Opinion
No. A05-986.
Filed December 20, 2005.
Appeal from the District Court, St. Louis County, File No. C4-04-601532.
Robert R. Nardi, John H. Daniels, Jr., Willeke Daniels, (for appellant).
R. Thomas Torgerson, Hanft Fride, P.A., (for respondents).
Considered and decided by Willis, Presiding Judge; Minge, Judge; and Worke, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
Appellant brought this action following his completion of a contractual term of employment for respondents. The district court granted respondents' motion for summary judgment. Because the record taken as a whole could not lead a rational trier of fact to find for appellant on his breach-of-contract claim, he was not entitled to an equitable accounting, and he was not discharged from employment for purposes of Minn. Stat. § 181.13 (2004), we affirm.
FACTS
Appellant Kevin L. Smith was formerly employed by respondents Radiological Associates of Duluth, Ltd. and an affiliated practice known as Radiologists Associates in Duluth, Ltd. On September 1, 1999, appellant began a three-year term with respondents to provide services as a licensed radiologist. The contract provided a graduated pay scale, under which appellant's original salary of $150,000 would increase by $25,000 in the second and third years of employment. The contract also provided that appellant's compensation could be increased by respondents without in any way affecting other terms and conditions of the contract. The contract provided for termination by either party's written notice 90 days prior to August 31, 2002, the end of the contract term. In the absence of a written, timely termination by either party, the contract would renew automatically for successive periods of one year with a continuation of its terms and conditions.
The contract also contemplated that appellant could acquire a shareholder's stake in the companies following the initial three-year term. By appellants account, discussions about ownership began more than a year before the end of the contract term; respondents confirm that it offered appellant an opportunity to become a shareholder in December of 2001 and increased his compensation. Appellant confirms that his salary was raised and also asserts that his responsibilities increased at this time.
In a February 2002 letter, respondents informed appellant that they could not go forward with appellant's purchase into ownership, citing a disagreement about its cost. Respondents, however, promised to continue to compensate appellant "in the same fashion as if [he] were an owner," and proposed renewed efforts to reach an agreement regarding his acquisition of an ownership interest.
In May of 2002, respondents notified appellant that it had opted to terminate the original employment contract at the end of the term, but did intend to continue discussions regarding appellant's potential ownership. However, despite continued negotiations, the parties could not reach an agreement about either an ownership interest or continued employment, and appellant's employment ended on August 31, 2002.
In February of 2004, appellant commenced this action against respondents, alleging that he did not receive compensation as though he were an owner; claiming damages in the form of unpaid compensation plus statutory damages, costs, and fees; and seeking equitable relief in the form of an accounting setting forth all income and expenses of respondents during the period in question. Under a confidentiality agreement and protective order, the district court permitted appellant's discovery of certain comparative data regarding his compensation and that of the various respondents' shareholders. In March of 2005, the district court granted respondents' motion for summary judgment in its entirety. This appeal follows.
DECISION
Our review of summary judgment considers whether the district court erred in its application of the law and whether it resolved issues of material fact. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). "While a written contract may be modified by the parties' subsequent conduct, whether such a modification occurred is a question for the factfinder." Poser v. Abel, 510 N.W.2d 224, 228 (Minn.App. 1994) (citing Wormsbecker v. Donovan Constr. Co., 247 Minn. 32, 41, 76 N.W.2d 643, 649-50 (1956)), review denied (Minn. Feb. 24, 1994). But "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party," summary judgment is proper. DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356 (1986)).
Appellant argues that the district court erred by granting summary judgment on his breach-of-contract claim. Smith contends that respondents' decision to increase his compensation effectively modified the terms of the employment contract, and respondents then breached their modified obligation by failing to pay him an amount equal to what the other owners of respondents received. Article 7 of the employment contract provided that no modification "shall be valid unless in writing signed by the party against whom the same is sought to be enforced" and stated that "[appellant]'s compensation may be increased at any time by [respondents] without in any way affecting any of the other terms and conditions of this Agreement[.]" Appellant argues that the February 2002 letter from RAD, signed by five of its six shareholders, met all of the employment-contract's requirements for modification. See City of Mounds View v. Walijarvi, 263 N.W.2d 420, 423 (Minn. 1978) (contemplating exchange of letters between the parties as proof of modification of a contract subject to amendment only by a written instrument signed by both parties). Respondents' shareholders stated in the letter: "Your original employment contract . . . continues with all benefits, etc., plus compensation equal to ours." "Compensation" is separately described in article 2 of the employment agreement, and might reasonably be construed as distinct from the "other terms and conditions" mentioned in article 7.
Respondents argue that they voluntarily and unilaterally increased Smith's salary prior to the February 2002 letter, and that the claim of modification was not evidenced by any consideration by Smith. See Johnson v. N. Oil Co., 212 Minn. 249, 249-50, 4 N.W.2d 82, 82 (1942) (stating that a modification to an existing agreement "is not a contract if it lacks consideration"). Appellant stated in his affidavit that his duties increased as a result of the increase in compensation because the motivation behind his prospective ownership was the impending retirement and decreased duties of one of respondents' shareholders. See Hartung v. Billmeier, 243 Minn. 148, 66 N.W.2d 784 (1954) (discussing performance as consideration for a unilateral promise).
But even if we were to assume that the letter constituted a modification of the employment contract, we are convinced that appellant's claim fails to survive summary judgment. The district court granted appellant's motion to compel production of documents, and issued a discovery order, subject to a confidentiality agreement. Appellant's attorney alleged during the subsequent summary judgment hearing that his theory of unequal compensation was based on the deferral of certain payments, but also stated that they did not know whether appellant was paid commensurate with the shareholders. Appellant does nothing on appeal to clarify this uncertainty, and we find nothing in the record to evidence his claim that he was not paid as promised by respondents. Because appellant did not present evidence that he was not paid in a manner "equal to" the shareholders, we affirm the district court's grant of summary judgment with respect to appellant's claim in contract. See DLH, 566 N.W.2d at 69 (if rational trier of fact could not find for nonmoving party, summary judgment is appropriate).
Appellant also contends that the district court abused its discretion by denying his claim for an accounting of respondents' compensation to its shareholders. An action to compel an accounting is an action in equity. Johnson v. Johnson, 272 Minn. 284, 298, 137 N.W.2d 840, 850 (1965). "Granting equitable relief is within the sound discretion of the trial court. Only a clear abuse of that discretion will result in reversal." Nadeau v. County of Ramsey, 277 N.W.2d 520, 524 (Minn. 1979).
Appellant claimed entitlement to an accounting from respondents of all income and expenses for 2002 and the total compensation provided to each of the shareholders during that period. The district court found that appellant had no standing or enforceable right to an accounting, and stated in its memorandum that appellant was seeking an accounting "as if he were an owner" or had an equitable interest.
In order to obtain the equitable relief of an accounting, a plaintiff must establish the existence of a fiduciary relationship with the accountable party. Sec. Sav. Bank v. Green Tree Acceptance, Inc., 739 F. Supp. 1342, 1352 (D. Minn. 1990) (citing Johnson, 272 Minn. at 298, 137 N.W.2d at 850); see Harris v. Mardan Bus. Sys., Inc., 421 N.W.2d 350, 353 (Minn.App. 1988) (shareholders and partners in a closely held corporation do not owe a fiduciary duty to employees); review denied (Minn. May 18, 1988), see also Pedro v. Pedro, 489 N.W.2d 798, 801 (Minn.App. 1992) (defining fiduciary duty as "dealing openly, honestly and fairly with other [partners]"), review denied (Minn. Oct. 20, 1992). Appellant does not dispute that he remained an employee throughout the period in question, and offers no Minnesota cases sustaining the grant of an equitable accounting of an employer to its employee. Because appellant was not owed a fiduciary duty by respondents, the district court did not abuse its discretion by denying his claim for an accounting of respondents' 2002 financial records.
Finally, appellant argues that the district court erred by denying his claim for statutory damages, costs, and fees. Minnesota law provides penalties for employers who fail to promptly pay an employee following a discharge, quit, or resignation, and provides for costs and fees to the plaintiff in a successful action. Minn. Stat. §§ 181.13, .14, .171 (2004). Appellant alleged that he was terminated by respondents and claimed unpaid wages plus statutory penalties, costs, and attorney fees. The district court denied the claim, stating that appellant "was not terminated from his employment nor was [he] forced to terminate or resign his employment." As previously discussed with respect to the contract-modification issue, appellant did not present evidence that respondents failed to pay him as promised, promptly or otherwise; we therefore decline to reach this issue.