Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-85-02368/USCOURTS-ca10-85-02368-0/pdf.json

Parties Involved:
The Marley Company
Appellant
Donald J. Wylie
Appellee

Document Text:

P"LED 1 "' - . United Stal{!~ t•Ji,, t ,::if Arr,c..1.ls 

P U B L I S H 'frmh Ci;·--..!i· 

IN THE UNITED STATES COURT OF APPEALS DEC l O 1989 

FOR THE TENTH CIRCUIT 

DONALD J. WYLIE, 

. Plaintiff-Appellee, 

V • 

THE MARLEY COMPANY, 

Defendant-Appellant; 

) 

) 

) 

) 

) . 

) 

) 

) 

) 

~OBERT L HOECKER 

-Clerk 

No. 85-2368 

· ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF KANSAS 

(D.C. No. 83-2033) 

David -M. Ebel, Davis, Graham&. Stubbs, Denver Colorado (Al~n M. 

Loeb, Catherine S. Martinez, and Allan L. Hale, Davis, Graham & 

Stubbs,. Denver, Colorado; T1mothy J. V~rhagen, Mission, Kansas; 

and Roger D. Stanton, Stinson, Mag & Fizzell, Overland Park, 

_Kansas-, were also on the briefs) for Defendant-Appellant 

David L. Welte, Polsinelli, White & Vardeman, Kansas City, 

Missouri (Mar~ J. Bredemeier, Polsinelli, White & Vardeman, Kansas 

City, Missouri, was also on the brief) for Plaintiff-Appellee 

Before HOLLOWAY, Chief Judge, McKAY, Circuit Judge, and BURCIAGA, 

District Judge* 

HOLLOWAY, Chief Judge 

*The Honorable Juan G. Burciaga, United States· District Judge for 

the District o'f·New Mexico, sit-ting by designation. 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 1
I. 

This is an appeal in a diversity action brought by Donald 

Wylie ("Wylie") against The Marley Company ("Marley") for breach 

of an employment agreement and for declaratory judgment for breach 

of contract. Wylie claimed compensatory damages in the amount of 

r $1,329,452 for lost wages and the value of lost compensation and 

be11efits through the termination date of the agreement. Marley 

answered denying liability and asserting in numerous defenses that 

Wylie had· repudiated the employment agreement,- 1 R. Doc. 15; and 

at trial Marley .offered evidence s·eeking to establish that Wylie_ 

orally resigned. Marley also asserted affirmative defenses, 

including waiver, estoppel, quasi-estoppel, repudiation, mutual 

rescission and failure of consideratiort~ The jury returned a 

v~rdict for Wylie for $1,329,424 and judgment ~as entered for him.· 

The judgment was increased $34i,705 to award prejudgment interest. 

Marley appeals and claims that the district court erred by 

instructing the jury that any resignation by Wylie must have been 

iri writing, by excluding certain testimony as falling within the 

attorney-client privilege, by failing to instruct the jury on two 

of its affirmative defenses, and by awarding Wylie prejudgment 

interest from the date of the breach to the. date judgment. was 

entered on the total amount of the ver~ict, while under the 

agreement in the event of a breach, Wylie was to receive his semimonthly payments when they .became due. We reverse and remand for 

a new trial, while upholding some rulings of the trjal court. 

II. 

Wylie began work for Marley in 1955. In 1977 or 1978, after 

working at various positions· in the company, Wylie was elected an 

2 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 2
executive vice president by the board of directors. Shortly 

thereafter Wylie executed an employment contract under which he 

was to be employed by Marley as its executive vice presfdent 'for a 

term of ten years, ending in September 1988. 

In 1981 Kohlberg, Kravis & Roberts ("KKR"), a general 

partnership engaged in investment banking, made Marley a private 

company through a leveraged buyout that resulted in KKR's owning 

or representing a controlling shareholder interest in Marley's 

stock. Shortly thereafter, KKR forme.d MC Acquisition Company, a 

privately held corporation, for the exclusive purpose of acquiririg 

Marley's assets. It was an objective of KKR to keep the present 

top management in place, and new or revised employment contracts 

were negotiated with "old" Marley's top management, iricluding 

Wylie.· 

Immediately after the closing, MC Acquisition was renamed 

"The Marley Company." On April. 28, 1981, MC Acquisition and Wylie 

ent~red into a new employment agreement which basically reiterated 

the terms of the old contract. Wylie was to continue his 

employment in the capacity of Marley's executive vice president 

and ca~ry out the responsibilities contained in Corporate Policy 

C-20, for·a term ending December 31, 1988 .. Furthermore, pursuant 

to his employment agreement Wylie was elected to Marley's board of 

directors .. Paragraph 3 of the April 28, 1981 employment agreement 

provided: 

During the term of this Agreement, the 

Employee [Wylie] shall hold the title of 

Executive Vice President and shall be assigned 

t6 and have the responsibilities set forth in 

Company's corporate policy C-20 as now 

existing or as altered after this date. by 

Company's Chairma~ of the Board. During the 

term of this Agreement the responsibilities 

3 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 3
an ~xecutive 

job title, 

of a nature 

top level 

shall be 

Company. 

the chief 

assigned to [Wylie] shall be of 

nature consistent with [Wylie's'] 

background, and expertise and 

appropriate to be assigned to a 

management executive. [Wylie] 

elected to the Board of Directors of 

[Wylie] will report directly to 

executive officer(s) of Company. 

Addendum to Appellant's Brief, doc. B, pp. 3-4. Corporate policy 

C-20, mentioned above, refers generally to the basic 

responsibilities of Marley's senior executives, and specifically 

to Wyl~e's responsibility for financial and facilities long-range 

planning, customer relations, Marley inter-company relations, 

implementation of policy and objectives, and executive management 

committee activi'ties. Addendum to Appellee's Brief, doc. III. 

Paragraph 7 of the Agreement set forth the· responsibi~ities 

and duties of each party in the event either party breached th~ 

contract: 

In the event Company shall fail or refuse to 

perform its obligations or carry out its duties 

~nder this Agreement, [Wylie] shall notify Company 

in writing of such failure or refusal, specifying 

the defaults alleged. Unless such defaults shall 

promptly (within thirty days of receipt of such 

notice) be corrected, then [Wylie] shall be 

entitled, upon written notice of termination to 

Company, to declare this Agreement breached, to 

terminate further performance hereunder, and 

thereupon shall be released from .any further 

obligation under this Ag~eement; provided, however, 

that such termlnation shall be without prejudice to 

[Wylie's] rights to continue to receive annually 

(in semi-monthly installments), for the remainder 

of the term of this Agreement (without reduction by 

reason of other employment and as though such 

termination had not occurred), his full base salary 

at the rate in effect at the time of termination 

plus an annual amount equal to the highest yearly 

amount of incentive compensation previously paid 

under the Agreement to [Wylie], or if none has been 

paid at the time of termination, in the amount paid 

by Marley to [Wylie] in January of 1981. 

4 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 4
Addendum to Appellant's Brief, doc. B, p.5. Paragraph 7(b), like 

subpart (a), similarly provided that if Wylie failed or refused to 

perform under the terms of the agreement, Marley must provide 

Wylie notice and an opportunity to cure any defects before it 

could declare the contract in breach. 1 Id. Paragraph 15 of the 

agreement stipulated that the agreement and t~e legal relations 

thereunder "shall be governed by the laws of the State of Kansas.'' 

A regularly scheduled meeting of Marley's Board of Directors 

on December 7, 1982, set the events in motion for this suit. 

Attending this meeting were Wylie and Rlcha~d Powell, Robert· 

McFadin, and Richard Signorelli, three directors representing the 

KKR interest and other directors representing Marley's management. 

Pow~ll was .Chairman of the Board and a member of the executive 

committee. McFadin was President and Chief Executive Officer of 

Marley. Prior to. the meeting Signorelli was a senio~ vice 

president. 

At the meeting McFadin nominated .Signorelli· to be a second 

executive vice president. After_ the meeting Wylie met with Powell 

to discuss the situation. Wylie believed that his job title had 

been diminished and that he was going to be seriously affected by 

Signorelli's promotion. Powell arranged.a meeting b~tween McFadin 

and Wylie for the following morning. 

On the morning of December 8, 1982, Wylie met with McFadin 

and Powell in McFadin's office. What was discussed at this 

meeting is sharply disputed. Wylie stated that the promotion of 

Signorelli breached his. employment agreement, that he was 

1 

The agreemerit contains no langu~ge concerning. the procedures 

for effectuating or accepting a resignation. 

5 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 5
disturbed by the promotion, and that he was going to discuss his 

concerns with KKR representatives in San Franciso. Wylie 

testified that he also told McFadin that he "couldn't see any way 

it could work" and "that it would be very difficult to work with 

two executive vice presidents." 3 R. 146-47. McFadin testified 

that Wylie told him that "he could no longer work for the Marley 

Company under the condition of there being a second executive vice 

president." 4 R. 251. Although McFadin understood this to mean 

that ·wylie wanted to resign, 4 R. 252, McFadin testifed that Wylie 

never ~tated that he was going to resigri or quit. 4 R. 262 . 

. Wylie testified he never said he was going to resign or quit, 3 R. 

147, nor that McFadin stated he would accept his resignation. 3 

R. 148 

Later that same day Wyli~ contacted Robert MacDonnei1, 

general partner for KKR, to discuss the Signorelli promotion. 

MacDonnell testifed that Wylie. told him that he had resigned. 4 R. 

287"'.'"88. Wylie denied this. 2 3 R. 149-50. The next day Wylie 

visted with MacDonnell in San Francisco. MacDonnell testified· 

that there Wylie again stated that he had resigned. 4 R. 290. 

When Wylie returned to Kansas City from his meeting with 

MacDonnell, he· received a litter dated December 8. from McFadin 

stating that McFadin had "accepted [his] resignation." 1 R. Doc. 

7, Ex. D. In response to the McFadin letter, Wyl~e wrote a letter 

2 

On the question whether Wylie had resigned, there was also a 

proffer of testimony of Mr. Wrobel, which was excluded. Wrobel, 

General Counsel and Chief Legal Officer for Marley, would have 

testified . that Wylie called him and during the communication said 

it probably would not surprise Wrobel.to know that he, Wylie, had 

resigned. This testimony was rejected for ·reasons discussed below 

in Part III B. . . 

6 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 6
to Powell, as Chairman of the Board, that Marley was in breach of 

its employment agreement, and denying that he resigned. Wylie 

also made formal demand to cure the contractual defaults as 

required by the employment agreement. When Marley failed to cure 

the defaults as requested, Wylie sent another letter to both 

Marley and KKR stating that the employment agreement was 

terminated and that any reliance on· an oral resignation was 

invalid as a matter of law. Shortly thereafter, Wylie initiated 

this action. 

Prior to trial, Wylie filed ·a motion for.partial s1,1mmary 

judgment on the ground that under applicable Kansas corporation 

law, he could not orally resign as executive vice preiident or as 

a director of Marley. Therefore, Wylie asserted that Marley's -

uncontroverted conduct breached. the Employment Agreement and 

constituted wrongful discharge. The trial ~curt denied Wylie's 

motion as t6 the wrongful discharge issue du~ to disputed material 

questions of fact surrounding Marley's affirmative defenses. 

However, the trial court did rule that under Kansas law an 

effective resignation by a corporate director or officer must be 

"unequivocal, in writing, and communicated to the corporation." ·2 

R. Doc. 103, pp. 3-6. ~n addition, the tri~l court ruled that if 

Marley showed that Wylie induced Marley to believe that he 

resigned, and Marley relied on that inducement to its prejudice, 

Wylie would be estopped from asserti.ng that a resignation was 

required to be -in writing to be effective. 2 R. Doc. 103, p. 7. 

Wylie also filed a motion in limine to exclude communications 

between himself and Robert Wrobel, the General Counsel and Chief 

~egal Officer of Marley at the time of the controversy over 

7 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 7
Signorelli's d~signation as a second executive vice-president. 

Wrobel had previously represented Wylie in the negotiation of his 

employment agreement with MC Acquisition Company. This motion 

sought to exclude testimony from Wrobel regarding the conversation 

between Wrobel and Wylie in which Wylie allegedly made reference 

to having resigned. The trial court granted Wylie's motion to 

exclude Wrobel's testimomy on this subject. 

The ensuing trial resulted in a jury verdict for Wylie for 

$1,329,424, on which judgment was enter~d. · Wylie moved to amend 

the judgment to include prejudgment interest, as allowed by Kansas 

law, in the amount of $341,705. Marley also filed post-trial 

motions for judgment notwithstanding the ver4ict a~d for a new 

trial. The district court granted Wylie's· motion to amend 

judgment and denied both of Marley's motions. An amended judgment 

reflecting prejudgment i"nterest was filed and 

followed. 

III 

A. 

this appeal 

Marley argues the district court erred in instructing the 

juiy that Wylie's resignation had to be in writing to be effective 

under Kansa~- law. Marley contends that pursuant to Kan •. Stat. 

·Ann. § 17-6302(a)(l981), 3 a resignation by a corporate officer 

3 

Kan. Stat. Ann. S 17-6302(a)(l981) provides in part:. 

Officers; manner of selection; terms of .office; 

resignation; duties;. failure to elect; vaciancies; 

not for profit, non-stock ~orporations. (a) Every 

corporation organized under this act shall have a 

president, secretary and treasurer, who shall be 

chosen as the bylaws may direct. Each officer shall 

hold his office until ·his successor is elected and 

(Footnote continued on next page) 

8 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 8
need not be submitted exclusively in writing. Rather, Marley 

suggests that the statute is permissive and states only that an 

unequivocal intention to resign is required. Marley argues that 

the trial court erred in submitting Instruction No. 11 which 

stated that a corporate officer can only effectively resign in 

writing. We agree. 

The trial court instructed the jury that: 

The plaintiff and defendant entered into an 

employment contract wherein defendant agreed to 

compensate plaintiff as its. executive vicepresident until Dec. 31, 1988. Under the law o·f 

the state of Kansas applicable to this case, the 

resignation of a corporate officer such as 

plaintiff, to be .effective, must be in writing, 

unequivocal, and communicated_ to the corporation. 

. Because the alleged resignation of plaintiff 

was not in writing, you must find for the_plaintiff 

unless defendant has established as more· pr9bably 

tru·e than not true one of its affirmative defenses. 

II R. 121, Inst-r. No. 11. 

In h·is order granting· partial summary judgment on the 

resignation isgue, the district court, in the absence of any 

Kansas authority, looked to Delaware law for guidance in 

interpreting § 17-6302(b) since Kansas adopted the statute from 

the Delaware code. Woodring v. Hall, 438 P.2d 135, 140 (Kan. 

1968); State -ex rel Carrington v. Shutts, 535 P.2d 982,· 985-86 

(Footnote continued): 

qualified or until 

removal. Any officer 

written notice to the 

his earlier resignation· or 

may resign at an~ time upon 

corporation ••.• 

The st~tutory · provision pertai~ing to director resignations 

is the same. See Kan. Stat. Ann. § 17-630l(b)(l981). Both of 

these prov1s1ons are patterned after Del. Code Ann. tit. 8 

§§ 14l(b) and 142. The organization of the statutory provisions 

was later revised in 1988, but their substance remained the same. 

Kan. Stat. Ann: §§. 17-6302(b) & 17-6301 (L988). 

9 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 9
(Kan. 1975). The district court relied primarily -on Dillon v. 

Berg, 326 F. Supp. 1214 (Del.), aff'd, 453 F,2d 876 (3rd Cir. 

1971) (per curiam), 4 which construed the Delaware statute 

concerning resignations of corporate directors, stating: 

The legislative history of the phrase, "Any 

director may resign at any time upon written notice 

to the corporation," indicates that the purpose of 

this provision was to prevent a corporate director 

who desired to resign from having his status placed 

in doubt by a refusal or failure of the Board to 

act. The logical interpretation of the provision 

is that acceptance is no longer essential to effect 

a valid resignation by a director. 

Froljl the requirements of 8 Del. C. § _14l(b) it' can 

also be inferred that it w~s the policy of this 

legislation that a resignation be unequivocal, in 

writing and· that it be communicated to the 

corporation. The necessity for written notice t.o 

the corporation before a director's resignation 

becomes effective clearly indicates an intent to 

outlaw secret,. covert resignations .1n o-rder to 

enable the other directors t~ know at all times the 

status of their fellow di rectors. Therefor·e, . the 

Court interprets the phrase "written notice to the 

corporation," used in 8 Del. c. § 142(b) in 

connection with the resignation of a director, to 

mean ~ctual written notice to each and every member 

of the Board·of Directors or actual written notice 

to an agent of the corporation, such as its· 

Chairman of the Board, President~ or Secretary. 

326 F. Supp. at 1223-1224. 

Hoorelbeke, 401 F. · Supp. 

See also, Rare Earth, Inc. v. 

26, 31-32 (S.D.N.Y. 1975)(same 

requirement under Michigan law). 

The Dillon case arose in a stockholders' derivative suit. 

There was a controversy as to alleged illegality of a 

stockholders' meeting due to misleading information in proxy 

4 

The court of appeals did not discuss the reasoning of t~e 

federal trial court on the interpretation of the Delaware statute, 

stating only that in the circumstances, "we agree that the 

purported iesignation of Power was not effective." 453 F.2d at 

877. 

10 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 10
solicitations. This in turn concerned the validity of a purported 

resignation of a director, Power, which was made by a written but 

undated secret resignation obtained by another director, Berg. 

Power later sought to withdraw the undated secret resignation but 

Berg back-dated the resignation and sent out word to the other 

· directors of the resignation. As stated in the reasoning quoted 

above, the federal district court in Dillon held that such a 

purported resignation was void because it was obtained by means of 

.an illegal agreement and the statute required such a · resignation 

to be ·unequivocal, in writing, and communicated to the 

corporation. 326 F. Supp. at 1224. Accordingiy the proxy 

information omitting Power's name was a violation of securities 

· regulations-. 

At one point the Dillon opinion pointed out that the 

legislative· history of the proviso on written resignations 

indicated that the statute's purpose "was to prevent a corporate 

director who desired to resign from having his.status placed in 

doubt by a refusaL or failure of the Bbard to act." 326 F. Supp. 

at 1223. Another purpose was noted of outlawing secret, covert 

resignations and to enable other directo(s to know the status of 

theit fella~ directors. Id. 

Despite the Dillon opinion by the federal district court in 

Delaware, we are persuaded that the Kansas statute should be 

construed to provide, in our circumstances, an elective procedure 

by which a corporate officer "may resign at any time upon written . . 

notice to the corporation," but that the provision is not 

mandatory and exclusive if the officer intends -to resign ~nd does 

state his intention to the corporation. 

11. 

In interpreting an 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 11
identical provision of Delaware ~law (Del. C~ Ann. tit. 8 

§ 14l(b)), the Delaware Court of Chancery said, in dictum, that, 

if required to rule on the point, it would be inclined to hold 

against the party arguing that only a written resignation was 

effective; the statutory language can be construed as permissive 

rather than mandatory; the purpose of the language was to provide 

a means for a resignation to become effective at a director's 

election rather than to require acceptance by the corporation; and 

· the court could conceive of circumstan·ces where a completely 

illogical result would follow. from ref~sing to recognize an oral 

resignation clearly given! Backman v. Ontell, 1984 W L 8245 (Del. 

Ch. 1984), 10 Del. J~ Corp. L 149. We feel the Backman opinion 

and its dictum are persuasive views here. 

Furthermore, ·comment on the Delaware statute dealing with 

resignations states that the purpose of the written resignation 

requirement was_ to prevent a corporate director "who desired to 

resign, from having his status placed in doubt by a refusal or 

failure of the boaid to act," citing Dillon. 1 Folk< Folk on the 

Delaware General Corporation Law § 141.5.2 p. 132 (1988 ed.). 

Moreover·, other comment discussing the Delaware statute and Dillon 

has • said that the·. proviso "does not preclude a di rector from 

resigning orally, but an oral resignation may not be effective 

until its acceptance by the board on behalf of the corporation." 

l Ballotti and Finkelstein, The Delaware Law of Corporations · and 

Business Organizations§ 4.5 p.69 and note 109, citing cases (1988 

Supp.) (emphasis added). See also 1 H. Marsh, M~rsh's California 

Corporation Law §§ 8.7, p.427 and 8.23 (2nd· ed. Supp. 1988) 

(California Corporation Code provisions on resignation by 

12 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 12
directors and officers, identical to those of Delaware and Kansas, 

.interpreted by principal oraftsman as not specifying an exclusive 

manner of resignation: "[t]he purpose of thii provision is to 

provide a method by which an officer may resign and terminate his 

capacity as such with certainty (§ 8.23 p.455)). 

In B. F. Goodrich v. Helena Motor Car Co., 165 P. 454 (Mont. 

1917), a corporation statute was construed which similarly 

provided that any -director, trust~e or officer of a corporation 

"may resign his off ice" by d_eliver ing to the corporate ·secretary 

or president his written resignatiori, and filing the resignation 

in the office of the clerk and recorder of the county. A written 

resignation was only given to the president. The Montana Court 

held that under the- _common law, this was sufficient and that the 

additional step· of filing with tha county clerk and recorder was 

part of "a mode which is permis~ive." 165 P. at 455. 

We are convinced that the interpretation .of the Kansas 

statutory provision oh resignation of officers, Kan. Stat. Ann. 

§ 17-6302(a), by the trial judge and the instruction based 6n his 

interpretation were in error. We hold that the statute does not 

make written resignations the mandatory and exclusive means for an_ 

~fficer to resign, and that instead he may do so by 9ther means 

than ·the elective provision in· the statute- for written 

resignations. In accord with common law, he. may also resi·gn by 

oral communications or other actions which are sufficient to £how 

his intent to resign. 

In defense of the judgment in his favor, Wylie further 

strenuously argues that in any·event the evidence was insufficient. 

to establish that he resigned orally. He says that the burden of 

13 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 13
proof on this issue was on Marley. Thus there was no 

justification for giving an instruction on the question whether 

Wylie orally resigned, and in any event no error by the 

instruction that a resignation had to be in writing. 

On review of the present record and in light of the 

interpretation of Kansas law we have made, we hold that there was 

a jury issue on the question of resignation having been_mad~ 

orally by Wylie. He has pled the agreement between himself and 

Marley and that the company breached the agreement by locking him 

out of his office, by refusing to allow him to continue in his 

position, ahd by refusing to make the payments agreed on in the 

employment contract. He had the burden of proof on the essential 

elements of his contract claim, with Marl~y having the burden:of 

proof on the affirmative defense of repudiation by resignation and 

other affirmative defens~s. See Fed. R. Civ. P. 8(c); see also 

Modern Heat & Power Co. v. Bishop Steamotor corporation, 34 · N.W. 

~d 581, 584 (Iowa 1948) (burden of proving resignati6n falls on 

party asse·rting the claim);. Patient Care Services 

N.E. 2d 471, 478 (Ill. Ct. App. 1975) (same). 

v. Segal, 337 

We feet that the 

evidence was suffici.ent,· particularly from.the testimony of· Mr. 

McFadin, Mr, MacDonnell, and Mr. Powell, to raise a substantial 

fact issue on the contention by Marley that Wylie resigned orally. 

Wylie also argues that, in any. event, on this record 

Ihatruction No. 11 on a written resignation being required was not 

r.eversible error. He says the jury did consider and rejected 

Marley's contentions and evideqce concerning the repudiation and 

estoppel defenses. It is true tnat these affirmative defenses 

were submitted along with th~ testimony on oral statements of 

14 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 14
Wylie which allegedly amounted to a resignation. However, the 

repudiati~n and estoppel affirmative defenses, as submitted, 

carried some added burdens of proof for Marley, beyond the 

resigpation issue 

defenses. We cannot 

itself, in order for Marley to establish these 

determine how much damage the erroneous 

Instruction caused. We cannot hold that the error in instruction 

No. 11 was harmless. 

Accordingly we hold that Instruction No .. 11 that under 

Kansas law a resignation had to be in ·writing - was prejudicial 

error and that on remand the court should give. an instruction 

consistent with this opinion, in substance that a corporate 

officer or director may resign in writing as ·the• statute permits, 

or -by oral communications or actions showing his intention to 

resign. 

B. 

Defendant Marley contends that the.· trial judge erred in 

refusing to give requested instructions on its defenses of quasiestoppel and waiver. It says the evidence and Kansas law 

supported such theories so that the refusal ~o charge cin the 

defenses was reversible ~rror, citing Delana v. Kitch, 542 F.2d 

550, 554 (10th Cir. 1976), appeal following remand, 663 F.2d 990 

(10th Cir. 1981), cert. denied,_ 456 U.S. 946 (1982). Although the 

trial court never explained its reasoning for.not instructing the 

jury on M~rley•~ defense of quasi-estoppel and waiver, we n~ed to 

address Marley's contention. 

We must agree that ori retrial such defenses should be covered 

by the instr~ctions if they are supported by the evidence at the 

15 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 15
new - trial. The showing for a quasi-estoppel defense was not 

strong, but Marley should be allowed to attempt an adequate 

showing on the .defense theory of quasi-estoppel, at the new trial. 

Even though some elements of a true estoppel are lacking, a quasiestoppel defense may be ·asserted under Kansas law by showing ''the 

previous assertion of a position so inconsistent with the one now 

taken as to make the present claim unconscionable~" Fast v. Fast, 

496 P.2d 171~ 175 (Kan. 1972). 

Lik~Wise, we feel that the defense of repudiation and 

_resignati~n is sufficiently distinguishable from Marley!s theory 

of a waiver defense that the latter theory should be covered by an 

instruction .if the elements for a waiver defense under Kansas law 

are shown on the new trial. "Waiver in contract law implies that 

a party has voluntarily and intentionally renounced oi gi~en up a 

known right, or has caused or done some ~ositive action or 

inaction which is inconsistent with the contractual right •••. , 

Once it has been established that a ·right has been waived, the 

party possessing the contractual right is precluded from asserting 

it in a court of law." United American· State Bank & Trust Co. v. 

Wild West Chrysler Plymouth, Inc., 561 P.2d 792, 795 (Kan. 1977). 

This is sufficiently distinguishable from 

resignation that with evidence to support it 

repudiation 

at retrial, 

by 

the 

defense should be cover.ed by an instruciton. The abandonment or 

repudiation of a contract under Kansas law is placing oneself, by 

voluntary act, in a position so that he is unable to fulfill his 

part of the agree_ment, which may be treated as an anticipatory 

breach, with the result that the other party may thereupon rescind 

it. -Jinnings v. Amend, 165 P. 845, 846 (Kan. 1917). 

16 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 16
For guidance of the trial court on retrial, which we hold 

must be allowed, we thus comment on these two defense instructions 

which should be given if supported by evidence at the new trial. 

c. 

Marley also argues that the trial court erred in granting 

Wylie's motion in limine, thus excluding the testimony of Robert 

Wrobel, Marley's General Counsel and Chief Legal Officer, on the 

grou~ds of attorney-clien~ privilege. The substance of Wrobel's 

testimony in question concerned a phone conversation with Wylie in 

which Wylie allegedly stated "I guess. you won't be surprised to 

learn that I resigned this- morning." Addendum to Appellant's 

Brief, Doc. G (Wrobel's Affidavit irt response to Wylie's motion in 

limine). Marley asserts that the distri~t c6urt's exclusion of 

Wrobel's teslimony under the attorney-client: privil_ege was, erro·r. 

Marley also says the ruling was prejudicial in that Wrobel's 

testimony would have clearly proven Wylie's resignation and was 

. . 

relevant to Marley's affirmative defenses. Additiqnally, Marley 

asserts that Wrobel's testim6ny would have impeached Wylie's 

testimony that he never intended to resign. 

The _district court, in addres~ing Wylie 1·s motiori in limine, 

correctly noted that Kansas law controls whether the atto~neyclient privilege is applicable. Fed. R. Evid. 501; Mfg. Systems, 

Inc. of Milwaukee v. Computer Tech., 99 F.R.D. 335, 337 (E.~. 

Wisc. 1983); New York Underwriters Ins. Co. v. Union Construction 

Co., 285 F.Supp. 868, 869 (D. Kan. 1968); 5 After reviewing the 

5 

Kan.· Stat. Ann. §60-426(a)(l983) states in pertinent part: 

" •.• communications found by the judge to ~ave _ 

(Footnote continued on next page) 

17 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 17
affidavits of both Wylie and Wrobel, the trial court determined 

that Wylie "could have believed that he could turn to [Wrobel] who 

negotiated his [employment] contract for the purpose of securing 

legal advice in the course of thei~ relationshi~ and in 

confidence." 2 R. Doc. 84, p. 4. The professional relationship 

for purposes of the privilege hinges upon the belief that one is 

consulting a lawyer and his inteniion to seek legal advice. See 

Westinghouse Electric Corp. v. Kerr-McGee Corp., 580 F.2d 1311, 

1319 (7th Cir. 1978); MCCORMICK ON EVIDENCE, § 88 (3rd ed. i984). 

The trial court also held that Wrobel's legal position with Marley 

was one which could have confused Wylie, and as a result, it would 

have. been unfair to allow Wrobel to use Wylie's communications to· 

Wrob~l against him as a res~lt of their attorney-client 

relationship. 2 R., Doc. 84, pp. 4-5. On review of the present 

record, we hold the district court•~ ruling was riot clearly 

erroneous or an abuse of discretion. 

Wrobel represented ~embers of Old Marley's senior management, 

including· Wylie, in connection with employ~ent contract 

negotiations with New Marley. 2·R. doc. 84, p. 2, ,3. In this 

cont~xt, Wylie and Wrobel were involved in an attorney-client 

relationship. Id. As a result.of Wrobel'i negotiations, Wylie's 

contract was extended to a term longer than the other senior 

management individuals. Id.; 1 R. doc. 75 (affidavit of Donald J. 

Wylie, ,13). up·on Wrobel's appointment as General Counsel and 

Chief Legal Officer of New Marley, he followed a practice of not 

(Footnote-continued): 

- beeri between 

course of that 

confidence, are 

lawyer and his or her client in the 

relationship and in .professional 

privileged .... " 

18 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 18
giving personal legal advice to officers and employees of Old 

Marley_. 2 R. doc. 84, pp. 2-3, ,1s. 

Both Wrobel and Wylie admit that they had a working 

relationship and had numerous conversations; however, they 

disagree as to their content. Wylie claims that these 

conversations touched upon matters concerning his employment 

agreement. Wrobel denied that he offered or was requested to 

offer legal .advice with. respect to the employment agreement. .Id. 

Wylie, in a phone.conversation with Wrobel, allegedly 

inquired as to what his -rights were under the employment contract, 

mentioned that he resigned, and sought legal representation from 

Wrobel. Id. ·at 1 7. Wylie-said he believed that Wrobel was still 

his attorney and that his conversation was confident.ial. Id. 

Both Wylie and Wrobel agree that duLing the conversation, Wrobel 

stated that he tould not represent Wylie. However, there· is a 

dispute as to the time at which this exchange occurred. Id. 6 

Marle·y further argues that the attorney-client privilege was 

waived by statements Wylie made to MacDonnell. aowever the 

alleged statements by Wylie to MacDonnell that he resigned did not 

make his conve~sations ~ith. Wrobel any less private, nor 

constitute a waiver of the privilege. 7 In sum, we hold the trial 

6 

The district court determined that Wylie was not informed 

that Wrobel could not represent him until after .Wylie "had spoken 

of his resignation." 2 R. Doc. 84, p. 5. 

7 

The district court addressed thi~ issue and held that any 

comments to MacDonnell by Wylie about his alleged resignation were 

immaterial as to .the issue concerning the attorney-client 

privilege between Wylie and Wrobel. Additionally, the trial court 

stated that even if Wylie made su~h a statement to MacDonnell, it 

was • not a waiver of the contents of the conversation Wylie had 

(Footnote continued on next page) 

19 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 19
judge's findings on the issue were not clearly erroneous and that 

the ruling granting the motion in limine was not in error or an 

abuse of discretion. 8 

D. 

In the event that Wylie prevails on the new trial, the issue 

of prejudgment interest raised by Marley would be presented again. 

Therefore we will address Marley's argument concerning the 

computation of prejudgment interest. 

The jury awarded Wylie $1,329,424, which represented the 

total salary and benefits ·he would have received absent Marley's 

breach. On Wylie's motion, the district court amended the 

judgment, adding prejudgment interest from the date of th~ ~rea¢h 

to the date judgment was entered on. the total amount of the 

verdict in the amount of $341,705. 2 R. Doc. 139. Marley argues 

that the district couri erred by awarding prejudgment interest on 

the total amount of the verdict because according to the 

Agreement, Wylie was only entitled to receive his annual salary 

payments as they· became due .. Marley further a·sserts· because some 

of Wylie's payments. had not become due at the time judgment was 

entered, Wylie's award of the prejudgment in~erest gave him mote 

money than he would have been entitled to under the Agre.ement. 

If Wylie prevails he would be entitled to prejudgment 

interest. His claim is liquidated. Section 16-201 of Kan. Stat. 

(Footnote.continued): 

· with Wrobel, but only a separate state~ent of a fact which did not 

• divulge the contents of the Wylie-Wrobel conversation. 2 R. Doc. 

84, p. 5. 

8 

Since the case is being r~manded,. for a new trial, we leave 

it to the trial court's discretion as to whether additional 

evidence need be takeri concerning this evidentiary issue. 

20 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 20
Ann. p~ovides in part that "[c]reditors shall be allowed to 

receive interest at the rate of ten percent per annum, when no 

other rate of interest is agreed upon, for any money after it 

becomes due;_ II This section is applicable to prejudgment 

interest awards involving liq'uidated claims. Delano v. Kitch, 663 

F.2d 990, 1001 (10th Cir. 1981), cert. denied 456 U.S. 946 (1982). 

In discussing when a creditor is entitled to prejudgment interest, 

the Kansas Supreme Court in First Nationa_l Bank of Girard· v. -

Bankers Dispatch Corpor~tion, 562 P.2d 32 (Kan. 1977)·, held: 

['A] claim becomes liquidated when both the amount 

due and the date on which- it is due are fixed and 

certajn, br when the same become definitely 

ascertainable by mathematical comput~tion.· Where 

ati amount is due upon contract, either expr~ss or 

implied, .and there is no uncertainty as to the 

amount which is due or the date· on which it becomes 

due, . t~e creditor i~- entitled to recover interest 

from the due date'. 

Id. at 40. 1herefore, the critical question for us to determine 

is at what point in time Wylie's claim becomes liquidat~d for 

purposes of calculating prejudgment interest. 

Marley asserts the district court was required to grant 

prejudgment _ interest in conformance with the terms of the 

Employment Agreement wherein Marley was to pay Wylie his annual 

salary in the event the Agreement was terminated. On the other 

hand, Wylie argues the liquidated amount became due for purposes 

of prejudgment interest when the company breached the agreement 

and he demanded continued payment in accordance with Paragraph 

7(a), and when Marley refused to follow the provisions of 

Paragraph 7(a) for his payments. We are persuaded that the 

district court erred in including prejudgment interest in the 

21 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 21
amended judgment for payments which.had not become due according 

to the Agreement. 

Although Wylie is correct in asserting that Marley's breach 

of the Agreement incl~ded the provisions contained within 

P~ragraph 7(a), this alone does not support his argume~t that the 

payments not yet due were accelerated and became part of the 

verdict for purposes of awarding prejudgment interest. Although 

we find no Kansas authority on point, we believe that Kansas in a 

case such as this, would hold that·a ~laim·becomes liqtiidated for 

prejudgment interest purposes when the total amount is due or, as 

here, when specific amounts prior to entry of judgment became due 

in semi-monthly amounts· as the contract· prov~ded. See· First· 

National. Bank of Girard, 562 P.2d at 40; Hollwedel v. Duffy-Mott 

·Co., Inc., 188 N.E. 266r 268 (N.Y; 1933); RESTATEMENT (SECOND) OF 

C_ONTRACTS §354 ( 1) comment c, illustration 7 ( 1981). 

We hold that Wylie was not entitled to prejudgment interest 

on the entire amount of the verdict as awarded. If Wylie prevails 

on retrial of the case, the district court shall calculate the 

prejudgment interest award to include interest on the amounts of 

semi-monthly payments and benefits from the various dates when 

due. 

IV. 

Accordingly, we REVERSE the judgment on the contract claim 

and the declaratory judgment entered in favor of Wylie, and REMAND 

for further proceedings· in accord with this opinion. 

22 

Appellate Case: 85-2368 Document: 010110280398 Date Filed: 12/18/1989 Page: 22