Robert J. Shipner v. Eastern Air Lines, Inc.

868 F.2d 401, 1989 U.S. App. LEXIS 3502, 1989 WL 18851

• Court: Court of Appeals for the Eleventh Circuit
• Decided: March 23, 1989
• Docket: 87-5861
• Status: Published

Opinions

HATCHETT, Circuit Judge:

In this action between Eastern Airlines (Eastern) and one of its former officers for benefits under a severance agreement, we are asked to determine whether the district court correctly interpreted the agreement and properly entered summary judgment. Finding the district court’s interpretation correct and summary judgment proper, we affirm.

FACTS

In August, 1984, Robert J. Shipner, the appellant, accepted the position of Vice-President Flight Operations and Systems Chief Pilot with Eastern Air Lines. Prior to assuming this management position, Shipner had been an Eastern pilot for approximately twenty-six years, advancing to the rank of Captain in 1967. As a result of the Eastern Air Line Pilots Association (ALPA) collective bargaining agreement, Shipner preserved his Eastern pilot status while serving in the management position.

Amid rumors that Eastern was a takeover target, the Eastern Board of Directors offered severance agreements to Shipner and twenty of its officers and senior managers. On January 15, 1986, Shipner signed the severance agreement (Agreement) which provided benefits to him upon termination within twenty-four months of a “change in control of the Company.” The Agreement defined a “change in control of the Company” to “have occurred if (1) any ‘person’ is or becomes the ‘beneficial owner’ ... directly or indirectly of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities....”

On March 26, 1986, Texas Air Corporation (Texas Air) acquired 47-percent of Eastern’s outstanding common stock. By June 16, 1986, Texas Air reported that it had acquired 51.25-percent of Eastern’s outstanding common stock. On July 1, 1986, Eastern dismissed Shipner as its Vice President Flight Operations and Systems Chief Pilot. Upon termination as an officer, Shipner returned to pilot duty. On October 1, 1986, Texas Air exercised control over Eastern after gaining Department of Transportation approval of the takeover.

PROCEDURAL HISTORY

On August 4, 1986, Shipner filed a two-count complaint against Eastern alleging a breach of the Agreement. Count I alleged that Eastern breached the terms of the Agreement through its refusal to pay Ship-ner three times his annual salary of $165,-000 and fringe benefits upon his dismissal as an officer. Shipner moved for a partial summary judgment on Count I; Eastern moved for summary judgment on both counts of the complaint. The district court, in a memorandum order, granted Eastern’s motion for summary judgment.

In response to the district court’s memorandum order, Shipner moved for leave to amend and supplement his complaint under Fed.R.Civ.P. 15(a) and (d). In a proposed Count III, Shipner requested a declaratory judgment on whether he would be entitled to receive benefits under the Agreement if he resigned as an Eastern pilot. In a proposed Count IV, Shipner sought recovery of legal fees and related expenses incurred during the litigation. The district court denied Shipner’s rule 15 motion to amend and entered final judgment for Eastern.

In his reply brief filed in this court, for the first time, Shipner indicated that he has terminated his employment as an Eastern pilot and is no longer an Eastern employee in any capacity. Shipner contends that if we do not reverse the district court’s summary judgment, we should remand this case for a ruling on the effect of his voluntary termination as a pilot under the Agreement. Eastern moves to strike portions of Shipner’s reply brief and for a determination that the issue presented for declaratory relief raised in Shipner’s brief is moot. In opposition to Eastern’s motion to strike, Shipner responds that the issue of declaratory relief is moot.

ISSUES

Shipner raises the following issues on appeal:

(1) whether the district court erred in ruling that the phrase “termination of your employment” in the Agreement is clear and unambiguous;

(2) whether the district court erred by refusing to consider extrinsic evidence of the parties’ intent;

(3) whether the district court erred in denying Shipner’s motion for partial summary judgment;

(4) whether the district court abused its discretion in denying Shipner’s motion for leave to amend and supplement the complaint; and

(5) whether we should consider facts which developed during the pendency of this appeal.

DISCUSSION

I. TERMINATION OF EMPLOYMENT

The provision of the Agreement, paragraph 4, which gives rise to this case provides:

4. TERMINATION FOLLOWING CHANGE IN CONTROL. If a Change in Control of the Company occurs while you are an employee of the Company, you shall be entitled to the benefits provided in paragraph 8 below upon the termination of your employment within twenty-four (24) months after such event, unless such termination is as a result of (a) your ‘Disability’ (as defined in clause 4(i) below), (b) your ‘Retirement’ (as defined in clause 4(ii) below, (c) your death, (d) your termination by the Company for ‘Cause’ (as defined in clause 4(iii) below), or (e) termination by you for other than ‘good reason’ (as defined in clause 4(iv) below), in any of which events you shall not be entitled to receive termination benefits under this Agreement.

Shipner contends that the district court erred in ruling that the phrase “termination of your employment” is clear and unambiguous. He argues that the Agreement is ambiguous on its face as to whether the phrase “termination of your employment” means “termination of your employment as an officer” or “termination of your employment as an employee.” Shipner argues that a contract is ambiguous if it is “susceptible to either of the divergent meanings contended for by the parties,” citing Ocean Reef Club, Inc. v. UOP, Inc., 554 F.Supp. 123, 128 (S.D.Fla.1982).

Eastern contends that the phrase “termination of your employment” is unambiguous. Eastern argues that Shipner’s attempt to alter the plain meaning of the phrase to connote “termination of your employment as an officer” is unreasonable, and that the district court’s determination is correct.

We must independently review the district court’s order granting summary judgment and determine whether any genuine issue of material fact exists. Mercantile Bank and Trust Co. v. Fidelity and Deposit Co., 750 F.2d 838 (11th Cir.1985).

The district court found that the Agreement does not specify whether “termination of employment” means termination of employment as an officer of the company, or whether it means total severance of any employment relationship with Eastern. In interpreting the contract, the district court endeavored to determine whether the definition of “termination of employment” is ambiguous. The district court first examined the “four corners” of the Agreement to determine if the intent of the parties could be gleaned from the Agreement itself. The district court considered the preamble of the Agreement, and determined that these severance agreements were intended only for officers who filled critical management positions. The district court found the phrase “termination of employment” to be unambiguous. The court conceded that extrinsic evidence would support Shipner’s contentions that the purpose of the Agreement was to keep him in the position of an officer, but it held that other terminology in the Agreement refuted this contention.

The district court found that the author of the Agreement foresaw a situation wherein new management could merely demote senior officers without terminating their employment with Eastern, thereby defeating the Agreement. To avoid this situation, the author of the Agreement provided, in paragraph 4(iv)(A), that termination of employment with benefits could be accomplished by resignation upon:

a change in your status or position(s) as an officer of the Company which, in your reasonable judgment, does not represent a promotion from your status and position^) as was in effect immediately prior to the Change in Control of the Company....

The district court further found that Eastern removed Shipner as an officer at a salary of $165,000 per year, which resulted in his continued employment with Eastern as a pilot at a salary of $95,000 per year. Shipner concedes that Eastern did not reassign him to the lesser position, but that he reverted to that position due to his rights under the ALPA union contract. Nevertheless, the district court found that the fact of reversion did not detract from the inescapable conclusion that Shipner had the right to claim the benefits of the severance agreement upon refusing to accede to the demotion and submitting his resignation. The district court found that Shipner elected to accept his reduced status with the company and to also enforce his contractual benefits; which, according to the district court, Shipner could not do. The district court also found no ambiguity in the phrase “termination of employment” and ruled that the phrase means complete severance of any employment relationship with Eastern. We agree; we find no ambiguity and affirm the district court on this issue. See Fabrica Italiana Lavorazione v. Kaiser Aluminum, 684 F.2d 776 (11th Cir.1982).

II. EXTRINSIC EVIDENCE

Shipner also contends that Florida law required the district court to consider extrinsic evidence, not only to interpret the disputed language in the Agreement, but also to ascertain whether the language itself is ambiguous. See Morris v. Federated Mutual Insurance Co., 497 F.2d 538, 540 (5th Cir.1974). Shipner concedes, however, that a Florida court may not consider extrinsic evidence to interpret a contract which is “clear and unambiguous.” See Atlas Sewing Center, Inc. v. Belk’s Dept. Store, 162 So.2d 274, 275 (Fla.App.1964). Shipner argues that the district court must necessarily examine extrinsic evidence to resolve the legal question as to whether a latent ambiguity exists. See Ace Elec. Supply Co. v. Terra Nova Elec., Inc., 288 So.2d 544, 547 (Fla.App.1973).

Eastern counters that: (1) the district court did not refuse to consider extrinsic evidence; (2) the extrinsic evidence does not establish any ambiguity, latent or otherwise; and (3) the district court did not err in its disposition of this issue. Eastern contends that references made in the judge’s memorandum opinion discuss a number of general background matters extrinsic to the Agreement. Eastern argues that where the language of a contract is clear and unambiguous, the court is bound to give the language its plain and ordinary meaning, may not add or subtract language from the face of the instrument, may not create a new contract for the parties, nor create an ambiguity where extrinsic evidence of unexpressed intentions exists and its intent can be easily inferred from the contract itself. See Quesada v. Director, Federal Emergency Mgmt. Agency, 577 F.Supp. 695, 697 (S.D.Fla.1983), aff'd 753 F.2d 1011 (11th Cir.1985), cert. denied sub. nom. Sodowski v. National Flood Ins. Program of Federal Emergency Mgmt. Agency, — U.S. -, 108 S.Ct. 2035, 100 L.Ed.2d 619 (1988).

Because the phrase regarding employment is clear and unambiguous, the district court did not err in refusing to admit extrinsic evidence. Even so, the extrinsic evidence upon which Shipner relies adds nothing of significance to the background information recited in the preamble of the Agreement. This information shows that the purpose of the Agreement was to induce top management personnel to stay with Eastern during the period of uncertainty due to a potential takeover.

III. OTHER CONTENTIONS

Because Eastern is an air carrier engaged in interstate commerce, Shipner contends that Eastern is subject to the provisions of the Railway Labor Act, 45 U.S.C. §§ 151-163, 181-185, 186 note, 187, 188, which require the term “termination of your employment” to be construed to mean “termination of your employment as an officer.” Shipner argues that as a matter of law, the term “employment” in paragraphs 1(a) and 7 “the termination of which triggers Eastern’s obligation to pay the benefits” can only be construed to refer to his employment as an Eastern officer. As a pilot, however, Shipner argues that he was a member of ALPA and protected from arbitrary termination under the grievance and arbitration provisions of the Eastern-ALPA collective bargaining agreement.

Shipner further contends that Florida law mandates that the contractual ambiguity in the term “termination of your employment” should be construed against Eastern, which drafted the agreement. Shipner cites several Florida cases which suggest that contract language is to be read most strongly against the party who selected it. See, e.g., Finberg v. Herald Fire Insurance Co., 455 So.2d 462, 463 (Fla.App.1984); Hurt v. Leatherby Ins. Co., 380 So.2d 432, 434 (Fla.1980).

Eastern contends that it was entitled to summary judgment because the terms of the contract were unambiguous. Alternatively, Eastern appeals the district court’s holding that no change in control of Eastern occurred until October 1, 1986. The district court found that a change in control occurred when Texas Air acquired more than 30-percent of Eastern’s common stock. The district court made this finding because the Agreement provided that a “change in the control of the company” occurs only if any person becomes the beneficial owner of Eastern’s stock representing 30-percent or more of the combined voting power of the company’s then outstanding securities.

When examining a decision denying or granting summary judgment, this court applies the same legal standards that control the district court’s determination. Accordingly, we hold that the district court did not err in denying Shipner’s motion for partial summary judgment.

IV. DECLARATORY RELIEF

Shipner also contends that his proposed amendments and supplemental facts set forth cognizable claims for declaratory relief which matured upon the district court’s allowance of Eastern’s motion for summary judgment. Shipner argues that the district court abused its discretion in denying his motion to amend under the provisions of Fed.R.Civ.P. 15. Shipner contends in his reply brief, however, that these declaratory claims as to his rights under the Agreement have become moot because he has voluntarily terminated his employment with Eastern. Shipner, however, reserves his claim for litigation expenses. Even though Shipner is no longer an Eastern employee, he asserts that his claim in proposed Count IV for litigation expenses remains viable. Thus, he argues that the district court’s denial of his motion for leave to add proposed Count IV resulted in the deprivation of his right to an adjudication of the merits and was fundamentally inconsistent with Fed.R.Civ.P. 15.

Eastern contends, in a motion to strike portions of the reply brief that the claim for declaratory relief has been rendered moot by the fact that Shipner terminated his employment with Eastern. Eastern argues that this court may not consider facts which are not a part of the record on appeal when deciding the merits of the appeal, but it may consider subsequent factual developments in determining whether the issue on appeal is moot.

Even though both parties claim that this issue is now moot, we hold that the district court did not err in denying Shipner’s motion for leave to amend and supplement the complaint. Fed.R.Civ.P. 15(a) governs amendments to pleadings and provides that after a responsive pleading has been filed, subsequent amendments are permitted only with leave of the court. The decision whether to grant leave to amend is committed to the sound discretion of the trial court. Espey v. Wainwright, 734 F.2d 748 (11th Cir.1984); Best Canvas Products and Supplies, Inc. v. Ploof Truck Lines, Inc., 713 F.2d 618 (11th Cir.1983). Rule 15(a) severely restricts the district court’s freedom, directing that leave to amend shall be freely given when justice so requires. Espey at 750. This policy of rule 15(a) in liberally permitting amendments to facilitate determination of claims on the merits circumscribes the exercise of the district court’s discretion; thus, unless a substantial reason exists to deny leave to amend, the discretion of the district court is not broad enough to permit denial.

The district court did not abuse its discretion in denying Shipner’s motion to amend the complaint and supplement the record at a time when it had granted summary judgment, but had not entered final judgment. See Schneider v. Russell Corp., 823 F.2d 422 (11th Cir.1987).

Even though Shipner concedes that an appellate court will not generally grant relief on the basis of facts or issues that were not presented to the district court, he argues that this rule does not apply with respect to supervening factual developments that occur after the entry of the judgment which is the subject of the appeal. Shipner argues that where circumstances have changed between the time of the district court’s ruling and the decision on appeal, the preferred procedure is to remand and give the district court an opportunity to pass on the changed circumstances.

Eastern also argues that Shipner cannot request relief based on a fact that was not a part of the record on appeal. Because Shipner’s voluntary termination of employment was not before the district court, Eastern had neither the opportunity nor a reason to discuss this development in its answer brief. Eastern argues that those portions of Shipner’s reply brief in which Shipner seeks relief based upon this factual development should be stricken.

We will not consider factual developments which have occurred since the district court’s order because those facts and issues were not presented to the district court. This decision is in line with United States v. Oakley, 744 F.2d 1553 (11th Cir.1984) where we held that arguments raised for the first time in a reply brief are not properly before this court. Oakley at 1556.

Accordingly, the judgment of the district court is affirmed.

AFFIRMED.