By Elaine McArdle
One of the world's largest accounting firms agreed to pay $1.8 million to settle a suit after reneging on signing bonuses that were promised while recruiting college grads for high-paying jobs that never materialized.
Although the class-action lawsuit was weakened by the New York "employment at will" law, plaintiffs' attorney Woodley Osborne mounted a case based on oral promises that he believed were strong enough to get the case to trial. Once before a jury, Osborne, who practices in Washington, D.C., was confident the company's behavior would be repugnant enough to jurors that he would prevail.
The Lead Plaintiff
When Megan Secrest graduated from Pennsylvania State University in May 2001, she packed her bags and moved to Virginia to begin a $52,000 a year job as a consultant with PricewaterhouseCoopers, the international accounting firm.
Secrest, like scores of other college kids on the East Coast, had been recruited by the company during her senior year. She was attracted by the salary, the company's reputation, outstanding benefits, and the promise of a $3,000 signing bonus and a second bonus of $4,000. In accepting the offer, Secrest turned down other job offers and signed an employment contract with Pricewaterhouse that promised a starting date of July 2, 2001.
But the job never materialized.
When Secrest learned that scores of other recent graduates had the same experience with Pricewaterhouse, she resolved to find a lawyer who would take their case. But more than 10 law firms either turned her down outright or ignored her.
Secrest finally found Osborne, who filed a class action on behalf of more than 250 plaintiffs, despite some serious legal impediments. Less than a year later, the case settled for $1.8 million.
Pricewaterhouse denies any wrongdoing.
"We settled this case to avoid the cost and burdens of protracted litigation. We denied and continue to deny that the allegations had any merit," said Steven Silber, a spokesman for PricewaterhouseCoopers. "It's not uncommon in our litigious times that students or anyone else would see fit to sue us. We don't believe the lawsuit had any merit."
There certainly were numerous hurdles facing the plaintiffs. Primary among them was the employment contract the students signed, which Pricewaterhouse claimed was governed by New York law. As New York is an "at-will" employment state, it seemed the contract was unenforceable and the graduates weren't entitled to damages even under a claim of detrimental reliance or promissory estoppel.
But Osborne, a labor and employment lawyer, was troubled by what he viewed as a big corporation taking advantage of young kids. His advice to other lawyers?
"If the equities are really strong, don't give up on the law," he said. He managed to find what he is certain was a strong argument that would have gotten the case before a jury - and once there, he's certain he would have won.
But even Osborne wasn't interested in the case at first.
"I still remember Megan coming into the office and saying to her, 'Why don't you talk to my associate?'" he recalled.
But as he heard the facts, he got angry. It wasn't that the jobs failed to appear; after all, the economy had soured between the fall of 2000 and the following summer. What bothered him was that Pricewaterhouse strung the kids along and, unlike other companies, never gave them any compensation for their losses such as moving costs, he said.
"All of a sudden I thought, 'This is a nasty case.' It really pissed me off," he said.
He was particularly incensed because the students believed the contract guaranteed them jobs - and so they turned down other work - when Pricewaterhouse was fully aware that New York law wouldn't protect the jobs at all.
After extensive research, Osborne settled on a theory he believed would keep the case alive. He was certain he could separate the written employment contract - which probably was not enforceable - from the earlier, oral promises of bonuses made by the recruiters, which he believed would be enforceable. That theory would at least let the case survive summary judgment, he believed.
"I always thought if we had to try the case, we could win, and obviously the equities were on our side," he said. "We'd certainly win before a jury, because it was such an obnoxious thing."
The case was ripe for class-action status. Secrest came armed with a list of more than 250 other kids who'd experienced the same problem, a list the plaintiff had compiled from various e-mails Pricewaterhouse sent to the group over the previous year.
"She's very resourceful, a great kid," said Osborne.
With their e-mail addresses in hand, it was easy to quickly contact almost all the members of the group, who almost uniformly agreed to join the lawsuit.
Breaking The Oral Promise
The fact pattern among the class members was almost identical.
In the fall of 2000, Pricewaterhouse was looking for entry-level employees for its consulting services on the East Coast. It sent recruiters to talk to seniors at a number of colleges and universities, including Cornell, New York University, the University of Pennsylvania, Pennsylvania State University, Villanova, Davidson College, Georgia Institute of Technology, the University of Virginia, the College of William and Mary, Georgia Institute of Technology, North Carolina State University, Duke, and the University of Georgia. Recruiters offered a bonus of $3,000 for moving expenses, and then, later, offered a $4,000 bonus for students who quickly accepted the job offer.
Once a student accepted the offer, he or she received a written contract to sign, stating a starting salary - typically around $52,000 - at a particular location, but no starting date. In return, the students promised not to accept employment anywhere else.
Around February 2001, students were given starting dates for employment, but a few months later, were informed the starting dates would be delayed. However, the recruiters orally assured the students their jobs were secure.
Most of the students turned down other specific job offers, and upon graduation, many, including Secrest, moved to the city where they'd been assigned. When the starting dates again were delayed, many gave up and took jobs elsewhere. The bonuses were never paid, and they weren't reimbursed for moving expenses.
Osborne enlisted the help of two other seasoned trial lawyers, H. Laddie Montague, a Philadelphia lawyer with extensive class-action experience, and David Cashdan of Washington, D.C. In September 2002, the trio filed a class-action suit in Superior Court in Washington, D.C., claiming breach of contract, promissory estoppel, breach of the implied covenant of good faith and fair dealing, quantum meruit, fraud, and negligent misrepresentation. The plaintiffs did not seek to be reinstated to their jobs at Pricewaterhouse, but rather sought damages in the amount of the promised bonuses.
It was only after the lawsuit was filed that Pricewaterhouse formally cancelled the job offers, Osborne said.
Fast Settlement
From the point of filing suit, the case moved very quickly. Within a month or so, the defendant began talking settlement, Osborne recalled.
Defense attorney Steven L. Sheinfeld of New York's Winston & Strawn did not return phone calls from Lawyers Weekly USA.
The plaintiffs' lawyers believe Pricewaterhouse was willing to negotiate a resolution because it was concerned about the public-relations fallout from the lawsuit, especially in the wake of two recent revelations. First, in the summer of 2002, Pricewaterhouse sold its consulting business to IBM for a small fortune.
"How crappy for them to be sitting on several million dollars and not to pay these kids," said Osborne. "That's not a legal issue, that's public relations."
Second, the plaintiffs learned the same employment promises had been made to students on the West Coast, but Pricewaterhouse paid those bonuses even though the jobs disappeared.
"They paid all of those, so we came on a pretty high ground, and that probably influenced them substantially," said Cashdan.
Also, many parents as well as administrators from some of the colleges had written to complain to Pricewaterhouse, Cashdan said. While many sympathized that the economy had taken a downturn, they did not agree with what they saw as the company stringing the students along.
With Secrest and a few others representing the class members, the plaintiffs' group met several times with Pricewaterhouse representatives.
In April 2003, the parties agreed to a settlement of $1.8 million, an amount equal to the promised bonuses plus about $1,000 for each class member. After legal fees of 20 percent to the plaintiffs' lawyers, each class member will receive 90 percent of the amount he or she was promised in bonuses. The final agreement was signed and approved on Aug. 1.
"I'm thrilled," said Osborne. "I think it's one of those relatively rare experiences in law practice where you do the right thing and it works out about right."
Plaintiffs' Attorneys: Woodley Osborne of Osborne & Deutsch in Washington, D.C.; David Cashdan of Cashdan, Kane & Seltzer, in Washington, D.C.; H. Laddie Montague of Berger & Montague in Philadelphia.
Defense Attorney: Stephen L. Sheinfeld of Winston & Strawn in New York, N.Y.
The Case: Secrest v. PricewaterhouseCoopers; Superior Court of the District of Columbia; Judge Melvin Wright.
Reprinted with permission from Lawyers Weekly USA, the national newspaper for small-firm lawyers. You can get a free trial subscription to Lawyers Weekly USA by visiting www.lawyersweeklyusa.com or calling 800-451-9998.
© 2003 Lawyers Weekly Inc., All Rights Reserved.
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October 27, 2003
