No Claim for Executive Pressured to Rescind Contract

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By Lisa Nagele-Piazza

June 1 — A former vice president for a data center service provider in Nebraska has no breach of contract claim despite pressure to rescind his employment agreement and accept new terms or risk being fired, a federal judge ruled ( Gilkerson v. Neb. Colocation Ctrs., LLC , 2016 BL 172337, D. Neb., No. 8:15-CV-37, 5/31/16 ).

Timothy Gilkerson didn't show his rescission of a 10-year employment contract with Nebraska Colocation Centers LLC was voidable as the result of duress, Judge John M. Gerrard of the U.S. District Court for the District of Nebraska said in “reluctantly” granting summary judgment to the company May 31.

For an agreement to be voidable because of duress under Nebraska law, the agreement must be obtained through wrongful coercion and “the agreement itself must be unjust, unconscionable, or illegal.”

The company president told Gilkerson during a recorded meeting, “If you're going to go to your lawyer, go to your lawyer, but you'll go to your lawyer without a job.”

Even if Gilkerson was coerced into rescinding his employment contract in exchange for less favorable terms, that's not enough to void the rescission, the court said. There's no evidence that the rescission agreement and new terms themselves were “unjust, unconscionable, or illegal,” the court held.

Pressure to Rescind

Gilkerson began working for Nebraska Colocation Centers in 2011 and was responsible for the company's information technology infrastructure, according to the court.

He signed a 10-year employment contract that set his salary, quarterly bonus potential and retirement bonus. If he was fired without cause, he would receive his remaining salary in a lump sum, as well as additional bonuses and his full retirement bonus.

If he was fired for cause, he would only receive pay for the time he actually worked.

The company's president, Jerry Appel, said he was unhappy with Gilkerson's sales performance—although Gilkerson disagreed with Appel about how much sales responsibility he was supposed to have.

In July 2013, Appel announced that he had hired a new vice president of sales, and he presented Gilkerson with a document agreeing to “mutually rescind” his employment contract.

Appel provided him new employment terms that kept his base salary the same but changed some of the bonus terms and eliminated the retirement bonus. Under the new agreement, the company would no longer be restricted from terminating Gilkerson's employment at will.

During subsequent meetings, Appel “clearly” gave Gilkerson the choice to agree to the rescission and new terms or be fired, the court said.

Appel told Gilkerson that the company could pay for litigation and would “outlast” him.

Gilkerson ultimately agreed to the new terms and was fired six months later.

No Duress

Gilkerson filed a lawsuit claiming that the rescission was voidable because it was the product of duress, but the court disagreed.

“Lawful coercion becomes impermissible when employed to support a bad-faith demand,” the court said. However, “an agreement must not only be obtained by means of pressure brought to bear, but the agreement itself must be unjust, unconscionable, or illegal.”

Gilkerson raised a genuine dispute as to whether the threat of being fired if he didn't rescind the agreement constituted unlawful coercion, the court said. But that's not enough to void the rescission under Nebraska law, it said. The new terms may have been less favorable to Gilkerson, but they weren't “unjust, unconscionable, or illegal,” the court said.

“Had the revised terms of his employment been given to a newly-hired employee, they would certainly be seen as fair, or even generous,” it said.

Counsel for the parties didn't immediately respond to Bloomberg BNA's requests for comment.

Adams & Sullivan represented Gilkerson. Jackson Lewis represented Nebraska Colocation Centers.

To contact the reporter on this story: Lisa Nagele-Piazza in Washington at lnagele@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com