Damian Cioni v. Globe Specialty Metals Inc

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 14-3404
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DAMIAN J. CIONI,
Appellant
v.
GLOBE SPECIALTY METALS, INC.; MALCOLM APPELBAUM;
JEFFREY BRADLEY; ALAN KESTENBAUM; MARK COHEN
_____________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D.C. Civil No. 2-10-cv-01388)
District Judge: Honorable Esther Salas
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Submitted Under Third Circuit LAR 34.1(a)
June 26, 2015
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Before: CHAGARES, KRAUSE and BARRY, Circuit Judges
(Opinion Filed: July 23, 2015)
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OPINION*
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*
This disposition is not an opinion of the full court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
BARRY, Circuit Judge.
This matter arises out of a hiring agreement between Damian Cioni and Globe
Specialty Metals, Inc. (“Globe”) in which Globe promised, but never granted, Cioni
unvested options in company stock. Cioni appeals the District Court’s grant of summary
judgment for the defendants. We will affirm.
I.
Cioni was recruited to join Globe by its CFO, Malcolm Appelbaum, who believed
that he had the authority to negotiate the terms of Cioni’s employment and compensation.
On April 29, 2009, Cioni accepted and signed Appelbaum’s third offer of employment.
The terms included a grant to Cioni of 30,000 unvested stock options, which were to vest
in thirds on the first, second, and third anniversaries of Cioni’s employment. The
agreement did not condition termination in any way, and Cioni understood that his
employment at Globe could end before the options vested. Cioni began working at Globe
on June 29, 2009 as its Vice President of Tax, reporting directly to Appelbaum.
Sometime before October 2009, Appelbaum learned that he lacked authority to
promise stock options to Cioni. Under Globe’s stock plan, the options could only be
granted after approval from Globe’s Board of Directors (the “Board”), and Cioni’s grant
was made “under and subject to the terms and conditions of our stock plan.” (App. 206.)
Cioni’s options were never put to the Board for a vote and, thus, never granted. When
Appelbaum brought the options to Alan Kestenbaum, the Board’s Chairman, Kestenbaum
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refused to add the vote to the Board’s meeting agenda because he believed that a 30,000-
option grant was an “out-sized option package” relative to Cioni’s “reporting position[]
. . ., which is not an income-generating type position” and that, as such, the grant was not
in the interest of Globe’s shareholders. (Supp. App. 100–01, 103.) According to
Kestenbaum, Appelbaum could have asked another Board member to put the grant to a
vote, but there is no indication that he did so.
In October and November 2009, Globe attempted to renegotiate Cioni’s
compensation. The Board delegated authority to Kestenbaum and Globe’s CEO, Jeffrey
Bradley, to grant options, subject to an overall cap, to Cioni and two other employees
whose compensation packages were to be adjusted. Under this authority, Bradley and
Appelbaum made Cioni a written offer of 15,000 options. The offer was subject to
Cioni’s acceptance by signature, which he never provided. Although the new offer did
not expressly waive the originally promised 30,000 options, Cioni testified, when
deposed, that he understood that the 15,000 options were offered “in lieu of” the 30,000
options and that he never understood Globe to be offering him a total 45,000 options.
(Supp. App. 71–72.) Appelbaum also assured Cioni that Globe would “try[] to make up
some portion of the other half in cash through yearly bonuses.” (App. 110.) But when
Cioni requested a written guarantee, Appelbaum declined.
Cioni rejected Globe’s offers and hired counsel. He did so against Appelbaum’s
advice, who told him that Kestenbaum would not appreciate Cioni hiring counsel. On
November 12, 2009, Cioni’s attorney spoke to Globe’s in-house counsel. The
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conversation appears to have been an attempt by Cioni to claim rights to both options
offers. In the words of his attorney, the “entire conversation” was about the “45,000 stock
options owed to Mr. Cioni,” as well as “some retaliation going on” against Cioni
regarding the options. (Supp. App. 107–09.)
Bradley fired Cioni the following day, November 13, 2009. The circumstances of
his termination are contested. Cioni testified that Bradley told him that his termination
was due to “a legal issue.” (App. 87.) Globe’s interrogatory answers asserted various
reasons: Cioni’s unwillingness to revise his compensation package; average to below-
average performance; accessing inappropriate websites at work; and Cioni’s “bad faith
claim[]” that he was entitled to 45,000 options. (App. 163.) Bradley testified that Cioni
was terminated because he was under-performing. Appelbaum testified that he
recommended Bradley terminate Cioni because Cioni was asking for more compensation
than had been promised and because the working relationship had become “strained and
difficult.” (App. 101–02.) Appelbaum further testified that, although Cioni’s work
product had “certain issues,” that was not the reason he recommended termination. (Id.)
Cioni brought suit against Globe, Appelbaum, Kestenbaum, and Bradley1 on
March 16, 2010, in an 11-count complaint. The defendants moved for summary judgment
on eight of the counts on August 31, 2012, and the District Court granted the motion in
its entirety on April 30, 2013. On June 26, 2013, the defendants sought leave to file a
second motion for summary judgment on the remaining three counts, which the Court
1
Cioni also named Mark Cohen, the headhunter who had recruited him to Globe, as a
defendant, but no claims against Cohen have been appealed.
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permitted,2 and granted the motion in its entirety. Cioni timely appealed the Court’s grant
of summary judgment on eight of the eleven counts.
II.
We have jurisdiction under 28 U.S.C. § 1291. We exercise plenary review over a
grant of summary judgment, applying the same standard as the District Court. Sulima v.
Tobyhanna Army Depot, 602 F.3d 177, 184 (3d Cir. 2010). “Summary judgment is
appropriate if, viewing the record in the light most favorable to the non-moving party,
there are no genuine issues of material fact and the moving party is entitled to judgment
as a matter of law.” Id. (citing Fed. R. Civ. P. 56(c)).
III.
A. Counts One and Two: Breach of Contract and Breach of the Implied
Covenant of Good Faith and Fair Dealing
The parties agree that Globe breached its employment contract with Cioni by
failing to grant the promised 30,000 unvested options, but disagree whether Cioni
suffered damages from the breach. Cioni contends that stock options do have value, albeit
a fluctuating one, and Globe’s breach denied him the anticipated value. He proffers an
2
Cioni faults the District Court’s allowance of a second motion for partial summary
judgment, which he contends was untimely because it was filed more than “30 days after
the close of all discovery.” Fed. R. Civ. P. 56(b). That Rule is only a default timing
provision, however; Rule 56 grants district courts discretion to “order[] otherwise.” Id.
This discretion permits “[s]cheduling orders [to be] tailored to the needs of the specific
case, perhaps adjusted as it progresses, [which is] likely to work better than default
rules.” Fed. R. Civ. P. 56 comm. n. (2009). We find no error in the Court’s allowance of
the motion, particularly as a trial date had not yet been set.
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expert’s estimation of the options’ value and cites deposition testimony and out-of-state
case law endorsing this valuation method.
Cioni’s argument, however, supports valuing unexercised options – where an
options holder possesses a present right to purchase shares – but not valuing unvested
options – where an options holder possesses only a conditional promise of a future right,
but no present right, to purchase shares. Cioni himself acknowledged, when deposed, that
unvested options were valueless to him. Without damages, of course, Cioni cannot
sustain a claim for breach of contract. 3 Cioni’s claims for breach of the implied covenant
of good faith and fair dealing, however phrased, 4 fail for the same reason.
B. Counts Three and Nine: Wrongful Discharge and Retaliatory Discharge for
Hiring Counsel
Cioni also claims that he was wrongfully terminated in retaliation for retaining an
attorney to advise him regarding his rights to the options. Unfortunately for Cioni, this
claim runs up against New Jersey’s presumptive preference in favor of at-will
3
Cioni alternatively argues that Globe’s breach harmed him because, by joining Globe,
he relinquished stock options at his prior company. He did not, however, make this
alternative harm argument before the District Court and cannot do so for the first time
before us.
4
Cioni’s complaint pled his implied covenant claim as an unlawful termination that was
not based on “willful misconduct,” “poor performance,” or “negligence,” (App. 56–57),
but in opposing summary judgment, he argued that Globe breached the implied covenant
because he was terminated in bad faith to foreclose his claim to the unvested options.
Even had Cioni shown that damages lie for such a claim, the claim would fail against
New Jersey’s presumptive preference for an employer’s right to terminate an employee at
will. See Pierce v. Ortho Pharm. Corp., 417 A.2d 505, 512 (N.J. 1980); see also Leang v.
Jersey City Bd. of Educ., 969 A.2d 1097, 1107 (N.J. 2009) (citing Pierce, 417 A.2d at
512). Lastly, Cioni claimed that Globe breached the implied covenant by failing to
present his options to the Board for approval, a claim unsustainable as a duplication of his
breach of contract claim.
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termination. An employee has a claim for wrongful discharge only “when the discharge is
contrary to a clear mandate of public policy.” Pierce, 417 A.2d at 512. Such public policy
may be found in judicial decisions, among other sources. Id. Cioni contends that New
Jersey has a clear public policy favoring an employee’s right to consult counsel and that
this policy is expressed in a series of cases holding that an employee’s waiver of claims
against his employer must be knowing and voluntary. 5 See, e.g., Keelan v. Bell
Commc’ns Research, 674 A.2d 603, 608 (N.J. Super. Ct. App. Div. 1996). To evaluate
such waivers, courts consider, among other factors, whether the employee had an
opportunity to consult counsel and whether the employer encouraged doing so. Swarts v.
Sherwin-Williams Co., 581 A.2d 1328, 1332 (N.J. Super. Ct. App. Div. 1990). We are
unconvinced that these factors – only two of eight non-exhaustive factors to be weighed
in a totality of the circumstances test – constitute a clear public policy.
Even were these cases to establish a public policy protecting employees who
consult counsel regarding potential waivers, however, Cioni has not pointed to evidence
that that is what he was doing. Cioni testified that he understood that the 15,000 options
were offered to replace the original 30,000, and his attorney testified that she contacted
Globe to assert Cioni’s right to all 45,000 options. In other words, the record before us
suggests that Cioni hired counsel to pursue his claim – not to advise him regarding a
potential waiver. This distinction is vital because, under Pierce, employers may lawfully
5
Cioni similarly claims the United States has a parallel public policy, and cites 29 U.S.C.
§ 626(f)(1)(E). But § 626(f)(1)(E) is expressly limited to an employee’s waiver of claims
of age discrimination under the Age Discrimination in Employment Act, which has no
relevance here.
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discharge employees who retain counsel in a dispute against the employer. See, e.g.,
Erickson v. Marsh & McLennan Co., 569 A.2d 793, 804 (N.J. 1990) (terminating an
employee who “has retained a lawyer to protest the employer’s actions . . . is a legitimate,
non-discriminatory method of handling the daily operations of a business”); Alexander v.
Kay Finlay Jewelers, Inc., 506 A.2d 379, 381 (N.J. Super. Ct. App. Div. 1986) (“There is
no statutory or regulatory proscription against a firing in retaliation for the institution of a
civil action against the employer as a means of resolving a salary dispute.”).
C. Count Five: Defamation
Cioni claims Appelbaum defamed him by telling other Globe employees that he
was terminated for asking for more compensation than his contract offered. But, as
discussed, Cioni’s attorney did assert that Cioni had a right to 45,000 stock options. He
did not. He never accepted Globe’s second offer of 15,000 options and, moreover,
understood it to be an offer replacing the originally promised 30,000 options. Truth is a
defense to defamation. G.D. v. Kenny, 15 A.3d 300, 310 (N.J. 2011).
D. Counts Six and Seven: Fraud and Negligent Misrepresentation
In these counts, Cioni contends that Appelbaum induced Cioni to come to Globe
by fraudulently, or negligently, misrepresenting that Globe would grant him 30,000 stock
options without actually intending to do so. He also claims that Appelbaum endorsed the
fraud after Cioni’s employment began by continuing to represent that Cioni’s options
were forthcoming when they were, in fact, not. Because Cioni’s argument is, in essence,
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that Appelbaum promised Globe would grant options when Globe would not – the very
same promise that Globe contracted to perform – Cioni’s claims are barred by the
economic loss doctrine. See Spring Motors Distribs., Inc. v. Ford Motor Co., 489 A.2d
660, 672–73 (N.J. 1985); Saratoga at Toms River Condo. Ass’n, Inc. v. Menk Corp., 2014
WL 3510872, at *5 (N.J. Super. Ct. App. Div. July 17, 2014) (“[E]conomic expectations
between parties to a contract are not entitled to supplemental protection by negligence
principles.”).
Cioni, citing Kaplan v. GreenPoint Global, argues that the economic loss doctrine
does not bar claims of misrepresentations made to induce a party into a contract. But in
Kaplan, the defendants allegedly misrepresented the company’s financial success to
induce the plaintiff to join the company. See Civ. No. 11-4854, 2012 WL 2992572, at *6
(D.N.J. July 20, 2012). The misrepresentations were apparently related to, but distinct
from, the parties’ expectations under the contract. See also McConkey v. AON Corp., 804
A.2d 572, 586 (N.J. Super. Ct. App. Div. 2002) (defendants misrepresented company’s
future growth and likelihood of being sold, inducing plaintiff to accept employment only
to be laid off seven months later when company was sold). Here, however, the
representations were false promises to perform as contracted. Cf. Saltiel v. GSI
Consultants, Inc., 788 A.2d 268, 280 (N.J. 2002) (holding architect’s cause of action
under tort, alleging that turfgrass corporation negligently performed its contractual duties
to prepare and design turf specifications for athletic field, arose only out of contract).
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E. Count Ten: Tortious Interference with Contract
Finally, Cioni asserts that Kestenbaum tortiously interfered with Cioni’s
employment contract in two ways: first, that he effectively vetoed Board approval of
Cioni’s promised stock options; and second, that he caused Cioni’s termination. As to the
first, Cioni has not pointed to evidence that Kestenbaum’s actions exceeded the scope of
his duties as the Board Chairman. New Jersey’s tort of interference with contract cannot
lie against Globe, a party to the contract, nor against Kestenbaum, unless he acted outside
the scope of his duties. See Printing Mart-Morristown v. Sharp Elecs. Corp., 563 A.2d
31, 37–38 (N.J. 1989); DiMaria Constr., Inc. v. Interarch, 799 A.2d 555, 561 (N.J.
Super. Ct. App. Div. 2001). When deposed, Kestenbaum testified that his decision not to
include a vote on Cioni’s options on the Board’s meeting agenda was within his authority
as Chairman, and Cioni has not pointed to contrary evidence. Kestenbaum further
testified that the other Board members also had authority to put Cioni’s options to a vote,
yet Cioni has presented no evidence that any of them attempted to do so or that
Kestenbaum improperly prevented any of them from doing so. Finally, Cioni has not
shown that Kestenbaum did anything outside of his authority as Chairman that a jury
could reasonably find caused Cioni’s termination.
V.
We will affirm the orders of the District Court.
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