Full opinion text
MEMORANDUM OPINION CAMPOS, District Judge. THIS CASE was heard by the Court sitting with a jury during the period from March 24, 1980, to June 26, 1980; the jury returned special verdicts on June 27, 1980, finding for Plaintiff on all five claimed breaches of contract and for Defendants on the fraud claim. My independent findings and conclusions are consistent with the jury’s verdicts and are more particularly set forth below. Based on these, I will order that Plaintiff, if he elects to have it so after the accounting, may have rescission of the transaction consummated by the parties in February of 1976. An accounting also will be ordered. Rescission shall be on terms set after the accounting. The reason for extending Plaintiff the option to rescind or not to rescind after the accounting will be explained subsequently. Plaintiff is Robert M. McKinney (“McKinney”), a citizen of the State of Virginia. He filed suit on September 1, 1978, against Gannett Co., Inc. (“Gannett”), a Delaware corporation, with its principal place of business in Rochester, New York, and against The New Mexican, Inc. (“The New Mexican”), a New Mexico corporation. Jurisdiction is based on diversity. In his First Amended Complaint, McKinney sought rescission of the contract by which he had conveyed his ownership of The New Mexican to Gannett plus an accounting and $5 million incidental and consequential damages. He also sought “legal damages”, or actual and compensatory damages, in the amount of $10 million against both Gannett and The New Mexican. Finally, McKinney prayed for exemplary or punitive damages in the amount of $10 million. As a basis for these remedies, McKinney alleged eleven causes of action against Gannett and The New Mexican: breach of contract, federal securities fraud, fraud and deceit, constructive fraud, negligent misrepresentation, meeting of the minds, inducing breach of contract, interference with prospective advantage, conspiracy, unjust enrichment and breach of duty of good faith. By my rulings on pre-trial motions and my rulings during the trial, I dismissed all but the breach of contract claim and the claim of fraud and deceit. Gannett answered, denying any wrongdoing and asserting eight affirmative defenses. The New Mexican answered, also denying any wrongdoing and asserting 26 affirmative defenses. At the trial, I submitted only two affirmative defenses for consideration by the jury: waiver, and legal excuse for the alleged breaches of contract. The New Mexican, by way of counterclaim, sought judgment against McKinney for $100,000 compensatory damages and $1 million punitive damages for his alleged wrongful acts and breaches of contract. After hearing all testimony, I dismissed The New Mexican’s counterclaim. A jury was demanded by McKinney and by The New Mexican. Because of the estimated length of trial, five weeks, a jury consisting of six regular and four alternate jurors was empaneled. STATEMENT OF THE CASE For many years prior to February 27, 1976, McKinney owned, either directly or through his personal holding company (El Nuevo Mexicano, Inc.), all of the stock of The New Mexican, which publishes The New Mexican, the only daily newspaper in Santa Fe, New Mexico. He held the highest position of authority at the newspaper, that of publisher. McKinney held many other positions with other corporations and government agencies, and frequently was away from Santa Fe. He maintained an apartment in New York City as well as a residence in New Mexico. To manage the day-to-day affairs of the newspaper, McKinney employed a general manager. Reporting to the general manager were the department heads, to whom the departmental staff were directly responsible. Gannett is a large newspaper group or chain which owns over 80 newspapers as well as several radio and television stations. In 1975 McKinney negotiated with Gannett for the transfer of all the shares of common stock of The New Mexican to Gannett in return for 300,000 shares of Gannett common stock. These negotiations culminated in an “Agreement and Plan of Reorganization” dated as of December 18, 1975, which agreement was to be supplemented and closed at a later time. Signatories to the agreement are Gannett on the one hand and McKinney, El Nuevo Mexicano, and The New Mexican on the other. That agreement was closed on February 27, 1976. During the interim, several issues had to be resolved and several documents prepared or finalized. Prior to the closing, McKinney and The New Mexican had agreed to the terms of an “Employment Agreement.” These are contained in Plaintiff’s Exhibit 505, attached hereto. Under the Employment Agreement, McKinney retained certain rights and responsibilities at the newspaper for a term of 10 years and certain others for a term of 5 years. The transactions between Gannett and McKinney of February 1976 included the acquisition by Gannett of The Taos News, a newspaper published at Taos, New Mexico. The reasons for this acquisition and the general terms thereof are treated elsewhere in this opinion. (See pp. 18-19) This lawsuit concerns the promises contained in the Employment Agreement. McKinney claims Gannett and The New Mexican breached that contract on several occasions. He also claims that Gannett defrauded him by entering into the Agreement and Plan of Reorganization with the intention not to fulfill its contractual obligations and undertakings contemplated by that Agreement and that The New Mexican participated in that fraud later on down the line. Because Gannett was not a party to the Employment Agreement, McKinney seeks to hold it liable for breach of contract by several theories: that The New Mexican was the alter-ego of Gannett, that Gannett induced The New Mexican to commit breaches, and that Gannett and The New Mexican conspired to breach McKinney’s contract. The New Mexican by its counterclaim avers that McKinney breached the Employment Agreement on several occasions and committed other wrongful acts, resulting in damage to The New Mexican. DISCOVERY MATTERS Shortly after McKinney filed this lawsuit, the Board of Directors of The New Mexican met and effectively removed McKinney’s authority at The New Mexican pending this litigation. During pre-trial discovery, Gannett took the position that information about any events which occurred after McKinney’s suspension was not discoverable. McKinney applied to the magistrate for relief, contending that under the liberal rules of discovery such information should be compelled. After an adverse ruling by the magistrate, McKinney appealed to this Court in a Motion to Reconsider the magistrate’s order. He argued that even after removal of his authority at The New Mexican, subsequent acts taken by Gannett and The New Mexican could constitute separate breaches of his contract. He also argued that information about events occurring after his removal was relevant to the issue of punitive damages and to the issue of fraud. Under Rule 26, Federal Rules of Civil Procedure, there is no bar against discovery of information about events occurring after the filing of a complaint. It is my view that while events occurring after McKinney’s authority was removed might not constitute separate breaches of the Employment Agreement, such events may shed light on prior events. Thus, the information is discoverable because it may be admissible at trial or lead to admissible evidence. The order of the magistrate denying discovery of information subsequent to the filing of the complaint was, therefore, set aside and the parties were directed to proceed under the rules of discovery without any arbitrary cut-off dates. Another serious discovery matter came up late in the trial. After McKinney had rested, Gannett called as its next witness Larry Miller, Gannett’s controller and vice president in charge of accounting. Through Miller, Gannett sought to introduce into evidence certain internal Gannett financial statements and comparisons of The New Mexican with other newspapers, Defendants’ Exhibits GK-31, 33-36 and GX-45, 46. McKinney objected on the basis that these documents had not been produced during discovery despite requests for production covering this type of document. I ruled that Miller could not testify about the documents until a complete set was provided to McKinney, and scheduled a hearing the next day to determine whether these documents were in fact called for by McKinney’s requests. Gannett attorneys then attempted to withdraw their offer of the exhibits and suppress them from being seen by McKinney’s attorneys on the ground that they contained “sensitive financial data”. McKinney pressed for discovery, and convinced me that the documents had clearly been called for in requests for production. Gannett argued that the burden was on McKinney to request specific documents if they were not produced. This is not the intent of the rules of discovery. A party seeking discovery of documents is often unable to request them specifically, and a general request is all that is required. Gannett attorneys then asserted that they were not produced because the attorneys had never seen the documents. However, it turned out that at least one of Gannett’s attorneys had actually discussed these particular documents with Miller in reference to McKinney’s requests. The discussion on non-production then shifted to McKinney’s former general manager, Stephen Watkins, who had received some of these documents on a monthly basis. Gannett reasoned that since Watkins had seen some of the documents, he should have had McKinney request the specific documents by name, despite the existence of a general request. This type of pre-trial denial of discovery is abhorrent in our current system of civil procedure. Sensitive documents may not be suppressed from discovery. Rather, appropriate orders and stipulations can protect such documents from reaching the public. In fact, a confidentiality stipulation had been agreed to in this case quite early on in the proceedings, and an order to that effect signed by the Court. I ordered Gannett to produce all these documents as soon as possible. I further ordered Miller to get together with McKinney’s attorneys to discuss other relevant documents which may not have been produced because they were sensitive or not asked for specifically, and to produce such documents taking a liberal view of the requests for production by McKinney. I did not impose sanctions sua sponte, nor did McKinney’s attorneys move for sanctions, but it was felt that this type of cat-and-mouse game played by Gannett could have justified sanctions. McKinney’s attorneys were ordered not only to keep these documents confidential pursuant to the stipulated confidentiality order, but were further ordered not to show them to any non-party not connected with their law office until further order of the Court, not even to their newspaper expert, John Malone. BIFURCATED TRIAL Gannett moved for a bifurcated trial. McKinney agreed, and a pre-trial order was entered to this effect. The issues of liability and damages for fraud and breach of contract were to be tried first, to a jury. The Court would then, if necessary, decide whether rescission would be ordered. If rescission were appropriate, the second phase of the trial would address any accompanying accounting for profits between the parties, as well as damages ancillary to rescission and punitive damages. RIGHT TO TRIAL BY JURY Phase 1. Since McKinney initially sought “legal damages” for fraud and breach of contract, there was no question about his right to jury trial. Similarly, The New Mexican asserted a counterclaim in which it sought legal damages. Thus, at least for the first phase of the trial, the parties’ right to a jury trial was undisputed. At the close of his case, however, McKinney waived his claim for legal damages and made a firm election for the equitable remedy of rescission. This posed a dilemma for the Court. It was clear that having proved no damages other than nominal damages which could be submitted to a jury, and having opted for rescission or nothing, McKinney was no longer entitled to a jury trial. In fact, McKinney had earlier in the trial waived any right to a jury he might have had. Gannett and The New Mexican continued to demand a jury throughout the trial. The New Mexican continued to assert its right to jury on the counterclaim. The rule is that where there is a compulsory counterclaim which is legal, then the common factual issues must be tried to a jury even though the complaint seeks only equitable relief. Beacon Theatres v. Westover, 359 U.S. 500, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959); 5 Moore’s Federal Practice Para. 38.14 (2d ed. 1978). The counterclaim in this case was undoubtedly compulsory under Rule 13(a), Federal Rules of Civil Procedure. It alleged, among other things, breaches by McKinney of the Employment Agreement, just as McKinney’s complaint alleged breaches of the Employment Agreement by Gannett and The New Mexican. Thus, it arose out of the transaction or occurrence that is the subject matter of the complaint. It was, therefore, determined that Gannett and The New Mexican still enjoyed a right to the jury, at least on the issues involved in the counterclaim. . At the close of all the testimony, I dismissed The New Mexican’s counterclaim, for reasons discussed below. Thus, the Court was left with a complaint seeking only equitable relief. Of course, McKinney had argued all along that he was entitled to some money damages ancillary to rescission as well as an accounting for income and punitive damages. But those items had been reserved for the second phase of the trial, and it has now been determined there is no right to a jury on that phase either (Phase 2 will be discussed in a separate memorandum). All that remained to be decided in Phase 1 was whether Gannett and The New Mexican were liable for five claimed breaches of the Employment Agreement and for fraud, and if so, whether rescission or some other remedy were appropriate. Thus the question reappeared as to whether there was a right to have any of these issues determined by a jury. It is my opinion that under these circumstances there was no right to a jury on Phase 1 of the trial. Rather than dismiss the jury at the close of all the testimony (some 57 trial days) and risk reversal on this point, it was decided to allow the jury to pass on whether there had been breaches of contract and fraud. This was done by means of six special verdicts, one for each of five claimed breaches and one for fraud. It was decided to treat these jury verdicts as advisory only, pursuant to Rule 39(c), Federal Rules of Civil Procedure. I would then make independent findings of fact, conclusions of law, and order the appropriate remedy, if any. This procedure has been suggested by Professor Moore in 5 Moore’s Federal Practice Para. 38.18 (2d ed. 1978). See, Hargrove v. American Cent. Ins. Co., 125 F.2d 225 (10th Cir.1942). It seems a wise procedure, designed to preclude the necessity of a remand for a new trial in the event of trial court error on the issue of right to a jury. The Court has opted for this cautionary procedure because of the uncertainty on the issue of the right to trial by jury. If McKinney had prayed only for rescission from the beginning, and there had been no counterclaim, the Court may not have empanelled a jury at all. But McKinney’s waiver of legal damages came late in the trial, after the Court had made several rulings and after the parties had had an opportunity to view the jury for several weeks. Possibly, it could be deemed an abuse of the system to “test the waters” in this way before dropping one’s legal claim, thus, depriving the other party of its right to a jury trial. SUMMARY JUDGMENT There were numerous pre-trial motions filed in this case. Among them was a Motion for Partial Summary Judgment filed by McKinney on January 31, 1980, in which McKinney argued that there was no material question of fact in dispute and that he was entitled to judgment as a matter of law with respect to four specific claimed breaches of the Employment Agreement by Gannett and The New Mexican. By letter of March 18, 1980, I informed counsel I would find and conclude that there remained genuine issues of material fact with respect to three of the alleged breaches of contract. But with respect to one of the claimed breaches, there was a clear breach of the Employment Agreement, and none of the affirmative defenses of either Gannett or The New Mexican was sufficient to raise a question of fact in regard to that breach. The clear breach concerned political endorsements for the New Mexico partisan primary elections in early June 1978. On June 4, 1978, The New Mexican published an editorial endorsing Bruce King in the Democratic primary and Joe Skeen in the Republican primary, but criticizing King for not addressing the issues. The critical portion of the editorial read: We admit disappointment with King’s performance in the primary. He has not met his campaign opponent head-on, has not addressed any of the campaign issues and prefers to stress his past record rather than raise any new issues of his own. Considering his record and his achievements in office, he could be much more forceful in addressing the state’s problems for the thousands of Democratic voters who have moved into the state since 1970 and do not know him. He will have to do this before the general election. (Plaintiff’s Exhibit 225.) On April 13, 1978, McKinney had met in Santa Fe with Robert Storey (the editorial page editor), Barclay Jameson (the managing editor), and N. Walter Ryals (the general manager). At that time McKinney let it be known that he wished to endorse Bruce King in the upcoming election. Later in April, Storey and McKinney had further discussions about the governor’s race. Storey said that the candidates were not addressing the issues of right to work laws, state funding of abortions, and the Waste Isolation Pilot Project (WIPP). McKinney replied that these were really nonissues, and that it was probably better if King was not specific on them. In response to a McKinney instruction, Storey and Jameson prepared a draft editorial. The draft was critical of King for not addressing the issues during the campaign. Storey read this draft to McKinney on May 22, 1978, over the telephone, as McKinney was in New York City preparing to leave for Europe. McKinney directed Storey to delete the criticism. Storey rewrote the editorial with the criticism toned down and read it to McKinney on May 23, 1978. Again McKinney directed Storey to delete the criticism of King. After discussion among Storey, Jameson and Ryals, it was decided to publish the editorial as last written, including the language above quoted criticizing King, which language McKinney had clearly ordered be deleted. The next day Storey informed McKinney that the editorial would not be changed as McKinney had directed. McKinney was referred by Storey to Ryals who reiterated that the editorial would not be changed and suggested to McKinney that local people should decide on or have input on local political endorsements, consistent with the editorial policy of Gannett and other newspapers throughout the country. McKinney claims that this failure to follow his instructions concerning the endorsement editorial is a breach of the Employment Agreement. He points to Paragraph 3B, which reads: Subject only to such news and editorial department budget limitations as may be established by the Publisher of such publications and the Board of Directors, as Editor-in-Chief, the Employee (referring to McKinney) shall be in complete charge of news and editorial policies of all publications presently published by the Company. He shall direct, supervise and oversee all news and editorial operations of such publications with complete authority over all news and editorial employees, subject only to such news and editorial department budgeting limitations as may be established by the Board of Directors of the Company and the Publisher of such publications____ Elsewhere in the Employment Agreement it is stated that McKinney will hold the position of Editor-in-Chief for a term of ten years from February 27, 1976, unless he becomes incapacitated. Because that term had not expired and because McKinney was not incapacitated, Paragraph 3B was in force in May and June 1978 when the controversy about the editorial arose and came to a head. I am of the opinion that the meaning of this provision of the Employment Agreement is clear and unambiguous. The interpretation of an unambiguous contract is a question of law for the court. Southwest Motel Brokers, Inc. v. Alamo Hotels, Inc., 72 N.M. 227, 382 P.2d 707 (1963); Stewart v. Brock, 60 N.M. 216, 290 P.2d 682 (1955). The foregoing facts are uncontroverted, thus, summary judgment is an appropriate approach to this issue. The only limitations on McKinney’s otherwise absolute editorial authority at The New Mexican are budgetary. It is inconceivable that budgetary limitations could affect McKinney’s right to decide the wording and tone of an endorsement editorial, but I need not even reach that question. From the record presented on motion for summary judgment, it is clear that no news or editorial department budgetary limitations had been imposed by the Board of Directors of The New Mexican. Thus, there were no valid limitations on McKinney’s editorial control, and the refusal to carry out his directives regarding the King editorial was wrongful and constituted a deliberate breach of the Employment Agreement. The New Mexican filed a Motion for Reconsideration of this decision in open court on March 24, 1980, which motion I denied. No new facts were brought to my attention, and the arguments presented nothing new. At trial, I announced my decision on that breach to the jury. Gannett and The New Mexican had argued long and hard that I should put off disclosing this to the jury, and ultimately that it should only be disclosed during instructions at the close of the case. I put off disclosure as long as possible but it became necessary at some point to explain this to the jury. The jury was to decide the issue of damages, and in order for them to have all relevant facts on that issue they needed to be informed of the breach involving the June 4 editorial. I thought the jury would be confused if not told a breach had been found when the editorial was discussed during the trial. The danger of prejudice to Gannett and The New Mexican was outweighed by these considerations. PAROL EVIDENCE On the first day of presentation of testimony, March 26, 1980, I allowed parol evidence about pre-merger negotiations on the theory that it was admissible on the fraud claim, and because the oral pre-contract negotiations did not contradict the terms of the written agreement. On that day, McKinney testified extensively about what had been said in pre-contract negotiations, over objection by Gannett and The New Mexican. I did give a limiting instruction based on the above rationale. Upon reconsideration of New Mexico case law on parol evidence, I decided that the theory on admissibility of parol evidence needed to be refined and cleared up for the jury. The specie of fraud upon which parol evidence is admissible is that Gannett entered into the merger intending not to perform the promises contained in the written documents, specifically the Employment Agreement. This type of fraud is recognized as actionable in New Mexico. Telman v. Galles, 41 N.M. 56, 63 P.2d 1049 (1936); Anderson v. Reed, 20 N.M. 202, 148 P. 502 (1915). Previously, McKinney had argued that another specie of fraud, namely fraud in the inducement, could be made out. But the promises alleged by McKinney as inducement for McKinney to enter into the merger are the very promises contained in the Employment Agreement. Thus, extrinsic or parol evidence is not admissible to prove these promises, either because the oral promises would contradict the written promises, or because the oral promises relate to the subject of the written documents. Bell v. Lammon, 51 N.M. 113, 179 P.2d 757 (1947); Alford v. Rowell, 44 N.M. 392, 103 P.2d 119 (1940). A motion was made on March 27,1980, in chambers by counsel for Gannett to limit the fraud claim to the Employment Agreement and Gannett’s alleged intent not to carry out the promises contained in it. This motion was resisted at the time by counsel for McKinney because I had not yet made a ruling on the separability of the merger documents. McKinney sought rescission of the entire merger, not just of the Employment Agreement, and so needed to assert that Gannett fraudulently induced McKinney to enter into the merger by making promises about his continuing employment at The New Mexican. I ruled that fraud in the inducement would not be dismissed, but that the parol evidence rule might preclude McKinney from proving that type of fraud, because all the alleged misrepresentations in Para. 2 of the Amended Complaint were merged in the Employment Agreement, and because Gannett did not sign the Employment Agreement. As things eventually turned out, I ruled the Employment Agreement, Plaintiffs Exhibit 505, and the Agreement and Plan of Reorganization, Plaintiffs Exhibit 501, were inseparable, so that the specie of fraud on which parol evidence could be heard was the only one which survived. The issue of the separability of the two documents, the Employment Agreement and the Agreement and Plan of Reorganization, Plaintiffs Exhibits 505 and 501, was the other issue on which I allowed parol evidence. As mentioned above, Gannett was not a party to the Employment Agreement. Rather, the Employment Agreement was between The New Mexican on the one hand and McKinney on the other. But the entering into the Employment Agreement was a condition to the Agreement and Plan of Reorganization, Article VI(h), Plaintiffs Exhibit 501 at 36. Also, a letter from Gannett’s counsel, Douglas H. McCorkindale, states that the Board of Directors of Gannett had duly approved the transactions. I concluded that the issue of the separability of the two agreements, such that breach of the Employment Agreement or fraud by Gannett with respect to the Employment Agreement would constitute breach of the entire merger or fraud with respect to the entire merger, was not dealt with unambiguously on the face of the documents. For this reason, the separability of the two documents was a factual issue. In order for the factfinder to ascertain the intent of the parties as to this issue, parol evidence of pre-contract negotiations was admitted. See, Franklin v. American Nat. Ins. Co., 135 F.2d 531, 534 (10th Cir.1943) (not error to admit parol evidence in explanation of contract separability). During the trial I gave a limiting jury instruction on the purposes for which parol evidence could be considered. This instruction was given numerous times, whenever requested by any party, or when objections were made by Gannett and The New Mexican to the admission of the parol evidence. BREACHES OF CONTRACT AND FRAUD I noted previously that the jury, also, failed to find the specie of fraud submitted to it for its advisory verdict. The jury’s advisory action on the fraud issue as well as on the five claimed breaches of contract upon which the jury returned advisory verdicts is congruent with my findings and conclusions. But having said this, the following, also, needs to be said: the failure of the jury to find fraud or the failure of the evidence to convince me that this specie of fraud existed means only that McKinney’s evidence failed to prove that Gannett entered into the Employment Agreement with the intent, at the time of execution, not to honor its terms. Notwithstanding this, the evidence is strikingly clear and convincing that after, but not too long after, the execution of the Employment Agreement, the first of a long series of actions which became the starting point of Gannett’s trail of broken promises was wilfully, deliberately and wrongfully taken by Gannett. My observation of the Gannett men who appeared and testified in court, consideration of their testimony and the exhibits admitted into evidence, and reflection on the testimony of others regarding the conduct which molded the breaches of the Employment Agreement tell me that these are hard-charging, wilful men who, almost without exception, were fully cognizant of the dimensions of Gannett’s obligations and McKinney’s rights under the Employment Agreement. But this awareness notwithstanding, some of them, acting together, struck for themselves and the corporation they represented a deliberate course of conduct which wilfully and wrongfully dishonored Gannett’s obligations and, bit by bit and day by day, shamelessly destroyed the rights bargained to McKinney. Evidence admitted at trial clearly establishes that Gannett, for whatever reasons, desired to sever the relationship between McKinney and The New Mexican. It is my conclusion that Gannett attempted to accomplish this by deliberately and repeatedly breaking the promises made to McKinney as contractual undertakings in the Employment Agreement. The Employment Agreement, Plaintiff’s Exhibit 505, went into effect on February 27, 1976, when the merger was closed. The provisions of the Employment Agreement that were breached are contained in paragraphs 3A and 3B: A. Subject to such overall corporate and departmental budget limitations as may be established by the Board of Directors, as Chief Executive Officer and Publisher, the Employee shall be in complete charge of the business and operations of the Company, and shall be responsible to the Board of Directors. He shall be responsible for the news and editorial policies of all publications subject to his direction and shall direct, supervise and oversee all operations of such publications, with complete authority over all employees. The employees of the Company shall be responsible to the Employee, and any policies established by the Board of Directors of the Company pertaining to employees shall be implemented through the Employee____ B. Subject only to such news and editorial department budget limitations as may be established by the Publisher of such publications and the Board of Directors, as Editor-in-Chief, the Employee shall be in complete charge of news and editorial policies of all publications presently published by the Company. He shall direct, supervise and oversee all news and editorial operations of such publications with complete authority over all news and editorial employees, subject only to such news and editorial department budgeting limitations as may be established by the Board of Directors of the Company and the Publisher of such publications____ The quoted provisions of the Employment Agreement are, in my opinion, clear and unambiguous. They give McKinney, as Editor-in-Chief for 10 years, total control of news and editorial policies of The New Mexican, subject only to budget limitations not here relevant. They give McKinney, as Chief Executive Officer and Publisher for 5 years, complete control of the business and operations of The New Mexican, Inc., subject only to “corporate and departmental budget limitations” not here relevant, except that as Chief Executive Officer and Publisher McKinney was to be “responsible to the Board of Directors.” In both capacities, McKinney had the duty, under Paragraph 3C, to “use his best endeavors to promote the interests of” The New Mexican, although he had complete discretion to decide how much time and effort he would devote to the performance of his duties under the contract, and to decide in what place or places and to what extent he would perform them. In the year 1976, McKinney had essentially no complaints about how the relationship between him and Gannett was working out. In retrospect, however, some incidents gain importance because of their relationship to later events. One such incident was the hiring of Steve Pope as circulation manager at The New Mexican on August 16, 1976. He was hired by The New Mexican’s general manager, Steve Watkins, on the strength of strong recommendations by Gannett and of Pope’s interview with Watkins. Pope was later discharged in the midst of an accounting scandal which is discussed below. Another incident gaining importance through later events was the filing of a unionization petition by newsroom employees with the International Typographical Union (ITU) on August 24, 1976. This set in motion a series of events culminating in the firing of Steve Watkins as general manager in March 1978 and a subsequent newsroom vote to decertify the union. In December 1976, a Gannett meeting was held in San Francisco. At that meeting the pending Speidel merger was announced. Speidel Co. was a relatively small, financially troubled newspaper chain which Gannett had agreed to buy. Many top executives from Speidel were to be kept on at Gannett. Gannett began a regionalization plan in which newspapers within the Gannett group in geographical proximity were grouped together. As a result of this regionalization, The New Mexican was to be a member of Gannett West. At the San Francisco meeting, Steve Watkins was introduced to two Speidel executives, Rollan Melton and Robert Whittington. These two would head Gannett West after the Speidel merger. Melton and Whittington were later used by Gannett to build a file against Watkins to justify his termination and to actually fire him. Gannett was very concerned about the impending unionization of the newsroom at The New Mexican. Gannett labor lawyers were in charge of strategy and negotiations. Part of the strategy was that Watkins would “wear the black hat” and take a very hard line against the union. He accepted this role and, partly because of it, there developed a strong animosity between Watkins and pro-union newsroom employees. On the Gannett corporate jet returning east from the San Francisco meeting, Allen Neuharth, president of Gannett, expressed to Watkins the seriousness of newsroom unionization at The New Mexican and told him that he was to do whatever was necessary to combat the union, even if it meant “stepping over the line.” Watkins understood this to mean that, if necessary, even illegal steps were to be taken. During the pre-unionization strategy and union negotiations, Watkins cooperated fully with Gannett labor lawyers and was in agreement with their policies. In the year 1977, winds of change began blowing at The New Mexican, and signs of problems became more pronounced. On January 12, 1977, the newsroom election went against the company. McKinney and Watkins traveled to Washington to meet with Neuharth and John Quinn, Gannett’s Senior Vice President of News and Information. It was decided a new managing editor would be needed in the newsroom, and Barclay Jameson was named by Gannett. McKinney and Watkins interviewed Jameson. The Employment Agreement was discussed and Jameson assured McKinney he would recognize McKinney’s authority under the contract. Jameson was hired with McKinney’s consent. Gannett and McKinney had different theories about why the newsroom voted for the union. Gannett thought wages under McKinney had been too low for many years and employee discontent just happened to come to a head in January 1977. McKinney thought wages at The New Mexican had been fair, taking into consideration other wages and salaries in the community of Santa Fe. His thinking was that the employees sensed that the merger forecast higher profits to be reaped by the corporate giant and that the employees desired to share in these by way of higher compensation for their services. Jameson was Watkins’ counterpoint in the union negotiation strategy: he wore the “white hat.” His assigned role was that of the nice guy to the newsroom employees. He took sides with personnel in the newsroom and supported them in their demands against the company. He did not participate in the formal negotiations. Gannett’s policy in the negotiations was to avoid a first contract with the union. It did not matter how favorable that contract may have been to the company. In the meantime, wages were frozen in the newsroom and pro-union employees were replaced with ones who would support the company over the union. Animosity towards Watkins grew. Affection for Jame-son increased. The union lost ground. Jameson’s loyalties were to Gannett rather than to McKinney. He developed a strong dislike for Watkins and began to have difficulties working under him. His response was to go to John Quinn of Gannett with his complaints. He did not communicate his problems with Watkins to McKinney at all, nor did Gannett relay that information to McKinney. Memos were introduced at trial which showed that Jame-son surreptitiously was providing prejudicial information about Watkins to Gannett officials at every opportunity. One memo circulated at Gannett West describes Jameson as Quinn’s “spy on the scene,” i.e. Jameson was Gannett’s agent at The New Mexican. In the fall of 1977 Jameson reported to Gannett that Watkins was quite shaken when he saw the Speidel profit margins. The issue of profit margins is a central one in this case. Under McKinney’s ownership, The New Mexican showed a moderate annual profit. After acquisition by Gannett there was a push to boost profits. McKinney and Watkins were in agreement with Gannett that profits should increase. Gannett provided services to its subsidiaries to streamline expenses. Profit plans (a positive way to say budgets) were developed annually for each subsidiary. Periodic reviews were made to evaluate achievement. Each subsidiary was ranked in comparison with the others. When the Speidel merger occurred the newspapers in that chain were added to the comparisons. The former Speidel newspapers showed profits of up to 50%, among the highest in the Gannett group. This worried Watkins. Not only was The New Mexican now being compared with Speidel newspapers, but the former Speidel executives were now the heads of Gannett West, of which The New Mexican became a part. As things progressed, Watkins feared he was being pushed to increase his profit margins too quickly. A precipitous rise in profits, he felt, would damage the quality of the newspaper and lead to its eventual demise. Watkins became defensive towards the profit push. This convinced Gannett officiáis that he was standing in the way of progress. Indeed, at a meeting in Visalia, California in late October 1977, Watkins openly resisted higher Gannett profit plans for The New Mexican. He expressed to Gannett officials that the readers and advertisers would not accept more price increases. His feeling was based on over 10 years’ experience as general manager of The New Mexican and a much longer association with the Santa Fe market. Watkins’ resistance at the Visalia meeting probably sealed his fate at Gannett. Larry Miller, Gannett’s controller, found Watkins “dense, defensive, boorish” at the Visalia meeting. He suggested Gannett fire him. Neuharth blurted out to Melton that “Watkins’ future is that he will be fired.” Neuharth also expressed to Melton that Gannett could not accomplish what needed to be done at Santa Fe “with McKinney and Watkins in the way.” In fact, Neuharth, the top executive at Gannett, testified that he had decided, by as early as late 1976 or early 1977, that Watkins had to be gotten rid of. The events which followed the Visalia meeting carried out the intent of Gannett to get rid of Watkins. Some of those events constituted clear and deliberate breaches of the Employment Agreement. The first clear breach of the Employment Agreement occurred when Gannett fired Watkins on March 28, 1978. Watkins insisted on honoring McKinney’s contract. He contacted McKinney when major changes were proposed in the business and operations of The New Mexican. One of the items in Gannett’s “file” against Watkins was that he acted as though he were responsible to McKinney rather than to Gannett. This, of course, was proper conduct on the part of Watkins. But it was frustrating to Gannett and Watkins thus was viewed as an impediment. The contract provides, in Paragraph 3A: “The employees of the Company shall be responsible to the Employee (McKinney)____” Clearly, it is the Employment Agreement itself which was getting in the way. Gannett hoped to get rid of the man who insisted on honoring that contract. It thereby would rid itself of obnoxious obligations under the contract. Another matter which rankled Gannett corporate headquarters about Watkins and McKinney were events surrounding the reacquisition of The Taos News by McKinney. Taos had been included in the 1976 merger in order to make it a tax-free transaction for McKinney. McKinney wanted to retain ownership of Taos to give to his daughter, Robin McKinney, then 21 years old. Because of legal restrictions, no reacquisition could be made for two years from the date of the merger, and no written option could be given. Gannett gave McKinney an oral option to repurchase Taos. The option was exercisable for six months commencing two years after closing. The New Mexican provided services for The Taos News: typesetting, printing, mailing, advertising layout, etc. A few months before the Taos option matured, Gannett decided to start charging Taos for those services, and to apply the charges retroactively. Watkins did not oppose a reasonable charge for the services rendered by The New Mexican, but the charges proposed by Gannett were far in excess of what The Taos News need pay for such services elsewhere. He resisted what he perceived as exhorbitant charges, and brought the matter to McKinney’s attention. McKinney instructed him not to oppose the charges, no matter how out of line, because his oral option was probably legally unenforceable and he did not want to cause Gannett to renege on that promise. Watkins withdrew his resistance. But he had generated more animosity from Gannett. By contract, McKinney had complete authority over all employees. Gannett speculated that by building a file against Watkins it could justify firing him and keep McKinney from insisting on his right to keep Watkins. The only attempt to apprise McKinney of problems with Watkins was on December 14, 1977. By then, the “file” on Watkins was ready and Gannett had begun looking for a proper successor. The type of person desired by Gannett was someone who, contractual obligations notwithstanding, would acknowledge Gannett as the “master” at The New Mexican. His qualifications must include an ability and willingness to ignore the plainly and precisely defined rights of McKinney and not permit these to stand in the way of orders coming down from Gannett. Watkins’ replacement should be someone who, in dealing with McKinney: 1) would be nice to the “old coot”; 2) would tell him what had been done after it had been done; and 3) would keep his office dusted in case he dropped in. On December 14, simultaneous meetings were held in Chicago and New York. In Chicago, Watkins was read a laundry list of complaints about his performance by Melton and Whittington. Top on the list was that Watkins acted like he was working for McKinney, not Gannett. Another complaint was that Watkins was not making enough progress in the profit margin area. The New Mexican was compared with two other Gannett newspapers, Bellingham and Olympia, which had margins of 36-38%. Watkins was told he didn’t have much future at Gannett unless he could raise his profits to similar levels. Watkins realized at that point he was a “gonner” because he knew it would destroy the newspaper to push it so hard so fast. Under Watkins’ managerial control, paid circulation figures had risen steadily over the years. He felt that squeezing so much profit out of the newspaper so quickly would produce long-term detriment. Loss of quality would lead eventually to drops in circulation, drops in advertising, and strengthening of competition. Of course, under the contract, the Board of Directors of The New Mexican could impose budget limitations on McKinney’s operation of the newspaper. Thus, the Board could have forced Watkins to implement a profit plan in which the margin was 50%. McKinney had agreed that the Board would be controlled by Gannett, and Gannett had agreed to elect McKinney Chairman of the Board. But a board meeting was not called to discuss profits. Instead, Gannett unilaterally fired Watkins. At the same time as Melton and Whittington were reading their laundry list of complaints to Watkins in Chicago, right down to the hour and minute, Paul Miller, the Gannett board chairman and top executive in charge of new acquisitions who had been the principal negotiator for Gannett in the acquisition of The New Mexican, was meeting in New York with McKinney. Miller did not tell McKinney that Watkins’ main problem was that he didn’t know for whom he was working. Instead, he mentioned four minor points, such as untidiness of certain rooms at The New Mexican and Watkins’ not getting around the plant enough. There was discussion of the necessity of Watkins working within the Gannett operating framework. The meeting in New York was “polite” and nothing in its tone or substance notified McKinney that his general manager’s head was on the chopping block. No mention was made of profit margins. The use of simultaneous meetings by Gannett was the method adopted to handle the Watkins affair. Thus, when Gannett fired Watkins on March 28, 1978, the same method was attempted, except that McKinney was not able to be reached at the precise time of the execution. The final decision to fire Watkins was made by the Gannett operating committee on March 21, 1978, at a meeting in Tucson. It was consciously decided to keep information regarding this decision from McKinney until Watkins was about to be fired. A meeting of the Board of Directors of The New Mexican was not called to discuss the matter. Eliminating Watkins was seen by Gannett as necessary not only as a first step in severing the McKinney relationship with The New Mexican. It also dovetailed nicely with the purpose of ridding the newsroom of the union. Over a year had passed since the newsroom had voted for the union. That meant that a decertification election could now be held. Watkins had played his black hat, hardliner role well and had incurred the wrath of the pro-union newsroom employees. Jameson was well established as the good guy, and had developed a genuine dislike for Watkins. He not only gave secret reports to Gannett headquarters about Watkins’ shortcomings, but he also fomented dislike for Watkins at home, in the newsroom. It was theorized correctly by Gannett that ridding The New Mexican of Watkins would also accelerate riddance of the terrible annoyance in the newsroom, the union. This would come by way of a decertification election. Enough pro-union employees had quit or been fired; Gannett had stalled the wage-frozen union long enough; getting rid of the newsroom’s nemesis would provide the final straw to break the union once and for all. Gannett refused to give the union anything in contract negotiations, but it now had the opportunity to placate pro-union employees by handing them Watkins’ head on a platter. It worked. Shortly after Watkins was fired, the newsroom petitioned for a decertification election. The vote was to decertify. And so Gannett did not consult McKinney about firing Watkins. It knew it didn’t have a strong enough case against him to get McKinney’s approval. Even attempts to pin the Pope circulation fraud scandal on Watkins would not be enough to justify the firing. McKinney would resist. He would insist on his rights under the contract. Gannett might be stuck with its deal, with McKinney, and with the newsroom union and a charge of unfair labor practices for bargaining in bad faith (“surface bargaining”) to boot. Too much was at stake, and so Gannett broke the Employment Agreement and fired Watkins. McKinney had complete authority over all employees. Even if Gannett were justified for legitimate budget reasons in firing Watkins (which I find it was not), McKinney’s contract was broken by the manner in which the firing was carried out. The Board was controlled by Gannett, but McKinney was Chairman and had the right to be present at all meetings. No meeting was called. The decision to get rid of Watkins was made unilaterally by Gannett without even informal consultation with McKinney. Certainly, McKinney’s contract gave him more than just the right to be informed of the termination of his right-hand man after the fact. The second breach of McKinney’s contract occurred around the same time as Watkins’ firing. This related to the selection and hiring of N. Walter Ryals as Watkins’ replacement. Gannett would not take the chance of allowing McKinney even a minute to name Watkins’ replacement even if he concurred that Watkins must go. That would defeat Gannett’s purpose of implanting a general manager from outside McKinney’s sphere of influence who would listen only to Gannett, and take his orders only from Gannett. Ryals was chosen because he was already a “company man” who understood that his orders came from Gannett and that McKinney was to be treated merely as a figurehead. He met all qualifications previously enumerated by Whittington (see pp. 19-20). Although Ryals and other Gannett men who testified at the trial denied it, I find on the bases of Plaintiff’s Exhibit 221 and the events which followed Ryals’ installation that Ryals conducted a Gannett-inspired campaign to sever the McKinney relationship with The New Mexican. A deliberate plan was launched to get McKinney’s name off the masthead of The New Mexican. The masthead carried McKinney in the capacity bargained to him by Gannett. Ryals’ subsequent actions were consistent with such a campaign. The only uneasiness felt at Gannett corporate headquarters seemed to be caused by the alacrity with which Ryals had launched the campaign. If McKinney could not have successfully blocked Watkins’ firing, his “complete authority over all employees” certainly gave him the right to hire Watkins’ replacement. Gannett preferred to ignore that right in order to accomplish its purposes. Gannett breached the Employment Agreement in so doing. I further find that McKinney did not waive his contractual rights with respect to these two breaches, i.e. the Watkins termination and the hiring of Ryals. True, he came to Santa Fe and treated Ryals as the new general manager. He discussed his Employment Agreement with Ryals and received assurances from Ryals that he understood and would honor the contract. He even held a luncheon to introduce Ryals and Jameson to the business community of Santa Fe. But because of the way Gannett had acted, McKinney was left without a choice. The announcement had already been made public about Watkins being fired and replaced by Ryals. The coup d’etat was complete. McKinney’s attempt at a counter-coup could have thrown The New Mexican into disastrous turmoil. McKinney testified that he tried to make the best of an unsatisfactory situation. He did what he thought was in the best interests of The New Mexican. He maintained composure and attempted to normalize the disruption. He sought to present a united front. But as between himself and Gannett, there was no acquiescence. McKinney refused to sign a consent form ratifying the actions previously taken by Gannett. He refused because those actions were taken without his prior knowledge or approval and, he felt, in contravention of the Employment Agreement. Gannett did not see fit to hold a board meeting of The New Mexican to ratify the actions until after this lawsuit was filed some five months later. The next breach of contract was the publication of the June 4, 1978, editorial. As discussed elsewhere, I decided this breach on summary judgment. Following the decision to buck McKinney’s authority, McKinney was so informed by Robert Storey, the editorial page editor. McKinney then had a conversation with Ryals in which McKinney requested a memo from Ryals explaining how he proposed to operate The New Mexican. Ryals told him at that time that he thought The New Mexican should operate “the same as any other Gannett newspaper.” A memo was then prepared, not by Ryals, but by Storey, and carefully redrafted by Gannett upper eschelon executives in Rochester. At trial, Plaintiff attempted to submit this memo to the fact finder as a separate breach, an anticipatory repudiation. The gist of the memo, Plaintiff’s Exhibit 228 (copy attached), is that McKinney’s complete editorial authority under the contract would be replaced by an editorial board of which McKinney would be one member. In other words, Ryals, with concurrence from the top, did not intend to honor a clear and important provision of McKinney’s contract, one which, at that time, would otherwise be in effect for about seven and one-half more years. I did not consider this a separate breach under the doctrine of anticipatory repudiation. However, this document made the overall situation clear to McKinney and to the Court. The enormity of the third breach was revealed. And it suggested things to come, things which were intolerable to McKinney, things for which there was only one reaction: get rid of those at The New Mexican who had no intention of honoring his contract. At trial, Ryals testified as to his interpretation of McKinney’s contract in relation to the restated bylaws of The New Mexican (Plaintiff’s Exhibit 560). He said he thought McKinney could only dictate editorial policy if he were physically present in Santa Fe. The bylaws say that in the “absence” of the Chairman of the Board, the President “shall be vested with all the powers and perform all the duties of the Chairman of the Board.” Article IV, Section 3, Plaintiff’s Exhibit 560 at 5. I find Ryals’ interpretation strained, unreasonable and unacceptable. The offices of President and Vice President were held by Stephen Watkins. Although Watkins was fired as general manager in March 1978, he was not removed as an officer or director until at least August 31, 1978, see, Plaintiff’s Exhibit 284. Thus, the bylaws in effect at the time of this breach in July 1978 gave no power to Ryals as he was not a director of The New Mexican at that time. Furthermore, even if Ryals were authorized by the bylaws to act in McKinney’s absence, I would interpret the term “absence” much more broadly to mean unavailable or unreachable by any reasonable means. This is so because the bylaws of The New Mexican and the Employment Agreement must be read together and, if possible, given meanings which are consistent with each other. Section 3C of the Employment Agreement, Plaintiff’s Exhibit 505, gives McKinney complete discretion to decide in what “place or places” he will exercise his rights and duties under that contract. Certainly his physical presence within the city limits of Santa Fe is not required. McKinney had been in contact with his attorney ever since the Watkins-Ryals affair. Shortly before the editorial incident, Gannett was assuring McKinney through his attorney that it would like him to participate more rather than less in the management of The New Mexican. These assurances were made despite the termination of McKinney’s right-hand man. Internal memos written at the same time these assurances were being given show that top Gannett officials really felt that the sooner they got McKinney’s name off the masthead the better. These Gannett officials included Neuharth, President and Chief Executive Officer of Gannett. Plaintiff’s Exhibit 221. What went wrong? Maybe a contract such as the Employment Agreement, which is the subject of this case, is practically unworkable between parties such as those we have here. Parol evidence of prior contract negotiations (admitted on certain issues discussed elsewhere in this Opinion) make clear that Gannett was reluctant to give McKinney a contract. It was against Gannett policy to give employment contracts to former owners of newly acquired newspapers. Gannett drafts of the contract attempted to strip McKinney’s authority and leave him with titles. McKinney would not stand for this. He got, in Gannett’s own words, “an airtight contract” in relation to his position as publisher and editor. I believe that Gannett went into this deal with its eyes wide open. It knew the Employment Agreement would interfere with how it wanted to run The New Mexican. It also knew that McKinney was old and physically infirm. It knew that he would be residing in Virginia. It wanted The New Mexican very badly. Gannett took a gamble. It gambled on McKinney’s health continuing to worsen. It gambled on McKinney not meaning what, during negotiations, he had informed Gannett he must retain, i.e. real authority. McKinney’s health improved dramatically at lower altitudes. McKinney, instead of fading away, insisted on exercise of his prerogatives under the contract. Gannett had lost its gamble and it must now act to set McKinney adrift, albeit in violation of the terms of their bargain. In the face of all the developments thus far, McKinney, after mature and careful deliberation as well as further consultation with his attorney, decided to direct Ryals to fire Barclay Jameson. He did this in writing, Plaintiff’s Exhibit 233. He was, in my opinion, exercising his contractual “complete authority over all employees.” McKinney was justified in firing Jameson because of his refusal to carry out McKinney’s orders on the June 4 editorial. Jame-son had not been “responsible to” McKinney. McKinney named an acting managing editor from the ranks of The New Mexican employees. Ryals refused to carry out this direct order. Ryals consulted with Gannett and then told McKinney he would not fire Jameson. Another breach. McKinney then fired Ryals. Plaintiff’s Exhibit 237. He named an acting general manager and directed Ryals to publish a news release in the next Sunday The New Mexican announcing the action. Gannett refused to carry out any of McKinney’s orders. Another breach. McKinney filed this lawsuit. Gannett responded by duly calling a meeting of The New Mexican’s board. McKinney declined to attend, a previous informal attempt at reconciliation having failed. At that meeting, a resolution was passed that the purported terminations of Jameson and Ryals by McKinney were void and of no effect. At that meeting, the final and ultimate breach of McKinney’s Employment Agreement occurred: McKinney’s responsibilities (authority) under his contract were suspended pending this litigation. He was left with empty titles and his perquisites. Gannett argued that it was necessary to remove McKinney’s authority after he had filed this lawsuit because it would have been destructive to the newspaper to allow McKinney to continue his authority while in an adversarial position with it. This argument assumes it was wrongful for McKinney to sue to enforce his rights under the contract. I do not agree. This lawsuit was a perfectly legitimate way for McKinney to vindicate his rights. Gannett could have responded by fully honoring McKinney’s contract. Instead, it escalated its pattern of breaches to the highest level of dishonor. With respect to these last three breaches (refusal to fire Jameson and Ryals, removal of McKinney’s authority), I determined that a question of fact existed as to an affirmative defense raised by Gannett, whether McKinney by his actions had failed to use his “best endeavors to promote the interests” of The New Mexican as required in his Employment Agreement. Plaintiff’s Exhibit 505, Para. 3(C) at p. 4. I submitted this defense to the jury for their determination. Independently I decided this aff