Seal v. Knorpp

Decision Date31 March 1992
Docket NumberNo. 90-3908,90-3908
Citation957 F.2d 1230
PartiesWarren L. SEAL, Plaintiff-Appellee, Cross-Appellant, v. J. Ronald KNORPP, etc., et al., Defendants, Florida Exploration Company and Enron Corporation, Defendants-Appellants, Cross-Appellees. Warren L. SEAL, Plaintiff-Appellant, v. APACHE CORPORATION OF DELAWARE, et al., Defendants, Florida Exploration Company and Enron Corporation, Defendants-Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

Walter W. Christy, N. Victoria Holladay, Kullman, Inman, Bee, Downing & Banta, New Orleans, La., for defendants-appellants, cross-appellees.

Wade P. Webster, Leake & Anderson, Alan Dean Weinberger, Middleberg, Riddle & Gianna, New Orleans, La., for plaintiff-appellee, cross-appellant.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before HIGGINBOTHAM and BARKSDALE, Circuit Judges, and McBRYDE, District Judge. 1

BARKSDALE, Circuit Judge:

The central issue in this consolidated appeal is whether Warren Seal was terminated for purposes of his employer's Trust Agreement, thereby allowing him to recover all of his royalty interests held in trust. This turns, in part, on his undisputed termination under the terms of his separate Employment Contract. Also in issue is whether Seal can recover for seismic data he supplied that employer. We REVERSE the award on the Trust Agreement claim, but AFFIRM the denial of the data claim.

I.

In 1976, for purposes of employee retention, reward, and incentive, the Florida Gas Exploration Company Employees Trust (Trust Agreement) was established. 2 As producing oil and gas properties were developed, overriding royalty interests in oil and gas leases (ORIs) were assigned to the Trust by Florida Gas (Florida Exploration) 3 for the benefit of designated employees. The Trustee paid the designated employees, on a monthly basis, their share of the income from those ORIs. 4 In addition, upon the occurrence of specified events, the Trustee assigned to the employee all or part of the ORIs (depending upon the event), as well as accrued but unpaid income from them. Full (100%) assignment took place after the ORIs had been held in trust for four years, or upon the employment ending under certain conditions. But, if the employment ended for other specified reasons, the employee received less than 100% of his ORIs.

Seal became a Trust participant in 1978, when he joined Florida Exploration as vice-president of its New Orleans division. Thereafter, ORIs were assigned to the Trust for his benefit.

In 1979, Florida Exploration offered employment contracts (Employment Contract) to many of its executives to alleviate concerns about a possible acquisition. Seal signed one that May. It provided that if acquired, Florida Exploration would "continue to employ [Seal] on a full time basis for a period of not less than three years from the date of such acquisition...." If Florida Exploration terminated Seal within that three-year period, it would pay him his salary for the balance of the period and accrue his retirement benefits under the pension plan, with them becoming fully vested at the conclusion of that period.

Employment Contract p 5 covered "non-actual termination":

In addition to an actual termination of employment, the following shall be deemed a termination of [Seal's] employment by the Company for purposes of this agreement:

a) A substantial change in [Seal's] present level of responsibility and authority;

b) A reassignment to another location without his consent; or

c) A substantial change from present policies or procedures affecting the areas of [Seal's] responsibilities.

Acceptance of the changes listed in paragraphs (a) and (c) for a period of time shall not be deemed a waiver of [Seal's] right to claim such changes as a termination.

(Emphasis added.) 5

No recovery could be had under the Employment Contract if the termination was for cause, which fell within three areas: "dishonesty; ... commission of a crime; or ... behavior which would generally be considered as sufficiently immoral or insubordinate to justify termination of employment." These are identical to the first three of four bases for termination for cause under the 1976 Trust Agreement. 6

The Employment Contract also provided for accelerated assignment to Seal of the ORIs held in trust for him under the Trust Agreement. If he remained with Florida Exploration for a year from the date of acquisition, he would receive "all of the [ORIs] held by the Trustee for [his] benefit ... at the time of [the] acquisition...."

The Continental Group acquired Florida Exploration on August 28, 1979, triggering the Employment Contract's three-year protected period. Seal's authority was substantially reduced in mid-1982. On the day before the end of the protected period, Seal stated in a letter to Florida Exploration that, "[i]n view of the recent changes in company policy and procedure", he had reviewed his Employment Contract; that, pursuant to it, the reduction of his responsibility constituted a termination of his employment; that "[t]he only significance of this ... [was] to entitle [him] to receive [under the Trust Agreement] a '100 per cent interest in [ (full assignment of) ] the ... ORIs previously assigned into trust', regardless of time factors"; and that if Florida Exploration agreed with his "interpretation", the assignment could be executed. 7

As noted, the Employment Contract provided that if Seal was terminated during the post-acquisition three-year protected period, he would receive his salary and retirement benefits for the balance of that period, with full vesting of pension plan benefits at the end of it. Obviously, as Seal implied in his letter, the required payments for termination during the protected period had no bearing; he did not claim termination until one day before it ended. Hence, the statement in his letter that "[t]he only significance of [the Employment Contract's non-actual termination provision] ... is to entitle me to receive" full (100%) assignment of the ORIs held in trust for him, "regardless of time factors".

The time factor was critical, because any ORIs placed in trust for him after acquisition had not fully vested (four years required). On the other hand, as noted, the Employment Contract provided for full assignment to Seal of his ORIs held in trust as of the August 1979 acquisition, if he remained with Florida Exploration for a year after it. Seal had done so, and then some; his termination claim was made one day short of three years after the acquisition. Therefore, his only ORIs for which he might not receive full assignment were those placed in trust for his benefit after the date of acquisition (August 28, 1979). To add further to the mix, and as discussed infra, the Trust Agreement provided that, if Seal was terminated (except for defined cause), he was to receive full assignment of his ORIs, regardless of the normal four-year vesting period. Therefore, in order to receive the maximum assignment of his post-acquisition ORIs, Seal had to fall within the termination, except for cause, provision in the Trust Agreement.

Florida Exploration promptly denied that termination had occurred. And, Seal remained with Florida Exploration until June 1983, when he submitted his written resignation. 8 Shortly thereafter, he received the ORIs that Florida Exploration felt he was due. In 1985, Seal filed two diversity actions in Louisiana on the same day: the first asserted that he was entitled to benefits under the Employment Contract and to additional ORIs under the Trust Agreement; the second sought recovery for seismic data that he had allegedly provided Florida Exploration during that employment.

The two actions were consolidated for a bench trial. The district court held that Seal: (1) was "constructively" terminated 9 under the terms of the Employment Contract and entitled to pension benefits; 10 (2) was therefore "constructively terminated without cause" under the Trust Agreement and to receive an accounting and assignment of the ORI's (and resulting income) to which he was entitled under that Agreement; but (3) had no claim for any seismic data in Florida Exploration's possession. Damages were referred to a special master. Because the ORIs had been sold by Florida Exploration, Seal was awarded their money equivalent (approximately $450,000). In addition, the judgment awarded Seal $340,000 (approximately) in prejudgment interest and $200,000 in attorney's fees; the fees were not allocated between the Employment Contract and Trust Agreement claims.

II.

Florida Exploration contends that the district court erred in holding that Seal was terminated under the Trust Agreement. Seal counters that it erred in the amount of the award for expert witness fees in his first case and in denying him recovery on the seismic data claim in his second. Our standard of review for bench trials is well established: findings of fact are reviewed for clear error; legal issues, de novo. E.g., Fed.R.Civ.P. 52(a); Missouri Pac. R.R. Co. v. Railroad Comm'n of Texas, 948 F.2d 179, 181 (5th Cir.1991), petition for cert. filed, (March 5, 1992) (No. 91-1423). Equally well established is the standard for determining whether a finding is clearly erroneous, "that is, if we are convinced[, based on our review of the record,] that the trial court made a mistake." Texas Pig Stands, Inc. v. Hard Rock Cafe Int'l, Inc., 951 F.2d 684, 693 (5th Cir.1992). 11

A.

Florida Exploration does not challenge the district court's holding that Seal was terminated (non-actual termination) under the terms of the Employment Contract. And, both parties agree that he was not terminated for cause as defined by the Trust Agreement. The issue is whether he was terminated (non-actual termination) under that Agreement.

As noted, the Trust Agreement provides for full assignment of ORIs to an employee upon, inter alia, termination "without cause". 12 There...

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