Opinion
01-21-00568-CV
06-28-2022
WS ATKINS, INC., Appellant v. SHAN SHI, Appellee
On Appeal from the 113th District Court Harris County, Texas, Trial Court Case No. 2018-64020
Panel consists of Chief Justice Radack and Justices Goodman and Hightower.
MEMORANDUM OPINION
SHERRY RADACK CHIEF JUSTICE.
When appellant, WS Atkins, Inc, ("Atkins"), purchased a company from appellee, Shan Shi and several others, the purchase agreement provided that a portion of the sales price would be held in escrow to be paid out three years later. At issue in this appeal is whether, under the purchase agreement, Shi's employment was 1 terminated for cause for committing a felony before being paid his pro rata share of the escrow amount. After the trial court granted Shi's motion for summary judgment on his breach-of-contract claim against Atkins and denied Atkin's cross-motion for summary judgment on its breach-of-contract claim, Atkins brought this appeal.
BACKGROUND
The Purchase Agreement
Before 2014, Shi was a manager for Houston Offshore Engineering LLC ("HOE") and owned a 4% interest in the company. On October 1, 2014, Shi and the other owners of HOE (collectively, "the Sellers") contracted to sell their membership interests in HOE for approximately $73,000,000.00 to Atkins. Atkins paid the majority of the purchase price to the Sellers at closing, less $14,600,000.00, which was to be held in escrow for three years. Shi's pro rata share of the escrow amount was $584,000.00.
Regarding payment of the escrow amount, paragraph 2.8(b) of the purchase agreement provided:
(a)Subject to Section 2.8(b), on the date that is three (3) years following the Closing Date, Buyer and Sellers' Representative shall jointly instruct the Escrow Agent to pay to each Seller such Seller's pro rata portion (based on each Seller's individual ownership of the Membership Interests on the Closing Date) of (i) the balance, if any, of the Escrow Amount . . . . and (2) interest or other earnings on such amount, if any, pursuant to the terms of the Escrow Agreement.
(b)a Seller's pro rata portion of the Escrow Amount will not be payable to such Seller if at the time of payment such Seller is no longer2
employed with the Company of a full time basis . . .; provided, however, if such . . . Seller's employment was terminated by the Company without Cause or such Seller terminated his employment for Good Reason, his pro rata portion of the Escrow Amount shall be payable to Seller in accordance with Section 2.8.
The purchase agreement defined "cause" to mean that the applicable Seller "has been charged with a felony which, in the reasonable opinion of the board of Directors of the Company . . . brings the Seller into disrepute or is likely to cause significant harm to the Company or the Company's . . . business, customer, or supplier relations, financial condition, or prospects[.]"
Shi Transitions to TAE Employment Status
Shi continued to work for HOE on a full-time basis until the week of March 23, 2015. After that date, Shi did not work a 40-hour work week, and, on October 19, 2015, he transitioned from being a full-time employee to a temporary assignment employee ("TAE"). The Company's human resources department documented the change in Shi's employment status with a memorandum that provided:
In the record, a TAE is one that works less than 24 hours per week on a continuous or as-needed basis.
Effective Monday, October 19, 2016, your full-time employment status with Atkins/Houston Offshore Engineering will transition to a temporary assignment employee position.
This change of status is to be considered as without cause in relation to the Membership Interests Purchase Agreement of Houston Offshore Engineering LLC (dated 1st October 2014), which as a signatory, you will remain bound by, including, but not limited to, clauses relating to3
non-compete and also with respect to your entitlement to your pro-rated share of the retention of the consideration, currently held in Escrow.
Shi is Indicted then Fired
On May 23, 2017, a criminal complaint was filed against Shi in the United States District Court for the District of Columbia, alleging theft of trade secrets. On June 8, 2017, Shi was indicted for conspiracy to steal trade secrets, and, on July 29, 2019, he was convicted by a jury of Conspiracy to Steal and Convert a Trade Secret.
After learning from the press that Shi was the subject of a criminal complaint, on June 2, 2017, Stacey L. Burch, Regional Human Resources Manager for Atkins, sent a letter to Shi at his home in Houston, which stated: "This letter will confirm your involuntary employment separation from Atkins Oil & Energy effective Friday, June 02, 2017." The letter also provided that (1) Shi's last day in the office would be June 02, 2017, and that he would not accrue vacation during the pay period in which the termination occurred, and (2) any funds owed to the company may be deducted from his final paycheck. On that same date, the Company's Board of Managers enacted the following Board Resolution:
Summary-judgment evidence shows that Burch is "one of the custodians of the books, records, and files of Atkins and its subsidiaries, including Houston Offshore Engineering, LLC," the company that employed Shi.
Shan Shi has been charged with a felony which, in the Board's reasonable opinion, brings the Company into disrepute and is likely to cause significant harm to the Company and to both the Company's and its affiliates' business and customer and supplier relationships in violation of Section 2.8(d)(ii) of the Purchase Agreement.4
The Board further resolved "that Shan Shi be terminated for cause effective immediately."
Atkins Refuses to Disburse Escrow Amount to Shi
On August 3, 2017, John Chianis, another Seller, contacted Shi to request his bank information for purposes of the upcoming escrow disbursement. Shi provided his information, but Atkins did not send him his pro rata share.
When Shi inquired about the disbursement, the Atkins general counsel responded by email, stating, "As you will recall, on or about June 2, 2017, Atkins notified you of your termination for cause. Under Section 2.8 of the Purchase Agreement, any Seller terminated for cause becomes ineligible for the pro rata payment from the Escrow Account."
Shi Sues Atkins and Atkins Counterclaims
On September 14, 2018, Shi sued Atkins, alleging that it breached the purchase agreement by not paying him his pro rata share of the escrow amount. In his petition, Shi alleged that "Atkins attempt to 'terminate' Dr. Shi 'with cause' was a nullity because Dr. Shi had already been terminated without cause on October 19, 2016, when he lost all salary and benefits and ceased to perform any services for Atkins."
In October 2018, Atkins filed a general denial, affirmative defenses, and a counterclaim for attorney's fees. In an amended pleading dated October 24, 2018, 5 Atkins filed counterclaims for breach of contract, declaratory judgment, and attorney's fees.
The Summary-Judgment Motions and Final Judgment
On October 9, 2020, Shi filed a Motion for Partial Summary Judgment, in which he argued that Atkins breached the purchase agreement when it withheld his pro rata share of the escrow amount. On December 23, 2020, Atkins filed a Response in Opposition to Plaintiff Shan Shi's Motion for Partial Summary Judgment and Cross-Motion for Summary Judgment, in which it contended that it properly withheld the escrow money from Shi because Shi had been terminated for cause, thereby forfeiting his right to payment.
On March 2, 2021, the trial court granted Shi's Motion for Partial Summary Judgment and denied Atkins' Cross-Motion for Summary Judgment.
On September 17, 2021, the trial court entered a Final Judgment that awarded Shi $584,000.00 in actual damages, $168,646.50 in attorney's fees, plus additional amounts for appellate representation and pre- and post-judgment interest. It dismissed Shi's declaratory action and all of Atkins' counterclaims without prejudice.
This appeal followed. 6
PROPRIETY OF SUMMARY-JUDGMENT RULINGS
In two related issues on appeal, Atkins contends that the trial court erred in granting Shi's Motion for Partial Summary Judgment and in denying its own Motion for Partial Summary Judgment. Specifically, Atkins contends that it is undisputed that Shi did not perform the under the terms of the purchase agreement and that he was properly terminated for cause, thereby forfeiting his right to any portion of the escrow amounts.
Standard of Review and Applicable Law
Generally, an order denying summary judgment is interlocutory and is not subject to appellate review. See Lancer Ins. Co. v. Garcia Holiday Tours, 345 S.W.3d 50, 59 (Tex. 2011); Bowman v. Lumberton Indep. Sch. Dist., 801 S.W.2d 883, 889 (Tex. 1990) (op. on reh'g). But, there is an exception: when both parties move for summary judgment and the trial court grants one motion and denies the other, "the reviewing court considers the summary judgment evidence presented by both sides, determines all questions presented, and if the reviewing court determines that the trial court erred, renders the judgment the trial court should have rendered." Fed. Deposit Ins. Corp. v. Lenk, 361 S.W.3d 602, 611 (Tex. 2012) (quoting Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005)). For this exception to apply, both parties must have either (1) moved for final summary judgment, see CU Lloyd's of Tex. v. Feldman, 977 S.W.2d 568, 569 (Tex. 1998), or (2) moved for 7 summary judgment on the same issues. See Tri-Cnty. Elec. Coop., Inc. v. GTE Sw. Inc., 490 S.W.3d 530, 537 (Tex. App.-Fort Worth 2016, no pet.); see also Lenk, 361 S.W.3d at 611-12.
Questions of contract construction are reviewed in much the same way as questions of statutory construction. As with statutory construction, the construction of an unambiguous contract presents a question of law subject to de novo review. Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011). Our primary concern in interpreting a contract is to ascertain and to give effect to the intentions of the parties as expressed in the instrument. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003). We examine and consider the entire writing in an effort to harmonize and give effect to all provisions of the contract, so that none will be rendered meaningless. Id. We construe contracts from a utilitarian standpoint, bearing in mind the particular business activity sought to be served, and will avoid, when possible, an unreasonable, inequitable, or oppressive construction. Frost Nat'l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005) (per curiam).
Analysis
Shi contends that he was "terminated" when he was transitioned to part-time employment, and that, at the time that decision was made, it was undisputedly done without cause. In his Motion for Partial Summary Judgment, Shi argued that once he was no longer a full-time employee, "paragraph 2.8(b) was satisfied with no 8 further application" and that "[t]here is no provision in the Agreement giving authority to [Atkins] to withhold payment to Dr. Shi if terminated from his temporary assignment employee status."
Atkins contends that Shi's reassignment to TAE status "did not immunize him from termination for cause following his indictment." Atkins argues that Shi was not "terminated" when he was reassigned to TAE status, thus Atkins retained the right to fire him for cause and withhold his share of the escrow amount.
We agree with Atkins. The Purchase Agreement does not define "termination," thus we must give it its plain, common, or generally accepted meaning unless the contract shows that the parties used the words in a technical or different sense. Plain Expl. & Prod. Co. v. Torch Energy Advisors, 473 S.W.3d 296, 305 (Tex. 2015). Termination of employment is defined as "[t]he complete severance of an employer-employee relationship." Black's Law Dictionary, "Termination" (11th ed. 2019).
In Chacko v. Sabre, Inc., 473 F.3d 604, 612 (5th Cir. 2006), the court was called on to decide the definition of the word "termination" in a company's general severance plan in order to determine when certain benefits accrued for an employee who had been terminated. Id. At issue was whether the employee was terminated on the date his employment ended or on the earlier date on which the Company informed him that it had decided to terminate him. Id. Applying the definition of 9 "termination" from Black's Law Dictionary quoted above, the Court held that "termination of employment occurs when the employee actually ceases providing services to and receiving compensation from" the Company. Id.
The uncontradicted summary judgment evidence shows that Shi was not terminated when he transitioned to TAE status in October 2015. Shi's timecards show that he continued to report time worked through at least the spring of 2016. Atkins issued W-2s for him for 2015-16. In April 2017, Atkins sent Shi information about how executive bonuses would be calculated for the financial year 2017-18. And, Shi himself testified that, as late as May 2017, he still had an access card to the office and that he met with potential clients in the office.
Accordingly, Shi was not "terminated" when he transitioned to TAE status in October 2015. There was no "complete severance of [the] employer-employee relationship" until June 2, 2017, when the Board resolved to terminate his employment for cause and notified him of such. See Black's Law Dictionary, "Termination" (11th ed. 2019).
This interpretation is supported by the October 19, 2015 correspondence sent from Atkins to Shi regarding his transition to TAE status, which provided that he would "remain bound by, including, but not limited to, clauses relating to non-compete and also with respect to your entitlement to your pro-rated share of the retention of the consideration, currently held in Escrow." Nothing in this letter 10 documenting Shi's transition to TAE status indicates that he would be released from his obligations under the Purchase Agreement while only Atkins would remain bound thereby. Shi's title after the transition-temporary assignment employee- shows that he was still considered to be an employee at the time he committed a felony and was then terminated.
The Purchase Agreement required Shi to (1) remain employed with Atkins on a full- time basis for at least 3 years following Atkins' purchase unless terminated "without cause," (2) "not take any action, either directly or indirectly, that could dimmish the value of the Company or interfere with the business of the Company," and (3) cooperate in Atkins's efforts to continue and maintain business relationships with customers, suppliers, and others.
As made clear by the definition of "Cause" in the purchase agreement, the purpose of paragraph 2.8(b) was to permit Atkins to terminate a Seller's employment (and his right to a pro rata share of the escrow amount) if the Seller was charged with a felony that would "bring[] the Seller into disrepute or [was] likely to cause significant harm to [Atkins]." Shi's interpretation of the word "termination" would allow a part-time or TAE employee to "bring[] the Seller into disrepute" or "cause significant harm to [Atkins]" without suffering any repercussions to his entitlement to a pro rata share of the escrow amount during the 3-year escrow period.
That Atkins allowed Shi to go part-time without forfeiting his right to his pro rata share does not support Shi's argument that Atkins could no longer fire Shi for being charged with a felony thus terminating his right to a pro rata share. To hold 11 otherwise would render the definition of "Cause" in paragraph 2.8(d)(i) meaningless. We will not interpret a contract in such a way that a part of it will be rendered meaningless. J.M. Davidson, 128 S.W.3d at 229. Indeed, the October 19, 2015 correspondence sent from Atkins to Shi regarding his transition to TAE status recognizes that the transition was not a "for Cause" event, but it cannot be read to exclude any "for Cause" event in the future.
CONCLUSION
Shi was not terminated when he transitioned to TAE status; he was terminated when he was charged with a felony. Because the trial court held otherwise, we reverse the judgment and render judgment that Shi take nothing on his breach-of-contract claim against Atkins. 12