Court Opinion

ID: 3029827
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:43:27.401095+00
Date Added: 2024-06-11T11:48:03.519038
License: Public Domain

United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 00-3534
                                   ___________

Stephen C. Jenkins,                     *
                                        *
            Appellant,                  *
                                        * Appeal from the United States
      v.                                * District Court for the
                                        * Western District of Missouri.
KLT, Inc.; KLT Gas, Inc.,               *
                                        *
            Appellees.                  *
                                   ___________

                             Submitted: November 14, 2001

                             Filed: October 15, 2002 (Corrected: October 31, 2002)
                                    ___________

Before BOWMAN, JOHN R. GIBSON, and STAHL,1 Circuit Judges.
                          ___________

BOWMAN, Circuit Judge.

       Stephen C. Jenkins sued his former employer, KLT, Inc. (KLT), a wholly-
owned subsidiary of Kansas City Power and Light (KCPL), for breach of contract and
negligent misrepresentation. Jenkins's breach-of-contract claims alleged that KLT
failed to complete payments owed to him from two incentive plans and a severance
agreement. Jenkins also claimed that KLT negligently misrepresented to him the

      1
       The Honorable Norman H. Stahl, United States Circuit Judge for the First
Circuit, sitting by designation.
length of time that certain severance benefits would continue and the extent of the
opportunity he would have to perform under one of the incentive plans. After a bench
trial, the District Court2 entered judgment in favor of KLT on the breach of contract
claims and later entered summary judgment in favor of KLT on the negligent
misrepresentation claim. We affirm.

                                         I.

      KLT hired Stephen Jenkins in 1995 to be President of KLT Power Inc., a
wholly-owned subsidiary of KLT. Jenkins served in that capacity until July 1998,
when KLT sold KLT Power. After the sale, KLT initially transferred Jenkins to
another subsidiary, but, on July 30, 1998, KLT notified Jenkins that his employment
would be terminated in ninety days.

      KLT was obligated to compensate Jenkins under two agreements: (1) Jenkins's
employment contract, which included incentive awards, and (2) Jenkins's severance
agreement.

Jenkins's Employment Contract

      Jenkins's at-will employment contract provided for a base salary and two
incentive plans. The first incentive plan was an annual incentive plan, while the
second was a long-term incentive plan. Under the annual incentive plan, Jenkins
could earn up to forty percent of his base salary. In addition, the annual incentive
plan was amended in 1997 to include a Project Incentive Plan (PI Plan), under which
Jenkins could earn an award for achieving certain milestones related to independent
power projects. Under the Long-Term Incentive Plan (LTI Plan), Jenkins could earn

      2
      The Honorable Fernando J. Gaitan, Jr., United States District Judge for the
Western District of Missouri.

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an award based on achievements over a three-year period beginning in fiscal year
1995.

       KLT paid Jenkins pursuant to these plans, including an annual incentive award
for his termination year, 1998. Jenkins, however, disputes the amounts KLT owed
him under these plans. The thrust of his argument is that KLT, in selling KLT Power
and terminating him, prevented him from maximizing his incentive awards.

Jenkins's Severance Agreement

       In addition to the incentive award agreements, Jenkins and KLT entered into
a severance agreement under which KLT agreed to pay Jenkins two cash awards, to
continue Jenkins's insurance coverage for two years after his termination, and to pay
his legal fees in certain situations. Jenkins brings claims regarding each component.

       The first cash award, laid out in paragraph 3(a)(1)(ii), was to be "a bonus in an
amount at least equal to the average annualized annual incentive compensation
awards and average annual long-term incentive awards paid or payable," over a set
period of time prior to the fiscal year in which KLT terminated Jenkins, "to the extent
not theretofore paid." (Br. of Appellant at App. 43-44.) The second cash award, laid
out in paragraph 3(a)(2)(ii), was to be the sum of (a) two times Jenkins's highest
annual base salary during the twelve-month period before his termination, plus (b)
two times Jenkins's average annualized incentive compensation awards and average
long-term incentive awards during the period of time used to calculate the award in
paragraph 3(a)(1)(ii).

      KLT paid Jenkins pursuant to the severance agreement, but Jenkins believes
that KLT wrongly calculated both cash awards. First, he argues that KLT used the
wrong time period to calculate the awards. Second, he argues that the cash award
under 3(a)(2)(ii) is distinct from the 1998 incentive award that KLT already paid.

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Third, because he believes KLT incorrectly calculated the annual incentive awards
and the long-term incentive awards, he contends that the severance awards are
necessarily incorrect.

      Jenkins also contends that KLT's post-termination medical and disability
coverage is less than his pre-termination coverage and that KLT owes him legal fees
pursuant to the severance agreement.

                                         II.

      We begin by reviewing Jenkins's breach-of-contract claims, first examining
those related to the employment contract, and then moving on to the severance
agreement claims. The District Court determined that Jenkins's contract claims raised
issues of contract construction that were solely questions of law and that the
governing contracts were unambiguous. We review de novo a district court's
conclusion that a contract is not ambiguous. See Farmland Indus., Inc. v. Frazier-
Parrott Commodities, 111 F.3d 588, 590 (8th Cir. 1997) (standard of review).

                                         A.

      Jenkins claims that KLT did not fulfill its obligations under the incentive
agreements related to his employment contract. According to Jenkins, KLT
prevented Jenkins from earning an incentive award by selling KLT Power and by
terminating him. Because the employment agreement was at-will and because the
agreement contained no implied guarantee that Jenkins could maximize his incentive
awards, we rule in KLT's favor.

                                        -4-
Long-Term Incentive Plan

       Under the LTI Plan, KLT would compensate Jenkins when Jenkins achieved
certain goals over a three-year period. The LTI Plan's terms were set forth in two
integrated documents: a letter dated August 16, 1995, (Br. of Appellant at Addendum
C-1), and a document entitled "1996-1998 KLT Power Inc. Long-Term Incentive Pay
Goals for President." (Id. at Addendum D-3.) The LTI Plan proposed the payment
of "a bonus of up to 200% of the maximum annual incentive amount with a target
centered on 100% of annual incentive, payable in cash at the end of 1998." (Id. at
Addendum C-1.) Eleven specific performance goals, each worth a various amount
of "points," determined the final amount paid under the LTI Plan. (Id. at Addendum
D-3, D-4.) Jenkins earned fifty-five of a possible total of two hundred points. (Br.
of Appellee at 6.)

       Upon Jenkins's termination of employment, KLT properly paid Jenkins
$112,401 under the LTI Plan based on Jenkins's annual incentive awards and points
earned. Jenkins concedes that $112,401 was the correct amount due given the goals
that he actually achieved. (Br. of Appellant at 19.) He argues, however, that KLT
must compensate him for the goals he could have hypothetically met but did not meet.
His rationale is that KLT prevented him from achieving these goals by selling KLT
Power and by terminating him, thereby violating an implied promise by KLT that it
would not prevent Jenkins from reaching the goals.

      Despite Jenkins's desire to maximize his incentive awards, the LTI Plan is
unambiguous: it contains conditions that Jenkins must perform to receive payment.
In order to enforce a promise based upon a condition, the contingency upon which the
promise depends must have occurred. Lowery v. Air Support Int'l, Inc., 982 S.W.2d
326, 329 (Mo. Ct. App. 1998). The LTI Plan spells out precisely the goals that
Jenkins must have achieved in order to receive compensation. Furthermore, there are
no provisions for payment should Jenkins not reach the goals because of termination

                                        -5-
of his employment, and KLT had the right to terminate Jenkins's employment because
his contract was at-will. See Luethans v. Washington Univ., 894 S.W.2d 169, 172
(Mo. 1995) (holding that employment contract without duration is at-will and
terminable by either party at any time). Given that KLT had the right to fire Jenkins
without cause, KLT had no obligation to alter its business strategy in order for
Jenkins to be able to maximize his incentive awards.

       Jenkins acknowledges he has been paid in full for the LTI Plan's goals that he
actually achieved. The District Court did not err in concluding that KLT has paid
Jenkins properly under the plan.

Annual Incentive Plan: the Project Incentive Plan

       Under the PI Plan, which amended the annual incentive plan in 1997, KLT
would compensate Jenkins when two "milestone" events occurred concerning the
establishment of an independent power project: (1) the execution of a power plant
purchase agreement, and (2) the financial closing of the power project. Jenkins
argues that he could not achieve either milestone event because of the sale of KLT
Power and the subsequent termination of his employment.

       Our analysis with respect to the PI Plan parallels that of the LTI Plan. The
agreement plainly laid out conditions precedent to payment, and it contained no
provisions for payment if the conditions were not fulfilled. Jenkins was an employee
at will, and KLT was free to terminate his employment or alter its course of business
without ensuring Jenkins an opportunity to maximize his awards. Because Jenkins
did not reach the milestone events, KLT owed Jenkins nothing under the PI Plan.

                                        -6-
                                          B.

      Jenkins next argues that KLT failed to pay him the proper amount of severance
compensation. Specifically, he urges that KLT based its bonus calculations on the
wrong time period and misclassified one of his payments. We discuss each of his
claims in turn.

The Appropriate Time Period

       Jenkins first argues that the time period that determines KLT's obligation under
the severance agreement should include KLT's 1998 fiscal year. KLT did not include
the 1998 fiscal year in its calculations. The agreement's disputed language, found
identically in paragraphs 3(a)(1)(ii) and 3(a)(2)(ii), directs KLT to pay Jenkins based
on incentive awards he received:

      . . . during the five fiscal years of the company (or if Executive shall
      have performed services for the Company and its affiliated companies
      for four fiscal years or less, the years during which Executive performed
      services) immediately preceding the fiscal year in which the Change of
      Control occurs . . .

(Br. of Appellant at App. 44-45) (emphasis added).

       Without the italicized parenthetical, this clause states that KLT's payment will
be determined by incentive awards made during the five fiscal years that immediately
preceded the fiscal year in which the Change of Control occurred. The Change in
Control here (Jenkins's termination of employment) occurred in 1998. The fiscal
years for determining the average awards would therefore be 1993, 1994, 1995, 1996,
and 1997. The italicized parenthetical addresses the situation where KLT employed
Jenkins for less than five years before termination. That is exactly what happened in
this case. Jenkins did not begin his employment at KLT until 1995, so the

                                         -7-
appropriate years for determining his severance award would be 1995, 1996, and
1997.

      Jenkins, however, argues that the words "immediately preceding the fiscal year
in which the Change of Control occurs" do not apply to the parenthetical. Under this
construction, because Jenkins worked four fiscal years or less, the appropriate years
for calculating the severance award would be every fiscal year of Jenkins's
employment, including 1998, the fiscal year of the Change of Control.

        Jenkins's construction, however, creates an ambiguity that does not exist. First,
if the parties intended such a reading, the parenthetical would have been placed after
the clause that says "immediately preceding the fiscal year in which the Change of
Control occurs." That construction would distinguish the parenthetical from the rest
of the sentence and make it a separate idea.

      Second, no plausible reason exists for Jenkins's reading. Jenkins's strongest
argument is that if he had worked less than one year when a change of control
occurred and if the District Court's reading applied, he would have received no award,
and such a result could not have been intended. Yet it is not hard to imagine that
KLT would deny Jenkins a severance award in those circumstances because he would
have performed limited services.

      We agree with the District Court that the clause is unambiguous and that
Jenkins is not entitled to have any part of the 1998 fiscal year included in the
computation of his severance pay. Instead, 1995, 1996, and 1997 are the years that
control the amount of his severance award.

                                          -8-
No Additional Bonus

      Next, Jenkins contends that KLT owes him an additional bonus under
paragraph 3(a)(1)(ii). Using fiscal years 1995, 1996, and 1997 to determine the
average awards, Jenkins was owed $43,834 pursuant to 3(a)(1)(ii). KLT paid Jenkins
a $62,366 incentive award for the portion of fiscal year 1998 that Jenkins worked.
Jenkins argues that this annual incentive award is distinct from the payment due
under 3(a)(1)(ii), which is labeled as a "bonus" (Br. of Appellant at App. 43) and not
an "award." No matter the label given to the 3(a)(1)(ii) payment, however, the
severance agreement states that this amount is due only "to the extent not theretofore
paid." This phrase can only refer to the possibility of KLT paying Jenkins incentive
awards before a severance award; there is no other award that KLT would have paid
Jenkins. In this case, KLT paid the $43,834 in full when it paid Jenkins $62,366 in
incentive award, and it has therefore fulfilled its obligation under 3(a)(1)(ii).

       Jenkins also argues that KLT underpaid its 3(a)(2)(ii) obligation. To the extent
this argument is based on Jenkins's claim that 1998 should be included in the award
calculations or is otherwise premised on arguments we already have rejected, we find
the argument meritless. To the extent it is based on a distinction between a "bonus"
and an "award," the argument fails because the severance agreement recognizes no
such distinction. The District Court correctly determined that KLT owed Jenkins
$87,686 under paragraph 3(a)(2)(ii) and that KLT has fulfilled this obligation.

No Obligation to Maximize Severance Award

      Jenkins also asserts that he was unable to maximize his severance award
because he could not maximize his incentive awards due to the sale of KLT Power
and the termination of his employment. Because we have rejected Jenkins's argument
concerning KLT's alleged duty to give him time to maximize the incentive awards,
we necessarily reject the same argument concerning the severance agreement.

                                         -9-
                                          C.

       The severance agreement requires KLT to provide Jenkins, after termination
of his employment, with two years of the same level of medical, accident, disability,
and life insurance coverage that he received while employed by KLT. The parties
dispute whether KLT has fulfilled its obligation with respect to medical and disability
insurance.

       To fulfill the medical insurance obligation, KLT provided Jenkins with
COBRA insurance coverage, see Consolidated Omnibus Budget Reconciliation Act
of 1985, Pub. L. No. 99-272, 100 Stat. 222 (codified as amended in scattered
sections of 26, 29, and 42 U.S.C.), for eighteen months and Blue Cross/Blue Shield
coverage for six more months. Jenkins maintains that the coverage KLT provided is
not identical to his pre-discharge coverage, but the record indicates otherwise. KLT
provided COBRA coverage, identical with Jenkins's prior coverage, for eighteen
months, the maximum length of COBRA coverage that is permitted by law. See 26
C.F.R. § 54.4980B (1999) (explaining that after a "qualifying event," such as
termination of employment, see § 54.4980B-4, COBRA coverage may only be
extended for eighteen months pursuant to § 54.4980B-7). To the extent the Blue
Cross/Blue Shield coverage falls short of Jenkins's pre-discharge COBRA coverage,
KLT has agreed to pay any additional costs Jenkins may incur. KLT has therefore
satisfied its obligation to provide two years of continued health insurance.

       As for disability insurance, Jenkins points out that, during his employment,
KLT provided him with disability insurance for 66.67% of his "base pay," which was
his monthly salary of $15,600, but KLT's post-termination coverage was only $2,500
per month. We believe this is a moot point, inasmuch as two years have passed, KLT
is no longer under any obligation to provide disability insurance, and the record does
not suggest that Jenkins ever made a claim for payments under the disability coverage
KLT provided. We therefore do not address this claim any further.

                                         -10-
                                          D.

      We are unpersuaded by Jenkins's argument that KLT owes him attorney fees
under the severance agreement. The severance agreement, in pertinent part, reads as
follows:

            If any contest or dispute shall arise under this Agreement
      involving termination of Executive's employment with the Company or
      involving the failure or refusal of the Company to perform fully in
      accordance with the terms hereof, the Company shall reimburse
      Executive, on a current basis, for all legal fees and expenses, if any
      incurred by Executive in connection with such contest or dispute ...
      provided, however, that in the event the resolution of any such contest
      or dispute includes a finding denying, in total, Executive's claims in
      such contest or dispute, Executive shall be required to reimburse the
      Company ... for all sums advanced to Executive pursuant to this Section
      [].

(Br. of Appellant at App. 49-50) (emphasis in original).

      The resolution of this dispute includes a finding that denies, in total, Jenkins's
claims. Had KLT advanced any attorney fees to Jenkins in connection with the
dispute, Jenkins would have been required to reimburse KLT. KLT, therefore, cannot
possibly owe Jenkins any attorney fees, and we agree with the District Court that
KLT has satisfied its obligation concerning attorney fees.3

      3
        There appears to be some ambiguity concerning the attorney fees provision
because KLT paid Jenkins's legal bills until the time that all amounts due to him
under the severance agreement were paid. KLT could argue that Jenkins should
reimburse KLT for these legal fees, even though KLT paid the fees before Jenkins
initiated his lawsuit, because they are "in connection with" the dispute inasmuch as
they concern Jenkins's compensation pursuant to the severance agreement. Were
such an argument made by KLT, Jenkins might counterargue that the provision

                                         -11-
                                         III.

      We now turn to Jenkins's argument that the District Court erred in granting
summary judgment in KLT's favor on Jenkins's claim of negligent misrepresentation.
"We review a district court's grant of summary judgment de novo." McGee v. Broz,
251 F.3d 750, 752 (8th Cir. 2001).

      Jenkins claims there are fact issues as to whether KLT misrepresented his
opportunity to perform certain aspects of the incentive plan and regarding the size of
his severance benefits. In effect, Jenkins reiterates certain aspects of his contract
claims: that he was entitled to more time to perform under the LTI Plan and that he
was denied appropriate severance benefits under the severance agreement.

        The issue here is distinguishing reliance damages, which Jenkins can seek,
from benefit-of-the-bargain damages, which Missouri law precludes Jenkins from
seeking as a remedy for negligent misrepresentation. Missouri follows the pecuniary
loss rule, which states that "the damages recoverable for a negligent
misrepresentation do not include the benefit of the plaintiff's contract with the
defendant." Restatement (Second) of Torts § 552B (1977), quoted in Frame v.
Boatmen's Bank of Concord Vill., 824 S.W.2d 491, 496 (Mo. Ct. App. 1992)
(emphasis added). The rationale is that there should be no liability in tort merely for
negligent conduct by the promisor that interferes with or frustrates the promisee's
pecuniary expectancy arising from the contract. A promisee can only recover
damages for pecuniary loss incurred in reasonable reliance on a misrepresentation
negligently made by the promisor. See Hartford Accident & Indem. Co. v. Contico
Int'l, 901 S.W.2d 210, 212-13 (Mo. Ct. App. 1995). To recover benefit-of-the-

operates as a penalty to him for bringing suit. KLT, however, does not seek
reimbursement for these legal fees, so we have no occasion to address the
hypothesized penalty issue.

                                         -12-
bargain damages, Jenkins would have had to prove fraudulent misrepresentation.
Frame, 824 S.W.2d at 496.

       In this case, the incentive and severance awards that Jenkins seeks are the
benefits of his bargain with KLT. If Jenkins achieved certain goals, KLT promised
the awards as a benefit. Jenkins does not allege any reliance damages, i.e., he does
not allege any pecuniary loss incurred through his reliance on the alleged negligent
representation.

      Because Missouri law bars Jenkins from recovering the benefit-of-the-bargain
damages he seeks for the alleged negligent misrepresentation, we affirm the District
Court's grant of summary judgment.

                                        VI.

      For the reasons stated, the judgment of the District Court is affirmed in all
respects.

      A true copy.

            Attest:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

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