556 F.3d 20 (1st Cir. 2009), 07-2159, Noonan v. Staples, Inc.

Docket Nº:07-2159.
Citation:556 F.3d 20
Party Name:Alan S. NOONAN, Plaintiff, Appellant, v. STAPLES, INC., Defendant, Appellee.
Case Date:February 13, 2009
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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556 F.3d 20 (1st Cir. 2009)

Alan S. NOONAN, Plaintiff, Appellant,


STAPLES, INC., Defendant, Appellee.

No. 07-2159.

United States Court of Appeals, First Circuit.

February 13, 2009

Heard Feb. 7, 2008.

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[Copyrighted Material Omitted]

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Wendy Sibbison, with whom Richard M. Gelb, Stamenia Tzouganatos, Daniel K. Gelb, and Gelb & Gelb LLP, were on brief for appellant.

Ariel D. Cudkowicz, with whom Krista Green Pratt and Seyfarth Shaw LLP, were on brief for appellee.

Before: TORRUELLA, WALLACE,[*] and LIPEZ, Circuit Judges.

TORRUELLA, Circuit Judge.

Alan S. Noonan was fired from his job as a salesman at Staples, Inc. for allegedly padding expense reports. A Staples executive then sent a mass e-mail to about 1,500 employees informing them that Noonan had been fired for violating the company's travel and expense policy. Staples also denied Noonan his severance benefits and refused to allow him to exercise his stock options, claiming that, under the terms of the agreements setting forth the right to these benefits, Noonan was ineligible because he had been fired " for cause." Noonan sued Staples in Massachusetts court for libel and breach of those agreements, and Staples removed to federal court. Both parties moved for summary judgment, the district court granted summary judgment in favor of Staples, and Noonan now appeals.

We initially affirmed the grant of summary judgment. Noonan v. Staples, Inc., 539 F.3d 1, 2008 WL 3866927 (1st Cir.2008). But, on panel rehearing, we withdraw

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our prior opinion and issue this opinion in which we affirm in part, reverse in part, and remand.

I. Background

Because this case comes to us on appeal from summary judgment, we relate the relevant facts in the light that most favors the nonmovant, Noonan. Franceschi v. U.S. Dep't of Veterans Affairs, 514 F.3d 81, 83 (1st Cir.2008). Noonan was a Staples sales director who did much traveling for business and had to compile expense reports to be reimbursed for travel, food, and other business-related expenses. Staples had a travel and expense policy requiring employees to submit receipts for all expenses over $75, and for all meals regardless of price; to use their corporate credit card for business expenses instead of their personal credit card; and to book all work-related travel through Staples's travel department. Noonan claims, with support in the record, that these directives were irregularly enforced and often not followed by many employees.

In November 2005, Staples discovered that an employee named James Dorman had been embezzling money from the company through fraudulent expense claims and fired him. It then undertook an audit of expense reports based on a sample of sixty-five traveling employees in the North American Division, including Noonan. Auditors investigating Noonan discovered a May 2005 expense report in which he had requested $1,622 in excess of what he had actually spent. The team also found that Noonan had used his personal credit card for many of these purchases, had booked the travel through a non-company travel agent, and had failed to submit all the required receipts.

These anomalies led Staples to assemble a special team, composed of certified accountants and a former police investigator, to look further into Noonan's past expense reports. Noonan admitted to the team that he often " pre-populated" his reports before a given trip-that is, he estimated what his expenses would be in advance, and submitted the report with these estimates, but with (Noonan claims) the intention to amend the report later to the extent the actual expenses differed from the estimates. The team found that Noonan had failed to enter such adjustments on a number of expense reports and discovered other anomalies, such as entries where the amount claimed was exactly $100 more than what the item actually cost, and entries where decimal points had been shifted two places to the right (resulting, for example, in an $1,129 meal at an airport McDonald's, instead of $11.29). Noonan also committed errors in Staples's favor. When the team asked him about the large amounts of extra money that had been deposited into his checking account, Noonan responded that he had not noticed.

Based on its findings, the team unanimously concluded that Noonan had deliberately falsified the audited expense reports and, as a result, Staples fired him. It sent him a letter stating that he had been terminated " for cause" for violating the travel and expense policy and the company's Code of Ethics, and that he was consequently ineligible for severance benefits. The following day, Executive Vice-President Jay Baitler sent an e-mail to all the employees in Staples's North American Division, a group whose precise number is unknown and disputed, but that totaled somewhere around 1,500 people. The e-mail stated as follows:

It is with sincere regret that I must inform you of the termination of Alan Noonan's employment with Staples. A thorough investigation determined that Alan was not in compliance with our [travel and expenses] policies. As always,

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our policies are consistently applied to everyone and compliance is mandatory on everyone's part. It is incumbent on all managers to understand Staples['s] policies and to consistently communicate, educate and monitor compliance every single day. Compliance with company policies is not subject to personal discretion and is not optional. In addition to ensuring compliance, the approver's responsibility to monitor and question is a critical factor in effective management of this and all policies.

If you have any questions about Staples['s] policies or Code of Ethics, call the Ethics Hotline ... or ask your human resources manager.

Over the course of Noonan's employment, he and Staples entered into two stock-option agreements, dating respectively from 1992 and 2004 (respectively, the " 1992 Stock-Option Agreement" and the " 2004 Stock-Option Agreement" ). The pertinent language in the 1992 Stock-Option Agreement provided as follows:

[I]f [Noonan's] relationship with Staples is terminated by Staples for " cause" (as defined below) ... the right to exercise this option with respect to any shares not previously exercised shall terminate immediately....

" Cause" shall mean willful misconduct by [Noonan] or willful failure to perform his or her responsibilities in the best interests of Staples (including, without limitation, breach by [Noonan] of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between [Noonan] and Staples), as determined by Staples, which determination shall be conclusive.

(Emphasis added.) The 2004 Stock-Option Agreement contained this language, and added other grounds constituting " cause," including " violation by [Noonan] of the Code of Ethics or an attempt by [Noonan] to secure any improper personal profit in connection with the business of Staples."

Six days before being fired, Noonan sent Staples a $290,714.40 check and notified it that he was exercising his vested right to purchase 23,825 shares of stock-22,700 governed by the 1992 Stock-Option Agreement, and 1,125 governed by the 2004 Stock-Option Agreement. Staples returned the check uncashed, noting that the investigation into Noonan's expense-reporting practices was ongoing, and that if Staples ultimately terminated him for cause, he would not be entitled to gains on the shares. Staples did not ultimately allow Noonan to exercise the stock options.

Noonan also had a severance agreement with Staples which stated that Staples would not be required to pay benefits if Noonan was terminated " for ‘ [c]ause’ " -that is, if Noonan " wilfully fail[ed] to substantially perform [his] duties with Staples," " violate[d] the Code of Ethics or attempt[ed] to secure any improper personal profit," or " engage[d] in misconduct which is demonstrably and materially injurious to Staples...." On these grounds, Staples did not give Noonan severance benefits.

Noonan, a Florida resident, filed suit in Massachusetts state court; Staples, a Massachusetts corporation, removed to the U.S. District Court for the District of Massachusetts. Noonan's complaint alleged (1) libel based on the Baitler e-mail; (2) breach of the two stock-option agreements; and (3) breach of the severance agreement.1 Noonan moved for summary judgment

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on a portion of the libel claim and on the claim alleging breach of the stock-option agreements; Staples filed a cross-motion for summary judgment on all counts in the complaint. The district court granted summary judgment on behalf of Staples. On the libel claim, the district court determined that what was stated in the e-mail was true, and that Noonan had presented no evidence of actual malice on the part of Staples. On the breach-of-contract claims, the court found that Noonan had been fired for cause and that, pursuant to the terms of the agreements, he was therefore ineligible for the stock options and benefits. Noonan now appeals.

II. Discussion

A. Standard of Review

We will affirm a district court's summary judgment where " the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). At summary judgment, the court's task is not " ‘ to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.’ " Asociación de Periodistas de P.R. v. Mueller, 529 F.3d 52, 55 (1st Cir.2008) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). We accord...

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