Facts
- In January 1978, Bramson Publishing Company hired Arthur Gollberg as an advertising space salesperson under a written employment contract executed in Michigan.
- Paragraph 2 stated: “The terms of this agreement shall be from January 3, 1978, for a period of one year, and shall continue from year to year, thereafter, unless terminated pursuant to paragraph 8, infra.”
- Paragraph 8 stated: “This agreement shall be terminable immediately upon the date of mailing of written notice by either party to the other,” using registered mail, return receipt requested (or upon the salesperson’s death).
- About six months later, on June 16, 1978, Bramson told Gollberg his employment was terminated and confirmed the termination in writing on June 19, 1978.
- After receiving the written notice, Gollberg asked that no taxes be withheld from his final paycheck and wrote Bramson requesting that the contract be “amend[ed]” to allow his termination to be effective immediately in exchange for separation compensation.
- In March 1979, Gollberg sued Bramson in federal district court for breach of contract, claiming the contract could not be terminated by Bramson during the first year and became terminable at will only after the initial year ended.
- Bramson moved for summary judgment, relying on Brekken v. Reader’s Digest Special Products, Inc., a Seventh Circuit decision applying Michigan law to nearly identical “one year” and “terminable immediately” language and holding the contract terminable at will.
- The district court denied summary judgment, found the contract ambiguous on terminability, and allowed trial with extrinsic evidence of the parties’ intent.
- At trial, Gollberg and Bramson’s president testified that Gollberg had not expressed (before being fired) any understanding that he was guaranteed a full year; Bramson’s president also testified, without rebuttal, that at-will arrangements were customary for advertising salespersons in the publishing industry.
- After trial, the district court interpreted the contract as creating an initial one-year period that was not terminable at will, followed by an at-will relationship thereafter, held Bramson breached by terminating in June 1978, and awarded damages to Gollberg.
- Bramson appealed.
Issues
- Whether a contract stating it runs “for a period of one year” and continues year-to-year “unless terminated” but also provides it is “terminable immediately” by either party on written notice is terminable at will during the first year under Michigan law.
- Whether the district court erred by finding ambiguity and allowing extrinsic evidence, rather than construing the contract as a matter of law in line with Brekken.
Decision
- The Seventh Circuit reversed and remanded with instructions to enter judgment for Bramson.
- The court held that, under Michigan law, the contract was terminable at will from the outset because the “terminable immediately” clause qualified the term language.
- The court treated Brekken as controlling because it construed virtually identical language under the same state-law framework.
- The court concluded the district court’s reading effectively nullified the immediate-termination provision during the first year and was therefore incorrect; the record evidence did not support a contrary shared intent.
Legal Principles
- Under Michigan law, employment is generally at will unless the parties clearly limit the right to terminate.
- Contract provisions must be read together; term language describing an initial year and year-to-year continuation does not create a guaranteed one-year job when the same contract expressly permits immediate termination on notice.
- When contract language is clear, interpretation is a question of law for the court; a contract is not ambiguous merely because the parties offer competing readings.
- A prior appellate decision interpreting materially identical language under the same governing state law should guide later cases.
- Extrinsic evidence cannot be used to create a fixed term when the written agreement plainly grants an immediate termination right.
Conclusion
Because the agreement expressly allowed either party to terminate “immediately” upon written notice, the Seventh Circuit held the contract was at-will from its start despite the “one year” term wording, reversed the damages judgment for Gollberg, and directed entry of judgment for Bramson.