Hinshaw v. Ligon Industries, L.L.C., C 07-3029-MWB.

Decision Date05 May 2008
Docket NumberNo. C 07-3029-MWB.,C 07-3029-MWB.
PartiesRobert HINSHAW, Plaintiff, v. LIGON INDUSTRIES, L.L.C., and Fisher Hydraulics, Inc., Defendants.
CourtU.S. District Court — Northern District of Iowa

Mark D. Sherinian, Sherinian & Walker, P.C., West Des Moines, IA, for Plaintiff.

Scott M. Brennan, Davis Brown Koehn Shors & Roberts, Des Moines, I A, for Defendants.


MARK W. BENNETT, District Judge.

                TABLE OF CONTENTS
                I.  INTRODUCTION.........................................................800
                 II.  FACTUAL BACKGROUND: UNDISPUTED FACTS.................................801
                III.  LEGAL STANDARDS FOR SUMMARY JUDGMENT.................................805
                 IV.  BREACH OF CONTRACT CLAIM.............................................808
                      A.  Offer............................................................809
                      B.  Acceptance......................................................813
                      C.  Estoppel.........................................................815
                  V.  IWPCL CLAIM....... ..................................................815
                      A.  Availability Of Liquidated Damages...............................816
                      B.  Complete Summary Judgment On Hinshaw's IWPCL Claim...............819
                 VI.  CONCLUSION...........................................................820

You don't have to ask Donald Trump to understand that the statement, "You're fired!" is not the same as the statement, "We accept your resignation." The parties assuredly agree on that. But the parties totally disagree as to whether the latter statement, and other conduct, form a contract in this case.


Plaintiff Robert Hinshaw filed a two-count petition and jury demand against defendants Ligon Industries, L.L.C., and Fisher Hydraulics, Inc., (collectively, the Defendants) in the Iowa District Court for Pocahontas County on March 15, 2007. [Plaintiff's App. 1-3]. The action was successfully removed on the basis of diversity jurisdiction to the United States District Court for the Northern District of Iowa on April 24, 2007. Dkt. # 1. Hinshaw alleges Defendants (1) violated the Iowa Wage Payment Collection Law (IWPCL) by failing to pay Hinshaw timely severance pay, and (2) breached the parties' January 12, 2007, contract by failing to honor the terms in the alleged contract. [Plaintiffs App. 2-3]. Defendants filed their answer, stating affirmative defenses, on April 25, 2007. Dkt. # 3. Defendants later filed the summary judgment motion now before the court on February 14, 2008. Dkt. # 14. Hinshaw filed a resistance on March 20, 2008. Dkt. # 17. Defendants filed a reply on April 2, 2008. Dkt. # 21. After receiving permission to do so, Hinshaw filed a sur-reply on April 10, 2008. Dkt. # 24.

Defendants requested oral arguments on their motion for summary judgment, and the court granted Defendants' request. Telephonic oral arguments were heard on Wednesday, April 30, 2008. Scott Brennan of Davis, Brown, Koehn, Shors & Roberts, P.C., in Des Moines, Iowa represented Defendants. Mark Sherinian of Sherinian & Walker Law Firm in West Des Moines, Iowa represented Hinshaw. The oral arguments were spirited and the lawyers were exceptionally well prepared. The Defendants' motion for summary judgment is now fully submitted.


Fisher Hydraulics, Inc. (Fisher), hired Hinshaw in August of 1999 as General Manager of its operations in Laurens, Iowa. Hinshaw executed an employment agreement with Fisher on August 5, 1999. The employment agreement contained the following provision for severance:

6. SEVERANCE — For the first two years of your employment with Fisher, if you are discharged without cause, you will be provided with twelve months of continued salary. If you are discharged without cause during the 25th through the 36th month after commencement of employment, you will be provided with nine months of continued salary. If you are discharged without cause during the 27th through the 48th month after commencement of employment, you will be provided with six months of continued salary. Thereafter, if you are discharged without cause, you will be provided with the greater of three months of continued salary or, the Fisher separation policy in effect at that time. If you are terminated during the first four years, the continuation of salary will end at the earlier of above time periods or upon commencing employment at a comparable salary. Termination with cause would include fraud, theft, being grossly insubordinate, misappropriation of company assets, etc.

[Defendants' App. 5]. Ligon Industries, L.L.C. (Ligon), purchased Fisher on June 1, 2000. Hinshaw remained as the General Manager at Fisher and had total control of management decisions, except for large capital expenditures.

John McMahon and Leon Nolen started Ligon for the purpose of purchasing manufacturing companies that had about $10 million in sales. McMahon acted as Ligon's Chairman. Prior to starting Ligon, McMahon practiced general commercial litigation from 1968 to 1975. Nolen acted as Ligon's Chief Executive Officer. Prior to starting Ligon, Nolen was employed as executive vice-president of McWane Cast Iron Pipe Company for approximately eighteen years. Nolen supervised a portfolio of companies while working for McWane.

Throughout the years 2005 and 2006, Nolen communicated to Hinshaw that Nolen had concerns about Fisher's performance. Nolen informed Hinshaw more than once that Nolen would accept Hinshaw's resignation if Hinshaw were to resign. Fisher's performance improved by December of 2006, but Fisher's operations remained unprofitable.

On Friday, January 12, 2007, Hinshaw's legal counsel sent a letter (the First Letter) by fax and U.S. mail to Nolen and McMahon. The First Letter read:

Dear Mr. Nolen:

My co-counsel, Mindy Vervaecke, and I represent Robert Hinshaw, the General Manager of Fisher Hydraulics in Laurens, Iowa. I am writing for the purpose of negotiating terms by which Mr. Hinshaw could resign from his position as General Manager.

It has become obvious to Mr. Hinshaw that you no longer wish him to be employed by Ligon Industries. That became clear in September of last year when, on three occasions, you asked him to consider resigning. In fact, in a letter dated September 1, 2006, you said, "If you ever believe that you physically cannot do the job or do not want to do it, I will be more than happy to accept your resignation." Despite the criticisms that were leveled at him, Mr. Hinshaw very effectively resolved the production issues that you were concerned about at that time, and he received a very complementary assessment of Fisher's performance by the end of September. Nonetheless, the expectations that have been placed upon Mr. Hinshaw and his facility's performance now lead him to the conclusion that you are setting him up for failure. The specific goals that have been set for production are simply unrealistic and unachievable. He believes that, ultimately, if the company does not meet those goals, you will use that issue as an excuse to terminate him.

Under the terms of his employment contract dated August 4, 1999, which was assumed by your company upon its purchase of Fisher Hydraulics, Mr. Hinshaw is entitled to severance payments if he is terminated other than for cause. "Cause" is defined to mean only "fraud, theft, being grossly insubordinate, and misappropriation of company assets." At no time has Mr. Hinshaw been accused of any such conduct, and I am sure you would agreee that his performance has been outstanding. In fact, on numerous occasions, you and other members of management have held Fisher Hydraulics up as the example to be followed by the other facilities in the Ligon group.

Please understand that Mr. Hinshaw absolutely loves his job. He described it to us as the best job he's ever had. It has given him great personal satisfaction to daily face the challenges and personal interaction that he enjoys with the members of his team.

Mr. Hinshaw's contract does not contain a non-compete agreement nor a confidentiality agreement. Under the circumstances, he would be more than willing to sign such an agreement under the proper terms. Specifically, we would propose that in return for the signing of a confidentiality agreement and a non-compete agreement, Mr. Hinshaw be awarded forty-eight (48) months of severance, based on the average compensation (both base salary and bonus) which he has received over the last three years. During the 48 month period he would also be willing to serve as a consultant. We would also expect that the annual bonus due Mr. Hinshaw for 2006 will be paid immediately and any unused vacation will be paid upon his effective resignation. Finally, we would ask that Mr. Hinshaw's medical insurance be paid by the company during the forty-eight (48) month period.

Please understand that Mr. Hinshaw would like nothing more than to retain his position as General Manager until such time as he would retire. However, at the age of fifty-nine, it would be very difficult for him to obtain new employment. Consequently, it would be in everyone's [sic] to negotiate a reasonable severance arrangement that would allow Mr. Hinshaw to exit gracefully from the company.

Please have your attorney contact me with your position in regard to this proposal.

                        Very truly yours
                        Mark D. Sherinian
                  xc: John McMahon

[Defendants' App. 8-9]. Nolen was at his lake home when the First Letter was sent. McMahon received the First Letter on January 12, 2007, read it thoroughly, and called Nolen the same day to discuss it. McMahon states that he told Nolen over that phone that "I have some very bad news — and he said — what is that — and I said — we've gotten a letter from a lawyer representing Bob in which he has accused the company of very inappropriate behavior, and given...

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