Robinson v. Kelly Cable of N.M., LLC
Unreported Disposition (2025)
Rule of Law:
An employer breaches an employment contract by conditioning severance payments on the execution of a release that contains material terms not contemplated in the original agreement, such as the forfeiture of separate equity interests. Furthermore, the 'after-acquired evidence' doctrine cannot be used to defeat summary judgment where the employer's governing body has not actually acted to reclassify a termination as 'for cause.'
Facts:
- In 2021, Plaintiff Robinson became president of Kelly Cable and signed an Employment Contract stating that if she were terminated 'without cause,' she would receive one year of salary and COBRA premiums upon signing a General Release.
- The Employment Contract included a specific draft General Release and stated it could only be modified based on changes in the law or circumstances of termination.
- Separately, Robinson held 'P units' (equity/profit-sharing interests) in IX Capital, a parent company, which were governed by a distinct LLC agreement.
- On January 31, 2023, Kelly Cable terminated Robinson 'without cause' due to corporate restructuring.
- To receive her severance, Kelly Cable presented Robinson with a new Severance Agreement that required her to forfeit all her 'P units' in IX Capital for zero consideration.
- The new agreement also required releasing claims against IX Capital, an entity not included in the original draft release.
- When Robinson did not sign this materially altered agreement, Kelly Cable withheld her severance salary and her COBRA payments.
Procedural Posture:
- Plaintiff filed a Complaint in the Superior Court of Delaware alleging breach of contract.
- Defendants filed an Answer admitting they terminated Plaintiff 'without cause.'
- Plaintiff filed a Motion for Summary Judgment arguing the breach was clear from the contract documents.
- Defendants opposed the motion, arguing discovery was needed regarding settlement negotiations and potential employee misconduct.
- The Court ordered Defendants to supplement the record to specify what discovery was necessary.
- Defendants submitted affidavits alleging Plaintiff concealed a vehicle accident and ignored whistleblower complaints, arguing this 'after-acquired evidence' raised material facts.
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Issue:
Does an employer breach an employment contract by requiring an employee to forfeit separate equity interests as a condition of receiving bargained-for severance payments, and can the employer avoid summary judgment by citing 'after-acquired evidence' of misconduct when the Board has not formally changed the termination status to 'for cause'?
Opinions:
Majority - Judge Butler
Yes, the employer breached the contract by materially altering the release terms, and the after-acquired evidence defense fails because the Board never acted on it. The Court reasoned that the 2021 Employment Contract obligated the company to tender a release 'substantially in the form' of the attachment. By demanding the forfeiture of 'P units'—which were governed by a separate LLC agreement and not the Employment Contract—the Defendants attempted to use the leverage of severance payments to seize Plaintiff's separate property rights. This constituted a material breach. Regarding the 'after-acquired evidence' defense (where Defendants alleged they later discovered Robinson hid a driver's accident and ignored whistleblower complaints), the Court rejected this as a bar to summary judgment. Under the contract, only the Board of Directors could terminate Robinson for cause. Since the Board had not met or voted to recharacterize her termination from 'without cause' to 'for cause' based on this new evidence, the allegations remained merely theoretical and did not create a material dispute of fact.
Analysis:
This decision reinforces the sanctity of severance provisions in executive employment contracts. It signals to employers that they cannot 'hold hostage' contractually owed severance payments to extract new concessions (like equity forfeiture) that were not part of the original bargain. Legally, the opinion is significant for its treatment of the 'after-acquired evidence' doctrine in Delaware non-fiduciary employment cases. The Court clarifies that for an employer to use after-acquired evidence to avoid liability, they must actually take the formal corporate steps (e.g., Board action) to terminate the employee for cause based on that evidence. Mere arguments by counsel that the Board could fire the employee are insufficient to survive summary judgment.
