Ford v. AEFA

• Citation: 98 P.3d 15,2004 UT 70
• Decision Date: 20 August 2004
• Docket Number: No. 20020550.,20020550.
• Parties: Jerry FORD, Mark Russell, Robert P. Welch, Travis Kell, J. Mathew Zundel, David K. Eaton, John D. Ford, Robert Aamodt, D. Scott Bunnell, individuals, and others similarly situated, Plaintiffs and Appellees, v. AMERICAN EXPRESS FINANCIAL ADVISORS, INC., a Minnesota Corporation, Defendant and Appellant.
• Court: Supreme Court of Utah

98 P.3d 15

2004 UT 70

Jerry FORD, Mark Russell, Robert P. Welch, Travis Kell, J. Mathew Zundel, David K. Eaton, John D. Ford, Robert Aamodt, D. Scott Bunnell, individuals, and others similarly situated, Plaintiffs and Appellees, v. AMERICAN EXPRESS FINANCIAL ADVISORS, INC., a Minnesota Corporation, Defendant and Appellant.

No. 20020550.

Supreme Court of Utah.

August 20, 2004.

M. David Eckersley, John P. Ashton, Robert G. Wing, James W. McConkie, III, Salt Lake, for plaintiffs.

David A. Anderson, Elisabeth R. Blattner, Salt Lake, Charles G. Cole, Morgan D. Hodgson, Paul J. Ondrasik, Washington, D.C., for defendant.

DURHAM, Chief Justice:

¶ 1 This case presents an appeal of the trial court's grant of partial summary judgment to class action plaintiffs, finding the defendant liable for breach of contract. All members of the plaintiff class (the Advisors) are financial planners who worked for defendant American Express Financial Advisors (AEFA) as independent contractors. The trial court allowed a jury trial on the issue of damages, and the jury returned a verdict for the Advisors of $14,109,068.82.

¶ 2 There are three main issues on appeal: (1) whether the trial court erred in granting partial summary judgment to the Advisors on the issue of whether AEFA breached a contract known as the Financial Planners Agreement (the FPA); (2) whether the trial court committed error when it granted partial summary judgment to the Advisors on AEFA's claim that a subsequent contract, known as the Business Franchise Agreement (BFA), was a substitute contract for the FPA; and (3) whether the trial court erred in granting the Advisors' motion in limine seeking exclusion of evidence regarding offsetting benefits by AEFA. We affirm on all three issues.

BACKGROUND

¶ 3 The FPA governed the relationship between the Advisors and AEFA until March 22, 2000. The parties agree that the Advisors had to meet certain contractually specified production levels¹ in one year in order to receive contributions from AEFA toward their medical, dental, and life insurance coverage ("welfare benefits") for the next fiscal year.² They further agree that there were other prerequisites to receiving welfare benefits contributions: the Advisors also had to elect to participate in the AEFA benefits plan and pay their own share of the premium.

¶ 4 The parties disagree about whether, as an additional prerequisite for the receipt of welfare benefits contributions, the Advisors were also required to continue to work under the FPA. The Advisors claim that their achievement of the productivity levels irrevocably "entitled" them to the benefits contributions in the following year so long as they remained associated with AEFA. AEFA counters that attaining the specified production levels rendered the Advisors merely "eligible" for the benefits contributions, and that actual payment of the benefits contributions was additionally contingent on the Advisors continuing to work under the FPA specifically.

¶ 5 On May 21, 2000, AEFA terminated the FPA and restructured its contractual relationship with the Advisors. The amount and nature of the forewarning that AEFA gave the Advisors about this termination is a matter of some disagreement, but it is undisputed that in place of the FPA, AEFA offered the Advisors two alternative "platforms" upon which to base their prospective contractual relationships with AEFA. Those who chose Platform 1 became employees of AEFA, while those who chose Platform 2 became "franchisees." All of the Advisors voluntarily chose Platform 2, which required them to sign a new contract called the Business Franchise Agreement (BFA).

¶ 6 The BFA differed from the FPA in several respects. The salient difference between the two for purposes of this appeal, however, was that under the BFA, AEFA would not pay any contributions toward the Advisors' welfare benefits. AEFA further claimed that it had no obligation to pay even the benefits contributions promised in the FPA, even though the Advisors had met the requisite production levels specified in the FPA. AEFA's refusal to pay welfare benefits contributions is primarily what gave rise to the Advisors' lawsuit against AEFA ¶ 7 The Advisors filed suit to recover the welfare benefits contributions they claim they were owed pursuant to the FPA. All of the Advisors had fully met the requisite production levels in 1998, 1999, or both. The trial court granted partial summary judgment to the Advisors on the issue of liability, finding as a matter of law that AEFA did breach the FPA, and that the BFA was not a substituted contract. The trial court permitted the case to proceed to a jury trial on the issue of damages only, and it granted the Advisors' motion in limine seeking exclusion of all evidence regarding offsetting benefits that AEFA claims the Advisors received as a result of AEFA's actions. The trial resulted in a jury verdict against AEFA for $14,109,068.82. After the trial court denied AEFA's motion for a new trial, AEFA appealed.

ANALYSIS

I. THE ADVISORS' ENTITLEMENT TO WELFARE BENEFITS CONTRIBUTIONS UNDER THE FPA

¶ 8 The first issue is whether the trial court correctly granted partial summary judgment for the Advisors in ruling that AEFA breached the FPA by refusing to make welfare benefits contributions on behalf of the Advisors. There is no dispute that AEFA's "Platform Rollout" prospectively terminated AEFA's obligation to subsidize the Advisors' welfare benefits under the BFA. The key question is whether the refusal to make contributions contemplated by the FPA constituted a breach. The parties agree that Minnesota law applies to this case. The trial court found that under Minnesota law, "[e]ven if more than a tender of performance were required, the Advisors earned their benefits contributions. Earned benefits cannot be taken away."

¶ 9 "[S]ummary judgment is only appropriate where `there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.' Utah R. Civ. P. 56(c)." Smith v. Four Corners Mental Health Ctr., Inc., 2003 UT 23, ¶ 13, 70 P.3d 904. Therefore, when we review a trial court's decision granting summary judgment, "we need review only whether the trial court erred in applying the relevant law and whether a material fact was in dispute." WebBank v. Am. Gen. Annuity Serv. Corp., 2002 UT 88, ¶ 13, 54 P.3d 1139. We give the trial court's legal conclusions no deference, and instead review them for correctness. Smith, 2003 UT 23 at ¶ 10, 70 P.3d 904.

¶ 10 AEFA challenges the trial court's legal conclusions that the Advisors "earned their benefits contributions," and "[e]arned benefits cannot be taken away." It asserts that the FPA did not give the Advisors a "guaranteed right to [benefits contributions] irrespective of whether they continued working under the FPA." The Advisors counter that they earned their benefits contributions by meeting the production goals set out in the FPA, and AEFA simply refused to honor the terms of its promise to pay the contributions. We agree with the trial court and the Advisors, and conclude that the Advisors had earned the benefits contributions pursuant to the plain terms of the FPA, and that AEFA's termination of the benefits contributions constituted a breach of the FPA.

¶ 11 AEFA's offer of welfare benefits contributions in exchange for the Advisors' work and meeting of certain production levels constituted a unilateral contract that AEFA was not at liberty to revoke or modify once the Advisors began fulfilling their contractual obligations. "An offeror of a unilateral contract always retains the power to modify or revoke the offer so long as the offeree has not begun performance, but retention of that power does not preclude the offer from becoming a contract once accepted by the offeree by tender of performance." Feges v. Perkins Rests., Inc., 483 N.W.2d 701, 708 (Minn.1992) (citation omitted). "[A]n offer for a unilateral contract may neither be changed nor revoked once the offeree begins the performance requested by the offer." Peters v. Mut. Benefit Life Ins. Co., 420 N.W.2d 908, 914 (Minn.Ct.App.1988). "Where an employer represents in a written document distributed to employees that an employee will receive benefit payments in certain specified circumstances as an incentive for continued service, those benefits are part of the employee's compensation which the employer is contractually obligated to pay." Melin v. Northwestern Bell Tel. Co., 266 N.W.2d 183, 186 (Minn.1978) (overruling previous case that "treat[ed] benefits under a noncontributory plan as gratuities rather than contractual obligations").

¶ 12 AEFA makes no effort to refute these basic principles of law regarding unilateral contracts, or to assert that they have no application here. Rather, AEFA argues that we should find that the Advisors were not entitled to welfare benefits contributions after the termination of the FPA, even though they had achieved the required production levels, unless the FPA expressly provided that the contributions would continue after AEFA terminated the FPA. AEFA relies on several cases for this proposition, but each of them is distinguishable from the case before us.

¶ 13 The first case, Knudsen v. Northwest Airlines, Inc., exemplifies the unexceptional rule that "where an employee enters into a stock option agreement that is granted on certain terms and conditions, he is bound by those conditions." 450 N.W.2d 131, 133 (Minn.1990); see also Pillsbury v. Elston, 283 N.W.2d 370, 374 (Minn.1979)

(holding stock option repurchase provision enforceable because it was a condition to which the parties expressly agreed). The employee in Knudsen had been terminated, and he sued his employer to exercise stock option rights after his termination despite contractual language expressly prohibiting such action. Knudsen, 450 N.W.2d at 132-33. The instant case does not involve terminated...