Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-05-01530/USCOURTS-ca8-05-01530-0/pdf.json

Parties Involved:
Thomas F. Botten
Appellant
David J. Shorma
Appellee
Donald S. Shorma
Appellee
Edward F. Shorma
Appellee
Jane Shorma
Appellee
Patricia Shorma
Appellee
Richard E. Shorma
Appellee
Robert A. Shorma
Appellee
Shelle Shorma
Appellee
Thomas D. Shorma
Appellee
William Shorma
Appellee

Document Text:

1

The Honorable David S. Doty, United States District Judge for the District of

Minnesota.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 05-1530

___________

Thomas F. Botten, *

*

Appellant, *

*

v. * Appeal from the United States 

* District Court for the

Edward F. Shorma, Thomas D. Shorma, * District of Minnesota.

Patricia Shorma, Richard E. Shorma, *

Donald S. Shorma, William Shorma, *

David J. Shorma, Jane Shorma, *

Robert A. Shorma, Shelle Shorma, *

*

Appellees. *

___________

Submitted: December 14, 2005

Filed: March 14, 2006

___________

Before WOLLMAN, BEAM, and RILEY, Circuit Judges.

___________

WOLLMAN, Circuit Judge.

Thomas Botten appeals from the district court’s1

 dismissal with prejudice of his

breach of contract claim. We affirm. 

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In September, 1994, Thomas Botten became PrimeWood Inc.’s President and

Chief Operating Officer. The Shormas were PrimeWood’s shareholders. On January

1, 1995, Botten and PrimeWood entered into the PrimeWood Executive Bonus and

Deferred Compensation Plan (Employment Agreement).

In early 1998, PrimeWood merged with another company. At this time, Botten

asserted that he was entitled to additional compensation under the Employment

Agreement with respect to fiscal years ending in 1995, 1996, 1997, and 1998. To

facilitate the merger, Botten, the Shormas, PrimeWood, and the parent company

entered into an Assignment, Assumption and Novation Agreement (Assignment

Agreement) on June 16, 1998. The Assignment Agreement terminated Botten’s

Employment Agreement with PrimeWood and provided that the Shormas would

assume any liabilities arising out of the Employment Agreement. 

On May 21, 2003, Botten made a written demand on the Shormas for

recompense. The Shormas rejected the demand, and Botten commenced this lawsuit

on or about January 27, 2004. In his breach of contract claim, Botten alleged that

PrimeWood breached the Employment Agreement and that the Shormas were

obligated to compensate Botten under the Assignment Agreement. The Shormas

moved to dismiss Botten’s complaint under Rule 12(b)(6) arguing that his claims were

time-barred under Minnesota’s two-year statute of limitations for wage claims. The

district court dismissed the complaint with prejudice, and Botten appeals his breach

of contract claim.

We review de novo the district court’s grant of a motion to dismiss for failure

to state a claim under Rule 12(b)(6). Stahl v. United States Dep’t of Agric., 327 F.3d

697, 700 (8th Cir. 2003). We affirm only if the plaintiff can prove no set of facts that

would entitle him to relief. Id.

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The parties dispute whether Botten’s claim arose from a general breach of

contract, subject to a six-year statute of limitations, or a breach of an employment

agreement, subject to a two-year statute of limitations. See Minn. Stat. §§ 541.05(1),

541.07(5) (2005). Minn. Stat. § 541.07(5) provides for a two-year statute of

limitations for the recovery of wages or damages related to wages. The statute defines

“wages” broadly to include “all remuneration for services or employment, including

commissions and bonuses . . . where the relationship of master and servant exists.”

Id. “Minnesota courts consistently hold that all damages arising out of the

employment relationship are subject to § 541.07(5).” Kulinski v. Medtronic BioMedicus, Inc., 112 F.3d 368, 371 (8th Cir. 1997) (internal quotations and citations

omitted). Here, the complaint specifically alleged that PrimeWood breached the

Employment Agreement by failing to pay Botten certain bonuses and incentives.

Where the gravamen of the action is a breach of an employment contract, the claim

is essentially a claim for wages subject to the two-year statute of limitations period set

forth in Minn. Stat. § 541.07(5). Portlance v. Golden Valley State Bank, 405 N.W.2d

240, 243 (Minn. 1987). Accordingly, we affirm the district court’s application of

Minn. Stat. § 541.07(5) to Botten’s breach of contract claim. 

Finally, Botten argues that the breach occurred when the Shormas rejected

Botten’s written demand for compensation on May 21, 2003. Using this date,

Botten’s claims would be timely under either the two-year or the six-year statute of

limitations. The cause of action arose, however, when the terms of Botten’s contract

were breached. See Levin v. C.O.M.B. Co., 441 N.W.2d 801, 803 (Minn. 1989).

When a contract sets a date for payment, the statute of limitations begins to run on that

date. Honn v. Nat’l Computer Sys. Inc., 311 N.W.2d 1, 2 (Minn. 1981). The

Assignment Agreement incorporates the Employment Agreement, which provides the

schedule for bonus payments and deferred compensation. According to the schedule,

the most recent breach was in 1998, more than four years before Botten filed suit.

Botten’s claims are therefore time-barred under the two-year statute of limitations.

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The judgment is affirmed.

BEAM, Circuit Judge, dissenting.

In its search for an applicable statute of limitations, I believe the court relies

upon the wrong contract. Thus, I respectfully dissent.

The court is correct that Botten had a “master and servant” relationship with

PrimeWood, Inc., a North Dakota corporation (PrimeWood), Minnesota Statutes

Section 541.07(5), creating the “employment contract” referenced by the panel

majority, ante at 3. At no time did Botten have a master and servant relationship with

the Shormas, especially one that generated “wages or overtime or damages,” as

“remuneration for services or employment.” Minn. Stat. § 541.07(5).

PrimeWood, through Botten, its then president and COO, entered into

negotiations with Woodcraft Industries, Inc., a Minnesota corporation (Woodcraft),

which negotiations ultimately resulted in Woodcraft’s 1998 purchase of PrimeWood.

The pathway to this destination was not unobstructed. At the time of the intercorporate bargaining, Botten and PrimeWood had an ongoing intra-corporate dispute

over bonuses and other compensation allegedly due under the Executive Bonus and

Deferred Compensation Plan (Executive Compensation Plan) portion of the

Primewood-Botten employment contract. It is Botten’s continuing claim for these

past due payments that is the subject matter of this action. At the time of the 1998

purchase, much, if not all, of the existing claim had not expired under even a two-year

statute of limitations.

Woodcraft opted not to inherit this dispute, apparently for at least three separate

reasons. It wanted the sale to proceed expeditiously, it hoped to employ Botten in the

merged firm, and it desired the dissolution of PrimeWood’s Executive Compensation

Plan, the writing giving rise to Botten’s claim. Presumably a continuing quarrel with

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one of its newly acquired executives over past benefits due from the recently acquired

entity would have been inimical to a tranquil commencement of the combined

operation.

Since Botten was to derive significant benefits from the successful combination

of the firms, he also had reason to reach an amicable solution with Woodcraft and the

Shormas. The Shormas sought to induce the speedy consummation of the sale

because as the only shareholders of PrimeWood, they were in line to receive most of

the fruits of the corporate sale.

Thus, PrimeWood, Woodcraft, Botten and the Shormas (as individuals) entered

into an agreement dated June 16, 1998. Concurrently with the execution and delivery

of this particular undertaking, an earlier contract for the PrimeWood purchase became

final and PrimeWood became a “wholly-owned subsidiary of Woodcraft.” 

The June 16 document directly affects the viability of this appeal. Under the

deal, PrimeWood agreed to assign and the Shormas agreed to “assume, pay and

perform . . . all liabilities . . . [and] obligations [of PrimeWood], if any,” under the

Executive Compensation Plan with Botten. Botten, in turn, agreed to absolve

PrimeWood and look only to the Shormas for the satisfaction of his claim and to

release PrimeWood and Woodcraft from “any obligation . . . [and] liability . . . in

connection with the Botten Agreement.” PrimeWood also was to dissolve the

Executive Compensation Plan that gave rise to Botten’s claim. 

While the court calls this PrimeWood-Shorma-Botten arrangement an

“assignment agreement,” ante at 2, it was, under Minnesota law, a new contract, in

part at least a novation. “’A mere assignment does not absolve the [assignor’s]

obligations under a contract.’” Vetter v. Sec. Cont’l Ins. Co., 567 N.W.2d 516, 521

(Minn. 1997) (quoting Tony and Leo, Inc. v. United States Fid. & Guar. Co., 281

N.W.2d 862, 865 (Minn. 1979)). “When an assignment is made, . . . the assignor

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remains liable if ‘performance [by the assignee] is substantially different . . . than

performance [promised] by the original party.’” S O Designs USA, Inc. v.

Rollerblade, Inc., 620 N.W.2d 48, 54 (Minn. App. 2000) (emphasis added) (quoting

Epland v. Meade Ins. Agency Assocs., Inc., 564 N.W.2d 203, 207 (Minn. 1997)). “If

the other party consents to the delegation of duties, thus [as here] completely

substituting one party for another, the proper term for the transaction is a ‘novation.’”

Epland, 564 N.W.2d at 207 (emphasis added). “A novation works to extinguish an

original debt or obligation against the original debtor and shifts the debt by mutual

agreement to a new party.” Ehlen v. Johnson, No. C1-97-954, 1997 WL 769534, at

*3 (Minn. App. Dec. 16, 1997) (unpublished).

Accordingly, under Minnesota law, Botten’s wage claim against PrimeWood

was extinguished by the new agreement (the novation) and the Shormas, for good

consideration, assumed liability in the June 16, 1998, contract for Botten’s existing

claim and cause of action. While the measure of damages agreed upon in the June 16

contract may have been limited by the amount of the then existing claim for wages,

the right to recover under the novation was a new contractual obligation. Looking to

this new agreement for a statute of limitations, as we must, we discover that Botten

was entitled to a six-year window of opportunity to commence his litigation. Minn.

Stat. § 541.05.

I respectfully dissent.

______________________________

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