CPR v. Spray

• Decision Date: 01 August 1998
• Docket Number: No. 1472,D,No. 98-7922,1472,98-7922
• Parties: (2nd Cir. 1999) CPR (USA) Inc., Plaintiff, CPR, Plaintiff-Appellant, v. PHILIP R. SPRAY, Defendant-Appellee. ocket
• Court: U.S. Court of Appeals — Second Circuit

Page 245

187 F.3d 245 (2nd Cir. 1999)

CPR (USA) Inc., Plaintiff, CPR, Plaintiff-Appellant, v. PHILIP R. SPRAY, Defendant-Appellee.

No. 1472, Docket No. 98-7922

August Term, 1998

UNITED STATES COURT OF APPEALS

SECOND CIRCUIT

Argued: May 20, 1999

Decided: Aug. 11, 1999

Appeal from the order of the United States District Court for the Southern District of New York denying Plaintiff's and Plaintiff-Appellant's motion to stay arbitration and granting Defendant-Appellee's motion to compel arbitration. Affirmed. [Copyrighted Material Omitted]

[Copyrighted Material Omitted] JAYNE S. ROBINSON, New York, NY (K. Ann McDonald, Robinson Murphy & McDonald, on the brief), for Plaintiff-Appellant.

JACK B. GORDON, Washington, DC (Fried, Frank, Harris, Shriver & Jacobson, on the brief), for Defendant-Appellee.

Before: CARDAMONE and JACOBS, Circuit Judges, and MCMAHON, District Judge.^*.

MCMAHON, District Judge:

Plaintiff-appellant CPR appeals from an order entered in the United States District Court for the Southern District of New York (Patterson, J.) to the extent that the court denied CPR's motion to stay arbitration and granted the cross-motion of defendant-appellee Philip R. Spray ("Spray") to compel arbitration of a dispute concerning a written agreement entered into by CPR and Spray in September 1989 (the "Agreement"). The district court dismissed CPR's claims for declaratory and monetary relief for lack of personal jurisdiction over Spray and held that the parties' dispute over the interpretation of the Agreement was arbitrable. Spray moves to dismiss CPR's appeal for lack of appellate jurisdiction, contending that the district court order is not appealable at this time because it was entered in the course of an "embedded" proceeding. See Filanto, S.P.A. v. Chilewich Int'l Corp., 984 F.2d 58, 60-61 (2d Cir. 1993). We deny Spray's motion and affirm the underlying order compelling arbitration, albeit for a reason different than that relied on by the district court.

I. Background

CPR is a French banking and asset management company which decided in 1989 to enter the United States market in proprietary trading, money management, and other financial services. CPR hired Spray to build and manage a new "enterprise business," CPR (USA) Inc. (referred to occasionally herein as the "Subsidiary"), that was formed for the purpose of carrying out these activities. Spray and CPR entered into the Agreement on or about September 1, 1989. Under the Agreement, CPR promised to provide $10 million of initial capital for the new business, to arrange lines of credit for the Subsidiary, and to cause the hiring of trading and portfolio management professionals and support staff acceptable to Spray.

The focus of the Agreement is the terms and benefits of Spray's initial employment by the Subsidiary. In Article II of the Agreement, CPR agreed to cause the Subsidiary to employ Spray for a "Period of Employment." Article III defines the term "Period of Employment" as a five-year period commencing on September 1, 1989. Articles IV and V set forth Spray's duties and compensation as an "Employee" of the planned Subsidiary. Under Article IV, CPR agreed to employ Spray as chief executive officer of the Subsidiary and Spray agreed to devote his "best efforts" to management of the enterprise business. CPR agreed in Article V to compensate Spray for his efforts by paying him an annual salary of $200,000, as well as a guaranteed bonus of $100,000 at the end of each of the first two years of the Period of Employment.

In Article VI, CPR agreed to establish a "Special Bonus Pool" equal to 25% of the Subsidiary's "Going Concern Value" (subject to certain limits). The Special Bonus Pool was payable to Spray and to the Subsidiary's trading and portfolio management professionals under certain defined circumstances, as set forth in section 6.6. The interpretation of that section forms the crux of the underlying dispute. Unfortunately, as all parties concede, section 6.6 is far from a model of contractual draftsmanship. Therein lies the difficulty.

The section provides that Spray would be entitled to payment from the Special Bonus Pool under three sets of circumstances: First, subsection 6.6(a) reads:

Under the circumstances provided for in Section 8.6 and 8.7 of this Agreement and on the retirement of Employee after reaching 62 years if Employee is then employed by Employer, provided if entitlement under Section 8.7 is predicated on an event described in Section 8.4(d), then Employee may elect to receive his share of the Special Bonus Pool without terminating his employment.¹

Section 8.6, which is referred to in subsection 6.6(a), but which is not pertinent to this case, entitles Spray to a Special Bonus payment in the event the Period of Employment is terminated by CPR because of his disability or death. Section 8.7, the other clause referred to in subsection 6.6(a), may be relevant, since it deals with Spray's rights in the event of termination by him for good reason or termination of him by the Subsidiary without cause. It provides, in pertinent part, as follows:²

Rights of Employee in the Event of Termination by Employee for Good Reason or Termination of Employee by Employer Without Cause. If Employee should terminate the Period of Employment for Good Reason or Employer should terminate Employee without Cause, CPR shall cause Employer to . . .

(c) pay to Employee his share of the Special Bonus Pool calculated through the date of termination, as provided for in ARTICLE VI, and payable within 30 days from the required calculation which shall be made with all commercial promptness . . . .

To summarize, under subsection 6.6(a), Spray was entitled to payment from the Special Bonus Pool prior to the end of the Period of Employment upon early termination by him for "good reason," or upon the Subsidiary's termination of Spray's employment either without cause or following Spray's death or disability. If Spray were to remain employed by CPR's Subsidiary through age 62, subsection 6.6(a) would also entitle him to payment from the Special Bonus Pool upon his subsequent retirement.

Subsection 6.6(b) describes the second situation in which CPR would be required to make a Special Bonus Pool pay-out to Spray:

In the event at the end of the Period of Employment, Employer does not offer Employee continued employment on terms no less favorable than those provided for in this Agreement.

CPR did not offer Spray a contract at the end of the Period of Employment, but he continued to perform the same job for CPR's Subsidiary with the same salary and benefits. The parties disagree over whether the absence of a contract for a fixed term after 1994 meant that Spray was not offered continued employment on terms no less favorable than those provided in the Agreement.

Finally, subsection 6.6(c) sets forth the remaining circumstance in which Spray would be entitled to receive payment from the Special Bonus Pool:

At a time designated by Employee or in the event at the end of the Period of Employment Employee declines Employer's offer of continued employment on terms no less favorable than those provided for in this Agreement, provided that in either such case the Special Bonus shall, if elected by Employer within 20 days of Employee's designation or declination, by notice to Employee, be payable in three yearly installments the first such installment to be an amount equal to 1/3 of the Special Bonus that would be payable to Employee if Employer did not make such election and payable 30 days following Employee's designation or declination, the second 1/3 calculated as if Employee had made his designation or declination under this Section 6.6(c) one year after the date of his original designation or declination and payable 30 days after the first anniversary of such original designation or declination, and the third 1/3 calculated as if Employee had made his designation or declination under this Section 6.6(c) two years after the date of his original designation or declination and payable 30 days from the second anniversary of such original designation or declination, provided that to receive the portion of the Special Bonus Pool receivable after the first 1/3, Employee may be required by Employer to be employed by Employer at the time payment is to be made unless Employer has terminated Employee without Cause or Employees [sic] has terminated his employment for Good Reason, each as defined in ARTICLE VIII. If due to Employer's election, employment shall continue beyond the Period of Employment, it shall be offered to Employee on the terms provided for in this Agreement.

The parties hotly dispute the meaning of subsection 6.6(c), but it clearly gives Spray an additional right to receive a Special Bonus payment under circumstances other than those specified in subsections 6.6(a) and (b), while giving CPR the right to spread payment over two years.

The Agreement contains a broad arbitration clause, found at Article IX, section 9.3. It provides:

Any controversy or claim arising out of or relating to this Agreement, or any difference as to the interpretation or performance of any of the provisions of this Agreement shall be settled by arbitration in the County of New York, State of New York in accordance with the commercial arbitration rules of the American Arbitration Association ("AAA") then in effect . . . .

Section 9.3 also contains a special arbitration provision to take effect if the "dispute concerns a determination with respect to the Special Bonus Pool." In such a case, the Agreement instructs the AAA to appoint as arbitrator "a firm qualified to evaluate Going Concern Value having no relationship with CPR, Employer, Employee or their affiliates to determine such dispute."

As noted above, at the conclusion of the Period of Employment in September 1994, Spray was not offered a contract extension or a new contract. However, he remained principal manager of...