Earlier this month, the Franklin County Court of Appeals affirmed an employer’s summary judgment on an employee’s breach of contract and promissory estoppel claims based on emailed negotiations over her severance pay when the emails contemplated a final, signed agreement which was never executed by the parties. Watson v. Franklin University, 2019-Ohio-2929. The plaintiff requested 18 months instead of the offered 6 months of severance pay and the employer initially appeared to agree in an email, which was corrected later that same afternoon to change the date from 2014 from 2015. Because the plaintiff sought 18 months of severance pay, this implicated the statute of frauds because performance would last more than one year and the requirement for a signed agreement could not be satisfied through promissory estoppel. Further, the plaintiff could not show justifiable reliance on an email which agreed to the 18 months of severance when the email was corrected later that same afternoon to change the date from 2015 to 2014 and the parties never signed a formal severance agreement. There was no evidence that she relied on the morning email to her detriment by rejecting job offers in reliance on the morning email before it was corrected. Accordingly, she could not prove a valid claim for promissory estoppel.
According to the Court’s opinion, the plaintiff was hired in 2011 and was notified that her job was being eliminated and her employment terminated on November 13, 2013. She was offered 6 months of severance, contingent on signing an agreement and release of claims and on a reduction in the severance pay if and when she obtained other employment. She had previously negotiated a severance agreement in connection with a prior job and had retained an attorney to advise her. She countered a couple of weeks later requesting 18 months of severance that would not be reduced if and when she obtained another job. After speaking with the employer on December 3, the employer emailed her that same morning confirming their conversation about severance pay through May 2015 without being reduced by other employment. A formal agreement was to follow with the new terms. Later that same afternoon, the employer emailed her to explain that it had misread the dates and that it was only willing to pay severance through May 2014 – i.e., six months. It sent her the formal agreement to sign, but she refused to sign it because it only promised six months of severance pay.
She brought suit for claims of breach of contract, breach of the covenant of good faith and fair dealing and promissory estoppel. The trial court granted summary judgment on the first two claims prior to discovery and on the promissory estoppel claim after discovery. She appealed.
The Court agreed that the statute of frauds applied to an agreement to make installment payments for more than a year and would have applied to the parties’ severance pay agreement. The plaintiff attempted to argue that the emails exchanged discussing the terms of the severance agreement satisfied the statute of frauds and indicated the employer’s initial agreement with her demand. However, “that e-mails purporting to reference an agreement or some aspect of an agreement are not sufficient to satisfy the statutory requirement for a signed agreement as provided for in R.C. 1335.05.” Further, the emails reflected that both parties anticipated the signing of a formal agreement and were not relying on the emails as the contract. “Where the evidence establishes that it was the expectation of all parties that no meeting of the minds would occur absent a final written agreement signed by all the parties, no party can base a legal claim on communications or correspondence that comprise the interim negotiations.” This is particularly true when the negotiating parties are sophisticated in terms of education, experience and advice of counsel. Finally, the Court refused to use promissory estoppel to satisfy the statute of frauds.
The Court also affirmed dismissal of the promissory estoppel claim on the basis that she could not show that she reasonably relied or detrimentally relied on the employer’s morning email appearing to agree to the 18 months of severance. In order to prove a promissory estoppel claim, the plaintiff must show, among other things, that she relied to her detriment on the false promise and that her reliance was reasonable. In this case, however, “'[i]f a written agreement is contemplated, reliance upon statements made before an agreement is signed will be unreasonable as a matter of law, particularly when sophisticated business parties are involved in the negotiations.” In light of her experience, she was considered to be a sophisticated party. Further, the evidence showed that the plaintiff never changed her position, let alone relied to her detriment, on the morning email appearing to agree to the 18 months of severance before that misunderstanding was clarified in writing in the afternoon.
NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.
