Johnson v. Michigan Claim Service, Inc.

• Decision Date: 23 January 2007
• Docket Number: Civil No. 05-2909 (PJS/RLE).
• Citation: 471 F.Supp.2d 967
• Parties: Stacy O. JOHNSON, Plaintiff, v. MICHIGAN CLAIM SERVICE, INC., d/b/a The ASU Group, Defendant.
• Court: U.S. District Court — District of Minnesota

471 F.Supp.2d 967

Stacy O. JOHNSON, Plaintiff, v. MICHIGAN CLAIM SERVICE, INC., d/b/a The ASU Group, Defendant.

Civil No. 05-2909 (PJS/RLE).

United States District Court, D. Minnesota.

January 23, 2007.

Christopher P. Rosengren, Gislason & Hunter, New Ulm, MN, for plaintiff.

Jeremy D. Sosna, Chad W. Strathman, Ford & Harrison LLP, for defendant.

ORDER ADOPTING REPORT AND RECOMMENDATION

SCHILTZ, District Judge.

This matter is before the Court on the parties' objections to Chief Magistrate Judge Raymond L. Erickson's Report and Recommendation ("R & R") dated December 1, 2006. Judge Erickson recommends denying the parties' cross-motions for summary judgment. The Court has conducted a de novo review. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b). Based on that review, the Court adopts the R & R and denies the motions.

Plaintiff Stacy O. Johnson brings this action against defendant Michigan Claim Service, Inc. ("MCS"), alleging that MCS terminated his employment in violation of 38 U.S.C. § 4316(c) of the Uniformed Services Employment and Reemployment Rights Act.¹ Section 4316(c) provides that

[a] person who is reemployed by an employer under this chapter shall not be discharged from such employment, except for cause . . . within one year after the date of such reemployment, if the person's period of service before the reemployment was more than 180 days[.]

38 U.S.C. § 4316(c). The parties do not dispute that Johnson was "reemployed by an employer under this chapter" after a previous period of service exceeding 180 days, or that he was discharged within one year after the date of his reemployment. Instead, the parties dispute whether Johnson was discharged "for cause" within the meaning of § 4316(c).

Unfortunately, the parties largely confuse this question — that is, the question of whether Johnson's discharge was "for cause" — with the question of whether the non-competition and confidentiality agreement that Johnson refused to sign would have been legally enforceable. The two questions are related, but not identical. As Judge Erickson recognized, the ultimate issue in this case is not whether the non-competition and confidentiality agreement would have been enforceable. The ultimate issue is whether MCS's discharge of Johnson for refusing to sign the agreement was reasonable under § 4316(c) (an issue on which MCS bears the burden of proof, see 20 C.F.R. § 1002.248(a)²).

If the agreement would have been unenforceable, then it can be assumed that Johnson's dismissal was unlawful. An employer almost surely does not have "cause" to fire an employee for refusing to sign an unenforceable agreement. As Judge Erickson explained, though, this Court cannot decide on this record and briefing whether the agreement that Johnson refused to sign was in fact unenforceable. One problem is that it is not clear whether Minnesota law or Michigan law controls, and Minnesota law appears to differ from Michigan law in important respects. Compare Freeman v. Duluth Clinic, Ltd., 334 N.W.2d 626, 630 (Minn.1983) (mere continuation of employment may be sufficient consideration for non-competition agreement, but only if it is bargained-for and provides the employee with "real advantages") with QIS, Inc. v. Indus. Quality Control, Inc., 262 Mich.App. 592, 686 N.W.2d 788, 789 (2004) (mere continuation of employment is sufficient consideration for non-competition agreement). The parties have inexplicably failed to brief this issue. A second problem is that, regardless of which state's law controls, there are important factual issues on which the record is either silent or in conflict.³

It is also true, as Johnson argues, that even if the agreement would have been enforceable, Johnson's dismissal may not have been lawful. An employer can act unreasonably in firing an employee for refusing to sign an enforceable non-competition and confidentiality agreement. The reasonableness of the employer's conduct depends on all of the circumstances. MCS argues that there is no dispute that it faced adverse economic conditions which necessitated the agreement. But there is evidence in the record that the division in which Johnson was employed was in good financial health, Stubbs Dep. 69, and that two other employees were offered compensation in exchange for signing the agreement, while Johnson was not, Johnson Dep. Ex. 3 at 4 (Docket No. 22-3 at 4).

The bottom line is that the parties will have to try the question of whether the firing of Johnson was "for cause." Because the enforceability of the non-competition and confidentiality agreement under state law is an important — possibly determinative — factor relevant to that question, the parties will at some point need to submit full briefs on whether Minnesota or Michigan law controls. The parties should submit briefs on that issue, at the latest, when they submit their motions in limine.

ORDER

Based on all of the files, records, and proceedings herein, the " Court ADOPTS Judge Erickson's Report and Recommendation [Docket No. 49]. IT IS HEREBY ORDERED THAT:

1. Defendant's motion for summary judgment [Docket No. 19] is DENIED;

2. Plaintiff's motion for partial summary judgment [Docket No. 25] is DENIED; and

3. To the extent that plaintiff's complaint may be read to assert a claim under 38 U.S.C. § 4311, the claim is DISMISSED WITHOUT PREJUDICE as abandoned.

REPORT AND RECOMMENDATION

ERICKSON, Chief United States Magistrate Judge.

I. Introduction

This matter came before the undersigned United States Magistrate Judge pursuant to a special assignment, made in accordance with the provisions of Title 28 U.S.C. § 636(b)(1)(B), upon the Motion of the Defendant Michigan Claim Service, Inc. ("MCS"), for Summary Judgment, as well as the Motion of the Plaintiff Stacy O. Johnson ("Johnson") for Partial Summary Judgment on the liability issue. A Hearing on the Motions was conducted on November 1, 2006, at which time, the Plaintiff appeared by Christopher P. Rosengren, Esq., and the Defendant appeared by Jeremy D. Sosna, and Elizabeth A. Grande, Esqs. For reasons which follow, we recommend that both Motions be denied.

II. Factual and Procedural Background

This action arises from Johnson's allegation that MCS terminated his employment, in violation of the Uniformed Services Employment and Reemployment Rights Act, Title 38 U.S.C. § 4828, et seq. ("USERA"). See, Complaint, Docket No. 1. Specifically, Johnson contends that MCS failed to retain him for a period of one (1) year, following his return from a military deployment of more than one hundred and eighty (180) days. Id. at page 2, ¶ 3. In response, MCS alleges that it had just cause for terminating Johnson's employment, as he refused to comply with a company policy, that was instituted after his return, and that required key management members, and sales staff, to execute a noncompete and confidentiality agreement (the "Agreement"), as a condition of continued employment See, Defendant's Memorandum of Law, Docket No. 21-1, at 1.

At the time that Johnson began working for MCS in 2002, he was a Captain in the Minnesota Army Reserves. See, Complaint, at page 2, ¶¶ 5-6. He was mobilized for Active Duty in Iraq, on March 15, 2003, where he remained until his deactivation on June 12, 2004. Id. at ¶¶ 8-9; see also, Deposition of Stacy Johnson ("Johnson Dep."), Docket No. 29, Exhibit 1, at p. 13. On May 11, 2004, Johnson filed a request, under USERRA, for reemployment with MCS, and he returned to work on August 2, 2004, in the same position as he held prior to his activation, and with the same pay. Id. at ¶¶ 10-11. In January of 2005, MCS presented the Agreement to over thirty-three (33) staff members, including Johnson, and informed them that, if they failed to sign the Agreement, they would be terminated. See, Defendant's Motion in Support, Docket No. 21, at 8-11. Johnson refused to sign the Agreement unless he were given "additional severance pay or compensation," id. at 10, and, on January 11, 2005, his employment with MCS was terminated, along with that of several other non-military MCS staff members, who had also refused to sign the Agreement. See, Complaint, at page 2, ¶ 12.

Johnson filed his Complaint on December 15, 2005. See, Complaint, Docket No. 1. On September 8, 2006, MCS moved for Summary Judgment, see Docket No. 19, and on the same day, Johnson filed his Cross-Motion for Partial Summary Judgment on the issue of liability, see, Docket No. 25.

III. Discussion

A. Standard of Review. Summary Judgment is not an acceptable means of resolving triable issues, nor is it a disfavored procedural shortcut when there are no issues which require the unique proficiencies of a Jury in weighing the evidence, and in rendering credibility determinations. See, Wallace v. DTG Operations, Inc., 442 F.3d 1112, 1118 (8th Cir.2006), citing Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Midwest Oilseeds, Inc. v. Limagrain Genetics Corp., 387 F.3d 705, 711 (8th Cir.2004), cert. denied, 544 U.S. 977, 125 S.Ct. 1860, 161 L.Ed.2d 728 (2005). Summary Judgment is appropriate when we have viewed the facts, and the inferences drawn from those facts, in a light most favorable to the nonmoving party, and we have found no triable issue. See, Smutka v. City of Hutchinson, 451 F.3d 522, 526 (8th Cir.2006), citing Mayer v. Nextel W. Corp., 318 F.3d 803, 806 (8th Cir.2003); Eide v. Grey Fox Technical Servs. Corp., 329 F.3d 600, 604 (8th Cir. 2003); Philip v. Ford Motor Co., 328 F.3d 1020, 1023 (8th Cir.2003). For these purposes, a disputed fact is "material" if it must inevitably be resolved and the resolution will determine the outcome of the case, while a dispute is "genuine" if the evidence is such that a reasonable Jury could return a Verdict for the nonmoving party. See, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Planned Parenthood of Minnesota/South, Dakota v. Rounds, 372 F.3d 969, 972 ...