Smythe v. Raycom Media, Inc.
MEMORANDUM AND ORDER re: 20 MOTION for Reconsideration re 17 Order of Dismissal (case - Stipulation of Dismissal) MOTION for Relief from Order of Dismissal filed by Plaintiff Michael R Smythe motion is DENIED. Signed by District Judge Carol E. Jackson on 11/15/13. (MRS) (Main Document 29 replaced on 11/15/2013) (MRS).
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
MICHAEL R. SMYTHE,
RAYCOM MEDIA, INC.,
Case No. 1:13-CV-12 (CEJ)
MEMORANDUM AND ORDER
Plaintiff Michael Smythe brought this declaratory judgment action against his
former employer, defendant Raycom Media, Inc., to reinstate stock shares he was
awarded during his employment and that were forfeited when he went to work for one
of defendant’s competitors. The Court dismissed the complaint for failure to state a
claim for relief. Plaintiff now moves to reconsider the dismissal order, pursuant to
Fed.R.Civ.P. 59(e), and asks for leave to file an amended complaint. Defendant has
filed a response in opposition to the motion and the issues are fully briefed.
During his employment, plaintiff was awarded shares of defendant’s common
stock through plans defendant offered to select employees. The plan documents
included a provision authorizing defendant’s board of directors to forfeit a participant’s
shares for engaging in anticompetitive conduct, such as working for a competitor. The
board took that action when, shortly after his termination, plaintiff went to work for a
In his complaint, plaintiff contended that the forfeiture provisions were
unenforceable under Delaware law because they did not have reasonable restrictions
as to duration or geographic scope. Defendant moved to dismiss, arguing that, when
a board of directors took an action committed to its discretion, a reviewing court was
limited to determining whether the board’s action was the product of fraud or bad faith.
The parties supported their positions with citations to case law. Plaintiff relied
on Pollard v. Autotote, Ltd., 852 F.2d 67 (3rd Cir. 1988), in which the Third Circuit
Court of Appeals reviewed a forfeiture-for-competition provision for reasonableness,
including appropriate limitations on geographic scope and duration. Defendant relied
on W.R. Berkley Corp. v. Hall, 2005 WL 406348 (Del. Sup. Ct. Feb. 16, 2005), in which
the court stated:
[W]hen a stock option committee is vested with final, binding and
conclusive authority to determine a participant’s right to receive or retain
benefits, [a] decision made in accordance with the provisions of the
agreement will not be second guessed by the Court absent a showing of
fraud or bad faith.
Id. at *4.
In determining whether to apply Pollard or W.R. Berkley, the Court noted that
the Pollard court was addressing “the enforceability of a forfeiture provision against an
employee who was involuntarily terminated without fault.” Pollard, 852 F.2d at 70.
Plaintiff alleged in his complaint that “on or about November 30, 2011, the Plaintiff and
Defendant . . . entered into an agreement to facilitate Plaintiff’s retirement.” ¶11.
Based on this allegation, the Court determined that Pollard did not apply where, as
here, the plaintiff was not involuntarily terminated. In order to proceed, therefore,
plaintiff had to establish that the forfeiture decision was the product of fraud or bad
faith. His claim failed because he did not allege that the board acted fraudulently or
in bad faith.
Plaintiff now seeks leave to amend his complaint to allege that he was
A district court has broad discretion in determining whether to grant or deny a
motion to alter or amend judgment pursuant to Rule 59(e).
United States v.
Metropolitan St. Louis Sewer Dist., 440 F.3d 930, 933 (8th Cir. 2006). Rule 59(e)
motions serve the limited function of correcting “manifest errors of law or fact or to
present newly discovered evidence.” Id. (citations omitted). “Such motions cannot
be used to introduce new evidence, tender new legal theories, or raise arguments
which could have been offered or raised prior to entry of judgment.” Id.
“Although a pretrial motion for leave to amend one’s complaint is to be liberally
granted, different considerations apply to motions filed after dismissal.” Hawks v. J.P.
Morgan Chase Bank, 591 F.3d 1043, 1050 (8th Cir.2010) (citation omitted). After a
complaint has been dismissed, “the right to amend under Federal Rules of Civil
Procedure 15(a) terminates.” Dorn v. State Bank of Stella, 767 F.2d 442, 443 (8th Cir.
1985). It is within the court’s discretion to refuse to allow amendment of pleadings
because of a failure to explain a delay in seeking leave to amend or if the amendment
would be futile. Schriener v. Quicken Loans, Inc., 4:12CV1193 CDP, 2013 WL 147842,
at *1 (E.D. Mo. Jan. 14, 2013) (citing Humphreys v. Roche Biomedical Lab., Inc., 990
F.2d 1078, 1882 (8th Cir. 1993), and Niagara of Wis. Paper Corp. v. Paper Indus.
Union–Mgmt. Pension Fund, 800 F.2d 742, 749 (8th Cir. 1986)).
Defendant filed its motion to dismiss on January 29, 2013, and the Court
granted the motion on August 15, 2013.
Plaintiff thus had ample time to seek
amendment of his pleadings before the Court issued its ruling.
He provides no
explanation for his failure to seek leave to amend at an earlier time. Instead, he
argues that the Court’s dismissal was based on an error of fact – i.e., that he left his
employment voluntarily. He makes no acknowledgment that this “error” was based
on the allegations in his complaint. He now submits documents to show that he was
given the choice of either accepting retirement or being terminated. Plaintiff had these
documents at his disposal when he filed his complaint. And, he was on notice that the
circumstances under which his employment ended were significant to the analysis:
The Pollard case on which he relied established the standard for an involuntarily
terminated employee. Defendant argued that Pollard was distinguishable because
plaintiff alleged that he had retired. Despite being in possession of the documents and
on notice of the critical issues, plaintiff chose not to correct his pleadings until after his
case was dismissed. The instant motion is a misuse of Rule 59(e). See Auto-Owners
Ins. Co. v. Mid-America Piping, Inc., 4:07 CV 00394, 2008 WL 2277594, at *2 (E.D.
Mo. May 29, 2008) (“[T]he Court’s limited resources are not maximized when it
engages in the oft meticulous and time-consuming task of reviewing the parties’
arguments and exhibits, only to be confronted with successive, fresh legal theories and
In addition to being untimely, plaintiff’s proposed amendment would be futile.
Section 8.2 of the plans provides:
Termination of Employment. If employment with the Company of a Key
employee who is a Participant terminates for any reason other than
death, Disability, Retirement, or any Approved Reason, unpaid Awards
granted hereunder. . . shall be canceled or forfeited, as the case may be,
unless the Participant’s Award Notice provides otherwise.
§ 8.2 (emphasis added).
The plans define “Award Notice” as:
[A] written notice from the Company to a Participant that establishes the
terms, conditions, restrictions, and limitations applicable to an Award in
addition to those established by this Plan and by the Board’s exercise of
its administrative powers.
An “Award” is defined as “shares of Restricted Stock” or “Employee Stock
Options.” § 2.2.
If plaintiff were involuntarily terminated, as he now alleges, his stock shares and
options would have been forfeited under § 8.2.
Plaintiff attempts to avoid the
operation of this provision by stating that he falls within the underlined exception,
based on a letter provided by defendant on December 5, 2011, after his separation
from the company. This letter outlined the procedures for redeeming his vested shares
and options and did not award plaintiff shares of stock or options. The letter is not an
“Award Notice.” Thus, upon his alleged involuntary termination from the company,
plaintiff’s shares would have been forfeited by operation of § 8.2.
For the foregoing reasons,
IT IS HEREBY ORDERED that plaintiff’s motion to reconsider and for relief
from order of dismissal [Doc. #20] is denied.
CAROL E. JACKSON
UNITED STATES DISTRICT JUDGE
Dated this 15th day of November, 2013.
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?