Cousins v. Hutton Constr.

• Decision Date: 08 February 2023
• Docket Number: E2021-01251-COA-R3-CV
• Parties: KEITH COUSINS v. HUTTON CONSTRUCTION, INC. ET AL.
• Court: Tennessee Court of Appeals

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KEITH COUSINS v. HUTTON CONSTRUCTION, INC. ET AL.

No. E2021-01251-COA-R3-CV

Court of Appeals of Tennessee, Knoxville

February 8, 2023

Session August 16, 2022

Appeal from the Chancery Court for Hamilton County No. 17-0556 Jeffrey M. Atherton, Chancellor

This is an employment contract dispute involving the interplay of a paid sick leave provision and a bonus compensation provision. The appellant, Keith Cousins ("Cousins"), was hired by a real estate business in 2017. He signed a two-year contract which included provisions for salary, bonuses, and paid sick leave. After being with the defendant company for only a few weeks, Cousins suffered a major heart attack and ultimately, never returned to work. A dispute regarding his compensation arose and in July of 2017, Cousins filed suit against his former employer for, inter alia, breach of contract. The trial court determined that the company breached Cousins' contract and awarded him some damages but not the full balance of the two-year contract as Cousins requested. Both Cousins and the company appeal. We affirm in part, reverse in part, and vacate in part. The case is remanded for further proceedings.

Tenn R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed in part, Reversed in part; Vacated in part; Remanded

John P. Konvalinka, Katherine H. Lentz, and Lawson Konvalinka, Chattanooga, Tennessee, for the appellant, Keith Cousins.

John R. Bode and Jessica Malloy-Thorpe, Chattanooga, Tennessee, for the appellees, Karen J. Hutton, Hutton Real Estate Ventures I, LLC, Hutton Construction, Inc., Hutton Growth One, LLC, Hutton Development, LLC, Hutton Growth OFP, LLC, and Hutton Growth, LLC.

Kristi M. Davis, J., delivered the opinion of the Court, in which D Michael Swiney, C.J., and Thomas R. Frierson, II, J., joined.

OPINION

KRISTI M. DAVIS, JUDGE

Background

This appeal arises from an employment contract dispute between Keith Cousins and Karen Hutton. Ms. Hutton is the founder and CEO of several closely affiliated real estate businesses based in Chattanooga. The parties refer to Ms. Hutton's related real estate businesses collectively as "Hutton." On January 30, 2017, Cousins and Ms Hutton, signing as CEO of Hutton, executed an employment contract (the "Agreement"). Under the Agreement, Cousins assumed the position of executive vice president for real estate for a term of two years. The Agreement also provided:

Reporting: This position will report to Karen Hutton, CEO

Salary: $275,000 per year.

* * *

Profit Sharing: Employee will receive a minimum annual bonus of Two Hundred Seventy-Five Thousand dollars ($275,000) per year. Additional bonus opportunity earned, of which initial $275k minimum will be netted against an additional bonus based on Single and Multi-Tenant developments and future types of growth as the department expands its development platform. Employee will earn 2.5% of each dollar of net profits after departmental company overhead, total project cost annually. Earnings from bonus above the One Million Dollars ($1,000,000) annually will be paid out over the following three-year period, 1/3, 1/3, 1/3.

Bonus compensation is earned and paid while employed at Hutton as outlined and also paid if not employed by Hutton under the following conditions, as long as employee does not voluntarily terminate employment with Hutton and employment is not terminated due to proven cause. Employee will continue to be compensated as outlined above if employee becomes unable to work due to illness or unable to work due to immediate family illness.

(Emphasis added).^[1] A different portion of the Agreement provided paid sick leave:

Sick, Personal, Vacation, 30 days per year as needed. Notice of time away from office is all that is needed for internal planning purposes, limit vacation times to not more than two weeks at any one time without our mutual consent so we could plan accordingly.

The parties executed the Agreement on January 30, 2017 after sending several drafts back and forth. The "illness clause," bolded above, was added after Cousins raised concerns that he might forego earned compensation based on "timing." In a redline draft sent to Ms. Hutton on January 26, 2017, Cousins inserted a revision just after the phrase "[b]onus compensation is earned and paid while employed at Hutton." Cousins commented as follows: "This would be ok if I were to leave for another job or terminated for proven cause but if I am sick, dead or unable to work due to an unforeseen practical reason such as a family member gravely ill god forbid - don't ya think my estate or I should get what we worked to achieve not forego based on timing?" Ms. Hutton agreed with Cousins' suggested change and thus the "illness clause" was inserted in the final draft of the Agreement.

Cousins assumed the position of executive vice president for real estate in late February of 2017. Cousins attended a work event in Texas on March 8, 2017, during which he experienced chest pain. By March 17, 2017, Cousins determined that he was having or had had a heart attack. Cousins eventually underwent a double by-pass surgery on March 22, 2017, at the University of Alabama Birmingham hospital. Following his initial recovery, Cousins entered a twelve-week cardiac rehabilitation program beginning on April 27, 2017. Cousins and Ms. Hutton kept in contact early in this rehabilitation period. Mr. Cousins maintained that he worked some remotely, but the record does not show that he did anything significant or with regularity. Several Hutton employees testified that Mr. Cousins did not fulfill any job duties following his heart attack aside from forwarding emails and voicemails.^[2]

Hutton paid Cousins his full salary through May 18, 2017. After he realized that a paycheck had been missed, Cousins reached out to Ms. Hutton through a text message: "5/18 was the last paycheck I received, did not get a 6/2 deposit. Is that what you wanted to do?" Ms. Hutton responded that she had not intended to stop paying Cousins and that it was a mistake triggered by Hutton's payroll office. While Ms. Hutton admitted that stopping Cousins' pay was a mistake, she also maintained that Cousins had exhausted his thirty days of paid sick leave provided by the Agreement. In an email on June 7, 2017, Ms. Hutton outlined a plan under which Cousins could collect an advance on his salary while in recovery:

Keith this is what I propose. Take a look and let's discuss. Hope you had a good day yesterday. Any movement on the ad for the real estate vp or director[?]

Revised to show signing bonus and 15 days PTO.^[3] Attached is the excel sheet showing Keith's pay for the balance of 2017. After the payment of the missed 6/2 payroll, [Keith] will be paid $4,713 every two weeks starting 6/16/17. These payments and the amount already paid to Keith this year, will equal his 6.5 month salary amount.

Attached to the email was a spread sheet breaking down Ms. Hutton's proposal. The proposal included the $10,000.00 signing bonus and six and a half months of salary. Under Ms. Hutton's proposal, Cousins' total compensation for 2017 would have been $158,958.00. It was unclear at this juncture when Cousins would be able to return to work because he was still in the rehabilitation program, and his doctors had not cleared him to work.

Cousins responded in an email on June 9, 2017, explaining that he disagreed with Ms. Hutton's interpretation of the Agreement:

Karen, with a lot of reflection and as honestly and candidly as I can, I am following up on our brief phone conversation of Sunday the 4th of June and your email sent on the 7th of June. You have indicated to me in multiple emails, texts, phone calls and your visit since open heart surgery on March 22nd that you need me to return to full working capacity ASAP. In the latest of our communications above and in conjunction with the unexpected stoppage of my paycheck to have been paid on the 2nd of June (that surprised me because it happened without discussion or notice), you proposed to negatively change our January 30, 2017 agreement regarding my compensation. I suggest and recommend that this does not change. We are bound by our agreement that was negotiated and executed in good faith and I am to be compensated without offset based on the terms of our agreement. Our agreement contemplated fully and clearly the outcome in the event an illness were to make me unable to fulfill my job responsibilities. This outcome is unfortunate, but nevertheless it has triggered a provision that we negotiated and included in the agreement. The last sentence of the first page is explicit and captures Hutton's requirement and obligation therein.

Cousins went on to say that while his doctors had not cleared him to work full-time, he was willing to meet with Ms. Hutton and discuss how he could fulfill "sub elements" of the job in the interim.

On June 11, 2017, the parties exchanged text messages regarding the need to discuss compensation. Among other things, Cousins told Ms. Hutton that he hoped she "[was] able to or will pull to review our agreement and recall our discussions and that it does require continued payment under the circumstances." Ms. Hutton responded, as relevant:

I've pulled the agreement and want to get with you regarding when you are feeling better. Let me know. . . . I interpreted the Agreement differently from you and I also wanted to go over how I recalled our conversations leading into the insertion and placement of the illness clause.

Communication between the parties broke down following this exchange. Through June of 2017, Ms. Hutton and Hutton employees reached out to Cousins regarding a short-term compensation plan while he remained in recovery. Following the above exchange,...