Court Opinion

ID: 7799866
Source: CourtListenerOpinion
Date Created: 2022-08-11 17:00:58.627196+00
Date Added: 2024-06-11T16:29:00.525812
License: Public Domain

NONPRECEDENTIAL DISPOSITION
                 To be cited only in accordance with FED. R. APP. P. 32.1

                United States Court of Appeals
                                For the Seventh Circuit
                                Chicago, Illinois 60604

                                Argued August 3, 2022
                                Decided August 11, 2022

                                           Before

                         DIANE S. SYKES, Chief Judge

                         MICHAEL Y. SCUDDER, Circuit Judge

                         AMY J. ST. EVE, Circuit Judge

Nos. 21-3254 & 21-3324

JOHN COCQUYT,                                        Appeals from the United States District
     Plaintiff-Appellee/Cross-Appellant,             Court for the Northern District of Indiana,
                                                     South Bend Division.

      v.                                             No. 3:19-CV-933-PPS

SPARTANNASH COMPANY & MARTIN’S                       Philip P. Simon,
SUPER MARKETS, INC.,                                 Judge.
     Defendants-Appellants/Cross-Appellees.

                                       ORDER

       This appeal arises out of a severance-payment dispute between John Cocquyt
and his former employer. When Cocquyt began working as an executive for the
company, he signed a three-year contract that contemplated that his employment “may
be terminated” within the three-year term. “If, and only if,” such a termination occurred
within one year of a change in ownership, Cocquyt was entitled to twice his annual
salary. SpartanNash Company bought the business during the three-year term. About
Nos. 21-3254 & 21-3324                                                            Page 2

eight months later—but after the three-year term had ended—it fired Cocquyt. Cocquyt
sued for breach of contract, asserting that although his three-year term had ended, he
deserved the severance because SpartanNash fired him within a year of buying the
company. After a bench trial, the district judge entered judgment for Cocquyt,
awarding him roughly $500,000 in damages but no prejudgment interest.

        Both sides appeal. SpartanNash challenges the judgment against it, contending
that under the contract’s plain language, SpartanNash did not owe Cocquyt severance
pay because it fired him after the three-year term had expired. Cocquyt also appeals,
challenging the denial of prejudgment interest. Because we agree with SpartanNash
that the contract unambiguously states that the severance pay is owed to Cocquyt only
if he is fired within the contract’s three-year term, we reverse the judgment.

                                     I. Background

        Cocquyt and Martin’s Super Markets entered into a three-year employment
contract in August 2016. Cocquyt was leaving a stable, executive-level position with a
national company, and he feared that his new regional employer might soon sell to
another company; he therefore negotiated terms to ensure job stability. The contract set
an initial three-year term. It warranted that if Cocquyt was discharged before the end of
that term and within one year of a change of ownership, the company would pay him a
severance of twice his yearly salary. Unless either party gave notice within 60 days of
the end of the term of no intent to renew, the contract would renew for additional one-
year periods. We provide these provisions here:

                  1. Employment.

             Term. … [T]he Employee hereby accepts full-time
             employment with the Company for a term beginning on
             August 29, 2016, and continuing for a period of three (3) years
             (the “Term”). This agreement may be terminated prior to the
             end of the Term … [as] provided for in Section 5 below.

             ….

                5. Termination; Rights on Termination. Employee’s
             employment may be terminated in any one of the following
             ways, prior to the expiration of the Full-Time Term:
Nos. 21-3254 & 21-3324                                                           Page 3

             ….

                 (e) Change of Control. If, and only if, the Employee is
             terminated within twelve (12) months after a change of
             control, … then, and in that event Employee shall receive
             from the Company an amount equal to two (2) times
             Employee’s Base Salary in effect for the calendar year
             immediately preceding the calendar year in which his
             termination of employment occurs … . Such payments are to
             begin within thirty (30) days of the date of severance and be
             made over an eighteen (18) month period, … and Employee
             shall not be required to comply with [the contract’s non-
             compete agreement].
             ….

                  10. Extension of Agreement. Unless earlier terminated
             pursuant to Paragraph 5 and unless either Employee or
             Company gives notice … not to renew this Agreement at least
             sixty (60) days prior to the end of the … term, if Employee is
             employed by the Company at the end of the … term, then this
             Agreement shall be automatically extended from year to year
             thereafter … .

       SpartanNash acquired Martin’s Super Markets in December 2018, about eight
months before the end of Cocquyt’s initial three-year contract. SpartanNash continued
Cocquyt’s employment through the end of that term and gave Cocquyt the required
60-day advance notice that it would not renew the contract. It discharged Cocquyt on
August 31, 2019. This was two days after the contract’s three-year term had expired, but
less than one year after SpartanNash acquired the company. (SpartanNash offered
Cocquyt six months of severance pay—approximately $131,000—which Cocquyt
refused.)

       Cocquyt sued SpartanNash and Martin’s Super Markets in Indiana state court for
breach of contract. He contended that under section 5(e)—the “change of control”
provision—he should collect twice his salary as severance (and be freed from the
noncompete agreement) because he was fired within one year of a change in control.
SpartanNash removed the case to federal court and sought summary judgment. It
Nos. 21-3254 & 21-3324                                                                 Page 4

argued that the severance right in section 5(e) is limited by the first sentence of
section 5, which applies to a termination made “prior to the expiration of the Full-Time
Term” of the Agreement. Because the contract defines this “Term” as the initial three-
year contract, SpartanNash argued that section 5(e) did not apply after that period
ended.

        The judge denied the motion for summary judgment. He ruled that the contract
was ambiguous about whether the change-of-control provision applied only if the
termination occurred within the contract’s three-year term. When read by itself, the
judge thought that section 5(e) seems to say that Cocquyt was entitled to twice his
salary if fired within one year of a change in control, even if that discharge occurred
after the contract’s three-year term. On the other hand, the court continued, if section
5(e) is read alongside the opening sentence of section 5, it seems to describe Cocquyt’s
rights if he is fired during the contract’s initial three-year term. Further, the judge
thought that if section 5(e) applied only within the contract’s initial three-year term,
then it rendered another section—section 5(d)—superfluous. That section provided that
if “the Company” (defined as Martin’s Super Markets) fired Cocquyt without cause, he
would receive severance equal to twice his annual salary. The judge concluded that a
trial was needed to resolve the ambiguity and these issues.

       After a two-day bench trial, the judge entered judgment for Cocquyt. The judge
heard testimony from Cocquyt and the former CEO of Martin’s Super Markets, who
negotiated the contract. Each said that when entering into the contract, each wanted
Cocquyt to receive his severance if he were fired within one year of a change of control,
even if the discharge occurred after the contract’s three-year term. Based on this
testimony about their subjective intent, the judge concluded that SpartanNash breached
the contract and ordered it to pay Cocquyt $524,000 in damages, which included his full
severance and postjudgment interest at a rate of 0.16%. The judge denied prejudgment
interest because that amount was not easily calculated and, thus, was unwarranted.

                                        II. Analysis

       SpartanNash appealed the judgment. Cocquyt cross-appealed, challenging the
denial of prejudgment interest.

      SpartanNash contends that the contract unambiguously denies Cocquyt any
severance when, as here, he is fired after the initial three-year term. In its view all of
Nos. 21-3254 & 21-3324                                                                Page 5

section 5—including the change-of-control provision in section 5(e)—describes
Cocquyt’s rights upon termination during the initial three-year term. Because
SpartanNash fired Cocquyt after this three-year term was over, SpartanNash did not
need to pay Cocquyt twice his salary as severance. We review de novo a district court’s
determination of whether a contract is ambiguous. Aeroground, Inc. v. CenterPoint Props.
Tr., 738 F.3d 810, 813 (7th Cir. 2013).

        We agree with SpartanNash that the contract unambiguously does not entitle
Cocquyt to the severance. When interpreting a contract, Indiana law requires a judge to
“examine the plain language of the contract, read it in context and, whenever possible,
construe it so as to render every word, phrase, and term meaningful, unambiguous, and
harmonious with the whole.” Celadon Trucking Servs., Inc. v. Wilmoth, 70 N.E.3d 833, 839
(Ind. Ct. App. 2017). We thus begin with Section 5’s first sentence. It states that
Cocquyt’s employment “may be terminated in any one of the following ways, prior to
the expiration of the Full-Time Term.” (Emphasis added.) “Term” is defined as the initial
“period of three (3) years.” Section 5(e) adds that if the employment termination, so
defined as occurring within the first three years, also occurs within one year of a change
of control, Cocquyt receives the two years of severance. Thus, Cocquyt’s discharge,
which occurred two days after the end of the three-year term, albeit within one year of
change of control, did not entitle him to two years of pay.

       Construing section 5(e) to apply only during the three-year term does not render
the provision for termination without cause in section 5(d) superfluous as the judge
believed it would. Section 5(d) states that if “the Company”—defined as Martin’s Super
Markets—fires Cocquyt without cause during the three-year term, he is entitled to twice
his salary. By contrast, section 5(e) covers severance if, after a change in control,
Cocquyt is fired by another entity. Moreover, the benefits in section 5(d) are different.
The severance under section 5(d) is paid in 24 equal monthly payments. As
SpartanNash observes, section 5(e) provides for a quicker payout (18 months instead of
24) and release from the noncompete agreement. Thus, because these sections provide
different rights, neither is superfluous even if each applies only during the three-year
term.

       Cocquyt resists this interpretation of section 5(e), giving three reasons, but none
persuades us. First, he points to the phrase “If, and only if” at the start of the change-of-
control provision of section 5(e). (The full sentence is: “If, and only if, the Employee is
terminated within twelve (12) months after a change of control, … then and in that
Nos. 21-3254 & 21-3324                                                              Page 6

event Employee shall receive from the Company an amount equal to two (2) times
Employee’s Base Salary … .”) In Cocquyt’s view the “only” precondition for receiving
severance under this section is if he is fired within one year of a change in control; the
discharge need not occur within the three-year term. But the word “only” works against
Cocquyt’s claim. In conjunction with the first sentence of section 5, this word
emphasizes that the “only” way he gets the speedy 18-month payout of two years of
severance and release from the noncompete agreement is if he is fired before the end of
three years and within one year of a change in control.

       Second, Cocquyt contends that the change-of-control provision, unlike the other
subsections in section 5, explicitly applies for 12 months after a change in control and
thus might outlast the initial term. But as revealed elsewhere in the contract, the parties
knew how to express when they definitively wanted a provision to survive the initial
three-year term. Section 6—the contract’s noncompete provision—expressly states, for
example, that it applies “[d]uring the Term, and thereafter.” Nothing in the language of
section 5(e) states that it, like section 6, outlasts the three-year term.

       Third, Cocquyt maintains that evidence at trial showed that when SpartanNash
acquired Martin’s Super Markets, it treated the contract as entitling Cocquyt to his
severance if it fired him in a year, regardless of when his term ended. But Cocquyt
misrepresents this trial evidence. The evidence showed that SpartanNash accepted that
the contract required it to pay Cocquyt a severance if it fired him within a year of
acquisition and within the three-year term. Internal e-mails from SpartanNash show it
planned to fire him on August 31, 2019, precisely because by that date Cocquyt’s three-
year contract term was over and SpartanNash believed it no longer owed him the
severance.

       Because the contract’s terms (and SpartanNash’s conduct) unambiguously
contradict Cocquyt’s claim, the judge should not have received extrinsic evidence.
Although neither side raises the point, we note that when considering extrinsic
evidence to interpret an ambiguous contract, a judge generally should consider only
objective evidence of the parties’ intended meaning; a judge should “never consider[]
either side’s private thoughts and hopes.” Kunkel v. Comm’r, 821 F.3d 908, 910 (7th Cir.
2016). Here, however, the judge appears to have relied on Cocquyt and the former
CEO’s testimonies about their subjective intent for the contract rather than objective
evidence. See Knutson v. UGS Corp., 526 F.3d 339, 342 (7th Cir. 2008) (applying Indiana
law and stating the necessity of objective evidence to resolve latent ambiguities in a
Nos. 21-3254 & 21-3324                                                              Page 7

contract); Univ. of S. Ind. Found. v. Baker, 843 N.E.2d 528, 535 (Ind. 2006) (relying on
extrinsic evidence such as contemporaneous notes from the contract drafter and
affidavits from third parties attesting to the parties’ spoken intent); Higgins v. State,
855 N.E.2d 338, 342 (Ind. Ct. App. 2006) (using industry practice as a form of objective
evidence).

       On SpartanNash’s appeal, we REVERSE the judgment and remand with
instructions to enter judgment for SpartanNash. Because Cocquyt is not entitled to the
two years of severance, we need not consider whether the judge also erred by not
awarding him prejudgment interest.

                                                                               REVERSED