In Lesson on Error Preservation, Court Affirms Jury’s Rejection of Employee’s Claims

| Jason M. Knott

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Our state and federal courts generally have two levels of courts: trial and appellate courts.  The archetypal trial court is the knock-down, drag-out venue of TV drama, where judges issue quick rulings and juries weigh the testimony and documents to make their mysterious decisions.  Appellate courts are much more monastic (and thus, much less entertaining for TV’s purposes).  There, learned panels of esteemed judges review cold court records and legal tomes, reviewing the parties’ arguments and applying the law in order to reach their thoughtful and detailed decisions.

Appellate courts may not even entertain every argument that a party seeks to make.  For the most part, to argue in the appellate court that the trial court made a mistake, a litigant has to “preserve” the error below – meaning that the litigant must give the trial court the opportunity to rule on the issue in the first instance.  The failure to preserve error has tripped up many an appeal.

The case of Jeff Gennarelli, the former regional vice president of American Bank and Trust Company (ABT), gives us yet another example of this stumbling block. 

In June 2010, Gennarelli quit his job with ABT, joining a competitor, Bridgeview Bank.  ABT sued him immediately, claiming that he had breached restrictive covenants in his employment agreement, breached confidentiality and fiduciary duties, and engaged in civil conspiracy.  Genarelli countersued, alleging that ABT breached his employment agreement by failing to pay him required commissions and committed fraud by “skimming” funds from revenue used to calculate those commissions.  After a short trial, an Iowa jury found in favor of ABT on its claims and returned a verdict for the company on Gennarelli’s breach of contract counterclaim.  The court also entered a directed verdict on his fraud counterclaim – meaning that it decided at trial that there wasn’t enough evidence to even send that claim to the jury for decision.

Gennarelli appealed the jury’s decision on his counterclaims.  (Oddly, he does not appear to have appealed the jury’s verdict on the company’s claims.)  After review, the Iowa appellate court rejected all of his arguments.  American Bank & Trust Co., N.A. v. Leyden, 2013 WL 6405161 (Iowa Ct. App. Dec. 5, 2013). 

Where did Gennarelli’s appeal go off the rails?  For the most part, it was in the trial court – on grounds of error preservation.  As to his counterclaim for breach of contract, Gennarelli argued on appeal that the evidence was insufficient to support any other finding than a verdict in his favor on his breach of contract counterclaim, pointing to the monthly net revenue compensation that was due him under his agreement.  However, in the trial court, his counsel had moved for a directed verdict as to revenue generated on a different metric – personal production.  Therefore, Gennarelli could only challenge that evidence on appeal, and couldn’t address the monthly net revenue metric.  As to the personal production metric, the court found evidence to support the jury’s finding.

Gennarelli also argued that ABT’s corporate designees impermissibly were allowed to testify at trial about their knowledge of his employment agreement, when they said in their depositions that they had no knowledge of the agreement.  He contended that at minimum, the court should have instructed the jury on this issue.  But Gennarelli’s counsel didn’t ask the trial judge to strike or disallow this inconsistent testimony.  In fact, when the judge said that Iowa law didn’t allow her to strike the testimony, counsel replied: “I’m not asking for that.”  And although counsel mentioned needing an “accurate instruction,” counsel never submitted one or objected to a lack of the instruction on the testimony.  Therefore, because Gennarelli didn’t preserve error, the court wouldn’t consider his request for a new trial based on the inconsistent testimony.

The outcome of Gennarelli’s appeal shows yet again that it’s important for trial counsel to make the necessary objections and ask for rulings in the trial court in order to have their arguments considered on appeal.  Absent these actions, the appellate court typically can still review for “plain error” – but this standard is much more difficult to meet, in part because appellate courts don’t like to second-guess trial courts when the trial courts haven’t been given the opportunity to get it right.  With all of the drama that trial judges face on a daily basis, even the typically demanding appellate courts don’t expect them to be perfect.