James Morgan v. Interstate Rescources, Inc.

CourtCourt of Appeals for the Sixth Circuit
DecidedJune 28, 2024
Docket23-3866
StatusUnpublished

This text of James Morgan v. Interstate Rescources, Inc. (James Morgan v. Interstate Rescources, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
James Morgan v. Interstate Rescources, Inc., (6th Cir. 2024).

Opinion

NOT RECOMMENDED FOR PUBLICATION File Name: 24a0284n.06

Case No. 23-3866

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT FILED Jun 28, 2024 ) KELLY L. STEPHENS, Clerk JAMES W. MORGAN ) Plaintiff-Appellant, ) ON APPEAL FROM THE UNITED ) STATES DISTRICT COURT FOR v. ) THE SOUTHERN DISTRICT OF ) OHIO INTERSTATE RESOURCES, INC., dba DS ) OPINION SMITH HOLDINGS, INC., ) Defendant-Appellee. )

Before: SUTTON, Chief Judge; CLAY and BUSH, Circuit Judges.

BUSH, Circuit Judge. James Morgan was terminated from his executive job at DS Smith

Holdings, Inc. (“DSS”) after his division at DSS had a financially unsuccessful year. He brought

multiple claims against the company, including for age discrimination and fraud. The district court

granted summary judgment to the defendants on all claims. On appeal, Morgan contends that the

district court failed to properly weigh the evidence in his favor. We affirm.

I.

In November 2006, Interstate Resources, Inc. (“IRI”) hired Morgan, born in 1958, as

Executive Vice President. By 2017, Morgan had been promoted to President and was responsible

for running the company’s paper business. On August 25, 2017, DSS purchased IRI and assumed

Morgan’s employment contract. The new owner appointed Morgan, who was then 59 years old, No. 23-3866, Morgan v. Interstate Resources, Inc., et al.

as head of its North American Packaging and Paper (“NAPP”) division. In that role, he reported

to Miles Roberts, DSS’s Group Chief Executive.

There are a few contractual provisions relevant to Morgan’s claims. First, Morgan’s

Employment Agreement, which was assumed by DSS after its acquisition of IRI, contained a

change-in-control provision. The exercise of this change-in-control provision enabled Morgan to

receive a severance payment equal to one year’s salary in the event IRI was acquired by another

company, as long as he continued to work for the new owners for at least three months.1 That

provision was triggered when DSS bought IRI. In October 2017, Morgan agreed to amend that

term such that, in addition to the three-month requirement, he would need to retire before August

25, 2019, to receive the severance payment. Second, IRI, in coordination with DSS, offered

Morgan a cash retention bonus of $910,898 to be paid in two equal parts if he remained employed

on the first and second anniversaries of DSS’s acquisition––or on August 25, 2018 and 2019.

Third, as the Managing Director of NAPP, he was eligible to participate in a Deferred Share Bonus

Plan (“DSBP”) and Performance Share Plan (“PSP”), which allocated awards if he stayed in his

position for at least three years. If Morgan left before three years’ time, the awards could still vest

if DSS deemed Morgan a “Good Leaver.” A “Good Leaver” is an employee who, for example,

retires on good terms.

In July 2019, Morgan told Roberts that he was considering retiring. He voiced concerns

about whether his DSBP and PSP awards and change-in-control payment would vest. Morgan

claims that Roberts assured him DSS had no plans to replace him, but Roberts denies making any

such statement.

1 The Agreement provides that Virginia law governs the execution and performance of the contract.

2 No. 23-3866, Morgan v. Interstate Resources, Inc., et al.

NAPP met its annual and monthly financial forecasts in its first fiscal year with Morgan at

the helm. But NAPP began to slip soon after: five months into the 2018 fiscal year, Morgan

emailed his employees to inform them that they would need to recover $3.5 million to meet their

forecasted performance level. Roberts texted Morgan a few months later letting him know that he

noticed “a drop on over $4 [million]” in April, adding that “[t]his is a problem.” Morgan’s

awareness that NAPP needed to right ship, it ended the year below forecast across most segments,

and its full year forecast for earnings before interest, taxes, depreciation, and amortization declined

by $6.5 million. Notwithstanding NAPP’s poor performance, Roberts still awarded Morgan a

bonus.

In July 2019, Roberts sent Thomas Jakobsen, one of DSS’s packaging managers, to NAPP

to act as a consultant. The two had previously discussed Jakobsen’s assuming a more permanent

role at NAPP and Morgan’s vision for the future of the company. In May 2019, for example,

Roberts sent Jakobsen hand-drawn charts depicting NAPP’s current organizational structure and

how he would like it to look in the future. The present-day chart showed Morgan as the head of

NAPP, overseeing the Packaging and Paper divisions, as Managing Director. The future chart

created separate roles for the Managing Director of Paper and Managing Director of Packaging

but did not indicate who would fill those roles. Jakobsen ultimately declined any permanent

position at NAPP, opting instead for the consulting arrangement.

In notes dated August 20, 2019, Jakobsen described a multitude of problems: “a complete

lack of NAPP strategy and direction,” “[l]ittle real buy-in to DSS strategy,” “huge cap[a]bility

issue[s] in top management,” and “no path/chance to change to DSS way of working.” Jakobsen

concluded that “[t]he clear underlying problem [was] top management” and that “[w]ithout the

replacement of the top people all good intentions will not change [the] direction of the business.”

3 No. 23-3866, Morgan v. Interstate Resources, Inc., et al.

He conveyed these observations to Roberts on a phone call on the same date and expanded on

them in a 45-page report presented to Roberts in September 2019.

Talks about terminating Morgan began in late August 2019. On August 28, Roberts

contacted DSS’s legal team to inquire about Morgan’s contract and what the termination process

would be. Roberts terminated Morgan on October 6, 2019. At least three other NAPP employees

over the age of 60 were terminated around the same time. Following Morgan’s termination, DSS

appointed NAPP’s Chief Financial Officer, Kevin Ledbetter, as interim Managing Director.

Ledbetter did not replace Morgan as Managing Director, but instead took on Morgan’s duties in

addition to his existing duties as CFO and received a salary supplement. Roberts discussed with

Jakobsen the possibility of him taking over as NAPP Managing Director, but that never came to

fruition. In March 2022, DSS appointed Jeff Jones, born in 1966 and formerly head of Shared

Services at DSS, to permanently fill the role.

Morgan brought five claims against DSS: (1) national origin discrimination, in violation of

Title VII; (2) national origin discrimination, in violation of Ohio Rev. Code § 4112; (3) age

discrimination, in violation of the Age Discrimination in Employment Act (“ADEA”); (4)

negligent/intentional misrepresentation; and (5) fraudulent inducement. DSS moved for summary

judgment.

The district court granted DSS summary judgment on all five claims, three of which are

relevant to this appeal. First, as to his age discrimination claim, the district court concluded that

Morgan failed to present sufficient evidence to show that DSS’s stated, nondiscriminatory reason

for terminating him––poor performance––was pretextual. Second, as to his intentional

misrepresentation and fraudulent inducement claims, the district court concluded that Morgan did

not provide any evidence that Roberts harbored an intention to fire him during their July 18, 2019,

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James Morgan v. Interstate Rescources, Inc., Counsel Stack Legal Research, https://law.counselstack.com/opinion/james-morgan-v-interstate-rescources-inc-ca6-2024.