This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2000).








Paul Gelhaus,





Fingerhut Companies, Inc.,



Filed May 7, 2002


Toussaint, Chief Judge


Hennepin County District Court

File No. 008505



Kevin J. Hughes, Paul R. Harris, Tad S. Pethybridge, Hughes Mathews, P.A., 110 Sixth Avenue South, Suite 200, Post Office Box 548, St. Cloud, MN 56302-0548 (for appellant)


Richard A. Ross, Catherine M. Powell, Fredrikson & Byron, P.A., 1100 International Centre, 900 Second Avenue South, Minneapolis, MN 55402-3397 (for respondent)



            Considered and decided by Toussaint, Chief Judge, Anderson, Judge, and Parker, Judge.*

U N P U B L I S H E D   O P I N I O N

TOUSSAINT, Chief Judge

            Appellant Paul Gelhaus alleges the district court erred in granting respondent Fingerhut Companies, Inc.’ s motion for summary judgment dismissing Gelhaus’s lawsuit for breach of his employment contract with Fingerhut.  We affirm.


            Gelhaus began his employment with Fingerhut (“FH”) in 1970, working his way up in the company.  In November of 1989, Theodore Deikel was named CEO; Deikel installed his own senior management team of four executive vice-presidents.  Three of these individuals came from outside the company; the fourth was Gelhaus.  On November 21, 1989, Gelhaus and Deikel executed an employment agreement stating that his employment was “at will” and containing the following provision:

[Gelhaus] shall be entitled as part of such employment to a base salary of $20,833 per month [$250,000 per year], * * *.  In addition, [Gelhaus] shall be entitled to participate in incentive (“MBO Plan”) and benefit plans generally applicable from time to time to senior officers of Fingerhut.


The agreement also provided that it “shall be governed by, and construed and enforced in accordance with, the laws of the state of Delaware without giving effect to the conflicts of laws provisions thereof,” and that any amendments to the agreement had to be in writing.

In late 1991 and into 1992, FH discovered that a Wisconsin subsidiary, Figi, Inc., was experiencing losses of millions of dollars.  In May or June of 1992, FH informed Gelhaus that he would be assigned to “perform the responsibilities of president” at Figi.  Gelhaus testified that he “asked about a housing allowance” and was told he would “receive a temporary housing allowance.”  Soon after moving to Wisconsin and taking over the duties of Figi president, Gelhaus began to believe that he was not receiving the “same benefits as other Fingerhut executive vice presidents and senior officers.”  Gelhaus raised this issue with various senior management individuals at FH, at various times, and was told that FH believed it was complying with the employment agreement. 

            Gelhaus continued in his capacity as president of Figi's, asserting that he was still an executive vice president with FH and claiming that FH was not meeting its responsibilities under the employment agreement.  Gelhaus’s salary upon reassignment was $290,125.16 per year for years 1993-97 and 1999, and $301,283.82 for 1998.  Gelhaus received significant annual cash bonuses during his tenure as president of Figi, ranging from lows of $260,000 to a high of $550,000.  In terms of cash compensation, Gelhaus was consistently one of the four highest-paid officers within FH and/or its subsidiaries.  Gelhaus also received some stock options: in June 1995 he received 5,000 options and in October 1998 he received 30,000.  Throughout the time period in question, FH had in place a compensation committee responsible for determining salaries, bonuses, stock options, and other discretionary benefits.  It is undisputed that the stock option agreements provide that the compensation committee has the absolute authority and discretion with respect to whether stock options are to be granted, to whom they are awarded, the number of any such options, and the applicable option price.  The compensation committee returned similar discretion with respect to salary increases.

            Eventually, the issue as to whether Gelhaus was an employee of FH performing duties for Figi or an employee of Figi came to a head.  From April 1993 until January 1995, Gelhaus and FH exchanged correspondence and memoranda addressing Gelhaus’s contention that he remained an employee of FH.  The crux of these memoranda is that FH considered Gelhaus an employee of Figi and not FH.  Gelhaus continued to assert, however, that he believed FH was not meeting its responsibilities under the employment agreement, and FH continued to reply that it was.  Gelhaus alleged that he retained the title of executive vice president for FH, and that he was not receiving his fair compensation with respect to stock options and salary increases.  Despite the disagreement, Gelhaus continued performing in the role of Figi president.

            Eventually, Federated Department Stores acquired FH in March of 1999.  As a result, the value of FH stock options increased significantly.  Gelhaus again raised his contention that FH was not meeting its obligations under the employment agreement.  According to Gelhaus, it was only then that FH informed Gelhaus that the employment agreement was no longer in force because of his extended tenure with Figi as its president.  In response, Gelhaus initiated this lawsuit on January 28, 2000.  Gelhaus was then terminated on February 2, 2000.  The district court granted FH’s motion for summary judgment, dismissing Gelhaus’s suit, and this appeal followed. 


            The employment agreement provides that it “shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware.”  Minnesota courts generally honor the parties’ clear choice of law.  Combined Ins. Co. of Am.. v. Bode, 247 Minn. 458, 464, 77 N.W.2d 533, 536 (1956).  When questions regarding choice of law arise for reasons other than the parties’ election in contract, Minnesota follows the “almost universal rule that matters of procedure and remedies [are] governed by the law of the forum state.”  Davis v. Furlong, 328 N.W.2d 150, 153 (Minn. 1983) (citing Stotzheim v. Djos, 256 Minn. 316, 319, n.2. 98 N.W.2d 129, 131, n.2 (1959)).  Accordingly, Delaware law will apply as to matters of substantive law, and Minnesota law applies to procedural matters. 

            Summary judgment is appropriate when the pleadings, discovery, and affidavits demonstrate that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.  Minn. R. Civ. P. 56.03.  On appeal, the reviewing court views the evidence in a light most favorable to the non-moving party.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).

 “On appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the lower courts erred in their application of the law.”


 State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990) (citation omitted).  In DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn. 1997), the supreme court stated:

[W]e hold that there is no genuine issue of material fact for trial when the nonmoving party presents evidence which merely creates a metaphysical doubt as to a factual issue and which is not sufficiently probative with respect to an essential element of the nonmoving party’s case to permit reasonable persons to draw different conclusions.


With this standard, then, we turn to the district court’s ruling.

            The district court determined as a matter of law that FH had not breached Gelhaus’s employment agreement, even if it remained viable after his assumption of duties as Figi president, because the benefit plans at issue clearly stated the compensation committee held exclusive authority and discretion with respect to the stock options granted and salary increases awarded.  Gelhaus concedes that the benefit plan documents are clear on this issue.  Gelhaus maintains, however, that because the employment agreement does not specifically refer to the benefit plan documents, the district court erred in utilizing them to interpret the employment agreement.  Gelhaus maintains further that the term “participate in benefit plans” is ambiguous, raising a fact issue of its appropriate construction.

            Delaware law defines a contract term as “ambiguous” when it is “reasonably or fairly susceptible of different interpretations or may have two or more different meanings.”  Rhone-Poulenc Basic Chemicals Co., v. Am. Motors Ins. Co., 616 A.2d 1192, 1196 (Del. 1992) (emphasis added).  Whether a contract term is ambiguous is a determination for the court.  True North Communications, Inc. v. Publicis S.A., 711 A.2d 34, 38 (Del. Ch. 1997).  Under Delaware law, if the contract language is ambiguous, the court “will consider parol evidence in order to ascertain the parties’ intentions.”  Id. Under Minnesota law, if the language is ambiguous, “resort may be had to extrinsic evidence,” which usually creates a fact issue, “unless such evidence is conclusive.”  Transport Indem. Co. v. Dahlen Transport Inc., 281 Minn. 253, 259, 161 N.W.2d 546, 550 (1968), (quoting Noreen v. Park Const. Co., 255 Minn. 187, 190, 96 N.W.2d 33, 36 (1959), (quoting Leslie v. Minneapolis Teachers Retirement Fund Ass’n, 218 Minn. 369, 373-74, 16 N.W.2d 313, 315 (1944) (emphasis added).  Thus under either Delaware or Minnesota law, when extrinsic evidence renders an arguably ambiguous contract term clear, the construction of the language is for the court.[1]

Gelhaus claims that FH failed to honor his employment agreement.  Specifically, Gelhaus maintains that FH failed to adequately compensate him with respect to stock options and potential other “benefits” owed to senior officers of FH.  Gelhaus focuses on the question as to whether or not he retained his status as an executive vice president of FH after assuming the responsibilities of president of the subsidiary company, Figi, Inc.  FH, meanwhile, goes to great lengths to explain how this was not what, in fact, transpired.  Because we conclude that the employment agreement was not breached, however, it is not necessary to address that particular issue.

Gelhaus’s employment agreement required FH to pay Gelhaus an annual salary of $250,000 and entitled him “to participate in the benefits available from time to time to FH’s senior officers.”  Gelhaus has specifically alleged that FH did not award him the appropriate amounts of stock options and certain other additional “benefit programs” certain other senior officers of FH obtained. 

            Fatal to Gelhaus’s claim, however, is the reality that the compensation committee retained the absolute authority to award these stock options and other benefits according to its own exclusive discretion.  Gelhaus concedes that no “pattern” exists as to how the compensation committee exercised this discretion in awarding the options and other discretionary benefits to the senior officials.  Gelhaus’s own expert admits that the senior officials either received or were passed over at various times during the years at issue. Gelhaus offered no evidence indicating that he was not considered at each appropriate time or that the compensation committee acted arbitrarily or maliciously.

Gelhaus focuses upon the phrase “participate in incentive and benefit plans.”  Gelhaus argues this phrase “participate in” is ambiguous and thus must be construed against FH, the drafter of the employment agreement, or, at a minimum, left for the fact-finder to decide the parties’ intent.  Gelhaus alleges that in order to “participate in” something, one must actually do something or receive something, and thus in order to “participate in” a stock option plan, one must receive stock options.

Even if we accept Gelhaus’s argument that “participate in” is ambiguous, any ambiguity is eliminated upon reading the benefit plan documents.  When extrinsic evidence clears up any potential ambiguity as to a contract term, the construction of that term remains a question of law for the court.  Leslie, 218 Minn. at 373-74, 16 N.W.2d at 315; True North Communications, Inc., 711 A.2d at 38.  Furthermore,

where parties to a contract have given it a practical construction by their conduct, * * * such construction may be considered by the court in determining its meaning and in ascertaining the intent of the parties.


 Leslie, 218 Minn. at 374, 16 N.W.2d at 315-16. 

            The district court needed to gather some information to understand what the parties intended by the phrase “participate in incentive (“MBO plans”) and benefit plans applicable from time to time to senior officers.”  When the district court did this, by way of the stock option plan and other benefit plan documents, it determined that Gelhaus’s claim must fail.  These documents clearly state that the compensation committee has the absolute plenary authority to determine which employees receive options and the number of exercisable shares.  These documents do not even remotely suggest that employees of similar or identical titles or positions are to be treated equally or even similarly.  The district court decided that under the employment agreement Gelhaus was entitled to be considered by the compensation committee for these benefits; he was not entitled to actually receive them.  The record clearly indicates this was the correct interpretation. In light of this undisputed information, contained in the benefit plan documents, the district court concluded that Gelhaus’s claim must fail.

            Also, Gelhaus has offered no evidence to indicate that any alternative system was in place prior to the creation of the plan documents.  Gelhaus cannot demonstrate that the award of any options or specialized benefits was required at any time.  Instead, the evidence in the record indicates that FH retained the discretion to award, or not to award, the various specialty benefits.  This was the practice and course of conduct from the outset of Gelhaus’s employment agreement.  See Leslie, 218 Minn. at 374, 16 N.W.2d at 315-16 (parties’ conduct useful in determining parties’ contractual intent). 

Gelhaus argues two points in response.  First, he implies that unless he actually receives the benefits, the contract phrase “participate in” becomes empty and meaningless.  Gelhaus’s suggestion is flawed, however, because not all employees of FH are entitled to be considered for stock options, bonus plans, and other benefits that the compensation committee might award to “senior officers.”  By being eligible to receive the benefits, and by being considered for these benefits, Gelhaus received something that “non-senior officials” of FH did not,[2] and this was all the employment agreement actually extended, or guaranteed, to him. 

Gelhaus’s argument also fails because “participate in” is not an ambiguous phase.  The legal test for contract construction with respect to determining whether an ambiguity exists under Delaware law (and Minnesota law) involves deciding whether the word or phrase is reasonably susceptible to more than one interpretation.  Rhone-Poulenc Banc Chemicals Co. v. Am. Motors Ins. Co., 616 A.2d at 1196 (Del. 1992).  If additional information is necessary to determine what might be a “reasonable” interpretation – i.e. the way a stock option plan works – then the court may resort to that information in order to determine what reasonable interpretation or interpretations exist.  Indeed, the district court cannot be expected to view the “participate in” phrase in a vacuum.  See True North Communications, Inc. 711 A.2d at 38.  Gelhaus maintains that this is precisely what must happen if the district court is to stay true to the summary judgment standard.  The suggested alternative interpretation must be “reasonable,” however.   Rhone-Poulenc, 616 N.W.2d at 1196.  The district court could not arrive at any sort of “reasonable” interpretation of the term “participate in benefit plans” without looking at how those benefit plans were effectuated. 

Having examined the benefit plans themselves, the district court concluded that Gelhaus had no claim.  Gelhaus received the benefit of his bargain; he participated in the benefit plans available to senior officers.  Gelhaus received substantial cash bonuses under the “MBO (Management by Objective Goals) plan,” and he received some stock options.  Gelhaus might not have received as many options as other senior officers, but many of those others did not receive nearly as much in cash bonuses.  The compensation committee had the authority to make these decisions regarding benefit distribution according to its own absolute discretion, as clearly set forth in the various benefit plan documents and the parties’ course of conduct.  Gelhaus produced no evidence indicating that the compensation committee acted arbitrarily or maliciously with respect to any of its decisions, or that the committee did not consider Gelhaus for the various benefits at any of the appropriate times.  In short, FH did not breach Gelhaus’s employment agreement, even if it remained in effect, because he received everything to which he was entitled under the agreement.

Moreover, Gelhaus has produced no evidence indicating that an alternative interpretation is warranted.  Gelhaus argues that “participate in” could conceivably mean that he is to actually receive the stock options and other “senior officer” benefits.  Gelhaus offers nothing, however, to support this contention.  It is undisputed that no “pattern” existed as to how the benefits were awarded to the various senior officers.  Gelhaus has offered nothing to indicate that certain levels, or types, of officers received a set amount of options or other benefits.  Gelhaus’ argument is not, in fact, a reasonable interpretation of the contract term at issue; instead, it is so lacking in definiteness and specificity as to not constitute an interpretation at all.[3]  Gelhaus has, in effect, done nothing more than create the “metaphysical doubt” that controlling precedent condemns as insufficient to answer a motion for summary judgment.  See DLH, Inc., 566 N.W.2d at 71. 

Gelhaus received the salary guaranteed in the employment agreement.[4]  Gelhaus also “participated in” the benefit plans available to the senior officers of FH.  Gelhaus would have liked to receive more stock options and other discretionary benefits and may even believe that he should have received more options and other benefits.  His belief does not result in a viable legal claim, however.  Because FH did not breach the employment agreement even if it remained in effect following Gelhaus’s assumption of the duties of president of Figi, the district court properly granted summary judgment dismissing Gelhaus’s claim.   

Because we conclude that no breach occurred as a matter of law, summary judgment was therefore appropriate under Minnesota Rule of Civil Procedure 56.03.   We need not address the remaining arguments Gelhaus raises.


            * Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.

[1] Minnesota follows the “almost universal rule” that matters of procedure are governed by the forum state.  Davis v. Furlong, 328 N.W.2d 150, 153 (Minn.1983) (citations omitted).  The standard regarding a motion for a directed verdict is a “procedural matter” which “the law of the forum governs.” Stotzheim v. Djos, 256 Minn. at 319, n.2, 98 N.W.2d at 131, n.2.  Likewise, the issue as to whether the evidence presents a jury question is governed by the law of the forum state.  Franklin v. Minneapolis, St. Paul & Sault Saint Marie Ry. Co., 179 Minn. 480, 487, 229 N.W. 797, 800 (1930).  Therefore, although no controlling precedent directly on point appears to exist, we believe that Minnesota law would control this issue as to how the employment agreement's language is to be construed.  In any event, when the standards of proof are the same, then no conflict exists and “there is no choice of law issue.” Vetter v. Security Cont. Ins. Co., 567 N.W.2d 516, 521-22 (Minn. 1997).  Here the standards are the same for practical purposes.

[2]  Not only did Gelhaus receive the benefit of his bargain – consideration for stock options – he actually received options on two occasions.

[3] Gelhaus has not suggested a basis on which the options would have been granted to him – what number of options, when granted, applicable price, etc.  Using the largest amount granted to any other senior officer in each and every year, and the optimal price, to calculate damages does not constitute a reasonable alternative interpretation.

[4] Gelhaus’s salary in each year at issue exceeded that guaranteed in the agreement - $250,000.  Also, the compensation committee had absolute discretion to determine salary increases.