Olson v. F & D Publishing Co., Inc.

• Decision Date: 19 May 1999
• Citation: 982 P.2d 556,160 Or. App. 582
• Court: Oregon Court of Appeals
• Parties: Donald OLSON, Appellant, v. F & D PUBLISHING CO., INC., an Oregon corporation, dba Signature Graphics, and Brian Dutton, Respondents.

982 P.2d 556

160 Or. App. 582

Donald OLSON, Appellant, v. F & D PUBLISHING CO., INC., an Oregon corporation, dba Signature Graphics, and Brian Dutton, Respondents.

(960402775; CA A97402)

Court of Appeals of Oregon.

Argued and Submitted October 22, 1998.

Decided May 19, 1999.

Jay W. Beattie, Portland, argued the cause for appellant. On the opening brief were Gilion C. Ellis, Glen McClendon and Lindsay, Hart, Neil & Weigler, LLP.

Stephen S. Walters, Portland, argued the cause for respondents. With him on the brief were Scott E. Crawford and Stoel Rives, LLP.

Before EDMONDS, Presiding Judge, and LINDER and KISTLER,¹ Judges.

KISTLER, J.

This case arises out of an employment dispute. Plaintiff claims that defendants breached their agreement with him when they failed to give him part of the company's stock. Alternatively, he claims that defendants misrepresented that they would give him part of the company's stock to induce him to come to work for them. The trial court granted summary judgment in defendants' favor on both claims and entered judgment for defendants. We affirm the trial court's judgment in part, reverse it in part, and remand. Because this case arises on defendants' summary judgment motion, we state the facts in the light most favorable to plaintiff. In the early 1990s, plaintiff Donald Olson worked at RFD Publications. Defendant Brian Dutton was president of Signature Graphics. Over a period of several years, Dutton spoke with Olson about coming to work for Signature Graphics. In December 1994 and January 1995, their conversations became more serious. They agreed on the annual salary Olson would receive and that Olson would serve as Signature Graphics' president. They also discussed whether Olson would receive a percentage of Signature Graphics' stock.

According to Olson, the two men entered into two pre-employment agreements concerning his acquisition of Signature Graphics' stock. First, before Olson began working for Signature Graphics, he and Dutton "agreed that [Olson] would receive a 10% ownership interest in Signature Graphics in consideration for [his] going to work for the company." Second, Olson expressed his interest in "acquir[ing] up to an additional 10% of the company," but he and Dutton "agreed that [they] would make a separate agreement [on acquiring additional stock through some type of bonus plan or other performance-based system] that [they] would finalize later." Olson acknowledged that when they reached their pre-employment agreements, Dutton "told [him] that he needed to figure out how to transfer the stock because of certain tax implications." Olson "understood[, however,] that [Dutton] needed to address these issues for his own personal reasons. These issues had nothing to do with [him] or [his] contract with [Dutton and his company]."

Olson began working for Signature Graphics in January 1995. No stock was transferred to him. Approximately five months later, in May 1995, Olson retained an attorney who proposed that Dutton, Olson, and their attorneys get together to discuss the terms of Olson's employment. Olson's attorney suggested that the parties "look at factoring an employment contract into the discussions with stock, and any bonus compensation so that * * * the whole agreement came together at one time." There were two primary issues to be resolved at the meeting—Olson's equity interest in the company and his right to receive performance-based compensation in addition to his salary. The meeting occurred in late July. At the meeting, it became clear that Olson and Dutton had very different views about what, if anything, they had agreed before Olson came to work at Signature Graphics.

Shortly after the meeting, on July 28, 1995, Olson's attorney wrote a letter proposing that his client's present salary continue, that he receive 10 percent of the increases in the company's gross operating profits as additional performance-based compensation, and that he receive 15 percent of the company's stock, which would vest in three five-percent increments over a 30-month period. At the conclusion of his letter, Olson's attorney explained that he had not discussed these proposals in "any greater detail, because I want to see if they are headed in the right direction."²

Olson understood that Dutton and his attorney would make a counterproposal that would address those issues. As Olson explained, he viewed his attorney's July 1995 letter as "simply a concept or a vehicle to further some discussions. * * * [T]his wasn't a proposed deal." Indeed, Olson stated that even if Dutton had agreed to his attorney's July proposal on performance-based compensation, he would not have accepted it as a "stand-alone item." If, however, Dutton had agreed to Olson's attorney's proposal for both performance-based compensation and his acquisition of equity, Olson believed that it was "very likely" that they would have a deal. In any event, Olson explained that after his attorney sent the letter, he expected to get something back from Dutton and his attorney that would lead to further negotiations.

A couple of weeks later, in early to mid-August, Olson had not received a response and asked Dutton about it. According to Olson, Dutton responded that "what I want to get to is this. I want to give you 15 percent of the company." Dutton also said, "I just want to find a way that I can give you 15 percent of the company." When Dutton used the phrase "find a way," Olson understood "that it's got to do with the taxing issues he has the attorney working on and et cetera." Olson responded, "[G]reat. That's acceptable to me. End of discussions. Let's put that down. Can we meet on that. Well, I'll have Bruce [defendants' attorney] work on it."³

Although Dutton's attorney intended to work on the agreement, he did not in fact produce one. Olson asked Dutton three or four times about Dutton's attorney's progress on the written agreement. As Olson testified, he either wanted to "have this thing done" by mid-December or "have the documents for me to review, the proposal of something coming back to me, whatever it is that [defendants' attorney] is working on [so] that I've got something that I can read and share with my attorney." Although the parties repeatedly set deadlines for Dutton's attorney to produce an agreement, none was forthcoming.

Olson initially believed that Dutton's delay in producing a written agreement was not a rejection of his demands but instead was "a deliberate tactic about timing and how he would ultimately put the whole thing together." Olson explained, however, that "[f]rom September to—through November, I got less and less confident that anything was ever going to happen, based on our agreements back in May, [to] sit down and get this thing done." When asked what led him to that conclusion, Olson replied: "A complete lack of information, meetings, criteria by which these agreements were going to be developed, no further discussion, only delays, time delays setting—agreeing on deadlines. Yeah, we'll try to get that done * * * on three or four occasions and receiving no response of any kind in terms of partial progress or whatever." When Dutton's lawyer had not produced either a written agreement or "partial progress" on an agreement by December 1995, Olson submitted his resignation.

After he resigned, Olson sued Dutton and the company for breach of contract and misrepresentation. Defendants moved for summary judgment twice. The first time, the trial court granted defendants' motion on the misrepresentation claim. It denied their motion on the breach of contract claim but "only to the extent that there remains a triable issue whether plaintiff was induced to leave his former employment to join Signature Graphics * * * by an oral agreement between plaintiff and defendants that plaintiff would immediately receive ten percent of the stock of Signature Graphics at the outset of his employment."⁴ Defendants filed a second summary judgment motion claiming that any pre-employment agreement to transfer 10 percent of the company's stock had been impliedly modified. The court granted defendants' second motion and dismissed all aspects of plaintiff's claims. Plaintiff challenges both rulings on appeal.

We begin with the contract claim. As the parties frame the contract issues on appeal, there are two relevant events, each of which raises different questions. The first is the pre-employment agreement to give Olson 10 percent of the stock on coming to work for the company. The second is the effect of the August 1995 agreement to give Olson an additional five percent of the company's stock.

On the pre-employment agreement, defendants argue primarily that even if an enforceable agreement were formed, the parties modified it when plaintiff continued to work after learning that defendants did not intend to transfer any stock to him. They base their argument on the principle that an employer may unilaterally modify an at-will employee's contract and that the employee impliedly accepts the modification by continuing to work after learning of it.⁵See Fish v. Trans-Box Systems, Inc., 140 Or. App. 255, 914 P.2d 1107 (1996); Albrant v. Sterling Furniture Co., 85 Or.App. 272, 736 P.2d 201,rev. den. 304 Or. 55, 742 P.2d 1186 (1987). Defendants acknowledge that the legal principle they invoke only applies prospectively. As they correctly admit, "[a]n employer cannot inform an [at-will] employee that wages have been retroactively reduced * * *. Wages for past work within the employment relationship are `earned' and `vested.' "See Hughes v. State of Oregon, 314 Or. 1, 838 P.2d 1018 (1992). Given those legal principles, defendants' argument reduces to the question whether plaintiff's right to 10 percent of the stock was earned or became vested before he learned that defendants were not going to transfer any stock to him.

On that point, plaintiff testified in his deposition that the "terms of the [pre-empl...