469 S.W.3d 716
Tex. App.2015Background
- Thomas G. McCoy was Alden Industries’ majority shareholder and agreed in 2008 to a recapitalization that reduced his ownership; closing documents were signed June 9, 2008.
- A May/June 2008 summary sheet and cover letter described an insurance-funded redemption plan (McCoy $30M; Adams $22M) and other governance changes; a July 2008 draft "Fourth Amended Restated Stock Redemption Agreement" signed by McCoy (but not by Alden) likewise contemplated a $30M purchase on McCoy’s death funded by life insurance.
- Alden’s board discussed and (by minutes) approved pursuing redemption agreements and purchasing life insurance at a July 22, 2008 meeting; Alden nevertheless never executed the July 2008 draft, later maintaining life insurance on both men.
- In 2010 Alden presented and obtained McCoy’s signatures on interim March and August 2010 redemption agreements that included integration clauses and limited durations; Alden also reduced McCoy’s compensation in November 2010.
- McCoy sued for breach of (1) an alleged long-term insurance-funded redemption agreement and (2) a compensation-package agreement (salary/benefits while he remained a director), seeking damages, specific performance, and attorneys’ fees. Both parties moved for summary judgment; trial court granted Alden’s motion and denied McCoy’s. The court of appeals affirmed in part, reversed in part, and remanded.
Issues
| Issue | Plaintiff's Argument (McCoy) | Defendant's Argument (Alden) | Held |
|---|---|---|---|
| Enforceability of 2008 insurance-funded redemption agreement | The summary sheet, McCoy-signed July 2008 draft, and board approval evidence a binding long-term redemption obligation funded by life insurance (purchase price $30M) | No meeting of the minds on essential terms (duration, primary obligations, transfer restrictions); summary sheet/draft left material terms open | Trial court erred to grant summary judgment for Alden on the ground the 2008 agreement lacked essential terms; genuine fact issues exist about formation and intent — remand required |
| Effect of March/August 2010 interim agreements (integration/supersession) | Interim agreements lack new consideration and thus cannot supersede a prior binding agreement; integration clauses unenforceable without consideration | Interim agreements provided sufficient consideration (and/or represented settlement) and therefore superseded any prior understanding | Court sustained McCoy’s challenge to the trial court’s ruling that the interim agreements conclusively superseded the earlier agreement; a material fact issue exists whether there was adequate consideration — remand |
| Compensation-package (salary $250k while a director) | Salary increase to $250,000 and related benefits were part of the comprehensive deal and were to continue for as long as McCoy remained on the board; reduction breached the agreement | No meeting of the minds: bylaws require board approval of officer salaries and the board never fixed such a long-term compensation commitment | Genuine fact issue exists about whether parties agreed McCoy’s $250k salary would continue for the duration of his board service; summary judgment improper on this disputed issue |
| Remedies dependent on contract existence (specific performance, injunctive relief, attorneys’ fees) | Remedies are available if the underlying contract claims succeed | Remedies unavailable if no enforceable contract or if interim agreements validly supersede prior obligations | Trial court erred to grant summary judgment on these remedies to the extent they rest on disputed contract formation and supersession issues — remand |
Key Cases Cited
- McCalla v. Baker’s Campground, Inc., 416 S.W.3d 416 (Tex. 2013) (formation of contract may present questions of law and fact)
- Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844 (Tex. 2009) (standard for reviewing competing summary judgment motions)
- T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218 (Tex. 1992) (parties must agree on material terms before a contract can be enforced)
- Foreca, S.A. v. GRD Dev. Co., 758 S.W.2d 744 (Tex. 1988) (meeting of the minds often a fact question)
- Scott v. Ingle Bros. Pac., Inc., 489 S.W.2d 554 (Tex. 1972) (nonessential provisions may be left open while essential terms must be agreed)