Davsko v. Golden Harvest Products, Inc.

• Decision Date: 06 May 1997
• Docket Number: Civil Action No. 96-2196-EEO.
• Parties: John L. DAVSKO, Plaintiff, v. GOLDEN HARVEST PRODUCTS, INC., et al., Defendants.
• Court: U.S. District Court — District of Kansas

965 F.Supp. 1467

John L. DAVSKO, Plaintiff, v. GOLDEN HARVEST PRODUCTS, INC., et al., Defendants.

Civil Action No. 96-2196-EEO.

United States District Court, D. Kansas.

May 6, 1997.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

David A. Vorbeck, Clark Hill, P.C., Kansas City, MO, Cynthia F. Grimes, Grimes & Rebein, L.C., Lenexa, KS, for John L. Davsko.

Robert J. Bjerg, Lynne C. Kaiser, Rachel H. Baker, Seigfreid, Bingham, Levy, Selzer & Gee, Kansas City, MO, for Golden Harvest Products, Inc., Timothy J. MacKenzie, David Giesler, Bernie Brownell, Marc J. Walfish.

Arthur H. Stoup, Stephen W. Nichols, Arthur H. Stoup & Associates, P.C., Kansas City, MO, Thomas R. Rehorn, Kansas City, MO, for Terry Rabe.

Leland H. Corley, Lewis, Rice & Fingersh, Kansas City, MO, for Kurt Rabe.

MEMORANDUM AND ORDER

EARL E. O'CONNOR, Senior District Judge.

This matter is before the court on defendants' motion for summary judgment (Doc. # 51). After careful consideration of the parties' briefs and evidentiary materials, and the time having expired for the filing of a reply brief, the court is prepared to rule. For the reasons set forth below, defendants' motion is granted with respect to defendants Geisler, Brownell, and Walfish and denied with respect to defendants Golden Harvest Products, Inc. ("Golden Harvest") and MacKenzie.

Factual Background

For purposes of this opinion, the following is a brief summary of the material facts that are uncontroverted or deemed admitted, pursuant to Federal Rule of Civil Procedure 56 and District of Kansas Rule 56.1.

On March 31, 1995, Mr. Timothy MacKenzie, a member of Golden Harvest's Board of Directors, sent a letter to Mr. Davsko offering him a position as president and CEO of Golden Harvest. On April 3, Mr. Davsko sent a letter to Mr. MacKenzie outlining his requests for relocation expenses, the signing of an employment contract confirming any agreement between the parties, and a provision in the employment agreement for compensation if Mr. Davsko was terminated without cause. On April 4, Mr. MacKenzie sent a letter to Mr. Davsko with a modified employment offer. In this letter, Mr. MacKenzie "outlined the key financial terms" of Golden Harvest's offer and "attempted to include each of the items" he discussed and agreed upon with Mr. Davsko that morning in a telephone conversation. Mr. MacKenzie also stated in the letter that he had started "drafting an employment agreement which will formalize the terms of your employment with Golden Harvest." Mr. MacKenzie also stated in an attachment to his April 4, 1995, letter to Mr. Davsko that the employment offer included a "6% fully diluted ownership in Golden Harvest Products, Inc." and that plaintiff's equity "[o]wnership [would] be provided through stock or options at no cost to [plaintiff]." Mr. Davsko accepted Mr. MacKenzie's revised employment offer which was outlined in the April 4, 1995 letter.

Plaintiff started working for Golden Harvest on April 11, 1995. Both Mr. Davsko and Golden Harvest intended to execute a formal employment agreement, but no agreement was ever executed. On June 12, 1995, Mr. MacKenzie sent a draft of a formal employment agreement to Mr. Davsko which reflected all the terms that Mr. MacKenzie understood were a part of Mr. Davsko's employment agreement. Except for the omission of his equity ownership in Golden Harvest as part of the agreement, Mr. Davsko accepted the provisions of the June 12, 1995, draft employment agreement as reflecting the parties' agreement. No formal employment agreement was ever signed by the parties.

In June 1995, Mr. MacKenzie also sent a draft of a Management Shareholders' Agreement to Mr. Davsko. This agreement provided that Mr. Davsko could purchase 21,400 shares of Class B Common Stock of GHP Holdings, Inc. (6% of Golden Harvest's Class B Common Stock) at the per share price of $0.01. The agreement also provided for the repurchase of the stock in the event of Mr. Davsko's termination without cause at the "fair market value of the stock" as defined in the agreement. This agreement was never signed by the parties.

On August 28, 1995, Golden Harvest terminated Mr. Davsko's employment.

Summary Judgment Standards

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509, 91 L.Ed.2d 202 (1986); Vitkus v. Beatrice Co., 11 F.3d 1535, 1538-39 (10th Cir.1993). A factual dispute is "material" only if it "might affect the outcome of the suit under the governing law." Anderson, 477 U.S. at 248, 106 S.Ct. at 2510.

The moving party bears the initial burden of showing that there is an absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Hicks v. City of Watonga, 942 F.2d 737, 743 (10th Cir.1991). Essentially, the inquiry as to whether an issue is genuine is "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52, 106 S.Ct. at 2512. An issue of fact is genuine if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party. Id. at 248, 106 S.Ct. at 2510. This inquiry necessarily implicates the substantive evidentiary standard of proof that would apply at trial. Id. at 252, 106 S.Ct. at 2512.

Once the moving party meets its burden, the burden shifts to the nonmoving party to demonstrate that genuine issues remain for trial "as to those dispositive matters for which it carries the burden of proof." Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir. 1990); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986); Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir.1991). The nonmoving party may not rest on his pleadings but must set forth specific facts. Applied Genetics, 912 F.2d at 1241.

"[W]e must view the record in the light most favorable to the parties opposing the motion for summary judgment." Deepwater Invs., Ltd. v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10th Cir.1991). "In a response to a motion for summary judgment, a party cannot rely on ignorance of facts, on speculation, or on suspicion, and may not escape summary judgment in the mere hope that something will turn up at trial." Conaway v. Smith, 853 F.2d 789, 793 (10th Cir. 1988). The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment. Anderson, 477 U.S. at 256, 106 S.Ct. at 2514. Where the nonmoving party fails to properly respond to the motion for summary judgment, the facts as set forth by the moving party are deemed admitted for purposes of the summary judgment motion. D. Kan. Rule 56.1.

In this diversity case, we ascertain and apply Kansas law with the objective that the result obtained in federal court should be the same result as in a Kansas court. See Adams-Arapahoe School Dist. No.28-J v. GAF Corp., 959 F.2d 868, 870 (10th Cir.1992).

With respect to plaintiff's fraud claims under Kansas law, federal law standards for granting summary judgment apply. See Fed.R.Civ.P. 56. In Anderson v. Liberty Lobby, 477 U.S. at 252, 255, 106 S.Ct. at 2512, 2513, the United States Supreme Court held:

we are convinced that the inquiry involved in a ruling on a motion for summary judgment or for a directed verdict necessarily implicates the substantive evidentiary standard of proof that would apply at the trial on the merits.... Consequently, where the ... "clear and convincing" evidence requirement applies, the trial judge's summary judgment inquiry as to whether a genuine issue exists will be whether the evidence presented is such that the jury applying that evidentiary standard could reasonably find for either the plaintiff or the defendant.

Allegations of fraud must be proven by clear and convincing evidence. See Rajala v. Allied Corp., 919 F.2d 610, 626 (10th Cir.1990), cert. denied, 500 U.S. 905, 111 S.Ct. 1685, 114 L.Ed.2d 80 (1991); Sipes v. Crum, 204 Kan. 591, 464 P.2d 1, 6 (1970). Thus, plaintiff as the nonmoving party carrying the burden of proof at trial must present sufficient evidence of a clear and convincing nature to withstand summary judgment on his fraud claims. See Ramirez v. IBP, Inc., 913 F.Supp. 1421, 1430 (D.Kan.1995); Sprague v. Peoples State Bank, Colby, Kan., 844 F.Supp. 662, 667 (D.Kan.1994); All West Pet Supply Co. v. Hill's Pet Prods. Div., Colgate-Palmolive Co., 840 F.Supp. 1426, 1431 (D.Kan.1993).

Analysis

I. Plaintiff's Breach Of Contract Claim (Count I).

Golden Harvest first moves for summary judgment on Mr. Davsko's breach of contract claim. Golden Harvest argues that no binding contract ever existed between the parties. The Kansas Supreme Court has stated that "[w]hether parties to an informal agreement become bound prior to the drafting and execution of a contemplated formal writing is largely a question of intent on their part. The intent of the parties is to be determined by the surrounding facts and circumstances of each case." King v. Wenger, 219 Kan. 668, 671, 549 P.2d 986, 989 (1976) (citations omitted). "The subsequent conduct and interpretation of the parties themselves may be decisive of the question of whether a contract has been made even though a document was contemplated and has never been executed." Id. at 672, 549 P.2d at 990. Here, Mr. MacKenzie conceded that his April 4, 1995, letter "represented a meeting of the minds about what the terms of [plaintiff's]...