Gorog v. Best Buy Co.

• Decision Date: 24 July 2014
• Docket Number: No. 13–2231.,13–2231.
• Citation: 760 F.3d 787
• Parties: Christopher GOROG, Plaintiff–Appellant v. BEST BUY CO., INC.; Napster, Inc., Defendants–Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

760 F.3d 787

Christopher GOROG, Plaintiff–Appellant

v.BEST BUY CO., INC.; Napster, Inc., Defendants–Appellees.

No. 13–2231.

United States Court of Appeals, Eighth Circuit.

Submitted: May 14, 2014.

Filed: July 24, 2014.

Adam W. Hansen, argued, Minneapolis, MN (Steven Andrew Smith, Minneapolis, MN, on the brief), for Plaintiff–Appellant.

Brooke D. Anthony, argued, Minneapolis, MN (Joseph William Anthony, Minneapolis, MN, on the brief), for Defendants–Appellees.

Before WOLLMAN, MELLOY, and BENTON, Circuit Judges.

WOLLMAN, Circuit Judge.

Christopher Gorog appeals from the district court's ¹ dismissal of his amended complaint against Best Buy Co., Inc., and Napster, Inc., for breach of contract. We affirm.

I. Background

Gorog was the CEO of Roxio, Inc. In 2002, Roxio acquired the assets of Napster, an Internet file-sharing service. Roxio re-branded Napster, and Gorog assumed the role of Napster's CEO.

In 2008, Best Buy purchased Napster. Best Buy sought to continue the employment of Gorog and other Napster executives. Gorog entered into an employment agreement (the Employment Agreement) with Napster, which was then a wholly owned subsidiary of Best Buy. The Employment Agreement contemplated, among other things, that Napster and thereby Best Buy would employ Gorog until March 3, 2012, and that Gorog would be entitled to a performance award subject to certain conditions. The terms of the performance award were agreed upon in a separate document (the Award Agreement).

The Award Agreement provided that Gorog had “the right to earn a performance-based award, which may be comprised of a series of interim payments (collectively the ‘Performance Award’), having a target value of $2,925,000 [.]” The Award Agreement contemplated that Gorog would be eligible to earn the performance award at four specific performance target dates provided that he remained employed and that Napster achieved certain performance criteria measured on the performance target dates.

A few months after his employment began, Gorog decided to resign because he believed that Napster was not a priority for Best Buy. On December 31, 2009, in connection with his resignation, Gorog signed a Waiver and General Release (the Separation Agreement). The Separation Agreement provided that Gorog's employment would be terminated without cause and that Gorog would not release any claims to a performance award under the Award Agreement.

Sometime in the fall of 2011, Best Buy sold Napster to Rhapsody, another Internet music business. Rhapsody ceased operating Napster and transferred Napster's subscribers to Rhapsody's platform.

This contract dispute arises out of Best Buy's refusal to pay Gorog a performance award under the Award Agreement. Relevant to this dispute, the Award Agreement contained four “Forfeiture/Acceleration” provisions that addressed othercircumstances in which Gorog would or would not be entitled to a performance award. The provisions read as follows:

2.4 Forfeiture/Acceleration

(a) If, prior to the end of the Performance Period, your employment is terminated by reason of death or because you become Disabled, you will be entitled to receive a Performance Award equal to 100% of the Performance Award Target Value....

(b) If, prior to the end of the Performance Period, your employment is terminated by Napster without Cause or you terminate your employment with Napster for Good Reason, the Performance Period will continue and you will be entitled to receive a Performance Award equal to a pro-rata portion, based on the number of Whole Months you served during the Performance Period, of the Performance Award that otherwise would have been earned in accordance with the Performance Criteria Schedule....

(c) If, prior to the Performance Target Date, majority ownership of Napster (or any successor entity) is sold by Best Buy or spun-off to its shareholders, or if the venture ceases operations (the “Event”), you shall be entitled to receive a Performance Award equal to 100% of the Performance Award Target Value, regardless of whether the Performance Criteria have been met....

(d) If your employment is terminated during the Performance Period for any other reason, your rights to any Performance Award will be immediately and irrevocably forfeited.

Gorog filed a complaint against Best Buy alleging, among other things, breach of contract, and claiming that Best Buy owed him a performance award under section 2.4(c) as a result of its sale of Napster. Gorog then amended his complaint to add Napster as a defendant.² Best Buy moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6), arguing that the forfeiture and acceleration provisions were mutually exclusive and that because Gorog was terminated without cause, the only forfeiture and acceleration provision that potentially applied was section 2.4(b).

The district court granted Best Buy's motion. In doing so, the district court considered the Employment Agreement, the Award Agreement, and the Separation Agreement, which Best Buy submitted with its motion to dismiss. The district court concluded that the language of the forfeiture and acceleration provisions mandated that Gorog be entitled to a post-termination performance award only “if he satisfied one of the reasons for termination set forth in section 2.4(a)-(c).” D. Ct. Order of May 8, 2013, at 9. Thus, because Gorog had not alleged that he was terminated due to death or disability or as a result of the sale of Napster, the district court determined that Gorog could recover only under section 2.4(b). The district court then noted that the amended complaint contained no allegation that Napster had satisfied the performance criteria as required by section 2.4(b). Consequently, the district court dismissed Gorog's breach-of-contract claim because Gorog had not alleged that he was entitled to a performance award under 2.4(b), the sole applicable forfeiture and acceleration provision.

II. Discussion

Gorog advances two main arguments on appeal: (1) the district court erred by failing to convert Best Buy's motion to dismiss into a motion for summary judgment and, as a result, denied Gorog the opportunity to conduct reasonable discovery; and (2) the district court erred in dismissing Gorog's complaint for failure to state a claim for breach of contract.

A. Federal Rule of Civil Procedure 12(d)

We first consider Gorog's argument that the district court erred by considering matters outside the pleadings without then converting Best Buy's Rule 12(b)(6) motion to dismiss into one for summary judgment, thereby denying Gorog an opportunity to conduct discovery.

“If, on a motion under Rule 12(b)(6) ..., matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in [Federal] Rule [of Civil Procedure] 56.” Fed.R.Civ.P. 12(d). “Rule 12(b)(6) motions are not automatically converted into motions for summary judgment simply because one party submits additional matters in support of or [in] opposition to the motion.” Casazza v. Kiser, 313 F.3d 414, 417 (8th Cir.2002) (alteration in original) (quoting Missouri ex rel. Nixon v. Coeur D'Alene Tribe, 164 F.3d 1102, 1107 (8th Cir.1999)). A district court does not convert a motion to dismiss into a motion for summary judgment when, for example, it does not rely upon matters outside the pleadings in granting the motion. BJC Health Sys. v. Columbia Cas. Co., 348 F.3d 685, 688 (8th Cir.2003).

Although Best Buy submitted voluminous documents with its motion to dismiss, the district court exclusively relied on the Employment Agreement, the Award Agreement, and the Separation Agreement in rendering its decision. Gorog concedes that the Employment Agreement and the Separation Agreement are embraced by his amended complaint and thus were appropriately considered by the district court. Accordingly, we must determine whether the Award Agreement is a matter outside the pleadings such that conversion to summary judgment was required.

“Most courts ... view ‘matters outside the pleading’ as including any written or oral evidence in support of or in opposition to the pleading that provides some substantiation for and does not merely reiterate what is said in the pleadings.” Id. at 687 (omission in original) (quoting Gibb v. Scott, 958 F.2d 814, 816 (8th Cir.1992)). “Though matters outside the pleading may not be considered in deciding a Rule 12 motion to dismiss, documents necessarily embraced by the complaint are not matters outside the pleading.” Ashanti v. City of Golden Valley, 666 F.3d 1148, 1151 (8th Cir.2012) (quoting Enervations, Inc. v. Minn. Mining & Mfg. Co., 380 F.3d 1066, 1069 (8th Cir.2004)). “[T]he contracts upon which [a] claim rests ... are evidently embraced by the pleadings.” Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697 n. 4 (8th Cir.2003); see also Stahl v. U.S. Dep't of Agric., 327 F.3d 697, 700 (8th Cir.2003) (“In a case involving a contract, the court may examine the contract documents in deciding a motion to dismiss.”).

We conclude that the Award Agreement is embraced by Gorog's amended complaint. Gorog quotes from the Award Agreement in paragraph 13 of his amended complaint:

Relevant here, the agreement contained two acceleration provisions. First, the agreement stated that, “[i]f, prior to the Performance Target Date, your employment is terminated ... the Performance Period will continue and you will be entitled to receive a Performance Award equal to a pro-rata portion, based on the number of Whole Months you served during the performance period....” Second, the agreement stated that, “[i]f, prior to the Performance Target Date, majority ownership of Napster ... is sold by Best Buy ... or the venture ceases operations ... you shall be entitled to receive a Performance Award equal to 100% of the Performance Award Target Value, regardless of whether the Performance Criteria have...