Ayala v. CyberPower Systems (USA), Inc.
ORDER granting 81 Motion for Summary Judgment (Written Opinion) Signed by Senior Judge David S. Doty on 3/21/2017. (DLO)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 15-1196(DSD/KMM)
CyberPower Systems (USA), Inc.,
Dwight G. Rabuse, Esq. and DeWitt Mackall Crounse & Moore,
S.C., 1400 AT&T Tower, 901 Marquette Avenue, Minneapolis, MN
55402, counsel for plaintiff.
Amy B. Conway, Esq., Daniel Oberdorfer, Esq. and Stinson
Leonard Street LLP, 150 South Fifth Street, Suite 2300,
Minneapolis, MN 55402, counsel for defendant.
This matter is before the court upon the motion for summary
judgment by defendant Cyber Power Systems (USA), Inc.
Based on a
review of the file, record, and proceedings herein, the court
grants the motion.
CyberPower hired Ayala in July 2006 as Vice President Worldwide
Rabuse Aff. Ex. V, at 26.
Ayala was responsible for
value-added resellers (VAR) sales. R. Lovett Dep. at 27:12-23. At
the time, Robert Lovett was President and Chair of CyberPower, and
his son Brent Lovett was the company’s operations manager.
Ayala reported directly to Robert Lovett.
Ayala resided in Illinois and commuted to CyberPower’s
offices in Minnesota every other week and in the interim traveled
elsewhere to visit customers.
Ayala Dep. at 82:13-18.
On July 10, 2006, Ayala signed an agreement acknowledging that
he was an at-will employee.
Rabuse Aff. Ex. V, at 24-25.
acknowledged that any changes to his at-will status “must be in
Id. at 24.
In January 2007, Ayala signed another
representative of the Company, other than the President or Vice
guaranteeing employment for any specific period of time” and that
“any such agreement, if made, will not be enforceable unless it is
in writing and signed by both parties.”
Id. at 22.
Between 2006 and 2012, Ayala performed well and VAR sales grew
exponentially. R. Lovett Dep. at 30:23-31:11. CyberPower promoted
Ayala and increased his compensation several times during that
Id. at 30:12-22; see Rabuse Aff. Ex. V, at 13, 14, 16, 18.
On at least two such occasions, CyberPower reiterated Ayala’s atwill status: “This agreement does not create a vested right to any
term of employment or otherwise change the fact that you remain
‘employed at will.’”
Rabuse Aff. Ex. V, at 15, 19.
In 2012, Robert Lovett decided to retire as president of
CyberPower and began the process of finding a replacement.
Lovett Dep. at 32:9-17.
In April 2012, Ayala expressed his
interest in the position and implied that he would leave CyberPower
if he was not chosen to succeed Robert Lovett.
Rabuse Aff. Ex. F.
Ayala was not seriously considered for the position, however,
because he “had a very difficult time with people.” R. Lovett Dep.
Robert Lovett specifically noted that Ayala could
become “autocratic” thereby “creat[ing] dysfunctional communication
tension, argumentative behavior, pushy monolog, and periodic lapses
Conway Aff. Ex. D, at 1.
chose Brett Lovett to replace him.
Robert Lovett ultimately
R. Lovett Dep. at 33:20-25.
Robert Lovett asked Ayala to stay at CyberPower to mentor his son
and offered him a promotion and an increased compensation package.
Ayala Dep. at 72:20-24. The parties agreed that Ayala would become
the Executive Vice President Americas & General Manager LATAM
(Latin America) and would receive an increase in annual base pay
from $270,000 to $400,000.
The salary increase appears to have
been effective as of September 12, 2012, but the parties continued
to negotiate other aspects of Ayala’s compensation.
Aff. Ex V, at 12.
Ayala wanted to have an agreement in place that
would ensure him a consistent commission formula going forward.
Ayala Dep. at 79:19-80:11.
It appears that over the next few weeks Ayala and Robert
Lovett spoke several times about Ayala’s compensation.
See id. at
81:4-84:22. On October 22, 2012, Ayala sent Robert Lovett an email
entitled “Comp Memo,” which attached a proposed “compensation
agreement” setting forth a calculation for determining Ayala’s
compensation above his base salary of $400,000. Conway Aff. Ex. F.
It is undisputed that Ayala drafted the document.
agreement states that the “plan will remain in place until sales
reach $150 million USD on a calendar year for all territories and
VAR team assigned accounts.”
Id. at 2.
address Ayala’s at-will status.
It did not explicitly
On October 28, Ayala sent Robert Lovett a follow-up email
attaching his notes recalling the parties’ negotiations and a copy
of the proposed agreement.
Id. Ex. G.
The notes set forth the
parties’ specific negotiations as to financial terms but do not
mention any change to Ayala’s at-will status.
See id. at 3-4.
Robert Lovett responded later that day stating that he had “issues
signing such a long term employment contract, this will need to be
run past our outside accounting firm and legal assistance.”1
Ex. H. The next morning, according to Robert Lovett, he told Ayala
that the agreement was for compensation purposes only.
Dep. at 21:11-22.
Ayala testified that Robert Lovett told him to
It is unclear whether counsel for CyberPower ever reviewed
the agreement before it was executed.
“make sure that this is not interpreted as a multiyear agreement.”
Ayala Dep. at 90:16-18. Ayala then modified the agreement and sent
the new version to Robert Lovett with the following notation:
Please see attached.
I modified paragraphs 6 and 7.
Please feel free to modify as you see fit. The agreement
is for compensation purposes and by no means a multiyear
Conway Aff. Ex. I.
Paragraph 7 of the compensation agreement
Employment terms. 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.
Id. at 3.2
In January 2013, Ayala sent an email to both Lovetts asking
them to sign the agreement even though “[f]or all practical
purposes” it was already in place.
Id. Ex. J, at 1.
that he wanted to “ensure that the sales comp. plan” would remain
in place until CyberPower achieved “$150 million in sales.”
Although the date is unclear, the Lovetts ultimately signed the
Id. Ex. E.
In May 2013, the parties signed a relocation expense agreement
under which CyberPower agreed to finance a portion of Ayala’s
purchase of a condominium in Minneapolis.
Id. Ex. K.
committed to pay Ayala $100,000 over a three-year period ending on
CyberPower estimates that it will reach $150 million in
sales in 2019 or 2020. B. Lovett Dep. at 70:22-72:8.
June 1, 2015.
The parties expressly contemplated that Ayala
could be terminated from CyberPower before he received the full
Should you be terminated for any reason prior to
receiving the full amount ($100k), you will receive the
corresponding balance on your date of termination.
CyberPower, became concerned about Ayala’s fitness for his position
following an incident during a meeting with CyberPower’s parent
company and reports of other troubling incidents by CyberPower
employees and customers.
B. Lovett Dep. at 47:11-48:7, 86:16-
He was also concerned about Ayala’s admittedly lagging
Id. at 47:15-19; Ayala Dep. at 200:16-19.
decided to offer Ayala a different sales position - General Manager
for Latin America.
B. Lovett Dep. at 121:7-25; Rabuse Aff. Ex. R;
Am. Compl. Ex. B.
Ayala was willing to consider the new position until he
received a draft revised compensation agreement that would have
reduced his salary and bonus structure.
See Am. Compl. Ex. B ¶ 2.
employment “is and remains at-will.”
Id. ¶ 4.
that CyberPower could change his title and responsibilities, but he
terminate him before sales reached $150 million.
See Rabuse Aff.
Ex. N, at 1.
Ayala then drafted a new agreement that increased his
salary and bonus structure, required CyberPower to buy out the
compensation agreement for $950,000, and set a five-year term of
employment terminable for cause only.
Id. Ex. M ¶¶ 1, 3, 4, 5.
CyberPower rejected Ayala’s proposal, denying that (1) it had
a multiyear employment contract with him, and (2) the compensation
agreement was inviolable until CyberPower reached $150 million in
Id. Ex. S, at 1.
Unable to reach agreement, CyberPower
CyberPower explained to Ayala that it terminated him as Executive
employment because they were unable to agree to terms of the new
Rabuse Aff. Ex. U.
It is undisputed that CyberPower
paid Ayala everything owed to him as of February 4, 2015, including
the last payment under the relocation expense agreement.
Dep. at 258:24-259:5.
In his amended complaint, filed on April 16, 2015,
Ayala also named Insperity PEO Services, L.P., which
provided administrative services to CyberPower, as a defendant.
See Am. Compl. ¶¶ 44-47, 57-61. Ayala later voluntarily dismissed
Insperity from the case. ECF Nos. 46, 49.
CyberPower now moves for summary judgment.4
Summary Judgment Standard
“The court shall grant summary judgment if the movant 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); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
A fact is material only when its resolution affects the outcome of
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
A dispute is genuine if the evidence is such that it could
cause a reasonable jury to return a verdict for either party.
On a motion for summary judgment, the court views all evidence
and inferences in a light most favorable to the nonmoving party.
Id. at 255.
The nonmoving party, however, may not rest on mere
denials or allegations in the pleadings but must set forth specific
facts sufficient to raise a genuine issue for trial.
U.S. at 324.
A party asserting that a genuine dispute exists - or
CyberPower moved to dismiss the amended complaint soon
after it was filed. The court, based on the report and
recommendation of the magistrate judge, denied the motion,
concluding that the compensation agreement was ambiguous. See ECF
Nos. 41, 49. Ayala argues that the court is bound by that ruling
under the law of the case doctrine. The court disagrees and will
review the matter de novo. See Lovett v. Gen. Motors Corp., 975
F.2d 518, 522 (8th Cir. 1992) (holding that the law of the case
doctrine “applies only to issues decided by final judgments”).
cannot exist - about a material fact must cite “particular parts of
materials in the record.”
Fed. R. Civ. P. 56(c)(1)(A).
plaintiff cannot support each essential element of a claim, the
court must grant summary judgment because a complete failure of
proof regarding an essential element necessarily renders all other
Celotex, 477 U.S. at 322-23.
Breach of Contract
Ayala first alleges a claim of breach of contract, arguing
that the compensation agreement altered his at-will status and
compensation until it reached $150 million in sales.
Minnesota law, “[a] claim of breach of contract requires proof of
three elements: (1) formation of a contact, (2) the performance of
conditions precedent by plaintiff, and (3) breach of the contract
by the defendant.”
Thomas B. Olson & Assocs., P.A. v. Leffert, Jay
& Polglaze, P.A., 756 N.W.2d 907, 918 (Minn. Ct. App. 2008).
cardinal purpose of construing a contract is to give effect to the
intention of the parties as expressed in the language they used in
drafting the whole contract.”
Art Goebel, Inc. v. N. Suburban
Agencies, Inc., 567 N.W.2d 511, 515 (Minn. 1997).
an unambiguous contract is a legal question for the court, while
construction of an ambiguous contract is a factual question for the
Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 346 (Minn.
Whether a contract is ambiguous is a question of law for a
court to decide.
Republic Nat’l Life Ins. Co. v. Lorraine Realty
Corp., 279 N.W.2d 349, 354 (Minn. 1979).
A contract is ambiguous
if “it is reasonably susceptible to more than one interpretation.”
Art Goebel, Inc., 567 N.W.2d at 515.
“Where the parties express
their intent in unambiguous words, those words are to be given
their plain and ordinary meaning.”
Motorsports Racing Plus, Inc.
v. Arctic Cat Sales, Inc., 666 N.W.2d 320, 323 (Minn. 2003).
court determines whether a contract is ambiguous “based solely on
the language of the contract.”
Maurice Sunderland Architecture,
Inc. v. Simon, 5 F.3d 334, 337 (8th Cir. 1993).
The Compensation Plan is Unambiguous
This case turns on whether the parties altered Ayala’s at-will
status when they entered into the compensation agreement.
usual employer-employee relationship is terminable at the will of
either” the employer or employee.
Cederstrand v. Lutheran Bhd.,
117 N.W.2d 213, 221 (Minn. 1992).
To overcome the presumption of
Lindgren v. Harmon Glass Co., 489 N.W.2d
804, 810 (Minn. Ct. App. 1992).
An employee’s subjective beliefs
about his employment status are irrelevant.
Ayala admits that he was an at-will employee initially, but
unambiguously promises him employment at a certain compensation
level regardless of his conduct or performance “until $150 million
USD is reached.”
Conway Aff Ex. I, at 3.
Ayala even contends that
he was not free to resign until sales reached $150 million.
Dep. at 137:5-9.
CyberPower responds that a plain reading of the
agreement leads to the contrary conclusion, namely that Ayala was
guaranteed the compensation set forth in the agreement if he
remained in the role of Executive Vice President Americas & General
Manager LATAM and until sales reached $150 million.
further notes that the agreement’s subsequent language clarifying
that “[i]t is not a multiyear commitment or employment contract for
either party” establishes that the parties intended that Ayala’s
inserted before “or” and after “contract”5 and that the failure to
include them supports his interpretation of the clause.
disagrees with Ayala’s position and finds that CyberPower did not
employment until sales reached $150 million.
First, a plain reading of the agreement undermines Ayala’s
assertion that the compensation agreement was not terminable for
any reason by either party until sales reached $150 million.
“It is not a multiyear
contract[,] for either party.”
repeatedly referred to as a “compensation plan” and “new salary and
bonus structure” - does not prohibit his termination until the
sales threshold is reached, nor does it guarantee the same amount
of compensation if his responsibilities change.
compensation agreement sets forth the basis for computing Ayala’s
compensation as “EVP Americas & General Manager LATAM” until sales
reach $150 million.
Conway Aff. Ex. I, at 2 ¶¶ 2, 7.
additional provision stating that the “agreement outlines the new
salary and bonus structure and “is not a multiyear commitment or
employment contract” - even without commas - evinces the parties’
intent in this regard.
Id. ¶ 7.
unreasonable and would lead to an absurd result.
See Emp’rs Mut.
Liab. Ins. Co. of Wis. v. Eagles Lodge of Hallock, Minn., 165
N.W.2d 554, 556 (Minn. 1969) (“[T]he terms of a contract must be
read in the context of the entire contract, and the terms will not
result.”). This absurdity is highlighted by Ayala’s testimony that
altogether before sales reached $150 million.
Ayala Dep. at
Third, the agreement does not specifically and definitely
alter Ayala’s at-will employment. Lindgren, 489 N.W.2d at 810. To
the contrary, the agreement states that it is not a “multiyear
agreement is not a “multiyear commitment” because it is based on an
event rather than a set number of years is unpersuasive.
practical matter, the only reasonable interpretation of the term
“multiyear” is that it refers to an extended period of time; it
does not evince the parties’ intent to only prohibit a term of
employment defined by a certain number of years.
Ayala’s interpretation, his employment could extend indefinitely if
he could not - or chose not to - drive sales to $150 million.6
Under Minnesota law, a contract of such indefinite term “is
terminable by either party at will upon reasonable notice to the
Benson Co-op. Creamery Ass’n v. First Dist. Ass’n, 151
N.W.2d 422, 426 (Minn. 1967).
Further, it strains credulity to
suggest that CyberPower would not agree to employ Ayala for a
Finally, Ayala’s argument that the compensation agreement
promises him a salary and bonus after his termination as a “golden
parachute” is unavailing.
The cases on which he relies involve
The fact that CyberPower estimates that sales may reach
that level by 2019 or 2020 does not mean that they will.
employment contracts with post-termination compensation provisions.
See Covinsky v. Hannah Marine Corp., 903 N.E.2d 422, 425 (Ill. App.
Ct. 2009); Sealock v. Tex. Fed. Sav. & Loan Ass’n, 755 S.W.2d 69,
70-71 (Tex. 1988).
The compensation agreement contains no such
As a result, a plain reading of the compensation agreement
warrants the entry of summary judgment on the breach-of-contract
Even if Ambiguous,
compensation agreement could be deemed ambiguous.
A contract is
ambiguous when “the language used is reasonably susceptible to more
than one meaning.” Blattner v. Forster, 322 N.W.2d 319, 321 (Minn.
“If the writing is ambiguous, a court must ascertain the
intent of the parties and determine the meaning of the language by
looking to the circumstances surrounding the making of the contract
Medtronic, Inc. v. Catalyst Research Corp., 518 F.
Supp. 946, 951 (D. Minn. 1981). A court may also consider evidence
Gutierrez v. Red River Distrib., Inc., 523 N.W.2d 907,
908 (Minn. 1994) (quotation marks and citation omitted).
contradict Ayala’s interpretation of the agreement.
negotiating the agreement, Robert Lovett told Ayala that he had
issues signing a “long term employment contract” and to “make sure
that this is not interpreted as a multiyear agreement.”
Aff. Ex. H; Ayala Dep. at 90:16-18.
When Ayala sent Robert Lovett
a revised agreement, he confirmed that the “agreement is for
compensation purposes and by no means a multiyear contract.”
Conway Aff. Ex. I.
Any ambiguities in the resulting contractual
language are construed against Ayala, who drafted the compensation
See Hilligoss v. Cargill, Inc., 649 N.W.2d 142, 148
(Minn. 2002) (“[A]mbiguous contract terms must be construed against
Second, and even more compelling, the relocation agreement
expressly contemplates that CyberPower could terminate Ayala before
June 2015 - the date the last payment was due and long before
either party anticipated sales reaching $150 million.
Aff. Ex. K.
As a result, even if the compensation agreement is
ambiguous, CyberPower is entitled to summary judgment.
III. Fraudulent/Negligent Misrepresentation
In the alternative to his contract claim, Ayala alleges that
CyberPower defrauded him by promising to maintain his employment at
the level of compensation set forth in the compensation agreement
until sales reached $150 million.
claim, Ayala must prove that:
In order to maintain a fraud
(1) there was a false representation by a party of a past
or existing material fact susceptible of knowledge; (2)
made with knowledge of the falsity of the representation
or made as of the party’s own knowledge without knowing
whether it was true or false; (3) with the intention to
induce another to act in reliance thereon; (4) that the
representation caused the other party to act in reliance
thereon; and (5) that the party suffered pecuniary damage
as a result of the reliance.
Stumm v. BAC Home Loans Servicing, L.P., 914 F. Supp. 2d 1009, 1013
(D. Minn. 2012) (citing Hoyt Props., Inc. v. Prod. Res. Grp.,
L.L.C., 736 N.W.2d 313, 318 (Minn. 2007)).
Ayala submits no
evidence in support of his claim and instead relies on allegations
raised in the amended complaint.
See Pl.’s Mem. at 33-36.
opposing a properly supported motion for summary judgment, however,
“may not rest upon mere allegations ..., but must set forth
specific facts showing that there is a genuine issue for trial.”
Anderson, 477 U.S. at 256.
Ayala has failed to meet this burden.
As a result, summary judgment is warranted on the fraud claim.
Ayala asserts a claim under Minn. Stat. § 181.13, which
requires employers to pay wages promptly on termination.
concedes that he was paid everything owed to him on the date of his
termination, including the remainder of the relocation amount, but
argues that he should continue to be paid the amount set forth in
the compensation agreement until CyberPower’s sales reach $150
million. As set forth above, the record does not support a finding
that the parties agreed to such an arrangement.
As a result,
CyberPower does not owe Ayala any additional wages and is entitled
to summary judgment on this claim as well.
See Karlen v. Jones
Lang LaSalle Americas, Inc., 766 F.3d 863, 867 (8th Cir. 2014)
(“Section 181.13 only applies if an employer owes an employee
unpaid wages or commissions under the employment contract.”).
Accordingly, based on the above, IT IS HEREBY ORDERED that the
motion for summary judgment [ECF No. 81] is granted.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: March 21, 2017
s/David S. Doty
David S. Doty, Judge
United States District Court
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?