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U-Save Auto Rental of America, Inc. v. Miller

United States District Court, S.D. Mississippi, Northern Division

May 22, 2014

U-SAVE AUTO RENTAL OF AMERICA, INC., Plaintiff,
v.
SANFORD MILLER, Defendant, SANFORD MILLER Counter-Claimant/Third Party Plaintiff
v.
U-SAVE AUTO RENTAL OF AMERICA, INC.; FRANCHISE SERVICES OF NORTH AMERICA, INC.; and THOMAS P. McDONNELL, III Counter-Defendant/ Third Party Defendants

MEMORANDUM OPINION AND ORDER REGARDING THE PARTIES' MOTIONS FOR SUMMARY JUDGMENT

LOUIS GUIROLA, Jr., Chief District Judge.

BEFORE THE COURT are the Motion for Summary Judgment [188] filed by Thomas P. McDonnell, III, the Motion for Partial Summary Judgment on Counterclaim Alleging Defamation [190] filed by U-Save Auto Rental of America, Inc., the Motion for Partial Summary Judgment [193] filed by Sanford Miller, the Motion for Partial Summary Judgment [195] filed by Franchise Services of North America, Inc., and the Motion to Strike [216] filed by Sanford Miller in this lawsuit that arose out of FSNA and U-Save's decisions to terminate Miller's employment. After reviewing the submissions of the parties and the applicable law, the Court finds: (1) Miller's Motion for Partial Summary Judgment [193] is denied; (2) FSNA's Motion for Partial Summary Judgment [195] is granted; (3) the Motion for Partial Summary Judgment on Counterclaim Alleging Defamation [190] filed by U-Save Auto Rental of America, Inc., is granted; (4) the Motion for Summary Judgment [188] filed by Thomas P. McDonnell, III, is granted as to Miller's fraud, defamation, conspiracy, punitive damages, and intentional infliction of emotional distress claims, and is denied as to Miller's interference with contractual and business relations claims; and (5) Miller's Motion to Strike is moot.

BACKGROUND

U-Save filed a Complaint for Declaratory Judgment against its former executive employee Sanford Miller, asking the Court to adjudicate whether U-Save terminated Miller for cause pursuant to an Executive Employment Agreement dated December 5, 2003. (Compl. at 2, 5, ECF No. 1). Pursuant to the Agreement, Miller served as Co-Chief Executive Officer and Co-Chairman of U-Save. ( Id. at 2). Third party defendant Thomas McDonnell also served as U-Save's Co-CEO and Co-Chair. (FSNA's Reply, Ex. A at 3, ECF No. 214-1). Miller served as Co-Chief Executive Officer and Co-Chairman of U-Save's parent company, FSNA, but the parties dispute whether FSNA should be considered a party to Miller's Executive Employment Agreement. Miller and McDonnell were the sole directors of U-Save. ( Id. at 4). FSNA had five directors: Miller, McDonnell, Thomas McNeely, David Forseth, and Michael Linn. ( Id. )

In 2012, FSNA was in the process of merging with Advantage Rent-A-Car, a former Hertz company. The merger was funded in part by Macquarie Capital. Some of the members of FSNA's board of directors have testified that Macquarie refused to go forward with the merger unless Miller was terminated. (FSNA's Resp., Ex. E at 38-39, ECF No. 208-5; FSNA's Resp., Ex. H, ECF No. 208-5; Miller's Resp., Ex. 13 at 140-41, ECF No. 207-13). Macquarie was particularly concerned with at least three incidents of misconduct allegedly committed by Miller. ( See id. ) FSNA's board voted to terminate Miller's employment as Co-Chief Executive Officer on December 6, 2012. FSNA's minutes state:

Mr. McNeely noted that the directors have come together to consider potential personnel changes in support of the current transaction before the board, and not for any other reason, with the goal that Macquarie proceeds toward the transaction previously contemplated, which the board believes to be in the best interest of the shareholders of FSNA.
....
The board having determined that proceeding with the transaction continues to be in the best interest of FSNA and its shareholders, and that having first given Miller the opportunity to resign, and having further determined that the termination of Mr. Miller would assist materially in preserving the value of the transaction for FSNA's shareholders, the board hereby resolves to remove Mr. Miller from all executive offices that he holds in FSNA and its subsidiaries, including his positions as Co-Chairman and Co-CEO of FSNA, with immediate effect.

(Miller's Mot., Ex. 3, ECF No. 193-3). FSNA's December 7, 2012, press release related to the termination stated, "In contemplation of the Acquisition [of Advantage], the Company's board of directors has decided to streamline the Company's executive management, effective today.... Mr. Sanford Miller, the former Co-Chief Executive Officer and Co-Chairman, will not continue in an executive capacity with the Company but will continue to serve as a director." (Miller's Mot., Ex. 5, ECF No. 193-5). Miller voluntarily resigned his position on the FSNA Board on December 7, 2012.

U-Save terminated Miller on December 7, 2012. (Miller Resp., Ex. 11, ECF No. 207-11). U-Save's minutes give no explanation for Miller's termination. ( See id.)

On December 18, 2012, an attorney representing Miller contacted FSNA, suggesting that the parties attempt to resolve any disputes related to Miller's termination. (U-Save's Resp., Ex. I to Ex. 3, pp. 34-39, ECF No. 204-3). The attorney proposed that Miller's salary should be paid while the parties negotiated. ( Id. ) As a result, U-Save continued to pay Miller's salary, and it considered Miller an at-will employee during this time. (U-Save's Resp., Ex. 3 at p. 5, ECF No. 204-3).

FSNA and U-Save claim that Miller tried to interfere with FSNA's merger with Advantage after he was terminated. (U-Save Resp., Ex. 6 at 81-82, ECF No. 204-6). As a result, the parties' settlement negotiations ceased, and on February 28, 2013, FSNA's board met again to discuss Miller's termination. (Miller's Mot., Ex. 12, ECF No. 12). The minutes of that meeting state:

Mr. McDonnell called upon Mr. Turner to present Mr. Miller's current status to the board and to request their resolution of Mr. Miller's termination. Discussion ensued, with Mr. Turner outlining the options.
....
Mr. Forseth moved to terminate Mr. Miller finally and to file a declaratory judgment action in Mississippi, and Mr. McDonnell seconded. Mr Forseth voted in favor, as did Mr. McDonnell. Mr. Linn voted no. Mr. McNeely voted in favor of the motion.

( Id. ) The FSNA board also voted to file a declaratory judgment action against Miller. ( Id. )

On March 1, 2013, U-Save sent a letter to Miller stating that Miller was terminated effective December 7, 2012, as to his position as Co-Chief Executive Officer and Co-Chairman and effective immediately as to the at-will employment status Miller acquired during settlement negotiations. (Miller's Mot., Ex. 13, ECF No. 193-13). The letter also stated that the termination was "for cause based on transgressions falling within the scope of the dishonesty clause of the Executive Employment Agreement (as amended)." ( Id. ) FSNA's Notice of Annual Meeting of Shareholders and Information Circular dated March 1, 2013, provided, "On December 6, 2012, FSNA's board of directors decided to streamline the Corporation's executive management... and resolved to remove Sanford Miller from all of his executive positions with FSNA and its subsidiaries." (U-Save's Resp., Ex. B to Ex. 3, ECF No. 204-3).

On March 1, 2013, U-Save filed this lawsuit, seeking a judgment declaring:

a. Miller was terminated from his positions as Co-Chief Executive Officer and Co-Chairman of U-Save for cause effective 7 December 2012.
b. Miller's termination was not a "qualifying termination."
c. U-Save has no contractual duty to pay Miller any severance pay or benefits.
d. The Agreement has been terminated and no longer has any force or effect.
e. U-Save is entitled to an award of contractual attorney's fees, litigation expenses, and costs.

( Id. at 5). In its Complaint, U-Save stated that it terminated Miller for the following reasons:

a. Miller opened a bank account at a bank of which he was an officer in violation of corporate by-laws, deposited a check made payable to FSNA in that bank account, and disbursed funds to himself from the bank account.
b. Miller assigned an inflated value to property that he owned and was attempting to sell to an affiliate of an entity involved in an acquisition transaction with FSNA, with that affiliate to be merged with FSNA as part of the transaction. Miller also falsely represented that an alternative property under consideration by the buyer was subject to a restriction that would not allow the property to be used for the purposes intended by the buyer.
c. Miller, as a shareholder of a U-Save franchisee, used his influence as an officer of U-Save to forestall collection activities against the franchisee after the franchisee defaulted on its obligations. Previously, Miller used his influence as a U-Save officer to preclude his signing a personal guarantee for the performance of the franchisee's obligations, a material deviation from the standard requirement that shareholders of a franchisee be guarantors.

(Complaint at 4, ECF No. 1).

Miller filed a counterclaim against U-Save and a third party complaint against FSNA and his former co-CEO, Thomas McDonnell. (Miller Ans., ECF No. 9). Miller seeks a declaratory judgment against U-Save and FSNA that his termination from both entities constituted a qualifying termination, and thus he is entitled to severance payment and other benefits. ( Id. at 30). Miller has also filed breach of contract, breach of the covenant of good faith and fair dealing, intentional infliction of emotional distress, and defamation claims against U-Save and FSNA. ( Id. at 30-35). The claims filed against McDonnell are: interference with contractual and prospective business relations, fraud, conspiracy to commit fraud, defamation, and intentional infliction of emotional distress. ( Id. ) All of the parties have filed Motions for Summary Judgment.

DISCUSSION

A motion for summary judgment may be filed by any party asserting that there is no genuine issue of material fact and that the movant is entitled to prevail as a matter of law on any claim. Fed.R.Civ.P. 56. The movant bears the initial burden of identifying those portions of the pleadings and discovery on file, together with any affidavits, which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the movant carries its burden, the burden shifts to the non-movant to show that summary judgment should not be granted. Celotex Corp., 477 U.S. at 324-25. The non-movant may not rest upon mere allegations or denials in its pleadings but must set forth specific facts showing the existence of a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256-57 (1986).

I. Miller's Motion for Partial Summary Judgment [193]

Miller seeks partial summary judgment as to U-Save and FSNA's liability for breach of contract as well as Miller's claim for declaratory judgment. Miller argues that U-Save and FSNA did not terminate him for cause and, thus, they breached the Agreement by denying him severance and other benefits.

First, Miller asserts that the reasons that U-Save and FSNA proffer for his termination do not constitute "cause" under the ...


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