Gannon v. Continental Insurance Co.

A-1692-96T3 (N.J. Super. App. Div. 1998) (Unpublished)
  • Opinion Date: January 5, 1998

EMPLOYER-EMPLOYEE; SECURITIES; DISCRIMINATION—A terminated employee was unable to fashion a securities fraud claim against his employer with respect to shares acquired during his employment.

A Vice-President of an insurance company was terminated and sued his former employer for damages arising both from the termination, and from a decline in the value of his shares of the company. The claims were dismissed on motion for summary judgment. On appeal, the Vice-President argued that his complaint stated a prima facie case under both the New Jersey Law Against Discrimination and the relevant securities laws.

The Vice-President alleged he suffered personal damage because of a decline in the value of his shares of the company, and that this decline was the result of an annual report that failed to definitively establish reserves for environmental claims. In affirming the dismissal, the Appellate Division found that his shares were acquired prior to this annual report, and held that the securities claim failed to set forth the elements of fraud, an action maintainable by the Vice-President personally. Rather, the allegations supported a claim of waste or breach of fiduciary duty, which are derivative actions and could not be maintained by the Vice-President in his individual capacity. Even if such a charge was maintainable in a personal capacity, the Court found that: (1) the information left out of the annual report was not enough to support a claim of loss, and (2) the Vice-President was a high ranking executive with substantial knowledge of the financial situation of the company. Additionally, an insurance company’s establishment and maintenance of reserves is an area so highly regulated that any information that may have been left out of the annual report was easily verifiable by other means. The Court stated that the securities claim was really an attempt by the Vice-President to reword his prior federal statutory claim, which had been dismissed by the United States District Court for the District of New Jersey, into a state common law framework.

The Vice-President also sued for retaliation and discrimination under the Law Against Discrimination, claiming he had been dismissed because he protested the alleged sexual harassment of a female executive by the company president. The Court found, however, that he had no objective reason to believe that any sexual relationship which may have existed between the executives was other than voluntary and consensual. It also stated that the Vice-President’s subjective opinions about the reason for his dismissal and whether there was sexual harassment were not enough to support a claim of discrimination.