St. Jude Med. S.C., Inc. v. Tormey

• Decision Date: 11 March 2015
• Docket Number: No. 14–1619.,14–1619.
• Citation: 779 F.3d 894
• Parties: ST. JUDE MEDICAL S.C., INC., a Minnesota corporation, Plaintiff–Appellee v. Thomas M. TORMEY, Jr., Defendant–Appellant Tormedco, Inc., a New York corporation, Counter plaintiff-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

779 F.3d 894

ST. JUDE MEDICAL S.C., INC., a Minnesota corporation, Plaintiff–Appellee

v. Thomas M. TORMEY, Jr., Defendant–AppellantTormedco, Inc., a New York corporation, Counter plaintiff-Appellant.

No. 14–1619.

United States Court of Appeals, Eighth Circuit.

Submitted: Oct. 8, 2014.

Filed: March 11, 2015.

Rehearing and Rehearing En Banc Denied May 5, 2015.

Dwight Rabuse, argued, Minneapolis, MN (Erin E. Neils, on the brief), for Appellant.

Edward F. Fox, argued, Minneapolis, MN (Carrie L. Hund, Peter Gregory, on the brief), for Appellee.

Before RILEY, Chief Judge, WOLLMAN and BYE, Circuit Judges.

Opinion

BYE, Circuit Judge.

St. Jude Medical Center, Inc. (“St. Jude”), sued Thomas M. Tormey, Jr., its former employee, to recover $650,000 plus statutory interest owed on a promissory note. Tormey disputed his liability on the note and filed counterclaims arguing St. Jude breached Tormey's employment contract. Tormey also added his company, Tormedco, Inc., as a plaintiff to the counterclaims and asserted an additional claim on behalf of Tormedco against St. Jude. The district court¹ granted judgment as a matter of law to St. Jude on its collection claim, on the counterclaims, and on Tormedco's claim after a jury was unable to reach a verdict. Tormey and Tormedco appeal, and we affirm.

I

In 2001, St. Jude hired Tormey to work as an independent sales representative, selling its cardiac-related medical devices such as pacemakers and defibrillators. Tormey previously worked for Medtronic in this same capacity for fifteen years. To initiate his employment with St. Jude, Tormey entered into several agreements including a representative agreement, a separate letter agreement, an asset purchase agreement, and a loan agreement.

The representative agreement provided the length of Tormey's contract with St. Jude, his salary, his sales territory, his commission rate, and a procedure for setting his sales quotas. It also detailed that for the first year of Tormey's contract, his sales quota would be set at zero due to a noncompete agreement he held with Medtronic. The representative agreement further provided that St. Jude would hire a “technical support specialist (TSS) as soon as practicable” to assist Tormey with his work and that St. Jude could terminate Tormey if he failed to meet sales quotas in three out of any twelve consecutive months.

In the separate letter agreement and asset purchase agreement, Tormey agreed to form a corporation through which he would conduct his business for St. Jude. Then, on October 3, 2006, the corporation would have the option to sell itself to St. Jude at a price derived from a formula contained in the agreements. The option, however, was contingent on the representative agreement being in full force at that time. Pursuant to these agreements, Tormey thereafter created Tormedco, Inc., in January 2002 and assigned the representative agreement he had with St. Jude to it.

St. Jude and Tormey also entered into a loan agreement, which was referenced by the separate letter agreement. The loan agreement entailed St. Jude making a $650,000 interest-free loan to Tormey. In exchange for the loan, Tormey executed a promissory note which required him to repay the loan on October 3, 2008, or upon the sale of Tormedco to St. Jude, whichever occurred earlier. The separate letter agreement indicated St. Jude would deduct the amount Tormey owed on the loan from the amount it paid for Tormedco when Tormedco exercised its option to sell itself to St. Jude.

As a result of his noncompete agreement with Medtronic, Tormey did not begin selling St. Jude's products until fall 2002. Around that same time, Tormey's wife was diagnosed with terminal lung cancer, and Tormey informed St. Jude of his wife's condition.

Also in late 2002 and into early 2003, Tormey began inquiring about when St. Jude would hire a TSS to assist him. In February 2003, Jim Catlett, Tormey's manager, emailed Tormey about his inquiry. Catlett indicated before St. Jude incurred the expense of a TSS, Catlett wanted to know Tormey's thoughts about what that person would do on a day-to-day basis. Catlett stated he had several clinical support people in training. Tormey alleged the lack of TSS support would keep him from meeting his sales quotas.

Tormey then met with St. Jude in September 2003 to discuss setting upcoming sales quotas. On September 17, Tormey sent an email to Catlett recommending minimum sales quotas. Tormey's proposed sales quotas considered several things including no TSS support, and he suggested the sales quotas be set at a minimum until the issue could be resolved. Tormey also indicated that when St. Jude hired a TSS for Tormey, the numbers would be a moot point. Until then, Tormey explained he would accomplish what was required by himself. St. Jude and Tormey signed sales quota sheets with Tormey's recommended numbers in mid-October 2003. Tormey added a handwritten note to the sheet indicating the “guarantee is based on Tormey accounts until ... a TSS is provided according to contract.”

Thereafter, on October 24, 2003, Catlett sent Tormey an email indicating St. Jude had assigned a TSS to assist Tormey. The email further indicated that if Tormey needed additional assistance, four other employees were available to support him. Tormey, however, objected to this particular TSS because he was not fully dedicated to helping Tormey. St. Jude's general counsel responded to Tormey and explained the TSS would only support others if Tormey did not need his assistance.

Tormey's wife's condition worsened in November 2003, and Tormey thereafter did not meet his sales quotas. Tormey attributes his performance in part to his wife's condition. According to Tormey, St. Jude repeatedly told him that his wife's health should be his first priority throughout her illness. Thereafter, in February and April 2004, Tormey sent emails to his managers at St. Jude proposing changes to his relationship with St. Jude. Two options included St. Jude considering the $650,000 loan paid in full.

Tormey's wife passed away on May 3, 2004. Two weeks later, Jim Gantz, a vice president at St. Jude, sent Tormey a letter terminating the representative agreement. The letter indicated Tormey's sales were unacceptable and had fallen significantly short of the sales quotas. It further included a comparison of the sales quotas and actual sales from March 2003 through April 2004, supporting Gantz's conclusion for both pacemakers and defibrillators. After receiving the letter, Tormey spoke with Gantz on the telephone and sent a follow-up email explaining he forwarded the letter to his legal counsel as they had discussed. Gantz thereafter responded to Tormey's email and indicated he was willing to discuss any additional issues Tormey may have but directed that Tormey's counsel should be speaking with St. Jude's counsel as the matter progressed.

According to Tormey, he then had an additional telephone conversation with Gantz. During the conversation, Tormey indicated Gantz proposed that if Tormey agreed to forego any actions against St. Jude, then St. Jude would waive any claim to repayment of the $650,000. Tormey asserts he accepted Gantz's offer and presumed his obligations to St. Jude had been discharged. There are no written documents evidencing this “walk-away agreement,” however, and Gantz denies it occurred. Gantz recalled speaking to Tormey only once. In the years following this alleged conversation, St. Jude sent IRS Form 1099s to Tormey for interest income, and Tormey reported the interest income on his tax returns. In preparation for Tormey's 2006 tax return, Tormey's accountant included a note indicating Tormey's loan with St. Jude was still being negotiated.

On October 30, 2008, Aimee Gordon, counsel for St. Jude, sent Tormey a letter asserting the $650,000 loan was due for repayment. Tormey did not repay the loan at that time, and he was unsure if his counsel responded to the letter. Gordon then sent a second letter on May 12, 2009, asserting the loan was due and immediately payable in full. Tormey again failed to repay the loan and made no indication of a “walk-away agreement” to Gordon.

St. Jude filed suit against Tormey in Minnesota state court on January 11, 2011, seeking to recover the amount owed on the note plus statutory interest. Tormey removed the suit to federal court. Tormey and Tormedco then asserted counterclaims against St. Jude alleging St. Jude breached the representative agreement and fraudulently induced Tormey to leave Medtronic. Tormedco also asserted an additional claim against St. Jude for breach of contract.² St. Jude thereafter moved for summary judgment on its claim and the counterclaims twice, but the district court granted summary judgment in favor of St. Jude on only the counterclaims contending St. Jude engaged in fraudulent conduct. The magistrate judge³ also denied some of Tormey's requests for discovery. The remainder of the counterclaims and St. Jude's collection claim proceeded to a jury trial.

At the close of evidence, St. Jude moved for judgment as a matter of law, arguing the evidence did not support the counterclaims or defenses asserted by Tormey or Tormedco. The district court denied St. Jude's motion, and the case was given to the jury. The jury, however, was unable to reach a unanimous decision, and the district court declared a mistrial. St. Jude then renewed its motion for judgment as a matter of law. This time, the district court granted St. Jude's motion on the counterclaims, finding they were time-barred, and on St. Jude's claim for repayment of the note, finding the evidence did not support Tormey's defense that St. Jude first committed a material breach of the representative agreement. Tormey and Tormedco appeal.

II

Tormey and Tormedco first challenge judgment as a matter of law. On appeal, we review de novo the district court's grant of judgment as a matter of law. Hortica–Florists' Mut. Ins. Co. v. Pittman Nursery Corp., 729 F.3d 846,...