United States District Court, W.D. Texas, Austin Division
MEMORANDUM OPINION AND ORDER
YEAKEL, UNITED STATES DISTRICT JUDGE.
the court in the above-styled and numbered cause are
Defendant's Motion for Partial Summary Judgment filed
April 1, 2019 (Dkt. No. 16), Plaintiffs Response in
Opposition to Motion filed April 15, 2019 (Dkt. No. 18), and
Defendant's Reply in Response to Motion filed April 24,
2019 (Dkt. No. 20). Having reviewed and considered the
motion, response, reply, and applicable law, the court denies
the motion for the reasons that follow.
March 19, 2018, Plaintiff Michael Heflin filed this lawsuit
against Defendant Sprout Tiny Homes, LLC
("Sprout"), his former employer, in the 201st
Judicial District Court of Travis County, Texas. On April 16,
2018, Sprout removed this suit to federal court based on
diversity jurisdiction. See 28 U.S.C. §§
1332, 1441, 1446. The complaint alleges that Sprout breached
Heflin's employment agreement (the "Agreement")
when Sprout terminated his employment.
entered into the Agreement with Sprout for a term of two
years beginning on July 1, 2017. Under the Agreement, Heflin
served as the chief operating officer and a member of a
two-person board of directors of Sprout Tiny Homes, Inc., the
parent company of Sprout. The only other member of the board
was Rod Stambaugh, the president and chief executive officer
("CEO") of Sprout.
Agreement allows for early termination of Heflin's
employment for two reasons: (1) just cause, or (2) by
majority vote of the board of directors of Sprout Tiny Homes,
Inc. The Agreement requires Sprout to provide 15-days'
written notice in advance of early termination. The Agreement
contains no express provision regarding the procedure for
removal of a board member. The Agreement provides for
enforcement under Colorado law.
is a Colorado-based company that manufactures tiny homes.
Heflin's initial duties under the Agreement included
"all functional areas under the CEO except finance"
as well as serving on the board. Heflin reported to the CEO,
and the Agreement provided for the possibility that Heflin
could be delegated with additional duties. One of
Heflin's primary responsibilities was the fulfillment of
a contract for the purchase of 275 tiny homes in Austin,
Texas. When Sprout delivered the first prototype of a tiny
home, the client was unhappy and terminated the contract.
Stambaugh attributed the failure of the project and resulting
loss of the contract to Heflin. As a result, Stambaugh sought
to terminate Heflin. Stambaugh did not terminate Heflin under
the "just cause" provision of the Agreement.
Instead, Stambaugh removed Heflin from the board in March
2018 and then terminated Heflin by email effective
immediately. Neither the board nor the shareholders met or
conducted a vote regarding Heflin's employment before or
after Heflin's termination. In addition, no notice was
given to schedule a meeting to terminate Heflin.
than 10 months later, Stambaugh unilaterally executed two
documents purporting to consent to these actions. In one
document, acting as the majority stockholder, Stambaugh
ratified Heflin's prior removal from the board. In the
other document, acting as the sole board member, Stambaugh
consented to prior termination of Heflin's employment.
judgment is appropriate if the record shows "that there
is no genuine issue as to any material fact and the movant is
entitled to judgment as a matter of law." Fed.R.Civ.P.
56(a). A fact is material if it concerns an essential element
of the movant's case. Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986). The court must draw any
inferences in the light most favorable to the non-moving
party. Matsushita Elec. Indus. Co. v. Zenith Radio,
475 U.S. 574, 587 (1986); Washburn v. Harvey, 504
F.3d 505, 508 (5th Cir. 2007). If a reasonable jury could
return a verdict for the non-moving party, then the dispute
is genuine, and summary judgment is not appropriate.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
parties agree that Colorado law controls the interpretation
of the Agreement. In order to give effect to the intent of
the parties, a written contract will be enforced according to
its plain language if it is complete and unambiguous. Ad
Two, Inc. v. City & Cty. of Denver, 9 P.3d 373, 376
(Colo. 2000). To prevail for breach of contract under
Colorado law, a plaintiff must prove four elements: "(1)
the existence of a contract, (2) performance by the plaintiff
or some justification for nonperformance, (3) failure to
perform the contract by the defendant, and (4) resulting
damages to the plaintiff." Western Distrib. Co. v.
Diodosio, 841 P.2d 1053, 1058 (Colo. 1992) (en
banc) (internal citations omitted). The performance
element may be satisfied by "substantial
performance," in which a party has deviated from literal
performance in "trifling particulars" without
materially reducing the benefit the other party expected to
receive. Id. "Whether performance is complete,
substantial, or less than substantial involves a factual
determination for the trier of facts." Little
Thompson Water Ass 'n v. Strawn, 466 P.2d 915, 917
law governs removal of a corporate board member and
procedures for board actions:
(1) Unless the articles of incorporation require that such
action be taken at a shareholders' meeting, any action
required or permitted by . . . this title to be taken at a