Vitkus v. Beatrice Co.

• Decision Date: 13 December 1993
• Docket Number: Nos. 92-1083,92-1093,s. 92-1083
• Parties: Richard F. VITKUS, Plaintiff-Counter-Defendant-Appellant, National Union Fire Insurance Company of Pittsburgh, Pennsylvania, Plaintiff-Intervenor-Appellant, v. BEATRICE COMPANY, a Delaware corporation, Defendant-Counter-Claimant-Appellee. Richard F. VITKUS, Plaintiff-Counter-Defendant, and National Union Fire Insurance Company of Pittsburgh, Pennsylvania, Plaintiff-Intervenor-Appellant, v. BEATRICE COMPANY, a Delaware corporation, Defendant-Counter-Claimant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1535

11 F.3d 1535

Richard F. VITKUS, Plaintiff-Counter-Defendant-Appellant, National Union Fire Insurance Company of Pittsburgh, Pennsylvania, Plaintiff-Intervenor-Appellant, v. BEATRICE COMPANY, a Delaware corporation,

Defendant-Counter-Claimant-Appellee.

Richard F. VITKUS, Plaintiff-Counter-Defendant, and National Union Fire Insurance Company of Pittsburgh, Pennsylvania, Plaintiff-Intervenor-Appellant, v. BEATRICE COMPANY, a Delaware corporation,

Defendant-Counter-Claimant-Appellee.

Nos. 92-1083, 92-1093.

United States Court of Appeals, Tenth Circuit.

Dec. 13, 1993.

Rehearing Denied Jan. 13, 1994.

Barry D. Hovis, of Sadler & Hovis, San Francisco, CA (Roger P. Thomasch, Mark J. Gilbert, and Leslie A. Eaton, of Ballard Spahr Andrews & Ingersoll, Denver, CO, with him on the brief, for Richard F. Vitkus and James M. Lyons, Peter L. Edwards, and Patrick M. Flaherty, of Rothgerber, Appel, Powers & Johnson, Denver, CO, with him on the brief for Nat. Union Fire Ins. Co. of Pittsburgh), for Richard M. Vitkus.

Leo A. Knowles, of McGrath, North, Mullin & Kratz, Omaha, NE (Pamela K. Black and William F. Hargens of McGrath, North, Mullin & Kratz, Omaha, Nebraska, and Terence P. Boyle, Berliner, Boyle, Kaplan, Zisser & Walter, Denver CO, with him on the brief), for Beatrice Co.

Before BALDOCK, WOOD, ^* and EBEL, Circuit Judges.

EBEL, Circuit Judge.

I. FACTS

This case arises out of the failure of Silverado Banking, Savings and Loan Association ("Silverado"). Plaintiff-appellant Richard Vitkus worked for Beatrice from 1978 to 1987 and served as General Counsel from 1981 until 1988. While employed by Beatrice, the company asked him to serve on the Silverado Board of Directors, which he did. He continued to serve on the Silverado board even after he left Beatrice.

At the time Vitkus served on the Silverado board, Article VI of the Beatrice By-laws provided for the indemnification of officers, directors and employees. Beatrice also maintained a directors and officers' liability insurance policy that specifically covered Vitkus' position on the Silverado board.

In March 1986, while a corporate takeover of Beatrice was pending, Beatrice executed a Severance Agreement with key employees, including Vitkus. Under the agreement, Vitkus was to be entitled to over $1 million in benefits if the takeover was successful and if he left Beatrice under one or more of the conditions specified in the agreement. One of the specified conditions entitled Vitkus to the benefits if he voluntarily left the company for "good reason," which was defined as including assignment to "duties materially inconsistent with your present position, duties, responsibilities and status with the Company."

In April 1986, Beatrice was acquired by an affiliate of Kohlberg Kravis Roberts & Co. Under the Merger Agreement, Beatrice agreed: (1) to maintain Beatrice's directors and officers' insurance and indemnification policy or an equivalent policy for claims made within six years of the effective date of the merger; (2) to indemnify the officers and directors of Beatrice to the fullest extent allowed by law with respect to all acts and omissions arising out of such individuals' services as officers, directors, employees or agents of the Company; and (3) to maintain indemnification of directors and officers as provided in the Beatrice By-laws. ¹

Following the merger, Vitkus resigned his position as an officer of Beatrice on August 29, 1986, and left the company on January 5, 1987. Vitkus contends that he left for "good reason" as defined in the Severance Agreement. On January 5, 1987, he received a Termination Letter from the company. The letter requested that he sign an attached General Release ("the Release"), and it set forth the benefits he was to receive upon termination of his employment. On the same day, Vitkus signed the Release, which broadly stated that it discharged all claims and financial obligations Vitkus might have in connection with his employment with Beatrice:

For good and valuable consideration ... the undersigned ... does hereby release ... Beatrice ... of and from any and all claims, ... financial obligations, actions, suits at law or in equity ... of any kind or nature, whether known or unknown (including, but without limitation of the foregoing, any claim for severance or vacation benefits, breach of contract, wrongful discharge, impairment of economic opportunity, reimbursement for fines paid, intentional infliction of emotional harm or other tort, or employment discrimination ...) which he ... may ever have had, may have now, on account of, arising out of, or in connection with his employment with Beatrice or the termination thereof, excepting only those financial obligations undertaken by Beatrice Companies, Inc., specifically set forth in its letter to you ... pursuant to which this General Release is being executed and delivered.

Aplt.App. 513. Vitkus now contends that he understood the Release to apply only to employment compensation and termination claims that he had at the time he signed the release. Vitkus did receive the benefits listed in the Termination Letter, which were worth more than one million dollars.

After leaving Beatrice, Vitkus went to work for Emhart Corporation. On September 21, 1990, the Federal Deposit Insurance Corporation ("FDIC") sued Vitkus and other Silverado officers and directors for claims arising out of Silverado's failure. Beatrice refused to defend him. National Union Fire Insurance Company ("National Union"), which had insured Vitkus under an endorsement to Emhart's directors and officers' liability policy, participated in his defense. National Union ultimately paid ten million dollars in settlement of the FDIC action on Vitkus' behalf. Vitkus also claims that he personally incurred expenses in connection with the FDIC action. Vitkus and National Union therefore sued Beatrice for common law indemnification, breach of contract to provide indemnification, and breach of covenant to maintain directors and officers' liability insurance. ²

The district court granted summary judgment against Vitkus and National Union on the ground that the Release barred Vitkus' claims for indemnity and breach of covenant to maintain directors and officers' insurance. ³ On appeal, Vitkus first contends that the district court erred in holding that consideration for his release existed as a matter of law. His remaining three contentions center on whether the district court properly held as a matter of law that his claims were within the scope of the release. He asserts (1) that the district court erred in holding his indemnity claim barred by the Release because the indemnity claim was a "future" claim under Illinois law that could not be barred under the Release, (2) that the district court erred in holding his claim for breach of covenant to provide insurance barred by the Release because that claim was unknown at the time the Release was signed and therefore was outside its general scope, and (3) that the district court erred in resolving factual issues of intent when it held that his release covered the claim he now asserts. Although we agree with many of the district court's rulings, we conclude that it erred in resolving factual issues of the parties' intent on summary judgment. Accordingly, we reverse and remand on that issue.

II. STANDARD OF REVIEW

We review the grant or denial of summary judgment de novo, applying the same legal standard used by the district court under Fed.R.Civ.P. 56(c). Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.1990). Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986); Russillo v. Scarborough, 935 F.2d 1167, 1170 (10th Cir.1991). However, "we must view the record in a light most favorable to the parties opposing the motion for summary judgment." Deepwater Invs., Ltd v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10th Cir.1991).

The moving party bears the initial burden of showing that there is an absence of any issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Hicks v. Watonga, 942 F.2d 737, 743 (10th Cir.1991). Once the moving party meets its burden, the burden shifts to the nonmoving party to demonstrate that there are genuine issues for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986); Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir.1991). "However, the nonmoving party may not rest on its pleadings but must set forth specific facts showing that there is a genuine issue for trial as to those dispositive matters for which it carries the burden of proof." Applied Genetics, 912 F.2d at 1241.

To be a "genuine" factual dispute, there must be more than a mere scintilla of evidence. To avoid summary judgment, the evidence must be such that a reasonable jury could return a verdict for the nonmoving party. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. Summary judgment may be granted if the evidence is merely colorable or is not significantly probative. Id. at 250-51, 106 S.Ct. at 2511-12.

III. THE ISSUE OF CONSIDERATION

Vitkus first asserts that the district court erred in granting summary judgment on the question of whether the Release was supported by consideration. We agree with the district court that the severance benefits Vitkus received pursuant to the Termination Letter were consideration for the Release. ⁴ D.C.Op. at 33. In doing so, we reject Vitkus's contention that Beatrice had a pre-existing duty...