, are as follows.

3 Donovan was interviewed for the open position of maintenance

supervisor by Castle Springs’ Executive Vice President of

Operations, Mark Wiggins, in late July 1999. Wiggins ultimately

offered Donovan the position. Donovan accepted, and began work

on August 2 . Donovan had learned of the position through a

newspaper advertisement which stated, in pertinent part:

Now accepting applications for a full-time, year-round Maintenance Supervisor. Duties include inside and outside care of estate grounds and plowing during the winter months. Benefits include health, dental, RX card, matching 401K, life insurance, short & long-term disability and vacation.

Castle Springs has submitted, in support of its motion for

summary judgment, a substantially more detailed job description,

but Donovan states, in his affidavit, that he “was never given a

job description other than the advertisement” and was not “sent

an offer letter describing [his] employment.”

When he interviewed for the position, Donovan asked for a

salary of $40,000 per year plus benefits, but was offered, and

accepted, a salary of $30,000 per year plus benefits, with the

promise that his salary would be reviewed after three months.

Donovan was also told that he would have to work long hours

4 during the tourist season at Castle Springs, but that his long

hours “would be made up to [him] in the off season.” Donovan’s

salary was paid bi-weekly, at a rate of $576.92 per week.

While the term “at-will employee” was never used during

Donovan’s employment interview, he signed, on his first day of

work, a document titled “Employee Acknowledgment Clause,” which

states:

My signature on this page certifies that I have received [the] Castle Spring[s] Inc. Personnel Policy Manual outlining the company’s policies, rules and general information. I understand that this manual is not an expressed or implied contract of employment, but rather an overview of working rules and benefits which may be changed at any time at management’s discretion.

Furthermore, I acknowledge that my employment is “at will” and is not guaranteed for any particular length of time and that either party remains free to terminate the employment relationship at any time within the guidelines established in the Personnel Policy Manual.

The Personnel Policy Manual, in turn, contains the following

relevant provisions:

Your employment at Castle Springs, Inc. is “at- will” and any statement to the contrary, whether written or verbal, is expressly disavowed unless it is in writing and signed by the Managing General Partner

5 or the Executive Vice President of Operations. This ns that you may sever your relationship with Castle means Springs, Inc. at any time and for any reason and Castle Springs, Inc. may terminate your employment at any time for any reason.

All employees are on a trial period for their first three months (90 calendar days) with the company. This trial period gives the company a chance to view employee performance and to assure it is up to company standards. If at any time during the trial period it becomes evident that your performance is not satisfactory, the company may terminate the employment relationship without prejudice.

Employees will . . . be classified as exempt (salaried) or non-exempt (hourly). Non-exempt employees will receive overtime pay after forty-hours (40) per week. Exempt employees will receive no overtime pay.

Since employment with this organization is based on mutual consent, both the employee and the employer have the right to terminate employment, at-will, with or without cause, at any time.

Donovan concedes that he signed the “Employee Acknowledgment

Clause” and that he received no written statement indicating that

he was anything other than an at-will employee, but states that

he only skimmed the Personnel Policy Manual.

6 Donovan worked for Castle Springs, as its maintenance

supervisor, from August 2 , 1999, through November 1 9 , 1999, when

he was terminated. During the course of his employment, Donovan

supervised two full-time employees (Wills Clinton, who worked for

Castle Springs for the whole of Donovan’s tenure, and Adam

Clough, who was employed by Castle Springs for the first four

weeks of Donovan’s tenure) and three part-time employees. He

also supervised maintenance work performed by workers assigned to

him (from Castle Springs’ bottling plant) on an as-needed basis,

and oversaw Castle Springs’ half-dozen tram drivers, at least to

the extent of co-ordinating their scheduling and filling in when

no regular tram drivers were able to work. Donovan’s supervisory

activities occupied approximately ten to fifteen percent of his

time; the remainder of his time was spent performing the same

kinds of manual labor and other maintenance tasks that his two

subordinates performed. While Donovan earned a salary and was

provided benefits, all the employees he supervised, including

Clinton and Clough, were paid on an hourly basis and did not have

benefits.

7 In nine of the eleven workweeks from August 2 , 1999, through

October 1 7 , 1999, the employees performing maintenance duties

under Donovan’s supervision, worked, in the aggregate, no fewer

than eighty hours per week. Taking into account the tram

drivers, employees under Donovan’s supervision worked no fewer

than 220 hours per week (collectively) during that time period.

As for Donovan, from August 2 through November 1 9 , the date on

which he was terminated, he worked a total of 1119.5 hours, which

is 479.5 hours more than he would have worked had he put in

forty-hour workweeks.1

As noted, Donovan was terminated on November 1 9 , 1999,

during the course of a conversation with his supervisor, Mark

Wiggins. That conversation took place approximately two and one-

half weeks after Donovan’s three-month trial period had expired.

When Donovan asked Wiggins why he was being terminated, Wiggins

said simply that things had not worked out.

1 Castle Springs maintained no records of Donovan’s hours, presumably because he was a salaried employee; Donovan kept a personal record of the hours he worked.

8 In response to his termination, Donovan filed this suit, in

which he seeks: (1) payment of $10,371.58 for 479.5 hours of

uncompensated overtime, under the FLSA (Count I I ) ; (2) contract

damages, including full salary for the period from November 2 0 ,

1999, through August 1 , 2000, under three different theories:

breach of contract (Count I I I ) ; promissory estoppel (Count I V ) ;

and breach of the implied covenant of good faith and fair dealing

(Count V ) . 2

Discussion

Castle Springs moves for summary judgment on Counts III, IV,

and V , and for partial summary judgment on Count I I , on the

theory that Donovan was entitled to overtime pay under the FLSA

only after October 1 7 , 1999. The court considers each of

Donovan’s claims in turn.

I. Count I I : Unpaid Overtime under the FLSA

In this count, Donovan argues that under the FLSA, Castle

Springs is obligated to pay him, at the rate of time and one-

2 As noted above, Donovan has voluntarily dismissed Count I , which asserted a claim under RSA chapter 279.

9 half, for the 479.5 hours he worked in excess of a standard

forty-hour workweek.3 Castle Springs contends that because

Donovan was employed in a bona fide executive capacity until

October 1 7 , the overtime provisions of the FLSA did not apply to

him during the period from August 2 through October 17. 4 Donovan

counters that he was not exempt from the overtime provisions of

the FLSA because he devoted no more than fifteen percent of his

work time to management functions.

According to the “maximum hours” provision of the Fair Labor

Standards Act:

Except as otherwise provided in this section, no employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not

3 Donovan calculates the amount of overtime pay he is due by dividing his weekly salary by forty, to establish an hourly rate, and then multiplying the number of hours he worked in excess of forty per week by 1.5 times his calculated hourly rate of pay. 4 For purposes of summary judgment, Castle Springs concedes that it cannot produce undisputed evidence that Donovan was exempt from the FLSA after October 1 7 , because from that date onward, he no longer supervised the equivalent of two full-time employees.

10 less than one and one-half times the regular rate at which he is employed.

(a).

The statutory rate of overtime pay, “one and one-half times

the regular rate,” is subject to several different modes of

calculation, including one for employees paid a weekly salary for

a fixed number of hours, see

(a), and another

for employees paid a fixed salary for fluctuating hours, see

. See generally Valerio v . Putnam Assocs., Inc.,

5 , 38-40 (1st Cir. 1999). Under the first mode of

calculation, an employee whose salary is $400 for a 40-hour week,

and who works 50 hours, is entitled to $150 in overtime pay ($400

per week, divided by 40 hours (the fixed workweek), for an hourly

rate of $ 1 0 , times 1.5, yielding an overtime rate of $15 per

hour, multiplied by 10 hours of overtime). Under the second mode

of calculation, an employee whose salary is fixed at $400 per

week, for fluctuating hours, and who works 50 hours, is entitled

to only $40 in overtime pay ($400 per week divided by 50 hours

(the actual hours worked, for which the weekly salary was paid),

11 for an hourly rate of $ 8 , times . 5 , for an overtime premium of $4

per hour, times 10 hours of overtime). 5

However, while the FLSA requires that certain employees be

paid overtime, the overtime provisions of the FLSA “shall not

apply with respect to . . . any employee employed in a bone fide

executive, administrative, or professional capacity . . . (as

such terms are defined and delimited from time to time by

5 The regulation pertaining to overtime for workers paid a fixed salary for fluctuating hours provides, in pertinent part:

An employee employed on a salary basis may have hours of work which fluctuate from week to week and the salary may be paid him pursuant to an understanding with his employer that he will receive such fixed amount as straight time pay for whatever hours he is called upon to work in a workweek, whether few or many. Where there is a clear mutual understanding of the parties that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number, rather than for working 40 hours or some other fixed weekly work period, such a salary arrangement is permitted by the Act if the amount of the salary is sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate for every hour worked in those workweeks in which the number of hours he works is greatest, and if he receives extra compensation, in addition to such salary, for all overtime hours worked at a rate not less than one-half his regular rate of pay.

(a) (emphasis added).

12 regulations of the Secretary [of Labor] . . . .”

(a)(1). Castle Springs does not argue that Donovan was

employed in an administrative or professional capacity, but that

he was employed in an executive capacity. And because Donovan

earned more than $250 per week, see

(f), both

parties agree that the proper test for determining whether he was

an exempt executive employee is the so-called “short form” test.

That test defines an “employee employed in a bona fide executive

. . . capacity” as “any employee . . . whose primary duty

consists of the management of the enterprise in which the

employee is employed or of a customarily recognized department or

subdivision thereof, and includes the customary and regular

direction of the work of two or more other employees therein . .

. .”

(emphasis added); see also

(explaining application of the “short form” test for “high

salaried executives”).

As for the kinds of work that constitute “management,” the

interpretive section of the regulations provides that:

it is generally clear that work such as the following is exempt work when it is performed by an employee in the management of his department or the supervision of

13 the employees under him: Interviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing their work; maintaining their production or sales records for use in supervision or control; appraising their productivity and efficiency for the purpose of recommending promotions or other changes in their status; handling their complaints and grievances and disciplining them when necessary; planning the work; determining the techniques to be used; apportioning the work among the workers; determining the type of materials, supplies, machinery or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety of the men and the property.

. The regulations also characterize the

direction of two or more employees as the supervision of “at

least two full-time employees or the equivalent.”

.

Of greater significance to this case is the regulatory

interpretation of the phrase “primary duty.” Whether an

employee’s primary duty is management involves a fact-specific

inquiry, made on a case-by-case basis. See

.

While “[t]he amount of time spent in the performance of the

managerial duties is a useful guide,” and “[i]n the ordinary case

it may be taken as a good rule of thumb that primary duty means

14 the major part, or over 50 percent, of the employee’s time . . .

[t]ime alone . . . is not the sole test.”

According to the

regulations, even an employee who spends less than fifty percent

of his or her time performing managerial duties can be considered

to be employed in an executive capacity based upon an analysis of

other “pertinent factors” such a s :

the relative importance of the managerial duties as compared with other types of duties, the frequency with which the employee exercises discretionary powers, his relative freedom from supervision, and the relationship between his salary and the wages paid other employees for the kind of nonexempt work performed by the supervisor.

To state the legal test for determining whether Castle

Springs employed Donovan in a bona fide executive capacity is to

demonstrate why the court must deny Castle Springs’ motion for

partial summary judgment on Donovan’s FLSA claim. Specifically,

there are at least three issues of material fact that preclude

judgment in favor of Castle Springs: (1) the portion of Donovan’s

work that qualified as managerial; (2) whether managerial work

was Donovan’s primary duty (which would appear to entail a

15 balancing of the time Donovan spent on his managerial duties

against the other pertinent factors listed above); and (3)

whether Donovan’s oversight of the tram drivers rose to the level

of supervision, o r , alternatively, constituted only non-

managerial record keeping, scheduling, or coordination. While

the primary evidence Donovan provides to support his objection to

summary judgment is his own affidavit, that is enough to create a

triable issue of fact sufficient to defeat Castle Springs’ motion

for partial summary judgment on Count I I .

Finally, the court notes that should Donovan prevail on his

claim to non-exempt status and, as a consequence, that the FLSA

required Castle Springs to pay him overtime, it appears that a

strong argument can be made that he would qualify only for the

overtime rate set out in

(a) (for non-exempt

employees paid a fixed salary for fluctuating hours), rather than

the more traditional version of the time-and-one-half rate

described in § 778.113(a) (for non-exempt employees paid a weekly

salary for a fixed number of hours). In other words, it may be

(subject to proof of a “clear mutual understanding,”

(a)) that even if Donovan were to succeed on his claim to

16 payment for overtime hours, he would be due approximately $1,810,

rather than the $10,371.58 he seeks.

II. Count III: Breach of Contract

In Count I I I , Donovan claims that Castle Springs breached

his employment contract when it refused to retain him for a full

year. In essence, he claims that Castle Springs enticed him away

from his previous employment by promising him a full year’s work,

and then reneged on its promise. Based upon his breach of

contract theory, Donovan seeks, among other damages, payment of

his salary from November 2 0 , 1999, through August 1 , 2000.

Castle Springs moves for summary judgment on grounds that Donovan

was not contractually entitled to employment for one year, but

was an employee at will. Donovan counters that triable questions

of fact precluding summary judgment are created by: (1) Castle

Springs’ representations that: (a) he would be paid a yearly

salary; (b) his three-month review was for the purpose of

determining whether he would receive a raise (not whether he

would be allowed to keep his job); 6 and (c) his hard work during

6 Donovan also appears to suggest that even if he was subject to termination during a three-month trial period, his termination came more than two weeks after he had been employed for three months, thus taking his employment outside the trial- 17 the tourist season would be “made up” to him during the off

season; and (2) the flimsiness of the reasons given for his

termination, which Donovan characterizes as a pretext for

terminating him prior to the time when Castle Springs would have

been obligated to give him compensatory time in exchange for the

overtime he worked during the tourist season. Because the

undisputed factual record establishes that Donovan was an at-will

employee, Castle Springs is entitled to summary judgment on Count

III.

Donovan’s breach of contract claim depends, of course, upon

the existence of an enforceable contract under New Hampshire law.

Donovan argues, in his memorandum of law in opposition to summary

judgment, that “[a]lthough there was no guarantee as to a

specific period of employment, plaintiff reasonably expected to

be employed for at least the year of his quoted salary so long as

he performed his job satisfactorily.” (Mem. of Law Supp. Pl.’s

O b j . to Def.’s Part. Mot. Summ. J., at 10.) That expectation was

not reasonable, however, given the “Employee Acknowledgment

period termination provision set out in the Personnel Policy Manual. Because Donovan was an employee at will, as the court explains more fully below, the timing of his termination is not pertinent.

18 Clause” Donovan signed, which explicitly provided that: (1) his

employment was “at-will;” and (2) both parties retained the right

to terminate the employment relationship at any time. Donovan’s

expectation that he was entitled to keep his job so long as he

performed well, o r , conversely, that he could be discharged only

for poor performance, is simply insufficient to overcome the

express terms of the Employee Acknowledgment Clause he admits to

having signed.

Furthermore, while Donovan emphasizes the fact that he was

told that he would be paid a yearly salary, “[a] hiring at so

much a day, week, month or year, no time being specified, is an

indefinite hiring, and no presumption attaches that it was for a

day even, but only at the rate fixed for whatever time the party

may serve.” Cloutier v . Great Atl. & Pac. Tea Co., 121 N . H . 915,

919 (1981) (quoting H . G . W O O D , A TREATISE ON THE LAW OF MASTER AND

SERVANT § 136, at 283-84 (2d ed. 1886)). In other words, “a

general or indefinite hiring is prima facie a hiring at will.”

Id. Nothing presented suggests or supports any other legal

conclusion but that Donovan was an at will employee.

19 In summary, based upon the undisputed factual record,

construed in the light most favorable to Donovan, Donovan did not

have a one-year employment contract under New Hampshire law. He

was an employee at will. Because Donovan was an employee at

will, Castle Springs’ decision to terminate him before he had

completed a full year did not constitute a breach of contract.7

Accordingly, Castle Springs’ motion for summary judgment is

granted as to Count I I I , Donovan’s breach of contract claim.

III. Count IV: Promissory Estoppel

In Count IV, Donovan relies upon the doctrine of promissory

estoppel to establish Castle Springs’ obligation to pay him a

full year’s salary. According to Donovan’s complaint, Castle

Springs “led [him] to believe that he would be employed for at

least a year, based upon the statement of his yearly salary and

the representation that he could have time off during the

remainder of the one year period as the busy season would require

him to work in excess of 40 hours per week.” Castle Springs

argues that promissory estoppel is inapplicable where, as here,

7 Obviously, even the termination of an at-will employee can be actionable, under limited circumstances. But Donovan does not make out a claim for wrongful termination under New Hampshire law.

20 the party against whom estoppel has been asserted is not alleged

to have made any promise. The court agrees.

Promissory estoppel is a doctrine that courts use “to

enforce promises when consideration is lacking.” Great Lakes

Aircraft C o . v . City of Claremont,

7 0 , 290 (1992)

(citation omitted).

More recently, however, its application has been expanded to enforce promises underlying otherwise defective contracts and promises made during the course of preliminary negotiations. In some instances, it has been employed to provide a remedy for reliance upon offers subsequently withdrawn. CALAMARI AND PERILLO, [THE LAW OF CONTRACTS,] § 6-5 [(3d ed. 1987)]. . . . It serves to impute contractual stature based upon an underlying promise, and to provide a remedy to the party who detrimentally relies on the promise. 2 A CORBIN ON CONTRACTS § 196A, at 55-56 (Supp. 1991).

Great Lakes Aircraft, 135 N.H. at 290. According to the

Restatement, which the New Hampshire Supreme Court regards as

authoritative on this topic, see Marbucco Corp. v . City of

Manchester,

(1993),

A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The

21 remedy granted for breach may be limited as justice requires.

RESTATEMENT (SECOND) OF CONTRACTS § 90(1) (1981).

Here, there simply was no promise. Castle Springs offered

Donovan an annual salary, but did not promise him employment for

one year. See Cloutier, 121 N . H . at 919. Similarly, Castle

Springs discussed Donovan’s wintertime duties and the nature of

his work during the off season not because it was promising him

work for a year, but because it was seeking to hire a year-round

maintenance supervisor. Moreover, Donovan himself concedes that

“there was no guarantee as to a specific period of employment.”

Because promissory estoppel requires a promise to have been made

by the party against whom estoppel is sought, and because Donovan

has identified no promise made by Castle Springs and has produced

no evidence from which a reasonable jury could find that Castle

Springs promised him a full year’s employment, see Navarro, 261

F.3d at 94 (citations omitted), defendant’s motion for summary

judgment is granted as to Count I V .

22 IV. Count V : Breach of the Implied Covenant of Good Faith and Fair Dealing

In Count V , Donovan asserts that Castle Springs breached its

duty of good faith and fair dealing by inducing him to leave his

former employment and then failing to keep the promises that

formed the inducement on which he relied. The complaint does not

say so explicitly, but the court presumes that Donovan claims to

have been induced to come to work for Castle Springs by a promise

of employment for a year, as well as by a promise of less work

during the winter months, in exchange for more work during the

tourist season. Castle Springs argues that: (1) Donovan fails to

state a claim for breach of the covenant of good faith and fair

dealing implied in every New Hampshire contract because he had no

employment contract with Castle Springs;8 and (2) even if there

were an employment agreement, Donovan has produced no evidence to

show that Castle Springs breached i t . Without necessarily

8 While Castle Springs correctly states the rule that the covenant of good faith and fair dealing only exists when there is an underlying contract into which it may be implied, this is not a case in which there was “no contract” between the parties. The court has ruled that Castle Springs did not agree to employ Donovan for a year, but there was, nonetheless, an employment agreement, specifically, “a contract for employment at-will.” Centronics Corp. v . Genicom Corp.,

(1989).

23 adopting all of Castle Springs’ reasoning, the court agrees that

Castle Springs is entitled to summary judgment on Count V .

As a preliminary matter, it should be noted that, as pled,

Count V does little more than assert that Castle Springs treated

Donovan unfairly and in bad faith by breaching its employment

agreement with him. On that basis, Count V is indistinguishable

from Donovan’s breach of contract claims. Recognizing, however,

that Donovan likely intended to plead something above and beyond

his breach of contract claim, the court turns to the law of good

faith and fair dealing.

Under New Hampshire law, an implied duty of good faith and

fair dealing arises “in three distinct categories of contract

cases: [1] those dealing with standards of conduct in contract

formation, [2] with termination of at-will employment contracts,

and [3] with limits on discretion in contractual performance.”

Centronics,

. Donovan’s complaint does not

disclose which of the three duties of good faith he believes to

have been breached by Castle Springs, but his objection to Castle

Springs’ motion for summary judgment appears to identify the

24 first and the third. Again, in the interest of accepting all

plausible inferences favorable to Donovan, each type of implied

duty will be examined in order.

With respect to the duty of good faith in contract

formation, the New Hampshire Supreme Court has explained:

In our decisions setting standards of conduct in contract formation, the implied good faith obligations of a contracting party are tantamount to the traditional duties of care to refrain from misrepresentation and to correct subsequently discovered error, insofar as any representation is intended to induce, and is material t o , another party’s decision to enter into a contract in justifiable reliance upon i t .

Centronics,

(citing Bursey v . Clement,

(1978)). In other words, to make out a claim under this

branch of the covenant of good faith and fair dealing, a

plaintiff must allege a misrepresentation made by the defendant

that induced him or her to enter into a contract. One acts in

bad faith, under these circumstances, by making a promise,

without any intention of keeping i t , for the purpose of inducing

another to enter into a contract. See Hydraform Prods. Corp. v .

Am. Steel & Aluminum Corp.,

8 7 , 200 (1985) (citations

25 omitted). 9 Conversely, all one needs to do to act in good faith,

at contract formation, is to have the intention and the capacity

to keep the promises one makes. Here, Donovan argues that a jury

could find bad faith based upon Castle Springs’ intention, at the

time of contract formation, not to honor its promise of a full

year’s employment. However, because Castle Springs made no

promise of a full year’s employment, by Donovan’s own admission,

it could not have acted in bad faith by making a promise that it

did not intend to keep. Thus, Donovan’s claim under the first

branch of the good faith doctrine could not survive a 12(b)(6)

motion to dismiss under F E D . R . C I V . P . 12(b)(6). Furthermore,

even assuming that Castle Springs had promised Donovan a full

year’s employment, he has produced no evidence, other than his

own belief, that Castle Springs did not intend to employ him for

9 In Hydraform Products, the New Hampshire Supreme Court explained:

While a promise is not a statement of fact and hence cannot, as such, give rise to an action for misrepresentation, a promise can imply a statement of material fact about the promisor’s intention and capacity to honor the promise. It follows that mere proof of breach of promise, whether or not the promise is a contractual term, will not support an action for misrepresentation.

127 N.ah. at 200.

26 a full year when it promised to do s o . Accordingly, even if he

had stated a claim on which relief could be granted, that claim

could not survive summary judgment. See Mesnick v . Gen. Elec.

Co.,

(1st Cir. 1991) (explaining that

“[g]enuine issues of material fact are not the stuff of an

opposing party’s dreams”).

Donovan does not appear to invoke the second branch of the

implied covenant of good faith doctrine, which concerns the

termination of at-will employment. Under the second branch, “an

employer violates an implied term of a contract for employment

at-will by firing an employee out of malice or bad faith in

retaliation for action taken or refused by the employee in

consonance with public policy.” Centronics,

(citing Cloutier, 121 N.H. at 921-22). Because Donovan comes

nowhere close to identifying any public policy that might be

offended by his termination, the court need say no more about the

second branch.

27 With regard to the third branch, governing the exercise of

discretion in contract performance, the New Hampshire Supreme

Court has developed the following rule:

under an agreement that appears by word or silence to invest one party with a degree of discretion in performance sufficient to deprive another party of a substantial proportion of the agreement’s value, the parties’ intent to be bound by an enforceable contrac raises an implied obligation of good faith to observe reasonable limits in exercising that discretion, consistent with the parties’ purpose or purposes in contracting.

Centronics,

. Adoption of that rule rested in

part on a case decided under New York law, holding that “an

otherwise unregulated right to discharge [is] limited [by the

implied covenant of good faith and fair dealing] so as to

preclude the employer from depriving his employee of contract

consideration to which the employee had already become entitled

by virtue of his own performance.”

(citing Wakefield v .

Northern Telecom, Inc.,

(2d Cir. 1985)). In

Wakefield, “an employer was held to have violated good faith in

firing an employee for the sake of taking advantage of a contract

clause extinguishing the employee’s right to accrued commissions

upon discharge.” Centronics,

(citation omitted).

28 Castle Springs did not breach the implied covenant of good

faith and fair dealing by terminating Donovan less than a year

after he was hired. Donovan neither alleged nor established

facts under which continuing employment (up to one year) could

possibly be characterized as “contract consideration to which

[Donovan] had already become entitled by virtue of his own

performance.” Centronics,

. Furthermore, Donovan

has not created a triable issue of fact by asserting that he is

somehow owed additional compensation, under his at-will

employment agreement, for the long hours he worked during the

tourist season.

According to Donovan, Wiggins told him that his “long hours

. . . during the tourist season . . . would be made up to [him]

in the off season.” To the extent that statement might be

construed as something more than a mere description of Donovan’s

duties, and amounted to an enforceable term of his at-will

employment agreement, the only “contract consideration to which

[Donovan became] entitled by virtue of his own performance,”

Centronics,

(citation omitted), other than his

salary, was the right to have his long hours “made up” to him

29 during the off season. But entitlement to that consideration

necessarily presupposes his employment in the off season.10

While Donovan now argues that his long hours were to have been

“made up” by means of a specific form of compensatory time (i.e.,

one winter season hour off for every tourist season hour worked

over some set number in a given week), he has produced no

evidence to support such a claim. He attributes no such specific

promise to Wiggins or any other representative of Castle Springs,

and, interestingly, while Donovan has produced personal records

he kept of the hours he worked, no comparable records were

maintained by Castle Springs. Donovan does not assert that

Castle Springs directed him to keep records of his own time to

facilitate implementation of the specific compensatory time plan

Donovan claims to have been working under. Thus, Donovan has

produced no admissible evidence from which a reasonable jury

could conclude that he had been promised specific compensatory

time, or that, should his employment be terminated, accrued

10 The court has already explained that Wiggins’ promise that Donovan’s long hours would be “made up” during the off season was insufficient, as a matter of law, to transform Donovan’s employment at will into employment for a fixed term. Thus, that promise posed no obstacle to Donovan’s termination.

30 compensatory time would be paid for at his regular salary rate,

or at some other rate.

Because Donovan has produced no evidence from which a jury

could conclude that he was promised compensatory time or that

Castle Springs even knew how much “compensatory time” he had

“earned,” his termination could not plausibly be deemed a breach

of the implied covenant of good faith and fair dealing, which,

under its third branch, requires the termination at issue to have

been motivated by the employer’s specific intent to deprive the

employee of compensation that he or she had already earned. See

Centronics,

; Wakefield,

. That

i s , without knowledge of the amount of Donovan’s accrued

“compensatory time,” and absent a belief that Donovan was

entitled to set compensatory time in the first place, there is

simply no logical basis for a claim that Castle Springs

terminated Donovan in an attempt to avoid its obligation to

compensate him.

Finally, while Castle Springs has produced evidence

demonstrating that it terminated Donovan because of

31 dissatisfaction with his job performance, Donovan has produced no

evidence, other than his own conjecture, from which a reasonable

jury could conclude that he was terminated for the purpose of

relieving Castle Springs of the obligation to compensate him for

the long hours he worked during the tourist season (presumably by

paying him his regular salary while he worked fewer than normal

hours in the off season). Obviously, direct evidence of intent

is difficult to obtain, but Donovan has not even pointed to

circumstantial evidence, such as evidence that he was replaced in

the off season by a part-time hourly employee rather than another

full-time salaried maintenance supervisor.

In summary, Donovan has failed to create a triable issue of

fact with respect to the third branch of the implied covenant of

good faith and fair dealing; he points to no facts from which a

reasonable jury could conclude that Castle Springs terminated him

in order to avoid providing compensatory time he had earned.

Conclusion

For the reasons given above, Castle Springs’ motion for

partial summary judgment (document n o . 10) is granted in part and

32 denied in part. Specifically, Castle Springs is entitled to

summary judgment on Counts I I I , IV, and V . On the other hand,

Donovan is entitled to proceed to trial on his FLSA claim (Count

II). However, as the court has explained, it may be that even if

Donovan prevails on his FLSA claim, he would be entitled to

recover approximately $1,800 rather than the $10,371.58 he seeks

(assuming he is found to be a non-exempt employee paid a salary

for fluctuating work weeks).

SO ORDERED.

Steven J. McAuliffe United States District Judge

December 2 0 , 2002

cc: Leslie H . Johnson, Esq. Mark T . Broth, Esq.

33