Gelco Exp. Corp. v. Ashby, WD

• Decision Date: 09 April 1985
• Docket Number: No. WD,WD
• Citation: 689 S.W.2d 790
• Parties: GELCO EXPRESS CORPORATION and Insurance Company of North America, Appellants, v. R. Richard ASHBY, Respondent. 35955.
• Court: Missouri Court of Appeals

Page 790

689 S.W.2d 790

GELCO EXPRESS CORPORATION and Insurance Company of North America, Appellants, v. R. Richard ASHBY, Respondent.

No. WD 35955.

Missouri Court of Appeals Western District.

April 9, 1985.

Paul Scott Kelly, Jr. and Linda V. Gill, Kansas City (Gage & Tucker, Kansas City, of counsel), for appellants.

Paul E. Vardeman, Kansas City (Polsinelli, White & Vardeman, Kansas City, of counsel), for respondent.

Before PRITCHARD, P.J., and SHANGLER and DIXON, JJ.

PRITCHARD, Presiding Judge.

This is a suit by Gelco Express Corporation to enjoin respondent Ashby from competing with Gelco in its business as an intrastate courier of time-sensitive documents and small packages which are required to be delivered by specific deadlines, usually less than 24 hours from the time of pickup.

The trial court, having issued ex parte a temporary restraining order, dissolved it; denied a preliminary injunction; and entered judgment against Gelco on its claim for permanent injunction; and for Ashby on his counterclaim for damages against Gelco and Insurance Company of North America on the temporary restraining order bond for $12,469.55, and $14,583.97 for Ashby against Gelco for severance pay and other post-termination benefits.

Ashby had been employed by Gelco, or its predecessor companies, including Bankers Dispatch, for 22 years. In the fall of 1982, Ashby became dissatisfied with the manner in which Gelco was being run by upper management, and an employment contract was negotiated, effective February 1, 1983, which provided for a "term" of employment for the entire period of Ashby's employment and 24 months thereafter; an initial period of one year from February 1, 1983 to January 31, 1984, was provided; and this clause (the applicability of which is in controversy) was included: "1. (d) This one year period of employment shall automatically be renewed on its anniversary date for an additional one (1) year period on the same terms and conditions contained herein, unless notice in writing is given by either party of its intention to terminate or renegotiate the terms and conditions hereof, not less than thirty (30) days prior to said anniversary date." Paragraph 3 provided for a covenant of Ashby not to compete during the term (24 months) with any of the types of businesses in which Gelco was engaged [transportation of time-sensitive and non-time sensitive commodities by motor carrier, aircraft and forwarding pursuant to operating authority granted by appropriate government regulatory agencies and/or in accordance with applicable law] within the territory, which was defined to be within the states of Kansas, Missouri and Nebraska. Ashby's title was that of Senior Regional Manager for the territory, at an annual base salary of $50,000, plus such increases and bonuses as may be granted by the company.

Ashby's territory was always profitable. In the 1983 fiscal year, Gelco had a net loss of over 7 million dollars on gross sales of about 70 million dollars, while Ashby's territory produced 3 million dollars profit on 15 million dollars in sales. Ashby was "an excellent businessman" with his own aggressive management style.

Ashby thought that things had not improved with Gelco during 1983, and on October 12, 1983, he wrote a letter to Andrew Grossman, Gelco's president, requesting renegotiation of his employment contract, saying: "The reason I am giving an early notification, as the agreement specifies not less than thirty days, is that I feel it will take more than just the thirty days for us to really discuss the terms and make a decision. In the event that we cannot reach an agreement, then you should have more than just the thirty days to determine my replacement." On December 20, 1983, Ashby wrote a letter to Grossman stating that he did not wish to renew the contract on its expiration date, January 31, 1984. Pursuant to a telephone conversation with Grossman, that letter was withdrawn by Ashby by letter of January 3, 1984, in which he reiterated the necessity of negotiating the terms of the contract and referring to his October, 1983, correspondence.

On October 28, 1983, Gelco signed a contract with Baker Industries, Inc., by which Gelco agreed to sell all of its stock to Baker for 27.5 million. The contract was subject to the approval of the United States Department of Justice, and the Interstate Commerce Commission. An assignment of Ashby's contract of employment was specifically included, as was a provision that Gelco had not and would not terminate any of its employees without the prior consent of Baker or its designee. At the time of the contract, Baker had a wholly owned subsidiary known as Pony Express Courier Corporation which was engaged in the same business as Gelco but in a different part of the United States. Baker then sent a management team, headed by Bob Moree, from Pony Express, to Gelco to become acquainted with the latter's operation. Moree was to become president of both Gelco and Pony Express, and he designated Drew Naber for vice president in charge of a twenty-state territory including Ashby's region. Ashby learned of the Baker-Gelco contract through reading the Wall Street Journal, and he had no function in the mechanics of the take-over. The Baker-Gelco contract was closed February 1, 1984.

Grossman never did respond to Ashby's October 12, 1983, letter requesting renegotiation, and Grossman entered into no meaningful negotiations with Ashby regarding his contract even though he advised Ashby that he was to deal with Gelco. Ashby tried to talk to his supervisor, Gallagher, but was told by him that Grossman and senior vice president, Milovic, would be the ones responsible for negotiating with Ashby. In apparent frustration, Ashby, on November 15, 1983, sent Gallagher a list of demands for the renewal of his contract, to "get something going" and to protect himself from any adverse consequences of the Baker-Pony Express acquisition of Gelco. Gallagher never responded to the list of demands, but sent it on to Grossman and Milovic, neither of whom ever instructed him as to Ashby's demands.

Ashby attended a meeting of key management field personnel in Minneapolis in early November, 1983, at which time he was told by Moree that nothing could be done about his employment contract because Pony Express did not own the company (Gelco). Shortly thereafter, Moree met with Ashby during a tour of 10 or 12 field offices. Ashby then raised the matter of his employment contract and Moree responded that Pony Express would be more definitive about contract discussions at an appropriate time. On November 18, 1983, Ashby wrote Moree again requesting renegotiation of his employment contract. Later in the month, Moree telephoned Ashby and told him that he ought to accept the contract as is and that perhaps the negotiation deadline could be extended past the contract's January 31, 1984, expiration date. Moree told Ashby that he could not sit down and work anything out regarding the contract until the "appropriate time", which in Moree's mind was in late January after ICC's approval of the sale of Gelco's stock. According to Ashby, Moree told him that if he did not accept the contract as is, he was "liable to be whittling all day and scratching crap with the chickens all night."

A few days after Ashby withdrew his resignation, at a breakfast meeting in Denver on January 6, 1984, Naber told Ashby that he was not well-versed with his employment contract situation and that he would talk to Moree about it. On the previous night, Moree told Ashby that he should talk to Naber about the employment contract. Eleven days later, in a car ride from Lincoln to Omaha, shared by Naber and Ashby, nothing developed with respect to contract discussions. Naber testified that Ashby refused to provide him with any demands, and Naber was unaware of the November 15, 1983, demand by letter to Pat Gallagher whom he did not know. Ashby did ask Naber what "you are going to offer, and we'll get together much quicker." Naber did tell him that he was almost sure that Ashby could be kept at the same salary, but he might have to take a little pay cut. Ashby told him, "Well, I am not taking a cut in pay, so there is not really anything we are going to talk about on that line." Ashby expected a salary increase, ordinarily granted by Gelco, of 8 to 10 per cent on February 1, 1984.

On January 23, 1984, Moree wrote Ashby rejecting his demands made in a phone call to Naber a few days before, but offering to consider extending the contract renegotiation deadline for three months. There was no counterproposal to Ashby's salary and employment demands.

On January 26, 1984, Ashby sent a memorandum to all personnel of Gelco stating that January 31, 1984 would be his last day with the company. On January 31, 1984, Ashby and Naber met to discuss the transition of the Kansas City office, at which there was no mention of renegotiation of the contract. At the conclusion of the meeting, Ashby gave Naber his office keys, company car, company credit cards and other company property, and left the office at 3:30 or 4:00 p.m., being driven home by another Gelco employee. A going-away party that evening was given Ashby by employees who had worked for him.

At about 11:00 a.m., on January 31, 1984, Moree gave Erickson, Gelco's executive vice president, a list of about 80 persons who were to be taken off the payroll the next day (to make it clear the action was that of the new management). Ashby's name was on the list, put there according to Moree because his contract was to expire at 12:00 p.m., on January 31, therefore he was to be taken off the payroll. Moree testified that Ashby was on the list because he had resigned. At about 5:00 p.m., on January 31, Gallagher called Ashby and told him he had bad news, that Ashby had just been fired, and told him he would receive severance pay over the next four months.

Ashby testified that he viewed Moree's...