Opinion
No. C8-97-1079.
Filed December 30, 1997.
Appeal from the District Court, Ramsey County, File No. C8-96-3643.
Robert J. Hennessey, Sally J. Whiteside, Lindquist Vennum, P.L.L.P., (for respondents).
Stanley Efron, Neil M. Kliebenstein, Henson Efron, P.A., (for appellants).
Considered and decided by Crippen, Presiding Judge, Schumacher, Judge, and Amundson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1996).
UNPUBLISHED OPINION
Appellants challenge summary judgment in favor of respondents, arguing that no contract was formed requiring them to accelerate vesting of future benefits to employees who continued working during a change of ownership of the company. Appellants also challenge the district court's assessment of conversion damages for their sale of stock benefits. We affirm.
FACTS
Respondents (employees) are former management employees of Lake Superior Paper Industries (LSPI). LSPI was formerly owned and operated as a joint venture by appellant LSPI Paper Corp. (formerly known as Minnesota Paper, Inc.) and appellant LSPI Duluth Corp. (formerly known as Pentair Duluth Corp.).
At issue in this case is the effect of a letter sent to key employees dated October 10, 1994 (October letter). The October letter was sent when Pentair was in negotiations to divest its interest in LSPI, which also led to the divestiture of Minnesota Paper's parent company, Minnesota Power Light Co. (Minnesota Power). The district court found that the October letter sent by Winslow Buxton was an offer by LSPI to waive any restrictions on cash and stock incentive units (awards) conferred under their Long-term Equity Incentive Plan if LSPI was sold. LSPI was successfully sold and vesting was accelerated on all awards prior to and including 1994, but LSPI paid out only 13% of the 1995 awards.
Buxton was chairperson of the Venture Council, a group of representatives of Minnesota Power and Pentair that managed LSPI.
The relevant portions of the October letter follow:
You have been advised of Pentair's announcement concerning its paper business strategy which could result in divestiture of its interest in LSPI. Additionally, the future course of events could dictate the divestiture of the interest of Minnesota Power as well. While no final decisions have been made by either party at this time, we want to indicate to you on an early basis your eligibility for a divestiture/retention program.
Should divestiture occur, in consideration of your active, cooperative, and positive support of accomplishing this transaction, as well as operating the business in a manner which maximizes short-term profits during the period of sale, LSPI will provide the following compensation program for you at such time the sale is consummated. In addition, we will outline for you briefly how we anticipate the handling of various other benefit matters upon transitioning to a new company.
* * * *
It is contemplated that various major benefit plans and programs will be handled as follows:
* * * *
4. LSPI's Long-term Equity Incentive Plan
If both Minnesota Power and Pentair divest their LSPI interest, restrictions on stock and cash [awards] would be lifted and accounts distributed. New ownership may replace current plan with their own.
* * * *
This letter is intended to express our intentions based on the facts as we know them today and may require modification once meaningful negotiations would be initiated. We want you to understand that this letter expresses our intent to provide fair treatment for you as you transition to a new employer. Should we not be able to negotiate our expressions of intent, we will do our very best to work out a "best efforts" agreeable solution with the new company.
At the end of this letter, the word "ACCEPTED" appeared above a signature and date block. All employees received and signed the October letter.
In December 1994, LSPI granted 1995 awards to all employees, but only 13% of the awards were paid out after LSPI was sold. The letter granting 1995 awards was the same as the previous award letter, detailing the vesting period that would begin three years after the award was granted. The December 1994 decision to grant the 1995 awards was made when it was contemplated that both Pentair and Minnesota Power would divest their interests in LSPI.
The district court found that all awards had vested upon the sale of LSPI, and assessed conversion damages rather than breach of contract damages when the 1995 awards of stock were sold by a trustee.
DECISION
On appeal from summary judgment, this court asks two questions:
(1) whether there are any genuine issues of material fact, and
(2) whether the district court erred in its application of the law. State by Cooper v. French , 460 N.W.2d 2, 4 (Minn. 1990).
I. Existence of a Contract
LSPI argues that there was no contract to accelerate 1995 awards because the October letter was not an offer, but rather a letter of intent. LSPI also argues that even if the October letter were an offer, it did not apply to the 1995 awards because those awards were made after the October letter.
Contract construction and effect are matters of law for the court. Turner v. Alpha Phi Sorority House , 276 N.W.2d 63, 66 (Minn. 1979). An enforceable contract consists of an offer, an acceptance, and consideration. Cohen v. Cowles Media Co. , 457 N.W.2d 199, 202 (Minn. 1990), reversed on other grounds , 501 U.S. 663, 111 S.Ct. 2513 (1991). LSPI contests only the existence of an offer. Generally, if a promise is made with the intent to be bound by it, it is an offer. See Cedarstrand v. Lutheran Bhd. , 263 Minn. 520, 533, 117 N.W.2d 213, 222 (1962).
We can and must seek that intent "by applying the words used, with all their reasonable implications, to the subject matters as the parties themselves, under all the surrounding circumstances, must have applied, used, and understood them."
Id. (quoting Hartung v. Billmeier , 243 Minn. 148, 151, 66 N.W.2d 784, 788 (1954)).
The October letter was clearly an offer. LSPI's intent to be bound by the October letter can be found by examining the circumstances. LSPI was about to divest its interest and it wanted management employees to stay on the job to keep operations running smoothly. The October letter was designed to encourage the employees to work during the divestiture. The letter's central theme was that LSPI was concerned about the best interests of the employees. Each employee was asked to sign and accept the terms of the entire letter.
LSPI lifted the restrictions on the awards as part of a package intended to keep management on the job during the sale of the company. The 1995 awards were made while negotiations were ongoing and were thus part of the same package to keep the employees working throughout the negotiations and sale of LSPI.
If not viewed as incentives to keep the employees working during the divestiture, the awards would mean nothing to LSPI. LSPI made the 1995 awards knowing that divestiture was imminent. The only reason the 1995 awards could have been made was as an incentive to keep employees there until the sale was complete. It would be unfair to allow LSPI to benefit when it induced these employees to remain by sending the October letter promising to lift restrictions on awards.
The district court correctly found that the October letter was an offer to lift restrictions on the 1995 awards if the employees continued working throughout the divestiture.
II. Conversion Damages
To claim conversion, an injured party must have a right to use, possess, or own the contested property. Beck v. American Sharecom, Inc. , 514 N.W.2d 584, 588 (Minn.App. 1994), review denied (Minn. June 29, 1994). To claim conversion of stock, an injured party must have ownership rights in identifiable shares of stock. Id. at 588-89.
Prior to vesting, certain quantities of shares were assigned to each of the employee accounts, but the shares were not identified by certificate or any other manner. The employees had no ownership rights in identifiable shares of stock until vesting. The district court erred in assessing conversion damages.
The district court found that the breach of contract occurred on June 29, 1995, when the Venture Council voted a partial vesting of stock. The breach in fact occurred when the trustee sold the shares on July 14, 1995, because that was when the employees were entitled to the value of the stock. On July 14, 1995, the value of Pentair was $45.25 and the value of Minnesota Power was $27.125. Finding conversion, the district court assessed damages based on the stock's highest values in the 45-day period between August 25, 1995 (when final plan distributions were made), and October 10, 1995. In that period, the value of Pentair was $45.69 and the value of Minnesota Power was $27.50. The difference between the amount of damages calculated at the conversion rate and the breach of contract rate is $1,539.58. Considering the large number of employees that this shortfall would be divided among, although the district court erroneously calculated damages, we affirm because the amount of error per individual is de minimus in comparison to the total damages for all employees, which are greater than $133,000.