## Facts

- John J. Capistrant worked for Lifetouch National School Studios, Inc. and later entered a written agreement entitling him to substantial residual commissions after retirement.
- The agreement included post-employment restrictions and required Capistrant to “immediately” return all company property upon termination; it also stated that breach would terminate Lifetouch’s duty to pay residual commissions.
- Capistrant retired in March 2015 while litigation between the parties was pending.
- Months after retirement, Lifetouch discovered Capistrant retained certain company documents (including customer-related and other business information) and demanded their return.
- Capistrant returned the materials, but not “immediately” upon retirement.
- Lifetouch asserted the delay breached the return-of-property provision and forfeited Capistrant’s residual commissions; Capistrant argued forfeiture was improper given his eventual return and the magnitude of the commissions.

## Issues

1. Whether Capistrant’s delayed return of company property allowed Lifetouch to withhold all residual commissions under a contract clause treated as a condition precedent.
2. Whether Restatement (Second) of Contracts § 229 may be used to excuse nonoccurrence of a post-formation condition when enforcement would cause forfeiture and the condition is not material.
3. Whether materiality of the condition and disproportionality of the forfeiture could be decided as a matter of law on summary judgment.

## Decision

- The Minnesota Supreme Court affirmed in part, reversed in part, and remanded.
- The court held that § 229 is consistent with Minnesota law’s disfavor of forfeitures and may be consulted to potentially excuse nonoccurrence of a condition that would cause forfeiture.
- The court held that, on the record presented, the materiality of the return-of-property condition and whether forfeiture of residual commissions was disproportionate could not be resolved as a matter of law.
- The court reversed the determination excusing noncompliance as a matter of law and remanded for further proceedings.

## Legal Principles

- Minnesota law disfavors contractual forfeitures and permits judicial scrutiny of conditions that operate to forfeit significant accrued benefits.
- Restatement (Second) of Contracts § 229 may excuse nonoccurrence of a condition to avoid forfeiture when (1) enforcement would cause forfeiture and (2) the condition was not a material part of the agreed exchange.
- When a purported condition is triggered after contract formation and its enforcement would eliminate substantial earned compensation, courts must assess materiality and proportionality before enforcing or excusing the condition.
- Materiality of the condition and whether the forfeiture is disproportionate are fact-intensive questions that may require evidence about the nature of the retained property, the harm or risk from delay, and the size of the benefit forfeited.

## Conclusion

The court recognized that § 229 can prevent forfeiture caused by failure to satisfy a post-formation condition, but required factual development on whether the return-of-property requirement was material and whether forfeiting substantial residual commissions was disproportionate to the delayed return of documents.


Capistrant v. Lifetouch Nat'l Sch. Studios, Inc., 916 N.W.2d 23 (Minn. 2018)