-POR Kurilko v. Teletech Holdings, Inc. et al, No. 3:2009cv00707 - Document 24 (S.D. Cal. 2009)
Court Description: ORDER Denying 6 Motion to Dismiss, or in the Alternative, Motion to Sever Action: Aspen shall file an answer to the Third-Party Complaint within 15 days of the entry of this Order. Signed by Judge Barry Ted Moskowitz on 10/26/2009. (mjj) (jrl).
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-POR Kurilko v. Teletech Holdings, Inc. et al Doc. 24 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ROBERT KURILKO, CASE NO. 09cv707 BTM(POR) Plaintiff, 12 ORDER DENYING MOTION TO DISMISS, OR IN THE ALTERNATIVE, MOTION TO SEVER ACTION v. 13 14 TELETECH HOLDINGS, INC., and DOES 1-10, 15 16 Defendants. TELETECH HOLDINGS, INC., 17 Third-Party Plaintiff, 18 19 20 v. ASPEN MARKETING SERVICES, INC. and ASPEN ACQUISITION HOLDINGS LLC, 21 Third-Party Defendants. 22 23 Third-party Defendants Aspen Marketing Services, Inc. (“Aspen Marketing”) and 24 Aspen Acquisition Holdings LLC (“Aspen Acquisition”) (collectively “Aspen”) have filed a 25 motion to dismiss the Third-Party Complaint, or, in the alternative, to strike the Third-Party 26 Complaint or sever the action. For the reasons discussed below, Aspen’s motion is DENIED. 27 /// 28 /// 1 09cv707 BTM(POR) Dockets.Justia.com 1 2 I. BACKGROUND A. Kurilko’s Claims 3 On February 20, 2009, Plaintiff Robert Kurilko (“Kurilko”) commenced this action 4 against TeleTech Holdings, Inc. (“TeleTech”) in the Superior Court of the State of California, 5 County of San Diego. According to the Complaint, on or about May 2006, Kurilko became 6 employed in San Diego, California as the Vice President of Marketing of Newgen Results 7 Corporation (“Newgen”). (Compl. ¶ 3.) Kurilko alleges that TeleTech was the parent 8 company of Newgen and a joint employer. (Compl. ¶ 6.) On or about April 24, 2007, Kurilko 9 entered into a written employment agreement, which included the following term regarding 10 11 12 13 severance pay: [I]f the Company (a) terminates your employment due to a change in control (in the event that TeleTech does not offer you a comparable job) or (b) terminates your employment without cause, . . . the Company shall pay you severance compensation equal to the sum of six months of base pay, which shall be payable bi-weekly or in a lump sum as mutually agreed, less legally required withholdings, on the first of the month following the termination date. 14 (Compl. ¶ 8.) 15 Kurilko claims that on or about October 1, 2007, he was terminated due to a change 16 in control when TeleTech entered into an Asset Purchase Agreement with Aspen Marketing. 17 (Compl. ¶ 9.) Kurilko alleges that he was not offered a comparable position by TeleTech 18 upon his termination and has not received the severance payment under the employment 19 agreement. (Compl. ¶ 10.) Kurilko asserts claims for breach of the employment agreement, 20 violation of Cal. Labor Code §§ 201, 203, and 218.5, and intentional interference with 21 contractual relations. 22 23 B. Third-Party Claims 24 On April 8, 2009, TeleTech removed this action to federal court. Shortly thereafter, 25 TeleTech filed its Third-Party Complaint against Aspen. 26 TeleTech’s Third-Party Complaint is based on indemnification provisions in the Asset 27 Purchase Agreement (“APA”). Under the terms of the APA, Aspen agreed to purchase all 28 of the assets of Newgen. Aspen also agreed to make an offer of employment to each current 2 09cv707 BTM(POR) 1 employee of Newgen (except certain specified individuals not including Kurilko) “on 2 substantially the same terms and conditions provided by Seller taken as a whole, which offer 3 shall remain open until the Closing Date.” (APA (Ex. B to Third-Party Compl.), § 2.8(a).) 4 Section 10.1(b) of the APA provides that Aspen shall indemnify Newgen “and their 5 managers, members, directors, officers, employees, Affiliates and agents at all times against 6 and in respect of Losses arising from or relating to . . . any breach of Section 2.8(a) and 7 2.8(c).” 8 TeleTech contends that if Kurilko prevails on his claim that he was not offered 9 comparable employment, Aspen is obligated to indemnify TeleTech under §§ 2.8(a) and 10 10.1(b) of the APA. 11 indemnification. TeleTech asserts claims for breach of contract and contractual 12 13 C. Prior Lawsuit Against Newgen 14 On February 8, 2008, Plaintiff filed a state court action against Newgen to recover the 15 severance payments that are allegedly owed to him. (San Diego Superior Court Case No. 16 37-2008-077697.) On December 22, 2008, Newgen filed for bankruptcy under Chapter 7 of 17 the Bankruptcy Code, resulting in a stay of the action. 18 19 II. DISCUSSION 20 Aspen argues that TeleTech’s Third-Party Complaint should be dismissed because 21 (1) TeleTech has no standing to sue on the APA; (2) even if TeleTech has standing to sue, 22 under the terms of the APA, Aspen is not liable for Kurilko’s severance claims or any other 23 claims under Kurilko’s employment agreement; and (3) any alleged breach by TeleTech of 24 Kurilko’s employment agreement does not implicate a breach of Aspen’s obligations under 25 the APA. The Court is not persuaded by any of these arguments. 26 /// 27 /// 28 /// 3 09cv707 BTM(POR) 1 A. Standing 2 Aspen argues that TeleTech does not have standing to sue for indemnification. 3 Section 2.8(a) provides, “Buyer shall indemnify Seller for any Losses arising from or relating 4 to any breach of this Section 2.8(a).” “Seller” is defined in the introduction of the Agreement 5 as Newgen Results Corporation, Carabunga.com, Inc., and Newgen Results Canada, Ltd. 6 The introduction indicates that TeleTech (“Parent”) is a party “solely with respect to Section 7 5.2, Section 5.4, Section 5.5, Section 5.7, and ARTICLE X of the Agreement.” 8 However, Section 10.1(b) (part of Article X) provides: “From and after the Closing 9 Date, Buyer and Holdings shall jointly and severally indemnify and hold harmless Seller and 10 their managers, members, directors, officers, employees, Affiliates and agents at all times 11 against and in respect of Losses arising from or relating to . . . any breach of Section 2.8(a) 12 and Section 2.8(c).” “Affiliate” is defined as follows: 13 14 15 16 17 “Affiliate” means, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto. (APA § 1.1.) 18 Kurilko alleges that TeleTech was a joint employer who “maintained centralized 19 control over Newgen’s operations, including but not limited to Newgen’s labor relations.” 20 (Compl. ¶ 6.) If Kurilko’s allegations are true, TeleTech meets the definition of an “Affiliate” 21 and has standing to sue for indemnification for a breach of Section 2.8(a). 22 Aspen argues that the fact that the APA specifically refers to “Parent” in other sections 23 but does not in Section 10.1(b) indicates that the parties did not intend Section 10.1(b) to 24 apply to TeleTech. However, one could make the opposite argument that the parties could 25 have excluded “Parent” from the definition of “Affiliate” if they wised to prevent TeleTech from 26 suing for indemnification. Under the plain meaning of Section 10.1(b), if TeleTech is an 27 “Affiliate” of Newgen (a matter that the Court does not decide now), TeleTech has standing 28 to sue under Section 10.1(b). 4 09cv707 BTM(POR) 1 B. Liability Exclusions 2 Aspen contends that even if TeleTech has standing to sue for indemnification, 3 TeleTech’s claims fail because the APA excludes liability on the part of Aspen for (a) claims 4 under Kurilko’s employment agreement and (2) severance claims by former Newgen 5 employees or “Hired Employees.” 6 The definition of “Assumed Liabilities” excludes, among other things, “Severance 7 Liabilities.” (APA, §1.1.) “Severance Liabilities,” is defined, in turn, as “any . . . severance 8 costs . . . or any other employee benefit arrangement relating to Seller’s employees listed on 9 Schedule 1.3 hereto and all former employees of Seller.” (Id.) Kurilko is not included in the 10 11 12 13 14 15 16 17 18 19 20 21 22 23 list of employees on Schedule 1.3. The allocation of liability for severance claims is discussed in more detail in Section 2.8(a), which provides: On the Closing Date, Buyer shall make an offer of employment to each current employee of Seller . . . on substantially the same terms and conditions provided by Seller taken as a whole, which offer shall remain open until the Closing Date. Each of Seller’s employees who receive and accept an offer of employment from Buyer (the”Hired Employees”) on or before the Closing Date shall become employed by Buyer effective as of the date immediately following the Closing Date. . . . Any liability for severance pay to terminated employees under Seller’s informal severance policy more particularly described on Schedule 2.8 incurred in connection with any current employee of Seller who receives an offer of employment pursuant to this Section 2.8(a) and who does not become a Hired Employee (each, a “Non-Hired Employee”), shall be retained by Buyer, and Seller shall have no obligations with respect to such employee, including with respect to such liabilities. Buyer shall indemnify Seller for any Losses arising from or relating to any breach of this Section 2.8(a). Any liabilities incurred in connection with any employee of Seller listed on Schedule 1.3 hereto or any former employee of Seller shall be retained by Seller and Buyer shall have no obligations with respect to such employees, including Severance Liabilities. In addition, any severance obligations due to any Hired Employees for any periods on or prior to the Closing Date shall be retained by Seller, and Buyer shall have no obligation with respect to such severance obligations. Seller shall indemnify Buyer for any Losses arising from or relating to any breach of this Section 2.8(a). 24 25 Aspen argues that Kurilko is a “former employee” of Newgen and that, therefore, any 26 liability for severance payments to Kurilko was retained by Newgen/TeleTech. However, 27 upon reading Section 2.8(a) in its entirety, it is clear that the term “former employee” refers 28 to employees of Newgen who were separated from Newgen before the closing of the 5 09cv707 BTM(POR) 1 agreement. In describing employees who were in the employ of Newgen up until the closing, 2 the APA uses the term “current employee.” 3 In its Reply Brief, Aspen makes the alternate argument that Kurilko is a “Hired 4 Employee” because, according to Newgen’s cross-complaint in the prior state action, Kurilko 5 was hired by Aspen as an Executive Vice President and has been employed in that position 6 since October 1, 2007, the closing date of the Asset Purchase. (Aspen’s RJN.) Under § 7 2.8(a), “any severance obligations due to any Hired Employees for any periods on or prior 8 to the Closing Date shall be retained by Seller, and Buyer shall have no obligation with 9 respect to such severance obligations.” 10 11 12 13 14 15 However, at this point in time, it is unclear to the Court whether Kurilko qualifies as a “Hired Employee,” within the meaning of § 2.8(a). Section 2.8(a) provides: On the Closing Date, Buyer shall make an offer of employment to each current employee of Seller . . . on substantially the same terms and conditions provided by Seller taken as a whole, which offer shall remain open until the Closing Date. Each of Seller’s employees who receive and accept an offer of employment from Buyer (the”Hired Employees”) on or before the Closing Date shall become employed by Buyer effective as of the date immediately following the Closing Date. 16 (Emphasis added.) 17 “Hired Employee” is one who receives and accepts an offer of employment that complies with 18 the requirements of § 2.8(a) – i.e., the offer is on substantially the same terms and conditions 19 provided by Newgen/TeleTech taken as a whole. Whether Aspen’s offer of employment to 20 Kurilko was on substantially the same terms and conditions is in dispute. 21 22 23 24 25 Reading the first and second sentences together, it appears that a Aspen also relies on the fact that Schedule 1.2 excludes the following from the “Assumed Liabilities”: All obligations and liabilities (other than accrued vacation obligations for Hired Employees and liabilities to Non-Hired Employees set forth in Section 2.8(a)) under all employment agreements or offer letters to current or former employees including, without limitation, Dan Powell, Chris Howie and Robert Kurilko or any offer letter and employment agreement listed on Schedule 3.15(g). 26 (Aspen, Ex. B.) (Emphasis added.) Aspen argues that under this provision (hereinafter 27 referred to as the “Employment Agreement Exclusion”), it is not liable for any claims, 28 6 09cv707 BTM(POR) 1 including severance claims, under Kurilko’s employment agreement. The Court is not 2 persuaded by this argument. 3 First and foremost, although Aspen may not have actively assumed liability for 4 severance claims under employment agreements, Aspen may still have to indemnify 5 Teletech/Newgen for such claims if they constitute a loss “arising from or relating to any 6 breach of this Section 2.8(a).” “One who assumes a liability, as distinguished from one who 7 agrees to indemnify against it, takes the obligation of the transferor unto himself.” Bouton 8 v. Litton Indus., Inc., 432 F.2d 643. 651 (3d Cir. 1970). Schedule 1.2 limits the assumption 9 of liability under employment agreements but does not preclude the obligation to indemnify 10 in the event that Aspen’s breach of contract gives rise to a claim for severance under the 11 employment agreement. 12 13 14 In addition, uncertainty is created by the fact that Kurilko may not meet the definition of a “Hired Employee” or a “Non-Hired Employee.” Section 2.8(a) provides: 17 Any liability for severance pay to terminated employees under Seller’s informal severance policy more particularly described on Schedule 2.8 incurred in connection with any current employee of Seller who receives an offer of employment pursuant to this Section 2.8(a) and who does not become a Hired Employee (each, a “Non-Hired Employee”), shall be retained by Buyer, and Seller shall have no obligations with respect to such employee, including with respect to such liabilities. 18 If Aspen made an offer of employment, although not on substantially the same terms and 19 conditions, and Kurilko accepted, Kurilko arguably does not qualify as a “Non-Hired 20 Employee” or a “Hired Employee.” The agreement does not address this middle category 21 of employee at all, leaving it unclear what the parties intentions were with respect to 22 employees who accepted employment with Aspen on different terms and conditions. 15 16 23 Moreover, Schedule 1.2 appears to conflict with other provisions of the contract. The 24 “Severance Liabilities” excluded from the definition of “Assumed Liabilities” include any 25 compensation or benefit arrangement relating to Seller’s employees listed on Schedule 1.3 26 (which does not include Kurilko) and all former employees of Seller. (APA, § 1.1.) Similarly, 27 Section 2.8(a) provides: “Any liabilities incurred in connection with any employee of Seller 28 listed on Schedule 1.3 hereto or any former employee of Seller shall be retained by Seller 7 09cv707 BTM(POR) 1 and Buyer shall have no obligations with respect to such employees including Severance 2 Liabilities.” These provisions do not exclude liability for severance claims under employment 3 agreements by individuals who are not listed on Schedule 1.3 and are not former employees. 4 Therefore, it is unclear whether the parties intended Schedule 1.2 to limit liability for 5 severance claims under employment agreements. 6 Because the terms of the APA do not necessarily preclude an obligation on the part 7 of Aspen to indemnify TeleTech for Kurilko’s severance claims, the Court denies Aspen’s 8 motion to dismiss. The Court does not, however, make any findings at this juncture 9 regarding the proper interpretation of Section 2.8(a) and the Employment Agreement 10 Exclusion because it may be necessary to consider extrinsic evidence in making this 11 determination. See Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232-33 12 (Del. 1997) (explaining that when the provisions in controversy are fairly susceptible of 13 different interpretations, then the interpreting court must look beyond the language of the 14 contract to ascertain the parties’ intentions). 15 16 C. Breach of Employment Agreement v. Breach of APA 17 Aspen’s final argument is that Kurilko’s claim that TeleTech breached the employment 18 agreement does not implicate Aspen’s duties and obligations under the APA. Kurilko is suing 19 TeleTech under the employment contract provision that promises severance equal to six 20 months of pay if Newgen terminates his employment due to a change in control and 21 TeleTech does not offer him “a comparable job.” Aspen argues that Teletech’s obligations 22 under the employment agreement have nothing to do with Aspen or Section 2.8(a) of the 23 APA. 24 Based on the record before it, the Court cannot tell whether Kurilko’s claims implicate 25 Aspen’s duties under Section 2.8(a). If Kurilko’s claim is that the employment offered by 26 Aspen was not comparable to his employment with Newgen, then Aspen’s duties under 27 28 8 09cv707 BTM(POR) 1 Section 2.8(a) may come into play.1 On the other hand, if Kurilko does not dispute that the 2 employment offered by Aspen was comparable but, rather, contends that the employment 3 offer had to come directly from TeleTech, then Aspen’s performance of the APA is not 4 implicated. 5 6 Because there is a possibility that Kurilko’s claims implicate the performance of Aspen’s duties under the APA, the Court denies Aspen’s motion to dismiss. 7 8 III. CONCLUSION 9 For the reasons discussed above, the Court DENIES Aspen’s motion to dismiss 10 TeleTech’s Third-Party Complaint. Aspen’s motion to strike and motion to sever are based 11 on the same grounds as the motion to dismiss. Therefore, the Court DENIES these motions 12 as well. Aspen shall file an answer to the Third-Party Complaint within 15 days of the entry 13 of this Order. 14 IT IS SO ORDERED. 15 16 DATED: October 26, 2009 17 18 Honorable Barry Ted Moskowitz United States District Judge 19 20 21 22 23 24 25 26 27 28 1 Aspen implies that an offer of a “comparable” job is different from an offer of employment on “substantially the same terms and conditions as a whole.” The Court does not decide this issue but observes that there may be overlap between the two standards. 9 09cv707 BTM(POR)
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