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Hampton v. Kohler

United States District Court, D. Minnesota

July 25, 2019

Bruce Hampton Plaintiff,
Michael Kohler Defendant.

          Brain W.Varland, Esq., Donald R. McNeil, Esq., and David K. Snyder, Esq., Heley, Duncan & Melander, PLLP, counsel for Plaintiff.

          Christopher J. Harristhal, Esq., and John Anders Kvinge, Esq., Larkin Hoffman Daly & Lindgren, Ltd., counsel for Defendant.




         This is a contract dispute over whether Defendant Michael Kohler (“Kohler”) breached an Agreement with Respect to Post-Closing Amounts by refusing to distribute a pro-rata portion of post-closing amounts promised to Plaintiff Bruce Hampton (“Hampton”). The pro-rata payment was conditioned upon Hampton's employment at the time of distribution. The parties dispute whether Hampton met the condition of employment during the relevant time. The Court now considers Kohler's motion for summary judgment on Hampton's remaining breach of contract claim. (Doc. No. [37].) For the reasons set forth below, the Court grants the motion.


         Hampton alleges one count of Breach of Contract. (Doc. No. 1, Ex. 1 (“Compl.”.) The basis of the lawsuit involves an Employment Agreement (Doc. No. 53-1, (“Hampton Aff.”) ¶ 2 (“Employment Agreement”)) and Restricted Stock Agreement Under the Milestone Systems, Inc. Stock Incentive Plan (Hampton Aff. ¶ 3 (“Restricted Stock Agreement”) signed by the parties in September 2002. (Compl. ¶ 5.) Kohler was the president of Milestone Systems at that time. (Id.) The Restricted Stock Agreement awarded Hampton 760 shares of restricted Series B stock in the company. (Id. ¶ 6.) In 2005, an amendment to the Restricted Stock Agreement increased Hampton's total shares to 1, 465. (Id. ¶ 8.)

         In April 2016, Milestone Systems' shares were sold to Kudelski Security, Inc. (“Kudelski”). (Doc. No. 52, (“Pl. Memo.”) at 3.) In the leadup to closing, on or around April 29, 2016, Hampton and Milestone, along with other employees, executed a Termination and Release Agreement (Hampton Aff. ¶ 6 (“Termination and Release”)) which was signed by Hampton and Mark Greer, Milestone's then-president. (Compl. ¶ 9.) Hampton alleges that the Termination and Release was presented to him the same day he signed it and that he was told he would be fired if he refused to sign. (Pl. Memo at 4.) The Termination and Release superseded the employees' respective restricted stock agreements but promised that the company would pay each the amounts that would otherwise have been payable to them at the closing. (Termination and Release § 9.) On or about that same date, Hampton and Kohler executed an Agreement with Respect to Post-Closing Amounts (Hampton Aff. ¶ 6 (“Post-Closing Agreement”)), pursuant to which Kohler would pay Hampton his individual pro-rata portion of all post-closing amounts. (Compl. ¶¶ 11, 12.) According to a letter Hampton received prior to closing from the accounting firm that calculated closing amounts (Hampton Aff. ¶ 5 (“Krier Letter”)), a sum of $4, 000, 000 was set aside for escrow. (Compl. ¶ 10.) Hampton was due an employee payout at closing totaling $1, 368, 641 based on his 1, 465 unvested shares. (Krier Letter.) If the full escrow was collected, Hampton's shares would entitle him to an additional $164, 903, to be disbursed on November 14, 2017. (Id.; Compl. ¶ 10; Pl. Memo at 10.) Section 3 of the Post-Closing Agreement, “Payment Conditioned on Employment, ” provides:

In order for an Employee to receive its pro rata portion of the Post-Closing Amounts, the Employee must be employed by the Company at the time of payment. Notwithstanding the foregoing, however, an Employee remains eligible to receive its pro rata portion of the Post-Closing Amounts (if any) if the Company terminates the Employee's employment without cause (as described in Employee's employment agreement).

         Post-Closing Agreement § 3. In turn, the 2002 Employment Agreement states, in a paragraph entitled “Termination, ” that the Employment Agreement may be terminated “[u]pon the expiration of thirty (30) days following the date on which MILESTONE or Employee shall give to the other written notice of intention to terminate without cause, ” reserving the right to the company to provide thirty days' pay in lieu of the notice required. (Employment Agreement § 16(b).) The other subparagraphs under the “Termination” heading address situations involving mutual consent between the parties, uncured breach committed by Hampton, termination for cause as determined by the company, and termination in the case of Hampton's death. (Id. §§ 16(a), (c)-(e).) The term “termination” is not defined anywhere within the Employment Agreement.

         Kudelski announced its acquisition of Milestone on May 3, 2016. (Compl. ¶ 14.) Hampton alleges that on July 18, 2016, he was informed that he was being reassigned from his Milestone position in management to that of an individual contributor within Kudelski, which would require international travel for extended periods. (Hampton Aff. ¶ 9.) The next day, July 19, Hampton expressed his dissatisfaction with the change in working conditions to Kudelski's chief operating officer, Steve Speidel (“Speidel”). (Hampton Aff. ¶ 10.) Hampton told Speidel that for him to “take on responsibilities that required frequent and extended travel was not a good option” for him at that time due to family obligations. (Id.) Speidel told Hampton he would discuss the matter with Kudelski's chief executive officer, Rich Fennessy, and both would meet with Hampton the following day. (Id.) In the course of the July 20 meeting, Hampton alleges, he “was informed that Kudelski was going to terminate [his] position at the end of February” following the renewal of an account that Hampton worked on with a major customer, but in light of Hampton's concerns, “they would terminate [his] position sooner than later” and “get back to [him].” (Id. ¶ 11.)

         On August 9, 2016, Kudelski presented Hampton with a Confidential Separation Agreement by e-mail. (Hampton Aff. ¶ 12.) That same day, Hampton responded through e-mail to Speidel, asking for contact information so that his attorney could communicate with the attorney “the company is using to put this together.” (Id.) On August 26, 2016, Fennessy e-mailed Hampton for his approval of a draft of an announcement to be issued to the company about Hampton's upcoming departure, which stated that as of September 30 that year, Hampton would be “retiring from Kudelski” and while Fennessy was “disappointed that [Hampton] will be retiring . . . [he] wish[ed] him all the best.” (Hampton Aff. ¶ 17.) The announcement further stated that after September 30, Hampton would continue to be available to the company and its clients “on a consultancy basis.” (Id.) Hampton had no objections to the wording of the announcement. (Doc. No. 40, (“Harristhal Decl.”), ¶ 8 (“Hampton Dep.”) at 49.) On August 31, 2016, then-president Greer sent an e-mail to Kohler, noting that it was Greer's last day with the company and mentioning that Hampton was “also leaving [Kudelski].” (Hampton Aff. ¶ 17.) Greer reported that over the previous 45 days, Hampton “made it very clear” to Greer that he wanted out of Kudelski, and that he wanted to be “terminated/released [without] cause due to the significant financial implications.” (Id.) Over the course of their “numerous verbal discussions, ” Hampton communicated to Greer that if Kudelski did not release him without cause, Hampton would still leave but “could end up working for a competitor” and could work hard to move the business with their major customer away from Kudelski. (Id.) Greer told Kohler he had passed this information on to Kudelski management, and that Hampton would be receiving a package “richer” than that given to Mark Thompson at his separation, including termination without cause, payout of all vacation, all earned and unearned bonuses, and three months' payment of premiums to continue his health insurance. (Id.)

         The parties' respective counsel “worked amicably” together to draft a final separation agreement and consulting agreement, signed by Hampton on August 26, 2016 to be effective September 30, 2016. (Hampton Aff. ¶¶ 14-15; Doc. No. 56 (“Separation Agreement”); Doc. No. 57 (“Consulting Agreement”).) Hampton concedes that Kudelski did not “in any way mandate” that his employment end in 2016, and that he was not “forced to sign” the Separation Agreement, which terminated his previous Employment Agreement and set forth new terms. (Hampton Dep. at 50.)

         Specifically, the Separation Agreement states that “Kudelski wishes to reach an amicable separation with [Hampton] and assist [Hampton's] transition to other employment, ” and that “[t]he parties' separation is without cause by either party.” (Separation Agreement ¶¶ A-B.) Under the agreed terms, Hampton would be provided a severance payment of $37, 500, which would constitute “adequate legal consideration for the promises and representations made by [Hampton]” in the contract. (Id. § 1.) Kudelski would also provide premiums for three months of Hampton's health and dental benefits, his usual salary and bonuses until the date of separation, additional bonuses for transactions completed before the separation date, yet another bonus for successful renewal of the major account expected to occur on or around the separation date, expense reimbursement, and pay for all earned and unused vacation or paid time off. (Id. ยงยง 2-3.) Hampton agreed to make himself available through at least April 30, 2017 to provide services to Kudelski pursuant to the attached Independent Consultant General Services Agreement for compensation of $200 per hour plus expenses, if the work was done locally, or $1, 600 per day ...

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