Allen v. Kansas Association of Counties ( 2020 )

NOT DESIGNATED FOR PUBLICATION
No. 121,582
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
RANDALL L. ALLEN,
Appellant,
v.
KANSAS ASSOCIATION OF COUNTIES,
Appellee.
MEMORANDUM OPINION
Appeal from Shawnee District Court; TERESA L. WATSON, judge. Opinion filed May 1, 2020.
Reversed.
Alan V. Johnson, of Sloan, Eisenbarth, Glassman, McEntire & Jarboe, L.L.C., of Topeka, for
appellant.
Larry G. Michel and Laurel A. Michel, of Kennedy Berkley Yarnevich & Williamson, Chartered,
of Salina, for appellee.
Before ARNOLD-BURGER, C.J., GREEN and BUSER, JJ.
PER CURIAM: When parties fairly enter into a contract, the district court should
not seek loopholes and technical legal grounds to defeat the contract's intended purpose.
"'[T]he paramount public policy is that freedom to contract is not to be interfered with
lightly.'" Idbeis v. Wichita Surgical Specialists, P.A., 279 Kan. 755, 770, 112 P.3d 81(2005) (quoting Weber v. Tillman, 259 Kan. 457, 474, 913 P.2d 84 [1996]).
1
Randall L. Allen and the Kansas Association of Counties (KAC) entered into an
employment agreement in August 2013. The agreement automatically renewed every
year unless Allen provided adequate written notice of his resignation or the KAC
provided adequate written notice of termination. The agreement also contained a
severance payment clause; if the KAC terminated Allen without just cause, the KAC was
obligated to pay Allen six months' severance pay.
Allen and the KAC renewed the contract for several years. But in October 2018,
the KAC sent Allen written notice that his employment would end on December 31,
2018. The KAC refused to pay Allen severance pay. Allen sued KAC alleging breach of
contract.
The KAC filed a motion to dismiss, which the district court granted. The district
court held that the KAC was not obligated to pay Allen severance pay under the plain
language of the contract. We disagree. A plain reading of the contract requires the KAC
to pay Allen severance pay when it terminates the agreement without just cause. As a
result, we reverse the district court's order granting KAC's motion to dismiss.
FACTUAL AND PROCEDURAL HISTORY
In 1996, the KAC hired Randall L. Allen to be its Executive Director. The parties
entered into a written employment agreement in August 2013.
The agreement noted that the KAC desired to:
"1) . . . retain the services of [Allen] and provide inducement for him to remain in such
employment, 2) . . . induce full work productivity by [Allen] by providing peace of mind
with respect to future security; . . . and 5) . . . provide a just means for terminating
[Allen's] services at such time as [Allen] may deem it prudent."
2
Under Section 2.A of the agreement, Allen agreed "to continue employment with
[the KAC] and remain in the exclusive employ of [the KAC] until December 31, 2014,
and neither to seek other employment nor to become employed by another employer until
said termination date, unless said termination date is affected as hereinafter provided." A
similar provision—2.B—relating to the KAC's rights stated: "Nothing in this agreement
shall prevent, limit, or otherwise interfere with the right of [the KAC] to terminate the
services of [Allen] at any time, subject only to the provisions set forth in Section 4,
Paragraphs A and B, of this agreement."
The employment agreement was for a one-year term, but the agreement also
contained a clause which addressed extending the employment agreement each year.
Under Section 2.D:
"In the event written notice to terminate or resign, as the case may be, is not
given by either party to this agreement to the other party sixty (60) days prior to the
termination date as hereinabove provided, this agreement shall be automatically extended
on the same terms and conditions as provided herein for an additional term of one year.
Said agreement shall continue to be extended thereafter for additional one year terms on
the same terms and conditions including the notice provision."
Section 4.A of the agreement addressed the possibility of Allen being
compensated if his employment ended. Under what circumstances Allen would be
entitled to compensation is the subject of this appeal. Section 4.A of the agreement stated:
"In the event [Allen] is terminated by [the KAC] for any reason other than for
just cause, and during such time [Allen] is willing and able to perform the duties of
Executive Director, [the KAC] agrees to pay [Allen] six (6) full months' salary, said
payment to be made in the same manner as if [Allen] were still employed. . . . It is
understood by the parties hereto that the provisions of this Section for severance pay do
not apply if the employment relationship is terminated by reason of the death of or
voluntary resignation by [Allen]."
3
Allen and the KAC renewed the agreement each year, until October 2018, without any
changes to the sections discussed above.
On October 24, 2018, the KAC sent written notice to Allen informing him that the
KAC would not renew his contract. According to the letter, the notice was "provided
pursuant to Section 2.D. of the Employment Agreement dated August 23, 2013.
Accordingly, your employment will end on December 31, 2018." The relevant text of the
letter was quoted in Allen's initial petition.
The KAC placed Allen on paid leave in November 2018. Allen filed suit against
the KAC on December 12, 2018. Allen claimed that the KAC breached the employment
agreement by refusing to pay him six months' worth of his salary as severance pay under
section 4.A. He also claimed he was entitled to compensation for his accrued vacation
and sick leave. Allen sought an order of mandamus compelling the KAC to pay him what
he believed he was owed under the contract, as well as attorney fees and damages.
Finally, Allen alleged that the KAC's actions violated the Kansas Wage Payment Act. But
this claim was apparently resolved in the district court, and Allen does not pursue it here.
The KAC moved to dismiss Allen's suit under K.S.A. 2019 Supp. 60-212(b)(6).
The KAC's motion and memorandum in support attached the employment agreement and
a paystub which included a payout for Allen's vacation and sick leave—neither of which
were included in Allen's initial pleading.
Allen responded to the KAC's motion and argued, in part, that the motion must be
treated as a motion for summary judgment because the KAC included evidence that was
not included in the pleadings.
The district court considered the parties' arguments and determined that the KAC's
motion could be treated as a motion to dismiss because it did not need to consult the
4
extraneous evidence to reach its decision. The district court agreed with the KAC,
holding that Allen was not entitled to severance pay under the circumstances and
dismissing Allen's suit. Allen timely appeals the district court's decision.
ANALYSIS
Allen raises one over-arching issue on appeal: whether the KAC is obligated to
pay him severance pay after not renewing his employment contract. Answering this
question requires interpretation of the employment agreement.
Any way you look at it, our standard of review is de novo.
As an initial matter, the parties argue about how the district court should have
handled the KAC's motion to dismiss. Allen argues that because both parties included
evidence outside the pleadings—the written notice of nonrenewal, employment
agreement, and paystub—the court should have treated it as a motion for summary
judgment. See Brown v. Ford Storage and Moving Co., 43 Kan. App. 2d 304, 306-07,
224 P.3d 593 (2010) (summary judgment standard required when court considers facts
beyond the face of the pleading in examining a motion to dismiss).On the other hand, the
KAC believes the district court should have treated the motion to dismiss as a motion to
dismiss.
The district court determined that it did not need to consider any of the extraneous
evidence to rule on the merits and could treat the KAC's motion as a motion to dismiss.
The court noted that even if it was to evaluate the motion under a summary judgment
standard, the outcome would be the same. We agree.
5
Whether a district court erred by granting a motion to dismiss for failure to state a
claim is a question of law subject to unlimited review. This court reviews the well-
pleaded facts in a light most favorable to the plaintiff and assumes as true those facts and
any inferences reasonably drawn from them. If those facts and inferences state any claim
upon which relief can be granted, then dismissal is improper. Cohen v. Battaglia, 296
Kan. 542, 545-46, 293 P.3d 752 (2013).
That said, there is no factual dispute in this case. So even if we were treating this
as a summary judgment motion, our standard of review is also de novo. See Martin v.
Naik, 297 Kan. 241, 246, 300 P.3d 625 (2013) (de novo standard of review for summary
judgment when there is no factual dispute).
Finally, whether Allen is entitled severance pay from the KAC is a question of
contract interpretation. This court exercises unlimited review over the interpretation and
legal effect of written instruments and is not bound by the lower court's interpretations or
rulings. Born v. Born, 304 Kan. 542, 554, 374 P.3d 624 (2016). Whether a contract is
ambiguous is a question of law subject to de novo review. Waste Connections of Kansas,
Inc. v. Ritchie Corp., 296 Kan. 943, 964, 298 P.3d 250 (2013).
So there can be no doubt that we review the issue at the heart of this case, whether
Allen was entitled to severance pay, de novo. With that in mind, we turn to the question
at issue.
Allen was entitled to severance pay when his employment was terminated by KAC.
"'The primary rule for interpreting written contracts is to ascertain the parties'
intent. If the terms of the contract are clear, the intent of the parties is to be determined
from the language of the contract without applying rules of construction.'" Peterson v.
Ferrell, 302 Kan. 99, 104, 349 P.3d 1269 (2015). Additionally, contractual provisions
6
should not be interpreted by isolating one particular sentence or provision. Instead, courts
should consider the contract as a whole. "The law favors reasonable interpretations, and
results which vitiate the purpose of the terms of the agreement to an absurdity should be
avoided.'" Waste Connections of Kansas, 296 Kan. at 963.
The plain language of the contract here indicates that Allen was entitled to
severance pay when his employment ended. Sections 2.B and 2.C give the KAC and
Allen the right to voluntarily and unilaterally end the employment agreement, subject to
the other provisions of the contract. Section 2.A states that Allen agreed to continue
employment with the KAC "and remain in the exclusive employ of [the KAC] until
December 31, 2014, and neither to seek other employment nor to become employed by
another employer until said termination date, unless said termination date is affected as
hereinafter provided." (Emphasis added.) The contract listed December 31, 2014, as the
termination date, and the date remained the same each year as the employment agreement
carried over. Nothing in Section 2 gives either party the right to choose to "not renew"
the contract. As the contract is written, it would continue in perpetuity until there was
appropriate written notice of termination or resignation.
Under the plain language of the contract, Allen would be entitled to severance pay
"[i]n the event [he was] terminated by [the KAC] for any reason other than for just cause,
and during such time [he was] willing and able to perform the duties" of his job. The
question then is whether the KAC terminated Allen by sending him written notice that the
KAC would not be extending his contract and that his employment would end on
December 31, 2018.
Section 2.D controlled the renewal of the employment agreement between the
parties. Under that section, if
7
"written notice to terminate or resign, as the case may be, is not given by either party to
this agreement to the other party sixty (60) days prior to the termination date as
hereinabove provided, this agreement shall be automatically extended on the same terms
and conditions as provided herein for an additional term of one year."
Under Section 2.D, the employment agreement between Allen and the KAC would
continue to renew, every year, unless one party provided the other 60 or more days'
written notice of termination or resignation. Section 2.D makes no reference to a decision
to not extend the agreement. The agreement is either extended an additional year or
comes to an end, on the termination date, by (1) the KAC electing to terminate or (2)
Allen electing to resign.
Allen clearly did not resign. The KAC sent him written notice that it was electing
to not renew his contract—in effect terminating his employment. In its brief, the KAC
inadvertently acknowledges this by saying "Allen and the KAC each had the option to
terminate the employee-employer relationship on December 31, 2014 by giving the other
60 days prior notice that they were choosing not to extend the employee-employer
relationship beyond that contracted term, or in other words, that they were choosing to
non-renew the Agreement." (Emphasis added.) Allen could have done so by resigning,
which would not have triggered the severance pay provision. The KAC could only do so
by terminating Allen. The plain language of the contract did not have an option for a
separate "nonrenewal."
The district court reasoned that this was absurd, questioning: "Why would KAC
ever give two months' notice to end the term of the contract, only to be required to pay
Allen six months' severance pay on top of that?" But this court has acknowledged that
severance pay generally serves two objectives: "(1) to protect employees from the
economic hardship of joblessness and (2) to reward employees for past service." A.O.
8
Smith v. Kansas Dept. of Human Resources, 36 Kan. App. 2d 530, 537, 144 P.3d 760(2005). Either objective could apply here.
A plain language reading of Section 2.D and 4.A does not seem so absurd that this
court needs to twist the plain meaning of the employment agreement. See 36 Kan. App.
2d at 537. While it may seem odd that an employer could be required to give a 60-day
notice that it was not renewing the employment agreement and still be required to pay six
months' severance pay, parties generally may contract how they please. Idbeis, 279 Kan.
at 770 (noting freedom to contract is not to be interfered with lightly); Razorback
Contractors v. Board of Johnson County Comm'rs, 43 Kan. App. 2d 527, 540, 227 P.3d
29 (2010) (acknowledging that generally courts should not interfere with contracts made
by competent parties).
The plain and unambiguous language of the employment agreement entitled Allen
to six months' severance pay if he was terminated for any reason without just cause. The
employment agreement has only two ways for the contract to stop automatically
renewing each year: termination or resignation. Allen did not resign; therefore, the KAC
necessarily must have terminated him by sending him written notice that the employment
agreement would not be renewed. Because Allen was terminated without just cause,
while Allen was willing and able to continue as Executive Director, the KAC was
obligated to pay him six months' severance under the terms of the employment
agreement. The order of the district court granting KAC's motion to dismiss is reversed.
Reversed.
9