Moses v. Corning Inc.

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
7-16-2004
Moses v. Corning Inc
Precedential or Non-Precedential: Non-Precedential
Docket No. 03-3003
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
No. 03-3003
THOM AS D. MOSES,
Appellant
v.
CORNING INCORPORATED
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil No. 01-cv-01287)
District Judge: Hon. Gary L. Lancaster
Submitted Under Third Circuit LAR 34.1(a)
July 15, 2004
Before: SLOVITER, BARRY and WEIS, Circuit Judges
(Filed: July 16, 2004 )
OPINION OF THE COURT
SLOVITER, Circuit Judge.
Thomas Moses appeals from the District Court’s order granting summary
judgment in favor of defendant Corning Incorporated in Moses’ suit alleging Corning
breached its contract to provide M oses certain stock options.
I.
A. Employment History
Moses was the executive director and chief executive officer of Clinical Pathology
Facility, Inc. (“CPF”). In November 1991, CPF was acquired by Corning and merged
with an indirect subsidiary of Corning. Also in November, Moses signed an employment
agreement with CPF (“1991 Employment Agreement”) pursuant to which M oses would
continue his employment with CPF as president for three years, with automatic successive
extensions of 18 months each unless sooner terminated in accordance with the contract.
Moses was also designated as the general manager of MetPath, Inc. (“MetPath”) for the
region covering parts of Pennsylvania, Ohio, New York, and West Virginia.
Two years after the 1991 Employment Agreement was signed, Moses advised
Dennis Jilot, then president of MetPath, that he wished to step down as president of CPF
and general manager of M etPath. Although Moses’ retirement was announced in a press
release on April 14, 1994, he remained an active employee under different terms and with
less responsibility.
Under the terms of Moses’ second employment contract with CPF effective May 1,
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1994 (“1994 Employment Contract”), Moses received an annual salary of $200,000 and
certain fringe benefits, such as insurance coverage and the use of a car. In exchange,
Moses maintained some of his former responsibilities, such as coordinating the
consolidation of laboratories in Youngstown and Cleveland.
As of December 31, 1996, CPF and MetPath were spun-off as subsidiaries of a
new, independent company, Quest Diagnostics, Inc. (“Quest”) and, as a result, CPF and
MetPath ceased to be subsidiaries of Corning. But Moses continued his employment with
Quest under the 1994 Employment Contract until it expired on May 25, 1997.
B. Stock Options
On December 1, 1993, while the 1991 Employment Agreement was in effect,
Corning granted Moses an option to purchase 5,000 shares of Corning common stock
under Corning’s 1989 Stock Option Plan. In particular, the agreement provided:
(a) Commencing [February, 1 1996], such option may be exercised by
the Optionee to the extent of fifty percent of the aggregate number of
shares optioned by this Agreement; and
(b) Commencing [February 1, 1997], such option may be exercised by
the Optionee to the extent of an additional fifty percent of the
aggregate number of shares optioned by this Agreement.
App. at 96.
Section 3 of the stock option agreement provides that the option shall terminate
upon the happening of any of four listed events: (1) the expiration date of the options,
listed as November 30, 2003; (2) termination of Moses’ employment, except in the case
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of his death or retirement with the consent of Corning; (3) the expiration of three months
after Moses’ retirement with Corning’s consent (except if he were to die during that
three-month period); and (4) the expiration of twelve months after Moses’ death provided
that he was employed at Corning at the time of his death or he had retired with consent
less than three months prior to his death. Importantly, the agreement also stipulated that
if Moses worked for a subsidiary of Corning, and that subsidiary ceased to be a subsidiary
of Corning during the course of Moses’ employment, then the options would be
terminated.
In 1994, Corning established its 1994 Employee Equity Participation Program for
“executive, managerial, technical, and other employees” of Corning and its Subsidiaries.
App. 145. Moses fell into this category. The program consisted of two plans: the 1994
Stock Option Plan and the 1994 Incentive Stock Plan.
On December 7, 1994, Corning granted Moses an option to purchase 2,208
additional shares pursuant to an Incentive Stock Option Agreement and 2,792 additional
shares pursuant to a Non-qualified Stock Option Agreement, with both agreements
subject to Corning’s 1994 Employee Equity Participation Program. Under the terms of
these agreements, fifty percent of the options could be purchased on or after December 7,
1996, and all the shares could be purchased on or after December 7, 1997. Under these
agreements, as under the prior Stock Option Plan, the options would terminate if the
subsidiary “shall cease to be a [Corning] subsidiary company and [Moses] is not
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thereupon transferred to and employed by [Corning] or another subsidiary company.”
App. at 42, 44.
On December 11, 1996, while the 1994 Employment Contract was in effect, Moses
exercised his option to purchase 5,000 shares of Corning stock comprised of half of each
set of options that he had received, i.e., the 1993 options, the 1994 incentive options, and
the 1994 non-qualified options. After exercising these options, Moses had remaining the
options to purchase 2,500 shares from the 1993 agreement, 1,396 shares from the 1994
incentive options, and 1,104 shares from the 1994 non-qualified options.
C. Corporate Changes
Effective December 31, 1996, CPF and MetPath, Moses’ employers under the
1994 Employment Agreement, ceased being subsidiaries of Corning. Under the explicit
language of the agreements containing the option programs, Moses’ unexpired options to
purchase Corning stock would have terminated on December 31, 1996.
To alleviate this result, Corning, by two memos authored by A. John Peck and
dated November 15, 1996 (“The Peck Memos”), notified the option holders that the
options would not terminate but that the options would be “tied to future employment and
will be forfeited if your employment with Quest Diagnostics (instead of Corning) is
terminated for any reason after the [spin off].” App. at 105. The Peck Memos also
explained changes in the number of options and the exercise price of those options due to
changes in the number of Corning shares outstanding as a result of the spin off. Moses
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admits that he received these memos and he signed and returned the accompanying
consent form.
Moses’ 1994 Employment Agreement expired on May 25, 1997. By the terms of
the various stock option agreements and by the terms of the Peck Memos, the options
terminated as of that date. Moses then entered into negotiations with Kurt Fischer to
arrange the terms of his departure. These negotiations ran until November when an
agreement was reached.
In a letter dated March 26, 1999, Moses attempted to exercise the remaining
options, which, as a result of the adjustments described in the Peck Memos, were now to
purchase 5,989 shares of Corning stock. He tendered the amount of $141,878.05 but was
notified by Peck that his options had expired. Moses then brought this action to recover
damages caused by Corning’s alleged wrongful action in denying his exercise of the
options.
II.
The District Court granted summary judgment for Corning. The court, after noting
that the contracts and the parties’ intent were clear, explained as follows:
Under both stock option agreements, Mr. Moses would lose his
options where the company he worked for ceased to be a subsidiary of
Corning. After the Quest transaction, Corning’s compensation committee,
deeming the loss of options of the part of many Corning employees as too
harsh, amended the stock option agreements.
The amendment, as described in the Peck Memos, could not be
clearer. When an employee left Quest, for any reason, he or she could lose
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their unexercised options. When Mr. Moses left Quest following the
second employment agreement, he lost his unexpired options.
As there is no material dispute regarding the nature of the contracts,
and that their meaning could not be plainer, summary judgment is
appropriate. Mr. Moses was properly denied the ability to exercise his stock
options and therefore, the court will grant Corning’s motion for summary
judgment.
App. at 10.
We subject a district court’s grant of summary judgment to plenary review, and
therefore we apply the same standard that the District Court should have applied. Farrell
v. Planters Lifesavers Co., 206 F.3d 271, 278 (3d Cir. 2000). Summary judgment is
appropriate “if there is no genuine issue of material fact and if, viewing the facts in the
light most favorable to the non-moving party, the moving party is entitled to judgment as
a matter of law.” Smathers v. Multi-Tool, Inc., 298 F.3d 191, 194 (3d Cir. 2002).
We agree with the District Court that the 1993 Options Agreement and the two
1994 Options Agreements were clear and unambiguous. According to Pennsylvania
contract law, when interpreting a contract the court must determine the intent of the
parties and give effect to all provisions of the contract. Commonwealth v. Manor Mines,
Inc., 565 A.2d 428, 432 (Pa. 1989). In this case, the three options agreements contained
clauses stating that the options to purchase Corning stock terminated if the Corning
subsidiary that Moses worked for ceased to be a Corning subsidiary. This is the exact
situation that occurred when Corning spun off CPF and MetPath, Moses’ employers, to
create Quest. Therefore, but for the Peck Memos, Moses’ options would have been
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terminated immediately following the spin-off. The amendment provided by the Peck
Memos imposed the following condition on the extension of the options:
Your Corning stock options will continue to be tied to future employment
and will be forfeited if your employment with Quest Diagnostics (instead of
Corning) is terminated for any reason after the Distributions.
App. at 105 (emphasis added). Moses signed and returned the consent form showing that
he had understood the memos. Therefore, upon the termination of Moses’ employment
with Quest on May 25, 1997, all of his outstanding stock options were terminated.
Because Moses’ right to the stock options was created by the agreements, and the
agreements themselves provided for termination upon certain events, Moses’ claim that
he had a vested interest in those options must fail.
However, we are not prepared to dispose of Moses’ claim of equitable estoppel in
similar fashion. Moses claims that when he exercised half of his options in December
1996, he was told by a representative of Corning’s Legal Department that he could not
exercise the remainder of his options until December 1997. As we read the agreements,
this information, if given, would not have been accurate, for Moses could have exercised
the options he was granted in 1993 any time following February 1997. Moses alleges that
he reasonably relied upon this information in delaying the exercise of his options, and that
he lost the value of his 1993 options because of that reliance.
The District Court did not discuss this claim, and we therefore do not know
whether the District Court believed that the claim was not properly preserved or whether
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the District Court rejected it sub silentio because Moses, a highly experienced executive,
could not reasonably rely on information that varied from the written agreements. Under
these circumstances, we will remand the matter to the District Court for its consideration
in the first instance. We intimate no view on the matter.
III.
For the reasons set forth, we will affirm the District Court’s judgment insofar as it
rejected Moses’ contract claim and will vacate the summary judgment to the extent that it
rejected Moses’ putative equitable estoppel claim.
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