Labor & Employment Law Daily Employment documents treated as one agreement to apply forum selection clause, remand to state court
Friday, January 11, 2019

Employment documents treated as one agreement to apply forum selection clause, remand to state court

By Lorene D. Park, J.D.

Affirming the grant of an employer’s motion to remand its breach of contract suit to state court, the Eighth Circuit held that a job offer letter, employee agreement, and repayment agreement that were executed contemporaneously during the formation of the employment relationship were part of the same contract under Minnesota law. Thus, the forum selection clause in the employee agreement applied to the employer’s claim that the employee breached the repayment agreement when he terminated his employment during a three-year guarantee period without paying back the difference between his commissions earned and what he had already been paid (Medtronic Sofamor Danek, Inc. v. Gannon, January 9, 2019, Gruender, R.).

Employee agreement with forum selection clause. In March 2015, the employee signed an offer letter which included basic information like start date and compensation, and stated that it was contingent upon his signing the attached employee agreement. The employee agreement dealt with issues like confidentiality and restrictions on competition. It also included a forum selection clause stating that disputes “arising out of or related to this Agreement” must be litigated in Minnesota state court, and the employee “irrevocably consents to the personal jurisdiction of the state courts in the State of Minnesota for the purposes of any action arising out of or related to this Agreement.” The employee agreement did not address compensation or other financial terms, which it stated were set forth in separate documents. The employee agreement said that nothing in it “affects any term or provision of any MEDTRONIC compensation or benefit plan or any agreements related thereto.”

Repayment agreement. A one-page repayment agreement stated that Medtronic and the employee “wish to enter into an . . . employment relationship” and Medtronic agreed to pay $900,000 over a three-year “Guarantee Period,” but if the employee “voluntarily terminates from Medtronic during the Guarantee Period or within one year after,” he had to repay “the difference between” his earned commissions and payments received. The offer letter also described the guarantee period and condition of repayment.

Lawsuit for repayment. In late 2016, the employee left Medtronic, which then sued him in Minnesota state court, alleging he failed to repay Medtronic pursuant to the repayment agreement. The employee removed the action to federal court and Medtronic moved to remand.

Agreements were part of same contract. The court granted the motion to remand, holding that the forum selection clause in the employee agreement applied to actions arising from the repayment agreement because, under Minnesota law, both agreements were different parts of the same contract. It also determined that Medtronic’s suit was “related to” the employee agreement and therefore subject to its forum selection clause.

Affirming, the appeals court rejected the employee’s argument that the employee agreement and repayment agreement are separate contracts. As the lower court explained, under state law, “instruments executed at the same time, for the same purpose, and in the course of the same transaction are, in the eyes of the law, one instrument and will be read and construed together unless the parties stipulate otherwise.” Here, the two agreements and the offer letter were executed simultaneously and the circumstances surrounding the execution indicated they should be treated as a single contract. Indeed, the offer letter summarized key provisions of the repayment agreement, which stated that the parties “wish to enter . . . employment relationship.” The repayment agreement was therefore not a free-standing contract as the employee claimed.

Repayment dispute is related to employee agreement. Also rejected was the employee’s argument that language in the employee agreement precluded application of its forum selection clause here. The forum selection clause applies to disputes “arising out of or related to this Agreement” and, in the appellate court’s view, that was susceptible to only one interpretation—the repayment agreement was unambiguously related to the employee agreement. The analysis concluding that they were part of the same contract applied here as well. Because the employee agreement contained a clear and unequivocal forum selection clause, remand was affirmed.

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