Helmut Porkert v. Chevron Corporation

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 10-1384
HELMUT F. PORKERT,
Plaintiff - Appellant,
v.
CHEVRON CORPORATION, a Delaware corporation,
Defendant - Appellee.
Appeal from the United States District Court for the District of
South Carolina, at Beaufort. Sol Blatt, Jr., Senior District
Judge. (9:07-cv-03940-SB)
Argued: December 8, 2011 Decided: January 12, 2012
Before WILKINSON, KING, and KEENAN, Circuit Judges.
Affirmed by unpublished opinion. Judge Keenan wrote the
opinion, in which Judge Wilkinson and Judge King joined.
ARGUED: Sean Michael Bolchoz, HALE & BOLCHOZ, LLC, Hilton Head
Island, South Carolina, for Appellant. Lewis Joseph Loveland,
Jr., KING & SPALDING, LLP, Atlanta, Georgia, for Appellee. ON
BRIEF: Bryson M. Geer, NELSON MULLINS RILEY & SCARBOROUGH, LLP,
Charleston, South Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
BARBARA MILANO KEENAN, Circuit Judge:
In this breach of contract action, we consider whether the
district court erred in granting summary judgment in favor of
the defendant, Chevron Corporation (Chevron), on a complaint
filed by a former Chevron employee, Helmut Porkert, contesting
the expiration of certain stock options. The issues presented
are: 1) whether the district court correctly determined that
Porkert failed to exercise his stock options within the
applicable time period; and 2) whether there were genuine issues
of material fact relating to Porkert’s employment agreement or
stock option grants that precluded the district court from
awarding summary judgment. Upon our review, we affirm the
district court’s judgment.
I.
Because this appeal arises from the district court’s award
of summary judgment, we present the facts in the light most
favorable to Porkert, the non-moving party. See Henry v.
Purnell, 652 F.3d 524, 527 (4th Cir. 2011) (en banc). The
2
record before us shows 1 that Porkert and Chevron entered into
negotiations in 1999 to employ Porkert as Chevron’s new Chief
Procurement Officer. In the negotiations with Porkert, Chevron
was represented by its former Vice Chairman, David O’Reilly, and
former Chief Financial Officer, Martin Klitten. Several draft
terms of employment were considered by the parties, which
covered matters such as Porkert’s salary, benefits, signing
bonus, and stock options.
From the outset of the negotiations, Porkert indicated that
because he was 59 years old, he would not accept a position that
required a lengthy period of employment before he became vested
in Chevron’s retirement plan. In May 1999, Porkert received a
letter from Chevron proposing certain terms of employment (the
May 1999 letter), which included a provision regarding his
eligibility for stock options under Chevron’s “Long-Term
Incentive Plan” (LTIP). With regard to stock options, the May
1999 letter provided:
IV. Long-Term Incentive Plan
Non-qualified stock options and Performance
Units awarded annually to E-1s under the
1
In addition to certain documents in the record, the
parties largely rely on Porkert’s deposition testimony to
establish the facts underlying his claims.
3
terms of the Long-Term Incentive Plan. This
amount may vary from year-to-year. In 1998,
E-1s were awarded 8,000 non-qualified stock
options (ten year term) and 1,700
Performance Units.
(Emphasis added.) Because Porkert did not agree to all the
terms of the May 1999 letter, the parties continued to negotiate
to find acceptable terms for Porkert’s employment.
In June 1999, Klitten sent Porkert a letter by facsimile,
which was signed by O’Reilly on behalf of Chevron (June 1999
letter). The June 1999 letter also addressed the terms of
Porkert’s employment, including his annual compensation, signing
bonus, benefits, terms of severance, and a provision regarding
his eligibility for stock options under the terms of the LTIP,
which was virtually identical to the stock option provision
contained in the May 1999 letter. Although Chevron contends
that the June 1999 letter embodied the final terms of Porkert’s
employment, we assume for summary judgment purposes, as argued
by Porkert, that the parties agreed upon the final terms of his
employment in a later agreement.
Porkert testified that in a final version of his employment
agreement, later in June 1999, it was agreed that he would be
fully vested in the retirement plan after two years’ employment
with Chevron, and that he could exercise stock options for up to
ten years from the date he received them. Porkert did not
4
receive a copy of this final written agreement, and neither the
agreement, nor any documentation relating to the agreement, is
contained in the record before us.
Porkert began working as Chief Procurement Officer of
Chevron on July 15, 1999. In August 1999, he received a letter
from Chevron regarding his eligibility for stock option grants
under the LTIP (the August 1999 letter). The August 1999 letter
identified as attachments and enclosures the full plan documents
comprising the LTIP, and also provided a website link through
which Porkert could obtain access to the plan documents.
Porkert testified that he did not remember reading the
attachments or enclosures to the August 1999 letter, and that he
was preoccupied with his work at the time.
The LTIP rules included a provision regarding the effect of
an employee’s retirement on the right to exercise vested stock
options. In addition to the circumstance of an employee’s
retirement, the provision also addressed the event of an
employee’s termination, death, or disability (the LTIP
termination rule). 2 The LTIP termination rule provided, in
relevant part, as follows:
2
A materially-identical provision was contained in the 2002
and later versions of the Chevron LTIP.
5
D. Effect of Termination of Employment
1. Upon termination of employment for
reasons other than death, Disability or
termination of employment at or after
Eligibility for Retiree Welfare Benefits or
at age 65 pursuant to the Corporation’s
mandatory retirement policy, vested options
may be exercised within three months from
the date of termination (but in no case
later than ten years from the date of
grant). However, if the optionee has
engaged in Misconduct, all options are
canceled effective as of the time of
termination of employment.
(Emphasis added.)
Porkert was 64 years old when he retired from Chevron, and
he does not argue that his employment was terminated under
circumstances falling within the above exceptions to the LTIP
termination rule, namely, “death,” “[d]isability,” termination
after “[e]ligibility for [r]etiree [w]elfare [b]enefits,” or
termination “at age 65 pursuant to the Corporation’s mandatory
retirement policy.” As a result, the terms of the LTIP
applicable to Porkert provided that Porkert’s “vested options
may be exercised within three months from the date of
termination (but in no case later than ten years from the date
of grant).”
From 1999 through 2004, during each year of Porkert’s
employment at Chevron, he received annual stock option grants
under the LTIP. Beginning in 1999 through 2001, Porkert
6
accepted and signed each stock option grant, as required by the
terms of those grants. Porkert also accepted stock option
grants annually, from 2002 until 2004, even though these grants
did not require his signature.
All stock option grants were subject to the LTIP and its
rules, and contained specific language to that effect. While
Porkert understood that the LTIP and its rules were incorporated
into the stock option grants and were available upon request, he
did not read those documents because he “didn’t have time for
that.”
Porkert worked as Chevron’s Chief Procurement Officer until
his retirement on February 15, 2005. As of that date, almost
72,000 of Porkert’s 110,000 stock options were vested. However,
Porkert did not attempt to exercise any of his options until May
2007. At that time, he was informed that all 110,000 of his
stock options 3 had been cancelled by Chevron three months after
his retirement.
3
This figure excludes the stock options Porkert received as
a signing bonus that he was able to exercise in May 2007. The
stock option agreement under which these stock options were
granted expressly provided that “[a]t termination, the vested
shares under this Grant will be exercisable for the remainder of
the 10-year term.” The stock option agreements at issue in this
case do not include similar language.
7
After attempting to resolve this issue directly with
Chevron, Porkert filed suit in a South Carolina state court,
asserting claims including breach of contract and promissory
estoppel. After Chevron filed a notice of removal, the case was
removed to the district court.
In the district court, Chevron moved for summary judgment.
The district court requested additional briefing on the breach
of contract claim, but granted summary judgment to Chevron on
the remaining claims. The district court later granted summary
judgment to Chevron on the breach of contract claim, holding
that Porkert failed to exercise his stock options within three
months of his retirement as required under the LTIP and its
rules. The district court held that, even assuming Porkert and
Chevron reached an express employment agreement as described by
Porkert, the stock option grants effectively modified that
original agreement because Porkert agreed to the terms of the
LTIP incorporated in each grant. After the district court
denied his request for reconsideration, Porkert filed this
appeal.
II.
We review de novo the district court’s award of summary
judgment. S.C. Green Party v. S.C. State Election Comm’n, 612
8
F.3d 752, 755 (4th Cir. 2010). We view the facts, and all
reasonable inferences that may be drawn from those facts, in the
light most favorable to the non-moving party. Bonds v. Leavitt,
629 F.3d 369, 380 (4th Cir. 2011). Summary judgment is
appropriate only when “there is no genuine issue as to any
material fact and the movant is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986).
We begin by considering the language of the termination
provision to determine whether the LTIP termination rule
required that Porkert’s vested stock options be exercised within
three months of his retirement. As set forth above, this
termination rule stated that “vested options may be exercised
within three months from the date of termination (but in no case
later than ten years from the date of grant).” 4 (Emphasis
added.) Porkert argues that the word “may” in this provision is
used as a “permissive term,” rather than as a “mandatory term.”
He further contends that this language in the LTIP termination
4
The termination rule included in the LTIP terms in 2002
and later years similarly provided that under such circumstances
of termination, “vested Stock Options may be exercised within 90
days from the date of termination (but in no case later than ten
years from the date of grant).” (Emphasis added.)
9
rule was ambiguous and, therefore, should have been construed
against the drafter, Chevron, to the effect that vested stock
options could have been exercised outside the stated three-month
window. We disagree with this argument.
Under California law, 5 the interpretation of a contract
presents an issue of law when the language of the contract is
unambiguous. See F.B.T. Prods., LLC v. Aftermath Records, 621
F.3d 958, 963-64 (9th Cir. 2010) (citing City of Hope Nat’l Med.
Ctr. v. Genentech, Inc., 181 P.3d 142, 156 (Cal. 2008)). Any
interpretation of a contract that effectively reads a word or
clause out of the contract must be avoided whenever possible.
See Cal. Civ. Code § 1641. Courts interpreting a contract are
instructed to “give significance to every word of a contract,
when possible, and [to] avoid an interpretation that renders a
word surplusage.” In re Tobacco Cases I, 111 Cal. Rptr. 3d 313,
318 (Cal. Ct. App. 2010); see also Transp. Guar. Co. v. Jellins,
174 P.2d 625, 628 (Cal. 1946).
We conclude that Porkert’s proposed construction of the
LTIP termination rule, permitting stock options to be exercised
5
The parties do not dispute that California law governs
issues concerning the existence, modification, or interpretation
of the LTIP, its rules, and all stock option agreements at issue
in this case.
10
both within three months of his date of termination as well as
outside that three-month window, would render the clause mere
surplusage. Thus, we decline to give this contractual language
such an implausible interpretation. To the extent that Porkert
sought to exercise his vested stock options following the
termination of his employment, the plain language of the LTIP
termination rule required that it be done “within three months
from the date of termination (but in no case later than ten
years from the date of grant).” 6
We next consider Porkert’s contention that there were
genuine issues of material fact relating to the terms of his
final employment agreement, which precluded the district court
from granting summary judgment to Chevron. Porkert argues that
irrespective whether the LTIP termination rule applied, the
final version of his employment agreement provided that he would
become fully vested in Chevron’s retirement plan after two
years’ employment, and could exercise his stock options for up
to ten years after issuance regardless of his retirement date.
6
The use of the word “may” in the LTIP termination rule is
permissive to the extent that Porkert was not required to
exercise his stock options, but could have let them lapse after
termination of his employment if, for example, he found it
financially impracticable to exercise them.
11
In considering this argument, we reiterate that the
district court assumed the veracity and accuracy of Porkert’s
alleged final employment agreement in reaching its decision.
We likewise accord Porkert’s allegations this same status.
Thus, Porkert’s arguments concerning the terms of his employment
agreement do not, without more, raise any issue of material fact
that would preclude summary judgment, because those facts
already have been viewed in Porkert’s favor.
We therefore turn to address the district court’s analysis
whether the stock option grants under the LTIP were
modifications of Porkert’s final employment agreement. Porkert
argues that the issues whether the stock option grants were
modifications of his final employment agreement, and whether
adequate consideration supported any such modifications, were
issues of material fact that should have been submitted to a
jury. Porkert also contends that the stock option grants could
not have modified his final employment agreement, because a
valid modification requires several contractual elements that
were lacking in this case. First, according to Porkert, there
was no “meeting of the minds” regarding the particular LTIP term
that vested stock options had to be exercised within three
months of his retirement because, under his employment
agreement, he was allowed ten years to exercise vested stock
12
options. Second, Porkert argues that the adequacy of
consideration presented a question of material fact for the
jury. Third, Porkert contends that because he already was
entitled to receive stock options under his final employment
agreement, his later receipt of stock options could not
constitute “new consideration” supporting a modification.
We address each of Porkert’s arguments in turn under
applicable principles of California law. Under California law,
a written contract may be modified by another written contract.
Cal. Civ. Code § 1698(a). The valid modification of a written
contract must satisfy the same criteria essential to the
formation of the original contract, including offer and
acceptance, or mutual assent, and adequate consideration. See
Am. Bldg. Maint. Co. v. Indem. Ins. Co. of N. Am., 7 P.2d 305,
307 (Cal. 1932). California law does not require that a court
weigh “the quantum of benefit received by a promisor or of the
detriment suffered by a promisee where the consideration is
plainly substantial.” Winkelman v. City of Tiburon, 108 Cal.
Rptr. 415, 422 (Cal. Ct. App. 1973). Further, in the context of
stock option agreements, California law provides that “[i]n
cases involving employee benefits, such as pension plans and
stock options, the rule has developed that the offer of such
bonuses constitutes an offer for a unilateral contract, which is
13
accepted if the employee continues in employment after the
offer.” DiGiacinto v. Ameriko-Omserv Corp., 69 Cal. Rptr. 2d
300, 303 (Cal. Ct. App. 1997) (emphasis added). Simply put,
“[c]onsideration is inherent where stock options are granted to
employees and the employee continues employment knowing of the
options.” Id. at 303-04 (quoting Newberger v. Rifkind, 104 Cal.
Rptr. 663, 665 (Cal. Ct. App. 1972)). In some instances, the
adequacy of consideration may be a question of fact for the
jury, but when the facts underlying the purported consideration
are uncontested, a court may find consideration adequate as a
matter of law. See In re Southland Supply, Inc., 657 F.2d 1076,
1081 (9th Cir. 1981); Garcia v. World Savings, FSB, 107 Cal.
Rptr. 3d 683, 690-91 (Cal. Ct. App. 2010).
We find no merit in Porkert’s contention that the parties
did not reach a “meeting of the minds” regarding the particular
LTIP term that his vested stock options had to be exercised
within three months of his retirement. Porkert unequivocally
accepted each stock option grant on an annual basis from 1999
until 2004, and did so knowing that each grant was expressly
governed by the LTIP terms and rules. Indeed, Porkert admits
that he “naturally assumed” that his stock options were issued
pursuant to the LTIP. At all times relevant to this dispute,
the LTIP terms and rules required that in the circumstances
14
under which Porkert left Chevron’s employ, Porkert was required
to exercise his vested stock options within the lesser of three
months from the date of termination, or ten years from the date
the options were granted. Thus, in effect, Porkert’s argument
that the parties did not reach a “meeting of the minds” is based
on nothing more than the fact that Porkert did not read the LTIP
terms that governed his stock option grants. Manifestly, “one
who assents to a contract is bound by its provisions,”
irrespective whether one reads them. Madden v. Kaiser Found.
Hosps., 552 P.2d 1178, 1185 (Cal. 1976).
Second, we reject Porkert’s argument that the issue of
adequacy of consideration presented a genuine issue of material
fact. There is no dispute that, from 1999 until 2004, Porkert
annually accepted each stock option grant subject to the terms
of the LTIP, that he understood the grants were governed by the
terms of the LTIP, and that he continued his employment with
Chevron knowing of such grants. Thus, under California law, we
may determine the adequacy of consideration as a matter of law.
See In re Southland Supply, 657 F.2d at 1081; Garcia, 107 Cal.
Rptr. 3d at 690-91.
Third, we find no merit in Porkert’s argument that because
he was entitled to stock options as part of his employment
contract with Chevron, the stock option grants were not “new
15
consideration” sufficient to support the modification of a
contract. As we already have stated, in cases of stock options,
the rule in California is that consideration is inherent when
stock options are granted to an employee who continues in that
employment with knowledge of that stock option grant.
DiGiacinto, 69 Cal. Rptr. 2d at 303. Thus, because Porkert
unambiguously accepted grants for specific and substantial
numbers of stock options knowing that they were governed by the
LTIP, and because Porkert continued his employment with Chevron
thereafter, he cannot argue that the stock option grants lacked
the consideration necessary to modify his prior employment
agreement. See id. Accordingly, we conclude that the stock
option grants modified any prior agreement to the contrary, and
that Porkert only was permitted to exercise his stock options
within three months of his retirement date.
Finally, we disagree with Porkert’s contention that the
district court erred in granting summary judgment to Chevron on
his promissory estoppel claim. Under California law, when the
parties have entered into a written contract, a claim arising
under it is one for breach of contract and may not be asserted
on the separate ground of promissory estoppel. See Kliff v.
Hewlett Packard Co., Inc., 318 F. App’x 472, 477 (9th Cir. 2008)
(citing Youngman v. Nevada Irr. Dist., 449 P.2d 462, 469 (Cal.
16
1969)). Pursuant to Porkert’s testimony and his argument before
the district court, he entered into a final written employment
agreement with Chevron in June 1999, which established the
contractual rights he asks us to enforce on appeal. Therefore,
because Porkert claims that Chevron breached a written contract,
his claim of promissory estoppel based on those same contractual
terms is barred under California law, and the district court did
not err in granting summary judgment in favor of Chevron on the
promissory estoppel claim. 7 Accord Kajima/Ray Wilson v. Los
Angeles Cnty. Metro. Transp. Auth., 1 P.3d 63, 69 (Cal. 2000)
(promissory estoppel developed for circumstances when “a party
lacking contractual protection relied on another’s promise to
its detriment”).
III.
For these reasons, we affirm the district court’s judgment.
AFFIRMED
7
Although the district court disposed of the promissory
estoppel claim on the different ground that Porkert had not
shown the reasonable reliance element of promissory estoppel,
the district court’s analysis does not alter the result we reach
here. See Cochran v. Morris, 73 F.3d 1310, 1315 (4th Cir. 1996)
(en banc) (district court judgment may be affirmed on other
grounds).
17