McGrann v. First Albany Corp., 04-3602.

• Decision Date: 14 September 2005
• Docket Number: No. 04-3602.,04-3602.
• Citation: 424 F.3d 743
• Parties: Christopher C. McGRANN, Appellee, v. FIRST ALBANY CORPORATION, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 743

424 F.3d 743

Christopher C. McGRANN, Appellee, v. FIRST ALBANY CORPORATION, Appellant.

No. 04-3602.

United States Court of Appeals, Eighth Circuit.

Submitted: June 21, 2005.

Filed: September 14, 2005.

Christopher A. Grgurich, argued, Minneapolis, MN (Paul A. Banker, Minneapolis, MN, on the brief), for appellant.

Joseph W. Anthony, argued, Minneapolis, MN (Aaron R. Hartman, Minneapolis, MN, on the brief), for appellee.

Before RILEY, BOWMAN, and BENTON, Circuit Judges.

RILEY, Circuit Judge.

Christopher C. McGrann (McGrann) filed suit to enforce an arbitration award in his favor in the amount of $840,165.99 against his former employer, First Albany Corporation (FAC). FAC moved to vacate the arbitration award partially to $340,165.99. The district court¹ confirmed the entire arbitration award, and entered judgment in McGrann's favor. We affirm.

I. BACKGROUND

From 1995 to 2001, McGrann worked as a research analyst and institutional salesperson for the investment bank of Wessels, Arnold and Henderson (Wessels)² in Minneapolis, Minnesota. During his tenure at Wessels, McGrann's sales territory included Boston and New York. In 1999, McGrann earned $1,075,000; in 2000, he earned $1,400,000.08. In his 1999 year-end performance review, McGrann was characterized as professional, trusted, intelligent, and one of Wessels's top salespersons.

In the fall of 2000, FAC's Senior Vice President and Director of Institutional Equity Sales contacted McGrann and two other salespersons at Wessels to discuss employment with FAC. During negotiations, McGrann estimated the revenues he might generate if he joined FAC's institutional equity sales division. In March 2001, FAC offered employment to McGrann and the other two Wessels employees. In an agreement dated March 30, 2001, FAC hired McGrann as Managing Director of FAC's Institutional Equity Sales Department under the following terms:

We have agreed to pay you a base salary at the rate of $150,000 per year for calendar years 2001 and 2002 to the extent you remain employed by us. Generally, bonuses are based on your contribution, the performance of the firm as a whole and other important factors within our sole discretion. However, we have agreed to pay you a bonus of not less than $500,000 for 2001 and $600,000 for 2002. Such bonuses will be payable on February 15th of the following year or on such other date as firm-wide bonuses are paid, and only if you remain employed by us at such times.

....

We have agreed to give you a loan of $350,000 (the "Loan") [, which] ... will be forgiven in two equal annual installments during the Employment Period provided that you remain employed by us on such dates.

We will also recommend to the Board [of Directors of FAC] that you be granted such number of shares of restricted stock of the firm (the "Restricted Stock") valued at $500,000 .... The Restricted Stock shall be subject to vesting over the first three years of your employment, one-third per year.

We will also make a contribution (the "Contribution") on your behalf to [FAC's] Deferred Compensation Plan for Key Employees and in accordance with the terms thereof in the amount of $500,000. Such contribution shall be subject to vesting over the first three years of your employment, one-third per year.

You will also be entitled to participate in the standard employee benefit plans....

If [FAC] terminates your employment for any reason other than Cause (as defined below) prior to the second anniversary of your employment you will (i) receive the balance of your unpaid base salary and shall be vested in the Restricted Stock and the Contribution, in each case as though you had been employed for two full years, (ii) be forgiven the Loan in full and (iii) receive (or have already received) the bonus for the year 2001....

....

This letter agreement shall be subject to, governed by and construed in accordance with the laws of the State of New York without regard to its choice of law principles....

In November 2001, FAC tried to renegotiate the terms of the agreement, asking McGrann "to rip up" his compensation guarantees. McGrann responded, "We all negotiated in good faith and all of a sudden [FAC] want[s] us to give these up six months later? No. We're not interested in that." Within a week, FAC terminated the employment of one of the three Wessels employees who had moved to FAC. The day after that termination, FAC summoned McGrann to a meeting, informing him his "account package is under review." At the meeting, FAC changed McGrann's coverage territory. McGrann responded he was willing to make the change if he could help the firm. FAC then sought concessions on McGrann's guaranteed compensation, saying, "You should do the honorable thing and offer to make concessions to FAC." McGrann responded, "We all negotiated in good faith." FAC replied, "Honorable men make honorable gestures." Although McGrann refused to concede his compensation guarantees, FAC nonetheless reassured McGrann that FAC wished to retain him.

On April 30, 2002, FAC again approached McGrann about his compensation, informing McGrann that FAC was "coming after" his contractual guarantees. FAC asked McGrann, "Will you tear up your guarantee [on your cash bonus].... if you tear that up, you can keep the restricted stock and deferred comp, but just give back the $600,000." The next day, FAC bluntly said to McGrann, "We want to honor [your employment] contract but your production has sucked."³ To the point, FAC said, "If you don't give up your guarantees, [FAC] can't control what might happen." In response to FAC's request to renegotiate, McGrann stated, "At this point I am not willing to cut up my contract. I took a ton of risk coming here." FAC answered, "OK. That's your—that's your choice, but now it's all about business. It's not personal."

On May 13, 2002, FAC sent McGrann a letter stating he had "not substantially performed [his] duties" and his "production ha[d] been extremely disappointing." The letter threatened a for cause termination of employment if McGrann did not cure all of his performance deficiencies, which could only be accomplished if McGrann generated $400,000 of revenue per month for three months. FAC's top producer had achieved only $300,000 of revenue in any given month. Despite the tall order, McGrann increased the intensity of his work to meet FAC's new demands.

On October 18, 2002, FAC terminated McGrann's employment, contending the termination was for cause because McGrann failed to perform his duties. FAC simply determined "it was worth the risk to fire [McGrann] for cause." When seeking employment after the termination, McGrann informed potential employers FAC terminated his employment for cause due to his inability to meet production requirements. McGrann believes his duty to inform potential employers of his for cause termination caused him to lose "leverage" in the employment process, as he "was not able to negotiate ... from a position of strength."

Because the parties were associated with the National Association of Securities Dealers, Inc. (NASD), McGrann sought arbitration before an NASD Dispute Resolution panel. Over the course of eleven days, McGrann and FAC presented their claims to an arbitration panel. The panel's arbitration award provided the following case summary:

[McGrann] asserted the following causes of action [against FAC]: breach of contract, violation of Minnesota Stat. § 181.64, and violations of NASD rules. The causes of action related to [McGrann]'s allegation that FAC breached its employment contract with him after unilaterally imposing additional performance obligations. [McGrann] further alleged that FAC stated false and defamatory reasons for his departure and has not honored the guaranteed bonuses and incentives as set forth in the March 30, 2001 employment contract.

McGrann initially sought unspecified damages. At the hearing, McGrann sought $840,165.99 in compensatory damages, as well as costs, attorney fees, interest, punitive damages and equitable relief. McGrann's attorney presented the following argument to the panel: "[FAC] breached the contract. They don't get the benefit of a contract that they didn't adhere to. Mr. McGrann worked 5/6ths of the year. At a minimum he is entitled to 5/6ths of his bonus. And we believe, but for this breach, he would have finished the year and earned his entire $600,000."

FAC denied McGrann's allegations, asserted a number of affirmative defenses, and counterclaimed for breach of contract, fraud, misrepresentation, fraudulent inducement, negligence, negligent misrepresentation and violation of NASD rules. At the hearing, FAC sought $350,000 in compensatory damages, as well as interest, attorney fees, punitive damages, costs and equitable relief. FAC presented the arbitration panel an exhibit outlining FAC's theory regarding "the alternate `for cause' and `no cause' termination pay-out scenarios as of October 18, 2002, the termination date." According to FAC, if the arbitration panel found FAC terminated McGrann's employment for cause, then McGrann owed FAC $175,000 plus interest. On the other hand, FAC contended, if the arbitration panel found FAC terminated McGrann's employment without cause, then the maximum FAC owed McGrann was $340,165.99. According to FAC, the agreement limited McGrann's damages for termination without cause to $340,165.99, which included $66,875 in unpaid salary; $136,673.99 in restricted stock; and $136,617 in deferred compensation.

On March 2, 2004, the arbitration panel issued its award. The arbitration panel found in McGrann's favor, and awarded him $840,165.99 in compensatory damages, interest on that amount, $100,000 in attorney fees under Minnesota Statutes section 181.13, and $250 for filing fees. The arbitration panel also found no evidence supported FAC's fraud claim, and that claim "was made only for the purpose of coercing" McGrann.

Seeking confirmation of the...