Qwinstar Corporation v. Anthony

Background

Qwinstar Corporation repairs and maintains IBM 3890 check-processing machines. Pro Logistics, LLC was engaged in the same business when Qwinstar and Curtis Anthony began negotiating in 2012 for Qwinstar to acquire Pro Logistics. In 2013, Qwinstar and Anthony signed an Asset Purchase Agreement under which Qwinstar agreed to purchase Pro Logistics’ inventory and assets for $50,000. They also signed an Employment Agreement hiring Anthony for five years at an annual salary of $200,000.

Qwinstar began performing under both agreements. In 2014, it became concerned that Anthony was misrepresenting Pro Logistics’ inventory and selling some of it to third parties. Qwinstar fired Anthony in January 2015 under the Employment Agreement’s provision allowing termination for “misappropriation or other material act of dishonesty against the company.”

Qwinstar sued for breach of contract, alleging that Anthony’s actions breached the Asset Purchase Agreement. Anthony counterclaimed, alleging that Qwinstar breached the Employment Agreement by wrongfully firing him and failing to pay his salary and benefits for the full five-year term. An earlier summary-judgment ruling was affirmed in part on appeal, but the appellate court held that summary judgment on Anthony’s counterclaim was improper because the contract provisions were ambiguous and their interpretation presented factual questions.

Motion to Amend

Qwinstar sought to amend its answer to add the after-acquired-evidence doctrine. This doctrine can limit an employee’s damages when an employer later discovers conduct that independently would have justified discharge. Qwinstar wanted to use evidence concerning Anthony’s criminal conviction for child sex trafficking and the later-discovered information that Anthony may not have been Pro Logistics’ sole owner, contrary to what he had claimed. The opinion states that Qwinstar confirmed the ownership information during Frankie Anthony’s deposition on September 7, 2018.

Because the deadline for amending pleadings had passed, Qwinstar had to show good cause, including diligence. The court found that Qwinstar acted diligently because the new information arose more than two years after the case began and Qwinstar pursued the issues after learning of them. The court also concluded that additional discovery would allow the parties to address the new evidence and avoid undue prejudice. It therefore granted Qwinstar’s Motion to Amend.

Second Motion for Summary Judgment

Defendants sought summary judgment on Anthony’s breach-of-contract counterclaim. Summary judgment is appropriate only when there is no genuine dispute over a material fact and the moving party is entitled to judgment under the law.

The court held that Defendants had not shown that no genuine factual disputes existed. The Employment Agreement’s termination provisions remained ambiguous; questions remained about whether Anthony was fired for cause; and the parties’ intent concerning Anthony’s salary remained unclear. The court also found that Anthony’s new declaration did not eliminate contradictory statements from his earlier depositions or provide objective evidence resolving the contract ambiguities.

The court concluded that a jury must decide what the Employment Agreement means and how it applies to Anthony’s termination. Judge Paul A. Magnuson therefore denied Defendants’ Second Motion for Summary Judgment.

Order and Deadlines

The court ordered that Qwinstar could amend its answer by November 21, 2018. The parties had until March 1, 2019, to conduct discovery and until April 1, 2019, to file dispositive motions. The case was to be ready for trial on June 1, 2019.