Hamilton v. Segue Software Inc.

• Decision Date: 20 November 2000
• Docket Number: No. 00-10541,00-10541
• Parties: (5th Cir. 2000) RANDALL K HAMILTON, Plaintiff - Appellant v. SEGUE SOFTWARE INC; STEVE BUTLER, Defendants - Appellees Summary Calendar
• Court: U.S. Court of Appeals — Fifth Circuit

Page 473

232 F.3d 473 (5th Cir. 2000)

RANDALL K HAMILTON, Plaintiff - Appellant v. SEGUE SOFTWARE INC; STEVE BUTLER, Defendants - Appellees

No. 00-10541

Summary Calendar

IN THE UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT

November 20, 2000

[Copyrighted Material Omitted] Appeal from the United States District Court for the Northern District of Texas.

Before KING, Chief Judge, and SMITH and PARKER, Circuit Judges.

PER CURIAM:

Plaintiff-Appellant Randall Hamilton appeals the district court's grant of summary judgment in favor of Defendants-Appellees, Segue Software, Inc. and Steve Butler, President and Chief Executive Officer of Segue Software, Inc. For the following reasons, we AFFIRM.

I. FACTS AND PROCEDURAL BACKGROUND

In 1999, while employed as a Product Marketing Manager at AutoTester, Inc., Randall Hamilton was recruited to work at Segue Software, Inc. ("Segue"). Steve Butler, President and CEO of Segue, offered Hamilton the position of Director of Enterprise Resource Planning (ERP) Initiatives at the company. The offer was formalized in an offer letter dated February 24, 1999 and signed by Butler.

The offer letter included three paragraphs relevant to our disposition of this case. First, the letter contained language stating, "Your base salary will be at an annual rate of $125,000.00 paid semi-monthly. Upon mutually agreed upon objectives, you will be eligible for an annual 20K MBO [bonus]." Second, the letter stated, "A copy of Segue's standard Employment Agreement is enclosed. Please sign this agreement and return it with this letter." Finally, the letter stated, "To accept this offer, please sign the enclosed copy of this letter and the Employment Agreement and return both to Human Resources . . . ."

Hamilton signed and returned the letter, accepting the position. However, there was no Employment Agreement attached. Hamilton did not receive or sign an "Employee Agreement"¹ until July 13, 1999. This document was a standard form employment contract setting forth the terms and conditions for employment at Segue, including, inter alia, rules governing conflicts of interest, confidentiality, and intellectual property rights. Paragraph seven of the signed Employment Agreement also included the language, "I understand that, unless expressly provided otherwise in any other written agreement signed by me an [sic] the Company by the Executive Vice President or CEO, my employment with the Company is 'at will' and that my employment may be terminated by the Company at will at any time with or without cause or notice."

Hamilton began working at Segue on March 15, 1999 as Director of ERP Initiatives. In this capacity, he traveled on behalf of Segue to meet with clients and was paid according to the figure in the offer letter. On July 1, 1999, Hamilton was transferred to a new position as a member of Segue's Business Development team. On August 20, 1999, Segue terminated Hamilton's employment altogether.

Hamilton brought suit for breach of contract and fraud in the inducement in Texas state court. The suit was removed to the United States District Court for the Northern District of Texas pursuant to 28 U.S.C. §§ 1332 and 1441. To support his breach of contract claim, Hamilton asserts that the language in the offer letter established a one-year contract under Texas law and that Segue and Butler breached this employment agreement by firing him.

To support his fraud in the inducement claim, Hamilton asserts that Butler and Segue fraudulently induced him to join the company by promising him the Director of ERP Initiatives position, without any intent to keep him in that position. Hamilton also alleges that prior to and during his employment, Segue perpetrated an accounting fraud that resulted in a restatement of Segue's 1998 financial statement. This fraud precipitated the filing of a shareholder class action lawsuit and is claimed to have weakened the financial condition of the company. Hamilton argues that this fraud was concealed from him and would have altered his decision to join the company.

In federal district court, Segue and Butler moved to dismiss Hamilton's suit. The district court converted the Motion to Dismiss into a Motion for Summary Judgment pursuant to Federal Rule of Civil Procedure 12(b) and directed the parties to submit summary judgment evidence. On May 11, 2000, the district court granted Defendants' Motion for Summary Judgment. Hamilton timely appeals.

II. STANDARD OF REVIEW

We review a grant of summary judgment de novo, applying the same criteria used by the district court in the first instance. See Norman v. Apache Corp., 19 F.3d 1017, 1021 (5th Cir. 1994); Conkling v. Turner, 18 F.3d 1285, 1295 (5th Cir. 1994). Summary judgment is proper "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 judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). After the movant has presented a properly supported motion for summary judgment, the burden shifts to the nonmoving party to show with "significant probative evidence" that there exists a genuine issue of material fact. See Conkling, 18 F.3d at 1295. A fact is "material" if its resolution in favor of one party might affect the outcome of the lawsuit under governing law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue is "genuine" if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party. Id.

III. BREACH OF CONTRACT CLAIM

The gravamen of Hamilton's breach of contract complaint is that the February 24, 1999 offer letter and his acceptance created a binding contract of one-year employment. The letter stated in relevant part, "Your base salary will be at an annual rate of $125,000.00 paid semi-monthly. Upon mutually agreed upon objectives, you will be eligible for an annual 20K MBO." This case turns on whether, under Texas law, the "annual rate of $125,000.00" language in the offer letter creates a definite contract of employment for a one-year period. As our jurisdiction in this case is based on diversity of citizenship, we therefore function as an Erie court and must, to the best of our ability, apply Texas law as we think a Texas court would. See Erie R. Co. v. Tompkins, 304 U.S. 64 (1938).

The district court interpreted the contractual relationship by reading the offer letter and the Employment Agreement together. It found that the offer was conditioned on Hamilton's signing of the Employment Agreement, which expressly termed Hamilton's employment "at will". The court reasoned that because the offer letter stated that an Employment Agreement was attached, the at-will terms in that agreement were "expressly incorporated" in the offer. Our difficulty with the district court's reasoning, however, is that the Employment Agreement was not signed until five months after the offer letter.² While the district court dismissed this time difference as insignificant, we are not so persuaded.³ Nevertheless, we affirm the district court on the ground that the offer letter language, alone, fails to limit in a "meaningful and special way" the employer's right to terminate at will.

"The long-standing rule in Texas provides for employment at will, terminable at any time by either party, with or without cause, absent an express agreement to the contrary." Ronnie Loper Cheverolet-Geo, Inc. v. Hagey, 999 S.W.2d 81, 83 (Tex. App.--Houston [14th Dist.] 1999, no pet.) (citing Montgomery County Hosp. Dist. v. Brown, 965 S.W.2d 501, 502 (Tex. 1998)). "To rebut the presumption of employment at will, an employment contract must directly limit in a 'meaningful and special way' the employer's right to terminate the employee without cause." Rios v. Texas Commerce Bancshares, Inc., 930 S.W.2d 809, 815 (Tex. App.--Corpus Christi 1996, writ denied) (quoting Massey v. Houston Baptist Univ., 902 S.W.2d 81, 83 (Tex. App.--Houston [1st Dist.] 1995, writ denied)).

Hamilton argues that the language in the offer letter limits his employer's right to terminate him at will. He argues this "annual rate" language fits within the long-established "English Rule"⁴ adopted by Texas courts. The English Rule provides that "a hiring at a stated sum per week, month or year, is a definite employment for the period named." Dallas Hotel Co. v. Lackey, 203 S.W.2d 557, 561 (Tex. Civ. App.--Dallas 1947, writ ref'd); see also Winogard v. Willis, 789 S.W.2d 307, 310 (Tex. App.--Houston [14th Dist.] 1990, writ denied) ("A hiring based upon an agreement of an annual salary limits in a 'meaningful and special way' the employer's prerogative to discharge the employee during the dictated period of employment."). Offering the "annual rate" language as evidence of "a hiring based on an agreement of an annual salary," Hamilton argues he has met his burden for summary judgment.

The difficulty in resolving this question is that a conflict exists in Texas law over whether a written job offer proposing an annual salary constitutes a binding one-year employment contract. Specifically, a conflict exists over the status of the English Rule as it relates to the presumption of at-will employment, that can only be overcome with specific terms.⁵

Two cases frame our analysis in deciding this matter. First, Dallas Hotel Co. v. Lackey, provides an analogous factual situation whereby an employee accepted a written offer letter stating an annual salary and then upon commencing work was required to sign an employment agreement, including an "at-will clause." 203 S.W.2d 557, 561 (Tex. Civ. App.--Dallas 1947, writ ref'd). The Lackey court, following the English Rule, found that the initial letter controlled, and that the subsequent employment agreement could not alter the already agreed to term employment. See id.

In contrast,...