2014 VT 51


Kneebinding, Inc. v. Howell (2013-004)
 
2014 VT 51
 
[Filed 23-May-2014]
 
NOTICE:  This opinion is subject
to motions for reargument under V.R.A.P. 40 as well as formal revision before
publication in the Vermont Reports.  Readers are requested to notify the
Reporter of Decisions by email at: JUD.Reporter@state.vt.us or by mail at: Vermont
Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801, of any errors
in order that corrections may be made before this opinion goes to press.
 
 

2014 VT 51

 

No. 2013-004

 

Kneebinding, Inc.


Supreme Court


 


 


 


On Appeal from


     v.


Superior Court, Lamoille Unit,


 


Civil Division


 


 


Richard Howell


November Term, 2013


 


 


 


 


Alden
  T. Bryan, J. (Ret.), Specially Assigned


 

Peter G. Anderson, Stowe, for Plaintiff-Appellee.
 
Caroline S. Earle of Ellis Boxer & Blake PLLC,
Montpelier, for Defendant-Appellant.
 
 
PRESENT:   Reiber, C.J., Dooley, Skoglund and Robinson, JJ.,
and Toor, Supr. J.,
                     Specially Assigned
 
 
¶ 1.          
DOOLEY, J.   Richard Howell, defendant in this commercial
contract and employment dispute, appeals from a judgment in favor of plaintiff
Kneebinding, Inc. on his counterclaims alleging breach of contract, tortious
interference with contract, defamation, trademark violation, and
misappropriation of trade secrets.  Howell contends the trial court erred in
concluding that: (1) a contractual release barred the counterclaims arising
prior to the date of the release, and (2) the release was supported by
sufficient consideration.  We affirm.
¶ 2.          
Except where otherwise noted, the material facts are not in dispute.  In
2006, Howell formed Kneebinding, Inc. to develop a ski binding based on a new
release mechanism that he had invented.  John Springer-Miller provided major
financing and received a controlling interest in the corporation.  Pursuant to
a series of agreements, John Springer-Miller became the chairman of the board
of directors and Howell was employed as president and chief executive officer. 
An employment agreement executed by the parties in November 2007 provided that
Howell would be an at-will employee with an annual base-salary of $80,000 per
year, and, in the event his employment was terminated “other than for Cause,”
Howell would receive $80,000 as severance compensation payable in equal installments
over a period of one year.        
¶ 3.          
Less than a year later, in September 2008, the company’s board of
directors voted to terminate Howell’s employment without cause.  Negotiations
between the company and Howell over the terms of his departure resulted in a
letter from John Springer-Miller on behalf of Kneebinding to Howell, dated
October 2, 2008, confirming “the terms and conditions of [Howell’s] severance
arrangement with Kneebinding, Inc. (‘the Company’).”  The provisions of the
letter and certain attachments thereto form the basis of the instant dispute.  As
originally presented to Howell, the material provisions of the letter agreement
were as follows.  The first and second unnumbered[1]
paragraphs of the agreement provided, in pertinent part: 
The
Company will provide you [Howell] with the benefits described herein if you
sign and return this letter agreement and the Consulting Agreement attached
hereto as Attachment A to me by October 9, 2008, and agree to timely sign and
return the Release of Claims attached hereto as Attachment B within five
calendar days following the end of the Consulting Period (as defined in the
Consulting Agreement).  
 
 
By signing and returning this letter agreement (including Attachment A), you
will be agreeing to the terms and conditions set forth in such agreements.
 
The substance of the agreement is
in paragraph two and the following sections of the agreement.  Paragraph two provides:
Subject
to your compliance with the terms of this Agreement . . . : 
 
(a)   In accordance
with Section 5 of your Employment Agreement dated November 1, 2007 . . . the
Company will pay you severance in the form of continuation of your base salary
(equivalent to $80,000) (the “Severance Pay”), less applicable taxes and
withholdings, provided, however, that the Company shall deduct from the
Severance Pay the sum of $18,000 pursuant to Paragraph 2(b)(i) below.  The
Company shall pay the remaining Severance Pay (i.e. $62,000) in equal
semi-monthly installments of $2,583.33, less applicable withholdings.
 
(b)  Severance
Benefits:  Provided you timely sign and return this letter agreement and
the Release of Claims at Attachment B after the end of the Consulting Period
(as defined in Attachment A):
 
i.
 The Company agrees to sell you, and you agree to purchase, the Volkswagen . . . vehicle
you used in connection with your employment with the Company . . . for
a price of $18,000 (the “Car Price”).  You agree that the Company may deduct
the Car Price from the Severance Pay in accordance with Paragraph 2(a) above. . . .
 
ii.
 The Company agrees to engage you as a Consultant for a period of six months
pursuant to the terms and conditions set forth in the Consulting Agreement
attached to this letter as Attachment A. 
 
Finally, as directly relevant here,
the agreement provided in paragraph three as follows:
3. 
Release: - In consideration of the agreements and promises
described in Paragraph 2(b), which you acknowledge you would not otherwise be
entitled to receive, you hereby fully, forever, irrevocably and unconditionally
release, remise and discharge the Company, its officers, directors, attorneys,
affiliates, investors, agents and employees (each in their individual and
corporate capacities) . . . from any and all claims . . . of
every kind and nature that you have ever had or now have against the Released
Parties, including, but not limited to, any and all claims arising out of or
relating to your employment with and/or separation from the Company  . . . .
 
There then followed an exhaustive
list of claims which Howell agreed to release, “including, but not limited to,”
employment discrimination under federal and state law and tort and contract
claims of every sort, subject to several exceptions, including Howell’s rights
under the parties’ Voting Agreement and Investors’ Rights Agreement.  
¶ 4.          
The Consulting Agreement referenced in the agreement (Attachment A) provided
for a six-month period of consulting services from Howell, for a fee of $1,050
per month plus $350 per day for every day of services in excess of three per
month.  The Release of Claims (Attachment B) tracked verbatim the broad release
provisions set forth in paragraph three of the agreement.  
¶ 5.          
Howell failed to immediately sign either the letter agreement or
Consulting Agreement, but sought instead to renegotiate some of the severance
terms, ultimately without success.  Kneebinding in the meantime had continued
to maintain the insurance and registration on Howell’s company car and had
permitted him continued use of the vehicle.  In December 2008, however, the
company informed Howell that the insurance and registration on the vehicle were
expiring and that it planned to take repossession absent a signed agreement. 
Howell, in response, met with Springer-Miller later that month.  The parties thereupon
made several handwritten changes to the letter agreement and the Consulting
Agreement and signed both.  The revisions to the letter agreement were minor:
the dates set forth in the first and last paragraphs were changed from October
9, 2008 to December 30, 2008, and the make of the company car described in
Paragraph 2(b)(i) was changed from Volkswagen to Saab.  
¶ 6.          
The parties’ revisions to the Consulting Agreement were more
significant.  They deleted Howell’s previously guaranteed consulting fee of $1050
per month for six months, leaving only a discretionary provision for payment of
$350 per day for any services he performed between December 30, 2008 and June
30, 2009.  The company ultimately did not engage Howell for any consulting
services during this period,[2]
and Howell never signed the separate release set forth in Attachment B at the
end of the designated consulting period.    
¶ 7.          
Shortly after the revised agreement was signed, in early January 2009, Kneebinding
sent a check and memo to Howell indicating that it was for his accrued “salary”
of $18,083.31 for the preceding seven pay periods (based on an annual rate of
$62,000 commencing from the date of his termination in mid-September 2008),
plus $18,000 for “vehicle,” minus deductions for taxes and child support and
$18,000 for “vehicle purchase.”[3] 
Howell received a bill of sale and title to the company car the same month.  Additional
severance checks were sent to Howell through mid-September 2009.  
¶ 8.          
In March 2009, Kneebinding filed a lawsuit against Howell alleging that
he had violated certain non-disparagement and non-compete provisions of their
agreements, committed trademark violations and defamation, tortiously
interfered with contracts between Kneebinding and its customers and
distributors, and misappropriated trade secrets.  Howell answered and
counterclaimed, alleging counts for breach of contract, defamation, invasion of
privacy, misappropriation, unfair competition, tortious interference with
business relations, patent violations, and intentional infliction of emotional
distress.[4] 

¶ 9.          
Kneebinding thereafter moved for summary judgment on Howell’s counterclaims,
asserting that they were barred by the release set forth in paragraph three of
the signed letter agreement.  In a written decision filed in September 2012,
the trial court granted the motion with respect to all of the counterclaims
that arose prior to the execution of the release on December 30, 2008, and
denied the motion as to those claims that arose after the release.[5] 
Howell then moved for reconsideration or, alternatively, permission to take an
interlocutory appeal.  The trial court denied the motion for reconsideration,
but granted the request for interlocutory appeal.  We accepted review.    
¶ 10.      
Howell asserts that, in granting summary judgment on the counterclaims, the
trial court erred in finding a valid release because he never signed the separate
release of claims set forth in Attachment B to the letter agreement.  In
reviewing a summary judgment, we employ the same standards as the trial court. 
“[S]ummary judgment is appropriate only when the record clearly shows that
there is no genuine issue of material fact and that the movant is entitled to
judgment as a matter of law.”  Madowitz v. Woods at Killington Owners’ Ass’n,
2010 VT 37, ¶ 9, 188 Vt. 197, 6 A.3d 1117 (quotation omitted).  We review
“the trial court’s interpretation of the parties’ contract de novo.”  Dep’t
of Corr. v. Matrix Health Sys., P.C., 2008 VT 32, ¶ 11, 183 Vt. 348,
950 A.2d 1201.  Our paramount goal in interpreting a contract is “to give
effect to the parties’ intent, which we presume is reflected in the contract
language when [it] is clear.”  In re Adelphia Bus. Solutions of Vt., Inc.,
2004 VT 82, ¶ 7, 177 Vt. 136, 861 A.2d 1078.  In so doing, we strive to
“give effect to every part of the instrument and form a harmonious whole from
the parts.”  In re Verderber, 173 Vt. 612, 615, 795 A.2d 1157, 1161
(2002) (mem.).
¶ 11.      
The parties presented two different theories on the meaning of the
documents.  For Howell, the critical language is in the opening phrase of
paragraph three of the letter agreement, the paragraph headed “Release.”
 The phrase states “in consideration of the agreements and promises described
in Paragraph 2(b), which you acknowledge you would not otherwise be entitled to
receive.”  Howell argues that the language is significant and controlling
because paragraph two, subsection (b) defines his “Severance Benefits,”
again with an opening proviso:  “Provided you timely sign and return this
letter agreement and the Release of Claims at Attachment B after the end of the
Consulting Period (as defined in Attachment A)” and goes on to describe the
severance benefits of the car purchase and the consulting agreement.  Howell
argues that, when considered together, paragraphs two and three mean that the
release in paragraph three is effective only when Howell signed the Appendix B release. 
Since Howell never signed the Appendix B release, he argues that the paragraph three
release never went into effect.
¶ 12.      
The company argues that the purpose of the two release provisions—one in
Appendix B and one in paragraph three—can be explained only by concluding that
the Appendix B language is intended to include any claims arising during the
consultation period.  It argues that this purpose is clear from the preamble of
the letter agreement providing that the company is providing the benefits only
if Howell signs the letter agreement and “agree[s] to timely sign and return
the Release of Claims attached hereto as Attachment B within five calendar days
following the end of the Consulting Period.”  Kneebinding points out that the
effect of Howell’s argument is that paragraph three is superfluous, without
having any effect in any circumstance.  
¶ 13.      
The trial court accepted the company’s argument and concluded that the
parties’ agreement was clear and unambiguously released Kneebinding from
liability pursuant to the release provision set forth in Paragraph three of the
agreement, even without Howell’s signature on the separate Release of Claims
set forth in Attachment B.  As the trial court observed, “[t]here is no
suggestion that the release in the termination [agreement] itself . . . would
be affected by [Howell’s] failure to later sign the ‘Release of Claims,’ which
he merely “agreed” to sign at a later date following the consulting period. 
The essential contractual quid pro quo—the $18,000 advance allowing Howell to
purchase the company car in return for the release in paragraph three of the agreement—operated
independently of the consultancy agreement and release in Attachment B.  The
only tangible effect of Howell’s failure to sign the separate release at the
end of the consulting period, as the trial court observed, was “that the claims
released are claims from December 30, 2008 [the date of execution of the
agreement] and earlier rather than claims from the end of the Consulting Period
[June 30, 2009] and earlier.”  
¶ 14.      
The court amplified its holding in response to the motion to
reconsider.  It explained:
The
requirement that Mr. Howell sign and return the “letter agreement” applied to
the benefit in Paragraph 2(b)(i).  (The automobile).  The requirement that he
sign and return the “Release of Claims” after the end of the Consulting Period
applied to the benefit in Paragraph 2(b)(ii).  (The consulting period).  This
is the way the parties themselves interpreted Paragraph 2(b).  Indeed, if the
requirement that Mr. Howell sign the “Release of Claims” applied to paragraph
2(b)(i), then the purchase and sale of the Saab in January 2009 was premature,
since at that time the six-month Consulting Period had only just begun, and Mr.
Howell had not signed the “release of Claims” nor was he required to. 
Similarly, the “Release of Claims” plainly applied to Paragraph 2(b)(ii), both
in terms of subject matter (the consultancy) and logic.  Since there was
already a release in Paragraph 3 of the severance agreement, the only purpose
that the largely identical “Release of Claims” could possibly serve would be to
release claims that arose between Mr. Howell’s termination and the end of the
Consulting Period.  In short, the “Release of Claims” has nothing to do with
the operation of the release in Paragraph 3 of the severance agreement.[6]
 
 
¶ 15.      
We agree with the court’s analysis that the relevant contractual
language is unambiguous and supports the company’s position.  The language of
paragraphs three and paragraph two, subsection (b) do not explicitly state that
paragraph three comes into effect only if the release of claims is signed.  Instead,
we read it to say only that the consideration for the detriment to Howell
caused by the release in paragraph three is the benefits to him in paragraph
two, subsection (b).  The logic of Howell’s construction is perverse because it
conditions the applicability of a detriment to Howell, the paragraph three
release, on his incurring another detriment by signing the release of claims in
Appendix B.  Under that construction, the acceptance of either release is
optional with Howell, an option not surprisingly he declined to invoke.  As the
company also argues, Howell’s construction makes paragraph three superfluous. 
As we have often stated, we assume that the parties included contract terms for
a reason and will not embrace a construction that would render a provision
meaningless.  Southwick v. City of Rutland, 2011 VT 53, ¶ 4, 190
Vt. 106, 35 A.3d 113.
¶ 16.      
Howell’s second argument is that, if paragraph three is given effect, it
is fatally undermined by a failure of consideration for the release agreement. 
In this regard, he notes that  he received no entitlement to work in the
consulting agreement, and asserts that the $18,000 for the vehicle was not an
additional benefit in the form of an advance on the $80,000 severance he was
owed under the parties’ original employment agreement, but merely a credit
against the accrued payments which he was already owed from the date of
termination—September 15, 2008—to the date of the agreement—December 30, 2008. 
Alternatively, he argues that the character of the payment presented a material
issue of fact that could not be decided on summary judgment.  The trial court
concluded otherwise, and again we agree with its reading.  
¶ 17.      
The “definition of a benefit is extremely broad,” and requires simply
that the promisor “receive something desired for his or her own advantage” to
constitute consideration.  Lloyd’s Credit Corp. v. Marlin Mgmt. Servs., Inc.,
158 Vt. 594, 598, 614 A.2d 812, 815 (1992).  We do not have to dig deeply into
the facts to find a qualifying benefit.  As the trial court here concluded, the
promise to sell the vehicle in return for the release of claims was itself
sufficient consideration, but even assuming that Howell’s characterization of
the payment is correct, his receipt of the $18,000 credit for the vehicle
“spread out over seven pay periods” rather than “over the course of a full
year” constituted an “early payout of at least some of the funds” and a “value
[which] supports the . . . conclusion that there was new
consideration for Mr. Howell’s release.”  See id. at 599, 614 A.2d at 815
(noting that even a “mere expectation or hope of benefit is sufficient to serve
as consideration,” and that even in commercial transactions “a very slight
advantage is sufficient to constitute consideration” (quotations omitted)).  The
facts and law support these findings and conclusions, and we therefore discern
no basis to disturb the judgment.
Affirmed.  

 


 


FOR THE COURT:


 


 


 


 


 


 


 


 


 


 


 


Associate
  Justice

 


[1]
 The first two paragraphs of the letter are unnumbered.  The third paragraph is
also unnumbered, but is the introduction to the eighteen numbered paragraphs
that follow.  


[2]
 It is unclear whether the absence of any consulting work was the result of a
decision by the company, by Howell or by both.


[3] 
The salary of $18,083.31 was based on seven installment payments of $2,583.33,
as provided in the parties’ agreement.
 


[4]
 Howell also filed third-party claims against the Springer-Millers and their
wholly owned company, ACL Investments, LLC.  These claims are not before us. 
 


[5] 
Those counterclaims which the court found had arisen after the date of release,
and were therefore not barred, were counts three, four, and five involving the
alleged misappropriation of Howell’s name and skills, and portions of count two
(defamation), count seven (intellectual property), and count eight (intentional
infliction of emotional distress).  In addition, the court ruled that count one
for breach of contract fell within the exception in the release provision for
claims arising under the Voting Agreement and Investors’ Rights Agreements.     


[6]
 Howell’s interpretation cannot be correct because it effectively grants him
the unilateral power to unravel all of the parties’ carefully negotiated
agreements by simply refusing to sign the “Release of Claims” at the end of the
consulting period.  For parties who wished to reach a stable resolution, such a
provision makes no sense.


