Emerson Electric Co. v. Yeo

Filing 63

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Defendant's Renewed Motion to Dismiss for Failure to State a Claim and Lack of Personal Jurisdiction 37 is DENIED. IT IS FURTHER ORDERED that a telephone conference with the parties is set for Thursday, January 3, 2013 at 11:00 a.m. to discuss Defendant's Motion to Dissolve or Modify The Temporary Restraining Order. [ECF No. 39] as well as a scheduling order. The parties shall initiate the call with the Court at [phone].. Signed by District Judge John A. Ross on 12/28/12. (LGK)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
EMERSON ELECTRIC CO.,
Plaintiff,
vs.
PETER RAMOS YEO,
Defendant.

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Case No. 4:12CV1578 JAR

MEMORANDUM AND ORDER
This matter is before the Court on Defendant’s Renewed Motion to Dismiss for Failure to
State a Claim and Lack of Personal Jurisdiction. [ECF No. 37]1 The Motion is fully briefed and oral
argument was held on the Motion on December 19, 2012. For the reasons set forth below, the
Motion will be denied.
Discussion
On August 30, 2012, Plaintiff Emerson Electric Company (“Emerson”) filed its Petition and
Motion for Temporary Restraining Order against Defendant Ramos Yeo (“Defendant”) in the Circuit
Court of Saint Louis County, Missouri. Emerson alleges Defendant, a former employee of its
indirect subsidiary Astec International Ltd., ROHQ (“Astec”), is competing against Emerson in
violation of a non-compete clause included in a stock option agreement he signed with Emerson
(“2011 Stock Option Agreement” or “Agreement”). Emerson filed suit in the Circuit Court of Saint
Louis County, Missouri, based on a forum selection clause in the Agreement. This matter was
removed to this Court on September 4, 2012. On September 7, 2012, this Court entered its

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Defendant originally filed his Motion to Dismiss for Failure to State a Claim and Lack of
Personal Jurisdiction on September 5, 2012. (Doc. No. 18) On September 14, 2012, the Court
ordered this matter stayed for a period of fourteen days and denied Defendant’s Motion without
prejudice. (Doc. No. 29)

Temporary Restraining Order. (Doc. No. 26) Defendant renewed his Motion to Dismiss on October
8, 2012.
In support of his motion to dismiss, Defendant argues that the 2011 Stock Option Agreement
is not supported by valid and sufficient consideration because the stock option grant was an illusory
promise. “The phrase ‘illusory promise’ means ‘words in promissory form that promise nothing.’
An illusory promise is not a promise at all and cannot act as consideration; therefore no contract is
formed.” Cordry v. Vanderbilt Mortgage & Finance, Inc., 445 F.3d 1106, 1110 (8th Cir. 2006)
(quoting Magruder Quarry & Co. v. Briscoe, 83 S.W.3d 647, 650 (Mo.Ct.App. 2002)). See also,
Am. Laminates, Inc. v. J.S. Latta Co., 980 S.W.2d 12, 23 (Mo.Ct.App.1998) (“Retaining the right
to cancel a contract or to avoid one's promise is an unenforceable, illusory promise.”); Cooper v.
Jensen, 448 S.W.2d 308, 314 (Mo.Ct.App.1969) (A contract is illusory where a party “had it always
in his power to keep his promise and yet escape performance of anything detrimental to himself or
beneficial to the promisee.”) Defendant states that under the Agreement, Emerson retained the right
to terminate him at any time, for any reason. Under the terms of the Stock Option Plan, if Emerson
terminated Defendant’s employment during the year before his options vested, he was not entitled
to exercise any options. As a result, Emerson retained the ability to “relieve itself of its promises,”
making the stock option grant illusory and the Agreement unenforceable. Frye v. Speedway
Chevrolet Cadillac, 321 S.W.2d 429, 442 (Mo.Ct.App. 2010); Fenberg v. Goggin, 800 S.W.2d 132,
136 (Mo.Ct.App. 1990). (Memorandum in Support of Renewed Motion to Dismiss, Doc. No. 38,
pp. 3-8)
Emerson responds that the fact that it had the right to terminate Defendant’s employment
does not make the stock option grant illusory, and that under the Agreement, Defendant had the right
to immediately exercise all of his outstanding options, regardless of whether they had vested, in the

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event of a “Change in Control.”2 Additionally, if Defendant died at any time during his employment,
his legatee(s), personal representatives or distributees could exercise all of his outstanding options,
regardless of whether they were vested.3 (Plaintiff’s Opposition to Defendant’s Renewed Motion
to Dismiss, Doc. No. 57, p. 6) This benefit acted in a manner similar to a life insurance benefit
providing security upon death to the Defendant. Both of these circumstances were outside the
control of Emerson. In reply, Defendant maintains that his right to exercise his options remained
contingent on Emerson not terminating his employment prior to either of these events occurring.
(Defendant’s Reply in Support of Renewed Motion to Dismiss, Doc. No. 60, p. 7) Because Emerson
always retained the right to relieve itself of its promise, the stock option grant remained illusory.
If this were true, then under the circumstances of employment at-will there could never be
adequate consideration because an employer always has the power to terminate its employee. The
Court will not go so far as to adopt Defendant’s position. “The tendency of the law is to uphold the
contract by finding the promise was not illusory when it appears that the parties intended a contract.”
Magruder, 83 S.W.3d at 650. Moreover, courts have found that “[e]ven slight consideration is
sufficient to support a promise.” Moore v. Seabaugh, 684 S.W.2d 492, 496 (Mo.Ct.App.1984). As
discussed above, under the terms of the Agreement, Defendant had the right to exercise his options,
regardless of whether they had vested, in the event of a Change of Control or upon his death.
Because Emerson’s performance rested unconditionally on the occurrence of either of these two

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Under § 2(i) of the Agreement and § 9 of the Plan, a “Change in Control” includes “[t]he
purchase or other acquisition (other than from the Company) by any person, entity or group of
persons, within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the ‘1934 Act’) . . . of 20% or more of either the then outstanding shares of Common
Stock or the combined voting power of the Company’s then-outstanding voting securities entitled
to vote in the election of directors.” (Doc. No. 1-1, pp. 39, 47)
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See § 11 of the Plan (Doc. No. 1-1, p. 49)
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events, and reading the Agreement as a whole, the Court finds that the stock option grant is not
illusory.
In further support of his motion to dismiss, Defendant argues that even if the stock option
grant was not entirely illusory, the non-compete clause in the Agreement is unenforceable due to the
lack of adequate consideration. Defendant relies on Sturgis Equipment Co., Inc. v. Falcon Industrial
Sales Co., 930 S.W.2d 14 (Mo.Ct.App. 1996), where the Missouri Court of Appeals held that the
consideration of agreeing to buy back the employee’s stock, without more, was insufficient to
support the broad non-complete clause at issue there. Id. at 17. Defendant states the only
consideration provided for in the Agreement is the grant of options, and where consideration is one
of the terms of the contract itself, the Court cannot look outside the contract to find adequate
consideration. Kassebaum v. Kassebaum, 42 S.W. 3d 685, 694 (Mo.Ct.App. 2001).
The Sturgis decision does not stand for the proposition that a stock purchase agreement
containing a non-compete clause can never, as a matter of law, be supported by adequate
consideration. Mayer Hoffman McCann, P.C. v. Barton, 614 F.3d 893, 904 (8th Cir. 2010). Rather,
the decision recognized the non-compete clause might have been enforced if the stock purchase
agreement had provided sufficient consideration, such as stating that the purpose of the non-compete
clause was to protect any special interest of the company. Id.
In examining the consideration supporting this non-compete clause, the Court is guided by
general principles of contract construction. The Court reads the Agreement as a whole, and construes
it from its four corners. See, Redwine v. Southwest Trust Co., N.A. , 2011 WL 4543958, at *10
(W.D. Mo. Sept. 30, 2011) (“Where parties to a contract have expressed their agreement in writing,
the intent of the parties is to be determined from within the four-corners of the document.”);
Medicine Shoppe Intern., Inc. v. Stopa, 2008 WL 3538980, at *2 (E.D.Mo. August 11, 2008) (“The
cardinal principle of contract interpretation is to ascertain the intention of the parties and to give
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effect to that intent. The terms of a contract are read as a whole to determine the intention of the
parties and are given their plain, ordinary, and usual meaning.”) (internal citations and quotations
omitted); Gustin v. F.D.I.C., 835 F.Supp. 503, 507 (W.D. Mo. 1993) (“Unless the agreement is
ambiguous, the intention of the parties and interpretation of the contract are for the court to
determine from the four corners of the document.”) (quoting Press Machinery Corp. v. Smith R.P.M.
Corp., 727 F.2d 781, 784 (8th Cir.1984).
When Defendant signed the Agreement, he expressly agreed and acknowledged that the grant
of stock options by Emerson was valid and “valuable consideration.” The Agreement does not
provide that the grant of stock options was the sole consideration. By signing the Agreement,
Defendant further acknowledged he was entering into the Agreement “in consideration of the
premises, and of the mutual agreements hereinafter set forth.” The Agreement recognizes Defendant
as a “key employee” of Emerson, and clearly contemplates that he would be privy to “confidential,
proprietary and/or trade secret information of or relating to Emerson.” Unlike in Sturgis, where the
agreement at issue was an agreement to repurchase stock, and nothing else, the Agreement here was
more involved, and clearly designed to protect confidential information that Defendant, as a key
employee, had access to. After considering the Agreement as a whole, the Court finds that the stock
options were granted to Defendant in consideration of his position with Emerson and in recognition
of his role as a key employee, and that this constitutes sufficient consideration to support the noncompete clause.
Finally, Defendant argues the forum selection clause is unenforceable. Section 15 of the
Stock Option Agreement provides that “any litigation arising out of, in connection with or
concerning any aspect of [the] Agreement shall be conducted exclusively in the State or Federal
courts in the State of Missouri,” and that Defendant expressly consents to “the exclusive jurisdiction
of said courts.” In the Eighth Circuit, a forum selection clause will be enforced unless the party
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seeking to avoid its application sustains a “heavy burden” to show the clause is unfair or
unreasonable. See Servewell Plumbing, LLC v. Federal Ins. Co., 439 F.3d 786, 789 (8th Cir. 2006).
Defendant focuses on his lack of minimum contacts with Missouri and the burdens he faces,
as a resident of the Phillippines, in defending Emerson’s suit in Missouri, including the travel costs,
time difference, and ability to enforce orders from this Court in various Asian countries. “[A] party
seeking to avoid his promise must demonstrate that proceeding in the contractual forum will be so
gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in
court.” Servewell, 439 F.3d at 790 (internal citations and quotations omitted). The Court finds no
basis for concluding that any expense and inconvenience to Defendant would deprive him of his day
in court. See, e.g., M.B. Restaurants, Inc. v. CKE Restaurants, Inc., 183 F.3d 750 (8th Cir. 1999)
(enforcing forum selection clause requiring litigation in Utah over plaintiff’s objection that he could
not afford to litigate there); Afram Carriers, Inc. v. Moeykens, 145 F.3d 298 (5th Cir. 1998)
(enforcing Peruvian forum selection clause against financially destitute family of deceased security
guard). Moreover, Defendant is an educated person and is presumed to have agreed to the forum
selection clause knowingly and intelligently. It is neither unfair, unjust nor unreasonable to hold
Defendant to his bargain and require him to defend this matter in this Court. Because the Court finds
the forum selection clause valid and enforceable, the Court need not proceed to due process
considerations. Whelan Security Company, Inc. v. Allen, 26 S.W.3d 592, 595 (Mo.Ct.App. 2000).
Conclusion
Based on the foregoing, the Court finds the Agreement, and the non-compete and forum
selection clauses therein, is valid and enforceable as between the parties.
Accordingly,
IT IS HEREBY ORDERED that Defendant’s Renewed Motion to Dismiss for Failure to
State a Claim and Lack of Personal Jurisdiction [37] is DENIED.
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IT IS FURTHER ORDERED that a telephone conference with the parties is set for
Thursday, January 3, 2013 at 11:00 a.m. to discuss Defendant’s Motion to Dissolve or Modify
The Temporary Restraining Order. [ECF No. 39] as well as a scheduling order. The parties shall
initiate the call with the Court at [phone].

Dated this 28th day of December, 2012.

JOHN A. ROSS
UNITED STATES DISTRICT JUDGE

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