Kansas State University v. Prince
| Citation | 673 F.Supp.2d 1287 |
| Decision Date | 08 December 2009 |
| Docket Number | No. 09-4112-SAC.,09-4112-SAC. |
| Parties | KANSAS STATE UNIVERSITY, and K-State Athletics, Inc, formerly known as The Intercollegiate Athletic Council of Kansas State University, Inc., Plaintiffs, v. Ronald D. PRINCE, and IPP, L.L.C., Defendants. |
| Court | U.S. District Court — District of Kansas |
George A. Hanson, Stueve Siegel Hanson, LLP, Kansas City, MO, Peter J. Paukstelis, KSU & KSU Athletics, Inc.,
Manhattan, KS, Todd M. McGuire, Stueve Siegel Hanson, LLP, for Plaintiffs.
Craig Shultz, Shultz Law Office, PA, Wichita, KS, James F. Neale, TV, McGuire Woods, LLP, Charlottesville, VA, for Defendants.
This case comes before the court on the plaintiffs' motion to remand this case to state court for lack of federal subject matter jurisdiction. The case was removed solely on the basis of diversity jurisdiction and asserts no federal question. The sole issue before the court is whether the case was properly removed to federal court.
The plaintiffs, Kansas State University (KSU) and K-State Athletics, Inc, formerly known as the Intercollegiate Athletic Council of Kansas State University, Inc. (IAC), originally filed this case in state court seeking a declaratory judgment action that a Memorandum of Understanding (MOU) signed by Ron Prince on behalf of IPP, LLC, and by Robert S. Krause on behalf of IAC, is not a valid or enforceable agreement or that certain provisions are of no force or effect following Prince's termination. The MOU, if valid, obligates the IAC to provide additional sums of money for Prince's benefit in the event Prince is terminated without cause before his contractual term expires.
The controlling facts are undisputed. Prince was employed as the head football coach for Kansas State University from December 5, 2005 until his termination effective December 31, 2008.
The 2005 agreement
Prince's first employment agreement, stated to be between the IAC, KSU, and Prince, was for five years, beginning on December 5, 2005. The agreement was signed "for Kansas State University" both by Dr. Jon Wefald as "President" and by Robert S. Krause as "Vice President for Institutional Advancement," and was signed "for IAC" by Tim Weiser as "Athletic Director," all on February 28, 2006. The employment agreement was signed by Ron Prince on December 23, 2006. That contract reserved to KSU the right to terminate Prince's employment at any time without cause, in which event it agreed to pay Prince stated amounts of money which lessened as the date of termination progressed: $1,200,000 if termination occurred after the 2005-06 contract year; $900,000 if termination occurred during or after the 2006-07 contract year; $600,000 if termination occurred during or after the 2007-08 contract year; and $300,000 if termination occurred during or after the 2008-09 contract year.
The 2005 agreement stated that "Acceptance by Coach of this amount will constitute full settlement of any claim that Coach might otherwise assert against the University, or any of its representatives, agents or employees." The 2005 agreement also contained an integration clause stating:
With the exception of the provisions of each annual appointment entered into by and between Coach and the University which are hereby incorporated by reference, this Agreement supersedes all prior agreements with respect to the subject matter hereof and constitutes the entire agreement between the parties hereto and may be modified only in a writing signed by the President of the University, the Athletic Director and Coach.
The 2008 agreement
In 2008, a new employment agreement for Prince was executed which "replace[d] and supersede[d] the prior 2005 agreement." Dk. 9, Exh. 2, p. 1. The term of this agreement between the IAC, KSU, and Prince was stated to be for five years beginning on January 1, 2008. It reflects that it was executed "for Kansas State University" by Dr. Jon Wefald as "President," and by Ron Prince on January 1, 2008.1 It was signed "for Kansas State University and the IAC" by Robert S. Krause as "Vice President for Institutional Advancement and Intercollegiate Athletics, Director of Athletics," on August 7, 2008, according to the handwritten date beside his signature. As had the 2005 agreement, the 2008 Agreement reserved to KSU the right to terminate Prince's employment at any time without cause, in which event it agreed to pay Prince the same amounts as stated in the 2005 agreement: $1,200,000 if such termination occurred before December 31, 2009; $900,000 if before December 31, 2010; $600,000 if before December 31, 2011, or $300,000 if before December 31, 2012.
Unlike the 2005 agreement, however, the 2008 agreement did not state that acceptance by Prince of that amount would constitute full settlement of any claim that he might otherwise assert against the University, or any of its representatives, agents or employees. The integration clause was also modified from the 2005 agreement, as the 2008 agreement omitted the statement that the agreement "constitutes the entire agreement between the parties hereto and may be modified only in a writing signed by the President of the University, the Athletic Director and Coach." Other differences exist between the 2005 and 2008 employment agreements, but are immaterial to the issue before this court.
Both the 2005 and the 2008 agreements provide that except for the obligation to pay Prince the amount set forth in the agreement's provision relating to termination without cause, all obligations of KSU and/or IAC to the extent not already accrued or vested, shall cease as of the effective date of such termination. Dk. 9, Exh. 2, p. 8, § 4.01(a); Dk. 9, Exh. 3, p. 8 § 4.01(b).
On the same date that Krause signed Prince's 2008 employment agreement (August 7, 2008) he also signed a separate "Memorandum of Understanding" (MOU) with a corporation stated to be an LLC named "In Pursuit of Perfection," (IPP). Krause signed "on behalf of IAC," and Prince signed "on behalf of IPP." The MOU states that the following amounts from a Reserve established by the IAC will be paid to IPP "if the owner of IPP is terminated by IAC without cause during the life of the owner's current employment agreement with the IAC ..." Prince is the owner of IPP.
Date of
termination Amount to be Date to be
without cause distributed distributed
12/31/08 $800,000 12/31/15
$800,000 12/31/16
$800,000 12/31/20
12/31/09 $800,000 12/31/15
$800,000 12/31/16
$800,000 12/31/20
12/31/10 $800,000 12/31/15
$800,000 12/31/16
12/31/11 $800,000 12/31/15
Dk. 9, p. 27. The MOU states that its provisions "constitute the entire MOU which shall be legally binding on both parties." Id.
The parties agree that Prince was notified on November 5, 2008 that he was being terminated as KSU's head football coach, effective December 31, 2008, that the termination was without cause, and that KSU paid Prince $1,200,000 as was required by the terms of the parties' 2008 employment agreement. No payment has been made pursuant to the MOU.
The lawsuit
Plaintiffs filed this declaratory judgment action in Riley County, Kansas and served defendants with their First Amended Petition, asking the court solely to:
... declare the rights, status, and other legal relations of the parties in the form of a declaratory judgment that the [MOU] is not a valid or enforceable agreement, or that if the [MOU] is not void or unenforceable, its payment provision was not triggered and the [MOU] is therefore of no force or effect following Prince's termination.
In response, defendants timely removed the case to federal court on the basis of diversity jurisdiction. Defendants then filed counterclaims solely against IAC.2 These are for: 1) anticipatory repudiation of the MOU, seeking damages in the amount owed under the termination payment provision of the MOU in the amount of $3,200,000; 2) fraudulently inducing Prince to sign the MOU in the event that Krause lacked legal authority to bind the IAC; and, 3) punitive damages for IAC's wanton and malicious anticipatory repudiation of the contract. Id. The sole issue currently before the court is whether, as plaintiffs contend, the case was improperly removed to federal court because no diversity jurisdiction exists.
Diversity jurisdiction/removal
"[A]ny action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant ... to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). However, "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c). "Those who seek to invoke federal jurisdiction must establish its prerequisites." McPhail v. Deere & Co., 529 F.3d 947, 953 (10th Cir.2008). Federal removal jurisdiction is statutory in nature and is to be strictly construed. Archuleta v. Lacuesta, 131 F.3d 1359, 1370 (10th Cir.1997), citing Shamrock Oil & Gas v. Sheets, 313 U.S. 100, 108, 61 S.Ct. 868, 85 L.Ed. 1214 (1941). Doubtful cases must be resolved in favor of remand. Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir.), cert. denied, 516 U.S. 863, 116 S.Ct. 174, 133 L.Ed.2d 114 (1995) ().
Removal in this case is premised solely on diversity jurisdiction under 28 U.S.C. § 1332, which provides that federal courts have original jurisdiction of civil actions where complete diversity of citizenship and an amount in excess of $75,000 in controversy exist. The plaintiffs agree...
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