United States 6th Circuit Court of Appeals Reports

THE KELLOGG CO. v. SABHLOK, 05-2626 (6th Cir. 12-22-2006)
THE KELLOGG COMPANY, Plaintiff-Appellee/Cross-Appellant, v.
JATINDER P. SABHLOK, Defendant-Appellant/Cross-Appellee.
Nos. 05-2626, 05-2627. United States Court of Appeals,
Sixth Circuit. Argued: November 29, 2006. Decided and
Filed: December 22, 2006.

Appeal from the United States District Court for the
Western District of Michigan at Grand Rapids. No. 04-00598
— Robert Holmes Bell, Chief District Judge.

ARGUED: Mary Ann Hart, SAFFORD & BAKER, Bloomfield Hills,
Michigan, for Appellant. Charles S. Mishkind, MILLER,
CANFIELD, PADDOCK & STONE, Grand Rapids, Michigan, for
Appellee.

ON BRIEF: Mary Ann Hart, Ralph R. Safford, SAFFORD & BAKER,
Bloomfield Hills, Michigan, for Appellant. Charles S.
Mishkind, MILLER, CANFIELD, PADDOCK & STONE, Grand Rapids,
Michigan, for Appellee.

Before: MARTIN and GUY, Circuit Judges; CARR, Chief
District Judge.[fn*]

[fn*] The Honorable James G. Carr, Chief United States
District Judge for the Northern District of Ohio, sitting
by designation.

OPINION

RALPH B. GUY, JR., Circuit Judge.

Jatinder P. Sabhlok, defendant and counter-plaintiff,
appeals from the entry of a declaratory judgment in favor
of his former employer, plaintiff and counter-defendant The
Kellogg Company. The district court found, on cross-motions
for summary judgment, that the Separation Agreement and
Release of Claims Form and the subsequent Amendment thereto
unambiguously released and barred the breach of contract and
age discrimination claims that Sabhlok threatened to bring
against Kellogg. Kellogg cross-appeals from the district
court’s further finding that Sabhlok was not liable under
the terms of the agreements for attorney fees and costs
that Kellogg incurred in this litigation. After review of
the record and the arguments presented on appeal, we affirm
the district court in all respects.

I.[fn1]

When Jatinder Sabhlok was hired by Kellogg in 1997, he had
22 years of experience with major food and beverage
manufacturers and retailers (ten years in international
markets). Over the next four years, Sabhlok received
favorable performance reviews and was promoted three times
by three different supervisors. Sabhlok was Vice-President
of the International Research and Development Group and the
business partner for the Asia/Australia territory when he
learned in July 2001 that Kellogg planned to restructure
his group at the end of September 2001. The group was
disbanded, more than 20 employees were moved to other
positions, and several positions — including
Sabhlok’s — were eliminated. Sabhlok turned 55 years
old in September 2001.

Sometime between July and September 2001, Kellogg asked
Sabhlok to extend his employment for a one-year period to
assist in decentralizing research and development and
establishing laboratories in Asia and Australia. According
to Sabhlok, he was induced to stay by oral assurances from
his supervisor, Donna Banks — made both before and
after the reduction in force was finalized on September 30,
2001 — that a permanent position would be found for
him at Kellogg.

Kellogg offered the affected employees a “standard” or an
“enhanced” severance package, but the latter required that
the employee accept the terms of the “Separation Agreement
and Release of Claims Form.” Sabhlok executed the
Separation Agreement on November 13, 2001, and continued to
work through September 30, 2002.[fn2]

During the one-year retention period, Sabhlok spent nearly
70% of his working time traveling to Asia and Australia.
Several permanent positions became available during that
year, and Sabhlok asked to be considered for each of them.
Despite repeated assurances that a permanent position would
be found, Sabhlok was not selected for any of the openings.
In fact, Sabhlok alleged that Kellogg selected a younger,
less qualified employee over him in each case. On one
occasion, Sabhlok was even told that he did not get the
position because “as you can see we are bringing up the
younger people.”

After the retention period expired and Sabhlok’s employment
ended, Sabhlok and Kellogg executed the “Amendment of
Separation Agreement and Release of Claims Form.” Sabhlok
contends that by this time, Kellogg had reconstituted the
R&D Group, returned all but three employees from other
positions, and selected a younger, less qualified employee
to be its director. The Amendment, signed by Sabhlok on
October 31, 2002, included an agreement that Sabhlok would
abide by a broad noncompete clause and that Kellogg would
provide Sabhlok with an additional six weeks of severance
pay and a pro-rata bonus for the year 2002.

Beginning in early 2004, Sabhlok, through counsel, wrote to
Kellogg threatening to sue. Kellogg chose to preempt the
suit and filed this declaratory judgment action on
September 8, 2004. Sabhlok filed an answer and a
counterclaim seeking declaration that the Separation
Agreement and Amendment did not release, waive, or discharge
claims for breach of contract or age discrimination that
arose after September 30, 2001. No discovery was conducted,
and the parties filed cross-motions for summary judgment in
reliance on the pleadings and written agreements. For the
reasons set forth in its opinion of September 21, 2005, the
district court granted Kellogg’s and denied Sabhlok’s
motions for summary judgment; denied Kellogg’s request for
attorney fees and costs; and entered judgment in favor of
Kellogg declaring that Sabhlok’s proposed claims were
barred by the Separation Agreement and Amendment. Judgment
was entered accordingly, and these appeals followed.

II.

Summary judgment is appropriate when there are no issues of
material fact in dispute and the moving party is entitled
to judgment as a matter of law. FED. R. CIV. P. 56(c). In
deciding a motion for summary judgment, the court must view
the factual evidence and draw all reasonable inferences in
favor of the nonmoving party. Matsushita Elec. Indus. Co.
v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Our review
of the district court’s decision in this case is de novo.
Johnson v. Karnes, 398 F.3d 868, 873 (6th Cir. 2005); see
also McMullen v. Meijer, Inc., 355 F.3d 485, 489 (6th Cir.
2004) (when denial of summary judgment is based on legal
grounds, review is de novo).

There is no dispute that Michigan law governs the
interpretation of the Settlement Agreement and Amendment.
The district court succinctly summarized the applicable law
as follows:

The scope of a release is controlled by the language of
the release. Adair v. State, 470 Mich. 105, 127, 680
N.W.2d 386, 399 (2004) (citing Batshon v. Mar-Que Gen.
Contractors, Inc., 463 Mich. 646, 650, 624 N.W.2d 903
(2001)). If the language of the release is unambiguous,
it must be construed as written. Id. “A contract is
ambiguous only if its language is reasonably susceptible
to more than one interpretation.” Cole v. Ladbroke Racing
Michigan, Inc., 241 Mich. App. 1, 13, 614 N.W.2d 169, 176
(2000) (citing Rinke v. Automotive Moulding Co., 226
Mich. App. 432, 435, 573 N.W.2d 344 (1997)). “The fact that
the parties dispute the meaning of a release does not, in
itself, establish an ambiguity.” Id. at 14 (citing Gortney
v. Norfolk & Western R. Co., 216 Mich. App. 535, 540, 549
N.W.2d 612 (1996)). “When a release is challenged, the
party seeking to avoid the release must prove by a
preponderance of the evidence that the release should be
set aside.” Binard v. Carrington, 163 Mich. App. 599, 603,
414 N.W.2d 900, 902 (1987).

Kellogg v. Sabhlok, No. 5:04-CV-598, 2005 WL 2297446, at *2
(W.D. Mich. Sept. 21, 2005) (unpublished decision).

A. Sabhlok’s Claims

We begin with the language from Paragraph D of the
Separation Agreement setting forth the broad release of
claims:

D. (1) . . . I irrevocably and unconditionally release,
waive, and forever discharge [Kellogg] . . . from any and
all claims, demands and causes of action I have or may
claim to have arising from or relating in any way to my
employment or separation of employment. This includes, but
is not limited to, all claims under . . . the Michigan
Elliott-Larsen Civil Rights Act, . . . ; and any and all
of Employees claims arising out of or related to any
contract, . . . or under any common law right of any kind
whatsoever,. . . .

. . . .

(3) Employee agrees and understands that execution of
this Separation Agreement and Release of Claims Form by
Employee operates as a complete bar and defense against
any and all of Employee’s Claims against Kellogg

. . . .

(4) I agree and acknowledge that the above-described
consideration (additional severance pay and benefits) is
in full and complete settlement of any and all claims,
demands, and causes of action I have or may have.

The parties clarified in Paragraph H of the Separation
Agreement that:

H. This Separation Agreement and Release of Claims Form
does not waive any claims that I may have that arise after
the effective date of the Separation Agreement and Release
of Claims Form.

Two other paragraphs of the Separation Agreement,
Paragraphs N and S, are specifically relevant to the claims
that Kellogg failed to “rehire” Sabhlok into a permanent
position. They provide as follows:

N. I understand that I may apply for employment as a new
employee, but acknowledge that the Company is not
obligated to offer employment to me now or in the future.

. . . .

S. I acknowledge and agree that this is the entire
agreement and the only promises made to me to sign the
Separation Agreement and Release of Claims Form are those
contained within this document.

At the end of October 2002, after Sabhlok’s last day of
work, Sabhlok executed the “Amendment of Separation
Agreement and Release of Claims Form.” The Amendment did
not include separate release language, but did contain the
following merger and integration clause:

4. Entire Agreement: Employee agrees that this Amendment
and original Separation Agreement dated November 15, 2001
constitute the entire agreement between Employee and
Kellogg and that this Amendment and the original
Separation Agreement supersede any and all prior and/or
contemporaneous written and/or oral agreements relating to
Employee’s employment with the Company and termination
therefrom. All other terms of the original Separation
Agreement and Release of Claims Form remain unchanged and
in full force and effect. Further, Employee acknowledges
that this Amendment may not be modified except by written
document, signed by Employee and an authorized officer of
the Company.

As Sabhlok concedes on appeal, the district court did not
err in finding that the Separation Agreement’s release
provisions plainly bar any claim for breach of contract or
age discrimination that arose on or before the effective
date of the Separation Agreement. Rather, Sabhlok contends
that he may pursue claims based on the failure to “rehire”
him during the retention period because such claims arose
after the Separation Agreement’s effective date (whether
that was at the time of the finalization of the separations
on September 30, 2001, or when he signed it on November 13,
2001).[fn3]

Sabhlok argues specifically that although he expressed
interest in several open positions between October 1, 2001,
and September 30, 2002, Kellogg selected younger and less
qualified individuals while continuing to promise that a
permanent position would be found for him. It is this
failure to “rehire” during the one-year retention period
that Sabhlok asserts as the basis for his proposed claims
for breach of an oral contract and age discrimination in
violation of Michigan’s Elliott-Larsen Civil Rights Act
(ELCRA), Mich. Comp. Laws Ann. § 37.2202. We address
each claim in turn.

1. Breach of Contract

The district court found that Sabhlok’s proposed claims
based on oral promises of future employment were barred by
the Separation Agreement and Amendment. Aside from the
releases, the Separation Agreement also explicitly provided
in Paragraphs N and S that Kellogg was “not obligated to
offer employment to [Sabhlok] now or in the future” and
that the Separation Agreement constituted the parties’
“entire agreement.” Sabhlok argues on appeal that this
reasoning ignores the parties’ freedom to modify their
agreement, as well as his claim that Kellogg made oral
promises of future employment after the effective date of
the Separation Agreement. On the contrary, the district
court recognized that the parties had formally amended
their agreement and that it precluded reliance on any such
oral promises.

Specifically, Paragraph 4 of the Amendment expressly stated
that the terms of the original Separation Agreement
remained unchanged. It also provided the Separation
Agreement and Amendment together not only constituted the
entire agreement between the parties but also superceded
any oral agreements “relating to [Sabhlok’s] employment with
the Company and termination therefrom.” As the district
court noted, “[a] merger clause such as this ‘serves to
integrate the agreement and makes the agreement a final
written expression of the parties.’ General Aviation, Inc.
v. Cessna Aircraft Co., 915 F.2d 1038, 1041 (6th Cir.
1990).” Kellogg, 2005 WL 2297446, at *3. Accordingly,
Sabhlok’s breach of contract claims are barred by the
Separation Agreement and Amendment.

2. Age Discrimination

Sabhlok concedes, as he must, that claims based on the
termination of his employment at the time of the Separation
Agreement and at the conclusion of the one-year period were
barred by the waiver and release provisions of the
Separation Agreement. Focusing instead on the claims of
discriminatory failure to “rehire,” Sabhlok argues that
neither the Separation Agreement nor the Amendment may
effectively waive or release claims that arose after the
effective date of the Separation Agreement.

Sabhlok urges us to find that the Michigan courts would
follow federal law and hold that prospective waivers of
civil rights claims are unenforceable. See, e.g., Adams v.
Philip Morris, Inc., 67 F.3d 580, 585 (6th Cir. 1995)
(employee may not prospectively waive rights under ADEA or
Title VII). We need not resolve this open question, however,
because the district court found Sabhlok’s
failure-to-rehire claims did not arise after the effective
date of the Separation Agreement and therefore did not
implicate a prospective waiver of civil rights claims.
Rather, the district court concluded that the claims of
discriminatory failure to “rehire” were barred by the
Separation Agreement itself because the claims “did not
arise independently after his termination but [were]
instead inextricably linked to the claims of wrongful
discharge that he expressly waived at the time of his
termination.” Kellogg, 2005 WL 2297446, at *5. The district
court reasoned as follows:

Kellogg cites Blakeney v. Lomas Info. Sys., Inc., 65 F.3d
482 (5th Cir. 1995). In Blakeney former employees who had
signed a release when they were discharged during a
reduction in force sued the company alleging that they
were victims of age discrimination when the company failed
to rehire them. The Fifth Circuit rejected their rehire
argument.

According to the employees, because they cannot
prospectively waive age discrimination claims, summary
judgment was improper on the rehiring claim. This
argument, however, is unpersuasive because the rehiring
claim is not a future claim. In the release, the employees
waived all rights to suit arising out of their
termination. The employees’ cause of action for failure
to rehire is simply an attempt to revive claims they
were paid to release. Any claim concerning failure to
rehire certainly arises out of their termination and was
extant when the release was ratified.

Id. at 485.

On the other hand, the Eleventh Circuit held that a
release waiving an employee’s right to sue on any
then-existing claims did not waive his right to sue for
the employer’s “subsequent post-termination conduct.”
Smith v. BellSouth Telecommunications, Inc., 273 F.3d
1303, 1311 n. 7 (11th Cir. 2001). In Smith the employee
signed a general release when he resigned from his
employment. He later reapplied for employment and was not
rehired. Although he had signed a release, he was allowed
to pursue a claim that the company’s failure to rehire was
in retaliation for his previous exercise of rights under
the Family Medical Leave Act. Id.

This Court does not believe that Blakeney and Smith are
necessarily contradictory. Neither case should be
understood as articulating a broad rule as to whether a
general release of claims will or will not bar a
subsequent failure to rehire claim. Instead, the cases are
best understood as being limited to their facts. See
Gustafson, Inc. v. Bunch, 1999 WL 304560, *3 (N.D. Tex.
1999) (“Blakeney involved a reduction in force, and the
facts do not indicate whether plaintiffs reapplied for the
same or different positions. The court is confident,
however, that Blakeney should not be read broadly and
indiscriminately to make every subsequent employment
application a ‘rehire.'”) [aff’d without opinion, 244 F.3d
134 (5th Cir. 2000)]. Under some facts a general release
will bar a subsequent failure to rehire claim and under
other facts it will not. It depends on how closely related
the rehire is to the original termination in terms of time
and subject matter. Where, as here, the employee gave up
his right to sue for age discrimination in his termination
and acknowledged that the employer had no obligation to
rehire him, his claim of age discrimination in the failure
to rehire arose out of his termination and cannot be the
basis for a separate claim. After releasing an age
discrimination claim, the employee cannot resurrect the
age discrimination claim by reapplying for employment. See
Burnham v. Amoco Container Co., 755 F.2d 893, 894-95 (11th
Cir. 1985) (per curiam) (holding that a failure to
rehire subsequent to an allegedly discriminatory firing,
absent a new and discrete act of discrimination in the
refusal to rehire itself, cannot resurrect the old
discriminatory act because otherwise a potential plaintiff
could always circumvent the limitations by reapplying
for employment).

Id. at *4.

Sabhlok argues that this interpretation ignores the
agreement in Paragraph H that the Separation Agreement did
not waive any claims that might arise after the effective
date of the Separation Agreement. Sabhlok relies on
Blakeney, pointing out that there the court found the
released failure-to-rehire claim “was extant when the
release was ratified.” 65 F.3d at 485. In fact, in this
case, the essence of the district court’s decision was its
finding that the failure to “rehire” claims were not new
claims that arose after the effective date of the
Separation Agreement.

We agree with the district court that the issue turns on
whether the failure to “rehire” Sabhlok during the
retention period provided him with a new and discrete claim
of discrimination or was merely an attempt to resurrect age
discrimination claims for which he was paid to release.
Most tellingly, Sabhlok’s proposed complaint alleged that
his “age was at least one factor that made a difference in
Kellogg’s decision to terminate [him] from his position of
Vice President of the International Research and
Development Group, and not transfer [him] to any of the
other positions given to younger, less experienced and lower
paid Kellogg employees.” Also, it was alleged with respect
to two of those positions that the younger employee was
given virtually all of his duties and responsibilities “and
essentially replaced [him].” Here, the failure to “rehire”
Sahblok into a permanent position during the period between
the notice of his termination and his last day of work did
not arise separately from the decision to terminate his
employment rather than offering him a different permanent
position.

Finally, the district court added that this conclusion was
also supported by the Amendment’s stipulation in Paragraph
4 that: “All other terms of the original Separation
Agreement and Release of Claims Form remain unchanged and
in full force and effect.” In particular, this language
reaffirmed that Kellogg was not obligated to offer Sabhlok
employment “now or in the future.” Also, emphasizing that
contracts must be construed consistent with common sense
and in a manner that avoids absurd results, see Parrish v.
Paul Revere Life Ins. Co., 302 N.W.2d 332, 333 (Mich.App.
1981), the district court observed that “common sense
dictates that Kellogg would not have offered additional
benefits to Sabhlok at the conclusion of the retention
period if it was not satisfied that Sabhlok had waived his
right to sue Kellogg for age discrimination claims arising
out of Kellogg’s failure to rehire Sabhlok during the
retention period.” Kellogg, 2005 WL 2297446, at *5.

Sabhlok maintains that the Amendment’s affirmation of the
terms in the Separation Agreement could not constitute a
knowing expansion of its releases to encompass claims
arising during the one-year period. See Wyrembelski v. City
of St. Clair Shores, 553 N.W.2d 651 (Mich.App. 1996)
(release is valid if fairly and knowingly made). Also,
pointing to the “common sense” comment, Sabhlok accuses the
district court of improperly rewriting the parties’
agreement under the guise of interpretation. See Upjohn Co.
v. N.H. Ins. Co., 476 N.W.2d 392 (Mich. 1991). However, the
district court did not find that the Amendment served to
expand the releases to encompass new claims, but concluded
that the failure-to-rehire discrimination claims fell within
the scope of the claims released in the Separation
Agreement.

The district court did not err in finding that the proposed
age discrimination claims were barred by the waiver and
release of claims in the Separation Agreement, and Kellogg
was entitled to declaratory judgment to that effect.

B. Kellogg’s Claim for Attorney Fees and Costs

Under the American Rule, followed in Michigan, attorney
fees are generally not recoverable by the prevailing party.
Haliw v. City of Sterling Heights, 691 N.W.2d 753 (Mich.
2005). Kellogg sought an award of fees and costs incurred
in this litigation in reliance on Paragraphs D(2) and (7)
of the Separation Agreement. Paragraph D(2) provided in
pertinent part that, “[t]o the fullest extent permitted by
law,” Sabhlok agreed he “shall not lodge, assist nor
participate in any formal or informal charge or complaint
in any court, [or] with any . . . agency or any other
forum, . . . arising out of or related to Employee’s Claims
or Employee’s employment . . . or the termination of that
employment[.]” Also, Paragraph D(7) provided:

(7) I have not filed any charges, claims, or lawsuits
against the Company involving any aspect of my employment
which have not been terminated as of the date of this
Separation Agreement and Release of Claims Form. If I have
filed any charges, claims or lawsuits against the
Company, I agree to seek immediate dismissal with
prejudice. . . . If I breach any portion of this
Separation Agreement and Release of Claims Form, I
acknowledge that I will to the fullest extent permitted by
law, be liable for all expenses, including costs and
reasonable attorney’s fees incurred by [Kellogg] in
defending the lawsuit or claim, regardless of the outcome.

Kellogg asserts in its cross-appeal that it was entitled to
recover attorney fees and costs under Paragraph D(7) both
because Sahblok sent letters that threatened suit and
because Sabhlok filed a counterclaim in this action.[fn4]

First, although Kellogg argues that the term “claim”
encompasses any demand for money, Paragraph D(7) prohibits
the “filing” of any claim, charge, or action in any court,
agency, or other forum. Correspondence from counsel,
demanding or not, does not constitute such a “filing,” and
cannot be the basis for an award under Paragraph D(7).
Second, Kellogg argues that the filing of the counterclaim
constituted “participation” in a complaint arising out of
his employment or the termination thereof in breach of
Paragraph D(2). However, the plain meaning of these
provisions is to prevent Sabhlok from filing or joining in
any charges, claims, or complaints against Kellogg and they
do not plainly or unambiguously preclude the employee from
filing pleadings in defense of an action instituted against
him by Kellogg. We agree with the district court that:
“Because Sabhlok did not file his proposed complaint in any
court or agency and because this action for declaratory
relief was initiated by Kellogg rather than by Sabhlok,
this Court does not find any breach of the agreement that
would give rise to attorney fees under D(7).” Kellogg, 2005
WL 2297446, at *5.

AFFIRMED.

[fn1] The facts are drawn from the pleadings, to which the
written agreements, correspondence, and proposed complaint
were attached.

[fn2] Kellogg executed the Separation Agreement on November
15, 2001.

[fn3] Sabhlok suggests at one point that the Separation
Agreement was ambiguous concerning which date should be
considered the “effective date.” Because we find that the
proposed failure-to-rehire claims are barred by the
parties’ agreements, it is not material whether the
Separation Agreement was effective on September 30, 2001, or
November 13, 2001.

[fn4] This court recently indicated that a waiver in a
separation agreement of the right to file a charge with the
EEOC or participate in EEOC proceedings may not be
enforceable. EEOC v. SunDance Rehab. Corp., 466 F.3d 490,
501 (6th Cir. 2006).