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Inc. v. Hegna

United States District Court, E.D. Louisiana

March 7, 2019

SMITTY'S SUPPLY, INC.
v.
LINDSAY MORGAN HEGNA

         SECTION: "S" (3)

          ORDER AND REASONS

          MARY ANN VIAL LEMMON UNITED STATES DISTRICT JUDGE

         IT IS HEREBY ORDERED that Smitty's Supply, Inc.'s ("Smitty's") Motion in Limine to Strike Kelley and Hegna's New Claims of Recovery (Rec. Doc. 313) is GRANTED.

         BACKGROUND

         Smitty's has filed the instant motion arguing that Kelly and Hegna (hereinafter, sometimes collectively "plaintiffs"[1]) have impermissibly sought to expand the pleadings in this case by arguments contained within their opposition motion to several of Smitty's motions. Specifically, Smitty's contends that while in all of their complaints, amended complaints, and counterclaims, plaintiffs have claimed to be owed 5% of Smitty's Phantom Stock Plan and Stock Appreciation Rights Plan (collectively, the “Stock Plans”) in a memorandum filed on January 24, 2019, for the first time, they have added a claim that they are entitled to a 5% in the entire Smitty's company and its affiliates.

         Smitty's further contends that the new theory of recovery is not trivial because since the inception of this case, it has proceeded on the basis that plaintiffs' were seeking to recover amounts owed them under the Stock Plans, and that it would be prejudiced if it had to generate an entirely new defense at this late date.

         In contrast, Kelly and Hegna argue that while not mentioning common stock in their complaints and counterclaims, their deposition testimony and breach of contract claims put Smitty's fairly on notice that they sought a 5% ownership interest in Smitty's under the notice pleading standard codified in Federal Rule of Civil Procedure 8.

         DISCUSSION

         At the outset, the court notes that it has reviewed every complaint, amended complaint, and counterclaim[2] filed by Kelley and Hegna, and they have never pled they are entitled to or were promised a 5% equity ownership in Smitty's and its related companies. Rather, Kelley and Hegna have always maintained that they were entitled to a 5% interest in the Stock Plans. As reflected in the pleadings, the essence of Kelley and Hegna's breach of contract claims is that Smitty's promised to adopt the Stock Plans and designate them as participants, and failed to do so.

         For instance, Hegna alleged that "Pursuant to the oral emplyment contract with the Defendants, Ms. Hegna had a vested interest in the Company's Phantom Stock Plan and SARs Plan."[3] And, "The Defendants' refusal to pay Ms. Hegna the value of her vested stock the Company's Phantom Stock Plan and SARs Plan constitutes a breach of contract."[4] Similarly, Kelley's complaint alleges that "defendant breached its agreements to provide plaintiff with the stock. . . ."[5]

         In their January 2019 opposition memorandum, for the first time, Kelly and Hegna made specific allegations that they each claim 5% of the value of Smitty's and its affiliates. The opposition memorandum in question[6] includes the following statements:

As discussed more fully below, Hegna and Kelley claim that Smith, as a sole shareholder, promised each of them a 5% equity interest in Smitty's and its affiliated companies as a form of incentive compensation. This promise was made before the stock plans were even drafted, and the plans were simply established as one possible method of fulfilling Smith's promise. The promise could also be fulfilled through other means, such as cash bonuses or common stock.
However, Smith told Kelley and Hegna they could not participate in the annual incentive compensation plan because they would each be given a 5% equity interest in the companies as part of their compensation for continuing to work and grow the companies.
Kelley and Hegna continued working for Smitty's for all of 2015 and part of 2016 with the understanding that they were participating in the stock plans that were set up to at least partially fulfill Smith's promise to ...

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