Facts

Edward R. Monfort filed suit against Adomani, its President and CEO James L. Reynolds, its CFO Michael K. Menery, its Vice President Robert E. Williams, its former COO and Secretary Kevin G. Ganning, and its former consultant Dennis Di Ricco in relation to the termination of his employment with Adomani and his shares of stock in the company. Monfort and Di Ricco incorporated Adomani in 2012, and the two initially agreed to divide any shares of Adomani at a rate of 60 percent to Monfort and 40 percent to Di Ricco. Monfort and Adomani entered several stock subscription agreements, and the parties later entered three separate agreements that gave Monfort the option to purchase a total of 27 million shares of common stock and 3 million shares of preferred stock. Leading up to Adomani's initial public offering, Monfort and the rest of Adomani's management disputed Monfort's ownership and entitlement to stock that Monfort had purportedly acquired through the agreements. Monfort and Adomani executed a new employment agreement in 2016, which included a general release of all claims existing prior to the execution of the agreement. After signing the 2016 employment agreement, Menery asked Monfort to void or cancel all four subscription agreements to clean up Adomani's files. Monfort subsequently represented that he owned 4 million shares of stock and 15 million stock options. Monfort was suspended without pay in June 2017 and his employment was terminated in March 2018 after a third-party investigation into Monfort's workplace misconduct. Monfort had attempted to exercise his options two days prior to his termination.

PLAINTIFF'S CONTENTIONS: Monfort asserted claims against defendants for breach of contract, fraud, fraudulent inducement, and declaratory relief. Monfort alleged that the release in the 2016 employment agreement did not bar his claims because he was fraudulently induced into signing the contract, and the terms did not address Monfort's claims against the individual defendants.

DEFENDANTS' CONTENTIONS: Defendants moved for summary judgment as to Monfort's breach of contract, fraud, and fraudulent inducement claims, and moved for dismissal of Monfort's declaratory relief claim. Defendants contended that the release in the 2016 employment agreement barred Monfort's claims besides the allegation of breach of contract relating to the option agreements he signed, and defendants alleged that there was no genuine dispute of material fact as to breach of the option agreements because those agreements allowed Adomani to terminate Monfort's options upon termination for cause. Defendants also claimed that declaratory relief would be superfluous. Defendants also argued that Monfort's conduct in the two years following his discovery of the alleged fraud amounted to ratification of the release in the employment agreement, and the release extended to the claims against the individual defendants.

Result

The court granted defendants' motion for summary judgment. The court found that Monfort's delay and subsequent conduct following his signing of the 2016 employment agreement constituted ratification of the release as a matter of law. The court found that the release barred Monfort's allegations that Adomani breached the subscription agreements, and no genuine dispute existed as to Monfort's allegations that Adomani breached the option agreements because the board's exercise of discretion to terminate Monfort for cause was governed by the standards in the option agreements. The court also concluded that Monfort's fraud claim failed under the economic loss rule, since Monfort failed to show how defendants' purported breach violated an independent duty arising outside of the context of the contracts. Further, the court determined Monfort's fraudulent inducement claim failed due to Monfort's ratification of the release as a matter of law, which prevented him from rescinding the 2016 employment agreement.