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Rogers v. Stonetrust Commercial Insurance Co.

United States District Court, M.D. Louisiana

February 2, 2018




         This matter is before the Court on the Motion for Partial Summary Judgment[1] by Plaintiff, John W. Rogers (“Plaintiff or Rogers”). Defendant, Stonetrust Commercial Insurance Company (“Stonetrust or Defendant”) has filed an Opposition[2] to this motion, to which Rogers filed a Reply.[3] For the reasons which follow, the Court finds that the Plaintiff's motion should be DENIED.


         Plaintiff filed this lawsuit alleging, inter alia, Stonetrust's breach of contract for failure to pay wages after his termination for good cause.[4] The current Motion specifically addresses Rogers' claim for breach of contract. In his complaint, Rogers alleges that he was employed by Stonetrust as the Senior Vice President of Sales and Marketing from August 2010 to May 14, 2016.[5] On January 5, 2015, Rogers and Stonetrust entered into an employment agreement which was in effect at the time of Rogers' termination.[6] The agreement contained mutual obligations on behalf of both parties concerning Rogers' employment.[7] At issue here are the terms under Sections 3 and 9 of the agreement comprised of Rogers' duties and termination.

         Rogers alleges that, on February 15, 2016, he and others were informed by Stonetrust's president and CEO, Timothy Dietrich (“Dietrich”), that the existing hierarchal management model was being replaced by a concept called Holacracy.[8]

         Holacracy has been defined as “a method of decentralized management and organizational governance developed by HolacracyOne, in which authority and decision- making are distributed throughout a holarchy of self-organizing teams rather than being vested in a management hierarchy.”[9]

The building blocks of Holocracy's organizational structure are roles. Holacracy distinguishes between roles and the people who fill them, as one individual can hold multiple roles at any given time. A role is not a job description; its definition follows a clear format including a name, a purpose, optional ‘domains' to control, and accountabilities, which are ongoing activities to perform. Roles are defined by each circle -or team- via a collective governance process, and are updated regularly in order to adapt to the ever-evolving needs of the organization.
Holacracy structures the various roles in an organization in a system of self-organizing (but not self-directed) circles. Circles are organized hierarchically, and each circle is assigned a clear purpose and accountabilities by its broader circle. However, each circle has the authority to self-organize internally to best achieve its goals. Circle conduct their own governance meetings, assign members to fill roles, and take responsibility for carrying out work within their domain of authority. Circles are connected by two roles known as “lead link” and “rep link, ” which sit in the meetings in both their circle and the broader circle to ensure alignment with the broader organization's mission strategy.
Each circle uses a defined governance process to create and regularly update its own roles and policies. Holacracy specifies a structured process known as “integrative decision making” for proposing changes in governance and amending or objecting to proposals. This is not a consensus-based system, not even a consent-based system, but one that supposedly integrates relevant input from all parties and ensures that the proposed changes and objections to those changes are anchored in the roles' needs (and through them, the organization's needs), rather than individual preferences or ego.
Holacracy specifies processes for aligning teams around operational needs, and requires that each member of a circle fulfill certain duties in order to work efficiently and effectively together. In contrast to the governance process, which is collective and integrative, each member filling a role has a lot of autonomy and authority to make decisions on how best to achieve his or her goals. Some have described the authority paradigm in Holacracy as completely opposite to the one of the traditional management hierarchy; instead of needing permission to act or innovate, Holacracy gives blanket authority to take any action needed to perform the work of the roles, unless it is restricted via policies in governance or it involves spending some assets of the organization (money, intellectual property, etc.).[10]

         Plaintiff alleges that the adoption of Holacracy fundamentally changed his position and authority in the company.[11] Prior to the adoption of Holacracy, Rogers reported directly to CEO Dietrich and managed five marketing staff members.[12] Plaintiff's authority included administering salaries, setting performance goals, evaluating and directing activities, as well as recommending termination as to the marketing staff.[13] Rogers alleges that, after the implementation of Holacracy, he had none of these duties.[14]

         Initially, Rogers was supposed to fill the role of “lead link” of the marketing circle.[15]As lead link of the marketing circle, Rogers also belonged to the “anchor circle, ” or “general circle, ” defined as the broadest circle in the organization.[16] “But on the day following Holacracy's formal adoption, February 16, 2016, Rogers lost his position and authority as lead link of the marketing circle, because the marketing circle was absorbed by the underwriting circle.”[17] Instead, Rogers was assigned to the roles of “lead marketeer” and marketing trainer within the underwriting circle.[18] Consequently, instead of reporting directly to CEO Dietrich, Rogers now reported to Michael Dileo (“Dileo”), the lead link of the underwriting circle, who was previously his equal.[19]

         After the events of February 16, 2016, Rogers hand delivered a resignation letter to Dietrich on March 9, 2016 in accordance with the provisions of Section 9(e)(i) of his employment agreement.[20] The letter notified Stonetrust of Plaintiff's intention to avail himself of the provisions of the employment agreement defined as an employee termination for good cause for a material diminution in employee's (Rogers') authority, duties, or responsibilities.[21] According to Section 9(e), Stonetrust is obligated to pay Rogers his monthly salary for a twelve month period following the effective date of such termination.[22] Additionally, the employment agreement provides for the reimbursement of COBRA continuing health coverage premiums in the event of an employee termination for good cause.[23] Stonetrust responded to Plaintiff's letter by written correspondence dated April 5, 2016 rejecting Rogers' assertion of section 9(e)(i) of the employment agreement, stating that his responsibilities and authority remained the same as before.[24]Rogers' final day at Stonetrust was May 2, 2016.[25]

         Rogers seeks summary judgment regarding Stonetrust's breach of contract for failure to pay the monthly salary payments and any COBRA reimbursements following his termination for good cause.[26] Stonetrust maintains the position that Rogers did not suffer any diminution in his authority, duties, or responsibilities.[27] Stonetrust also alleges that there are material issues of fact as to when Rogers received actual notice of this diminution and whether he timely complied with the applicable notice provisions under the employment agreement.[28]


         A. Summary Judgment Standard

         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”[29] “When assessing whether a dispute to any material fact exists, we consider all of the evidence in the record but refrain from making credibility determinations or weighing the evidence.”[30] A party moving for summary judgment “must ‘demonstrate the absence of a genuine issue of material fact, ' but need not negate the elements of the nonmovant's case.”[31] If the moving party satisfies its burden, “the non-moving party must show that summary judgment is inappropriate by setting ‘forth specific facts showing the existence of a genuine issue concerning every essential component of its case.'”[32] However, the non-moving party's burden “is not satisfied with some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence.”[33]

         Notably, “[a] genuine issue of material fact exists, ‘if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'”[34] All reasonable factual inferences are drawn in favor of the nonmoving party.[35] However, “[t]he Court has no duty to search the record for material fact issues. Rather, the party opposing the summary judgment is required to identify specific evidence in the record and to articulate precisely how this evidence supports his claim.”[36] “Conclusory allegations unsupported by specific facts … will not prevent the award of summary judgment; ‘the plaintiff [can]not rest on his allegations … to get to a jury without any “significant probative evidence tending to support the complaint.”'”[37]

         B. The Terms of the Employment Agreement

         The dispute between the parties is whether the change in the management scheme at Stonetrust resulted in a material diminution in Rogers' authority, duties, or responsibilities justifying his invocation of the provision pertaining to an employee termination for good cause. Section 9 of the employment agreement entitled “Termination” allows either party to end the term of employment under certain conditions, and states in pertinent part:

(a) Employee's employment hereunder shall be terminated upon the occurrence of any of the following:
(v) Employee Termination for Good Cause (as defined herein); or
(e) For purposes of this Agreement, “Employee Termination for Good Cause” shall mean Employee's termination of or resignation from Employment for any one or more of the following reasons:
(i) a material diminution in Employee's authority, duties, or responsibilities;[38]

         Rogers alleges that, after the implementation of Holacracy, his authority, duties, and responsibilities were materially diminished. As a result, Rogers chose to avail himself of the foregoing termination provision and argues that he is entitled to a year of monthly salary payments and reimbursement for continuing health coverage premiums according to section 9(f). Section 9(f) of the employment agreement states in pertinent part:

(f) In the event that Employee's employment is terminated at any time by a Company Termination Without Cause or an Employee Termination for Good Cause, for a twelve month period following the effective date of such termination, the Company shall pay monthly (as severance, termination pay, separation pay, contract payout, compensation, or liquidated damages) the monthly Salary that would have otherwise been payable to the Employee during such period.
In addition, in the event that Employee's employment is terminated at any time by a Company Termination Without Cause or an Employee Termination for Good Cause, the Company will pay or reimburse Employee the actual cost of COBRA continuing health coverage premiums, to the extent COBRA is applicable and Employee elects COBRA continuing health coverage.
The Company will pay or reimburse COBRA continuing health coverage premiums for the same period of time in which Employee receives continuation of Salary ...

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