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Click here for the full text of this decision FACTS:Caribbean Marine Inc. (CMI) bought Bag’n Baggage in 1983. At the time, Bag’n Baggage was a closely held corporation. Robert Farone entered into an employment agreement with Bag’n Baggage in 1985 to be the company’s president for a two-year term. He was also on the CMI board. The terms of the employment contract could be terminated before the end of two years by Farone’s death, disability or breach of contract. A renewal provision was not included. Farone and Bag’n Baggage also signed a stock option agreement. It would expire in three years unless exercised earlier, but it would also expire if Farone stopped working at Bag’n Baggage for any reason except death or disability. The stock option allowed Farone to buy up to 10 percent of Bag’n Baggage’s outstanding shares. While he worked for Bag’n Baggage, Farone exercised stock options equal to 5 percent of the outstanding shares. CMI decided to convert Bag’n Baggage into a partnership. Farone accepted CMI’s exchange of Bag’n Baggage stock for CMI stock of equal value, and he also accepted an offer to purchase a 1 percent limited partnership in the new Bag’n Baggage partnership. Based on concerns expressed to CMI’s president, Bill Bowen, Farone says he was told he would be compensated for the remaining stock options when Bag’n Baggage was sold or when Farone left the company. This alleged compensation agreement was not put in writing, however. Patrick Sullivan became president of CMI upon Bowen’s death in 1996. CMI’s board voted to discharge Farone in December 2000, and Sullivan fired Farone in January 2001. Farone sued Bag’n Baggage and CMI for breach of the employment contract and damages for breach of the alleged compensation contract he discussed with Bowen. The defendants filed for summary judgment, which the trial court granted. On appeal, Farone argues that the trial court erred, because his contract satisfied the statute of frauds, and because he was not an employee at will. HOLDING:Affirmed. The court explains that Farone would be considered an employee at will if the terms of his 1985 employment agreement were not extended. The court again notes that the agreement does not expressly discuss a renewal mechanism. The court says it will first have to decide 1. whether an employment contract that was originally subject to the statute of frauds can be renewed and extended by implication and enforced as originally written, or 2. whether the statute of frauds prevents implied renewal or extension of a contract that originally could not have been performed within a one-year period. The agreement here was for two years unless terminated by Farone’s death, disability or breach of contract. These methods of termination do not equate to performance under the contract, so the original contract falls under the statute of frauds. The court says that, for purposes of appeal, it will assume that Bag’n Baggage unequivocally expressed its intent to be bound by the two-year term. The question then becomes whether the agreement was continued by implication after the expiration of the initial two-year term. The court rules that the agreement was not continued by implication, because there were no successive agreements in writing, as is required by the statute of frauds. The original contract could not be performed within one year. Any implied renewal of the contract, therefore, could not be performed within one year. There may have been implied agreements to continue the original contract, but without anything else in writing during each period of so-called extension, any subsequent agreements are unenforceable, and Farone was an at-will employee. As an at-will employee, Farone could be terminated at any time, for any or no reason. As for Farone’s alleged compensation agreement with Bowen, it was not reduced to writing, either. There is no contract between them, as essential terms, such as price, method of payment and method of valuation, were missing. OPINION:Wright, J.; Arnot, C.J., and Wright and McCall, JJ.

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