Macy v. Waste Management, Inc.

• Citation: 294 S.W.3d 638
• Decision Date: 28 May 2009
• Docket Number: No. 01-07-00276-CV.,01-07-00276-CV.
• Parties: Griffin MACY, Appellant/Cross-Appellee, v. WASTE MANAGEMENT, INC., Appellee/Cross-Appellant.
• Court: Court of Appeals of Texas

294 S.W.3d 638

Griffin MACY, Appellant/Cross-Appellee, v. WASTE MANAGEMENT, INC., Appellee/Cross-Appellant.

No. 01-07-00276-CV.

Court of Appeals of Texas, Houston (1st Dist.).

May 28, 2009.

Opinion Concurring with Denial of En Banc

Consideration August 28, 2009.

Opinion Dissenting from Denial of En Banc

Consideration August 28, 2009.

John Zavitsanos, K.A.D. Camara, Paul M. Botros, Ahmad, Zavitsanos & Anaipakos, P.C., Thomas C. Wright, Wright Brown & Close, LLP, Houston, TX, for Appellant.

Don Jackson, Melissa Michelle Davis, Timothy F. Lee, Ware, Jackson, Lee & Chambers, L.L.P., Houston, TX, for Appellee.

Panel consists of Chief Justice RADACK and Justices ALCALA and HANKS.

OPINION

ELSA ALCALA, Justice.

Appellant, Griffin Macy, has filed a motion for rehearing of our March 12, 2009 memorandum opinion and judgment. We deny that motion. We, however, withdraw our March 12, 2009 memorandum opinion and judgment and issue this memorandum and judgment in its stead to clarify the analysis of the legal authority cited by Macy in his first appellate issue. Macy appeals a final judgment ordering he take nothing from appellee, Waste Management, Inc. The judgment also orders Macy to pay $170,173.19 to Waste Management for repayment of attorney's fees and litigation expenses advanced to Macy. Macy's three issues contend the trial court erred by (1) determining as a matter of law that Waste Management complied with the terms of the employment Agreement it had with Macy; (2) finding the Board of Directors' determination of cause was timely under the Agreement; and (3) denying certain discovery to Macy. In two issues in a cross-appeal, Waste Management contends it was entitled to judgment for $357,843.41, the entire amount of the fees it advanced to Macy, because Macy was not the prevailing party under the terms of the Agreement and the Agreement does not provide for segregation of attorney's fees. We conclude the trial court properly determined Waste Management complied with the terms of the Agreement; that Waste Management was due the return of only those fees it advanced to Macy following the decision of the Board of Directors (the Board) that Macy was terminated for cause, excluding the amount pertaining to litigation over the amount of the fees; and that the trial court properly denied the requested discovery. We affirm.

Background

Waste Management hired Macy in 2000 as the vice president of Enterprise Systems Development (ESD) in charge of software development. Macy had an employment Agreement with Waste Management, which provided that his employment "shall continue ... unless terminated pursuant to the terms of Section 5 and 6 of this Agreement."

Section 5 of the Agreement, entitled "Termination of Employment," provided that employment "may be terminated under the following circumstances." Those circumstances included death; total disability; voluntary termination by the employee; termination by the company without cause; and termination by the company for cause. The Agreement listed the following three criteria applicable to the designation of termination for cause under section 5:

(c) Termination by the Company for Cause. The Company may terminate Employee's employment hereunder for "Cause" at any time after providing written notice to Employee.

(i) For purposes of this Agreement, the term "Cause" shall mean any of the following ... (C) fraud or embezzlement determined in accordance with the Company's normal investigative procedures consistently applied in comparable circumstances....

(ii) An individual will be considered to have been terminated for Cause if the Company determines that the individual engaged in an act constituting Cause at any time prior to a payment date for any amounts due hereunder, regardless of whether the individual terminated employment voluntarily or is terminated involuntarily, and regardless of whether the individual's termination initially was considered to have been for Cause.

(iii) Any determination of Cause under this Agreement shall be made by resolution of the Company's Board of Directors adopted by affirmative vote of not less than a majority of the entire membership of the Board of Directors at a meeting called and held for that purpose and at which Employee is given an opportunity to be heard.

In the event of a dispute arising out of section 5(c)—the section describing termination for cause—section 10 of the Agreement provided for advance payment of the employee's attorney's fees for resolution of disputes between the employee and Waste Management.

Depending on the circumstances under which the employee stopped working for the company, section 6 of the Agreement provided for the structure of compensation following termination. Upon termination for cause or voluntary termination of employment, the employee received few benefits, such as payment of accrued wages. However, for termination without cause, the employee received more substantial benefits to be paid over a two-year period of time. The Agreement provided,

(e) Termination by the Company Without Cause.... [T]he company shall pay the following amounts to Employee:

. . . .

(iii) An amount equal to two times the sum of Employee's Base Salary plus his or her target annual bonus (as then in effect), of which one-half shall be paid in a lump sum within ten (10) days after such termination and one-half shall be paid during the two (2) year period beginning the date of Employee's termination....

In early 2004, Lynn Caddell was hired by Waste Management as its Chief Information Officer. At a meeting between Caddell and Macy, Macy stated he was thinking about leaving the company. On April 5, 2004, Macy stopped working for Waste Management. Caddell indicated she was accepting Macy's resignation. Macy, however, believed he was terminated without cause and entitled to severance fees in accordance with the Agreement.

Waste Management's Forensic Audit Services (FAS) conducted a "Special Review" of ESD, issuing an audit report in June 2004. FAS typically investigated financial impropriety within the company. The report indicated 12 people were interviewed, including Warren Brauer, "Finance Manager, ESD (Contractor)"; Gary Rind, "Budget Coordinator, ESD (Contractor)"; and Christy Cooper, "IT Controller." Macy was not interviewed.

In August 2004, Macy sued Waste Management for breach of contract for failure to pay the severance fees required for termination without cause. Waste Management generally denied, later amending to include affirmative defenses that Macy resigned or could have been terminated for cause.

In August 2005, and while Macy's lawsuit was pending, Waste Management convened the Board to determine the classification of Macy's departure. The Board, in writing, told Macy he was "invited to be heard at a special meeting called to consider whether [Macy] engaged in an act constituting Cause." Macy and Waste Management were told they could each submit a 10-page position paper with no more than 10 pages of exhibits, submit a proposed Board resolution, and make an oral presentation to the Board. Although the Board originally limited the oral presentations to 15 minutes per side, Macy's counsel was allowed approximately 30 minutes to address the Board at the meeting, which lasted approximately two hours. In addition to considering the oral statements by the parties' respective attorneys, the Board considered Macy's employment Agreement; the executive summary of the forensic audit report; and written documents submitted by counsel for Macy and Waste Management. Determining Macy committed fraud, the Board issued a resolution by a unanimous vote that cause existed for Macy's April 2004 termination. The Board determined Macy committed fraud by understating his departmental "headcount" and accumulating accruals. According to the Chairman of the Board, John Pope, these two problems could result in lack of compliance with Securities and Exchange Commission regulations.

Waste Management filed a matter-of-law motion for final summary judgment asserting the Agreement allowed the determination of cause to be made at any time prior to the date of any payment due under the Agreement. Waste Management also argued that the Agreement's unambiguous provisions required the Board to be the sole and final authority for the determination of cause. Waste Management further sought repayment of the attorney's fees it advanced to Macy. Waste Management later filed a matter-of-law and no-evidence motion for final summary judgment that the decision by the Board was made in good faith, and alternatively, seeking summary judgment limiting the fact finder to a review of whether the Board acted in good faith when it found Macy committed fraud.

Macy filed responses to Waste Management's motion for final summary judgment and competing motions for summary judgment. Macy challenged the Board's determination of cause under the Agreement by asserting he did not clearly waive his right to sue; the Board's determination of cause was not timely made under the terms of the Agreement; the Board waived its right to determine cause due to the delay in finding cause; the Agreement did not preclude the jury from reviewing whether cause to terminate Macy existed; and alternatively, if the trial court determined the Board's finding could be reviewed only on the matter of whether the Board acted in good faith, there was evidence raising a question of fact on the Board's good faith.

The trial court rendered partial summary judgment in favor of Waste Management, stating, "Section 5(c)(ii) of the Agreement allows the Board ... to make a cause determination at any time prior to a payment date for any amount due under the Agreement." The trial court subsequently granted Waste Management's motion for final summary judgment.

Upon prevailing in the summary judgment motions that determined Waste Management did not breach the Agreement, Waste Management filed a summary...