Wylie v. Marley Co., 85-2368

• Decision Date: 18 December 1989
• Docket Number: No. 85-2368,85-2368
• Parties: 29 Fed. R. Evid. Serv. 721 Donald J. WYLIE, Plaintiff-Appellee, v. The MARLEY COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1463

891 F.2d 1463

29 Fed. R. Evid. Serv. 721

Donald J. WYLIE, Plaintiff-Appellee, v. The MARLEY COMPANY, Defendant-Appellant.

No. 85-2368.

United States Court of Appeals Tenth Circuit.

Dec. 18, 1989.

David M. Ebel, Davis, Graham & Stubbs, Denver, Colo. (Alan M. Loeb, Catherine S. Martinez, and Allan L. Hale, Davis, Graham & Stubbs, Denver, Colo., Timothy J. Verhagen, Mission, Kan., and Roger D. Stanton, Stinson, Mag & Fizzell, Overland Park, Kan., were also on the briefs), for defendant-appellant.

David L. Welte, Polsinelli, White & Vardeman, Kansas City, Mo. (Mark J. Bredemeier, Polsinelli, White & Vardeman, Kansas City, Mo., was also on the brief), for plaintiff-appellee.

Before HOLLOWAY, Chief Judge, McKAY, Circuit Judge, and BURCIAGA, District Judge ^*.

HOLLOWAY, Chief Judge.

I.

This is an appeal in a diversity action brought by Donald Wylie ("Wylie") against The Marley Company ("Marley") for breach of an employment agreement and for declaratory judgment for breach of contract. Wylie claimed compensatory damages in the amount of $1,329,452 for lost wages and the value of lost compensation and benefits through the termination date of the agreement. Marley answered denying liability and asserting in numerous defenses that Wylie had repudiated the employment agreement, 1 R.Doc. 15; and at trial Marley offered evidence seeking to establish that Wylie orally resigned. Marley also asserted affirmative defenses, including waiver, estoppel, quasi-estoppel, repudiation, mutual rescission and failure of consideration. The jury returned a verdict for Wylie for $1,329,424 and judgment was entered for him. The judgment was increased $341,705 to award prejudgment interest.

Marley appeals and claims that the district court erred by instructing the jury that any resignation by Wylie must have been in writing, by excluding certain testimony as falling within the attorney-client privilege, by failing to instruct the jury on two of its affirmative defenses, and by awarding Wylie prejudgment interest from the date of the breach to the date judgment was entered on the total amount of the verdict, while under the agreement in the event of a breach, Wylie was to receive his semi-monthly payments when they became due. We reverse and remand for a new trial, while upholding some rulings of the trial court.

II.

Wylie began work for Marley in 1955. In 1977 or 1978, after working at various positions in the company, Wylie was elected an executive vice president by the board of directors. Shortly thereafter Wylie executed an employment contract under which he was to be employed by Marley as its executive vice president for a term of ten years, ending in September 1988.

In 1981 Kohlberg, Kravis & Roberts ("KKR"), a general partnership engaged in investment banking, made Marley a private company through a leveraged buyout that resulted in KKR's owning or representing a controlling shareholder interest in Marley's stock. Shortly thereafter, KKR formed MC Acquisition Company, a privately held corporation, for the exclusive purpose of acquiring Marley's assets. It was an objective of KKR to keep the present top management in place, and new or revised employment contracts were negotiated with "old" Marley's top management, including Wylie.

Immediately after the closing, MC Acquisition was renamed "The Marley Company." On April 28, 1981, MC Acquisition and Wylie entered into a new employment agreement which basically reiterated the terms of the old contract. Wylie was to continue his employment in the capacity of Marley's executive vice president and carry out the responsibilities contained in Corporate Policy C-20, for a term ending December 31, 1988. Furthermore, pursuant to his employment agreement Wylie was elected to Marley's board of directors. Paragraph 3 of the April 28, 1981 employment agreement provided:

During the term of this Agreement, the Employee [Wylie] shall hold the title of Executive Vice President and shall be assigned to and have the responsibilities set forth in Company's corporate policy C-20 as now existing or as altered after this date by Company's Chairman of the Board. During the term of this Agreement the responsibilities assigned to [Wylie] shall be of an executive nature consistent with [Wylie's'] job title, background, and expertise and of a nature appropriate to be assigned to a top level management executive. [Wylie] shall be elected to the Board of Directors of Company. [Wylie] will report directly to the chief executive officer(s) of Company.

Addendum to Appellant's Brief, doc. B, pp. 3-4. Corporate policy C-20, mentioned above, refers generally to the basic responsibilities of Marley's senior executives, and specifically to Wylie's responsibility for financial and facilities long-range planning, customer relations, Marley inter-company relations, implementation of policy and objectives, and executive management committee activities. Addendum to Appellee's Brief, doc. III.

Paragraph 7 of the Agreement set forth the responsibilities and duties of each party in the event either party breached the contract:

In the event Company shall fail or refuse to perform its obligations or carry out its duties under this Agreement, [Wylie] shall notify Company in writing of such failure or refusal, specifying the defaults alleged. Unless such defaults shall promptly (within thirty days of receipt of such notice) be corrected, then [Wylie] shall be entitled, upon written notice of termination to Company, to declare this Agreement breached, to terminate further performance hereunder, and thereupon shall be released from any further obligation under this Agreement; provided, however, that such termination shall be without prejudice to [Wylie's] rights to continue to receive annually (in semi-monthly installments), for the remainder of the term of this Agreement (without reduction by reason of other employment and as though such termination had not occurred), his full base salary at the rate in effect at the time of termination plus an annual amount equal to the highest yearly amount of incentive compensation previously paid under the Agreement to [Wylie], or if none has been paid at the time of termination, in the amount paid by Marley to [Wylie] in January of 1981.

Addendum to Appellant's Brief, doc. B, p. 5. Paragraph 7(b), like subpart (a), similarly provided that if Wylie failed or refused to perform under the terms of the agreement, Marley must provide Wylie notice and an opportunity to cure any defects before it could declare the contract in breach. ¹ Id. Paragraph 15 of the agreement stipulated that the agreement and the legal relations thereunder "shall be governed by the laws of the State of Kansas."

A regularly scheduled meeting of Marley's Board of Directors on December 7, 1982, set the events in motion for this suit. Attending this meeting were Wylie and Richard Powell, Robert McFadin, and Richard Signorelli, three directors representing the KKR interest and other directors representing Marley's management. Powell was Chairman of the Board and a member of the executive committee. McFadin was President and Chief Executive Officer of Marley. Prior to the meeting Signorelli was a senior vice president.

At the meeting McFadin nominated Signorelli to be a second executive vice president. After the meeting Wylie met with Powell to discuss the situation. Wylie believed that his job title had been diminished and that he was going to be seriously affected by Signorelli's promotion. Powell arranged a meeting between McFadin and Wylie for the following morning.

On the morning of December 8, 1982, Wylie met with McFadin and Powell in McFadin's office. What was discussed at this meeting is sharply disputed. Wylie stated that the promotion of Signorelli breached his employment agreement, that he was disturbed by the promotion, and that he was going to discuss his concerns with KKR representatives in San Franciso. Wylie testified that he also told McFadin that he "couldn't see any way it could work" and "that it would be very difficult to work with two executive vice presidents." 3 R. 146-47. McFadin testified that Wylie told him that "he could no longer work for the Marley Company under the condition of there being a second executive vice president." 4 R. 251. Although McFadin understood this to mean that Wylie wanted to resign, 4 R. 252, McFadin testified that Wylie never stated that he was going to resign or quit. 4 R. 262. Wylie testified he never said he was going to resign or quit, 3 R. 147, nor that McFadin stated he would accept his resignation. 3 R. 148.

Later that same day Wylie contacted Robert MacDonnell, general partner for KKR, to discuss the Signorelli promotion. MacDonnell testified that Wylie told him that he had resigned. 4 R. 287-88. Wylie denied this. ² 3 R. 149-50. The next day Wylie visited with MacDonnell in San Francisco. MacDonnell testified that there Wylie again stated that he had resigned. 4 R. 290.

When Wylie returned to Kansas City from his meeting with MacDonnell, he received a letter dated December 8 from McFadin stating that McFadin had "accepted [his] resignation." 1 R.Doc. 7, Ex. D. In response to the McFadin letter, Wylie wrote a letter to Powell, as Chairman of the Board, that Marley was in breach of its employment agreement, and denying that he resigned. Wylie also made formal demand to cure the contractual defaults as required by the employment agreement. When Marley failed to cure the defaults as requested, Wylie sent another letter to both Marley and KKR stating that the employment agreement was terminated and that any reliance on an oral resignation was invalid as a matter of law. Shortly thereafter, Wylie initiated this action.

Prior to trial, Wylie filed a motion for partial summary judgment on the ground that under applicable Kansas corporation law, he could not orally resign as executive vice president or as a director of Marley. Therefore, Wylie...