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Foster-Henderson v. Memphis Health Center, Inc.

Court of Appeals of Tennessee, Jackson

July 22, 2015


         Session June 9, 2015.

Page 215

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed and Remanded. Appeal from the Chancery Court for Shelby County. No. CH071016. Kenny W. Armstrong, Chancellor.

         Christopher F. Donovan, Memphis, Tennessee, for the appellant, Stacy Foster-Henderson.

         Robin H. Rasmussen and Peter D. Baskind, Memphis, Tennessee, for the appellee, Memphis Health Center, Inc.

         J. STEVEN STAFFORD, P.J., W.S., delivered the opinion of the Court, in which ARNOLD B. GOLDIN, J., and BRANDON O. GIBSON, J., joined.


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          This appeal involves a contract for employment entitling the employee to sixty days advance notice of the employer's decision to terminate the contract and six months additional salary from the date of the termination. The employer argued that the termination was effective in May 2005 and, therefore, that the employee had been fully compensated pursuant to the contract. The trial court ruled that the termination occurred in June 2005 and awarded employee damages equivalent to two months' salary. We conclude that the evidence preponderates in favor of finding that the employee did not receive the requisite notice of the termination of her employment until September or October 2005 at the earliest. Accordingly, we reverse the judgment of the trial court and award employee damages equivalent to six months' salary, as well as partial prejudgment interest. Reversed and remanded.



         Marion Foster served as the Chief Executive Officer of Defendant/Appellee Memphis Health Center, Inc. (" MHC" ) from July 2004 until sometime in 2005. The exact date of her termination is the central issue in this appeal. Under Ms. Foster's contract of employment, she was to receive six months' salary upon her termination. Specifically, her contract provides:

This Agreement may be terminated by the mutual assent of the parties hereto; or by election by MHC or the Employee with sixty days advanced notice.
MHC may terminate this Agreement with or without cause at any time and shall be obligated to pay Employee the compensation the equivalent of six (6) months salary, plus accrued vacation and other employee benefits up to the date of termination.

         The contract further provided that Ms. Foster would be paid a salary of $80,000.00 for the first year, which would increase to at least $82,400.00 in July 2005.

         MHC subsequently went into judicial receivership, and an entirely new Board of Governors (" Board" ) was appointed. Soon after the new Board was in place, the Board suspended several employees, including Ms. Foster. Ms. Foster was notified of her suspension by letter of April 29, 2005. It is undisputed that MHC paid Ms. Foster her salary until October 2005.

         On May 22, 2007, Ms. Foster filed a complaint against MHC for breach of her

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employment contract, seeking compensation for six months of salary and benefits. Specifically, Ms. Foster alleged that she had never been given notice that her employment with MHC was terminated. Additionally, Ms. Foster alleged that because her termination was not effective until after September 15, 2005, at the earliest, she was owed six months' additional salary from the date of the termination.

         MHC filed an answer denying Ms. Foster's claim on June 14, 2007. Thereafter, the case went dormant until approximately November 1, 2011, when MHC filed a motion to dismiss for lack of prosecution. According to MHC's motion, Ms. Foster had taken no action on the case since her final discovery response occurred on June 10, 2010. On November 7, 2011, MHC also filed a motion for summary judgment. On June 28, 2012, Ms. Foster's counsel filed a motion to withdraw as counsel and to substitute Christopher Donovan. A consent order allowing the withdrawal and substitution was entered on July 3, 2012. Ms. Foster responded in opposition to the motion for summary judgment on July 18, 2012, and the motion to dismiss on August 15, 2012. On September 18, 2012, the trial court denied MHC's motions for summary judgment and to dismiss. On November 30, 2012, Ms. Foster filed her own motion for summary judgment, which relied on several documents, including an affidavit provided by Ms. Foster. On March 6, 2013, Ms. Foster's counsel filed a suggestion of death indicating that Ms. Foster died on March 1, 2013. On March 25, 2013, the trial court entered an order allowing the substitution of Appellant Stacey Foster-Henderson (" Appellant" ) in her capacity as the Personal Representative of the Estate of Ms. Foster as the plaintiff.

         Due to Ms. Foster's death, MHC filed a motion to strike her affidavit on March 28, 2013. Appellant responded in opposition on April 12, 2013. In addition, Appellant filed a motion for sanctions against MHC due to the filing of the motion to strike, suggesting that the motion had no basis in law. On May 20, 2013, the trial court denied the motion for sanctions. On June 3, 2013, the trial court also denied MHC's motion to strike Ms. Foster's affidavit.

         The case was heard without a jury on September 11, 2013. Ms. Foster's deposition was admitted as an exhibit. In her deposition, she denied that she ever received any notice of the termination of her employment. Instead, Ms. Foster testified that the only notice provided to her was a notice of suspension on April 29, 2005. Ms. Foster admitted that she eventually applied for and received unemployment benefits after she left MHC but testified that she did not apply for those benefits until 2006.

         The parties stipulated to admission of several documents related to the termination of Ms. Foster's employment, including minutes from the Board. Relevant to this appeal, the record contains the April 29, 2005 letter suspending Ms. Foster pending the next Board meeting. The letter also informed Ms. Foster that if she had " any additional information . . . to share with the board or that . . . will assist the Board in making a final decision," Ms. Foster was permitted to attend the May 19, 2005 Board meeting to address the Board prior to a vote. According to the letter, Ms. Foster was " expected to present a detailed and comprehensive plan for corrective action to be put in place immediately."

         Ms. Foster did not attend the May 19, 2005 meeting, instead preferring to address the Board through a written document. The minutes from the May 19, 2005 Board meeting do not include any discussion of Ms. Foster or her employment status. Instead, the record contains a letter

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dated May 23, 2005 from Loyal Featherstone, the Chairman of the Board, to Ms. Foster. The letter states:

The Board [] has reviewed your letter to Chairman Featherstone dated May 19, 2005. We are troubled by the fact that you chose to personally bring your letter to [MHC] at 6:00 p.m. on the day of the meeting, but decided not to make an appearance before the board. Board members observed you drive away from the center just minutes before the start of our meeting, and you nor anyone else offered an explanation for your failure to appear.
In order for board members to hear your plan for corrective action directly from you, we have tabled a final decision on your employment status until our June 16th meeting. The board expects you to be present and to personally present your plans.
In the meantime, we have stopped the direct deposit of your payroll checks. You may retrieve them after your appearance before the Board.

         The Board held another meeting on June 16, 2005. The minutes reflect that Ms. Foster was present and made a presentation before the Board. The minutes show that the Board convened an executive session to discuss and vote on the termination of another MHC employee's employment. Because the Board voted to terminate the employment of this individual, the minutes indicate that a letter notifying the employee of the termination would be sent by registered mail. The minutes do not indicate that an executive session was convened to vote on Ms. Foster's continued employment.

         MHC sent a letter to Ms. Foster on June 22, 2005. The letter indicated that Ms. Foster's payroll check was enclosed, which reflected three days of approved administrative leave. However, the letter indicated that Ms. Foster's leave during the period of May 19, 2005 to June 16, 2005 was unapproved and that she would not be compensated for that time. In addition, the letter stated:

Frankly, your failure to appear at the May 19, 2005 board meeting without communicating any reason to Board Members is tantamount to job abandonment. Any further incidents of a similar nature will be grounds for immediate termination.
Upon your appearance at the June 16, 2005 board meeting, your regular pay was reinstated. The new pay period began on June 20, 2005, and you will be paid for each workday until a decision is made regarding your employment status.

         The Board held a " Special Call Meeting" on July 14, 2005. According to the minutes, one of the purposes of the July 14, 2005 meeting was " discuss the employment status" of Ms. Foster. The minutes also state: " Suspension of Ms. Marion Foster: Ms. Foster is to be offered three months pay and release."

         Another Board meeting was held on July 21, 2005. The record contains two versions of the minutes from the July 21, 2005 Board meeting--a signed and an unsigned copy, both of which were admitted as exhibits. According to the signed copy of the minutes, at the meeting, the Board " raised questions regarding the status of . . . Ms. Foster." The minutes reflect that an attorney informed the Board that Ms. Foster had an employment contract. The minutes go on to discuss a possible offer by the Board to reemploy another employee that was also suspended.[1] The minutes

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further state: " When questioned about Ms. Foster's status [a board member] reiterated that Ms. Foster's position was not to be rescinded. [Another board member] stated that she has been out for three months and will be offered three remaining months in pay."

         An additional Board meeting occurred on August 18, 2005. During this meeting, Ms. Foster was again discussed. The meeting minutes state:

[The Board's attorney] stated she received a call from Ms. Foster['s] . . . Attorney . . . . She cited letter and opinions reflecting her position on these former employees. [Ms. Foster's attorney] will be called and informed the Board had a pressing agenda ...

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