Opinion
No. 2007-CA-000326-MR.
January 9, 2009. NOT TO BE PUBLISHED
Appeal from Jefferson Circuit Court, Honorable Mitchell Perry, Judge, Action No. 02-CI-008822.
Stuart E. Alexander III, Kathleen M.W. Schoen, Louisville, Kentucky, Briefs for Appellant.
John T. Lovett Louisville, Kentucky, Brief for Appellee.
Before: LAMBERT and NICKELL, Judges; HENRY, Senior Judge.
Senior Judge Michael L. Henry sitting as Special Judge by assignment of the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution and KRS 21.580.
OPINION
Clifton E. Valentine III appeals from an order of the Jefferson Circuit Court granting summary judgment to Accent Marketing Services, LLC, upon Valentine's claims alleging (1) breach of his Employment Agreement with the company and (2) violations of Kentucky's Wage and Hour Act. For the reasons stated below, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
By Employment Agreement dated May 17, 2001, Accent hired Valentine as the company's Chief Executive Officer. In summary, the agreement was a one-year contract with a base pay of $150,000.00; a bonus plan; and a small ownership interest in the company. Section 2 of the agreement provided that the term of the agreement was to commence on May 17, 2001 and was to end at the close of business "one (1) year thereafter."
Valentine executed the agreement on May 17, 2001; however, Accent representative Brent Little did not sign it until the next day, May 18, 2001. Further, Valentine did not sign an associated acceptance letter stating "I accept the above offer of employment" until May 18, 2001. Valentine actually started work at Accent on June 4, 2001.
In early 2002 Valentine and Accent had began negotiating a three-year Employment Agreement that provided enhanced severance provisions and a mechanism for Valentine to obtain liquidity for his three percent share in the company on favorable terms. This process was well underway, with drafts by Accent circulating among Valentine, Accent, and Accent's attorneys. Nevertheless, as the term of Valentine's contract drew to a close, Accent decided not to continue his employment beyond the one-year term contained in the agreement. To this end, on May 1, 2002, Accent adopted a "unanimous written consent" which provided, in relevant part, as follows:
Whereas the Majority Members and Managers deem it advisable and in the best interests of the Company to terminate [Valentine] and remove him as the Company CEO after the end of the term of the Employment Agreement.
NOW, THEREFORE, be it RESOLVED, the Majority Members and Managers hereby approve and consent to not renewing or offering [Valentine] a new Employment Agreement and to terminating and removing him as the Company's CEO after the term of the Employment Agreement.
On May 17, 2002, at 8:45 a.m., prior to the close of business, Valentine was given notice of his termination from his position as CEO of Accent. The company's attorneys were present for the termination. Tom Hanson, a founder of Accent, told Valentine that his termination was not "for cause" and that his termination was related to a restructuring and consolidation of management positions within the company. Valentine was further told that Accent's executive offices were moving to Orlando, Florida.
Immediately after his termination on the morning of May 17, 2002, Valentine was asked to clean out his office and to leave the business premises by noon. At approximately 12:00 p.m. on May 17, 2002, Accent held a meeting where it advised its employees that appellant was no longer CEO and that the job was now filled by one of the company's founders, Tom Hansen. Accent also communicated this message to senior management via a company-wide e-mail.
On November 21, 2002, Valentine filed a Complaint in Jefferson Circuit Court alleging breach of the parties' employment contract. In due course the parties moved for summary judgment. On October 31, 2005, the trial court granted Accent summary judgment upon Valentine's principal breach of contract claim that he was entitled to severance pay, but determined that there was a genuine issue of material fact upon his claim that the company had failed to pay him all compensation due for the one-year period he had worked.
On January 24, 2007, the trial court entered an order incorporating the October 31, 2005, order therein, stating that the parties were now in agreement that Valentine had been paid all amounts due under the Employment Agreement for his one-year tenure at the company, and stating the order was final and appealable. This appeal followed.
STANDARD OF REVIEW
The standard of review on appeal when a trial court grants a motion for summary judgment is "whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law." Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App. 1996); Kentucky Rules of Civil Procedure (CR) 56.03. "The trial court must view the evidence in the light most favorable to the nonmoving party, and summary judgment should be granted only if it appears impossible that the nonmoving party will be able to produce evidence at trial warranting a judgment in his favor." Lewis v. B R Corp., 56 S.W.3d 432, 436 (Ky.App. 2001), citing Steelvest v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 480-82 (Ky. 1991).
"The moving party bears the initial burden of showing that no genuine issue of material fact exists, and then the burden shifts to the party opposing summary judgment to present `at least some affirmative evidence showing that there is a genuine issue of material fact for trial.'" Lewis, 56 S.W.3d at 436, citing Steelvest, 807 S.W.2d at 482. The trial court "must examine the evidence, not to decide any issue of fact, but to discover if a real issue exists." Steelvest, 807 S.W.2d at 480. The Kentucky Supreme Court has held that the word "impossible," as set forth in the standard for summary judgment, is meant to be "used in a practical sense, not in an absolute sense." Lewis, 56 S.W.3d at 436. "Because summary judgment involves only legal questions and the existence of any disputed material issues of fact, an appellate court need not defer to the trial court's decision and will review the issue de novo." Id.
BREACH OF CONTRACT
Valentine contends that Accent breached the parties' Employment Agreement because it terminated his employment prior to the expiration of the one-year term provided for in the Agreement for reasons other than "for cause," and that he is accordingly entitled to the severance benefits contained in Section 5.3 of the Agreement. In summary, he alleges that because the company terminated him before the close of business on May 17, 2002, the severance provisions of the Agreement provide that he is to receive severance pay.
The provisions of the contract relevant to our review are as follows:
Section 2 — Term
Unless sooner terminated in accordance with Section 5 of this Agreement, the term of this Agreement (the "Term") shall commence on May 17, 2001 and shall end at the close of business one (1) year thereafter.
Section 4 — Compensation
4.1 Compensation. During the Term, Employee's compensation for duties performed under this Agreement shall consist of the following:
(a) Base Salary. An annual Base Salary of one hundred and fifty thousand dollars ($150,000.00) (the "Base Salary"), to be paid in bi-weekly installments or pro-rata throughout the year based upon the Company's regular pay dates for the Company's employees. In addition, Employee shall receive a minimum five thousand dollar ($5,000) bonus for the second, third, and fourth Quarters of 2001. Beginning with January 1, 2002, the Employee shall be eligible for bonus payments based on the schedule set forth in the employment offer letter, attached hereto and incorporated herein.
Section 5 — Termination
5.1 Events of Termination. Notwithstanding any other provision of this Agreement to the contrary, Employee's employment under the terms of this Agreement will terminate immediately and without notice upon the first of the following events to occur:
(a) Employee's death;
(b) The Permanent Disability of the Employee as defined in Section 5.5 of this Agreement;
(c) The dissolution or cessation of business of the Company;
(d) Termination for Cause by the Company; or
(e) Thirty (30) days following written notice by either party to the other hereunder, for any reasons, with or without Cause.
5.2 Cause. "Cause" includes, but is not limited to:
(a) Violation of the Company's policies, which violation Employee has not cured to the reasonable satisfaction of the Company's management within thirty (30) days after the date of the Company's notice to Employee of such violation;
(b) Engaging in conduct which reflects poorly on or damages the image of the Company or any of its affiliates, including, but not limited to, dishonesty, neglect of duties, misconduct, theft, fraud, indictment for or conviction of a felony, or willful misconduct which seriously impairs or can reasonably be expected to seriously impair the Company's ability to conduct its ordinary business in the usual manner; and
(c) Breach of any covenant, provision, term or undertaking set forth in this Agreement, which breach Employee has not cured to the reasonable satisfaction of the Company's management within fifteen (15) days after the date of the Company's notice to Employee of such breach.
5.3 Compensation Upon Termination. The Company shall have no further liability to Employee under this Agreement for (a) any period subsequent to termination by the Company for Cause; or (b) any period subsequent to termination of this Agreement pursuant to Sections 5.1(a), 5.1(b), 5.1(c) or (if notice of termination under Section 5.1(c) is from the Employee). If the Company terminates Employee without Cause pursuant to Section 5.1(c) during the Term of this Agreement, then Company shall pay to Employee an amount equal to six (6) month's Base Salary. Furthermore, Company agrees that in the event of a sale, merger, acquisition, or any other business change that eliminates the need for Employee's continued services as Chief Executive Officer, substantially changes the scope of control and influence of Employee's position, or ends Employee's employment, Company agrees to pay to Employee an amount equal to one (1) year's Base Salary. The Company shall make any payments owed to Employee under this Section 5.3 pursuant to the Company's regular payroll schedule during the applicable period. The Company's obligation to make payments pursuant to this Section 5.3 shall cease if Employee violates any of his covenants and obligations under this Agreement including, without limitation. Employee's covenants in Sections 6 and 7.
Amounts payable under this Section 5.3 are in lieu of any severance pay that would otherwise be payable to Employee on termination of his employment with the Company under the Company's severance pay policies, if any.
. . . .
5.6 Effect of Termination. Employment beyond the Term of this Agreement is terminable at the will of either party without notice. Termination of Employee's employment hereunder by either party shall not be construed to nullify or terminate any covenant or obligation of Employee which is intended to survive Employee's employment pursuant to the terms of this Agreement, including, but not limited to, the covenants contained in Sections 6 and 7 of this Agreement.
Section 9 — Miscellaneous
. . . .
9.6 Entire Agreement. This Agreement constitutes the entire understanding and agreement between the Company and Employee with regard to all matters herein. There are no other agreements, conditions or representations, oral or written, expressed or implied with regard thereto. This Agreement may be amended only in writing, signed by both parties.
The primary object in construing a contract is to effectuate the intentions of the parties. See Withers v. Commonwealth, Department of Transportation, 656 S.W.2d 747, 749 (Ky.App. 1983); Wilcox v. Wilcox, 406 S.W.2d 152, 153 (Ky. 1966). "Any contract or agreement must be construed as a whole, giving effect to all parts and every word in it if possible." City of Louisa v. Newland, 705 S.W.2d 916, 919 (Ky. 1986). Absent an ambiguity in the contract, however, the parties' intentions must be discerned from the four corners of the instrument without resort to extrinsic evidence. Hoheimer v. Hoheimer, 30 S.W.3d 176, 178 (Ky. 2000). Interpretation of a contract is a question of law for the courts and is subject to de novo review. First Commonwealth Bank of Prestonsburg v. West, 55 S.W.3d 829, 835 (Ky.App. 2000); Morganfield Nat'l Bank v. Damien Elder Sons, 836 S.W.2d 893, 895 (Ky. 1992); Fay E. Sams Money Purchase Pension Plan v. Jansen, 3 S.W.3d 753, 757 (Ky.App. 1999).
Valentine's argument is stated in his brief as follows:
Quite simply, [Valentine] was terminated within the one-year term of his Employment Agreement. The term of the agreement states that "unless sooner terminated in accordance with Section 5 of this Agreement, the term of this Agreement (the "Term") shall commence on May 17, 2001 and shall end at the close of business one (1) year thereafter." Valentine was terminated within one (1) year of the inception of the agreement at approximately 8:45 a.m., prior to the close of business on May 17, 2002. As such, Accent Marketing is obligated to pay [Valentine] one year's base salary, per Valentine's Employment Agreement.
The trial court thoroughly considered, addressed, and resolved this issue in its October 31, 2005, order granting summary judgment to Accent upon the argument. Because the trial court's analysis so thoroughly and succinctly decides the issue, we adopt it as our own:
Plaintiff's arguments in support of his motion are two-fold. First, he contends that because he was informed early on May 17, 2002, that the Contract would not be extended when it expired later that day, he was not allowed to complete the term of the Contract. Second, he also argues that because he did not assume his duties with Accent until June 4, 2001, he was entitled to work an additional two weeks beyond May 17, 2002 and any termination of his employment with Accent prior to that time violated the Contract. Plaintiff argues in either case that Accent terminated him without cause prior to the Contract's termination on its terms. Because of this, he contends that he is entitled to receive an amount equal to an additional year's base salary pursuant to Section 5 of the Contract. Both arguments, however, contravene the clear terms of the Contract.
In light of the contract's plain language that the term of the agreement is to run from May 17, 2001, through May 17, 2002, Valentine has understandably abandoned this argument on appeal. For the sake of completeness, however, we have retained the trial court's discussion of the argument.
The circumstances surrounding Plaintiff's contention that he was terminated without cause on May 17, 2002 do not find support in the record. As set forth above, the Contract specified that it would expire after one year following its inception on May 17, 2001. According to the undisputed facts in the record, it was exactly one year later, May 17, 2002, that Plaintiff was informed that the Accent [sic] would allow the Contract to expire without renewal, thus eliminating his employment with the company. Because of this, Plaintiff was allowed to collect his personal items and go home sometime around midday.
Plaintiff now contends that because he was not allowed to continue to function in his job until "quitting time" on the Contract's final day, he necessarily was terminated in advance of the Contract's expiration. Under the circumstances it is highly improbable that Plaintiff would have accomplished any valuable service to Accent had he remained at work until the close of business on that day. Regardless, given the undisputed fact that Plaintiff was fully paid through the end of that day, Plaintiff simply has no basis for contending that Accent's decision to have him leave the company's premises early on May 17 somehow constituted a breach of the contract entitling him to an additional full year's base salary.
Plaintiff also argues that despite its plain provision to the contrary, the term of the Contract was from June 4, 2001 to June 4, 2002. Plaintiff bases this argument on the fact that he did not actually assume his duties with Accent until the former date. According to Plaintiff, this creates an ambiguity in the Contract which requires this Court to find that its one year period began on June 4, 2001 despite the Contract's specific provision stating it began on May 17, 2001 and concluded one year later. Under Kentucky law, if the terms of a contract are clear and unambiguous, a court is not free to rewrite its terms. See, e.g., Windlam v. Cunningham, 902 S.W.2d 838 (Ky.App. 1995). In the present matter, the "ambiguity" complained of by Plaintiff does not result from the language of the Contract, but rather the fact that his starting date with Accent was approximately two weeks after the starting date specified in the Contract. Under these circumstances, there is no basis for finding the ambiguity in the Contract, and though Plaintiff refers to various other documents and letters, he is bound by Section 9.6 of the Contract which states that
[t]his Agreement constitutes the entire understanding and agreement between the Company and Employee with regard to all matters herein. There are no other agreements, conditions or representations, oral or written, expressed or implied with regard thereto. . . .
Based upon the above rationale, we affirm the trial court's award of summary judgment upon this issue.
WAGE AND HOUR ACT VIOLATIONS
In what is by and large the same argument as addressed above recast as a violation of the Wage and Hour Act, Kentucky Revised Statutes (KRS) 337.010, et seq., Valentine contends he is entitled to severance pay based upon those violations. In support of his argument Valentine relies upon KRS 337.010(1)(c) and KRS 337.055.
KRS 337.010(1)(c) provides as follows:
"Wages" includes any compensation due to an employee by reason of his employment, including salaries, commissions, vested vacation pay, overtime pay, severance or dismissal pay, earned bonuses, and any other similar advantages agreed upon by the employer and the employee or provided to employees as an established policy. The wages shall be payable in legal tender of the United States or checks on banks convertible into cash on demand at full face value, subject to the allowances made in this chapter;
KRS 337.385 provides, in relevant part, as follows:
Any employer who pays any employee less than wages and overtime compensation to which such employee is entitled . . . shall be liable to such employee affected for the full amount of such wages and overtime compensation, less any amount actually paid to such employee by the employer, for an additional equal amount as liquidated damages, and for costs and such reasonable attorney's fees as may be allowed by the court.
Valentine argues that
Here, Accent Marketing has no arguable basis for claiming that it does not have to pay the severance that was agreed upon between the parties and specified in the Employment Agreement, particularly since Accent Marketing drafted the Employment Agreement and insisted that [Valentine] observe certain restrictive covenants even after [Valentine's] employment. [Valentine] did observe these employment restrictions and, therefore, has fulfilled his obligations under the Employment Agreement. Accent Marketing's failure to pay was not some good-faith clerical oversight; it was the calculated decision of Accent marketing's management.
As discussed in the previous section, Accent terminated Valentine in accordance with the Employment Agreement. Moreover, the termination was under circumstances which did not trigger the severance provisions of the Agreement. As further discussed, the mere fact that he was made to leave the company's premises before the close of the business day on May 17, 2002, does not establish a breach of contract. As such, Accent was under no obligation to pay Valentine severance benefits and, it follows, there was no violation of the Wage and Hour Act for failing to do so.
CONCLUSION
For the foregoing reasons the judgment of the Jefferson Circuit Court is affirmed.
ALL CONCUR.