Gerald Gresh v. Waste Services of America, Inc

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 09a0136n.06
Filed: February 17, 2009
No. 07-6136
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
GERALD GRESH, )
)
Plaintiff-Appellant, )
)
v. ) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR THE
WASTE SERVICES OF AMERICA, INC., ) EASTERN DISTRICT OF KENTUCKY
W. TODD SKAGGS, JAMES P. DALTON, )
and RIVER CITIES DISPOSAL, LLC, )
)
Defendants-Appellees. )
)
Before: MERRITT, COLE and SUTTON, Circuit Judges.
SUTTON, Circuit Judge. Gerald Gresh claims that Waste Services of America (“WSA”),
two of its corporate officers and an affiliated company fraudulently induced him to refrain from
exercising an option to buy WSA stock until after most of the corporation’s assets had been sold or
transferred. The district court rejected all of his claims as a matter of law. We affirm in part and
reverse in part.
I.
In 1995, Bruce Addington and Todd Skaggs created WSA, a landfill-development company.
Addington owned 55% of the stock, and Skaggs owned the balance. Because neither Addington nor
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Skaggs had extensive experience developing landfills, they invited Gerald Gresh, who had such
experience, to join them in the venture. To encourage Gresh, they offered him a stock-option
agreement: In exchange for becoming an at-will employee, Gresh would receive an option to
purchase up to 50 shares of WSA stock (5% of all authorized shares) for $1,000 per share. Gresh
accepted the offer and became a vice president of the company.
Addington eventually left WSA and conveyed all of his stock to Skaggs, making him the
corporation’s sole shareholder. Soon after Addington’s departure, Skaggs began negotiations to sell
many of WSA’s assets. On June 22, 1998, Skaggs told Gresh that he intended to sell WSA’s
landfills and that he must discharge Gresh as a result. Skaggs at the same time presented Gresh with
a proposed “Agreement and Release,” offering to buy Gresh’s stock option for $250,000. Gresh
rejected the offer and tried to negotiate a better deal. Over the next several months, Gresh and WSA
(through Jim Dalton, a vice president with the corporation) tried to negotiate a buyout of Gresh’s
option. The parties never reached an agreement, and by February 1999 Gresh still had his WSA
stock option, unsold and unexercised.
In the midst of these discussions, WSA (apparently unbeknownst to Gresh) negotiated with
Liberty Waste Services to sell some of its landfills. WSA and Liberty signed a non-binding letter
of intent on June 8, 1998, and after further negotiations the parties signed a binding letter of intent
on October 6, 1998. By January 1999, Skaggs had sold several WSA-developed landfills to Liberty
and transferred most of the others to affiliated companies he controlled. When Gresh learned in
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February 1999 of the sale to Liberty, Skaggs told him that WSA had one remaining asset—a single
landfill of little value—making Gresh’s option effectively worthless.
Invoking the diversity jurisdiction of the federal courts, Gresh brought six state-law claims
against Skaggs, Dalton, WSA and River Cities Disposal, LLC (one of the affiliated companies
Skaggs controlled): (1) breach of fiduciary duty, (2) fraudulent nondisclosure, (3) fraudulent
misrepresentation, (4) breach of the implied duty of good faith and fair dealing, (5) tortious
interference with existing contractual relations and (6) tortious interference with prospective
contractual relations. The defendants moved for summary judgment on all six claims, and the
magistrate judge recommended that the motion be granted. Over Gresh’s objections, the district
court adopted the magistrate judge’s report and recommendation.
II.
In addressing Gresh’s appeal, we give fresh review to the district court’s summary-judgment
decision, drawing all reasonable inferences in Gresh’s favor. See Med. Mut. of Ohio v. K. Amalia
Enters., Inc., 548 F.3d 383, 389 (6th Cir. 2008).
A.
Gresh first argues that Skaggs breached his fiduciary duties when he sold WSA’s landfills
without giving Gresh notice and when he transferred other assets to affiliated companies that Skaggs
controlled. Yet under Kentucky law, which (the parties agree) governs this case, Skaggs did not owe
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Gresh a fiduciary duty. There is no lockstep recipe for ascertaining when a fiduciary relationship
exists. See Abney v. Amgen, Inc., 443 F.3d 540, 550 (6th Cir. 2006). But as a “general rule,” a
fiduciary relationship turns “on trust or confidence reposed by one person in the integrity and fidelity
of another” that “necessarily involves an undertaking in which a duty is created in one person to act
primarily for another’s benefit in matters connected with such undertaking.” Steelvest, Inc. v.
Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 485 (Ky. 1991); accord In re Sallee, 286 F.3d 878,
892–93 (6th Cir. 2002). Certain relationships come to mind: executors of a trust; a joint venture;
an attorney-client relationship. See Bryan v. Sec. Trust Co., 176 S.W.2d 104, 107 (Ky. 1943); Lach
v. Man O’War, LLC, 256 S.W.3d 563, 569 (Ky. 2008); Am. Cont’l Ins. Co. v. Weber & Rose, P.S.C.,
997 S.W.2d 12, 13 (Ky. Ct. App. 1998). On the other side of the line are “ordinary business
relationship[s]” and other connections premised on “arm’s length” negotiations. See Quadrille Bus.
Sys. v. Ky. Cattlemen’s Ass’n, Inc., 242 S.W.3d 359, 364–65 (Ky. Ct. App. 2007).
The relationship between Gresh and Skaggs falls on the “ordinary business relationship” side
of the line. Gresh cannot ground his fiduciary-breach claim on his status as an employee of WSA
or on his status as a stock-option holder. Corporate officers generally do not owe fiduciary duties
to at-will employees, see, e.g., Grappo v. Alitalia Linee Aeree Italiane, S.P.A., 56 F.3d 427, 432 (2d
Cir. 1995), or to option holders, see, e.g., BHC Interim Funding, L.P. v. Finantra Capital, Inc., 283
F. Supp. 2d 968, 989–90 (S.D.N.Y. 2003); In re Cendant Corp. Sec. Litig., 76 F. Supp. 2d 539,
549–50 (D.N.J. 1999); Powers v. British Vita, P.L.C., 969 F. Supp. 4, 5 (S.D.N.Y. 1997).
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Nor has Gresh established a cognizable basis for concluding that his relationship with Skaggs
and WSA went beyond the at-will-employee status described in his stock-option agreement. Yes,
an affidavit signed by Addington says that he, Skaggs and Gresh orally agreed that they were
“essentially partners, or co-owners,” JA 795, that they would work in each other’s best interests and
that they would resist pursuing any landfill opportunity to the exclusion of the other two. Yet
whatever oral arrangements the parties may have had, the parol-evidence rule prohibits Gresh from
using (and bars us from considering) Addington’s affidavit to establish the existence of a “broader,
oral agreement,” Reply Br. at 26, that overrides the terms of the stock-option agreement. In signing
the stock-option agreement, Gresh “acknowledge[d] that he [was] an at-will employee of [WSA]”
and agreed that his option did nothing to “alter, add to, or change” his at-will-employment status.
JA 597 (internal quotation marks omitted). No less importantly, the agreement included an
integration clause, which said that the contract “constitute[d] the entire agreement of the parties,”
and that no “oral or implied agreement or representations” other than those set out in the agreement
could bind WSA or Gresh. JA 598. Gresh’s efforts to elevate the relationship to a de facto
partnership thus directly conflict with the agreed-upon terms of the stock-option agreement and the
integration clause, precluding us (or a jury) from invoking the Addington affidavit to establish the
existence of a “broader, oral agreement.” See Akins v. City of Covington, 97 S.W.2d 588, 590 (Ky.
1936); Caudill v. Acton, 175 S.W.3d 617, 620 (Ky. Ct. App. 2004).
The collateral-contract exception to the parol-evidence rule offers Gresh no refuge either.
A party to a written agreement, sure enough, may rely on parol evidence to prove the existence of
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a separate contract—one “independent of, collateral to, and not inconsistent with, the written
contract,” Tex. Gas Transmission Corp. v. Kinslow, 461 S.W.2d 69, 71 (Ky. 1970) (internal
quotation marks omitted). But that is not what is going on. Gresh seeks to establish the existence
of a “broader, oral agreement” by which he was “essentially [a] partner[] or co-owner[]” in
WSA—an agreement in other words that contradicts the stock-option contract. JA 795. The district
court correctly rejected Gresh’s fiduciary-breach claim as a matter of law.
B.
Gresh next argues that WSA and Skaggs fraudulently failed to disclose several facts to him:
(1) the full details concerning the sale of WSA assets to Liberty, including the timing, price and
terms of the deal, (2) Skaggs’ intent to transfer a WSA-developed landfill to another company that
he controlled and (3) Skaggs’ assumption of over $6 million in debt WSA owed to Addington. In
alleging fraud by omission, Gresh must do more than show that, as a matter of best-business
practices, Skaggs should have disclosed this information—true though that may be. He must show
that Skaggs (or WSA) owed him a duty to disclose it: (1) because Skaggs owed a fiduciary duty to
Gresh, (2) because a statute imposed such a duty, (3) because Skaggs had superior knowledge about
facts essential to the transaction and Gresh reasonably relied upon him to disclose that knowledge
or (4) because Skaggs partially disclosed relevant facts, making what was said and left unsaid
materially misleading. See Rivermont Inn, Inc. v. Bass Hotels & Resorts, Inc., 113 S.W.3d 636, 641
(Ky. Ct. App. 2003); Smith v. Gen. Motors Corp., 979 S.W.2d 127, 129 (Ky. Ct. App. 1998); United
Parcel Serv. Co. v. Rickert, 996 S.W.2d 464, 469 (Ky. 1999). When the first circumstance (a
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fiduciary duty) does not exist, the courts have been careful not to apply the other three circumstances
so broadly as to transform everyday, arms-length business transactions into fiduciary relationships.
Cf. Quadrille, 242 S.W.3d at 364–65; Anchor v. O’Toole, 94 F.3d 1014, 1024 (6th Cir. 1996);
Burton v. R.J. Reynolds Tobacco Co., 397 F.3d 906, 911 (10th Cir. 2005).
The first two grounds do not apply. Skaggs and Gresh did not have a fiduciary relationship,
as we have explained, and Gresh does not maintain that any statute created a duty to disclose.
A superior-knowledge duty of disclosure also does not apply. In “particular circumstances,”
the Kentucky courts have recognized that a seller may be obligated to disclose known risks or defects
that a reasonable buyer would want to know and that he could not discover through ordinary
diligence. Smith, 979 S.W.2d at 129. For example, a seller of a car may have a duty to disclose
material defects known to it, id., a party commissioned to drill for water may have a duty to disclose
that the water might not be potable, Faulkner Drilling Co., Inc. v. Gross, 943 S.W.2d 634, 638 (Ky.
Ct. App. 1997), and a seller of property may have to disclose a latent defect in it, Bryant v.
Troutman, 287 S.W.2d 918, 921 (Ky. 1956). Consistent with the Restatement of Torts, which the
Kentucky courts generally follow, see, e.g., Larkin v. Pfizer, Inc., 153 S.W.3d 758 (Ky. 2004);
Louisville Gas & Elec. Co. v. Roberson, 212 S.W.3d 107, 111 (Ky. 2006); United Parcel Serv., 996
S.W.2d at 469; but see Steel Techs., Inc. v. Congelton, 234 S.W.3d 920, 929 (Ky. 2007) (not
following Restatement approach for tort of negligent infliction of emotional distress), the failure to
disclose also must be “so shocking to the ethical sense of the community, and . . . so extreme and
unfair, as to amount to a form of swindling, in which the plaintiff is led by appearances into a
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bargain that is a trap, of whose essence and substance he is unaware.” Restatement (Second) of Torts
§ 551 cmt. l.
Neither Skaggs’ nor Dalton’s actions rise to that level or to the level of the cited cases. At
the June 22 meeting, Skaggs discharged Gresh, told him that he was going to sell WSA, then made
an offer to buy Gresh’s stock option. Dalton tried to negotiate an appropriate price for the option
with Gresh over the next several months—at one point raising the offer by $65,000—and several
times presented him with proposed contracts stating that WSA “has been discussing . . . the possible
sale of the assets or stock of WSA,” JA 621, 627, 923, 936.
The key information that Gresh needed to protect himself thus was disclosed at the June 22
meeting. And while Skaggs possessed other information that he did not disclose, Gresh has not
shown that he lacked sufficient information and time to protect his interests in the option, which by
definition has a value that may go up or down from day to day. It is the rare commercial relationship
that does not involve one party with some knowledge advantage over the other, and in many business
transactions each party will believe it has superior knowledge of what the commercial future will
bring, which is frequently what motivates the deal, be it the sale of a business or the purchase of a
share of stock. Cf. Restatement (Second) of Torts § 551 cmt. k (“To a considerable extent,
sanctioned by the customs and mores of the community, superior information and better business
acumen are legitimate advantages, which lead to no liability.”); id. § 551 illus. 8 (seller who is aware
that chattel is worth far less than the buyer thinks it is worth is not obligated to disclose that
knowledge to the buyer).
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Skaggs’ disclosures to Gresh during the June 22 meeting—that WSA planned to sell its
landfills and that Gresh’s option was worth $250,000—also did not trigger a duty to disclose
additional information about these topics. Speaking about a particular topic during a business
negotiation does not, by itself, obligate the speaker to disclose everything else he knows about the
topic. Only when a partial disclosure makes the spoken words materially misleading does the
omission become actionable. See Restatement (Second) of Torts §§ 529, 551(2)(b); United Parcel
Serv., 996 S.W.2d at 469 (relying on § 529 of the Second Restatement); In re Sallee, 286 F.3d at
896.
Skaggs’ statement that he intended to sell WSA did not give rise to a duty to disclose the
details of the Liberty deal (or his intent to transfer a WSA-developed landfill into another corporate
entity) because the omission of those details did not make Skaggs’ statement to Gresh misleading.
Skaggs truthfully told Gresh that he was going to sell WSA, and he did. The statement itself was
not a half-truth likely to lead Gresh astray but rather a direct and honest expression of what Skaggs
intended to do: sell the corporation.
A similar conclusion applies to Skaggs’ representations about the value of Gresh’s option.
While Gresh does not develop the argument, devoting less than a full sentence to it, the idea appears
to be that Skaggs’ representation that the option was worth $250,000 contained an actionable
omission—that Skaggs’ assumption of WSA’s debt to Addington effectively increased the value of
the option. The problem with this argument, as we explain in more detail below in addressing a
related fraudulent-misrepresentation claim, is the absence of reasonable reliance. See United Parcel
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Serv., 996 S.W.2d at 469 (indicating that a plaintiff must establish reliance to succeed on a fraud-by-
partial-disclosure claim); Rivermont Inn, 113 S.W.3d at 641 (stating that one element of a fraud-by-
omission claim is that the defendant’s failure to disclose the material fact induced the plaintiff to act
or refrain from acting). When asked in his deposition why he did not exercise the option, Gresh
explained only that he preferred to negotiate with WSA for a better deal. Gresh never said that he
continued to negotiate, rather than exercise his option, based on Skaggs’ estimation of the
corporation’s or the option’s worth. All of Gresh’s actions after the June 22 meeting confirm that
he believed that his stock option was worth more than the $250,000 WSA initially offered him,
which is why he negotiated for a higher price and why Skaggs eventually offered a higher price,
though apparently not a high enough price. In the absence of reliance, this claim fails as a matter of
law.
C.
Gresh next argues that Skaggs and Dalton made six fraudulent misrepresentations to him in
the course of the negotiations. To establish fraud, Gresh must establish with clear and convincing
evidence that, in taking or refraining from taking an action, he reasonably relied on a representation
that was material, false, known to be false or made recklessly, and made with the intent of inducing
him to act or refrain from acting. See Moore, Owen, Thomas & Co. v. Coffey, 992 F.2d 1439, 1444
(6th Cir. 1993); Ross v. Powell, 206 S.W.3d 327, 330 (Ky. 2006); United Parcel Serv., 996 S.W.2d
at 468. One of the six statements meets this standard; the other five do not.
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First, at some point in early October 1998—in the midst of ongoing negotiations with WSA
regarding the option buyout—Gresh asked Dalton about the status of Skaggs’ plans to sell WSA.
Yet, in October 1998, Dalton—whom Skaggs had given the responsibility of negotiating the buyout
of Gresh’s option—told Gresh that “nothing . . . had crossed [his] desk” concerning plans to sell the
corporation. JA 687 (internal quotation marks omitted). Whether Dalton made that statement in his
individual capacity, in his capacity as a representative of WSA or as an agent of Skaggs, a jury
reasonably could conclude that the representation was fraudulent.
WSA entered into a non-binding letter of intent with Liberty on June 8, 1998, and it entered
into a binding letter of intent on October 6, 1998. Skaggs executed both documents on behalf of
WSA. Having negotiated with Liberty for nearly four months, Skaggs could not represent truthfully
to Gresh in early October 1998 that there were no plans to sell the corporation. And Dalton, the
treasurer and vice president of WSA, cannot show that he had no knowledge of Skaggs’ plans to sell
most of WSA’s assets to Liberty. The record shows that, on September 18, 1998, Dalton faxed
information about four WSA-developed landfills to a corporate officer at Liberty, and by at least
October 5 Dalton was aware that Liberty was conducting due-diligence investigations at WSA’s
landfills.
Resisting this conclusion, the defendants argue—and the district court held—that it was
unreasonable as a matter of law for Gresh to rely on Dalton’s representation that he was unaware of
any plans to sell the company. Not true. As vice president and treasurer, Dalton was the second
highest-ranking officer at WSA. And as the corporate officer tasked with negotiating the buyout
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of Gresh’s stock option, Dalton gave Gresh a reasonable basis for believing that he spoke for WSA.
Gresh and Dalton had been in continual communication for several months regarding the buyout of
the option, and each time Gresh called WSA during the negotiations the company referred him to
Dalton. A jury could fairly conclude that Gresh reasonably relied on Dalton’s representation.
Kentucky’s five-year statute of limitations for fraud claims also does not defeat this claim.
See Ky. Rev. Stat. Ann. § 413.120(12). The statute of limitations began to run when Gresh
discovered the fraud or reasonably should have discovered it. See id. § 413.130(3); Madison County
v. Arnett, 360 S.W.2d 208, 210 (Ky. 1962). Gresh did not discover the falsity of this statement until
February 1999, when he learned about the Liberty sale from a trade publication, and no one offers
any tenable argument why he should have discovered it earlier. Because Gresh included this claim
in his original complaint, which he filed in October 2003, the statute of limitations does not bar it.
Second, at the June 22 meeting, Skaggs told Gresh that he had discussed the sale of WSA
with “a number of parties.” JA 947. Gresh argues that this representation was fraudulent because
Skaggs had talked to one potential buyer—Liberty—and had entered into a non-binding letter of
intent that prevented WSA from negotiating with other entities. But in fact Skaggs testified that over
the relevant period of time he did talk to several different entities about the possible sale of WSA,
and Gresh points to no record evidence contradicting that account.
Even if Gresh could produce such evidence, he has not shown that Skaggs made these
statements to induce Gresh to hold tight in exercising his option. Gresh’s theory is that, by
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misrepresenting the seriousness of the Liberty negotiations—by telling Gresh that WSA was talking
to several potential buyers when it was in serious negotiations with just one—Skaggs sought to
dissuade Gresh from exercising his stock option until most of WSA’s assets had been sold. But if
that were Skaggs’ intent, why would he tell Gresh anything about his intention to sell the
corporation? By telling Gresh of his plans to sell WSA’s assets, Skaggs put Gresh on notice of the
key fact that could affect the value of his option: a sale of some or all of the assets.
Third, Gresh argues that Skaggs’ representation that WSA was “worth $13 million” was
fraudulent because WSA was worth far more than that. Yet Gresh has not come forth with evidence
showing that Skaggs’ representation was false. Gresh points to the non-binding letter of intent in
which Liberty proposed to buy WSA for $29 million. But, as Skaggs explained, the $13 million
figure represented only a portion of the deal with Liberty. Some of the other assets involved in the
sale were owned by Skaggs’ other companies. Indeed, when the parties completed the sale in
January 1999, WSA received just over $13 million for the assets it sold to Liberty.
Even if Gresh could show that the representation was false, he has not presented any evidence
that he relied on Skaggs’ approximation of WSA’s value in choosing not to exercise his stock option.
The “essence” of a fraud claim is “the belief in and reliance upon the statements of the party who
seeks to perpetrate the fraud.” Wilson v. Henry, 340 S.W.2d 449, 451 (Ky. 1960). Yet when asked
in his deposition why he did not exercise the option, Gresh explained only that he preferred to
negotiate with WSA for a better deal. Gresh never said that he continued to negotiate, rather than
exercise his option, based on Skaggs’ estimation of the corporation’s worth. Gresh’s deposition
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testimony also shows that during the negotiations he clearly believed the company was worth more
than $13 million, which is presumably why he opted to prolong the negotiations, turning down offers
of $250,000 and $315,000, and making counteroffers substantially in excess of those amounts.
Because Gresh has not offered any evidence—much less clear and convincing evidence—that he
believed Skaggs’ representation or relied on it in making business decisions, this fraud claim fails
for this reason as well.
Fourth, Gresh cannot base a fraud claim on Skaggs’ representation that Gresh’s stock option
was worth approximately $250,000. Gresh’s entire course of conduct after the June 22 meeting
flowed from his belief that his stock option was worth more than the $250,000 WSA initially offered
him. As his actions confirm, he never viewed WSA’s $250,000 offer as an authoritative appraisal
of its value but merely as an opening offer in a negotiation, an offer that he anticipated would go up,
an offer that did go up but an offer that apparently did not go up enough.
Fifth, in December 1998, Dalton told Gresh that Skaggs “wanted to wait” before continuing
negotiations for the sale of Gresh’s option. JA 701. With the closing of the Liberty sale only a
month away, Gresh argues, that statement was materially misleading. This claim runs aground
because this statement, too, was not false. Even if Dalton and Skaggs were trying to keep Gresh in
the dark about the Liberty sale in the hopes that he would not exercise his option prior to the sale,
that proves that Dalton’s statement that Skaggs “wanted to wait” before continuing negotiations was
true: Skaggs indeed “wanted to wait” until the Liberty sale was completed.
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Sixth, in February 1999, Skaggs told Gresh that “all the landfills were sold on January 1,
1999,” save for one that had no significant value. JA 721. That statement was fraudulent, Gresh
argues, because two of the landfills developed by WSA were not “sold” but transferred into two
separate entities controlled by Skaggs. This claim fails because Gresh does not identify any relevant
action he took (or refrained from taking) in reliance on Skaggs’ representation. Gresh, true enough,
did not exercise his stock option, but this statement was hardly the reason. That WSA’s assets had
been sold—as opposed to transferred to other corporate entities—should have encouraged Gresh to
exercise his option, for presumably WSA would have received something of value in return.
D.
Gresh next argues that WSA breached an implied duty of good faith and fair dealing. To
recover on this theory, Gresh had to show that WSA acted in bad faith in denying him the benefits
intended by the agreement, without regard to whether WSA violated the agreement. See Farmers
Bank & Trust Co. of Georgetown v. Willmott Hardwoods, Inc., 171 S.W.3d 4, 11 (Ky. 2005); Ligon
v. Parr, 471 S.W.2d 1, 2–3 (Ky. 1971); see also O’Kentucky Rose B. Ltd. P’ship v. Burns, 147 F.
App’x 451, 457–58 (6th Cir. 2005). WSA breached that duty, a jury could reasonably find, when
Dalton told Gresh that nothing had “crossed [his] desk” concerning a possible sale of WSA.
In many respects, it is true, WSA dealt fairly with Gresh: Skaggs told him at the June 22
meeting that he was going to sell WSA, he offered a price for the option, and every contract that
WSA sent to Gresh offering him a buyout of his option referred to the fact that WSA had been
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discussing the sale of some or all of the corporation’s assets. But Dalton’s false assurance that no
sale was imminent prevented Gresh from protecting his interest in the value of the option and did
so at the one point when Gresh seemed to be aware of the impact such a sale could have on its value.
Even though WSA had been negotiating with Liberty for nearly four months and had executed a
binding letter of intent with Liberty in early October—calling for a December 1998 closing
date—WSA falsely led Gresh to believe that a sale of the corporation was not imminent and that he
could safely continue to negotiate the buyout of his option without fear of losing everything. Some
businesses, we appreciate, wield sharp elbows, and sometimes there is nothing the courts can do
about it except to invoke the timeless (and frequently ignored) warning of caveat emptor. But when
Gresh, an option holder, asked about the status of Skaggs’ plans to sell WSA, the common-law duty
of good faith required WSA either to be straight with Gresh or to say nothing at all. By telling Gresh
that a sale was not imminent, WSA deprived Gresh of the benefit for which he bargained: the
chance to exercise his option while it was worth something. Cf. Ligon, 471 S.W.2d at 3–4.
E.
Gresh next argues that Skaggs and Dalton tortiously interfered with the contract between him
and WSA. The district court properly granted summary judgment on this claim for one basic (and
good) reason: Gresh has not identified a contract between him and WSA that WSA breached, and
Kentucky law requires a breach in order to bring such a claim. See Indus. Equip. Co. v. Emerson
Elec. Co., 554 F.2d 276, 289 (6th Cir. 1977) (“Two of the necessary elements of [the tort of
intentional interference with an existing contractual relationship] are the existence of a contract
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between the plaintiff and a third party and a subsequent breach of the contract by the third party.”);
Harrodsburg Indus. Warehousing, Inc. v. MIGS, LLC, 182 S.W.3d 529, 532 (Ky. Ct. App. 2005).
WSA never breached the stock option agreement and, as explained above, the parol-evidence rule
defeats Gresh’s attempt to establish the existence of some “broader, oral agreement” among him,
Addington and Skaggs.
F.
Also unavailing is Gresh’s tortious-interference-with-prospective-contractual-relations claim.
To succeed, Gresh must (1) identify a prospective contractual relation (2) that defendants interfered
with and (3) establish that the interference was “intentional[] and improper[].” Restatement (Second)
of Torts § 766B; see also Nat’l Collegiate Athletic Ass’n v. Hornung, 754 S.W.2d 855, 857–58 (Ky.
1988) (adopting Second Restatement’s approach). Gresh proffers that he had a “prospective
contractual right . . . to own 5% of the solid waste opportunities developed by WSA.” JA 69. Yet
the terms of the stock-option agreement—which gave Gresh the option to own 5% of the stock in
WSA—do not support this contention, leaving Gresh again to invoke unsuccessfully his “broader,
oral agreement” among Skaggs, Addington and him. No evidence shows that the defendants
interfered with Gresh’s ability to acquire 5% of the stock in WSA. Gresh admits that he could have
exercised his option at any time, and when he exercised his option in 1999, WSA complied with the
terms of the agreement, giving Gresh one share of WSA stock for $1,000. Gresh simply has not
identified any affirmative action WSA, Skaggs, Dalton or River Cities took to obstruct or restrict his
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No. 07-6136
Gresh v. Waste Services
ability to exercise his option and acquire stock in WSA. Because he cannot show actual interference,
the district court properly granted summary judgment on this claim.
III.
For these reasons, we affirm in part, reverse in part and remand for further proceedings.
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