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Spacesaver Systems, Inc. v. Adam

Court of Special Appeals of Maryland

June 27, 2013

SPACESAVER SYSTEMS, INC.
v.
CARLA ADAM

Eyler, Deborah S. Wright, Kenney III, James A. (Retired, Specially Assigned), JJ.

OPINION

Kenney, J.

Spacesaver Systems, Inc., appellant, appeals the judgment of the Circuit Court for Montgomery County entered in favor of Carla Adam, appellee, in the amount of $255, 868.20. Spacesaver presents four questions for our review, [1] which we have consolidated, rephrased and renumbered as follows:

1. Did the trial court err in finding that the Employment Agreement was not an at-will contract, but rather a for-cause lifetime contract?
2. Did the trial court err in awarding damages where compensation, in the form of either salary or commissions, was not set in the Employment Agreement?

For the reasons that follow, we hold that the Employment Agreement is neither an at-will contract nor a contract for lifetime employment, and that Adam, under the circumstances of the case, could only be terminated for-cause. We shall affirm the award of damages.

FACTUAL AND PROCEDURAL BACKGROUND

Nineteenth century Russian literary critic Ivan Kireevsky chided that, "[i]n the West, brothers make contracts with brothers." Harold J. Berman, The Weightier Matters of the Law, in Solzhenitsyn at Harvard (Ronald Berman ed., Ethics and Public Policy Center 1980). In this case, siblings and half-siblings saw the need to contract with each other, and the result was, in the words of the trial court, "a family fractured by business problems." This Court is called upon to sort out the essential nature of those contracts, with Spacesaver arguing that Adam's employment contract was at-will, and Adam contending that it was a "lifetime contract" terminable only for-cause.

To be sure, lifetime employment contracts are like exotic, rare birds that have been identified and described in their occasional flights into Maryland, although they have rarely nested in our appellate jurisprudence. Their somewhat illusory nature was expressed by former University of Iowa football coach Hayden Fry when he said: "I thought I had a lifetime contract. Then I found out the other day that if I have a losing season, they're going to declare me legally dead." Ray Yasser, A Comprehensive Blueprint for the Reform Of Intercollegiate Athletics, 3 Marq. Sports L.J. 123, 148 (1993).

The background facts are not in dispute. Spacesaver is a Washington, D.C. corporation with 53 full or part-time employees. Its corporate office is in Kensington, Maryland. Spacesaver sells and installs tracked shelving and storage systems for business and governmental organizations with large storage needs. It was formed by Jack and Alice Schmidt in 1973. A Voting Trust Agreement gives each of the Schmidts' three children, Carla Adam, Amy Hamilton and David Craig, [2] a 1/3 capital stock interest in the company.[3] Erik Kloster, a business advisor to Spacesaver, was the original trustee. He appointed Adam, Hamilton, and Craig as additional trustees.[4] In 1995, all three of the Schmidts' children were employed by Spacesaver in executive capacities and served on its board of directors.[5]

Controversies among them led to the 2006 drafting of identical (except for name and title) "Executive Employment Agreements" for each of the Schmidts' three children, along with a "Stock Purchase Agreement." These documents were drafted by Albert Ellentuck, Spacesaver's corporate attorney.[6]

At issue in this case is Adam's Employment Agreement, which she signed as the "Employee" and which Craig signed as the "President" on behalf of Spacesaver. It includes the following provisions:

• Section 2.1 ("Compensation and Benefits: Base Salary"):
Employee shall be paid an annual base salary in an amount specified on Exhibit A attached hereto and made a part hereof . . . .[7] Any increases or decreases in Employee's Base Salary for years beyond the first year of Employee's employment shall be reflected on an amended Exhibit A, and shall be in the sole discretion of Company management, and nothing herein shall be deemed to require any such change.
• Section 3 ("Duties and Performance"):
The Employee acknowledges and agrees that she is being offered a position of employment by the Company with the understanding that the Employee possesses a unique set of skills, abilities, and experiences which will benefit the Company, and she agrees that her continued employment with the Company, whether during the term of this Employment Agreement or thereafter, is contingent upon her successful performance of her duties as noted above, or in such other position to which she may be assigned.
• Section 3.2 ("Specific Duties"):
The employee shall have the title of Managing Director, and shall have the following duties:
1) Create and manage a well balanced executive management team to ensure long term success and provide the ability for planning, organizing, control and leadership. Head towards setting company up for a transitional role of active management.
2) Contribute to company profitability through sales.
3) Ensure company profitability through accurate and effective management of Administration. Includ[ing] the training and development of staff, project planning, management, communication of status, and all other aspects.
4) Manage employee job performance and compliance of all company policies and procedures. Coach supervisors in the performance management process.
5) Provide active oversight, management and direction for sales, sales management and financial administration of the company.
6) Foster an environment of team orientation and individual ownership by establishing constructive relationships between employees. Inspire[] teamwork between employees, provides effective management, exhibit[] personal responsibility for team goals and attend[] bi-weekly management team meeting.
7) And all other duties as decided by the board of directors.
• Section 4 ("Termination of Employment"):
Employee's employment with the Company may be terminated, prior to the expiration of the term of this Employment Agreement[, ] in accordance ...

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