Roger Bannister v. Bemis Company, Inc. ( 2009 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 08-1634
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Roger William Bannister, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
Bemis Company, Inc., *
* [PUBLISHED]
Appellant. *
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Submitted: November 14, 2008
Filed: February 25, 2009
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Before MURPHY, HANSEN, and RILEY, Circuit Judges.
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HANSEN, Circuit Judge.
Bemis Company, Inc. (Bemis) appeals from the district court's1 summary
judgment order awarding Roger Bannister $81,051.36 based on Bemis's breach of a
Confidentiality and Non-Competitive Agreement. Having carefully reviewed the
record, we affirm.
1
The Honorable Richard H. Kyle, United States District Judge for the District
of Minnesota.
I.
Roger Bannister was the Director of Technical and Product Development for
Bemis, where he had worked since 1991. Bannister entered into a Confidentiality and
Non-Competitive Agreement (NCA) with Bemis in December 2000, which, among
other things, prohibited Bannister from working for a Bemis competitor for 18 months
following the termination of his employment. In the event that Bannister's
employment ended with Bemis and he was "unable to obtain employment consistent
with [his] abilities and education solely because of the provisions of paragraph c. [of
the NCA which prohibited his employment with a "Conflicting Organization"], such
provisions . . . continue[d] to bind [him] only as long as Bemis, in its sole discretion,
. . . ma[d]e payments to [him] equal to [his] monthly base salary at the time of [his]
termination . . . ." (Appellant's Add. at 15, NCA ¶ d.) Paragraph d. of the NCA
further required Bannister to provide Bemis with a detailed written account of his
"good faith and aggressive effort[s]" to obtain employment as well as a sworn
statement that although he had made a good faith and aggressive job search, the NCA
was the sole reason for his unemployment. For any month in which Bannister failed
to provide the required documentation, Bemis was relieved of making the monthly
payment.
In March 2004, Bannister requested that Bemis release him from the
noncompetition provisions of the NCA so that he could accept a position with Mondi
Packaging (Mondi), one of Bemis's competitors, but Bemis refused to release
Bannister. Around the same time, Bemis filed suit against Mondi and two former
Bemis employees who had accepted positions with Mondi alleging the
misappropriation of trade secrets and the disclosure of confidential information.
Mondi and Bemis eventually settled the lawsuit and entered into an agreement in
October 2004 under which Mondi agreed, for a period of 18 months from the date of
the settlement agreement, not to hire any Bemis employees who were then or who
became subject to a noncompetition agreement. In December 2004, Bemis offered
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Bannister a severance package of $40,000 and a release from the noncompetition
provisions of the NCA except as it related to Mondi. This time, Bannister declined.
Bemis terminated Bannister's employment on January 14, 2005.
On February 17, 2005, Bannister's counsel sent a letter to Bemis requesting
payment of his monthly salary under the NCA because he was unemployed due solely
to the noncompetition provisions of the NCA, attaching a February 7, 2005, letter he
had received from Mondi, which informed him that Mondi "would like to extend an
offer of employment to [him]" but could not because it was Mondi's understanding
that Bannister was subject to a noncompetition agreement with Bemis as of October
8, 2004. (Appellant's App. at 91.) Bannister received no response from Bemis, and
on March 31, 2005, Bannister sent a job contacts log to Bemis that detailed his job
search through March 2005. He again requested that Bemis start paying his monthly
salary under the NCA.
Bemis's counsel responded with a letter on April 14, 2005, in which it stated
that "[w]ith respect to [Mondi], Bemis is simply not inclined to meet your request as
[Mondi] has a separate agreement with Bemis Company in which it will not and
cannot offer employment to anyone who was subject to a [NCA] at the time that
agreement became effective." (Appellant's Add. at 18.) The letter continued, stating
that "Bemis did and does release Mr. Bannister from paragraph d of the
noncompetition portion of his Confidentiality and Noncompetitive Agreement as it
relates to all other companies other than [Mondi]." (Id. at 19 (emphasis added).)
Bannister responded by letter on April 25, 2005, that the April 14 Bemis
correspondence was the first notice of his release to pursue employment with any
competitor other than Mondi and that he considered the release a partial release
because of the Mondi exception. Bemis then confirmed in a letter dated April 27,
2005, that Bannister could accept "employment with any company other than
[Mondi,]" and reiterated its position that there were no damages due under the NCA
"based on the fact that Mr. Bannister has been released to seek employment with any
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company other than [Mondi]," noting that even if Bannister had been released to seek
employment with Mondi, Mondi could not hire him because of the Bemis/Mondi
settlement agreement. (Appellee's App. at 12-13.)
Bannister accepted a position with Bancroft Bag, Inc., a Bemis competitor, on
October 24, 2005. He brought this breach of contract claim against Bemis for its
failure to pay his monthly salary under the NCA for the nine-month period of January
through October 2005. Both parties moved for summary judgment. The district court
found the NCA to be unambiguous and granted summary judgment to Bannister,
awarding him $81,051.36, which represented his salary for the entire nine-month
period that he was unemployed. Bemis appeals.
II.
We review the district court's summary judgment order and its interpretation of
state law de novo, applying the same standards applied by the district court. STL 300
N. 4th, LLC v. Value St. Louis Assocs., L.P., 540 F.3d 788, 792 (8th Cir. 2008).
"Summary judgment is appropriate if the record shows no genuine issue of material
fact, entitling the moving party to a judgment as a matter of law." Corn Plus Co-op.
v. Cont'l Cas. Co., 516 F.3d 674, 678 (8th Cir. 2008). We apply Arkansas law to this
diversity contract case based on the contract's choice-of-law clause. " Under Arkansas
law, the determination [of] whether a contract is ambiguous is a question of law" for
the court. Jet Asphalt & Rock Co. v. Angelo Iafrate Constr., LLC, 431 F.3d 613, 616
(8th Cir. 2005).
We agree with the district court that the provisions of the NCA are clear and
unambiguous. The NCA unambiguously provides that Bemis had the sole discretion
to determine whether to enforce the noncompetition covenants by choosing to pay or
not to pay Bannister his monthly salary. If Bemis chose to enforce the provisions,
Bannister could not accept employment with a Bemis competitor, and he was required
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to provide Bemis with a detailed written account of his efforts to locate employment
along with a sworn statement that he was unemployed solely because of the NCA
before he was entitled to receive his base monthly salary. The corollary to Bemis's
discretion as to whether to enforce the noncompetition provisions is that if Bemis did
choose to enforce the provisions, then Bemis was required to pay Bannister his
monthly salary as long as Bannister met the prerequisites contained in the NCA.
The underlying facts are not in dispute; it is only the operative effect of those
facts on the NCA about which the parties disagree. It is clear from the language of the
correspondence between Bemis and Bannister that Bemis did not grant Bannister a
full release from the noncompetition provisions of the NCA. Bemis stated in its April
14 letter that it "did and does release Mr. Bannister from paragraph d . . . as it relates
to all other companies other than [Mondi]" (Appellant's Add. at 19 (emphasis added)),
and it reiterated in its April 27 letter that "Mr. Bannister has been released to seek
employment with any company other than [Mondi]" (Appellee's App. at 12).
Although Bemis raised the settlement agreement with Mondi in its attempt to preclude
Bannister from accepting employment with Mondi,2 Bemis explicitly asserted its
rights under the NCA when it told Bannister that he was not released from the NCA
as it related to Mondi. To the extent that the Mondi settlement is relevant, the only
reason it prevented Mondi from hiring Bannister is because of Bannister's NCA with
Bemis. Thus, even considering the settlement agreement, the NCA was still the sole
cause of Bannister's inability to be hired by Mondi. Because the NCA does not
provide for a partial release, once Bannister provided the required documentation and
sought payment from Bemis under the NCA and Bemis chose to enforce the NCA as
it related to Mondi, Bemis was obligated to pay Bannister his monthly salary.
2
In fact, Bemis had no power to exert over Bannister based on the Mondi
settlement itself. If Mondi chose to hire Bannister in violation of the settlement
agreement, Bemis's recourse would have been against Mondi, the party to the
settlement agreement, not Bannister, a nonparty, as Bemis acknowledged during oral
argument.
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We reject Bemis's attempt to rely on Bannister's alleged failure to meet the
conditions precedent before being entitled to his monthly salary under the NCA.
Bannister informed Bemis on February 17, 2005, that he would be employed by
Mondi but for the NCA, and he demanded payment of his monthly salary under the
NCA. Bannister then forwarded the required documentation on March 31 concerning
his job search, as well as the affidavit required by the NCA stating that he was
unemployed due solely to the NCA. Bannister requested that Bemis identify any
deficiencies it found in the submitted documentation. Bemis responded on April 14
that "[w]ith respect to [Mondi], [it] simply was not inclined to meet [Bannister's]
request," (Appellant's Add. at 18), and informed Bannister that he was released from
the NCA as to all other employers. Bemis reiterated on April 27 that it was refusing
to pay Bannister under the NCA because it had released Bannister "to seek
employment with any company other than [Mondi]," (Appellee's App. at 12), not
because Bemis found Bannister's submitted documents inadequate. The NCA
required Bannister to "give Bemis a detailed written account of [his] efforts to obtain
employment and . . . a sworn statement by [him] that although [he] conscientiously
sought employment and made a good faith and aggressive effort to obtain employment
consistent with [his] abilities and education, [he] was unable to obtain it solely
because of the provisions" of the NCA. (Appellant's Add. at 15.) Bannister provided
the required documentation: a detailed written account and an affidavit with the
required statements. Bannister met the conditions precedent contained in the NCA.
We also reject Bemis's argument that Bannister is entitled at most to only one
month's salary because he met the monthly conditions precedent required by the NCA
on only one occasion. After Bannister provided the required documentation, Bemis
informed him of its position that he was "not entitled to any payments under the
agreement" based on its assertion that Bannister had been released from the NCA.
(Appellee's App. at 12.) Bemis failed to perform under the NCA when it elected to
enforce the noncompetition provisions at least as to Mondi but refused to pay
Bannister under the NCA after he submitted the required documentation. Under
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Arkansas law, "the failure of one party to perform its contractual obligations releases
the other party from its obligations. The party who first breaches a contract is in no
position to take advantage of a later breach by the other party." Stocker v. Hall, 602
S.W.2d 662, 664-65 (Ark. 1980) (internal citations omitted); see also Restatement
(Second) of Contracts § 237 (1981) ("[I]t is a condition of each party's remaining
duties to render performances to be exchanged under an exchange of promises that
there be no uncured material failure by the other party to render any such performance
due at an earlier time."). Just as a builder who contracts to build a house in exchange
for installment payments is excused from further construction as long as the buyer
fails to make an installment payment, see Restatement (Second) of Contracts § 237,
cmt. a, illus. 1, Bannister was not required to continue to submit monthly
documentation of his job search as long as Bemis refused to pay him under the NCA.
Finally, we agree with the district court that Bannister was entitled to damages
for the entire nine-month period that he was unemployed. Bannister originally made
demand for payment of his monthly salary on February 17, one month after his
termination, and he provided the required documentation for the period beginning
with the date of his unemployment. Thus, Bemis's duty to pay Bannister his monthly
salary, once it elected to enforce the NCA, dates to his termination date. As for the
period after Bemis's breach of the NCA, Bannister was entitled to the benefit of his
bargain by being put in as good a position as he would have been in had Bemis
performed the contract. See Pennington v. Rhodes, 929 S.W.2d 169, 174 (Ark. Ct.
App. 1996) ("[T]he underlying purpose in awarding damages for breach of contract
is to place the injured party in as good a position as he would have been had the
contract been performed."); Restatement (Second) of Contracts § 347(a) & cmt. a
("Contract damages . . . are intended to give [the injured party] the benefit of his
bargain by awarding him a sum of money that will, to the extent possible, put him in
as good a position as he would have been in had the contract been performed."). If
Bemis had performed its contract, it would have paid Bannister his monthly salary for
up to 18 months, as long as he was unemployed due solely to the NCA. Bannister
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continued to seek employment consistent with Bemis's insistence that he could accept
a position with anyone except Mondi, and he documented his job search efforts.
Although Bemis's breach relieved Bannister of his obligation to meet the monthly
documentation conditions required by the NCA, he was still obligated to attempt to
mitigate his damages. See Marshall Sch. Dist. v. Hill, 939 S.W.2d 319, 322 (Ark. Ct.
App. 1997) ("Mr. Hill had a duty to take reasonable steps to mitigate the damages, and
he did so by seeking and finding other employment."). Bannister's efforts toward, and
eventual success at, securing employment satisfied his obligation to mitigate his
damages, and the district court appropriately awarded him damages for the nine-
month period during which he was unemployed.
III.
Bemis breached the unambiguous NCA when it chose to enforce the
noncompetition provisions as they related to Mondi but refused to pay Bannister's
monthly salary, and the district court appropriately awarded Bannister damages under
the contract for the period he was unemployed. The district court's judgment is
affirmed.
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