Sawyer v. Mills

• Decision Date: 27 August 2009
• Docket Number: No. 2007-SC-000296-DG.,2007-SC-000296-DG.
• Citation: 295 S.W.3d 79
• Parties: Barbara Lucinda SAWYER, Appellant, v. Melbourne MILLS, Jr., Appellee.
• Court: United States State Supreme Court — District of Kentucky

295 S.W.3d 79

Barbara Lucinda SAWYER, Appellant, v. Melbourne MILLS, Jr., Appellee.

No. 2007-SC-000296-DG.

Supreme Court of Kentucky.

August 27, 2009.

As Modified November 2, 2009.

Thomas W. Miller, Michael Joseph Cox, Miller, Griffin & Marks, PSC, Lexington, KY, Counsel for Appellant.

William E. Johnson, Samuel Ryan Newcomb, Johnson, True & Guarnieri, LLP, Frankfort, KY, Counsel for Appellee.

Opinion of the Court by Justice NOBLE.

Appellant Barbara Lucinda Sawyer appeals a decision affirming the circuit court's judgment notwithstanding the verdict ("JNOV") in favor of Appellee Melbourne Mills, Jr., in a dispute over the validity of an alleged oral agreement. Because the oral agreement violated the Statute of Frauds, lacked consideration, and could not have induced Sawyer's action, it was unenforceable, and the decision of the Court of Appeals is affirmed.

I. Background

Mills met Appellant Sawyer and her husband in 1991. In 1994, Sawyer requested that Mills become involved in already-pending class action litigation involving breast implants, and she solicited some women she knew as clients. Mills promised to give her a bonus if he ever had a big "payday" with one of his class actions, and she continued to research potential products liability claims. Between 1994 and 2001, she assisted Mills in marketing his law practice, researching potential class action lawsuits, and in performing work as a contract employee for relatively brief periods of time, for which she was paid. Her employment ended on March 31, 2002.

In 1997, the prescription drugs Fenfluramine and Phentermine (commonly known as "Fen-Phen") were receiving national media attention due to the possibility they were causing heart valve damage. Sawyer claims that she recommended Mills pursue a class action against Fen-Phen's manufacturer, and the drugs were recalled soon after Mills began to advertise for Fen-Phen clients. Mills received an overwhelming response from his advertising campaign and ultimately had about 2600 clients (about 400 of whom were from Kentucky) that he signed up on a contingency fee basis. Sawyer assisted with clerical work in processing the claims.

On May 1, 2001, a settlement for millions of dollars was reached between Fen-Phen's manufacturer and Mills's clients. After receiving his initial portion of the substantial attorney's fees on June 20, 2001, Mills made bonus payments to all of his employees. Six long-term employees received a $100,000 bonus, one paralegal who Mills thought was instrumental to the Fen-Phen litigation's success received more than a $1,000,000 bonus, and an attorney received an initial $1,000,000 bonus (and a more substantial additional bonus later). Hourly employees such as Sawyer received a bonus equal to two weeks' wages. Sawyer's bonus was $1,300. Over the years, Mills had mentioned to Sawyer that he would reward her with a large bonus when he hit a "payday" in the class action cases, and the Sawyers were disappointed in the $1,300 bonus.¹

On June 25, 2001, the Sawyers invited Mills to their art studio and secretly tape-recorded their conversation. Mills admitted that the voices on the recording were his and the Sawyers'. Sawyer and her husband suggested to Mills that he pay her a substantial bonus due to her encouragement of Mills to pursue class actions. After a lengthy discussion, the Sawyers suggested that Mills pay Sawyer a $1,065,000 bonus, consisting of $1,000,000 plus the value of a luxury car ($65,000), and Mills agreed. Mills discussed how and when the payments would be made.

Mills refused to make a lump sum payment even though he had the financial ability to do so; instead he agreed to make the payments in installments of $10,000 per month. They would also be hidden from his office employees (Sawyer claimed Mills did not wish to make the other employees jealous).² Mills also agreed to pay for an attorney to draft a written agreement to memorialize their understanding, and he spoke to the Sawyers' attorney, Mark Moseley, on the phone and confirmed he had agreed to pay a bonus to Sawyer. However, Mills later refused to sign any written agreement.

Mills made his first payment of $10,000 to Sawyer the day of the meeting, and he eventually made a series of payments of $10,000 each, and one of $15,000, totaling $65,000. Mills also made a one-time payment of $100,000 on October, 3, 2001. The last payment was paid on February 7, 2002, and Mills informed Sawyer in March that he was terminating her employment at the end of the month. He had paid her a total amount of $165,000. It was undisputed that Sawyer had completed her performance that might justify any bonus prior to the June 25 conversation between the parties, and also that she continued to work for Mills after the agreement.

Prior to trial, Mills moved for summary judgment, arguing that enforcement of the agreement was barred by Kentucky's Statute of Frauds and raising lack of consideration as a defense. The trial court denied the motion.

After a four-day trial, the jury returned a verdict for Sawyer and awarded her $900,000, and a trial verdict and judgment was entered. In response to two interrogatories, the jury answered that it was satisfied from the evidence that the parties reached an understanding and agreement as to the bonus at issue, and that the understanding and agreement could have been fully performed within one year of its making.

Mills moved the trial court for a JNOV, and it was granted. The court specifically explained that it

had previously addressed its concerns that this Statute of Frauds barred the claims of Cindy against Mel in this case. However, out of an abundance of precaution, in order to allow Cindy to present her full evidence at trial before a jury, the Court Overruled Mel's Motion for Summary Judgment on this issue in an Opinion and Order entered December 1, 2005.

After hearing Sawyer's full evidence at trial, however, the trial court found that the Statute of Frauds did in fact bar her claims and it granted Mills's JNOV motion. The Court of Appeals affirmed the trial court's ruling, and this Court granted discretionary review.

II. Analysis

A. The June 25, 2001 Oral Agreement

1. Application of the Statute of Frauds Where the Agreement's Terms and the Parties' Intentions Demonstrate It Could Not Be Completed Within One Year

Assuming there was a contract in this case, the Statute of Frauds applies and bars its enforcement. Kentucky's Statute of Frauds provides in pertinent part,

No action shall be brought to charge any person ... [u]pon any agreement that is not to be performed within one year from the making thereof ... unless the promise, contract, agreement, representation, assurance, or ratification, or some memorandum or note thereof, be in writing and signed by the party to be charged therewith, or by his authorized agent....

KRS 371.010(7). "In construing the Statute of Frauds, the general rule is that, if a contract may be performed within a year from the making of it, the inhibition of the Statute does not apply, although its performance may have extended over a greater period of time." Williamson v. Stafford, 301 Ky. 59, 190 S.W.2d 859, 860 (1945). However, "there is a well-recognized exception" to the general rule, "and that is that when it was contemplated by the parties that the contract would not, and could not, be performed within the year, even though it was possible of performance within that time, it comes within the inhibition of the Statute." Id. (emphasis added). This Court "must look to the evidence to determine whether the contracts in question fall within the rule or the exception." Id. at 861.

The Statute of Frauds "refers to a contract which, by its terms, is not to be performed within a year, and which, from its stipulations, is not capable of being performed within a year." Nickell v. Johnson, 162 Ky. 520, 172 S.W. 938, 938 (1915); see also Lively v. Elkhorn Coal Co., 101 F.Supp. 1014, 1016-17 (E.D.Ky. 1952) ("[W]here it is obvious from all surrounding facts and circumstances that it was not within the contemplation of the parties or within reason that it would be performed within a year the statute applies.") The appropriate inquiry thus is whether under the evidence of a particular case the parties contemplated that the contract at issue would be performed within a year, and if, by its terms, it could be. It is irrelevant whether performance would be possible under different terms. A contrary rule—that if it is possible to perform a contract within a year even though such completion is not contemplated by the parties—would eviscerate the Statute of Frauds' requirement that agreements not to be performed within one year be in writing.

Under well-settled precedent, this Court must determine whether Sawyer and Mills contemplated that their oral contract would be, or could be under its terms, performed within a year, even though Mills acknowledged that he could have paid the entire amount at the time of the negotiations. Williamson, 190 S.W.2d at 860.

This case involves the trial court's grant of a JNOV motion.

Upon review of the Order Granting JNOV, we must examine the trial court's decision under the clearly erroneous standard.... That is to say, we must review all the evidence presented to the jury and must uphold the trial court's decision if after all the evidence is construed most favorably to the verdict winner, a finding in his favor would not be made by a reasonable [person].

Moore v. Environmental Constr. Corp., 147 S.W.3d 13, 16 (Ky.2004) (internal citation and quotation marks omitted). For the purpose of the JNOV motion, the trial court properly considered the evidence in the light most favorable to Sawyer, the verdict winner and party opposing the JNOV motion, accepting many of the disputed facts as true. Among other things, the trial court accepted the following as true (5) That in the June 25, 2001 conversation between Mel, Cindy, and Cindy's...