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MacDonald v. Jenzabar, Inc.

Appeals Court of Massachusetts, Suffolk

January 11, 2018

ALAN MACDONALD
v.
JENZABAR, INC., & others. [1]

          Heard: October 10, 2017.

         Civil action commenced in the Superior Court Department on August 17, 2012.

         The case was tried before Janet L. Sanders, J., and entry of judgment was ordered by her.

          Colin R. Hagan for the plaintiff..

          Michael D. Blanchard for the defendants.

          Present: Vuono, Meade, & Kinder, JJ.

          MEADE, J.

         Alan MacDonald initiated this action in the Superior Court against his former employer, Jenzabar, Inc. (Jenzabar), and four of its directors (directors) after a dispute arose over his rights to certain Jenzabar preferred shares and stock options granted during the course of his employment. Central to that dispute is the interpretation of a severance agreement MacDonald executed as he departed from Jenzabar (severance agreement). According to Jenzabar and the directors, all of MacDonald's claims should be dismissed because the severance agreement, which contains a general release, is unambiguous and extinguished his rights to the preferred shares and stock options. MacDonald, in turn, maintains that the severance agreement is ambiguous and that extrinsic evidence, which Jenzabar chose not to dispute, establishes that the parties did not intend to so terminate his rights. After four years of litigation, both sides prevailed in part.

         Most of MacDonald's claims, including all of those against the directors, were dismissed at various stages of the litigation for reasons unrelated to the interpretation of the severance agreement.[2] As to that central issue, a judge concluded, in rulings issued both prior to and after trial, that the severance agreement is unambiguous insofar as it extinguished MacDonald's rights to the preferred shares, but is ambiguous regarding the stock options.[3] After Jenzabar preserved its appeal with respect to the interpretation of the contract and waived the right to argue that any ambiguities should be resolved in its favor, the same judge presided over a jury trial on the limited issue of liability for the stock options. At the conclusion of that trial, the jury returned a verdict finding Jenzabar liable for refusing to honor MacDonald's initial exercise of 1, 000 stock options, but not liable for failing to honor his second exercise of the remaining 1, 515, 000 options.[4]Following trial, therefore, the judge, at MacDonald's request, issued an order of specific performance as to the 1, 000 stock options. The verdict and various dispositive rulings were summarized in an "Order and Judgment" entered on August 11, 2016 (judgment). The present cross appeals followed, with the parties alleging error with respect to a number of the rulings issued throughout the litigation.

         We need reach only one of those issues. Upon de novo review, we conclude, as a matter of law, that the severance agreement is unambiguous insofar as it extinguished MacDonald's rights to both the preferred shares and stock options. We therefore affirm in part and reverse in part.

         1. Background.

         The following facts are undisputed. On June 30, 2004, several years into the first of his two terms of employment with Jenzabar, MacDonald, who was then the chief financial officer, executed a written employment agreement (employment agreement). The employment agreement provided, among other things, for the Jenzabar's issuance of shares of preferred stock (preferred shares) and options to acquire common stock (stock options) to MacDonald. As to the latter, MacDonald and Jenzabar entered into two additional written agreements, also dated June 30, 2004, wherein Jenzabar issued him options to purchase a total of 1, 516, 000 shares of its common stock (option agreements). The stock options vested in equal allotments over a three-year period and, to the extent not exercised, expired in ten years. Subsequently, in 2007, MacDonald left Jenzabar to pursue other interests. As of that time, he had neither received the preferred shares nor exercised any of the stock options.

         In the latter part of 2008, MacDonald returned to Jenzabar and took a position as mergers and acquisitions researcher. Six months later, however, he again left Jenzabar. At that time, he was offered a package, documented in the severance agreement, whereby Jenzabar agreed, in return for certain consideration, to continue to pay his salary, as well as a portion of his health insurance costs, for six months. MacDonald accepted and executed the severance agreement on May 26, 2009. As of that time, he had still not received the preferred shares or exercised any of his stock options.

         Three provisions in the severance agreement are of particular significance in this action. The first is the general release ...


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