Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-14-01619/USCOURTS-ca8-14-01619-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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United States Court of Appeals

For the Eighth Circuit

___________________________

No. 14-1619

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St. Jude Medical S.C., Inc., a Minnesota corporation

lllllllllllllllllllll Plaintiff - Appellee

v.

Thomas M. Tormey, Jr.

lllllllllllllllllllll Defendant - Appellant

Tormedco, Inc., a New York corporation

lllllllllllllllllllllCounter plaintiff - Appellant

____________

Appeal from United States District Court 

for the District of Minnesota - Minneapolis

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 Submitted: October 8, 2014

 Filed: March 11, 2015

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Before RILEY, Chief Judge, WOLLMAN and BYE, Circuit Judges.

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BYE, Circuit Judge.

St. Jude Medical Center, Inc. (“St. Jude”), sued Thomas M. Tormey, Jr., its

former employee, to recover $650,000 plus statutory interest owed on a promissory

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note. Tormey disputed his liability on the note and filed counterclaims arguing

St. Jude breached Tormey’s employment contract. Tormey also added his company,

Tormedco, Inc., as a plaintiff to the counterclaims and asserted an additional claim on

behalf of Tormedco against St. Jude. The district court1

 granted judgment as a matter

of law to St. Jude on its collection claim, on the counterclaims, and on Tormedco’s

claim after a jury was unable to reach a verdict. Tormey and Tormedco appeal, and

we affirm.

I

In 2001, St. Jude hired Tormey to work as an independent sales representative,

selling its cardiac-related medical devices such as pacemakers and defibrillators. 

Tormey previously worked for Medtronic in this same capacity for fifteen years. To

initiate his employment with St. Jude, Tormey entered into several agreements

including a representative agreement, a separate letter agreement, an asset purchase

agreement, and a loan agreement.

The representative agreement provided the length of Tormey’s contract with

St. Jude, his salary, his sales territory, his commission rate, and a procedure for setting

his sales quotas. It also detailed that for the first year of Tormey’s contract, his sales

quota would be set at zero due to a noncompete agreement he held with Medtronic. 

The representative agreement further provided that St. Jude would hire a “technical

support specialist (TSS) as soon as practicable” to assist Tormey with his work and

that St. Jude could terminate Tormey if he failed to meet sales quotas in three out of

any twelve consecutive months.

1

The Honorable Michael J. Davis, Chief Judge, United States District Court for

the District of Minnesota.

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In the separate letter agreement and asset purchase agreement, Tormey agreed

to form a corporation through which he would conduct his business for St. Jude. 

Then, on October 3, 2006, the corporation would have the option to sell itself to

St. Jude at a price derived from a formula contained in the agreements. The option,

however, was contingent on the representative agreement being in full force at that

time. Pursuant to these agreements, Tormey thereafter created Tormedco, Inc., in

January 2002 and assigned the representative agreement he had with St. Jude to it.

St. Jude and Tormey also entered into a loan agreement, which was referenced

by the separate letter agreement. The loan agreement entailed St. Jude making a

$650,000 interest-free loan to Tormey. In exchange for the loan, Tormey executed a

promissory note which required him to repay the loan on October 3, 2008, or upon the

sale of Tormedco to St. Jude, whichever occurred earlier. The separate letter

agreement indicated St. Jude would deduct the amount Tormey owed on the loan from

the amount it paid for Tormedco when Tormedco exercised its option to sell itself to

St. Jude.

As a result of his noncompete agreement with Medtronic, Tormey did not begin

selling St. Jude’s products until fall 2002. Around that same time, Tormey’s wife was

diagnosed with terminal lung cancer, and Tormey informed St. Jude of his wife’s

condition.

Also in late 2002 and into early 2003, Tormey began inquiring about when

St. Jude would hire a TSS to assist him. In February 2003, Jim Catlett, Tormey’s

manager, emailed Tormey about his inquiry. Catlett indicated before St. Jude incurred

the expense of a TSS, Catlett wanted to know Tormey’s thoughts about what that

person would do on a day-to-day basis. Catlett stated he had several clinical support

people in training. Tormey alleged the lack of TSS support would keep him from

meeting his sales quotas.

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Tormey then met with St. Jude in September 2003 to discuss setting upcoming

sales quotas. On September 17, Tormey sent an email to Catlett recommending

minimum sales quotas. Tormey’s proposed sales quotas considered several things

including no TSS support, and he suggested the sales quotas be set at a minimum until

the issue could be resolved. Tormey also indicated that when St. Jude hired a TSS for

Tormey, the numbers would be a moot point. Until then, Tormey explained he would

accomplish what was required by himself. St. Jude and Tormey signed sales quota

sheets with Tormey’s recommended numbers in mid-October 2003. Tormey added

a handwritten note to the sheet indicating the “guarantee is based on Tormey accounts

until . . . a TSS is provided according to contract.”

Thereafter, on October 24, 2003, Catlett sent Tormey an email indicating

St. Jude had assigned a TSS to assist Tormey. The email further indicated that if

Tormey needed additional assistance, four other employees were available to support

him. Tormey, however, objected to this particular TSS because he was not fully

dedicated to helping Tormey. St. Jude’s general counsel responded to Tormey and

explained the TSS would only support others if Tormey did not need his assistance.

Tormey’s wife’s condition worsened in November 2003, and Tormey thereafter

did not meet his sales quotas. Tormey attributes his performance in part to his wife’s

condition. According to Tormey, St. Jude repeatedly told him that his wife’s health

should be his first priority throughout her illness. Thereafter, in February and April

2004, Tormey sent emails to his managers at St. Jude proposing changes to his

relationship with St. Jude. Two options included St. Jude considering the $650,000

loan paid in full.

Tormey’s wife passed away on May 3, 2004. Two weeks later, Jim Gantz, a

vice president at St. Jude, sent Tormey a letter terminating the representative

agreement. The letter indicated Tormey’s sales were unacceptable and had fallen

significantly short of the sales quotas. It further included a comparison of the sales

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quotas and actual sales from March 2003 through April 2004, supporting Gantz’s

conclusion for both pacemakers and defibrillators. After receiving the letter, Tormey

spoke with Gantz on the telephone and sent a follow-up email explaining he

forwarded the letter to his legal counsel as they had discussed. Gantz thereafter

responded to Tormey’s email and indicated he was willing to discuss any additional

issues Tormey may have but directed that Tormey’s counsel should be speaking with

St. Jude’s counsel as the matter progressed.

According to Tormey, he then had an additional telephone conversation with

Gantz. During the conversation, Tormey indicated Gantz proposed that if Tormey

agreed to forego any actions against St. Jude, then St. Jude would waive any claim to

repayment of the $650,000. Tormey asserts he accepted Gantz’s offer and presumed

his obligations to St. Jude had been discharged. There are no written documents

evidencing this “walk-away agreement,” however, and Gantz denies it occurred. 

Gantz recalled speaking to Tormey only once. In the years following this alleged

conversation, St. Jude sent IRS Form 1099s to Tormey for interest income, and

Tormey reported the interest income on his tax returns. In preparation for Tormey’s

2006 tax return, Tormey’s accountant included a note indicating Tormey’s loan with

St. Jude was still being negotiated.

On October 30, 2008, Aimee Gordon, counsel for St. Jude, sent Tormey a letter

asserting the $650,000 loan was due for repayment. Tormey did not repay the loan

at that time, and he was unsure if his counsel responded to the letter. Gordon then sent

a second letter on May 12, 2009, asserting the loan was due and immediately payable

in full. Tormey again failed to repay the loan and made no indication of a “walk-away

agreement” to Gordon.

St. Jude filed suit against Tormey in Minnesota state court on January 11, 2011,

seeking to recover the amount owed on the note plus statutory interest. Tormey

removed the suit to federal court. Tormey and Tormedco then asserted counterclaims

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against St. Jude alleging St. Jude breached the representative agreement and

fraudulently induced Tormey to leave Medtronic. Tormedco also asserted an

additional claim against St. Jude for breach of contract.2

 St. Jude thereafter moved for

summary judgment on its claim and the counterclaims twice, but the district court

granted summary judgment in favor of St. Jude on only the counterclaims contending

St. Jude engaged in fraudulent conduct. The magistrate judge3

 also denied some of

Tormey’s requests for discovery. The remainder of the counterclaims and St. Jude’s

collection claim proceeded to a jury trial.

At the close of evidence, St. Jude moved for judgment as a matter of law,

arguing the evidence did not support the counterclaims or defenses asserted by

Tormey or Tormedco. The district court denied St. Jude’s motion, and the case was

given to the jury. The jury, however, was unable to reach a unanimous decision, and

the district court declared a mistrial. St. Jude then renewed its motion for judgment

as a matter of law. This time, the district court granted St. Jude’s motion on the

counterclaims, finding they were time-barred, and on St. Jude’s claim for repayment

of the note, finding the evidence did not support Tormey’s defense that St. Jude first

committed a material breach of the representative agreement. Tormey and Tormedco

appeal.

II

Tormey and Tormedco first challenge judgment as a matter of law. On appeal,

we review de novo the district court’s grant of judgment as a matter of law. Hortica2

Because of the substantial similarity between Tormey and Tormedco’s

counterclaims and Tormedco’s claim, the district court used the word “counterclaims”

to refer to these claims collectively. For consistency, we do the same.

3

The Honorable Tony N. Leung, United States Magistrate Judge for the District

of Minnesota.

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Florists’ Mut. Ins. Co. v. Pittman Nursery Corp., 729 F.3d 846, 854 (8th Cir. 2013). 

“A court may grant judgment as a matter of law if ‘the court finds that a reasonable

jury would not have a legally sufficient evidentiary basis to find for the party.’” 

Madden v. Lumber One Home Ctr., Inc., 745 F.3d 899, 902 (8th Cir. 2014) (quoting

Fed. R. Civ. P. 50(a)(1)). In our review, we therefore consider the facts in the light

most favorable to Tormey and Tormedco and give them the benefit of all reasonable

inferences. Roberson v. AFC Enters., Inc., 602 F.3d 931, 933 (8th Cir. 2010).

A. St. Jude’s Collection Claim

Tormey contends the district court erred by granting judgment as a matter of

law on St. Jude’s claim for repayment of the $650,000 loan. Tormey argues the

district court should have instead found sufficient evidence existed to support two

affirmative defenses asserted by Tormey.

Tormey’s first defense is that St. Jude breached a material term of the

representative agreement by failing to hire a TSS for Tormey. Under Minnesota law,

which applies in this case, see Chew v. American Greetings Corp., 754 F.3d 632, 635

(8th Cir. 2014), “a party who first breaches a contract is usually precluded from

successfully claiming against the other party,” gScribe, Inc. v. Soteria Imaging

Services, LLC, No. A11-265, 2011 WL 4008303, at *5 (Minn. Ct. App. Sept. 12,

2011) (internal quotation marks and citation omitted). Accordingly, Tormey asserts,

when considering all of the agreements Tormey executed with St. Jude as one unitary

agreement, this first material breach by St. Jude relieved Tormey from meeting his

sales quotas and ultimately his obligation to repay the loan.

Assuming St. Jude’s failure to provide Tormey with TSS support until October

2003 constituted a breach of the unitary agreement, we find it did not excuse

Tormey’s failure to repay the note. The continued recognition of a contract as still

binding after a breach is a waiver of the breach. See Wolff v. McCrossan, 210

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N.W.2d 41, 43 (Minn. 1973) (“Generally, where a defendant has orally waived certain

conditions of a written contract, he is estopped from asserting the nonperformance of

those conditions as a defense in a suit upon the contract.”); Cut Price Super Mkts. v.

Kingpin Foods, Inc., 98 N.W.2d 257, 267 (Minn. 1959) (“The right to rescind [a

contract] must therefore be exercised promptly on discovery of the facts from which

it arises and it is clear under the law that it may be waived by continuing to treat the

contract as a subsisting obligation.”); see also 17A Am. Jur. 2d Contracts § 715 (“An

election by a party to perform notwithstanding a breach, and thus waiving the breach,

is conclusive, in the sense of depriving that party of any excuse for ceasing

performance, with the result that the party at fault may require that the other party

perform.”). Under Minnesota law, a waiver is the “intentional relinquishment of a

known right.” White v. City of Elk River, 840 N.W.2d 43, 51 (Minn. 2013).

Here, although St. Jude had yet to provide Tormey with TSS support in

September 2003, Tormey continued to treat his contract with St. Jude as though it

remained in effect. This is evidenced by Tormey suggesting and accepting reduced

sales quotas which he acknowledged he could perform himself. Consequently,

Tormey bound himself to the provisions of the unitary agreement as a whole,

including meeting these sales quotas and repaying the note to St. Jude, regardless of

St. Jude’s first breach. Accordingly, we conclude Tormey waived his ability to rely

on a first-breach defense as an excuse for failing to repay the note.

Tormey’s second asserted affirmative defense relies on the “walk-away

agreement,” arguing St. Jude and Tormey settled the debt Tormey owed. According

to Tormey, the district court erred by instructing the jury to consider the existence of

the “walk-away agreement” under the clear and convincing evidence standard. 

Instead, relying on Bolander v. Bolander, 703 N.W.2d 529, 541 (Minn. Ct. App.

2005), Tormey contends the district court should have instructed the jury to review

the agreement based on the preponderance of the evidence standard because the

“walk-away agreement” was not a modification to the agreements existing between

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St. Jude and Tormey. Rather, like the agreement made in Petsche v. EMC Mortgage

Corp., 830 F. Supp. 2d 663, 672 (D. Minn. 2011), the “walk-away agreement” was the

settlement of a debt which is not considered a modification. Moreover, because the

agreement was the settlement of a debt, it cannot be considered a credit agreement and

need not be in writing to be enforceable. Id. Tormey concedes, however, if the

“walk-away agreement” was an oral modification or a credit agreement, then it needed

to be memorialized in writing to satisfy the Minnesota statute of frauds for credit

agreements.

Although Tormey frames the initial issue as an objection to the district court’s

jury instructions, because the district court granted judgment as a matter of law, in

substance, Tormey is objecting to the burden of proof applied by the district court

when it reached its conclusion on Tormey’s defense. To address Tormey’s arguments,

however, we need only consider whether the alleged “walk-away agreement” was a

credit agreement within the meaning of Minnesota statute § 513.33, which maintains

credit agreements must be in writing. Minn. Stat. § 513.33, subd. 2; see also Greuling

v. Wells Fargo Home Mortg., Inc., 690 N.W.2d 757, 761-62 (Minn. Ct. App. 2005)

(“[C]laims on agreements falling under section 513.33 fail as a matter of law if the

agreement is not in writing.”). A credit agreement within the meaning of § 513.33 is

“an agreement to lend or forbear repayment of money, goods, or things in action, to

otherwise extend credit, or to make any other financial accommodation.” Minn. Stat.

§ 513.33, subd. 1.

First, we find Tormey’s reliance on Petsche is misplaced and the case is not

controlling. Instead, we find Tormey’s circumstances are much like those found in

Loan Store v. McConnell, No. A06-122, 2006 WL 3490807, at *3 (Minn. Ct. App.

Dec. 5, 2006) (“Even if we were to interpret [§ 513.33] very narrowly, an agreement

that would excuse remaining payment on the debt would fall under forbearing

repayment of money.”), and Carlson v. Estes, 458 N.W.2d 123, 128 (Minn. Ct. App.

1990) (finding where a lender waived a claim to some monetary value, the agreement

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was a credit agreement under § 513.33 because it clearly constituted a financial

accommodation and was an action to forbear the repayment of money), which

determined the agreements were oral modifications to the original agreements and

therefore credit agreements. Tormey’s case is also distinguishable from Bolander,

which discussed whether the existence of a new “promise to pay” for services

rendered after expiration of the original contract was a modification to the original

contract. 703 N.W.2d at 542.

Additionally, the “walk-away agreement” by itself constitutes a credit

agreement regardless of whether it modified the terms of the original agreements

because it was an agreement to forbear repayment. See BankCherokee v. Insignia

Dev., LLC, 779 N.W.2d 896, 902 (Minn. Ct. App. 2010) (“Among the agreements

subject to [the] requirements [of § 513.33] are many that commonly would serve as

the basis for affirmative defenses, such as agreements to ‘forbear repayment of

money’ or make some ‘other financial accommodation.’”); Greuling, 690 N.W.2d at

762 (“The plain and unambiguous language of [§ 513.33] clearly prohibits a claim that

a new credit agreement is created unless the agreement is in writing, expresses

consideration, sets forth all relevant terms and conditions, and is signed by the creditor

and debtor.”). Consequently, because Tormey did not present evidence that the

“walk-away agreement” was in writing as required by § 513.33, we find the district

court did not err by granting judgment as a matter of law on this defense or on

St. Jude’s collection claim.

B. Tormey’s Counterclaims4

Tormey next contends the district court erred by granting judgment as a matter

of law on his counterclaims. The district court found Tormey’s counterclaims were

4

Because Tormey and Tormedco appear collectively for this portion of the

appeal, we refer to them simply as Tormey.

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barred by the statute of limitations, and Tormey failed to present sufficient evidence 

to toll the period based on a theory of estoppel. On appeal, Tormey argues he

reasonably relied on the “walk-away agreement” until at least May 2009 and asserted

his claims in February 2011, which resulted in his claims being filed within the twoyear statute of limitations provided in the representative agreement. Consequently,

Tormey asserts his counterclaims were not time-barred.

Contrary to Tormey’s assertion, we find the district court did not err by granting

judgment as a matter of law on Tormey’s counterclaims. Although Tormey does not

specify the particular theory of estoppel upon which he relies, based on the claims he

alleges and cases he cites, we find he is relying on promissory estoppel to toll the

statute of limitations. See Bracewell v. U.S. Bank Nat’l Ass’n, 748 F.3d 793, 796 (8th

Cir. 2014) (finding “[a] claim is more appropriately analyzed under the doctrine of

promissory estoppel, not equitable estoppel, where representations upon which the

plaintiff allegedly relied are more akin to statements of future intent than past or

present fact”) (alteration in original) (internal quotation marks and citation omitted). 

Under Minnesota law, oral promises which constitute a credit agreement within the

ambit of § 513.33 cannot be enforced under a theory of promissory estoppel; the

promises must be in writing. See Bracewell, 748 F.3d at 796 (affirming the dismissal

of a complaint alleging promissory estoppel because the claim of an oral agreement

was barred by the Minnesota Credit Agreement Statute); BankCherokee, 779 N.W.2d

at 903 (affirming summary judgment because the appellant could not assert

promissory estoppel as an affirmative defense on the basis of an oral promise which

constituted a credit agreement under § 513.33); Christensen v. PennyMac Loan Servs.,

LLC, 988 F. Supp. 2d 1036, 1044 (D. Minn. 2013) (citing cases standing for the

proposition that allowing parties to assert promissory estoppel as a mechanism to

enforce an alleged oral promise would constitute an “end run” around the writing

requirements of § 513.33). As a result, Tormey cannot assert promissory estoppel on

the basis of the “walk-away agreement” to toll the statute of limitations because there

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is not a writing evidencing the “walk-away agreement.” We therefore find the district

court properly determined Tormey’s counterclaims were time-barred.

III

Tormey finally argues the magistrate judge abused his discretion by denying the

majority of Tormey’s motion to compel answers to discovery requesting “sales levels

for other [St. Jude] cardiac sales reps, their conversion to employee status or

dismissal, and related issues.” The magistrate judge granted Tormey’s motion for

only one territory for which Tormey sought information. As a consequence of the

magistrate judge’s limitation on discovery, Tormey contends he was unfairly

prevented from developing a defense at trial that St. Jude terminated Tormey without

cause. We, however, are without jurisdiction to decide this issue because Tormey did

not object to the magistrate judge’s order. See Fed. R. Civ. P. 72(a) (stating that upon

issuance of a magistrate judge’s order on a nondispositive issue, “[a] party may not

assign as error a defect in the order not timely objected to”); McDonald v. City of

St. Paul, 679 F.3d 698, 709 (8th Cir. 2012) (finding a party could not challenge a

magistrate judge’s nondispositive pretrial discovery order on appeal because he did

not timely file objections before the district court).

IV

For the foregoing reasons, we affirm.

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