Niels Hvidtfeldt v. Sitrion Systems Americas, Inc. ( 2015 )

lit- *,* I
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
NIELS HVIDTFELDT, No. 72846-6-
Appellant, DIVISION ONE
v.
SITRION SYSTEMS AMERICAS, INC., UNPUBLISHED
Respondent. FILED: October 12, 2015
Cox, J. — Niels Hvidtfeldt appeals the trial court's order granting Sitrion
Systems Americas Inc.'s motion for summary judgment. There are no genuine
issues of material fact whether he is entitled to post termination bonuses under
the terms of his employment agreement. Likewise, there are no genuine issues
of material fact whether Sitrion willfully withheld any bonuses in violation of RCW
49.52.050 because the parties had a bona fide dispute over this issue. Sitrion is
entitled to judgment as a matter of law. We affirm.
This case is an employment agreement dispute between Hvidtfeldt and
Sitrion over post termination compensation. Specifically, this case involves the
success bonus portion of his compensation. At oral argument of this case,
Hvidtfeldt claimed this includes both a fourth-quarter segment bonus and an
annual segment bonus for the year 2012.
No. 72846-6-1/2
The material facts are largely undisputed. Hvidtfeldt owns eRhapsody. In
March 2011, eRhapsody and Sitrion GmbH, Sitrion's parent corporation, entered
into a written cooperation agreement. Under this agreement, Hvidtfeldt was to
receive post termination commission payments. Sitrion GmbH eventually
terminated this agreement in 2011.
In November 2011, Sitrion negotiated with Hvidtfeldt to hire him as its
general manager. Hvidtfeldt sent an e-mail to the president and chief executive
officer of Sitrion GmbH. In the e-mail, Hvidtfeldt stated that he was interesting in
working for Sitrion even if it meant "forfeiting substantial future and earned
commissions."1
Hvidtfeldt also proposed including a tail clause in the employment
agreement, which provided for post termination bonuses. Sitrion GmbH rejected
Hvidtfeldt's proposal, stating:
We believe the attached documents represent the final agreements
.... [T]here is no post agreement tail and we have no
intention to add one. As long [sic] you are with the company
you will receive compensation, if you leave this ends. This is
consistent with all similar agreements currently in place in the
company.!2'
Thereafter, the parties both signed the employment agreement without
any further modification. Later in this decision, we state the material terms of the
parties' final agreement.
1 Clerk's Papers at 37.
2]d. at 41 (emphasis added).
No. 72846-6-1/3
Hvidtfeldt and Sitrion GmbH also executed an incentive agreement. This
agreement provides that the terms expire 12 months after termination of the
employment agreement, if Sitrion terminates the employment agreement without
cause.
In September 2012, Sitrion's president terminated Hvidtfeldt's employment
as an at will employee.
Hvidtfeldt sued Sitrion for breach of contract based on its refusal to pay
him any success bonuses for the period after his termination. He also claimed
that Sitrion violated the wage claim statute, RCW 49.52.050. He sought
damages and attorney fees for the alleged violation under RCW 49.52.070.
Sitrion moved for summary judgment. The trial court granted the motion.
Hvidtfeldt appeals.
BREACH OF CONTRACT
Hvidtfeldt argues that the trial court erred by granting summary judgment
on his claim for breach of the employment agreement. We disagree.
"Summary judgment is appropriate only when there is no genuine issue as
to any material fact and the moving party is entitled to judgment as a matter of
law."3 "A genuine issue of material fact exists if 'reasonable minds could differ on
the facts controlling the outcome of the litigation.'"4 This court considers "all facts
3 Scrivener v. Clark Coll., 181 Wash. 2d 439, 444, 334 P.3d 541 (2014); See
also CR 56(c).
4 Knight v. Dep't of Labor & Indus., 181 Wash. App. 788, 795, 321 P.3d 1275
(quoting Ranger Ins. Co. v. Pierce County, 164 Wash. 2d 545, 552, 192 P.3d 886
(2008)), review denied, 339 P.3d 635 (2014).
No. 72846-6-1/4
and make[s] all reasonable, factual inferences in the light most favorable to the
nonmoving party."5 "A material fact precluding summary judgment is a fact that
affects the outcome" of a dispute.6
This court reviews de novo a trial court's grant of summary judgment.7
"Washington continues to follow the objective manifestation theory of
contracts."8 When interpreting an agreement, this court attempts "to determine
the parties' intent by focusing on the objective manifestations of the agreement,
rather than on the unexpressed subjective intent of the parties. We impute an
intention corresponding to the reasonable meaning of the words used."9 The
parties' subjective intent is "generally irrelevant if the intent can be determined
from the actual words used" in the agreement.10 These words are given "their
ordinary, usual, and popular meaning unless the entirety of the agreement clearly
demonstrates a contrary intent."11 We interpret only what was written in the
agreement, not "what was intended to be written."12
5 Scrivener, 181 Wash. 2d at 444.
6 Garrison v. Sagepoint Fin., Inc., 185 Wash. App. 461, 484, 345 P.3d 792,
review denied, 183 Wash. 2d 1009 (2015).
7 Scrivener, 181 Wash. 2d at 444.
8 Hearst Commc'ns. Inc. v. Seattle Times Co., 154 Wash. 2d 493, 503, 115
P.3d 262 (2005).
9 ]d_. (citation omitted).
10 Id, at 504.
11 \±
12 Id.
No. 72846-6-1/5
In Berg v. Hudesman,13 the supreme court "recognized the difficulties
associated with interpreting contracts solely on the basis of the 'plain meaning' of
the words in the document."14 Interpreting a contract "involves 'one person giving
a meaning to the symbols of expression used by another person.'"15 But "the
meaning of a writing 'can almost never be plain except in a context.'"16 The
supreme court adopted the "context rule" and recognized that the parties' intent
"cannot be interpreted without examining the context surrounding an instrument's
execution."17 Relevant extrinsic evidence to ascertain the parties' intent "may
include (1) the subject matter and objective of the contract, (2) all the
circumstances surrounding the making of the contract, (3) the subsequent acts
and conduct of the parties, and (4) the reasonableness of respective
interpretations urged by the parties."18
Since Berg, the supreme court has "explained that surrounding
circumstances and other extrinsic evidence are to be used 'to determine the
meaning of specific words and terms used' and not to 'show an intention
13115Wn.2d657, 801 P.2d 222 (1990).
14 Hearst Commc'ns. Inc. 154 Wash. 2d at 502.
15 id (alternation in the original) (internal quotation marks omitted)
(quoting Berg, 115 Wash. 2d at 663).
16 \± (internal quotation marks omitted) (quoting Berg, 115 Wash. 2d at 668).
17 Id.
1£
Id.
No. 72846-6-1/6
independent of the instrument' or to 'vary, contradict or modify the written
word.'"19
But not all extrinsic evidence is admissible. For instance, "evidence of a
party's unilateral or subjective intent as to the meaning of a contract word or term
is inadmissible."20 And a party cannot use extrinsic evidence to "'vary, contradict
or modify the written word.'"21
Here, the preliminary question is whether there are any genuine issues of
material fact for trial. Hvidtfeldt and Sitrion primarily dispute the meaning of the
language in the employment agreement. They do so, in part, by reference to
extrinsic evidence.
The January 1, 2012 employment agreement includes the following
material terms and conditions:
2. COMPENSATION
Base Salary: For services provided, Employer will pay Employee an
annual base salary of US$100,000 paid in accordance with
Employer's annual payroll procedures. The Base Salary will
increase to US$ 120,000 in fiscal year 2013.
Success Bonus: In addition to the base salary the Employee
will be receiving an annual variable compensation in the
amount of US$180,000 (at 100% target achievement) per year
to be paid upon achieving targets defined by the Board of the
Employer. See Appendix 1 for the 2012 Bonus agreement.
19 Id at 503 (emphasis omitted) (quoting Hollis v. Garwall. Inc., 137 Wash. 2d
683, 695-96, 974 P.2d 836 (1999)).
20 Miller v. Kenny, 180 Wash. App. 772, 792, 325 P.3d 278 (2014) (emphasis
omitted).
21 id at 793 (quoting Hollis. 137 Wash. 2d at 695).
No. 72846-6-1/7
The Success Bonus increases to US$ 230,000 (at 100% target
achievement) in fiscal year 2013.[22]
Moreover, the same agreement also states:
14. CONTINUING OBLIGATIONS
Notwithstanding the termination of Employee for any reason, the
provisions of paragraph 5, 6, 7, 9, and 13 of this Agreement will continue
in full force and effect following such termination.[23]
19. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the
Parties and supersedes any prior understanding or representation
of any kind preceding the date of this Agreement. There are no
other promises, conditions, understandings or other agreements,
whether oral or written, relating to the subject matter of this
Agreement. This Agreement may be modified in writing and must
be signed by both Employee and Employer.[24]
Hvidtfeldt does not argue that there are any other "promises, conditions,
understandings or other agreements, whether oral or written" that alter the terms
of this written agreement under paragraph 19.25 Rather, he rests his challenge
on the written agreement itself and extrinsic evidence concerning its context.
Because the parties do not dispute the language in the employment agreement
or the relevant extrinsic evidence, there are no genuine issues of material fact for
trial.
22 Clerk's Papers at 30 (emphasis added).
23 id at 32.
24 id at 32-33.
25 Id. at 33.
No. 72846-6-1/8
Thus, our primary focus is on determining whether Sitrion is entitled to
judgment as a matter of law. To do so, we focus on the objective manifestation
of the parties, as expressed in their written employment agreement. Doing so
here, we conclude that the only reasonable interpretation of the compensation
paragraph is that no success bonuses are payable to Hvidtfeldt after the
termination of his employment.
Paragraph 14 of the agreement specifies what portions of the agreement
survive "the termination of [Hvidtfeldt] for any reason."26 A straightforward
reading of the plain words of this paragraph make clear that only certain
numbered paragraphs of the agreement continue in full force and effect following
his termination. Notably, paragraph 2—the compensation paragraph—is not
among them. Thus, the entire compensation paragraph, which includes both
base salary and success bonuses, does not survive the termination of his
employment. That is the parties' clear objective manifestation as to the subject
of compensation.
To the extent there is any need to consider extrinsic evidence, that
evidence is consistent with this reading of the agreement. The e-mail
communication between Hvidtfeldt and Sitrion GmbH's president during the
negotiations that preceded the execution of the employment agreement by both
parties confirms this reading.
26 Id. at 32.
No. 72846-6-1/9
This communication shows that Hvidtfeldt understood that Sitrion GmbH
rejected his proposal to modify the proposed agreement to include any bonuses
after he was no longer employed by the company. In fact, Hvidtfeldt's
declaration acknowledges that Sitrion "rejected my proposal that I receive tail
compensation following . . . termination of the Employment Agreement."27 Thus,
the parties purposefully excluded a post termination bonus provision from the
employment agreement.
Other extrinsic evidence further supports our reading. The parties' other
agreements also demonstrate their intent to exclude post termination bonuses in
the employment agreement. The cooperation and incentive agreements both
explicitly provided circumstances where Hvidtfeldt would receive post termination
compensation. But the employment agreement lacks such language. Further, it
explicitly states that only certain paragraphs of the agreement, not including
compensation, survived termination of his employment. This demonstrates that
the parties intentionally excluded post termination bonuses from the employment
agreement.
In sum, the agreement's language, together with extrinsic evidence, show
that Hvidtfeldt is not entitled to post termination bonuses. Thus, Sitrion is entitled
to judgment as a matter of law.
Hvidtfeldt argues that the language in the employment agreement
unambiguously provides that he will be paid a bonus if certain conditions are met.
27 Id. at 83.
No. 72846-6-1/10
We are not persuaded by any of his arguments. Further, Hvidtfeldt's second,
third, and fourth arguments are not supported by any citation to authority.
Accordingly, we need not consider them.28
First, Hvidtfeldt asserts that neither the employment agreement nor the
appendix to the agreement state that his continued employment with Sitrion is a
condition to receiving a bonus. In making this argument, Hvidtfeldt focuses on
the words "will be receiving" and "to be paid" to argue that payment of the
bonuses is mandatory if Sitrion meets its goals.29 As previously stated, the entire
compensation paragraph includes both base salary and success bonus
provisions. He compares the base salary language to the success bonus
language to argue that his continued employment is not a condition to receiving
bonuses. He argues that while the base salary language states that his salary is
"[f]or services provided," the success bonus provision does not include similar
conditional language.30
This argument is unpersuasive because he takes words in the agreement
out of context to support his argument. This argument does nothing to undercut
our prior discussion that the plain words of paragraph 14 of the agreement show
that his compensation does not survive the termination of his employment. And
the extrinsic evidence is consistent with this reading. The essence of his
28 See Darkenwald v. Emp't Sec. Dep't, 183 Wash. 2d 237, 248, 350 P.3d
647 (2015); see also RAP 10.3(a)(6).
29 Clerk's Papers at 30.
30 jd; Appellant's Opening Brief at 14.
10
No. 72846-6-1/11
argument takes words out of context to conflict with the plain words we have
discussed. The controlling case authority that we discussed earlier in this
opinion bars that approach.
Further, his argument is inconsistent with his actions. The compensation
paragraph covers both base salary and success bonuses. Yet he only seeks in
this action success bonuses, not a continuation of base salary. If the
compensation paragraph survived termination of his employment, to be
consistent with his theory of this case, he would be seeking both continued base
pay and success bonuses. He is not.
Second, Hvidtfeldt argues that the parties "would have said so" if they
intended to condition the bonuses on Hvidtfeldt's continued employment.31
Hvidtfeldt uses the employment offer he wrote, which explicitly excludes post
termination bonuses, to support his argument.
As general manager, Hvidtfeldt sent an employment offer letter to Dean
Read. This letter provides that "[c]ommissions will only be paid on recognized
sales up to and including effective date of termination. Bonuses will not be paid
pro-rata; they must be earned in full prior to termination."32
But the continuing obligations paragraph makes unnecessary any
separate statement conditioning bonuses on his continued employment. In any
event, a subsequent employment offer to another employee that contains explicit
conditional language does not change the fact that the parties' purposefully
31 Appellant's Opening Brief at 13.
32 Clerk's Papers at 58.
11
No. 72846-6-1/12
excluded a post termination bonus provision from Hvidtfeldt's employment
agreement. In sum, the lack of explicit conditional language does not show that
the employment agreement entitles Hvidtfeldt to bonuses after the termination of
his employment.
Third, Hvidtfeldt argues that the continuing obligation paragraph is
consistent with Sitrion's obligation to pay him post termination bonuses. He
argues that this paragraph only applies to his obligations to Sitrion, not Sitrion's
obligations to him. We disagree.
Although this paragraph provides only his specific continuing obligations
that survive the termination of his employment, it does not negate the conclusion
that the agreement otherwise ends at the termination of his employment. None
of the enumerated paragraphs stated in paragraph 14 include paragraph 2—the
compensation paragraph. Thus, obligations under paragraph 2 ended at his
termination of employment.
Fourth, Hvidtfeldt argues that Sitrion terminated only his employment, not
the employment agreement. He claims that termination of his employment "does
not sever the Employment Agreement for purposes of payment of the Success
Bonus."33
This argument is not persuasive and makes no sense. It is undisputed
that Sitrion terminated Hvidtfeldt's employment in September 2012. Save for the
specified paragraphs, the agreement ended at that time. For the reasons we
33 Appellant's Reply Brief at 5.
12
No. 72846-6-1/13
stated previously in this decision, paragraph 14 does not include within its plain
terms the compensation paragraph on which he relies. Thus, his compensation
ended at the termination of his employment, both base salary and special
bonuses. That other specified paragraphs of the agreement survived is
immaterial.
Fifth, Hvidtfeldt argues that the email from Sitrion GmbH's president is not
material because he did not leave Sitrion. To the contrary, we believe it is highly
relevant as extrinsic evidence to assist in the interpretation of words in the
agreement.
The e-mail states, "[a]s long [sic] you are with the company you will
receive compensation, ifyou leave this ends."34 Hvidtfeldt focuses on the words
"if you leave," arguing that they refer to quitting his employment.35 He argues
that because Sitrion terminated him, he is entitled to post termination bonuses.
But Hvidtfeldt interprets this wording too narrowly. The common meaning
of "leave" is "depart."36 Neither that common meaning nor the context here
requires the narrow reading he seeks to impose on this wording. In short, the
fact that his employer initiated the termination is not material.
34 Clerk's Papers at 41.
35 Id.
36 The American Heritage Dictionary (5th ed. 2015),
https://www.ahdictionary.com/word/search.html?q=leave.
13
No. 72846-6-1/14
Hvidtfeldt attempts to support his argument by stating that his
understanding is consistent with the parties' "course of dealings," referring to the
cooperation and incentive agreements.37 This argument is flawed.
"Course of dealings is 'a sequence of previous conduct between the
parties to an agreement which . . . establishes] a common basis of
understanding for interpreting their [agreement].'"38 "[A] course of dealing does
not override express terms of a contract or add additional obligations, but
rather, is a tool for interpreting the provisions of a contract. If an agreement and
an applicable course of dealing are inconsistent with one another. . . then the
express terms control."39
Here, even assuming the cooperation and incentive agreements are
courses of dealing, a course of dealing cannot add additional obligations to the
parties' agreement. Thus, post termination compensation provisions in the
cooperation and incentive agreements do not add the additional obligation of
post termination bonuses to the employment agreement.
Lastly, Hvidtfeldt argues that the e-mail from Sitrion GmbH's president is
inadmissible extrinsic evidence because it varies, contradicts, and modifies the
terms in the employment agreement. It does no such thing.
37 Appellant's Opening Brief at 24.
38 City of Tacoma v. City of Bonnev Lake, 173 Wash. 2d 584, 590, 269 P.3d
1017 (2012) (alteration in the original) (internal quotation marks omitted) (quoting
Puget Sound Fin.. LLC v. Unisearch, Inc., 146 Wash. 2d 428, 436, 47 P.3d 940
(2002)).
39 Seattle-First Nat'l Bank v. Westwood Lumber. Inc., 65 Wash. App. 811,
819, 829 P.2d 1152 (1992) (emphasis added) (citation omitted).
14
No. 72846-6-1/15
The e-mail does not vary, contradict, or modify the terms of the
agreement. Instead, it explains why the prospective employment agreement that
was to be signed by the parties does not contain a post termination bonus
provision. This is consistent with the plain words of the agreement.
WILLFUL WITHHOLDING OF WAGES
Hvidtfeldt next argues that the trial court erred by dismissing on summary
judgment on his claim for willful withholding of wages. Because there was a
bona fide dispute over payment of bonuses, we disagree.
RCW 49.52.050 prohibits employers from "wilfully" depriving employees of
wages.40 "[B]onuses . . . paid for work performed!] are wages."41 RCW
49.52.070 outlines civil liability for willfully withheld wages. "The critical, but not
stringent, prerequisite to liability is that the employer's . . . failure to pay wages
was 'willful.'"42
The word "willful" means that an act "is volitional."43 An employer
withholds wages willfully if "it is the result of knowing and intentional action rather
than mere carelessness."44 "But a 'bona fide' dispute between the employer and
40 RCW 49.52.050(2).
41 LaCoursiere v. Camwest Dev., Inc., 181 Wash. 2d 734, 741, 339 P.3d 963
(2014); see also RCW 49.46.010(7).
42 Failla v. FixtureOne Corp.. 181 Wash. 2d 642, 655, 336 P.3d 1112(2014),
cert, denied sub nom., Schutzv. Failla, 135 S. Ct. 1904 (2015).
43 Snooualmie Police Ass'n v. City of Snooualmie, 165 Wash. App. 895, 908,
273 P.3d 983 (2012).
44 Moore v. Blue Frog Mobile, Inc., 153 Wn. App. 1,8,221 P.3d913
(2009); accord Failla, 181 Wash. 2d at 655.
15
No. 72846-6-1/16
employee regarding the wages can negate a finding of willfulness."45 "A bona
fide dispute is a 'fairly debatable' dispute over whether all or a portion of wages
must be paid."46
The employer bears the burden of showing a bona fine dispute.47 "'An
employer's genuine belief that he is not obligated to pay certain wages precludes
the withholding of wages from falling within the operation of RCW 49.52.050(2)
and 49.52.070.'"48 The issue is whether the employer's "asserted belief. . . was
reasonable enough to create a bona fide dispute. It does not matter if. . . [the
employer's] interpretation of the . . . clause is erroneous."49 "Usually wilfulness is
a question of fact, but. . . summary judgment is proper as a matter of law if the
evidence supports a single reasonable conclusion."50
Here, Sitrion did not willfully withhold bonuses from Hvidtfeldt because a
bona fide dispute exists regarding the payment of bonuses. As discussed earlier,
Hvidtfeldt is not entitled to post termination bonuses under the employment
45 Moore, 153 Wash. App. at 8; accord Wash. State Nurses Ass'n v. Sacred
Heart Med. Ctr.. 175 Wash. 2d 822, 834, 287 P.3d 516 (2012).
46 Wash. State Nurses Ass'n, 175 Wash. 2d at 834 (internal quotation marks
omitted) (quoting Schilling v. Radio Holdings. Inc.. 136Wn.2d 152, 161, 961 P.2d
371 (1998)).
47
Id.
48 Duncan v. Alaska USA Fed. Credit Union. Inc.. 148 Wash. App. 52, 79,
199 P.3d 991 (2008) (quoting Ebling v. Gove's Cove. Inc.. 34 Wash. App. 495, 500,
663P.2d 132(1983)).
49 Moore, 153 Wash. App. at 8.
50 Failla, 181 Wn.2dat655.
16
No. 72846-6-1/17
agreement. Thus, it is at least "'fairly debatable'" that Sitrion did not owe
Hvidtfeldt any further bonuses.51 Accordingly, Sitrion satisfied its burden of
establishing a bona fide dispute, even viewing the facts in the light most
favorable to Hvidtfeldt.
In sum, Sitrion did not willfully withhold Hvidtfeldt's wages. Summary
judgment was proper.
Hvidtfeldt argues that Sitrion failed to establish a bona fide dispute. But
Sitrion's reasonable asserted belief that Hvidtfeldt was not entitled to post
termination bonuses satisfied its burden.
We affirm the summary judgement order.
6ah^.
WE CONCUR:
l/Sokr v| j T
51 Wash. State Nurses Ass'n, 175 Wash. 2d at 834 (internal quotation marks
omitted) (quoting Schilling. 136 Wash. 2d at 161).
17