Gilkerson v. Nebraska Colocation Centers, L.L.C.

Filing 65

MEMORANDUM AND ORDER that the defendant's motion for summary judgment 8 is granted. The plaintiff's complaint is dismissed. A separate judgment will be entered. Ordered by Judge John M. Gerrard. (JSF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
TIMOTHY A. GILKERSON,
Plaintiff,
vs.

8:15-CV-37
MEMORANDUM AND ORDER

NEBRASKA COLOCATION
CENTERS, L.L.C.,
Defendant.
The plaintiff, Timothy Gilkerson, is suing his former employer,
Nebraska Colocation Centers, L.L.C. (NCC), for allegedly breaching
Gilkerson's employment contract. NCC contends the contract was validly
rescinded by the parties, but Gilkerson claims the rescission is void due to
duress. This matter is before the Court on the defendant's motion for
summary judgment (filing 48). The defendant's motion will reluctantly be
granted.
BACKGROUND
Gilkerson was hired in 2011 to be NCC's Vice President and General
Manager. Filing 49 at 1.1 Gilkerson and NCC agreed to a 10-year
employment contract, paying Gilkerson an annual base salary of $84,000,
quarterly sales bonuses, and a retirement bonus upon the expiration of
Gilkerson’s employment period. Filing 51-2 at 1; filing 55 at 9. Gilkerson was
responsible for developing NCC's information technology infrastructure.
Filing 49 at 1-2. The parties disagree about the extent to which Gilkerson
was expected to help with NCC's sales, and his commissions under the
employment contract were based on the company's sales, not his. Filing 49 at
2; filing 55 at 2.
The employment contract provided that if NCC terminated Gilkerson's
employment without cause before the 10-year term expired, Gilkerson would
Pursuant to NECivR 56.1, a party moving for summary judgment must include in its brief
a statement of material facts about which the movant contends there is no dispute, and the
party opposing summary judgment must include in its brief a concise response to that
statement of facts, noting any disagreement. Properly referenced material facts in the
movant's statement are considered admitted unless controverted in the opposing party's
response. NECivR 56.1(b)(1).
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receive his remaining salary for the balance of the term in a lump sum,
another 5 years' bonuses, and his full retirement bonus. Filing 51-2 at 5-6.
But if Gilkerson were to be terminated with cause, he would receive only his
unpaid compensation for services already performed. Filing 51-2 at 6. As
relevant, "cause" for termination could include Gilkerson's "willful
misconduct" in carrying out his duties; or "persistent failure to perform the
duties and responsibilities of his employment hereunder; which failure is not
remedied by him within 30 days after [his] receipt of written notice from
[NCC] of such failure." Filing 51-2 at 4.
NCC was evidently unhappy about Gilkerson's performance helping
with sales, and NCC's president, Jerry Appel, talked with Gilkerson about
how he wanted Gilkerson to "[c]lose more deals." Filing 51-1 at 11.
Gilkerson's performance review was generally average to positive, except for
"[u]nsatisfactory" ratings in "[a]chieves sales goals" and "[f]ulfills the terms of
his contract." Filing 57-4 at 2. The review indicated that Gilkerson's "lack of
sales is irrefutable and of great concern[,]" and detailed Gilkerson's alleged
failings in sales. Filing 57-4 at 3. Gilkerson signed the review on February 5,
2013, acknowledging its receipt. Filing 57-4 at 4. Gilkerson's comments on
the review express his disagreement regarding sales goals, generally
explaining that his experience was not in sales and that "except in the
startup phase when everyone needed to pitch in and wear many hats[,]" he
had understood that sales would be the responsibility of a dedicated sales
team. Filing 57-4 at 4-5.
Appel announced the hiring of a new "Vice President – Sales and
Marketing" on July 8, 2013. Filing 57-5 at 1. On the same day, Appel told
Gilkerson that Gilkerson's office was to be given to the new hire, and that
Gilkerson's job title had been changed to "Director: Field Engineering and
Channel Services." Filing 57-5 at 3. Gilkerson was also informed that Appel
was "developing a new compensation program for [his] new position. It
[would] retain [his] salary at the current level, provide incentives for channel
and carrier sales, and bonuses for field engineering and product
development." Filing 57-5 at 3. Then, on July 15, 2013, Appel met with
Gilkerson and presented Gilkerson with a document captioned "Mutual
Rescission," which would rescind Gilkerson's employment contract. Filing 49
at 4; see filing 51-5. Gilkerson was also presented with a "term sheet" setting
forth proposed terms of Gilkerson's continued employment. See filing 51-6.
Although Gilkerson contends he was given different term sheets at
different times, it is clear that the term sheet he ultimately signed provided
Gilkerson with the same base salary as the employment contract, a higher
commission rate, and an additional bonus contingent upon certain goals.
Filing 51-6; filing 57-3 at 4; see filing 57-8. But it limited calculation of
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commission to Gilkerson's "customers" as defined by the term sheet, and did
not include the retirement bonus. Filing 51-6. And the term sheet did not
prohibit Gilkerson's termination. Filing 51-6.
Gilkerson did not immediately agree to the rescission and term sheet.
See filing 49 at 5. He met with Appel again on July 17, 2013. Filing 49 at 5.
Both meetings were recorded. See filing 57-6.2 During the meetings, Appel
was sharply critical of Gilkerson's performance. E.g. filing 57-6 at 3-6, 10, 23,
30. Appel clearly presented Gilkerson with a choice between agreeing to the
rescission and term sheet, or being fired for cause. E.g. filing 57-6 at 4. For
instance, when Gilkerson asked Appel whether his employment contract
"means nothing," Appel replied,
No. In their opinion you didn't live up to what your obligations
were in this contract, which is to be – make this thing successful,
make this thing work. . . . I'm going to tell you, you go ahead and
go – If you're going to go to your lawyer, go to your lawyer, but
you'll go to your lawyer without a job.
Filing 57-6 at 4. Appel warned Gilkerson that money was available for
litigation, and that NCC could "outlast" Gilkerson. Filing 57-6 at 26. But
Appel tried to persuade Gilkerson to accept the rescission and term sheet and
continue working for NCC, asserting that he still believed Gilkerson could be
successful and earn as much as he would have earned under the employment
contract. E.g. filing 57-6 at 12. Appel also pointed out that it "would be tough"
for Gilkerson to be unemployed, in part because Gilkerson had health
problems and couldn't afford to lose his insurance. Filing 57-6 at 43. Appel
told Gilkerson, "If I were in your shoes and if I'm thinking clearly, I'm saying,
Wait a second. What's my alternative? 30 days from now I'm without a job.
That's my alternative. Do I want that?" Filing 57-6 at 46-47. Appel agreed
that he was "basically saying" that if Gilkerson did not sign the rescission,
Gilkerson would be fired. Filing 57-6 at 29.
Gilkerson was able to briefly consult with counsel after the first
meeting with Appel. Filing 51-1 at 5; see filing 57-6 at 31. But Gilkerson
NCC objects to the proffered transcripts of those recordings, claiming they are
unauthenticated hearsay. Filing 62 at 17. That objection is without merit. Appel's
statements made during those meetings are clearly not hearsay. See Fed. R. Evid.
801(d)(2)(D). And the standard at the summary judgment stage is not whether the evidence
offered would be admissible at trial, "it is whether it could be presented at trial in an
admissible form." See, Fed. R. Civ. P. 56(c)(2); Gannon Int'l, Ltd. v. Blocker, 684 F.3d 785,
793 (8th Cir. 2012). There is no reason to believe that the recordings, or transcripts of the
recordings, could not be properly authenticated and admitted at trial.
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ultimately signed the rescission and term sheet on July 18, 2013. Filing 49 at
6. NCC fired Gilkerson on January 8, 2014. Filing 49 at 6. Gilkerson sued
NCC in state court, alleging breach of contract and violation of the Nebraska
Wage Payment and Collection Act, Neb. Rev. Stat. § 48-1228 et seq.3 Filing 11 at 26-30. After some procedural confusion that is no longer relevant, NCC
eventually removed the case to this Court. Filing 1. Now before the Court is
NCC's motion for summary judgment (filing 48).
STANDARD OF REVIEW
Summary judgment is proper if the movant shows that there is no
genuine dispute as to any material fact and that the movant is entitled to
judgment as a matter of law. See Fed. R. Civ. P. 56(a). The movant bears the
initial responsibility of informing the Court of the basis for the motion, and
must identify those portions of the record which the movant believes
demonstrate the absence of a genuine issue of material fact. Torgerson v. City
of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). If the movant
does so, the nonmovant must respond by submitting evidentiary materials
that set out specific facts showing that there is a genuine issue for trial. Id.
On a motion for summary judgment, facts must be viewed in the light
most favorable to the nonmoving party only if there is a genuine dispute as to
those facts.4 Id. Credibility determinations, the weighing of the evidence, and
the drawing of legitimate inferences from the evidence are jury functions, not
those of a judge. Id. But the nonmovant must do more than simply show that
there is some metaphysical doubt as to the material facts. Id. In order to
show that disputed facts are material, the party opposing summary judgment
must cite to the relevant substantive law in identifying facts that might
affect the outcome of the suit. Quinn v. St. Louis County, 653 F.3d 745, 751
(8th Cir. 2011). The mere existence of a scintilla of evidence in support of the
nonmovant's position will be insufficient; there must be evidence on which
the jury could conceivably find for the nonmovant. Barber v. C1 Truck Driver
Training, LLC, 656 F.3d 782, 791-92 (8th Cir. 2011). Where the record taken

Gilkerson's Wage Payment and Collection Act Claim is, so far as the Court can tell,
premised on NCC's alleged failure to pay Gilkerson compensation that would have been due
under the employment contract. See filing 1-1 at 4-5. In other words, both of Gilkerson's
claims rest on the validity of the employment contract and effect of the rescission, and need
not be addressed separately.
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Gilkerson argues that, generally, there is an issue of material fact in this case because the
deposition testimony of NCC's witnesses is not credible, and contradicts other evidence.
Filing 54 at 7-8. But the Court has given Gilkerson the benefit of any contradiction, and his
evidence is still insufficient to avoid summary judgment.
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as a whole could not lead a rational trier of fact to find for the nonmoving
party, there is no genuine issue for trial. Torgerson, 643 F.3d at 1042.
DISCUSSION
The primary issue presented in this case is whether the parties'
rescission of Gilkerson's employment agreement is voidable as the product of
duress. Duress is coercion that is wrongful as a matter of law. City of
Scottsbluff v. Waste Connections of Neb., 809 N.W.2d 725, 744 (Neb. 2011).
Lawful coercion becomes impermissible when employed to support a badfaith demand: one that the party asserting it knows (or should know) to be
unjustified. Id.
To constitute duress, there must be an application of such pressure or
constraint that compels a person to go against that person's will and takes
away that person's free agency, destroying the power of refusing to comply
with the unjust demands of another. Bock v. Bank of Bellevue, 434 N.W.2d
310, 315 (Neb. 1989); Haumont v. Sec. State Bank, 374 N.W.2d 2, 6 (Neb.
1985); accord Lincoln Benefit Life Co. v. Edwards, 45 F. Supp. 2d 722, 750 (D.
Neb. 1999). But, "[t]o be voidable because of duress, an agreement must not
only be obtained by means of pressure brought to bear, but the agreement
itself must be unjust, unconscionable, or illegal." Waste Connections, 809
N.W.2d at 745 (emphasis supplied); accord, Edwards, 45 F. Supp. 2d at 750;
Kosmicki v. State, 652 N.W.2d 883, 893 (Neb. 2002); Bock, 434 N.W.2d at 315;
Lustgarten v. Jones, 371 N.W.2d 668, 672 (Neb. 1985); Carpenter Paper Co. v.
Kearney Hub Publ'g Co., 78 N.W.2d 80, 84 (Neb. 1956); see First Data Res.,
Inc. v. Omaha Steaks Int'l, 307 N.W.2d 790, 793 (Neb. 1981); see also
Gonzalez v. Union Pac. R.R. Co., 803 N.W.2d 424, 439 (Neb. 2011).5 The
essence of duress is the surrender to unlawful or unconscionable demands; it
cannot be predicated upon demands which are lawful, or the threat to do that
which the demanding party has the right to do. Kosmicki, 652 N.W.2d at 898;
Bock, 434 N.W.2d at 315; Lustgarten, 371 N.W.2d at 672; Carpenter Paper, 78
N.W.2d at 84.
So, in Omaha Steaks, the Nebraska Supreme Court affirmed the
dismissal on demurrer of the defendant's counterclaim for duress, because
"the agreement, supposedly the result of pressure, must be either illegal,
The Court is aware that generally, at common law, those requirements may be
disjunctive: that is, duress might be found where either (1) a threat is so shocking that a
court will not inquire into the fairness of the resulting exchange, or (2) the impropriety
consists of the threat in combination with resulting unfairness. See Restatement (Second) of
Contracts § 176 (Am. Law Inst. 1981). But that does not reflect Nebraska law, as
promulgated by the Nebraska Supreme Court in Carpenter Paper and expressly reaffirmed
in Omaha Steaks, Lustgarten, Bock, Kosmicki, and Waste Connections.
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unjust, or unconscionable," and the defendant's answer had "in no way
allege[d] that the amended agreement produced a contract the terms of which
were either illegal, unjust, or unconscionable. Having failed to allege an
essential element of the defense of economic duress or business coercion, the
answer was subject to demurrer." 307 N.W.2d at 793. Similarly, in
Lustgarten, the Court affirmed the dismissal of the plaintiffs' duress claim,
finding both that the action characterized as duress was not coercive and that
"[a]dditionally, there is no evidence that the [allegedly-voidable] agreement is
unjust, unconscionable or illegal." 371 N.W.2d at 672. And in Bock, the Court
affirmed a judgment against plaintiffs who had claimed they were compelled
by duress to sign a guaranty and deeds of trust, because the "evidence is
insufficient to show pressure or constraint . . . . Nor is the evidence sufficient
to show that the guaranty and deeds of trust are unjust, unconscionable, or
illegal." 434 N.W.2d at 315.
By contrast, in McCubbin v. Buss, the Nebraska Supreme Court found
clear and convincing evidence of a voidable transaction where the plaintiff
was compelled to cancel a stock purchase contract under threat of losing his
job. 144 N.W.2d 175, 178 (Neb. 1966). The transaction was unjust because
"the consideration for the discharge of the stock-purchase contract was
inadequate." Id. at 179. In Edwards, this Court found that an agreement to
repay a debt was voidable where an employee had been threatened with
termination unless he signed it, because the agreement forced the employee
"to repay a debt he did not owe due to [the employer's] fraud[,]" "had no
relationship to his job performance," and was invalid due to fraudulent
concealment. 45 F. Supp. 2d at 750. And in Waste Connections, the Nebraska
Supreme Court affirmed the district court's finding that an agreement
increasing the price the defendant charged the plaintiff for services was
voidable because of duress, because the new rate was a 41 percent increase
from a rate set only a month earlier, the new rate was not charged to any
other customers, and there was no economic justification for charging the
plaintiff more. 809 N.W.2d at 745-46.
In short, under Nebraska law, whether a contract is voidable as the
product of duress depends not only on the coercion employed to produce the
agreement, but whether the agreement "is itself unjust, unconscionable, or
illegal." Kosmicki, 652 N.W.2d at 893. And there is nothing in this case to
suggest that the agreement reached here—the rescission, and the term sheet
that served as consideration for the rescission—was unjust, unconscionable,
or illegal. In essence, Gilkerson accepted a reassignment: his title and
employment responsibilities were changed, he received the same base salary
but a different bonus structure, and he became an employee at will. Had the
revised terms of his employment been given to a newly-hired employee, they
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would certainly be seen as fair, or even generous. While Gilkerson might
have seen it (reasonably) as a demotion, and the terms may have been less
advantageous to him than the terms of his previous employment contract,
they were not unjust, unconscionable, or illegal.
And Gilkerson really does not argue otherwise. The focus of his brief is
arguing that the pressure brought to bear upon him to sign the rescission and
term sheet was coercive. Filing 54 at 3-6. And with that, the Court does not
disagree—there is, at least, a genuine issue of material fact as to whether the
threat of termination would support a claim of duress. The parties have not
presented the Court with much from which it could evaluate Gilkerson's job
performance, which means that NCC, as the party moving for summary
judgment, has not demonstrated that the threat to terminate Gilkerson's
employment "for cause" under the employment contract was made in good
faith. A factfinder could conclude that NCC had no sound basis to make that
threat, and therefore that the threat was unlawfully coercive. But as
explained above, under Nebraska law, that is not enough to void the
subsequent rescission. NCC is entitled to summary judgment.
IT IS ORDERED:
1.

The defendant's motion for summary judgment (filing 48) is
granted.

2.

The plaintiff's complaint is dismissed.

3.

A separate judgment will be entered.

Dated this 31st day of May, 2016.
BY THE COURT:

John M. Gerrard
United States District Judge

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