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Ayala v. CyberPower Systems (USA), Inc.

United States Court of Appeals, Eighth Circuit

June 6, 2018

Daniel Ayala Plaintiff- Appellant
v.
CyberPower Systems (USA), Inc. Defendant-Appellee

          Submitted: March 13, 2018

          Appeal from United States District Court for the District of Minnesota - Minneapolis

          Before GRUENDER, BEAM, and KELLY, Circuit Judges.

          GRUENDER, CIRCUIT JUDGE.

         This case concerns a written agreement between Daniel Ayala and his former employer CyberPower Systems. CyberPower, a manufacturer and seller of power-supply products, hired Ayala in 2006 to serve as a vice president.

         In 2012, Ayala drafted an agreement, entitled "Compensation Agreement, " that purports to describe the "compensation plan for Dan Ayala" for his new position as Executive Vice President and General Manager for Latin America. The agreement details his salary and bonus structure. It states that the "plan will remain in place until sales reach $150 million USD, " and under the heading "Employment terms, " it says: "The above-mentioned agreement outlines the new salary and bonus structure to remain in place until $150 million USD is reached. It is not a multiyear commitment or employment contract for either party." CyberPower President Bob Lovett, General Manager Brent Lovett, and Ayala signed the Compensation Agreement. The parties agree that before the agreement, Ayala was an at-will employee.

         Ayala was terminated before sales reached $150 million, and in 2015, he brought suit against CyberPower for breach of contract, fraud, and unpaid wages. He argued that the Compensation Agreement secured his employment until the $150 million sales threshold was met. CyberPower filed a motion to dismiss, arguing that the Compensation Agreement unambiguously did not modify Ayala's status as an at-will employee. The district court, adopting a magistrate judge's recommendation, denied the motion. In 2017, a different district court judge[1] granted summary judgment to CyberPower. The district court agreed with CyberPower that the Compensation Agreement unambiguously did not modify Ayala's at-will status, and it found further that even if ambiguity existed, the parol evidence sufficiently refuted Ayala's claim so as to warrant summary judgment for CyberPower. Ayala appealed.

         "Summary judgment is appropriate when no genuine issue of material fact remains and the movant is entitled to judgment as a matter of law." Rifkin v. McDonnell Douglas Corp., 78 F.3d 1277, 1279 (8th Cir. 1996). "We review a district court's grant of summary judgment de novo, viewing the evidence and drawing all reasonable inferences in the light most favorable to the nonmoving party." Foster v. BNSF Ry. Co., 866 F.3d 962, 966 (8th Cir. 2017). The parties agree that Minnesota law governs the dispute.

         Ayala's primary claim is for breach of contract. "To establish a breach-of-contract claim, a plaintiff must show that (1) a contract was formed; (2) the plaintiff performed any conditions precedent; and (3) the defendant breached the contract." Commercial Assocs., Inc. v. Work Connection, Inc., 712 N.W.2d 772, 782 (Minn.Ct.App. 2006). Juries typically resolve ambiguities in contracts, and ambiguity exists when the contract's language is "reasonably susceptible to more than one interpretation." Baker v. Best Buy Stores, LP, 812 N.W.2d 177, 180 (Minn.Ct.App. 2012). But "when the intention of the parties to a contract is ascertainable from the writing, construction is for the court." Cherne Contracting Corp. v. Marathon Petroleum Co., 578 F.3d 735, 740 (8th Cir. 2009). To alter Ayala's status as an at-will employee, the parties agree that CyberPower must have "clearly intended" to do so by entering the Compensation Agreement. See Gunderson v. All. of Comput. Prof'ls, Inc., 628 N.W.2d 173, 181-82 (Minn.Ct.App. 2001).

         There is no ambiguity on the question whether CyberPower "clearly intended" to modify Ayala's at-will status with the Compensation Agreement. See id. The text of the agreement indicates that it governs only compensation. The agreement is entitled "Compensation Agreement." It describes the "compensation plan for Dan Ayala." It states that the "plan will remain in place until sales reach $150 million USD, " but the agreement later reiterates that, rather than guaranteeing Ayala's employment, it sets out only his compensation until the sales threshold is met. It says that the "above-mentioned agreement outlines the new salary and bonus structure to remain in place until $150 million USD is reached. It is not a multiyear commitment or employment contract for either party."

         Although the prior sentence supports CyberPower's contention that the agreement is not an "employment contract, " Ayala argues that if one reads "multiyear" to modify "employment contract" in addition to "commitment, " then the sentence merely states that the employment term ends on a condition (reaching $150 million in sales), rather than after a term of years. This reading makes little sense in context. The sentence preceding the one at issue and the title of the document, among other provisions, indicate that the agreement covers compensation-not the employment term. Reading "multiyear" to modify "employment contract" also makes the phrase largely superfluous. See Econ. Premier Assur. Co. v. W. Nat. Mut. Ins. Co., 839 N.W.2d 749, 756 (Minn.Ct.App. 2013). The Compensation Agreement already says that it does not create a "multiyear commitment, " and the agreement was obviously not an employment contract for a term of years. There would be no need to say that the agreement was not a multiyear employment contract. But, as this case illustrates, there was a need to attempt to clarify that the agreement covered only compensation.

         Even if one accepts Ayala's stilted reading, however, the Compensation Agreement still does not have the requisite "clear" language to modify Ayala's status as an at-will employee. See Gunderson, 628 N.W.2d at 181-82 ("Typically, an employee must establish clear and unequivocal language by the employer evidencing an intent to provide job security."). The agreement's language, in other words, does not overcome the "strong presumption" of at-will employment under Minnesota law. See Fox v. T-H Cont'l Ltd. P'ship, 78 F.3d 409, 413 (8th Cir. 1996). Ayala cites Kvidera v. Rotation Engineering & Manufacturing Co., 705 N.W.2d 416 (Minn.Ct.App. 2005), to support his reading of the agreement. He emphasizes that, like here, the employer and employee in Kvidera both signed the agreement that the Minnesota Court of Appeals found to modify an at-will relationship. Id. at 421. But the contract in Kvidera was entitled "Employment Agreement, " specified a date that the agreement terminated, and addressed employment terms other than compensation. Id. It also lacked provisions, like those in Ayala's agreement, confining its scope to compensation.

         Three other arguments on the breach-of-contract claim are worth briefly addressing. First, Ayala argues that because the parties had already agreed to the compensation terms described in the agreement, the agreement would serve no purpose if it did not guarantee a term of employment. Ayala relies here on a faulty premise. In fact, he concedes that the agreement set out his bonus compensation for the first time. Second, Ayala and the dissent note that the agreement does not explicitly say that the relationship remains at will. But Minnesota law does not require a clear statement to continue at-will employment-it presumes such employment. See Fox, 78 F.3d at 413. What requires clarity is a modification to at-will employment, see Gunderson, 628 N.W.2d at 181-82, and the absence of an at-will provision and presence of "almost inscrutable terminology, " post at 8, does not provide it. Third, Ayala emphasizes that the agreement complied with internal CyberPower procedures for modifying at-will employment. The agreement was in writing and included the signatures of Bob and Brent Lovett. The mere fact that the agreement contains those elements, however, does not mean that it modifies Ayala's at-will status. Those elements might be necessary, but they are not sufficient.[2]

         In short, we conclude that because the Compensation Agreement unambiguously did not modify Ayala's status as an at-will employee, CyberPower did not breach the agreement by terminating his employment. As a result, the district court did not err ...


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