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Blanchette v. Kindred Healthcare Operating, Inc.

United States District Court, M.D. Tennessee, Nashville Division

February 26, 2018




         This is a breach of contract action that arises from the ending of Crispin Scott Blanchette's (“Blanchette”) employment with Kindred Healthcare Operating, Inc. and Kindred HealthCare, Inc.[1] (“Kindred”). Kindred has filed a Motion for Summary Judgment (Doc. No. 44), Blanchette has filed a Response (Doc. No. 47), and Kindred has filed a Reply (Doc. No. 49). The parties have submitted numerous exhibits. (Doc. Nos. 44-2 to 44-16, 46-1 to 46-5, 49-1 to 49-3, 55-1 to 55-4.) Finally, the parties have filed statements of facts, to which responses have been lodged. (Doc. Nos. 44-18, 47, 48, 50.) The motion is ready for decision. For the following reasons, Kindred's motion will be denied.

         I. Facts

         Kindred's corporate headquarters offices are in Louisville, Kentucky. Effective February 17, 2014, Kindred hired Blanchette as its Chief Information Officer (“CIO”), reporting to President and Chief Executive Officer (“CEO”) Benjamin Breier (“Breier”). (Doc. No. 44-2.) Blanchette was to receive a salary of $385, 000 per year and to receive a number of other valuable corporate benefits, including stock. (Id.) Kindred's Board of Directors was not involved in the decision to hire Blanchette. (Doc. No. 44-3.)

         A. The Employment Agreement

         Kindred and Blanchette executed an Employment Agreement (“Agreement”). (Doc. No. 44-4.) The term of the Agreement was for a one-year period commencing on the Effective Date, February 17, 2014, that was “automatically extended by one additional day for each day beyond the Effective Date that the Executive remains employed by the Company until such time as the Company elects to cease such extension by giving written notice of such election to the Executive.” (Id. at 2.) In such event, the Agreement would “terminate upon the first anniversary of the effective date of such election notice.” (Id.) The Agreement provides that it “shall be construed in accordance with and governed by the laws of the State of Delaware.” (Id. at 11.)

         The Agreement provides that Kindred may terminate Blanchette during its term for “Cause.”[2] (Id. at 3.) If Kindred terminates the Agreement for Cause, then Kindred owes no obligations to Blanchette. (Id. at 6-8.) However, if Kindred terminates the Agreement for other than Cause, Kindred would owe Blanchette significant salary and benefits. (Id.)

         On the other hand, the Agreement provides that Blanchette may resign for “Good Reason.”[3] If that occurs, there is a “cure period” before the resignation becomes effective. (Id. at 5.) If Blanchette resigns without Good Reason, the effective date of the termination of the Agreement is the date on which Blanchette notified Kindred of the termination of the Agreement and then Kindred owes no further obligations to Blanchette. (Id. at 5 and 8.) However, if Blanchette resigns with Good Reason, Kindred would owe Blanchette significant salary and benefits. (Id. at 6-8.)

         The Agreement specifies that “[a]ny termination by the Company for Cause, or by [Blanchette] for Good Reason, shall be communicated by [a] Notice of Termination given in accordance with this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) specifies the intended termination date (which date, in the case of a termination for Good Reason, shall be not more than thirty days after the giving of such notice). (Id. at 5.) The Agreement does not specify any procedural or substantive requirements for a notice of termination by the Company for other than Cause or by Blanchette without Good Reason. (Id. at 6-8.)

         Finally, the Agreement states that “[a]ny dispute or controversy arising under, out of, or in connection with this Agreement shall, at the election and upon written demand of either party, be finally determined and settled by binding arbitration in the City of Louisville, Kentucky” using the Labor Arbitration rules of the American Arbitration Association (“AAA”). (Id. at 9.) Moreover, the Agreement provides that Kindred shall be responsible for all costs of the arbitration and all reasonable fees incurred therein by Blanchette. (Id.).

         B. Blanchette's May 2015 Resignation and Subsequent Events

         On May 3, 2015, Blanchette sent an email to Breier entitled “Resignation Notice.” (Doc. No. 44-6.) In the email, Blanchette stated:

“It is with a heavy heart that I send my resignation notice. . . . This is most fundamentally a recognition that time spent with family, and one's physical, social, and emotional health is paramount. Often times the organizational communication around someone's departure equivocates something hollow like ‘he has a strong desire to spend more time with family' as code for something else. In this case, the words and the intent are exactly the same. . . . I want to find a way to make this as least impactful on Kindred as possible and give the organization the longest possible runway. At the same time, I would like to not make this an endless transition as both parties will benefit from an efficient timeline. . . . This is all the more difficult acknowledging the profound respect I have for you and the leadership that you bring to such a wonderful organization. That element of the future is what I will miss most following my departure.”

(Id. at 1-2.) Blanchette testified in his deposition that, at this point, it was his intention to end his employment with Kindred:

Q: In this e-mail on May 3rd, 2015, it was your intent to end your employment with Kindred Health Care, is that correct?
A: Correct.
Q: And following this e-mail on May 3rd, 2015, did you at any time specifically revoke or rescind this resignation?
A: No.

(Doc. No. (44-5 at 13.) Further, Blanchette testified that he had “no expectation of continued payment under any agreement for any period after the transition period that [he] would complete as part of [his] resignation” and “no expectation of continued benefits or stock.” (Id. at 145-46.) Finally, Blanchette testified that, at that time, he did not identify any material breaches of the Agreement by Kindred, or any Cause under the Agreement. (Id. at 146.) Blanchette and Breier's testimony agrees that Blanchette would no longer be serving as Kindred's CIO from that point and would assist with the transition of a new person into the CIO position. (Doc. Nos. 44-7 at 10-11; 52-1 at 9-10.)

         However, beyond that, the parties disagree on what happened. Blanchette maintains that Breier “explicitly stated that he was not willing to accept my resignation, and there were going to be other ways to keep me around.” (Id. at 140.) Blanchette testified that Breier told him he “was committed to doing whatever he needed to do to keep me there.” (Id. at 108.) Breier, on the other hand, testified that he accepted Blanchette's resignation and had no recollection of saying that he would not accept it. (Doc. No. 52-2 at 10-11.) Breier further testified in his deposition as follows:

A: I recall sort of saying, “Okay, ” you know, “so you're - you're leaving, and I now have to get on with thinking very quickly about what am I going to do to replace the chief information officer of this company. And that is sort of what I remember us talking about.
Q: Okay. Mr. Blanchette testified that when he had this meeting with you after he submitted his resignation that you told him that you considered it a personal failure of yours that he was resigning, that you wouldn't accept his resignation, and that you would find a position for him at Kindred. Did you say words to that effect?
A: I have no recollection of saying that.
Q: Okay. Is it possible you did?
A: No. I don't believe so.
Q: It not possible?
A: That I said a “personal failure on my part”?
Q: Correct.
A: No, not possible.
Q: Okay. Is it possible that you said, “I will not accept your resignation, and we will find you a position at Kindred”?
A: No. That is not possible. In fact, I recall getting on with the work of figuring out who Scott's replacement was going to be.
Q: Okay. Is it possible that you said that, “We will find you a position at Kindred”?
A: We have had some discussions around performance improvement opportunities for the enterprise in total. . . . And Scott had, as I recall, profit [sic] up the idea that there were efficiencies that could be had, that there were, you know, lien management techniques, that there were various things that could be done organizationally to potentially run our operation more efficiently, not as the chief information officer, but more broadly as a - as someone who would help us think about being more efficient, which, you know, we are always in need of doing. And it is - it is possible that that conversation at that conversation, that we had a conversation around saying, “Yeah. That's kind of interesting. You should have a conversation with Kent Wallace, who's our chief operating officer. I'll have a conversation, I guess, potentially with Kent to say you're going to go have a conversation with him. And why don't the two of you see if there's something here that might be feasible for you to - to do along - you know along that path?”
Q: Okay. I appreciate all that. Is it possible, though, that you said to him, “We will find you a position at Kindred.”
A: I don't believe I said that.
Q: Okay.
A: ...

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