Kinsey v. Cendant Corp.

• Decision Date: 09 September 2008
• Docket Number: No. 04 Civ. 582.,04 Civ. 582.
• Citation: 576 F.Supp.2d 553
• Parties: Douglas KINSEY, Plaintiff, v. CENDANT CORPORATION, Fairfield Resorts Inc., and FFD Development Company, L.L.C., Defendants.
• Court: U.S. District Court — Southern District of New York

576 F.Supp.2d 553

Douglas KINSEY, Plaintiff, v. CENDANT CORPORATION, Fairfield Resorts Inc., and FFD Development Company, L.L.C., Defendants.

No. 04 Civ. 582.

United States District Court, S.D. New York.

September 9, 2008.

King Pagano Harrison, by: Ira M. Saxe, New York, NY, for Plaintiff.

Skadden, Arps, Slate, Meagher & Flom LLP, by: Samuel Kadet, Esq., New York, NY, for Defendants.

OPINION

SWEET, District Judge.

Defendants Cendant Corporation ("Cendant"), Fairfield Resorts, Inc. ("Fairfield") and FFD Development Company, LLC ("FFD") (collectively, the "Defendants") have moved under Rule 56, Fed.R.Civ.P. for summary judgment to dismiss the claims of plaintiff Douglas Kinsey ("Kinsey" or the "Plaintiff") alleging negligent misrepresentation and negligence. On the findings and conclusions set forth below, the motion is granted as to Cendant and Fairfield and denied as to FFD.

The controversy over the expiration date of stock options between Kinsey, a former employee of Fairfield and FFD, and the Defendants has been hard fought. The difficulties of the relationship result from changes in corporate form and Kinsey's employment first at Fairfield, then FFD, then Fairfield again and finally with a competitor of the Defendants, Because no duty of care has been established with respect to Fairfield and Cendant in connection with the claimed negligent misrepresentation and negligence, dismissal of the claims against them is appropriate. Because there are factual issues as to the claims against FFD, summary judgment is not appropriate.

I. PRIOR PROCEEDINGS

The Defendants have previously made successful motions to dismiss and for summary judgment on all counts in the Amended Complaint with the exception of Counts 6 (Negligence) and 7 (Negligent Misrepresentation). See Kinsey v. Cendant Corp., No. 04 Civ. 0582, 2004 WL 2591946, 2004 WL 2591946 (S.D.N.Y. Nov. 16, 2004); Kinsey v. Cendant Corp., 521 F.Supp.2d 292 (S.D.N.Y.2007). Since the Court's November 6, 2007 Opinion, the parties have engaged in an unsuccessful mediation of the remaining claims.

The instant motion was heard and marked fully submitted on March 26, 2008.¹

II. THE FACTS

The facts are set forth in Defendants' Local Rule 56.1 Statement and Plaintiffs Response and Statement of Additional Material Facts and attached affidavits, and are not in dispute except as noted below,

Kinsey is a former at-will employee of defendants Fairfield and FFD. He holds a bachelor's degree in finance granted by Western Carolina University in 1983.

Fairfied issued Kinsey stock options under its 1997 Stock Option Plan ("Option Plan") pursuant to the terms of an Option Agreement between Kinsey and Fairfield, effective May 22, 1997 ("Option Agreement"). The stock options issued to Kinsey were exercisable within ten years of issuance, i.e. by May 21, 2007. However, if Kinsey ceased to be an employee of Fairfield or its subsidiary for any reason other than death or discharge for cause (or resignation in anticipation of discharge for cause), he could exercise any vested options only during the ninety calendar days following the termination of his employment.

In April, 2001, Cendant acquired Fairfield pursuant to a merger and assumed outstanding and unexercised options issued pursuant to the Plan. In conjunction with the Merger, options issued pursuant to the Plan, including Kinsey's, automatically became fully vested and were converted to options to purchase shares of Cendant common stock. Upon Cendant's acquisition of Fairfield, Kinsey's Fairfield stock options were therefore converted into options to purchase 33,918 shares of Cendant common stock at a "strike" price of $8.85 per share. The Cendant Statement of Stock Option Award issued to Kinsey lists as the options' expiration date May 21, 2007.

FFD was formed in connection with the transaction between Fairfield and Cendant, and Kinsey became employed by FFD on or about April 2, 2001. According to Kinsey, the employment by FFD was a transfer, not a termination of employment at Fairfield. However, this issue was resolved by the Court's November 6, 2007 Opinion, which held that "[t]he contention by Kinsey that he was `transferred,' not `terminated,' is rejected as semantic and insufficient to create a genuine issue of material fact." 521 F.Supp.2d at 306.

On March 21, 2001, the Fairfield Board of Directors passed a resolution that stated, with regard to options granted under the Fairfield 1997 Stock Plan:

if the Optionee's employment with the Company or Cendant or any of their respective Subsidiaries is terminated in connection with the Optionee becoming employed by FFD Development Company, LLC or its Subsidiaries, the period during which the Optionee may exercise the Option after the Optionee's employment with the Company or Cendant or any of their respective Subsidiaries has been terminated will be the longer of the period set forth in the related option agreement or the date that is one year after the date during which the Effective Time occurred; provided, however, if the Optionee's employment with FFD Development Company, LLC or its Subsidiaries is terminated voluntarily by the Optionee, the period during which the Option will be exercisable will be the period stated in the related option agreement commencing from the date the Optionee's employment with FFD Development Company, LLC or its Subsidiaries was terminated.

Cendant sent a notice to Kinsey informing him that his stock options would expire ninety days after the acquisition. On July 3, 2001, Defendants informed Kinsey that the notice that his stock options would expire ninety days after the acquisition was sent to Kinsey in error. Gregory Bendlin, Vice President, General Counsel and Secretary of FFD ("Bendlin"), later confirmed in an email that the stock options of former Fairfield employees who became FFD employees, including Kinsey, had not expired. Bendlin stated that as part of the merger, Fairfield's Board of Directors and Compensation Committee amended the 1997 Stock Option Plan "to provide that continued employment at FFD would count as continued employment under the option plan and the 90 day exercise period would not apply once the optionees were no longer Fairfield employees." Bendlin made no mention of any one-year period.

On or about August 13, 2001, Bendlin once again advised Kinsey, by email, that the options of Kinsey and another similarly situated employee, Brian Keller, had "not expired because of the special provisions made for the Fairfield employees (Brain and Doug) who transferred to FFD," and in so doing re-transmitted his July 3, 2001 email advising Kinsey that "continued employment at FFD would count as continued employment under the" Plan.

On August 14, 2001, Geri Fitterman, the stock option manager at Cendant sent an email regarding certain of Kinsey's stock options ("Awarded Options") to Bendlin. Attached to the August 14 email was a Grant Detail Report, which showed the expiration date of the Awarded Options to be April 1, 2002. The August 14 email stated that Kinsey could "access information about [his] options by contacting Merrill Lynch at 1-800-677-9405."

Bendlin responded to Fitterman the same day, stating that although the Grant Detail Report indicated an expiration date of April 1, 2002, for the Awarded Options, he believed that the expiration date might actually be the "longer of one year from 4/2/01 or the term set forth in the relevant option agreement." Bendlin asked Fitterman in the same email: "After your office has had a chance to look into this, would you mind letting me know whether 4/1/02 is the correct expiration date."

Kinsey was aware of the representation made in the August 13 emails concerning the expiration date of the options. Kinsey has maintained that he received oral representations from Bendlin that the 10-year term applied.

Bendlin acknowledged, in an August 14, 2001 email to Fitterman that Kinsey and Keller were similarly situated in relation to the period in which they were to exercise their converted stock options, which he referred to as "Fairfield Options." Bendlin's email requested: "After your office has had a chance to look into this, would you mind letting me know whether 4/1/02 is the correct expiration date. Then, I can inform Brian and Doug so the matter can be put to rest." Kinsey received and reviewed a copy of the August 14 email.

Kinsey became employed by Fairfield again on or about October 8, 2001.

On October 29, 2001, five months before the April 1, 2002 expiration date, Bendlin sent Kinsey another email, which stated: "My understanding is that you are now a Fairfield employee again. You should probably confirm with Fairfield HR that your converted Fairfield options are still in effect with their original expiration date." The same email chain shows that Kinsey contacted Matt Durfee, Senior Vice President of Human Resources at Fairfield and asked whether he needed "to do anything to preserve [his] existing options." Durfee forwarded Kinsey's request to Roe Sie, Director of Compensation and Benefits who responded directly to Kinsey, informing him that "Geri Fitterman is the only person who can confirm that your original options are still in place, so I'll leave that up to Greg."

According to the Defendants, Kinsey did not contact Fitterman after receiving the October 29 email. According to Kinsey, he had two or three inconclusive verbal communications with Fitterman.

In connection with Cendant's acquisition of Fairfield, Kinsey received an Owners Manual containing information on "keeping track of your stock options," including contact details for Merrill Lynch, the brokerage firm retained by Cendant to provide information and administrative services to employees regarding their Cendant options, and a wallet-sized card reflecting such contact information. Kinsey was aware that Merrill Lynch had been retained to provide information and administrative services regarding...