# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

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No. 1 3- 15 30

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Tho m as Km ak

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el la nt

v.

Am eri can Cen tu ry

Co m pa ni es , Inc

.

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll ee

__ __ __ __ __ __
App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Weste rn Dis tri ct of M is so ur i - Kan sa s C it y

__ __ __ __ __ __

Su bm it te d: Feb ru ary 11 , 20 14
Fil ed : J un e 5 , 20 14

__ __ __ __ __ __

Befo re LOKEN, BYE, an d C OLLOTO N, Circ ui t J ud ge s.

__ __ __ __ __ __

BYE, Cir cu it Ju dg e.

Tho m as Km ak ap pe al s th e di st ric t co ur t's di sm is sa l of Km ak 's se co nd am en de d

co m pl ai nt ("C om

pl ai nt ") fo r fai lu re to st at e a cl ai m up on w h ic h rel ie f co ul d be

gr an te d. Bec au se Km ak su ffi ci en tl y al le ge d th at Am eri can Cen tu ry Co m pa ni es , In c. ("Am eri can Cen tu ry ") ret al ia te d ag ai ns t hi m in vi ol at io n of pu bl ic po li cy , we rev ers e

an d re m an d.I

Am eri can Cen tu ry is an in ve st m en t m an ag em en t fir m

. It hi red Km ak in 19 90

to de ve lo p it s Ret ire m en t Pl a n S e rv ic es di vi si on

. Beg in ni ng in 19 98

, Am eri can

Cen tu ry ad op te d a se rie s of st oc k op ti on pl an s, en ab li ng Km ak an d ot he r em pl oyees

to pu rch as e Am eri ca Cen tu ry 's pr iv at el y he ld co m m on st oc k. On Octo be r 10

, 20 03

,

an d Apri l 28

, 20 05

, Km ak ex erci se d th es e op ti on s and pu rch as ed a to ta l of 238 ,00 0

sh ares

. As a sh areh ol de r, Km ak rece iv ed an an nu al di vi de nd pe r sh are at th e en d of

ev ery y ear.

Each st oc k pu rch as e was go ve rn ed by a "St oc k Res tri ct io n Agr eem en t fo r

Exe rci se of St oc k Opt io n" ("S to ck Res tri ct io n Agr eem en t" ). The St oc k Res tri ct io n Agr eem en t co nt ai ne d t he fol lo win g p ro vi si on :

(h ) Cal l Ri gh ts on Sh ares of C om m on Sto ck

.

(i) The Co m

pa ny wil l ha ve th e ri gh t to cal l an y of th e Sh ares fo r rep ur c ha se , in ex ch an ge fo r pa y m en t in

c a s h of th e m os t rece nt va lu e of th e Sh ares as de te rm in ed in acco rd an ce wit h th e va lu at io n
pr o c ed ur es pr ov id ed be lo w, at an y ti m e fo ll owi ng th e Pu rch as er's di sa

bil ity

, de at h, or te rm in at io n of

, or
ret ire m en t fro m , t h e Co m pa ny's em

pl oym en t

. . . . The Co m pa ny's rig ht to cal l t h e S h ares he reu nd er sh al l b e a co nt in ui ng rig ht

.

Bet ween 19 9 8 a n d 20 03

, Am eri can Cen tu ry op erat ed th e Ret ire m en t Pl an

Serv ic es di vi si on as a joi nt ve nt ur e wit h J PMo rg an . In 20 03 , J PMo rg an pu rch as ed

th e di vi si on ou tri gh t, an d Km ak le ft Am eri can Cen tu ry to wor k fo r JP Mo rg an

. W he n
he le ft Am eri can Cen tu ry , Km ak ha d sp eci fic co nv ers at io ns wit h Am eri can Cen tu ry 's
CEO, Bi ll Ly on s, who as su red Km ak Am eri can Cen tu ry wou ld no t ex erci se it s rig ht

-2

-of

red em pt io n fo r an y

sh ares Km ak ha d p ur ch as ed un le ss Km ak be ga n wo rk in g fo r

on e o f Am eri can Cen tu ry 's c om pe ti to rs

.

In 20 07

, Km ak le ft JP Mo rg an to st art hi s own bu si ne ss , Fi du ci ary Ben ch m ark s,
whi ch is no t an in ve st m en t m an ag em en t fir m an d do es no t co m pe te wit h Am eri can

Cen tu ry

. Km ak co ns id ered se ll in g hi s Am eri can Cen tu ry st oc k a t t h at ti m e, bu t

de ci de d ag ai ns t it

, be li ev in g Am eri can Cen tu r y wou ld on ly ex erci se it s rig ht of

red em pt io n i f he be ga n wo rk in g fo r a co m pe ti to r.

Sev eral y ears la te r, Am eri can Cen tu ry in it ia te d arb it rat io n pr oc eed in gs ag ai ns t

JP Mo rg an to res ol v e a di sp ut e rel at ed to th e Ret ire m en t Pl an Serv ic es di vi si on

. Km ak was su bp oe na ed to te st ify by JP Mo rg an , whi ch di d no t su bp oe na an y ot he r

cu rren t or fo rm er em

pl oyee of Am eri can Cen tu ry who h e l d s t o c k in th e co m pa ny.

Km ak pr o v i d e d swo rn te st im on y whi ch

, al le ge dl y , was no t he lp fu l to Am eri can

Cen tu ry 's po si t i o n

. Ult im at el y , Am eri can Cen tu ry pr ev ai le d in th e arb it rat io n an d

won a $3 73 m il li on jud gm en t ag ai ns t J PMo rg an

.

In May 20 11

, sh or tl y aft er K mak t e s t ifi ed

, Am eri can Cen tu ry se nt Km ak a
le tt er to "re m in d" hi m Am eri can Cen tu ry ha d th e rig ht to cal l hi s sh ares at an y ti m e.

To Km ak 's kn owl e d g e , t h i s rem in de r was no t se nt to an y ot he r Am eri can Cen tu ry
sh areh ol de r. W he n Km ak in qu ire d ab ou t th e le tt er, he rece iv ed as su ran ces Am eri can

Cen tu ry wou ld no t be cal li ng hi s sh ares

. Co ns is te nt wit h th is in fo rm at io n, Am eri can

Cen tu ry st at ed in a Decem be r 5, 2 0 1 1

, l e t te r th at Km ak wou ld rece iv e hi s reg ul ar

an nu al st oc k d iv id en d.

Mer e da y s la te r, be twee n D e c em be r 6 an d 9, 20 11

, Am eri can Cen tu ry 's

arb it rat io n award was fin al iz ed an d/ or pa id

. Km ak al le ge s th is pr om pt ed Am eri can

Ce nt ur y to ch an ge it s po si ti on

. On Decem be r 9, 20 11

, Am eri can Cen tu ry no ti fie d

Km ak it was cal li ng hi s sh ares fo r rep ur ch as e. As a res ul t, Km ak di d no t rece iv e
ei th er of th e two st oc k di vi de nd s is su ed in 20 11

, whi ch wou ld ha ve to ta le d m or e th an

-3

-$5 40 ,00 0. To Km ak 's kn owl ed ge , Am eri can Cen tu ry di d no t ex erci se it s call rig ht s

wit h re sp ect to an y

ot he r sh areh ol de r.

Km ak fil ed su it ag ai ns t A mer i c a n Cen tu ry on Aug us t 28

, 20 12

, as se rti ng a
si ng le cl ai m fo r br each of th e im pl ie d co ve na nt of go od fai th an d fai r de al in g. Km ak

al le ge d Am eri can Cen tu ry cal le d hi s sh ares in ret al ia ti on f o r hi s te st im on y on

JP Mo rg an 's be ha lf in th e arb it rat io n. Am eri can Cen tu ry m ov ed to di sm is s un de r Ru le

12 (b )(6 ) of th e Fed eral Ru le s of Civ il Pro ced ur e, arg ui ng it co ul d no t be hel d li ab le

be cau se it ha d a n u nq ua li fie d c on tra ct ua l ri gh t t o c al l i ts sh ares "at an y ti m e."

The di st ric t co ur t gr an te d Am eri can Cen tu ry 's m ot io n to di smi s s , reas on in g

Am eri can Cen tu ry "was en ti tl ed un de r th e 20 03 an d 20 05 St oc k Res tri ct io n Agr eem en ts to cal l Km ak 's st oc k fo r rep ur c h a s e 'at an y ti m e' aft er hi s em pl oym en t

wit h th e co m

pa ny ha d en d e d

. " A s a res ul t, th e di st ric t co ur t co nc lu de d Km ak 's

al le ga ti on s fa il ed to st at e a p la us ib le cla im for rel ie f un de r Mi ss ou ri l aw.

II

W e rev ie w " de no vo th e d i s t r i ct co ur t's gr an t of a m ot io n to di sm is s un de r
Fed eral Ru le of Ci vi l Pro ced ur e 12 (b )(6 ), acce pt in g th e pl ai nt iff 's fact ua l al le ga ti on s

as tru e an d co ns tru in g al l reas on ab le in fere nc es in fav or of th e pl ai nt iff ." Alex an de r
v. Hed ba ck , 71 8 F .3d 76 2, 7 65 (8t h C ir. 2 01 3)

.

"M is so ur i la w im

pl ie s a co ve na nt of go od fai th an d fai r de a l i n g i n ev ery

co nt ract ." Farm ers ' Elec . C o- op ., In c. v. M o. Dep 't o f Co rrs ., 9 77 S.W .2d 26 6, 27 1 (Mo

. 19 98 ). To es ta bl is h a br each of th e co ve na nt of go od fai th an d fai r de al in g, "t he
pl ai nt iff ha s th e bu rd en to es ta bl is h th at th e de fen da nt 'ex er c i s e d a jud gm en t

co nf err e d b y th e ex pr es s te rm s of th e ag reem en t in su ch a m an ne r as to ev ad e th e

sp iri t of th e tra ns act io n or so as to de ny [th e pl ai nt iff ] th e ex pe ct ed be ne fi t o f th e

co nt ract .'" Luc ero v. Cu rat or s o f Uni v. of Mo

., 40 0 S.W .3d 1, 9- 10 (Mo

. Ct

. App

.

-4

-20 13 ) (q uo ti ng Mo . C on so l. Heal th Care Pl an v. Cm ty. Heal th Pl an , 8 1 S.W .3d 34

,

46 (Mo

. Ct

. App

. 20 02 )). To su ffi ci en tl y pl ead su ch a br each

, Km ak ha s th e bu rd en
of pl ead in g th at Am eri can Cen tu ry "ex erci se d it s d is cret io n in a m an ne r co nt rary to

go od fai th an d fa ir d eal in g." Mo . Con so l. Heal th Care Pla n, 8 1 S .W .3d at 4 8.

Und er Mi ss ou ri la w, a pl ai nt iff pr o pe rly pl ead s a br each of th e im pl ie d

co ve na nt of go od fai th an d fai r de al in g whe n he al le ge s th e de fen da nt 's ac t io n
vi ol at ed pu bl ic po li cy or a st at ut e. Bi sh op v. Sh el te r Mu t. In s. Co

., 12 9 S.W .3d 50 0,

50 7 (Mo

. Ct

. App

. 2 0 0 4 ) (co nc lu di ng th e de fen da nt di d no t br each th e im pl ie d

co ve na nt of go od fai th an d fai r de al in g "s in ce [th e pl ai nt iff 's] te rm in at io n di d no t

vi ol at e pu bl ic po li cy or an y st at ut or y pr ov is io n." ). In Mi ss ou ri, ret al ia ti ng ag ai ns t an
in di vi du al fo r pr ov id in g tru th fu l te s t im on y in a qu as i-ju di ci al pr oc eed in g vi ol at es

pu bl ic po li cy

. See Dru ry v. Mo

. You th So ccer Ass 'n, 25 9 S.W .3d 55 8, 56 7 (Mo

. Ct

. App

. 20 0 8 ) ("[ I]t is well -s et tl ed th at pu bl ic po li cy req ui res th at wit ne ss es at tri al s
sh al l no t be r e s t r a i n ed by th e fear of be in g ve xe d by rep ris al s fro m th os e who are
di ss at is fie d wit h th ei r te st im on y ." ) ( c i t i n g Lau n v. Uni on Elec

. Co

. of Mo

., 16 6

S.W .2d 10 65

, 10 72 (Mo

. 19 42 )); se e al so L'Oran ge v. Med

. Pro te ct iv e Co

., 39 4 F.2 d

57

, 62 (6 th Ci r. 19 68 ) (h ol di ng an i n s u r a n c e co m pa ny's can cel la ti on of a po li cy as

pu ni sh m en t ag ai ns t a po li cy ho ld er who te st ifi ed in a jud i c i a l p ro ceed in g was

"m an ife st ly . . . con tra ry

to pu bl ic po li cy ").

Here, Km ak al le ge d Am eri can Cen tu ry ret al ia te d ag ai ns t hi m fo r hi s te st im on y
in th e arb it rat i on wit h JP Mo rg an

. Sp eci fic al ly, th e Co m pl ai nt al le ge d (1 ) Km ak

rece iv ed st oc k op ti on s pu rs ua nt to hi s em pl oym en t wit h Am eri can Cen tu ry ; (2 ) Km ak

te st ifi ed at JP Mo rg an 's req ue st in it s arb it rat io n ag ai ns t Am eri can Cen tu ry in Mar ch

20 11 ; (3 ) in May 20 11

, Km ak rece iv ed a le t t e r f ro m Am eri can Cen tu ry rem in di ng
hi m it ha d a rig ht to cal l hi s sh ares at an y ti m e; (4 ) Am eri c a n C e n t u ry 's arb it rat io n
award be cam e fin al be twee n Decem be r 6, 20 11

, an d Decem

be r 9, 20 11 ; (5 ) Am eri can

Cen tu ry ex erci se d it s cal l rig ht s on ly wit h res pe ct to Km ak 's sh ares on Decem be r 9,

20 11

, on e da y be fo re di vi de nd s were to be is su ed ; (6 ) Km ak reas on ab ly ex pe ct ed

-5

-Am eri can Cen tu ry wou ld ex erci se it s di sc ret io n in go od fai th ; an d (7 ) Am eri can

Cen tu ry ex erci se d it s cal l rig ht s "fo r th e pu rp os e of ret al ia ti ng fo r hi s de po si ti on an d

Arb it rat io n t es ti m on y ."

Bec au se Mi ss ou ri' s pu bl ic po li cy req ui red Amer i c an Cen tu ry no t to ret al ia te

ag ai ns t Km ak fo r te st ifyin g in th e arb it rat io n pr oc eed in g, Km ak ha s al le ge d a br each

of th e im pl ie d co ve na nt of go od fai th an d fai r de al in g su ffi ci en t to wit hs ta nd a Ru le

12 (b )(6 ) m ot io n. The di st ric t co ur t co nc lu de d Km ak co ul d no t reas on ab ly be li ev e he

wou ld no t su ffer ret al ia ti on fo r te st ifyin g t r u t hf ul ly in th e arb it rat io n be cau se th e

St oc k Res tri ct io n Agr eem en ts "d o no t co nc ern te st i mo n y in an arb it rat io n ari si ng

y ears lat er." Ho wev er, Km ak di d hav e a rea so na bl e ex pe ct at io n Am eri can Cen tu ry

wou ld no t ex erci se it s di sc ret io na ry au th or it y in a m an ne r whi ch wou ld vi ol at e pu bl ic

po li cy

. It was un ne ces sa ry fo r th e St oc k Res tri ct io n Agr eem en ts to refe ren ce pu bl ic

po li cy fo r Km ak 's ex pe ct at io n to be reas on ab le

. Thu s, it is fai r to acce pt

, at th e Ru le

12 (b )(6 ) st ag e, th at Km ak ha d a reas on ab le ex pe ct at io n Am eri can Cen tu ry wou ld no t

act in vi ol at io n of pu bl ic po li cy wit h res pe ct to hi s sh a res

. Am eri can Cen tu ry m ay
ha ve ha d th e rig ht to cal l Km ak 's sh ares "at an y ti m e," bu t it di d no t ha ve th e rig ht to

cal l t ho se sh ares for an y

reas on , if d oi ng so wou ld vi ol at e p ub li c p ol ic y

.

In reac hi ng it s ru li ng , th e di st ric t cou rt reli ed on Nem ec v. Sh rad er, 99 1 A.2d

11 20 (Del

. 2 0 1 0 )

. In Nem ec, th e pl ai nt iff s, fo rm er co rp or at e of

fic ers , su ed th e
de fen d a n t s c or

po rat io n an d bo ard m em be rs cl ai m in g th e bo ard br each ed th e

co rp or at io n's st oc k pl an 's im pl ie d co ve na nt of go od fai th an d fai r de al in g whe n th e
bo ard red eem ed th e pl ai nt iff s' st oc k aft er th ei r po st -ret ire m en t pu t rig ht s ha d ex pi red

, bu t be fo re se ll in g t he co rp or at io n's go ve rn m en t bu si ne ss di vi si on

. Id

. at 11 22 -2 5.

If th e de fen da nt s ha d wa i t ed to red eem th e st oc k un ti l aft er se ll in g th e go ve rn m en t

bu si ne ss di vi si o n, th e pl ai nt iff s wou ld ha ve real iz ed an ad di ti on al $6 0 m il li on in

pr of it s. Id

. at 11 24 -2 5. In st ead

, th at be ne fit accr ue d to th e d e f

e n d a n t s

. Id

. The

Dela ware co ur t re

jecte d t he pl ai nt iff

s' c la im , reas on in g t he de fen da nt s "di d n ot hi ng

un fai r an d br each ed no fid uc ia ry du ty by cau si ng th e Co m pa ny to ex erci se it s

-6

-ab so lu te co nt ract ua l rig ht to red ee m t h e [p la in ti ffs '] sh ares at a ti m e th at was m os t

ad va nt ag eo us to th e Co m pa ny's wor ki ng st oc kh ol de rs ." Id . at 1 12 7.

Howev er, Nem ec is in ap po si te to th e pr es en t cas e. The re, th e de fen da nt s were
si m pl y accu se d of ex erci si ng th ei r di sc ret io n a t a t i m e whi ch was eco no m ic al ly

di sa dv an ta ge ou s t o t he pl ai nt iff s. No vi ol at io n of pu bl ic po li cy was a ll eg ed . Here, by co nt ras t, A m er ic an Cen tu ry di d no t m erel y act at an eco no m ic al ly di sa dv an ta ge ou s
ti m e to Km ak

. In st ead

, Am eri can Cen tu ry is al l e ge d to ha ve ex erci se d it s rig ht to

reca ll Km ak 's sh ares in ret al ia ti on fo r hi s te st im on y in th e arb it rat io n p r oc eed in g.
Thi s al le ge d ret al ia ti on wou ld vi ol at e pu bl ic po li cy an d ren de rs Nem ec in ap pl ic ab le

. To th e ex te nt th e d i st ric t co ur t di sm is se d Km ak 's Co m pl ai nt fo r m erel y al le gi ng

Am eri can Cen tu ry act ed arb it rari ly, vi nd ic ti ve ly, or co nt rary to Km ak 's rea s o n ab le

ex pe ct at io ns ab ou t m at te rs ot he r th an pu bl ic po li cy , su ch di sm is sa l was pr op er. Cf.

Bi sh op , 12 9 S.W .3d at 50 6- 07 (s ta ti ng t he im pl ie d co ve na nt do es no t ap pl y to

al le ga ti on s in th e at -wil l em pl oym en t co nt ex t whe n an em pl oyer al le ge dl y te rm in at es

a co nt ract in ba d fai th or be cau se of il l wil l). B u t

, t o th e ex te nt Km ak ha s al le ge d

ret a l i at io n in vi ol at io n of pu bl ic po li cy , he ha s su ffi ci en tl y al le ge d a br each of th e
im pl ie d co ve na nt at th is st ag e, an d, th us , th e di st ric t co ur t erre d in di sm is si ng Km ak 's

Co m pl ai nt

.

Am eri can Cen tu ry is cri ti cal of Km ak 's co m pa ris on of hi s cas e to em

pl oym en t

di sc riminat io n cas es , bu t th e an al og y is a us efu l on e. The st oc k op ti on s at is su e were

no t mer el y co nt ract ua l pr ov is io ns

. In st ead

, th ey were co m pe ns at io n fo r Km ak 's

em pl oym en t wit h Am eri can Cen tu ry

. Mi ss ou ri' s em pl oym en t-a t- w il l do ct rin e

ge ne ral ly pe rm it s an em

pl oyer to di sc ha rg e an at -wil l em pl oyee, wit h or wit ho ut

cau se , wit ho ut li ab il it y fo r wro ng fu l di sc ha rg e. Si vi gl ia no v. Harrah 's N. Kan

. Ci ty

Co rp ., 18 8 S.W .3d 46

, 48 (Mo

. Ct

. App

. 20 06 ). Howev er, certa in ex cep ti on s to th e
do c t r i n e ha ve be en reco gn iz ed

, in cl ud in g th e pu bl ic po li cy ex cep ti on , whi ch

es ta bl is he s a cau s e of act io n fo r an at -wil l em pl oyee who ha s be en te rm in at ed in

vi ol at io n of pu bl ic po li cy

. Dun n v. Ent erp ris e Ren t-A- Car Co

., 17 0 S.W .3d 1, 6 (Mo

.

-7

-C t

. A p p

. 20 05 ). As di sc us se d ab ov e, on e su ch pu bl ic po li cy is fo r wit ne ss es to b e

free fro m fear of rep ris al fo r th ei r te st im on y in jud ic ia l pr oc eed in gs

. D r u r y, 25 9

S

. W. 3 d at 56 7. Thu s, acce pt in g Km ak 's al le ga ti on s as tru e, it was im pr o p e r f o r

Am eri can Cen tu ry , act in g in a m an ne r in vi ol at io n of pu bl ic po l i c y, to de ny Km ak

co m pe ns at io n e arn ed th ro ug h h is em pl oym en t.

Am eri can Cen tu ry al so arg ue s "Km ak ut te rly f a il s to al le ge pl au si bl e fact s
de m on st rat in g an y cau sa ti on ." W e di sa gr ee. Accep ti ng Km ak 's al le ga ti on s as tru e

an d co ns tru in g al l reas on ab le in fere nc es in hi s fav or , th es e fact s su ffi ci en tl y al le ge

a cau sa l co nn ect io n be twee n Km ak 's te st imo n y in th e arb it rat io n pr oc eed in g an d

Am eri can Cen tu ry 's de ci si on to cal l hi s sh ares

. Fi rs t, th ere is th e a ll eg at io n of

A mer ic an Cen tu ry 's ve il ed th reat , r em in di ng Km ak it co ul d reca ll hi s sh ares a t a n y
ti m e, aft er he te st ifi ed in th e arb it rat io n pr oc eed in g. Mo re te ll in g is th e al le ga ti on th at

Am eri can Cen tu ry el ect ed to cal l on ly Km ak 's sh ares jus t 1- 3 da y s aft er it s arb it rat io n
award was co nf

irmed an d/ o r p a id

. The reas on ab le in fere nc e he re is th at Am eri can

Cen tu ry wait ed to ret al ia te un ti l aft er th e arb it rat io n w a s f in al iz ed

, so as no t to jeop ard iz e it s p os it io n i n t ha t p ro ceed in g.

Fu rth er, an y in ti m at io n th at Km ak su ffer ed no da m ag es be cau se Am eri can

C e n t u r y c o ul d cal l Km ak 's sh ares "at an y ti m e" al so fai ls

. Mu ch li ke an at -wil l

em pl oyee te rm in at ed in a m an ne r vi ol at in g pu bl ic po li cy wou ld su ffer da m ag es , he re,

Km a k h a s si m il arl y al le ge d da m ag es res ul ti ng fro m a vi ol at io n of pu bl ic po li cy ,

na m el y , Am eri can Cen tu ry 's ret al ia ti on

. As su ch

, he ha s al le ge d da m ag es su ffi ci en t

to su rv iv e a Ru le 12 (b )(6 ) ch al le ng e.

III

Fo r th e fo reg oi ng reas o n s, we rev ers e an d rem an d fo r fu rth er pr oc eed in gs

co ns is te nt wit h t hi s o pi ni on

.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __

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-