Opinion
Civil Action No. 99-1355 Section "N".
May 19, 2000.
ORDER AND REASONS
Before the Court is Polymer International Corp.'s Motion for Partial Summary Judgment. For the following reasons, the Motion is GRANTED.
I. BACKGROUND
At issue in the instant motion is whether, under the terms of his Employment Agreement with Polymer International Corp. ("Polymer"), Pierre Jules Maraist timely exercised his stock options. Resolution of this issue requires the Court to construe various provisions of the Employment Agreement and the company's Executive Stock Option Plan.
A. THE EMPLOYMENT AGREEMENT
On November 3, 1993, Mr. Maraist and Polymer entered into an Employment Agreement whereby Polymer agreed to employ Mr. Maraist for a term of just over four years, from October 22, 1993 until December 31, 1997. See Agreement line 1 (making Agreement effective as of October 22, 1993) and art. 2.4 (termination date).
I. Termination and Renewal of Employment
The Agreement contains specific procedures for termination and renewal.
Article 2.4 provides that the Agreement "shall terminate automatically, without further notice or payment, on December 31, 1997 (the "Term"), unless (a) terminated earlier, or (b) subsequently renewed. . . ."
Article 11.1 expressly provides for four instances of "early" termination. Under this article, Polymer has the right to terminate the Agreement (1) "at anytime, for Cause," on simple notice, and (2) "at any time, without cause," on simple notice. See art. 11.1(a) and (c). "Cause" is defined as "any event or circumstance, which, pursuant to applicable law, constitutes cause for dismissal without either notice or payment in lieu of notice." See art. 1.1(f). Mr. Maraist has the right to terminate the Agreement early by providing 90 days written notice of his intention to "resign." See art. 11.1(b). In all three of the aforementioned cases, "[a]ny notice, direction or other instrument required or permitted to be given, shall be in writing and given by registered mail, by delivery or sent by telecopier or similar telecommunications device and addressed to the other Party at the address of such Party first mentioned in this Agreement." See art. 13.1. Finally, the Agreement also would terminate "upon the death or the Incapacity of Maraist. . . ." See art. 11.1(d).
If termination was without cause, Polymer would be obligated to pay Mr. Maraist the remainder of his salary. See art. 11.1(c) and art. 12.1-4.
As to renewal, under article 2.5 of the Agreement, Polymer has the right to provide "Notice of Intent to Renew" at least 90 days "prior to the expiry of the Term," whereafter Mr. Maraist would be given seven days to respond. However, if no renewal agreement is reached "prior to the expiry of the Term," Polymer is "under no obligation to renew the Agreement and the Agreement shall terminate at the expiry of the Term as if no Notice of Intent to Renew had been given, the whole without further notice from or further obligation by [Polymer] to Mr. Maraist." See id.
2. The Executive Stock Option Plan
In addition to providing a salary, benefits package, bonus plan and profit sharing plan, Polymer agreed to register and inscribe Mr. Maraist in the Intertape Polymer Group ("IPG") Executive Stock Option Plan. See art. 10.7. The Agreement states that, on October 26, 1993, IPG granted Mr. Maraist "the option to purchase, during the Term, up to a maximum of seventy-five thousand (75,000) common shares of IPG, at an exercise price of twelve dollars and eight cents ($12.08) per common share. . ., the whole in strict accordance with and pursuant to the provisions of the IPG Option Plan." See id. A copy of the original IPG Option Plan was attached to the Agreement as Schedule A. Additional terms and conditions were added to the original Option Plan on February 10, 1993, and these new terms are set forth in sections (a), (b) and (c) of article 10.7 of the Employment Agreement.
Intertape Polymer Group, Inc. is the indirect parent of Polymer. See Agreement art. 1.1(o).
Paragraph 7 of the ESOP contains the following vesting provision:
The options granted by the Board shall not be exercisable immediately on the date of such Grant, but shall vest twenty-five percent (25%) per year over four (4) years. Accordingly, twenty-five percent (25%) ofthe options so granted shall be exercisable on or after the first anniversary of the Grant, or of the date such Grant becomes effective, as the case may be, and a further twenty-five percent (25%) of the options so granted shall be exercisable on or after each of the second, third and fourth anniversaries of the Grant, or of the date such Grant becomes effective, as the case maybe.
Paragraph 9 of the ESOP contains provisions for the status of an employee's stock options upon "termination of employment and disability." According to Paragraph 9:
9.1 When an Optionee ceases to be an employee of the Company or one of its subsidiaries, for any reason other than retirement or death, any option held by the Optionee shall become void, unless the Board decides otherwise.
9.2 In the case of retirement, the Board, at its discretion, may allow the Optionee to exercise the options as they vest and accrue or over another period of time to be determined by the Board.
9.3 In the case of an Optionee's death, the estate of the Optionee shall be entitled to exercise any option for which fights have vested and accrued in the Optionee at the time of death and any other option not yet vested that the Board may determine within a period of time to be determined by the Board.
Article 10.7 of the Employment Agreement modifies paragraph 9 of the ESOP. This article provides that:
(a) all options vested under the IPG Option Plan at the time of the holder's death or retirement can be exercised within twelve (12) months of said death or retirement;
(b) in the event of the holder's resignation or termination of employment (with or without Cause), the holder is entitled to exercise vested options within three (3) months from the date of such resignation or termination of employment; and
(c) all options must be exercised within twenty-four (24) months of the vesting of the last twenty-five percent (25%) tranche of the holder's options in accordance with the IPG Option Plan.
Art. 10.7(a)-(c).
B. THE COURSE, FINALE AND EPILOGUE OF MR. MARAIST'S EMPLOYMENT WITH POLYMER
Mr. Maraist worked for Polymer as President of its Cajun Bag Division until July 1996, at which time the CEO of Polymer's parent corporation informed him that he would be replaced. Mr. Maraist's employment status during the remainder of the Agreement is somewhat unclear. Mr. Maraist claims that Polymer continued to employ him, but as a "consultant" rather than as "president." In contrast, Polymer suggests that it actually terminated Mr. Maraist's employment without cause in July 1996 and merely continued to pay him his salary as required by the Agreement. See art. 11.1(c) and art. 12.1-4. In any event, both parties agree that Polymer did not offer to renew the Agreement, and, therefore, there is no question that the Agreement "terminated" at least as of December 31, 1997 by its self-executing provisions. For purposes of the instant motion, Polymer is willing to concede that the Agreement terminated on December 31, 1997 rather than in July 1996. In addition, there is no evidence that Polymer provided written notice of termination.
In June 1998, approximately six months after his employment with Polymer ended, Mr. Maraist notified Polymer that he wished to exercise his stock options. Polymer first informed Mr. Maraist that he could exercise his options, but subsequently reversed its position. In the Board's view, Mr. Maraist's options had expired three months after employment ended, and his June 1998 request was therefore untimely. Unable to exercise his options, Mr. Maraist filed the instant suit against Polymer, requesting, inter alia, a declaratory judgment that he had timely exercised his options and an award of damages.
II. LAW AND ANALYSIS
A. INTERPRETATION OF THE EMPLOYMENT AGREEMENT: DID MR. MARAIST TIMELY EXERCISE HIS STOCK OPTIONS?
As set forth above, article 10.7 provides three different periods of time in which Mr. Maraist could exercise his stock options. Whether Mr. Maraist timely exercised his options depends on which of article 10.7's three periods applies to him. Resolution of this issue turns on whether, under the terms of the Employment Agreement, Mr. Maraist's employment ended by "termination," "retirement," or neither.
1. Principles of Louisiana Contract Law and Standard of Review
The Employment Agreement states that it is to be governed by Louisiana law. See art. 1.8. The IPG Option Plan states that it "shall be interpreted in accordance with the laws of the Province of Quebec." See ¶ 15. Because the Agreement incorporates and modifies the Option Plan as to Mr. Maraist, and because the parties have briefed only Louisiana law, the Court shall apply Louisiana law.
Under Louisiana law, the interpretation of an unambiguous contract is an issue of law for the court. See Amoco Prod. Co. v. Texas Meridian Resources Exploration Inc., 180 F.3d 664, 668 (5th Cir. 1999) (citingTexas Eastern Transmission Corp. v. Amerada Hess Corp., 145 F.3d 737, 741 (5th Cir. 1998)).
Even more fundamentally, whether a contract is ambiguous is a question of law. See Hampton v. Hampton. Inc., 713 So.2d 1185, 1189 (La.App. 1st Cir. 1998). "A contract provision is not ambiguous where only one of two competing interpretations is reasonable or merely because one party can create a dispute in hindsight." Amoco Prod., 180 F.3d at 668-69 (quotingTexas Eastern, 145 F.3d at 741). "On the other hand, a contract is ambiguous, under Louisiana law, "when it is uncertain as to the parties' intentions and susceptible to more than one reasonable meaning under the circumstances and after applying established rules of construction.'"Texas Eastern, 145 F.3d at 741 (quoting Lloyds of London v. Transcontinental Gas Pipe Line Corp., 101 F.3d 425, 429 (5th Cir. 1996)).
Under these rules of construction, "[e]ach provision of a contract must be interpreted in light of the other provisions so that each is given the meaning suggested by the contract as a whole." La.Civ. Code Ann. art. 2050 (West 1987). Contract provisions susceptible to different meanings should be interpreted "to avoid neutralizing or ignoring any of them or treating them as surplusage," Lambert v. Maryland Cas. Co., 418 So.2d 553, 559-60 (La. 1982), and "to preserve validity [of the contract]," Gibbs Constr. Co. v. Thomas, 500 So.2d 764, 769 (La. 1987). Louisiana courts will not interpret a contract in a way that leads to unreasonable consequences or inequitable or absurd results even when the words used in the contract are fairly explicit. See Makofsky v. Cunningham, 576 F.2d 1223, 1229 (5th Cir. 1978). "A doubtful provision must be interpreted in light of the nature of the contract, equity, usages, the conduct of the parties before and after the formation of the contract, and of other contracts of a like nature between the same parties." La.Civ. Code Ann. art. 2053 (West 1987).Texas Eastern, 145 F.3d at 742. However, "[w]hen the words of the contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent." La. Civ. Code art. 2046.
Under the Federal Rules of Civil Procedure, summary judgment is proper only where, viewing the evidence in the light most favorable to the nonmoving party, the court determines that there is no genuine issue of material fact and judgment is proper as a matter of law. See In re Intelogic Trace, Inc., 200 F.3d 382 (5th Cir. 2000); FED. R. Civ. P. 56. In the context of contract interpretation, only when there is a choice of reasonable interpretations of the contract is there a material fact issue concerning the parties' intent that would preclude summary judgment. See Amoco Prod., 180 F.3d at 669.
2. Interpretation of the Employment Agreement
For purposes of this motion, there is no question that Mr. Maraist's employment with Polymer ended on December 31, 1997, when the Term of the Agreement expired. The question lies in the proper terminology used to describe this event.
a. Polymer's ArEument: Mr. Maraist was "Terminated"
Polymer argues that Mr. Maraist was "terminated" on December 31, 1997. This argument is based on the language of article 2.4, which states that "[t]his Agreement. . . shall terminate automatically" at the end of the Term. Polymer contends that, because Mr. Maraist was "terminated," article 10.7(b), which applies to "terminations," governs the exercise of his stock options, and Mr. Maraist's attempt to exercise his options outside the three month window provided by that section was untimely.
b. Mr. Maraist's Argument: He Either "Retired" or the Expiration of the Agreement Tringered an Alternative Option Period
In contrast, Mr. Maraist argues that he "retired" at the expiration of the Agreement. In Mr. Maraist's view, the Agreement provides for five "exclusive methods to end employment," each of which "triggers" a corresponding "option period" under article 10.7(a) or (b). Four of these "methods" correspond verbatim with a "trigger": the "death or incapacity" method of article 11.1(d) corresponds with the "death" trigger of article 10.7(a); the "resignation" method of article 11.1(b) corresponds with the "resignation" trigger of article 10.7(b); the "termination for cause" method of article 11.1(a) corresponds with the "termination with cause" trigger of article 10.7(b); and the "termination without cause" method of article 11.1(c) corresponds with the "termination without cause" trigger of article 10.7(b). This leaves one unmatched method — the "expiration of contract" method of article 2.4 — and one unmatched trigger — the "retirement" trigger of article 10.7(a). In Mr. Maraist's view, "[r]etirement clearly is inconsistent with death, termination for cause, and termination without cause," and "cannot be the same as `resignation' given that article 10.7 uses the terms separately and provides different exercise periods for each." Plaintiff's Opposition Memorandum p. 7. On the other hand, Mr. Maraist argues, "retirement is perfectly consistent with the end of employment by expiration of the contract" because "[b]oth terms suggest a natural end of employment brought about by the passage of time, as opposed to a premature end by resignation, death, termination for cause, or termination without cause." Id.
Mr. Maraist argues that his interpretation of the Agreement is more loyal to Louisiana canons of contract interpretation than is Polymer's. In his opinion, equating "retirement" with "expiration of the contract" gives all portions of the contract meaning, since "retirement" is otherwise not given a meaning. Additionally, he argues that including expiration of the contract within the phrase "termination ( with or without Cause)" renders the parenthetical meaningless.
In the alternative, Mr. Maraist argues that, even if the end of Mr. Maraist's employment is not considered a "retirement," article 10.7(c) should govern. Mr. Maraist argues that article 10.7(c) governs where his employment does not end by retirement, death, resignation, or termination with or without cause.
c. The Court's Interpretation: Mr. Maraist was "Terminated" and Article 10.7(a) Governs the Exercise of His Stock Options
The Court finds that the Employment Agreement is unambiguous. Although the Agreement, like most writings, could have been more artfully drafted, the Court finds that it can discern the meaning of its terms from the four corners of the Agreement by applying Louisiana rules of construction. Accordingly, the Court has not considered any extrinsic evidence regarding the parties' intent.
The Court finds that the expiration of the Agreement is not synonymous with "retirement." First, under its generally prevailing meaning, retirement does not mean the expiration of a contract. For example, Blacks' Law Dictionary defines retirement as "[v]oluntary termination of one's own employment or career, esp. upon reaching a certain age." BLACK'S LAW DICTIONARY 1317 (7th ed. 1999). Similarly, Webster's defines retirement as "withdrawal from office, active service, or business." WEBSTER THIRD NEW INTERNATIONAL DICTIONARY 1939 (1993). Without any evidence within the Agreement that this was to be Mr. Maraist's last job, calling the expiration of the Agreement a "retirement" would be a clear stretch. Moreover, the above definitions indicate that "retirement" is not a passive decision, but rather a conscious choice to end one's employment. Second, if the parties did intend to provide the specialized meaning of "retirement" advanced by Mr. Maraist, it would be logical and internally consistent to include this meaning within the Agreement's definition section or within article 2.4, which provides for expiration of the Agreement. Neither section, however, contains such a reference. Third, contrary to Mr. Maraist's assertions, the "ends of employment" and the "triggers" for the "option periods" do not match up exactly. For example, although the Agreement provides that employment can end by "death or incapacity," there is no "incapacity" trigger. Mr. Maraist's matching-game argument appears to collapse "incapacity" into "death," even though the Agreement expressly defines "incapacity" in a manner clearly distinguishable from "death." Thus, Mr. Maraist's argument, though clever, is unpersuasive. Fourth, the purpose of the stock option plan belies Mr. Maraist's position. Paragraph 1 of the option plan states that the purpose of the plan is "to promote a proprietary interest in the Company and its subsidiaries among its executives;. . . to encourage the executives to further the development of the Company and its subsidiaries; and. . . to attract and retain the key employees necessary for the Company's and its subsidiaries' long-term success." In light of these purposes, it seems clear that a company would treat a retiree differently than it would treat someone who simply stopped working for the company. For all of these reasons, the Court concludes that Mr. Maraist did not "retire" and that article 10.7(a) does not apply. The question then becomes whether the expiration of the Agreement triggers article 10.7(b) or article 10.7(c).
Louisiana Civil Code article 2047 requires a court to give the words of a contract "their generally prevailing meaning."
Mr. Maraist suggests that retirement and the expiration of a contract, but not death, constitute a "natural" end to employment. Although many of us are hesitant to admit it, death is certainly a more "natural" end than either retirement or the expiration of a contract.
For example, the words "cause" and "incapacity" may be interpreted in light of their generally prevailing meaning. The Agreement, however, provides specialized definitions for both terms. See art. 1.1(f) and (n).
Reading the Agreement as a whole, the Court finds that expiration of the Agreement falls within the scope of the "termination" language of article 10.7(b). First, the Court finds that expiration of the Agreement is consistent with the concepts of termination with or without cause. In one sense, the expiration of the Agreement provides a legally-sufficient cause for termination. In another sense, because Polymer need offer no reason for choosing not to renew the Agreement, expiration of the Agreement is even more consistent with the concept of termination without cause. In both cases, the Agreement itself provides notice of termination, and, hence, the fact that no additional notice of termination was sent does not remove expiration of the Agreement from the scope of termination with or without cause. Second, the Court finds that article 10.7(c) neither overrides the provisions of articles 10.7(a) and (b)nor provides a "catch-all" provision for ends of employment not otherwise addressed in articles 10.7(a) and (b). Articles (a) and (b) clearly provide for exercise of the stock options after the end of employment. To read article (c) as providing an overriding or alternative option period following the end of employment would render articles (a) and (b) moot in most — and perhaps all — cases. In contrast, article (c) can be read to create a time limit for exercise of stock options where employment continues. Given the purposes of the plan and an even more general business value in certainty, it is understandable that Polymer would not want to wait four additional years for Mr. Maraist to exercise his options. Moreover, it would be anomalous to provide a longer period of time for someone whose employment has not been renewed to exercise his options than for someone who has retired from the company; certainly, this result would not further the goals of the ESOP.
Article 2.5 gives Polymer "absolute discretion" to decide whether to renew the Employment Agreement.
For example, if the Agreement had been renewed, Mr. Maraist would have been employed by Polymer until December 31, 2001, four years after the date of the vesting of the last twenty-five percent tranche of his stock options. Article 10.7(c) would require Mr. Maraist to exercise those options by December 31, 1999.
For these reasons, the Court finds that Mr. Maraist was "terminated" on December 31, 1997, and that, pursuant to article 10.7(b) of the Employment Agreement, he had three months within which to exercise his stock options. His June 1998 attempt to exercise his options was therefore untimely.
B. WAS THE BOARD'S DECISION THAT MR. MARAIST HAD FAILED TO TIMELY EXERCISE HIS OPTIONS BINDING?
Paragraph 2 of the Executive Stock Option Plan states that the Plan
shall be administered by the Board of Directors of the Company (the "Board"), The Board shall have full and complete authority to interpret the Plan and to prescribe such rules and regulations and make such other determinations as it deems necessary or desirable for the administration of the Plan. All decisions and determinations of the Board respecting the Plan shall be binding upon the Optionees. . . and conclusive.
As noted above, the Board determined that Mr. Maraist failed to exercise his options in a timely manner. In light of paragraph 2 of the ESOP, Polymer argues that this determination is binding. Mr. Maraist advances several arguments in opposition. However, this issue seems to touch upon issues of Louisiana public policy that would require more in-depth explication than was provided in either parties' memoranda. Moreover, because the Court has decided that the Board correctly interpreted the Agreement, the Court need not and does not reach this issue.
III. CONCLUSION
The Court finds that the Employment Agreement between Mr. Maraist and Polymer is unambiguous. Considering the Agreement as a whole and applying Louisiana rules of construction, the Court finds that, for purposes of determining how long he had to exercise his stock options following the end of his employment, Mr. Maraist was "terminated" within the meaning of article 10.7(b) when his Employment Agreement expired on December 31, 1997. Mr. Maraist therefore had three months to exercise his options and failed to do so in a timely manner. Accordingly,
IT IS ORDERED that Polymer International Corp.'s Motion for Partial Summary Judgment is GRANTED.