Holek v. Aurora Cooperative Elevator Company
Filing
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OPINION AND ORDER REGARDING 14 , 17 CROSS-MOTIONS FOR SUMMARY JUDGMENT. Signed by District Judge Gerald E. Rosen. (KWin)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
ANTHONY HOLEK
Plaintiff,
No. 15-cv-11322-GER-DRG
Hon. Gerald E. Rosen
vs.
AURORA COOPERATIVE
ELEVATOR COMPANY
A Foreign Profit Corporation,
Defendant,
______________________________/
OPINION AND ORDER REGARDING CROSS-MOTIONS
FOR SUMMARY JUDGMENT
At a session of said Court, held in
the U.S. Courthouse, Detroit, Michigan
on June 7, 2016
PRESENT: Honorable Gerald E. Rosen
United States District Judge
I.
INTRODUCTION
This diversity breach of contract action is presently before the Court on CrossMotions for Summary Judgment filed by Plaintiff Anthony Holek and Defendant Aurora
Cooperative Elevator Company. At issue is a five-year fixed term employment contract
the parties entered into on February 22, 2013. Defendant Aurora terminated the contract
on December 31, 2014. Plaintiff now moves for summary judgment claiming that there
is no genuine issue of material fact that he was terminated before the term of his contract
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ended and, therefore, Defendant is liable for breach of the contract. Defendant responded
by filing a cross-motion for summary judgment stating that it is undisputed that Plaintiff
was terminated due to economic necessity which causes Plaintiff’s breach of contract
claim to fail as a matter of law.
Having reviewed and considered the parties’ motions and briefs, and the entire
record of this matter, the Court has concluded that oral argument is not necessary.
Therefore, pursuant to Eastern District of Michigan Local Rule 7.1(f)(2), this matter will
be decided on the briefs. This Opinion and Order sets forth the Court’s ruling.
II.
PERTINENT FACTS
Plaintiff Anthony Holek is a 44-year-old man who has spent his career working in
agriculture and selling agricultural products to farmers. Defendant Aurora Cooperative
Elevator Company (“Aurora”) is a multi-purpose agricultural cooperative headquartered
in Aurora, Nebraska, with 65 locations nation-wide and over 550 employees.
In December 2012, Clarence Vernon of Aurora contacted Plaintiff Holek and
offered him employment as the Location Manager at Aurora’s Lennon, Michigan facility,
a position which entailed both managing the location and sales. [Plaintiff’s Dep. pp. 1114]. At the time, Holek was working as a salesman for Crop Production Services earning
$45,000 per year, with the potential of an $8,000 bonus if annual sales quotas were met.
Id. at 12. Holek was aware when Vernon offered him employment that Aurora’s Lennon
facility had had some financial difficulties, and Vernon specifically advised him that the
Lennon facility would likely not be profitable at least during the first year of his
employment. Id. at 16-17, 24. Nonetheless, after taking time to consider the matter,
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Holek believed he could turn the business around and accepted the offer, agreeing to start
work in February 2013. Id. at 13, 24.
On February 22, 2013, Holek entered into a five-year employment agreement with
Aurora, commencing on that date, February 22, 2013, and continuing until February 22,
2018. [Aurora Cooperative Employment Agreement, p. 1]. The agreement provided
Holek with a starting salary of $95,000 per year. Id., p. 2. The agreement also contained
the following provision regarding termination:
This agreement maybe [sic] terminated as follows:
1. This agreement shall immediately terminate upon the event of the Employee’s
death.
2. The employer may terminate this Agreement at any time upon 24 hours prior
notice “for cause.” For purposes of this agreement generally, “cause” shall
mean any act or omission which is commonly and materially harmful to the
Employer and/or successful pursuit of its business interests.
3. If this agreement is terminated by the Employee without the consent of the
Employer the Employee will be required to pay back all incentives paid to the
employee before termination of the agreement.
Id. at 1.
Holek worked for Aurora at the Lennon, Michigan facility from February 22, 2013
until December 31, 2014. [Plaintiff’s Dep. at 44.] During this time, the Lennon facility
experienced multiple financial difficulties. In 2013, the facility sustained a loss of
approximately $600,000.00, and in 2014, it sustained a loss of approximately
$300,000.00. Id. at 18-19.
The financial losses notwithstanding, Holek personally did well while working for
Aurora: He was rated number one in sales for national accounts in 2013, and number two
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in 2014. Id. at 23. Holek testified that he worked approximately 50 hours per week
during the down seasons and as many as 80-100 hours per week during the busy season.
Id. at 22. He received a positive employee review during this time, as well. [Aurora
Cooperative Elevator Company Performance Appraisal - Supervisory, p. 1].
However, on October 31, 2014, Clarence Vernon informed Holek that Aurora’s
Lennon, Michigan facility would be closing. [Plaintiff’s Dep. at 25]. Aurora offered
Holek multiple positions at its other facilities in Iowa, South Dakota, Nebraska and
Texas, but Holek turned the positions down because he wanted to remain in Michigan
near to his family. Id. at 28-29. 1 He continued to work for Aurora until December 2014.
Id. at 45.
Holek started to seek other employment as soon as he decided not to take another
position with Aurora. Id. at 30. After exploring multiple options and receiving multiple
offers, Mr. Holek accepted a sales position with Wilbur-Ellis Company. Id. at 34. He
started work with Wilbur-Ellis on January 1, 2015 for a yearly salary of $55,000, with the
potential for an annual bonus of $5,000. Id. at 33-34. [Wilbur-Ellis Employment
Agreement, p. 1].
On March 4, 2015, Holek filed a one-count breach of contract Complaint against
Aurora in Shiawassee County Circuit Court, claiming that Aurora wrongfully discharged
him when it terminated his contract before the end of his contractual five-year term.
Aurora timely removed the action to this Court on diversity of citizenship grounds on
Holek is divorced and has joint custody with his ex-wife of their four teenage
daughters. [Plaintiff’s Dep., p. 7].
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April 9, 2015. Discovery has now closed and the parties both move for summary
judgment.
The parties do not dispute that Aurora closed its Lennon, Michigan facility due to
an economic necessity. However, the parties disagree as to what effect this has on the
contract. Aurora claims that Holek cannot maintain a breach of contract claim because it
is undisputed that the actions of Aurora were motivated by economic necessity. Holek
argues that economic necessity was not within the definition of “cause” set forth in the
contract and, therefore, Aurora breached the contract by terminating him for economic
reasons.
III.
A.
DISCUSSION
STANDARDS APPLICABLE TO MOTIONS FOR SUMMARY JUDGMENT
Summary judgment is proper if the moving party “shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). As the Supreme Court has explained, “the plain language of Rule
56 [] mandates the entry of summary judgment, after adequate time for discovery and
upon motion, against a party who fails to make a showing sufficient to establish the
existence of an element essential to that party’s case, and on which that party will bear
the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548,
252 (1986).
In deciding a motion brought under Rule 56, the Court must view the evidence in a
light most favorable to the nonmoving party. Pack v. Damon Corp., 434 F.3d 810, 813
(6th Cir. 2006). Yet, the nonmoving party may not rely on mere allegations or denials,
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but must “cit[e] to particular parts of materials in the record” as establishing that one or
more material facts are “genuinely disputed.” Fed. R. Civ. P. 56(c)(1). Moreover, any
supporting or opposing affidavits or declarations “must be made on personal knowledge,
set out facts that would be admissible in evidence, and show that the affiant or declarant
is competent to testify on the matters stated.” Fed. R. Civ. P. 56(c)(1). Finally, “the mere
existence of a scintilla of evidence that supports the nonmoving party’s claims is
insufficient to defeat summary judgment.” Pack, 434 F.3d at 814 (alteration, internal
quotation marks and citation omitted). The Court will apply the foregoing standards in
deciding the Defendant’s motion for summary judgment in this case.
B.
PLAINTIFF HAS FAILED TO STATE A COGNIZABLE BREACH OF
CONTRACT CLAIM
It is well-settled under Michigan law that fixed-term employment agreements are
enforceable. See e.g., Webb v. Depew, 152 Mich. 698, 116 N.W. 560 (1908); Reinardy
v. Bruzzese, 368 Mich. 688, 118 N.W. 952 (1962). In Webb, the defendant hired the
plaintiff and her daughter to work in his home for a minimum period of 3 ½ months. 152
Mich. at 699. He fired them ten days after hiring them. Id. The Michigan Supreme
Court held that the plaintiff was allowed to recover damages for the full term of the
contract because she was wrongfully discharged before the expiration of the term. Id. at
701-02.
However, the premature termination of a fixed-term employment contract does not
automatically give rise to a cause of action. Bhogaonker v. Metropolitan Hospital, 164.
Mich. App. 563, 565, 417 N.W. 2d 501 (1987) (abrogated on other grounds); Reisman v.
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Regents of Wayne State University, 188 Mich. App. 526, 531, 470 N.W. 2d 678 (1991).
The discharged employee must show at least some evidence that the termination was
wrongful and constituted a breach of contract in order to withstand summary judgment.
Pachala v. Saunders Systems, 899 F.2d 496, 500 (6th Cir. 1990) (applying Michigan
law).
Economic necessity is a well-established defense to a claim of wrongful
termination. Featherly v. Teledyne Industries, Inc., 194 Mich. App. 352, 360, 486
N.W.2d 361 (1992). Where there is no evidence of pretext, there is no cause of action
when an employment contact is terminated for economic necessity. Bhogaonker, 164
Mich. App. at 565; Featherly 194 Mich. App. at 364-65; Friske v. Jasinski Builders,
Inc., 156 Mich. App. 468, 472, 402 N.W.2d 42 (1986)
In Featherly, three supervisory Teledyne employees brought suit after their
employment was terminated. One of the plaintiffs sued for breach of contract alleging
that oral representations made by the company president gave rise to an implied contract
terminable only for just cause. 194 Mich. App. at 364-365. The court allowed plaintiff the
benefit of the doubt as to the existence of an oral contract, but held that even if a contract
did exist, “[b]ecause it was undisputed that plaintiff’s employer imposed economically
mandated reductions in force, plaintiff failed, as a matter of law, to present facts alleging
a breach of contract claim under Toussaint.” Id.
A similar result was reached in Bhogoanker v. Metropolitan Hospital, supra. The
plaintiff in Bhogoanker was a doctor who was told by the hospital that he would have
employment as long as his work was satisfactory. Bhogoanker, 164 Mich. App. at 565.
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Seven years later, plaintiff was terminated due to a reduction in staff that had resulted
from budget cuts. Id. at 566. Plaintiff filed suit alleging that the defendant breached the
contract by firing him for a reason other than unsatisfactory performance. Id. The trial
court granted summary disposition in favor of the defendant on the grounds that the court
lacked subject matter jurisdiction. Id. The Court of Appeals held that even though the
trial court was incorrect when it stated it did not have subject matter jurisdiction,
summary disposition was nonetheless proper because there was no genuine issue as to a
material fact that the plaintiff was terminated due to an economic necessity. Id. at 566.
The appellate court explained:
Case law indicates that termination of the employment of an otherwise competent
employee due to an economically motivated business closing is not grounds for a
wrongful discharge claim . . . To hold otherwise would impose an unworkable
economic burden upon employers to stay in business to the point of bankruptcy in
order to satisfy employment contracts and related agreements terminable only for
good or sufficient cause.
Id. at 565-566 (internal citations omitted). See also McCart v. J. Walter Thompson USA,
Inc., 437 Mich. 109, 115, 469 N.W.2d 284 (1991) (where plaintiff failed to raise any
genuine issue of fact regarding the validity of defendant’s proofs that adverse business
conditions existed and that the elimination of plaintiff’s position was necessitated by
those conditions summary disposition was proper); Conklin v. Eastern Mich. Univ.
Chapter of American Ass’n of University Professors, 2008 WL 4648796 at *5 (Mich.
App. Oct. 21, 2008) (where the defendant’s evidence established that plaintiff’s
termination was economically necessary, and plaintiff failed to rebut that evidence with
evidence showing that the asserted economic necessity was pretextual and that she was
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actually discharged for another reason , the trial court properly granted defendant’s
motion for summary disposition).
The result is the same when an employee with a fixed-term contract is terminated
for reasons such as budget cuts or economic necessity: there is no wrongful termination
and, therefore, no cause of action. Reisman, 188 Mich. App. at 531. This applies even
when the contract states the employee can only be terminated for cause. Id. “Termination
because of economic hardship constitutes termination for cause under Michigan law.”
Olson v. Kennametal, Inc., 894 F.2d 1336, 1990 WL 7943 at *2 (6th Cir. 1990) (applying
Michigan law). See also Parker v. City of Flint, 2008 WL 2780090 (Mich. App. July 17,
2008).
In Parker the plaintiff argued that he was wrongfully discharged because, based
on his written employment contract with defendant, he could only be discharged for
specific violations of the contract or on receiving 30 days notice before the expiration of
the contract term. The trial court refused to allow the defense of economic necessity. The
Court of Appeals agreed with the defendant that economic necessity always constitutes a
valid basis for employment termination and concluded that the trial court erred in
precluding the defense. 2008 WL 2780090. at *4. The appellate court reasoned:
Defendant’s position is consistent with our Supreme Court’s ruling in
Toussaint v. Blue Cross & Blue Shield of Michigan, 408 Mich. 579; 292 N.W.2d
880 (1980) and its progeny, which provide “that an employee may have an
enforceable right not to be terminated except for just cause grounded in either an
express oral or written contract or in legitimate expectations arising from an
employer’s policy statements. However, it is recognized that under Toussaint,
bona fide economic reasons for discharge constitute “just cause.”
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Plaintiff is correct in asserting that the written contract executed between
the parties is subject to enforcement consistent with its terms and defendant’s
agreement to restrict its discretion to terminate his employment. However, while
relying on this premise as set forth in this Court’s ruling in Thomas v. John Deere
Corp., 205 Mich. App. 91, 93; 517 N.W.2d 265 (1994), plaintiff fails to recognize
the limitations of that decision. In Thomas, while this Court acknowledged the
rules pertaining to employment contracts and their interpretations, a limitation was
noted. Specifically,
If an employment contract provides that the employer can terminate the
employment only for just cause, then that provision is enforceable and the
employer cannot terminate employment at will.
Thomas, supra at 93.
Contrary to plaintiff’s interpretation, termination of a just cause
employment contract does not preclude the defense of economic necessity, rather
it merely assures that any termination is consistent with the just cause nature of the
contract and prohibits the employer from discharging an employee “at will.”
2008 WL 2780090 at *4-5 (internal citations omitted).
In this case, Defendant Aurora relies on the economic necessity defense. Plaintiff
does not dispute the legitimacy of that defense. He does not dispute that Aurora closed
its Lennon, Michigan facility for economic reasons. Indeed, as Plaintiff himself
acknowledged, in just the two years prior to closing, the Lennon facility sustained losses
of close to $1,000,000. [Plaintiff’s Dep., pp. 13-14].
The only way Plaintiff could withstand summary judgment would be to present
evidence that calls into question the legitimacy of the economic necessity defense.
Conklin, 2008 WL 4648796 at 2. Holek has not met this burden. In fact, Holek presents
absolutely no evidence of any other reason for his termination.
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There being no dispute that Aurora terminated Holek’s employment due to
economic necessity, applying Michigan law, the Court concludes that Plaintiff’s breach
of contract complaint fails as a matter of law.
CONCLUSION
For all of the reasons stated above in this Opinion and Order,
IT IS HEREBY ORDERED that Defendant’s Motion for Summary Judgment
[Dkt. # 17] is GRANTED and Plaintiff’s Motion for Summary Judgment [Dkt. # 14] is
DENIED. accordingly,
IT IS FURTHER ORDERED that Plaintiff’s Complaint is DISMISSED, in its
entirety, with prejudice.
Let Judgment be entered accordingly.
s/Gerald E. Rosen
Hon. Gerald E. Rosen
United States District Judge
Date: June 7, 2016
I hereby certify that a copy of the foregoing document was served upon the parties and/or
counsel of record on June 7, 2016, by electronic and/or ordinary mail.
s/Kelly Winslow for Julie Owens
Case Manager, (313) 234-5135
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