Ott v. Dimond (Published): Contract for 25 years of employment ruled unenforceable for lack of consideration. Father/president of family-owned car dealership fires his son and asks the sales manager to run the dealership – giving the manager a 25-year employment contract. After the father’s death, the son becomes president and fires the manager. Manager sued to enforce the contract. He lost.
This case is a great lesson in how the world really works. For reasons I’ll get into later, let me say up front that I don’t know any of the parties, much less their states of mind.
The Dimond [not a typo] family owns the “Jack ‘O Diamonds” dealerships in Tyler and Longview. Jack Dimond, the father, was the president of the business as of early 2004. Jack had concerns about how his son, John, was handling things. Jack fired John from John’s VP position. Jack then asked the sales manager at the Longview dealership, Bill Ott, to be in charge of all operations at that facility. As part of that request, Jack gave Bill a document (signed by Jack) promising Bill 25 years of employment with Jack ‘O Diamonds.
Jack passed away that same year. John (and family members aligned with him) inherited a controlling interest in the business. Those shareholders elected John to succeed his father as president. One of John’s first acts as president was … firing Bill. Bill sued, claiming breach of the 25-year employment contract.
But the document Bill relied on wasn’t a contract at all. Legal resolution of the case was straightforward. Contracts have to be based on consideration, and there wasn’t any. Sure, on the face of the contract it probably looked like a “deal” to a layman – Jack promised that Bill would have a job for 25 years, and in return, Bill promised to work for 25 years. But Jack’s promise doesn’t count in the eyes of the law, and neither does Bill’s.
First, Jack’s promise: the 25 years of employment wasn’t an absolute guarantee. Instead, it was merely a proposal that Bill would not be fired except for “good cause.” What does “good cause” mean? It’s not spelled out. Therefore, it means what the dealership says it means, and doesn’t really change the fact that Bill is an “at will” employee. In short, Jack’s promise means nothing, and is not valid consideration for a contract. See, Montgomery County Hosp. Dist. v. Brown, 965 S.W.2d 501, 502 (Tex. 1998).
Likewise Bill’s promise meant nothing at law. The same document that indicated Bill promised to work for Jack ‘O Diamonds for 25 years also stated that, promise notwithstanding, Bill retained the right to quit at any time. Again, that’s no consideration for a contract. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 228 (Tex. 2003).
What was really going on here? I don’t know. Start with the principles of “A man’s word is his bond” and “business is business” and kick this scenario around a little. Take the names out of it because it’s just not right to attach speculation to real people.
Having done that , make assumptions. Assume that the father had his wits about him. Then assume that he didn’t. Assume that the sales manager was just a good guy doing his job who got this dropped in his lap. Then assume that he weaseled his way into the father’s graces. Assume that the son is an incompetent businessman. The assume that he’s not. Or assume that you’re one of these three, and you can’t know for sure about the capacities and intent of the other two. Ask your kid to step into the shoes of each of these players. What questions come to mind? What would they do? Should the son have honored his father’s promise? Was it really the father’s promise, or the promise of the company itself made by and through its then-president? Was it the father’s place to make a promise that would extend beyond his own life? What should the sales manager have done when presented with the promise? (Well, for one thing, he should have consulted a good employment contract lawyer.) But beyond that, what are the practical ramifications of getting the blessings of your present boss, and thereby getting the enmity of your future boss? Was the father cagey enough to know that the promise could never be enforced – was the manager being used as part of a ploy to toughen up the son? Or was the father’s promise genuine?
A discussion like this is bound to tell you a lot about your kid’s readiness for the challenges of adulthood, and tell them a lot about your approach to business ethics.
Update: On April 9, 2008, Ott asked the Texas Supreme Court to extend his time to file a petition for review. On April 10th, the request was granted, and Ott was given until April 28th. That’s the last notation in the file. As of June 11, there’s no indication that Ott ever filed a petition for review.