Blanchette v. Kindred Healthcare Operating, Inc. et al
Filing
53
MEMORANDUM OPINION OF THE COURT. Signed by Chief Judge Waverly D. Crenshaw, Jr on 2/26/2018. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(am)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
CRISPIN S. BLANCHETTE,
Plaintiff,
v.
KINDRED HEALTHCARE
OPERATING, INC. and KINDRED
HEALTHCARE, INC.,
Defendants.
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NO. 3:16-cv-02496
CHIEF JUDGE CRENSHAW
MEMORANDUM OPINION
This is a breach of contract action that arises from the ending of Crispin Scott Blanchette’s
(“Blanchette”) employment with Kindred Healthcare Operating, Inc. and Kindred HealthCare,
Inc. 1 (“Kindred”). Kindred has filed a Motion for Summary Judgment (Doc. No. 44), Blanchette
has filed a Response (Doc. No. 47), and Kindred has filed a Reply (Doc. No. 49). The parties have
submitted numerous exhibits. (Doc. Nos. 44-2 to 44-16, 46-1 to 46-5, 49-1 to 49-3, 55-1 to 55-4.)
Finally, the parties have filed statements of facts, to which responses have been lodged. (Doc. Nos.
44-18, 47, 48, 50.) The motion is ready for decision. For the following reasons, Kindred’s motion
will be denied.
I.
Facts
Kindred’s corporate headquarters offices are in Louisville, Kentucky. Effective February
17, 2014, Kindred hired Blanchette as its Chief Information Officer (“CIO”), reporting to President
and Chief Executive Officer (“CEO”) Benjamin Breier (“Breier”). (Doc. No. 44-2.) Blanchette
1
Kindred Healthcare, Inc. is the parent company of Kindred Healthcare Operating, Inc.
was to receive a salary of $385,000 per year and to receive a number of other valuable corporate
benefits, including stock. (Id.) Kindred’s Board of Directors was not involved in the decision to
hire Blanchette. (Doc. No. 44-3.)
A.
The Employment Agreement
Kindred and Blanchette executed an Employment Agreement (“Agreement”). (Doc. No.
44-4.) The term of the Agreement was for a one-year period commencing on the Effective Date,
February 17, 2014, that was “automatically extended by one additional day for each day beyond
the Effective Date that the Executive remains employed by the Company until such time as the
Company elects to cease such extension by giving written notice of such election to the Executive.”
(Id. at 2.) In such event, the Agreement would “terminate upon the first anniversary of the effective
date of such election notice.” (Id.) The Agreement provides that it “shall be construed in
accordance with and governed by the laws of the State of Delaware.” (Id. at 11.)
The Agreement provides that Kindred may terminate Blanchette during its term for
“Cause.” 2 (Id. at 3.) If Kindred terminates the Agreement for Cause, then Kindred owes no
obligations to Blanchette. (Id. at 6-8.) However, if Kindred terminates the Agreement for other
than Cause, Kindred would owe Blanchette significant salary and benefits. (Id.)
On the other hand, the Agreement provides that Blanchette may resign for “Good
Reason.” 3 If that occurs, there is a “cure period” before the resignation becomes effective. (Id. at
2
The Agreement defines “Cause” as: (a) conviction or plea to a crime of moral turpitude; or (b)
willful and material breach of duties or responsibilities, committed in bad faith or without
reasonable belief that such breaching conduct is in the best interests of the Company or affiliates,
but only if the Board adopts a resolution of at least seventy-five percent of its members finding
the breaching conduct and Blanchette is given a reasonable opportunity to be heard by the Board
and at least thirty days to remedy or correct the purported breach. (Id. at 3-4.)
3
The Agreement defines “Good Reason” as: (a) a material adverse change in Blanchette’s
authority, duties, or responsibilities; (b) materially reducing the Base Salary or annual bonus
opportunity; (c) requiring Blanchette to relocate his principal business office more than thirty
2
5.) If Blanchette resigns without Good Reason, the effective date of the termination of the
Agreement is the date on which Blanchette notified Kindred of the termination of the Agreement
and then Kindred owes no further obligations to Blanchette. (Id. at 5 and 8.) However, if Blanchette
resigns with Good Reason, Kindred would owe Blanchette significant salary and benefits. (Id. at
6-8.)
The Agreement specifies that “[a]ny termination by the Company for Cause, or by
[Blanchette] for Good Reason, shall be communicated by [a] Notice of Termination given in
accordance with this Agreement. For purposes of this Agreement, a “Notice of Termination”
means a written notice that (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated and (iii) specifies the
intended termination date (which date, in the case of a termination for Good Reason, shall be not
more than thirty days after the giving of such notice). (Id. at 5.) The Agreement does not specify
any procedural or substantive requirements for a notice of termination by the Company for other
than Cause or by Blanchette without Good Reason. (Id. at 6-8.)
Finally, the Agreement states that “[a]ny dispute or controversy arising under, out of, or in
connection with this Agreement shall, at the election and upon written demand of either party, be
finally determined and settled by binding arbitration in the City of Louisville, Kentucky” using the
Labor Arbitration rules of the American Arbitration Association (“AAA”). (Id. at 9.) Moreover,
the Agreement provides that Kindred shall be responsible for all costs of the arbitration and all
reasonable fees incurred therein by Blanchette. (Id.).
miles from the initial location; or (d) a material breach by Kindred of payment of fringe or
pension benefits to Blanchette or Kindred’s failure to insist that a successor company assume the
employment agreement. (Id. at 4.)
3
B.
Blanchette’s May 2015 Resignation and Subsequent Events
On May 3, 2015, Blanchette sent an email to Breier entitled “Resignation Notice.” (Doc.
No. 44-6.) In the email, Blanchette stated:
“It is with a heavy heart that I send my resignation notice. . . . This is most
fundamentally a recognition that time spent with family, and one’s physical, social,
and emotional health is paramount. Often times the organizational communication
around someone’s departure equivocates something hollow like ‘he has a strong
desire to spend more time with family’ as code for something else. In this case, the
words and the intent are exactly the same. . . . I want to find a way to make this as
least impactful on Kindred as possible and give the organization the longest
possible runway. At the same time, I would like to not make this an endless
transition as both parties will benefit from an efficient timeline. . . . This is all the
more difficult acknowledging the profound respect I have for you and the
leadership that you bring to such a wonderful organization. That element of the
future is what I will miss most following my departure.”
(Id. at 1-2.) Blanchette testified in his deposition that, at this point, it was his intention to end his
employment with Kindred:
Q:
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Q:
A:
In this e-mail on May 3rd, 2015, it was your intent to end your
employment with Kindred Health Care, is that correct?
Correct.
And following this e-mail on May 3rd, 2015, did you at any time
specifically revoke or rescind this resignation?
No.
(Doc. No. (44-5 at 13.) Further, Blanchette testified that he had “no expectation of continued
payment under any agreement for any period after the transition period that [he] would complete
as part of [his] resignation” and “no expectation of continued benefits or stock.” (Id. at 145-46.)
Finally, Blanchette testified that, at that time, he did not identify any material breaches of the
Agreement by Kindred, or any Cause under the Agreement. (Id. at 146.) Blanchette and Breier’s
testimony agrees that Blanchette would no longer be serving as Kindred’s CIO from that point and
would assist with the transition of a new person into the CIO position. (Doc. Nos. 44-7 at 10-11;
52-1 at 9-10.)
4
However, beyond that, the parties disagree on what happened. Blanchette maintains that
Breier “explicitly stated that he was not willing to accept my resignation, and there were going to
be other ways to keep me around.” (Id. at 140.) Blanchette testified that Breier told him he “was
committed to doing whatever he needed to do to keep me there.” (Id. at 108.) Breier, on the other
hand, testified that he accepted Blanchette’s resignation and had no recollection of saying that he
would not accept it. (Doc. No. 52-2 at 10-11.) Breier further testified in his deposition as follows:
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I recall sort of saying, “Okay,” you know, “so you’re – you’re leaving, and
I now have to get on with thinking very quickly about what am I going to
do to replace the chief information officer of this company. And that is sort
of what I remember us talking about.
Okay. Mr. Blanchette testified that when he had this meeting with you after
he submitted his resignation that you told him that you considered it a
personal failure of yours that he was resigning, that you wouldn’t accept his
resignation, and that you would find a position for him at Kindred. Did you
say words to that effect?
I have no recollection of saying that.
Okay. Is it possible you did?
No. I don't believe so.
It not possible?
That I said a “personal failure on my part”?
Correct.
No, not possible.
Okay. Is it possible that you said, “I will not accept your resignation, and
we will find you a position at Kindred”?
No. That is not possible. In fact, I recall getting on with the work of figuring
out who Scott’s replacement was going to be.
Okay. Is it possible that you said that, “We will find you a position at
Kindred”?
We have had some discussions around performance improvement
opportunities for the enterprise in total. . . . And Scott had, as I recall, profit
[sic] up the idea that there were efficiencies that could be had, that there
were, you know, lien management techniques, that there were various
things that could be done organizationally to potentially run our operation
more efficiently, not as the chief information officer, but more broadly as a
– as someone who would help us think about being more efficient, which,
you know, we are always in need of doing. And it is – it is possible that that
conversation at that conversation, that we had a conversation around saying,
“Yeah. That’s kind of interesting. You should have a conversation with
Kent Wallace, who’s our chief operating officer. I’ll have a conversation, I
guess, potentially with Kent to say you’re going to go have a conversation
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with him. And why don’t the two of you see if there’s something here that
might be feasible for you to – to do along – you know along that path?”
Okay. I appreciate all that. Is it possible, though, that you said to him, “We
will find you a position at Kindred.”
I don’t believe I said that.
Okay.
No.
Is it possible?
Doesn’t sound like my words, no. I don’t believe so.
Okay. So it would not be possible that you said that?
You know, anything is possible in the world. I don’t believe I said that.
Okay. But it’s possible you did?
[Objection]
Is it possible that you said to Scott Blanchette, “We will find you a position
at Kindred”; yes or no?
I don’t believe I said that.
Yes or no, is it possible that you said it?
I suppose it is possible that I said it. Yes.
(Id. at 11-13.)
In conjunction with Blanchette’s resignation, there had at least been some discussion of a
“process and performance improvement office” in which Blanchette might have a future role. (Id.
at 11-14; Doc. No. 52-1 at 108.) But, as of early May 2015, there was “no job description for that
position . . . no budget, no staff . . . [Blanchette] was supposed to create all that.” (Id. at 109.)
Blanchette was supposed to discuss the matter with Kent Wallace, Kindred’s Chief Operating
Officer (who would be the supervisor of such an office) to “work something out.” (Id. at 15.) Breier
also suggested that Blanchette meet with Steve Cunanan, Kindred’s Chief People Officer (“CPO”)
as well: “And you know, Steve, as the chief people and administrative officer would handle, you
know, all kinds of those discussions around contractual relationships and just sort of what would
happen in, you know, in some sort of a future offer, and what compensation would look like for
[Blanchette].” (Doc. No. 55-2 at 15.)
Kindred never notified Blanchette that the Agreement was terminated, and he continued to
be paid under its terms after the meeting with Breier. (Doc. No. 52-4 at 52.) According to CPO
6
Cunanen, from the viewpoint of Kindred’s human resources department, Blanchette went from
“CIO” to “outgoing CIO” upon his May resignation. (Doc. No. 52-5 at 33.) This change was from
a “practical perspective only” because Blanchette was transitioning out and the new CIO was
transitioning in. (Id.)
C.
Events of June and July 2015
Kindred worked to identify a successor CIO and, over the next month, outlined plans for
transitioning Blanchette’s successor and for ending Blanchette’s CIO work. (Doc. Nos. 55-2 at 1213; 55-3 at 18-19.) In parallel, Wallace and Blanchette met and explored the possibility of
Blanchette’s new role in the process and performance improvement office. (Id.) Once again,
however, the parties’ versions of the facts diverge. According to Kindred, Blanchette and Kindred
never reached a final agreement, solidified any of the essential terms of such a position for
Blanchette, or offered Blanchette an actual new position. After speaking with Wallace, Breier
concluded that “it became pretty clear that we weren't going to – they weren’t going to come to
terms.” (Doc. No. 55-2 at 23.) Furthermore, Breier believed that all the parties knew that “if they
were not going to come to terms . . . then there was no position at Kindred for Blanchette” and his
resignation would actually result in him eventually exiting the organization. (Id. at 23-25.)
Blanchette, on the other hand, testified that he and Kindred had absolutely reached an agreement
and that Blanchette had accepted the position of head of the process and performance improvement
office. (Doc. No. 55-1 at 140-143.)
Moreover, Blanchette testified that he and Kindred had agreed – at Cunanan’s request –
that his existing CIO Agreement would remain in effect through January 1, 2016 until a new one
could be substituted with Board approval. (Id.) Cunanen flat out denies he said this, claiming he
could not because “that is under the purview of the Board of Directors.” (Doc. No. 52-4 at 53.)
7
This was in part because, as mentioned, the CIO employment agreement is attached to the position,
not the individual, so Cunanen testified that he could never have made a representation to
Blanchette that the Agreement would continue in Blanchette’s favor out of the Agreement’s
express bounds (e.g., while Blanchette was performing a new job). (Id. at 51-53.) Breier has
testified that “having continued to pay [Blanchette] at his probably current CIO rate and try to help
him with the transition, you know, it’s – it’s in the, you know, no good deed goes undone category,
as we sit here today, having really tried to do the right thing for Mr. Blanchette. You know, it’s a
– we were really trying to be, I think, good stewards and good people to help him in this transition
for wherever it was going to go, by keeping his salary in place, et cetera. But he really didn’t have
a role, honestly.” (Doc. No. 52-2 at 17-18.) Accordingly, Cunanen testified that the Agreement
remained in place, only “from a pay and benefits perspective,” through Blanchette’s last day of
employment. (Doc. No. 52-4 at 51-52.)
On June 10, 2015, Blanchette sent an e-mail to Cunanen with the subject line “Notice of
Resignation.” (Doc. No. 44-10.) The e-mail stated only: “With an effective date of August 3, 2015,
I resign my position as Chief Information Officer at Kindred Healthcare.” (Id.) Cunanen testified
that, as CPO, he asked Blanchette to send him this email because he wanted a “succinct”
resignation email for Blanchette’s employment file that was not the long resignation email
containing musings “about his own personal situation” that Blanchette has sent Breier in May.
(Doc. No. 52-4 at 35-37.) Cunanen stated that he was “sure” he told Blanchette when to make the
resignation effective, although he did not recall when or even any specific direction. (Id. at 34, 38.)
Blanchette, however, testified that he sent this email in response to a request from Cunanen and
General Counsel Joe Landenwich and that it was for Securities & Exchange Commission purposes.
(Doc. No. 55-1 at 153.)
8
June 16, 2015 is a pivotal date in this dispute. Breier sent an e-mail to hundreds of Kindred
employees and affiliates with the subject line “Creation of Process and Performance Improvement
Office & Leadership Changes.” (Doc. No. 44-11.) After an introduction is a prominent picture of
Blanchette, followed by:
[W]e are creating a permanent Process and Performance Improvement Office in
order to continually identify and drive organization process and efficiency
throughout the entire Kindred Enterprise. I have asked Scott Blanchette, Kindred’s
current Chief Information Officer, to lead this initiative. In this new role, Scott’s
priorities will be to focus on process improvement, quality assurance, compliance
and enhanced efficiencies at the enterprise, division, and local levels. As Kindred
grows and becomes more complex, it is critical that we ensure all our processes and
systems are simple, easy to use, effective and scalable. This new function will
enhance our ability to provide quality care. Scott will report to Kent Wallace, Chief
Operating Officer.
(Id. at 2.) Below the introduction of Blanchette is the announcement of the promotion of the new
CIO, Charlie Waldrip, with the statement that “[w]e know this will be a seamless transition with
[Blanchette] acting as Charlie’s mentor over the course of the next three months.” (Id.) The e-mail
concludes by asking the recipients to “[p]lease join me in congratulating Scott and Charlie on their
new positions.” (Id.) When questioned about this e-mail announcement, Cunanen stated:
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Now, how is -- how is it that Mr. Breier can send out an announcement like
that, but you're telling me Kindred really didn’t have a process improvement
office until the last six months?
When [Blanchette] submitted his resignation, we were under pressure
because he was going to be leaving to go on vacation. And we had a desire
to retain [Blanchette] in the organization. And what we said was, we haven’t
worked out any of the details on this. We haven’t reached an agreement with
[Blanchette] on what salary or duties would be. We haven’t reached an
agreement on what budget would be. But in order to ease the transition,
from a public perspective, we would go ahead and we would announce this
now and we’d work out the details later.
Okay. So are you saying you announced it publicly even though you weren’t
sure you were going to go through with this process improvement
department?
It was not finalized.
When that announcement was made, was there a chance that the process
improvement office would not exist?
9
A:
Yes, there was.
(Doc. No. 55-4 at 27-29.) In his deposition, Breier testified:
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Was it true that [Blanchette] had a new position when you sent this e-mail
out?
No.
Why did you say that he did?
You know, in reflection, I wish I wouldn’t have sent this note out, but
here’s what I recall . . . [Blanchette] had resigned his position as the CIO. It
was very important to me that we make an announcement regarding the new
CIO, Charlie Wardrip. Charlie and I had come to terms. We had agreed that
he would transition with the role. [Blanchette] had agreed to transition out
of the role. It was important to me that we, A, get that announcement made.
The company and the enterprise needed to know who the new chief
information officer of our company was going to be. So number one, I
wanted to get that out. Number two, I recall that [Blanchette] was concerned
about the timing of allowing this to be communicated. He was pushing, as
I recall, very hard to be able to want to say something with some form of
clarity to the folks that you see on the list, so that, you know, everybody had
a sense of the path of where the enterprise was sort of going down.
And as I recall, I remember thinking a lot about this thinking, you know, we
haven’t come to terms yet with [Blanchette]. I don't know if Kent’s going
to come to terms with Scott, but I need to announce that Charlie’s going to
be the new chief information officer of the company. It seemed to me that
it was a reasonable risk to take to make this announcement, to try and have
this transition be as smooth from a public consumption perspective as
possible. I was worried about how people would view [Blanchette] for
deciding that he wanted to leave. I was worried about the enterprise making
sure that it was on stable footing and making sure that they knew we had
plan. And so all of this was done sort of in an effort to make sure that the
underlings below, you know, the executive committee and Scott and the role
there, knew that we had or were working on a plan. Most importantly that
Charlie Wardrip was going to transition into and become the new chief
information officer. It had always been my view when I sent this out that
[Blanchette] and Kent had not yet come to terms on what the role would
look like and what would happen. I wasn’t sure if they would or wouldn’t.
I think obviously I sent this hoping that it would work out. Ultimately it
didn’t and I think in retrospect I regret clearly having sent this
announcement out without having had all our ducks in a row.
(Doc. No. 52-2 at 41-42.)
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Blanchette spent the last week of June 2015 “off the grid” on a vacation in Africa. (Doc.
No. 55-1 at 80-88.) He then spent a week back at Kindred, during which he continued to work on
the transition of the new CIO and the creation of the process and performance office. (Id.)
Blanchette then took a two-week Caribbean vacation, during which he testified that he performed
some similar work remotely. 4 (Id.) Blanchette returned from his travels on July 27, 2015. (Doc.
No. 52-4 at 83.)
D.
The End of Blanchette’s Employment at Kindred
On August 3, 2015, Wallace sent an e-mail to Cunanen stating: “Hey I am meeting with
Scott Blanchette Wednesday in Nashville. I am in Louisville today and tomorrow but felt it was
best to try to meet with him outside of Louisville. I am speaking to Ben [Breier] this afternoon to
make sure we are on the same page. Will keep you posted.” (Doc. No. 46-5 at 12.) Cunanen
responded: “Thanks, let me know how I can help.” (Id.)
On August, 5, 2015, Blanchette met with Wallace in Kindred’s Nashville office. (Doc. No.
55-1 at 157.) According to Blanchette, Wallace “advised [him] that [he] was being let go” because
“the company was not serious about changing and was no longer interested in standing up a process
and performance improvement office.” (Id. at 157-158.) In response, Blanchette admittedly did
not raise any questions with Wallace regarding the Agreement. (Id. at 158.)
According to Wallace, the purpose of the August 5 meeting was to tell Blanchette that he
“didn’t think this was a good idea. That we weren’t at terms as far as the job responsibilities. We’d
not come to any agreement on salary discussions, the organization, the resources. It just did not
feel, like, that it was the right time for the company to do any of this.” (Doc. No. 55-3 at 17.)
4
Kindred disputes this, citing to a deposition that they have not introduced into the record. (See
Doc. No. 47 at ¶ 51.) This is, obviously, insufficient to create a dispute of material fact on this
point. Fed. R. Civ. P. 56.
11
Wallace testified that he “felt it wasn’t right for the organization, [and] it was – it was my
responsibility to tell [Blanchette] that.” (Id. at 18.) Wallace believed that it was not his “job” to
tell Blanchette that his employment at Kindred was over – he “didn’t see that as [his]
responsibility.” (Id.) Wallace further testified that it was fair to say that he assumed that, after this
conversation, Blanchette “wasn’t going to show up and do any more work for Kindred and wasn’t
going to take a paycheck.” (Id. at 20-21.) In his deposition, Wallace was asked: “Mr. Blanchette
says you told him that his position was eliminated and Kindred no longer had a job for him; do
you deny that?” (Id. at 21.) Wallace responded: “I do deny that. Yes, sir.” (Id.)
Cunanen’s understanding of this meeting is that it was based on the fact that “we were not
able to reach an agreement – a mutual agreement on what that business transformation role would
be.” (Doc. No. 52-4 at 45.) Accordingly, Cunanen understood that Blanchette was informed that
“Kindred was not going to devote the monetary resources and the personnel as [Blanchette] had
designed and envisioned. And we were going to go ahead and his resignation was just going to be
effective, and that date was going to come.” (Id. at 46.) Cunanen understood this “resignation” to
be the one originally accepted in May by Breier. (Id. at 46-49.) This resignation had not had an
effective date, but an August resignation date had been supplied by Blanchette in the June 10 email for the personnel file requested by Cunanen. (Id. at 54-55.)
Breier described this development as follows:
Well, there was no termination of employment. We’ll start with that. There was a
resignation of employment. . . . In an effort, I think, to try and be good corporate
citizens, and in an effort to be a good friend, and in an effort to, you know, try and
do – you know, to try and see if there was something that could be worked out, we
sort of let [Blanchette] hang in to try and work out a new position. And when that
couldn’t be worked out, I suppose there was a, you know, a second resignation. But
it was really – in my view, it was less a – less a resignation of his CIO role, which
he had already resigned from, and more a, “This isn’t going to work out. You know,
now I’ve got to really exit the organization.”
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(Doc. No. 52-2 at 24-25.) According to Breier, the main reason behind Blanchette’s ultimate
departure in August was:
Well, I think it was mostly not being able to work out Mr. Blanchette’s employment
terms. You know, when – when [Blanchette] resigned as CIO, that led to a
resignation under his employment agreement, you know, which had made him a
member of our executive committee, which had him reporting directly to me, which
had certain levels of compensation, you know, et cetera. When that ended upon his
resignation, there had to be a job created and worked out, and compensation agreed
to in an entirely new role. And that never could, seems to me, be worked out. I think
there was a secondary component to the resources and the other things that would
be needed to run that department. But it seems to me, [the] most salient point of all
of that was that, you know, that is – that the terms of his ongoing or future
employment couldn’t be worked out.
(Id. at 26.)
At 10:49 a.m. on August 5, 2015, Blanchette sent an e-mail to twenty Kindred employees,
including the new CIO, with the subject line “Fair Winds and Following Seas.” (Doc. No. 44-12.)
The first paragraph of the e-mail states: It is with a good deal of disappointment that I inform you
that we were unable to reach terms on how best to formalize and advance a permanent Performance
and Process Improvement Office. Hence, after tying up some loose ends, I will be leaving Kindred
shortly.” (Id.) Wallace testified that this was a “very accurate” representation of the meeting he
had just had with Blanchette. (Doc. No. 52-3 at 52.)
At 8:33 p.m. on August 5, 2015, after receiving a forward of Blanchette’s farewell e-mail,
Breier sent an e-mail to Wallace and Cunanen that stated: “Good ending. Well done Kent. Can we
now please get Charlie to cut off his email access? And let’s get his shit out of the office so Joel
can move in. Thanks.” (Doc. No. 46-4 at 8.)
On August 18, 2015, Kindred completed a template form in their human resources system
entitled a “Personnel Action Request” denoting Blanchette’s “resignation with notice” with an
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effective date of August 7, 2015. (Doc. No. 44-13.) The delay of entry of this form into Kindred’s
system is due to internal filing issues unrelated to this case. (Doc. No. 44-14 at 34-35.)
On October 15, 2015, Cunanen sent Blanchette a letter discussing Blanchette’s demand for
payment under the Agreement. (Doc. No. 46-3 at 21.) The letter suggested that Kindred did not
accept Blanchette’s resignation in May, but rather did so in August:
“We agree that on May 3, 2015, you informed us of your intent to resign your
employment for personal reasons. We began immediately discussing with you a
transition from your role as CIO, but shortly thereafter, you proposed a new role
for yourself, working as the leader of a yet-to-be formed performance and process
improvement group. You provided a timeless that indicated you would lead a
“hands on” transition for Charlie Wardrip as successor to your role as CIO through
June; that July would be an observation and mentorship period in Charlie’s
transition, and that July and August would be a ramp up time period for the new
performance and process improvement office. On June 10, 2015, you sent an email
to me, stating that you were resigning your position as CIO effective August 3,
2015. After discussing the new role with you, we agreed to announce that you
would be moving into that new role. However, we had not finalized an offer; salary
had not been finalized, staffing of the new office had not been finalized and your
role had not been completely defined. In short, we had not prepared an offer letter,
nor had we gotten to the stage where we had agreed on the terms that would have
enabled us to make the offer.
. . . During the six-week period that you were out, we reviewed your proposal and
determined that our resources and expectations were far different than your
expectations and it became clear that we could not go forward. When you returned,
we accepted your resignation.
(Id. (emphasis added).) In his deposition over a year later, however, Cunanen testified that this
letter was “not correct” and that Kindred had in fact “already accepted the resignation” in May
2015 and before the August 5 meeting. (Doc. No. 52-4 at 62-64.)
E.
Demand for Arbitration
On June 15, 2016, Blanchette submitted to Kindred a written demand for arbitration. (Doc.
No. 1 at ¶¶ 24-25.) Blanchette asserted that this dispute related to his separation, which he claimed
concerned the Agreement. (Id.) Blanchette further asserted that, under the Agreement, Kindred
14
had an obligation to arbitrate and pay all costs of arbitration and unrelated fees. (Id.) On June 17,
2016, the AAA assessed Kindred the opening costs of the arbitration. (Doc. No. 1-3.) On July 11,
2016, counsel for Kindred wrote to counsel for Blanchette and stated the following:
Kindred is not required, and is not willing, to arbitrate any disputes related to the
termination of Mr. Blanchette’s employment. Both Mr. Blanchette and Kindred
agree that he tendered his resignation on May 3, 2015. As a result, after May 3,
2015, Mr. Blanchette continued his employment at Kindred on an at-will basis for
no specific duration. His employment was not government by the terms of his prior
Employment Agreement, including the arbitration provision, following his
tendered resignation. As such, Kindred is not bound by the arbitration provision of
Mr. Blanchette’s initial Employment Agreement and has no obligation to arbitrate
any disputes related to his separation from Kindred.
(Doc. No. 1-5.) Kindred paid nothing to the AAA, and the AAA administratively closed the
nascent arbitration proceeding. (Doc. No. 1-4.)
F.
Blanchette’s Complaint and Procedural History
On September 19, 2016, Blanchette filed this action. (Doc. No. 1.) In the Complaint,
Blanchette claims that (1) he submitted his notice of resignation to Kindred on May 3, 2015, but
it was not accepted and Blanchette continued to work at Kindred – at Kindred’s initiative – on
developing a new position as head of a performance and process improvement office; (2)
Blanchette accepted Kindred’s offer to head the new office and agreed with Kindred that, through
2015, the terms of the Agreement would remain in effect; (3) Kindred, through the date it
terminated Blanchette, continued to provide him the pay and benefits in the Agreement; (4)
Kindred involuntarily terminated Blanchette’s employment other than for cause on August 5, 2015
and took the position that it had not terminated Blanchette, but had accepted the resignation
tendered months earlier; (5) following the termination of Blanchette’s employment with Kindred,
Blanchette requested that Kindred pay him and provide him the benefits, including stock, due to
15
him pursuant to the Agreement, but Kindred refused; and (6) Blanchette demanded arbitration of
this dispute because it concerned the Agreement, but Kindred refused. (Id. at ¶¶ 10-30.)
In one cause of action, Blanchette asserts that Kindred breached the Agreement by (1)
“refusing to pay the amounts and benefits due to [Blanchette] for Kindred’s other than ‘for cause’
termination of Plaintiff,” and (2) “refusing to arbitrate with [Blanchette] whereby it would have
been required to pay [Blanchette] for all reasonable attorneys’ fees and accountants’ fees he
incurred in resolving the dispute between the parties.” (Id.)
II.
Legal Standard
In reviewing a motion for summary judgment, this Court will only consider the narrow
question of whether there are “genuine issues as to any material fact and [whether] the moving
party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). A motion for summary
judgment requires that the Court view the “inferences to be drawn from the underlying facts . . . in
the light most favorable to the party opposing the motion.” Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655
(1962)). “The party bringing the summary judgment motion has the initial burden of informing the
Court of the basis for its motion and identifying portions of the record that demonstrate the absence
of a genuine dispute over material facts.” Rodgers v. Banks, 344 F.3d 587, 595 (6th Cir. 2003).
After the movant has satisfied this initial burden, the nonmoving party has the burden of showing
that a “rational trier of fact [could] find for the non-moving party [or] that there is a ‘genuine issue
for trial.’” Matsushita, 475 U.S. at 587. If the evidence offered by the nonmoving party is “merely
colorable,” or “not significantly probative,” or not enough to lead a fair-minded jury to find for the
nonmoving party, the motion for summary judgment should be granted. Anderson, 477 U.S. at
479-52. “A genuine dispute between the parties on an issue of material fact must exist to render
16
summary judgment inappropriate.” Hill v. White, 190 F.3d 427, 430 (6th Cir. 1999) (citing
Anderson, 477 U.S. at 247-49).
III.
Analysis
A.
Choice of Law
Kindred asserts that, even though the Agreement specifies that it is governed by Delaware
law, the Court should apply Kentucky law to Blanchette’s breach of contract claim because
Delaware has no material connection to the Agreement and the parties entered into the Agreement
in Kentucky. 5 (Doc. No. 441- at 15 n.3) Blanchette “disputes that Kentucky law governs this
action.” (Doc. No. 46 at 10.) But Blanchette concedes that “which state’s law governs makes no
difference for this motion.” (Id.) As illustrated by the discussion focused on the factual disputes
below, the Court agrees with Blanchette’s latter observation. Regardless, given that Blanchette
5
It is well-established that federal courts sitting in diversity must apply the choice-of-law rules of
the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); Charash v.
Oberlin Coll., 14 F.3d 291, 296 (6th Cir. 1994). Tennessee follows the rule of lex loci contractus,
which provides that a contract is presumed to be governed by the law of the jurisdiction in which
it was executed absent a contrary intent. Ohio Cas. Ins. Co. v. Travelers Indem. Co., 493 S.W.2d
465, 467 (Tenn. 1973). If the parties manifest an intent to instead apply the laws of another
jurisdiction, then that intent will be honored provided certain requirements are met. Vantage
Technology, LLC v. Cross, 17 S.W.3d 637, 650 (Tenn. Ct. App. 1999). First, the choice of law
provision must be executed in good faith. Goodwin Bros. Leasing, Inc. v. H & B Inc., 597
S.W.2d 303, 306 (Tenn. 1980). Second, the jurisdiction whose law is chosen must bear a
material connection to the transaction. Id. Third, the basis for the choice of another jurisdiction’s
law must be reasonable and not merely a sham or subterfuge. Id. Finally, the parties’ choice of
another jurisdiction’s law must not be “contrary to ‘a fundamental policy’ of a state having [a]
‘materially greater interest’ and whose law would otherwise govern.” Id. at n.2 (citing
RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 187(2) (1971)). If a contractual choice of law
provision is missing or invalid under the above analytical rubric, “the substantive law of the state
in which the contract was executed governs disputes arising from the contract.” In re Estate of
Davis, 184 S.W.3d 231, 234 (Tenn. Ct. App. 2004).
17
apparently does not object to the application of Kentucky law for purposes of this motion, the
Court will consider it here to any minimal extent it may be necessary. 6
B.
Kindred’s Substantive Arguments for Summary Judgment
Kindred makes three substantive arguments for summary judgment. The Court will address
each in turn.
First, Kindred argues that there is no evidence that it had any contractual obligations to
Blanchette on August 5, 2015 and so his claim fails as a matter of law. The underpinning for this
argument is the assertions that (1) the Agreement ended on May 3, 2015 when Blanchette resigned
without Good Reason and Kindred had no further obligations to him whatsoever, (2) Blanchette
became an at-will employee on that date, and (3) that at-will employment ended when Blanchette
resigned (again) on August 5, 2015. (See Doc. No. 44-1 at 15-17 (citing Stringer v. Wal-Mart
Stores, Inc., 151 S.W.3d 781, 792 (Ky. 2004) (noting that either party may end an at-will
employment relationship at any time “for good cause, for no cause, or for a cause some might view
as morally indefensible”).) In addition, inherent in this argument is Kindred’s contention that “[t]he
fact that Kindred continued to pay Blanchette the same salary and benefits to which he would have
been entitled under the Agreement [from May 3, 2015] until August 3, 2015 is irrelevant.” (Id. at
16.) In short, Kindred essentially contends that Blanchette resigned on May 3, 2015 and nothing
that followed legally matters.
This is a somewhat heroic argument based on the record before the Court. To the contrary,
the Court finds that, as demonstrated above, there are crystal clear disputes of material fact relevant
to this argument. Just a few of the more obvious disputes in the light most favorable to Blanchette,
6
The parties have not provided the Court with enough information to make any further
determination regarding choice of law.
18
include (1) whether Blanchette’s “resignation” was accepted or rejected by Kindred in May 2015,
(2) whether Kindred continued to perform under the Agreement after May 2015 and the parties’
understandings of that performance, (3) whether Blanchette was ever offered and accepted the
position as head of the process and performance improvement office, 7 (4) whether an agreement
was reached between Kindred and Blanchette to keep the Agreement in place through the end of
2015, and (5) depending on whether Blanchette’s “resignation” was accepted or rejected in May
2015, whether Blanchette resigned (for either a first or second time) or was terminated by Kindred
in August 2015. 8 These existing questions of material fact preclude summary judgment.
These factual disputes are sufficiently established by Blanchette’s deposition testimony,
Declaration, and documentary evidence. In its Reply brief, Kindred argues vociferously that
Blanchette’s evidence is “self-serving” and “without factual support” and is thus insufficient to
defeat the motion for summary judgment. Kindred relies upon Hadley v. Inmon, No. 3:04-CV121, 2006 WL 141750, at *8 (E.D. Tenn. Jan. 18, 2006). Hadley, however, is far from analogous.
In Hadley, the plaintiffs attempted to create a material issue of fact and challenge the validity of
an assignment by including the following two paragraphs in each of their affidavits:
14. Contrary to Paragraph 8 of the Affidavit of Billy R. Inmon, I do not recall signing an
Assignment of Bid, and the bank where we signed the documents was not a branch we
did business with.
15. I believe the document entitled Assignment of Bid is a forgery.
7
This factual dispute is notable because it is so blatant. Blanchette claims he was offered and
accepted the job. Breier sent a company-wide email introducing Blanchette as the new head of
the office and asking for congratulations. But Kindred’s witnesses testified that no such position
even existed.
8
Kindred’s own versions of events have not been internally consistent either. Cunanen’s October
15, 2015 post-claim letter to Blanchette, which asserted that Blanchette merely discussed an
“intent” to resign in May and that Kindred “accepted” that resignation in August stated a version
of the facts at odds with Kindred’s own current explanation. In his deposition, Cunanen later
testified that this was “not correct” and that Kindred had in fact “already accepted the
resignation” in May 2015 and before the August 5 meeting.
19
Id. The Court held that these statements alone did not meet the requirements of Rule 56(e) for
summary judgment affidavits and did not create an issue of fact concerning the validity of the
assignment. Id. This was because Rule 56(e) requires that affidavits supporting or opposing
summary judgment must include facts based on personal knowledge, and therefore “statements
made ‘on information and belief’ are insufficient to satisfy the personal knowledge requirement of
Rule 56(e).” Id. Moreover, the Court held that the statements that the plaintiffs “d[id] not recall”
signing the assignment also did not demonstrate the personal knowledge required under Rule
56(e). Id. In this context, rather, stating “I did sign” or “I did not sign” the assignment would
demonstrate facts based on personal knowledge. Id. Here, Blanchette gave a 165-page deposition
about his direct, personal knowledge of the events involved in this case. (Doc. No. 52-1.)
Blanchette also submitted a two-page Declaration containing statements of personal knowledge. 9
(Doc. No. 46-2.) Further, Blanchette submitted supporting documentary evidence.
Kindred’s second argument is an offshoot of its first. Assuming, arguendo, that the Court
believes that Kindred has established that Kindred and Blanchette had an at-will employment
relationship after May 3, 2015, Kindred argues that the parties never reached an oral agreement to
alter that at-will relationship in Blanchette’s favor prior to August 5, 2015. (Doc. No. 44-1 at 1718 (citing Shah v. Am. Synthetic Rubber Corp., 655 S.W.2d 489, 492 (holding that parties can
9
The Declaration is not suspect. Kindred also complains that Blanchette’s Declaration is
improperly contradictory of his deposition testimony. The Court does not agree. In his
deposition, Blanchette explains that there was no formal pre-existing performance improvement
office position in the weeks following what he claimed was the rejection of his resignation in
early May, but that “[t]he offer had been made by both Kent and Ben to lead this function.”
(Doc. No. 55-1 at 111-114.) In his Declaration, Blanchette stated that he had accepted the offer
to head the office by no later than June 16, 2015. (Doc. No. 46-2.) The Court does not find this
evidence to be contradictory without sufficient explanation. Moreover, the jury will be fully
capable of considering the relative value of Blanchette’s Declaration.
20
alter an at-will employment relationship only with a clear statement of intention to do so).)
Blanchette, of course, disputes this premise because he maintains that his May 2015 “resignation”
was rejected. Regardless, Kindred’s own brief is self-defeating. The first paragraph of Kindred’s
argument in this section highlights the material factual dispute between Blanchette, on the one
hand – who testified that he was told the Agreement would remain in place through 2015 until
2016 when the Board could come up with a new employment agreement for him in his new
position as head of the process and performance improvement office – and Cunanen, on the other
hand – who denied that neither he nor Wallace told Blanchette anything of the sort. (Id. at 17.)
This is not grounds for summary judgment.
Kindred’s final argument is similarly without merit. Kindred argues that, even assuming
all of the facts alleged by Blanchette are true, Blanchette resigned without Good Reason on August
5, 2015, thereby terminating the Agreement without additional obligations on the part of Kindred.
(Doc. No. 44-1 at 19-20 (citing Metro Louisville/Jefferson Cty. Govt. v. Abma, 326 S.W.3d 1, 8
(Ky. App. 2009) (must have valid contract, breach by the accused, and damages flowing from
breach).) However, there is a clear dispute of material fact as to whether Blanchette “resigned” in
August 2015 (for the first or second time) or was terminated by Kindred without Cause during the
meeting with Wallace. As such, this is also not grounds for summary judgment.
The Court also notes that, although Kindred does not argue this point, it does include a
sentence in its conclusion stating that because in its view Blanchette was employed at-will on
August 5, 2015, “Kindred had no obligation to arbitrate any disputes related to his separation.”
(Doc. No. 44-1 at 20.) As the Court has discussed, there are questions of fact regarding
Blanchette’s employment status on May 3 and August 5. But more importantly, Kindred appears
to misapprehend the question of whether it had an obligation to arbitrate: the Agreement specifies
21
that Kindred had a duty to arbitrate “[a]ny dispute or controversy arising under, out of, or in
connection with this Agreement.” The relevant question as to arbitration, therefore, is not the status
of Blanchette’s employment on August 5, but whether the claim asserted by Blanchette arises “in
connection with” the Agreement. Given that (1) Cunanen testified that the Agreement remained in
effect through the last day of Blanchette’s employment, (2) the Complaint is based on the
Agreement, and (3) Kindred’s own summary judgment motion brief relies extensively on the
Agreement or the lack thereof, the assertion of Kindred that Blanchette’s claim does not arise “in
connection with” the Agreement and that Kindred had no obligation to arbitrate is peculiar indeed.
Regardless, to be clear, the Court also does not find any grounds for summary judgment on the
aspect of Blanchette’s claim that relates to breach of the Agreement’s arbitration provision.
IV.
Conclusion
Drawing all inferences in favor of Blanchette, a reasonable jury could conclude that there
is sufficient evidence to support his breach of contract claim. Moreover, numerous questions of
fact prevail. Accordingly, Defendants’ Motion for Summary Judgment (Doc. No. 44) will be
DENIED. The breach of contract claim will proceed to trial on March 27, 2018. All deadlines in
the Court’s December 13, 2016 Order (Doc. No. 20) remain in effect.
An appropriate Order will enter.
____________________________________
WAVERLY D. CRENSHAW, JR.
CHIEF UNITED STATES DISTRICT JUDGE
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