637 F.3d 1 (1st Cir. 2011), 10-1798, Artuso v. Vertex Pharmaceuticals, Inc.

Docket Nº:10-1798.
Citation:637 F.3d 1
Opinion Judge:SELYA, Circuit Judge.
Party Name:Anthony ARTUSO, Plaintiff, Appellant, v. VERTEX PHARMACEUTICALS, INC., Defendant, Appellee.
Attorney:David W. Krumsiek, with whom Perry, Krumsiek & Jack, LLP was on brief, for appellant. Alan D. Rose, with whom Amy R. Silverman and Rose, Chinitz & Rose were on brief, for appellee.
Judge Panel:Before BOUDIN, Circuit Judge, SOUTER,[*] Associate Justice, and SELYA, Circuit Judge.
Case Date:February 18, 2011
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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637 F.3d 1 (1st Cir. 2011)

Anthony ARTUSO, Plaintiff, Appellant,



No. 10-1798.

United States Court of Appeals, First Circuit.

February 18, 2011

Heard Jan. 5, 2011.

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[Copyrighted Material Omitted]

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David W. Krumsiek, with whom Perry, Krumsiek & Jack, LLP was on brief, for appellant.

Alan D. Rose, with whom Amy R. Silverman and Rose, Chinitz & Rose were on brief, for appellee.

Before BOUDIN, Circuit Judge, SOUTER,[*] Associate Justice, and SELYA, Circuit Judge.

SELYA, Circuit Judge.

This case involves a dispute about what emoluments are due to an ousted executive under an employment agreement (the Agreement). The district court dismissed the complaint for failure to state a claim upon which relief could be granted. See Fed.R.Civ.P. 12(b)(6). The plaintiff now appeals the dismissal of his claims for breach of contract and breach of an implied covenant of good faith and fair dealing. Discerning no error, we affirm.


Because this appeal follows a dismissal for failure to state a claim, we draw the facts from the complaint and those documents fairly incorporated into it. See SEC v. Tambone, 597 F.3d 436, 438 (1st Cir.2010) (en banc); Nisselson v. Lernout, 469 F.3d 143, 150 (1st Cir.2006).

The defendant, Vertex Pharmaceuticals, Inc., is based in Cambridge, Massachusetts. In the spring of 2008, an executive search firm acting on its behalf contacted plaintiff-appellant Anthony Artuso to gauge his interest in changing jobs. The plaintiff, then a highly paid executive at a rival pharmaceutical company, turned a deaf ear to these initial overtures. But the defendant persisted, and negotiations soon began.

The defendant stressed the availability of challenging work: it envisioned that the plaintiff would assume major responsibility in the marketing of a promising new drug. It also painted a glowing picture of the prospects for lucrative financial rewards; in that regard, it proposed that the plaintiff would receive equity— stock and stock options— as part of a generous compensation package.

The plaintiff ultimately succumbed to these blandishments and, on June 26, 2008, the parties signed the Agreement. Its terms are of paramount importance here.

The Agreement specified that the plaintiff would serve as an at-will employee of the defendant with the title of vice-president for strategic planning. It displaced the earlier negotiations through an integration clause, which stated that the Agreement would " constitute the complete agreement between [the plaintiff] and [the defendant] regarding employment matters and will supersede all prior written or oral agreements or understandings on these matters."

As to compensation, the Agreement provided for a hiring bonus, an annual base salary, and " start-up equity." This start-up equity included the following:

Restricted Shares— 3,000

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You will receive a restricted stock grant pursuant to Vertex's 2006 Stock and Option Plan. One quarter of the restricted shares will vest on each anniversary of your employment start date for as long as you remain employed by Vertex. Any shares that have not vested at the end of your employment will be forfeited.

Stock Options— 25,000

In addition to your restricted stock grant, you will be granted a non-qualified stock option pursuant to Vertex's 2006 Stock and Option Plan.... The common stock subject to your stock option will vest in 16 quarterly installments over four years.

The specific terms and conditions of the equity grants will be set forth in grant agreements, which, among other things, will incorporate the terms and conditions of ... Vertex's 2006 Stock and Option Plan.

The Stock and Option Plan incorporated by reference into this portion of the Agreement provided in pertinent part:

Except as otherwise provided in the applicable Stock Agreement ..., if a Participant ceases to be an Employee ... with the Company ... before the Participant has exercised all Stock Rights, the Participant may exercise any Stock Right granted to him or her to the extent that the Stock Right is exercisable on the date of such Termination of Service. Any such Stock Right must be exercised within three months after the date of the Participant's Termination of Service....

In addition, the Agreement stipulated that the plaintiff would be allowed to participate in the defendant's performance bonus program. The Agreement cited that participants in this program were eligible to receive cash bonuses at the end of each calendar year. Awards were pegged to 30% of an employee's base salary, modified by a factor in the range of 0-150%. The factor depended on the performance of both the employee and the company. In the end, however, bonus awards were " at the discretion" of the company's board of directors. The Agreement did not circumscribe this discretion in any way.

The plaintiff worked under the Agreement for some sixteen months, beginning on July 14, 2008. During this interval, he received glittering performance reviews and the defendant experienced exceptional growth (some of which was tied to the marketing of the new drug).

Despite this auspicious beginning, the relationship did not last. On December 1, 2009, the plaintiff was told that, as part of a reorganization, his position would be eliminated and his employment terminated. The defendant assured the plaintiff that this decision was unrelated to any shortfall in his job performance. The denouement came swiftly; the plaintiff's last day of work was December 4, 2009.

At the time of the plaintiff's departure, some of his stock options had vested. The defendant afforded him the opportunity to exercise those options. Asserting that he was entitled to more, the plaintiff sought to receive his unvested stock options. He also asked for a prorated bonus for calendar year 2009. The defendant rejected both of these requests.

Invoking diversity jurisdiction, see 28 U.S.C. § 1332(a), the plaintiff brought suit in the United States District Court for the District of Massachusetts. He sought through the suit to obtain damages to compensate him for the loss of the unvested stock options and the denial of a prorated bonus. His complaint propounded claims for negligent...

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