Fired by sister-in-law, brother gets second shot at severance pay lawsuit

By Chandra Lye | Feb 21, 2017

PIERRE, S.D. (Legal Newsline) – The South Dakota Supreme Court has granted a man the chance to prove he had an agreement with his terminally ill brother that included a $100,000 severance payment if he was fired by his sister-in-law.

David Knigge sued B&L Food Stores Inc. and his brother Robert Allen Knigge's estate after his sister-in-law refused to pay him the money his late brother had allegedly verbally agreed to.

In November 2012, the suit states Robert Knigge asked his brother, David Knigge, to take over K&J Food Stores in Oakes, North Dakota. Robert and his wife, Lynette Knigge, had shares in a corporation that had three grocery stores in North and South Dakota. Robert Knigge was responsible for operating the three stores, including B&L Food Stores in Redfield.

However, Robert Knigge had been diagnosed with brain cancer in 2011 and had been given little time to live, court documents state. According to David Knigge, the brothers had a verbal agreement that if Lynette Knigge terminated David Knigge following Robert Knigge’s death, there would be a $100,000 severance package.

David agreed to quit his job with the state as a public accountant, put his home up for sale and began to commute to Oakes from Pierre, where he lived, documents state.

In January 2013, Robert Knigge’s health deteriorated, and he was told there was no further medical treatment available, according to court documents. At that time, Robert Knigge allegedly told David Knigge he would like the B&L Food Store in Redfield to pass to his son, Jason.

However, Robert Knigge also allegedly told David Knigge that Jason was not ready to manage it yet. He asked David Knigge to close the Oakes store and take over management of the Redfield store. David Knigge allegedly agreed and moved in with Robert and Lynette Knigge until he could find a new home. He took over management of the B&L store in March 2013, the suit states.

David Knigge said the verbal contract included a $70,200 salary, a bonus based on the store’s performance and reimbursement for half of his health insurance costs. He was also allegedly given the opportunity to invest in future stores and the $100,000 severance payment if he was terminated. However, the contract was never in writing.

Lynette Knigge said she did not participate in the negotiations and did not hear her husband speak of a severance package or health insurance benefits. Court documents indicate she conceded that Robert may have made other negotiations about the employment of his brother.

Robert Knigge died in June 2013, and Lynette Knigge terminated David Knigge’s employment in August 2013. Court records indicate that Lynette heard of the severance agreement from two associates about a week before she terminated him. However, she refused to pay the money.

The Circuit Court of the 5th Judicial Circuit in Spink County granted the defendant's motion for summary judgment. The court ruled that the contract was unenforceable under the statute of frauds as it could not be performed in one year. It also found that the agreement was tied to contingencies that would not occur in a year - David Knigge’s retirement in 10-15 years or Robert Knigge’s children taking over management of the store.

However, Supreme Court Judge Tony L. Portra wrote in the court’s decision that “the circuit court erred in ruling that the contract was unenforceable under the statute of frauds. Because there are disputes of material fact regarding the existence of the severance term, we reverse and remand for further proceedings not inconsistent with this opinion.”

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