Heard: October 10, 2017.
action commenced in the Superior Court Department on August
case was tried before Janet L. Sanders, J., and entry of
judgment was ordered by her.
R. Hagan for the plaintiff..
Michael D. Blanchard for the defendants.
Present: Vuono, Meade, & Kinder, JJ.
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.
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. 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. 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.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.
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.
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.
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.
provisions in the severance agreement are of particular
significance in this action. The first is the general release