Brown et al v. K & L Tank Truck Service Inc et al

Filing 177

MEMORANDUM AND ORDER. Defendants' oral motion for judgment as a matter of law is denied as to plaintiffs' breach of contract claims against K & L. However, defendants' motion is granted as to plaintiffs' unjust enrichment claim. It is further ordered that plaintiffs' oral motion for judgment as a matter of law on defendants' defense of release is denied. Signed by District Judge J. Thomas Marten on 12/21/2017. (aa)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
JOHN BROWN and BARBARA BROWN,
Plaintiffs,
v.
Case No. 15-9587-JTM
K&L TANK TRUCK SERVICE, INC.,
ALFONSO MARTINEZ, and TOM HERRELL,
Defendants.

MEMORANDUM AND ORDER
The court held a trial in this case beginning on November 28, 2017. Defendants
moved for judgment as a matter of law pursuant to Federal Rule of Civil Procedure
50(a) after the close of plaintiffs’ case-in-chief on December 13, 2017. The court took the
motion under advisement. On December 14, 2017, the court granted the motion with
respect to plaintiffs’ unjust enrichment claim, but denied it as to plaintiffs’ breach of
contract claims against defendant K & L Tank Truck Service, Inc. (“K & L”).1
At the close of defendants’ evidence, plaintiffs move for judgment as a matter of
law on defendants’ defense that plaintiffs released defendants of their obligation to pay
John Brown his 2013 shareholder bonus.

The court denied plaintiffs’ motion on

December 14, 2017.

Defendants limited their motion to two claims: unjust enrichment and breach of contract for lifetime
employment and health insurance against K & L. Defendants did not move for judgment as a matter of
law on plaintiffs’ breach of contract claim for lifetime employment and health insurance against Martinez
individually.
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The court ruled on both motions in open court, and files this memorandum and
order to explain its rulings.
I.

Legal Standard—Judgment as Matter of Law

The Federal Rules of Civil Procedure state:
If a party has been fully heard on an issue during a jury trial and the court
finds that a reasonable jury would not have a legally sufficient evidentiary
basis to find for the party on that issue, the court may
(A) resolve the issue against the party; and
(B) grant a motion for judgment as a matter of law against the party on a
claim or defense that, under the controlling law, can be maintained or
defeated only with a favorable finding on that issue.
Fed. R. Civ. P. 50(a)(1)(A)–(B). Judgment as a matter of law is appropriate when the
evidence “conclusively favors one party such that reasonable [people] could not arrive
at a contrary verdict.” Weese v. Schuckman, 98 F.3d 542, 547 (10th Cir. 1996) (quoting W.
Plains Serv. Corp. v. Ponderosa Dev. Corp., 769 F.2d 654, 656 (10th Cir. 1985)).
II.

Defendants’ Motion
Breach of Contract

Defendants argue that plaintiffs presented insufficient evidence such that a
reasonable jury could find the president of K & L, defendant Alfonso Martinez, had the
inherent or implied authority to bind K & L to a contract for lifetime employment and
health insurance. Defendants state that the interpretation of K & L’s bylaws is a matter
for the court to decide. Defendants note that a contract for lifetime employment is
considered an extraordinary contract under Kansas law and not within a president’s
inherent authority.
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Defendants also claim that there was no evidence of apparent authority because
John Brown was a director of K & L and had knowledge of its bylaws and the
president’s authority.

Defendants contend that John Brown could not reasonably

believe the president could bind K & L to such a contract. Similarly, there was no
evidence of ratification of an unauthorized act because ratification would be by K & L’s
entire board of directors—not an individual member or two of the board.
Plaintiffs respond that there was sufficient evidence to allow the jury to decide
this claim. Plaintiffs state that the bylaws authorize the president to sign and execute
contracts. Additionally, the parties’ agreement was not only for lifetime employment,
but also for John Brown’s personal guarantee for securing the bank loan to purchase K
& L from the ESOP. Plaintiffs further argue that K & L’s president had authority to save
the company from all of its employees quitting as a result of not getting their money out
of the ESOP.
The court agrees with plaintiffs’ position and denies defendants’ motion with
respect to the breach of contract claim. The bylaws of K & L allow the president to,
among other things, “appoint agents,” “sign and execute all contracts and instruments
of conveyance in the name of the corporation,” and transfer property. Additionally, the
president “shall perform all duties usually incident to the office of President.” The jury
can evaluate the bylaws in accordance with the jury instructions and determine whether
the president had the ability to bind K & L to a contract for lifetime employment and
health insurance. Furthermore, a jury could determine that plaintiffs’ acts of stepping
in, agreeing to be responsible for K & L’s financial wellbeing, and guaranteeing the
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bank loan is sufficient to support a contract for lifetime employment and health
insurance. Therefore, defendants’ motion as it relates to plaintiffs’ breach of contract
claims is denied.
Unjust Enrichment
“Under Kansas law, the elements of an unjust enrichment claim are (1) plaintiff
conferred a benefit on defendant; (2) defendant knew and received a benefit; and (3)
defendant retained the benefit under circumstances that make it unjust.” Spires v. Hosp.
Corp. of Am., 289 F. App’x 269, 272–73 (10th Cir. 2008) (citing Haz-Mat Response, Inc. v.
Certified Waste Servs. Ltd., 259 Kan. 166, 910 P.2d 839, 847 (1996)).
Defendants argue that they are entitled to judgment as a matter of law on
plaintiffs’ claim of unjust enrichment because they did not receive a benefit that was
unfair under the circumstances. K & L paid out $257,000 of its cash reserve and took on
$500,000 in debt to the bank. Martinez personally loaned $116,000. Herrell personally
loaned $34,000. Martinez, Herrell, and John Brown each guaranteed 1/3 of the bank
loan to purchase the company back from the ESOP. K & L paid the loan off over the
next five years, and John Brown’s contributions were not unfair under the
circumstances. Moreover, K & L’s value had been diminished because of the debt it had
incurred from this transaction.
Plaintiffs counter that K & L would not have been able to secure the bank loan
without the Browns’ personal guarantee. Because of plaintiffs’ involvement, K & L
continued to exist and profited both Martinez and Herrell. Plaintiffs contend that their
actions allowed Martinez to become the majority shareholder and Herrell to become a
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shareholder. Plaintiffs state that defendants will continue to profit from plaintiffs’
efforts in the future.
The court finds that K & L did not unfairly receive a benefit as a result of any
conversations between plaintiffs and defendants. Nor did it receive an unfair benefit
based upon plaintiffs’ involvement in obtaining the bank loan. Martinez, Herrell, and
John Brown each personally contributed a portion to the buyout of K & L from the
ESOP. And Martinez, Herrell, and John Brown each agreed to be liable for 1/3 of the
loan. Martinez and Herrell did not retain a benefit that was unjust and plaintiffs’ claim
fails as a matter of law.
III.

Plaintiffs’ Motion

Plaintiffs move for judgment as a matter of law on defendants’ claim that John
Brown made a release of defendants’ obligation to pay the 2013 shareholder bonus.
Plaintiffs argue that Herrell testified there was no release. Additionally, plaintiffs claim
that there was no consideration for the release or meeting of the minds amongst the
parties.
Plaintiffs’ motion is denied. The court finds that there is enough evidence in the
record to allow the jury to decide the defense of release.
IT IS THEREFORE ORDERED this 21st day of December, 2017, that defendants’
oral motion for judgment as a matter of law is denied as to plaintiffs’ breach of contract
claims against K & L. However, defendants’ motion is granted as to plaintiffs’ unjust
enrichment claim.

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IT IS FURTHER ORDERED that plaintiffs’ oral motion for judgment as a matter
of law on defendants’ defense of release is denied.
s/ J. Thomas Marten
J. Thomas Marten, Judge

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