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Mitchell v. Leed HR, LLC

United States District Court, D. Idaho

April 10, 2015

JEFF RAY MITCHELL, Plaintiff,
v.
LEED HR, LLC and MICHAEL SCHROERING, Defendants.

MEORANDUM DECISION AND ORDER

EDWARD J. LODGE, District Judge.

Plaintiff Jeff Mitchell moves on summary judgment for an order enforcing (1) an "Engagement Incentive" clause in his contract with Defendant Leed HR, LLC ("Leed") and (2) Defendant Michael Schroering's personal guaranty of the incentive. (Dkt. 30.) Having fully reviewed the record, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, this matter shall be decided on the record before this Court without oral argument.

Because Defendants have not shown that the purpose of the engagement incentive or the personal guaranty was substantially frustrated by Mitchell's troubled business relationship with General Employment Enterprises, Inc. ("GEE"), the Court grants Mitchell's motion for partial summary judgment. The Court denies each parties' motions to strike portions of the other's supporting affidavits. (Dkts. 34, 43.)

FACTUAL BACKGROUND

Schroering was the sole member of Leed, and Leed was the largest shareholder of GEE stock. Apart from its role as a shareholder of GEE, Leed had no business operations. Schroering was also the CEO and chairman of GEE's board of directors.

Schroering contacted Mitchell for the purpose of hiring Mitchell as a business consultant. Schroering entered into a consulting agreement between Leed and Mitchell. In the section of the contract governing Mitchell's compensation, Leed promised the following "Engagement Incentive": "On September 1, 2013, Schroering shall grant to Consultant [Mitchell] 400, 000 GEE shares as an incentive for Consultant [Mitchell] to sign Consulting Agreement. The Engagement Incentive shall vest pro-rata over 90 days or immediately upon termination of this Agreement." (Dkt. 33-1, p.2.)

The same day Schroering signed the consulting agreement, he executed a personal guaranty in favor of Mitchell. Schroering agreed, "with or without demand, to pay Consultant [Mitchell], to the extent that such payment is not made by the [Leed], any and all amounts owed or incurred under the Contract." (Id. p.6.)

Although the consulting agreement stated Leed sought Mitchell's consulting services, Schroering maintains that the purpose of the agreement was to obtain Mitchell's services for the benefit of GEE. It was his intent that Mitchell would join GEE as a full-time employee, at which point the consulting agreement would terminate. That never happened.

According to Schroering, Mitchell had difficulty working with the other members of GEE's board from the outset. As a result, the board rebuffed Schroering's efforts to bring Mitchell on as a GEE employee or to utilize his services as a consultant. With no working relationship between GEE and Mitchell, and with Leed not having any need for Mitchell's services itself, Leed opted to not transfer the 400, 000 shares of GEE stock in accordance with the Engagement Incentive.

Mitchell filed this lawsuit alleging breach of contract by Leed, breach of the duty of good faith and fair dealing by Leed, breach of contract on the personal guaranty of Schroering and breach of the duty of good faith and fair dealing related to the personal guaranty of Schroering. (Dkt. 2-3.) For purposes of the motion for partial summary judgment, the Court will only address the breach of contract claims related to the Engagement Incentive clause of the consulting agreement.

STANDARD OF REVIEW

Summary judgment is proper if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Crim. P. 56(a). "Where the moving party will have the burden of proof on an issue at trial, the movant must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party." Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). On summary judgment, all disputed facts and reasonable inferences must be construed in favor of the nonmoving party. Anderson v. Liberty Lobby, 477 U.S. 242, 255 (1986). However, to defeat a properly supported motion for summary judgment, the nonmoving party must present more than a mere scintilla of evidence, and must come forward with evidence sufficient to show that a reasonable jury could return a verdict in its favor. Id. at 248.

Further, Federal Rule of Civil Procedure 56(c) "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). If the either party cannot make a showing on elements essential to his claims or affirmative defenses, there can be no genuine issue of material fact "since a ...


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