Dixon v. Pro Image Inc.

• Decision Date: 14 September 1999
• Docket Number: No. 981661.,981661.
• Citation: 1999 UT 89,987 P.2d 48
• Parties: Daniel E. DIXON, Plaintiff, Counter-defendant, and Appellant, v. PRO IMAGE INC., a Utah corporation, Transition Sports, Inc., a Utah corporation, and Rentrak Corporation, an Oregon corporation, Defendants, Counter-claimants, and Appellees.
• Court: Utah Supreme Court

987 P.2d 48

1999 UT 89

Daniel E. DIXON, Plaintiff, Counter-defendant, and Appellant, v. PRO IMAGE INC., a Utah corporation, Transition Sports, Inc., a Utah corporation, and Rentrak Corporation, an Oregon corporation, Defendants, Counter-claimants, and Appellees.

No. 981661.

Supreme Court of Utah.

September 14, 1999.

Earl Jay Peck, D. Scott Crook, Salt Lake City, for plaintiff.

Matthew L. Lalli, Salt Lake City, for defendants.

RUSSON, Justice.

¶ 1 Plaintiff Daniel E. Dixon appeals from the district court's grant of partial summary judgment in favor of defendants Pro Image Inc., Transition Sports Inc., and Rentrak Corporation. Dixon filed suit against defendants, alleging various breaches of both a consulting agreement and an employment agreement and asserting that defendants wrongfully terminated him. Defendants moved for partial summary judgment, arguing that certain of Dixon's claims failed as a matter of law. The district court granted the motion. We affirm in part and reverse in part.

FACTS

¶ 2 In early 1996, Rentrak Corporation became concerned about the financial well-being of its subsidiary, Pro Image Inc., a sports apparel retail company and franchisor. Rentrak decided to either sell Pro Image or consummate a "spin-off" transaction in which Pro Image stock would be distributed to Rentrak shareholders as dividends. To accomplish either objective, Rentrak believed it needed to improve the financial performance of Pro Image. With that aim, on May 1, 1996, Rentrak entered into both a "Consulting Agreement" and an "Employment Agreement" with plaintiff Daniel E. Dixon.

¶ 3 Under the consulting agreement, Dixon agreed to provide consulting services to Pro Image for a period of two months in exchange for $5,000 per month. As additional consideration, Dixon received an option, exercisable within five years, to purchase 25,000 shares of Rentrak common stock.

¶ 4 On July 1, 1996, the consulting agreement expired and Rentrak activated the employment agreement, thereby installing Dixon as president of Pro Image. The employment agreement stated that Dixon would be employed until October 31, 1996, or until otherwise terminated. It guaranteed Dixon a base salary of nearly $12,000 per month and provided that if, during his employment, Rentrak entered into a "definitive agreement" to sell Pro Image, he would also be entitled to a "Sale Bonus" equal to the greater of $50,000 or one percent of the net sale proceeds.

¶ 5 Dixon functioned as president of Pro Image until December 3, 1996, on which date Rentrak informed him that he would no longer be employed by Pro Image. The following day, pursuant to the employment agreement, Dixon received $9,333.33, which represented the first of six monthly installments comprising Dixon's severance pay.

¶ 6 Prior to the date Dixon took over as president, Pro Image consisted of approximately 63 corporate stores and 175 franchise stores. When Dixon's employment was terminated on December 3, 1996, Pro Image still consisted of 39 corporate stores and 155 franchise stores, having sold one corporate store and 18 franchise stores in October of that year and 7 more corporate stores in November.¹ On December 6, 1996, three days after Dixon's employment was terminated, Rentrak executed an asset purchase agreement whereby a group of former and then-current employees of Pro Image known as "P.I. Acquisitions" purchased the remaining 155 franchise stores of Pro Image.

¶ 7 In a letter dated January 13, 1997, Dixon formally demanded payment of the sale bonus under the employment agreement. Dixon contended that although a sale of the entire Pro Image business had not been consummated while he served as president, he was nevertheless entitled to the sale bonus by virtue of the sales and agreements to sell that occurred during his employment. Rentrak, however, refused to pay Dixon the sale bonus.

¶ 8 On or about March 19, 1997, Dixon attempted to exercise the stock option pursuant to the consulting agreement. Rentrak responded that Dixon could purchase only restricted stock, not freely tradeable stock. Dixon contested Rentrak's interpretation of the consulting agreement on this point. Because of this dispute, Dixon did not tender payment for stock and Rentrak did not deliver any stock.

¶ 9 Dixon thereafter filed suit against Pro Image, Transition Sports (a successor-in-interest to Pro Image), and Rentrak (collectively, "Rentrak"). Dixon alleged that Rentrak (1) breached the employment agreement by not paying him the sale bonus, (2) wrongfully terminated his employment in order to avoid paying him the sale bonus, which he had already earned, (3) was unjustly enriched by not paying the sale bonus, (4) breached the consulting agreement by not allowing him to exercise the stock option for freely tradeable stock, which he would have bought and immediately resold at a profit, and (5) owed him the final installment of his severance pay. As an alternative to his claim for monetary damages concerning the stock option, Dixon requested an order of specific performance requiring Rentrak to issue him unrestricted stock at the price stated in the consulting agreement.

¶ 10 At the close of discovery, Rentrak moved for partial summary judgment. Rentrak contended that Dixon's claims for breach of the employment agreement and unjust enrichment failed because, as a matter of law, Dixon was not entitled to the sale bonus. Rentrak asserted that the sale bonus provision unambiguously required a single sale of the entire Pro Image business rather than various sales of only some of the Pro Image stores, as occurred during Dixon's employment. Rentrak further argued that Dixon's claim of wrongful termination failed because, at the time his employment was terminated, he was an at-will employee who could be discharged for any reason or no reason. Finally, Rentrak contended that Dixon's claim for monetary damages with respect to the stock option failed because such stock options are presumed to be for restricted stock, which cannot be resold for at least one year; consequently, Dixon could not sue for profits he allegedly would have earned by exercising the stock option in March of 1997 at the contract price and immediately reselling the stock at the then-existing market value.

¶ 11 The district court agreed with each of Rentrak's arguments and, accordingly, granted Rentrak's motion for partial summary judgment. The court thereafter entered final judgment on its rulings pursuant to rule 54(b) of the Utah Rules of Civil Procedure.² This appeal followed.

STANDARD OF REVIEW

¶ 12 Summary judgment is appropriate only if there is no genuine issue concerning any material fact of the case and the moving party is entitled to judgment as a matter of law. See Utah R. Civ. P. 56(c); S.W. Energy Corp. v. Continental Ins. Co., 974 P.2d 1239, 1242 (Utah 1999). "[I]n reviewing a grant of summary judgment, we view the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party." Higgins v. Salt Lake County, 855 P.2d 231, 233 (Utah 1993). Here, we must determine whether the district court erred in concluding that under the facts of this case, Dixon, as a matter of law, (1) was not entitled to the sale bonus, (2) had no cause of action for wrongful termination, and (3) could exercise his stock option only by purchasing restricted stock from Rentrak. We review these conclusions for correctness, affording no deference to the district court. See id. at 235.

DISCUSSION

I. SALE BONUS

¶ 13 Whether Dixon is entitled to the sale bonus under the employment agreement is a matter of contract interpretation. "In interpreting a contract, the intentions of the parties are controlling." Winegar v. Froerer Corp., 813 P.2d 104, 108 (Utah 1991). If the contract is written and the language employed is not ambiguous, the parties' intentions are determined from the plain meaning of the language. See id.

¶ 14 Whether contract language is ambiguous is a question of law. See Willard Pease Oil & Gas Co. v. Pioneer Oil & Gas Co., 899 P.2d 766, 770 (Utah 1995). An ambiguity exists where the language "`is reasonably capable of being understood in more than one sense.'" R & R Energies v. Mother Earth Indus., Inc., 936 P.2d 1068, 1074 (Utah 1997) (quoting Black's Law Dictionary 73 (5th ed.1979)). "[W]hen a contract provision is ambiguous ... extrinsic evidence is admissible to explain the intent of the parties." Willard Pease, 899 P.2d at 770; see also Interwest Constr. v. Palmer, 923 P.2d 1350, 1359 (Utah 1996). If a contract is unambiguous, however, "a court may interpret [it] as a matter of law." Willard Pease, 899 P.2d at 770. In so doing, a court must attempt to construe the contract so as to "harmonize and give effect to all of [its] provisions." Nielsen v. O'Reilly, 848 P.2d 664, 665 (Utah 1993); see also Willard Pease, 899 P.2d at 770 (noting that each contract provision should be considered in relation to all others).

¶ 15 Here, the sale bonus provision of the employment agreement states:

[I]f during the Term of this Agreement Rentrak or [Pro Image], as the case may be, enters into a definitive agreement with respect to a Sale, then [Dixon] shall be entitled to a bonus (the "Sale Bonus") equal to the greater of (x) Fifty Thousand Dollars ($50,000) or (y) one percent (1%) of the net sale proceeds....

This language provides that Dixon is entitled to a "Sale Bonus" if, during the "Term" of the agreement, Rentrak or Pro Image entered into a definitive agreement with respect to a "Sale."

¶ 16 The employment agreement defines its "Term" as follows: "Employment shall commence on the date hereof and shall end on October 31, 1996 (the `End Date') or until [Dixon's] employment under this Agreement is terminated pursuant to this Section 2 (the `Term')." Thus, the "Term" of the agreement spanned from May 1, 1996, until December 3, 1996, the date on which Dixon's employment was terminated.³ If a "Sale" occurred...