Summary
finding that a contract lacking in terms to determine the valuation of stock options, “including the exercise price, the expiration date, and the vesting date of the options” was too vague to be enforceable
Summary of this case from United States v. WhiteOpinion
No. A04-124.
Filed August 31, 2004.
Appeal from the District Court, Hennepin County, File No. Ct 03-06046.
Robert A. Gust, Hellmuth Johnson, Pllc, (for appellant)
James K. Langdon II, Michelle S. Grant, Dorsey Whitney Llp, (for respondent)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
Appellant challenges the district court's decision granting respondent summary judgment on appellant's breach of contract, promissory estoppel, and unjust enrichment claims. We affirm.
FACTS
Appellant John B. Logan worked as an engineer for Vascular Sciences, Inc. (VSI). In September 1999, appellant learned through a public announcement that a merger agreement was reached between VSI and respondent St. Jude Medical, Inc. Shortly thereafter, in early September 1999, Dan Sullivan, appellant's boss both before and after the merger, met with appellant to convey information regarding the merger and the terms of appellant's employment with respondent. Sullivan gave appellant a document entitled "Summary for John Logan." Sullivan indicated that the terms contained in the summary were the results of his efforts to negotiate the best deal possible for the employees of VSI. The summary stated a salary, title, grade level, bonus percentage, and vacation. The document also represented that appellant would be entitled to 2,500 stock options per year for four years. The document was silent as to when the options would vest or expire, was silent as to the exercise price, did not contain contractual language and was not signed by either party. Moreover, at the time of the meeting, it is undisputed that respondent's board of directors had not yet approved the stock-option grants.
Following the merger, appellant became employed by respondent. And on October 13, 1999, appellant received 2,800 stock options, to vest evenly over a four-year period. Appellant received an additional 4,000 stock options on December 13, 2000, 5,500 stock options on December 10, 2001, and 4,900 stock options on December 9, 2002 (adjusted for a stock split).
Appellant contends the September 1999 summary represented a valid enforceable employment contract that entitled him to 10,000 stock options in 1999, pursuant to the merger between VSI and respondent, and that the options would vest at a rate of 2,500 per year for four years. Appellant asserts that options granted after 1999 do not satisfy the promise in the summary because they were not issued as part of the merger.
Appellant filed a complaint alleging breach of contract and, in the alternative, sought relief under promissory estoppel and/or unjust enrichment. Respondent filed a motion for summary judgment arguing that the summary did not create a binding contract and that appellant's promissory estoppel and unjust enrichment claims fail as a matter of law. The district court granted respondent's motion for summary judgment.
DECISION
"On an appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the lower courts erred in their application of the law." State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). "On appeal, the reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted." Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).
"A motion for summary judgment shall be granted when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that either party is entitled to a judgment as a matter of law." Id. No genuine issue of material fact exists "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party." DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997) (alteration in original) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356 (1986)).
[T]here is no genuine issue of material fact for trial when the nonmoving party presents evidence which merely creates a metaphysical doubt as to a factual issue and which is not sufficiently probative with respect to an essential element of the nonmoving party's case to permit reasonable persons to draw different conclusions.
Id. at 71.
I.
Appellant first argues that the district court erred in granting respondent's motion for summary judgment on his breach of contract claim. Generally, the existence of a contract as well as the terms of that contract are questions of fact to be determined by the fact-finder. Bergstedt, Wahlberg, Berquist Assocs., Inc. v. Rothchild, 225 N.W.2d 261, 263 (Minn. 1975). But where the relevant facts are undisputed, the existence of a contract is a question of law, which this court reviews de novo. Triple B G, Inc. v. City of Fairmont, 494 N.W.2d 49, 53 (Minn.App. 1992).
Minnesota follows the objective theory of contract formation, under which an outward manifestation of assent is determinative, rather than a party's subjective intent. Speckel by Speckel v. Perkins, 364 N.W.2d 890, 893 (Minn.App. 1985). A binding contract can exist despite the parties' failure to agree on a term if the term is not essential or can be supplied. Hill v. Okay Const. Co., Inc., 312 Minn. 324, 332-33, 252 N.W.2d 107, 114 (1977). But a contract does not exist unless the parties have agreed "with reasonable certainty about the same thing and on the same terms." Peters v. Mut. Ben. Life Ins. Co., 420 N.W.2d 908, 914 (Minn.App. 1988). And an alleged contract "which is so vague, indefinite, and uncertain as to place the meaning and intent of the parties in the realm of speculation is void and unenforceable." King v. Dalton Motors, Inc., 260 Minn. 124, 126, 109 N.W.2d 51, 52 (1961). Consequently, when substantial and necessary terms are left open for future negotiation, the purported contract is void. Id.
Here, the district court properly found that the terms contained in the summary are so vague and indefinite that it is unenforceable. Specifically, even when viewed in the light most favorable to appellant, the summary does not contain several substantial and necessary terms including the exercise price, the expiration date, and the vesting date of the options. These are terms that are necessary to determine whether the stock options will ever become valuable; therefore, they are substantial and necessary. Because the agreement left open substantial and necessary terms, we conclude that the district court correctly determined that there is no genuine issue of material fact and that respondent is entitled to judgment as a matter of law on appellant's breach-of-contract claim. SeeRuud v. Great Plains Supply, Inc., 526 N.W.2d 369, 372 (Minn. 1995) (noting that where an alleged promise is vague and indefinite, claims for breach of contract are properly dismissed).
Moreover, we note that the fact that respondent's board of directors had not approved the options at the time the summary was presented renders any agreement void. See Grimes v. Alteon, Inc., 804 A.2d 256 (Del. 2002). Minn. Stat. § 302A.401, subd. 1 (2002), provides that "a corporation may issue securities and rights to purchase securities only when authorized by the board." And Minn. Stat. § 302A.409, subd. 1 (2002), defines "right to purchase" as a right to purchase securities of a corporation by the exercise of options. In Grimes, the court held that Grimes failed to state a claim upon which relief could be granted because the agreement he entered into with Alteon, Inc.'s CEO, which gave him the right to purchase a certain percentage of an additional stock offering, was not approved by respondent's board of directors. 804 A.2d at 259-60. In so holding, the Delaware Supreme Court interpreted a Delaware statute, similar to Minn. Stat. § 302A.401, which grants the board of directors the power to issue rights or options. Id. at 260. While Delaware decisions are not binding on this court, we note that a purported issuance of stock options, such as this, that fails to comply with Minn. Stat. § 302A.401 would be void.
II.
Appellant also argues that the district court erred in granting respondent's summary judgment motion on his promissory estoppel claim. "Promissory estoppel is an equitable doctrine that impl[ies] a contract in law where none exists in fact." Martens v. Minnesota Mining Mfg. Co., 616 N.W.2d 732, 746 (Minn. 2000) (quotation and citations omitted). Application of promissory estoppel requires a showing that (1) there was a clear and definite promise; (2) the promisor intended to induce reliance and such reliance occurred; and (3) the promise must be enforced to prevent injustice. Olson v. Synergistic Techs. Bus. Sys. Inc., 628 N.W.2d 142, 152 (Minn. 2001). Appellant fails to raise a genuine issue of material fact regarding two of the necessary elements.
The first element of promissory estoppel requires a clear and definite promise. Here, the facts in the record indicate that the promise was neither clear nor definite. As discussed above, the written summary given to appellant lacks specificity. And the record also indicates that respondent's agents made no clear and definite oral promise of stock options to appellant. Specifically, deposition testimony indicates that, at the time appellant received the summary, he was informed that he would likely receive stock options, but that "nothing is for sure." Contrary to appellant's argument, this representation falls short of a clear and definite promise of 10,000 stock options. SeeRuud, 526 N.W.2d at 372 (noting that where an alleged promise is vague and indefinite, claims for promissory estoppel are properly dismissed).
The third element of promissory estoppel requires a showing that enforcement is necessary to prevent injustice. Faimon v. Winona State Univ., 540 N.W.2d 879, 883 (Minn.App. 1995), review denied (Minn. Feb. 9, 1996). Here, appellant has failed to show that enforcement is necessary to prevent injustice. Although appellant claims that Sullivan indicated that appellant would get the options stated in the summary and would possibly get more options, this does not amount to a promise of any more than 2,500 stock options per year. And although appellant claims that he is entitled to 2,500 vested stock options per year in addition to any other stock options he would receive in the course of his employment, the summary does not state this.
Moreover, it is undisputed that respondent has granted appellant more than 2,500 stock options each year during the relevant time period. Thus, we cannot say that failure to grant appellant further relief would result in injustice. Reviewing the record in the light most favorable to appellant, we conclude that the district court correctly determined that appellant has failed to raise a genuine issue of material fact regarding two elements necessary to establish promissory estoppel. Thus, the district court properly found that respondent is entitled to judgment as a matter of law on appellant's promissory-estoppel claim.
III.
Appellant also argues that the district court erred in granting respondent's summary-judgment motion on his unjust-enrichment claim. In order to establish a claim of unjust enrichment, the claimant must show that another party knowingly received something of value to which he was not entitled and that the circumstances are such that it would be unjust for that person to retain the benefit. ServiceMaster of St. Cloud v. GAB Bus. Servs., Inc., 544 N.W.2d 302, 306 (Minn. 1996).
Here, viewing the evidence in the light most favorable to appellant, the record indicates that he has failed to show a genuine issue of material fact with respect to his unjust-enrichment claim. A company is not unjustly enriched where it pays for what it receives. See id. at 306-07 (finding no unjust enrichment where a party paid "dollar-for-dollar" for what it received). And, as previously stated, the record indicates that appellant ultimately received more stock options than he alleges were promised to him in addition to an increase in salary for becoming an employee of respondent. Because appellant received everything he was promised in the summary, we conclude that the district court correctly determined that appellant has failed to raise a genuine issue of material fact and that respondent is entitled to judgment as a matter of law on appellant's unjust-enrichment claim.