Massot v. Commissioner, Docket No. 10086-98.
| Decision Date | 19 January 2000 |
| Docket Number | Docket No. 10086-98. |
| Citation | 79 T.C.M. 1399 |
| Parties | Alain and Monique Massot v. Commissioner. |
| Court | U.S. Tax Court |
Cynthia C. Smith and George A. Berman (specially recognized), for the petitioners. Christine Colley and Maureen T. O'Brien, for the respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
Respondent determined a $191,580 deficiency in petitioners' 1992 Federal income tax. The sole issue for decision is whether the $600,000 Alain Massot (petitioner) received in 1992 as a result of the termination of his employment is excludable from petitioners' gross income pursuant to section 104(a)(2).
Unless otherwise indicated, all section references are to the Internal Revenue Code as in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Some of the facts have been stipulated and are so found. The stipulations of facts and attached exhibits are incorporated herein by this reference.
Petitioners resided in Arlington, Massachusetts, at the time they filed their petition. They timely filed a joint 1992 income tax return.
Petitioner was born and raised in Brittany, France. He studied at the Institute of Chemistry of Paris, Sorbonne University, receiving a degree in chemical engineering in 1970.
Millipore, S.A. and Millipore Corp.
As of September 22, 1992, petitioner was the corporate vice president for marketing of Millipore Corp. (Millipore), a Fortune 500 company, and a member of its 12-person executive committee.
Millipore's business originally was based on the manufacturing and sale of precise membrane filters capable of removing bacteria and other harmful particles so as to purify water, air, gas, and other fluids in the pharmaceutical, microelectronic, food and beverage, and aircraft industries. Later, Millipore diversified into the manufacturing and sale of precision instrumentation, chromatography, and the synthesis of DNA and peptides.
Petitioner began working for Millipore, S.A., a French subsidiary of Millipore, in 1971 as a technical sales representative in third-world countries. He was promoted numerous times — first as area manager for the USSR, the Middle East, and Africa, then to sales manager, and in 1979, to general manager and vice president of Millipore, S.A., where he was responsible for the company's European membrane division.
Millipore, S.A. contributed to a retirement account for petitioner in France.
On May 7, 1986, petitioner was promoted to senior vice president of worldwide sales for Millipore (for the membrane division). Petitioner's promotion was announced in a general distribution memorandum.1 Petitioner's promotion required his and his family's relocation from Paris to Massachusetts. Petitioner ceased actively working for and receiving a salary from Millipore, S.A.; he did, however, continue to receive a French pension. (On February 2, 1996, petitioner became a U.S. citizen.) In his new position, petitioner managed the sales operations of Millipore's subsidiaries. Approximately 2 years later, petitioner was promoted to president of Millipore's analytical group.
On December 22, 1989, petitioner was promoted to president of MilliGen/Biosearch, a startup division of Millipore (with $16 million in sales and $20 million in losses). This promotion was announced in a general distribution memorandum, which stated in relevant part:
This election is evidence of the critical role Alain plays in the leadership of the corporation, and of the diverse management responsibilities he has successfully undertaken in his many years of service with Millipore. He has been an important leader directing the evolution of our European business. He has also been instrumental in the success of the Analytical Group, where he strengthened the management team and helped groom his own successor as president. And now, as president of MilliGen/Biosearch, he has assumed one of our most difficult managerial assignments in a business that is vital to our future.
On August 23, 1991, petitioner was promoted to Millipore's corporate vice president of marketing. Petitioner was responsible for marketing, promotion, public relations, merger and acquisitions, new business development, and long-range planning for the entire company. (Petitioner held this position at the time he was terminated, see infra.) This promotion was announced in a general distribution memorandum.
During petitioner's tenure at Millipore, the company grew from approximately $24 million in annual sales (in 1971) to $766 million (by 1992). Petitioner played a significant role in building the company.
As of early 1992, petitioner viewed Millipore and its 5,000 worldwide employees like family. Likewise, he was highly regarded in the company. Petitioner anticipated that eventually he would become president of Millipore.
During an early morning meeting on September 22, 1992, John Gilmartin, chief executive officer and chairman of the board of Millipore, informed petitioner that his employment with Millipore was being terminated effective immediately; Mr. Gilmartin did not provide petitioner with any reason for this decision.2 Petitioner was shocked; he became pale and began trembling. Mr. Gilmartin handed petitioner a letter containing Millipore's proposed termination offer. Under the provisions of that letter, petitioner would continue to receive his salary, benefits, and exercise certain stock options for a period of 18 months after his departure on the condition he did not accept a position with a competitor during that period. The letter further stated that should petitioner accept employment with a competitor, Millipore reserves the right to terminate petitioner's monthly salary payments as well as his right to exercise his stock options.
Shortly after the meeting with Mr. Gilmartin, Millipore's vice president of human resources instructed petitioner to turn in his company badge and keys. After doing so, petitioner met with an out-placement representative and then was asked to leave the building. Petitioner took a few personal items from his desk, placed them in a box, and walked out of the building. Petitioner was very distressed and considered suicide.
At midday, Millipore employees from around the world telephoned petitioner, inquiring about a general distribution memorandum (issued that day) that announced his departure from the company. The memorandum read:
The history of Millipore is full of individuals who have shaped the success of our company. Alain Massot most certainly has been among the most significant of these people. In recent months, however, it has become increasingly apparent to Alain that his interests were not being fully satisfied within our organization.
I am sorry to report that Alain will be leaving Millipore this month. I have every confidence that he will be greatly successful in whatever endeavors he chooses.
Alain departs Millipore with my sincere thanks and with the best wishes of all of us.
After receiving a copy of the memorandum from a colleague, petitioner became even more distraught because it falsely implied that he (1) had voluntarily resigned, and (2) was dissatisfied with Millipore.
On September 25, 1992, petitioner sent Mr. Gilmartin a letter in which he (1) objected to the circulation of the September 22 memorandum, and (2) explained that he was still considering the company's termination offer.
Petitioner's physical and emotional state deteriorated as a consequence of his termination. He gained approximately 20 pounds, his cholesterol level increased, he was diagnosed as having diabetes, and he lost interest in his marital relations. He became obsessed with his employment termination; he avoided leaving his home and was unable to sleep.
Before his termination, petitioner negotiated deals for Millipore all over the world. Following the termination, he lacked the confidence required for a successful job interview. He felt he had been defamed and humiliated before his colleagues and the entire industry in which he had worked. Petitioner was never offered an executive position with a company comparable to Millipore. Ultimately, in January 1999, he was offered, and accepted, a position as vice president for sales and marketing at a relatively small company.
Petitioner engaged counsel both in the United States and France for advice as to his legal rights as a consequence of his employment termination. His French attorney advised him that under French law, in order to obtain recovery against Millipore, he would have to institute a suit in France against Millipore, S.A. Petitioner's French counsel informed petitioner that he had a bona fide claim under French law.
Additionally, petitioner was informed that potentially he had legal rights under a French collective bargaining agreement governing Millipore, S.A.'s managers and engineers ("convention collective Ingenieurs et Cadres de la Metallurgie"), which applied to Millipore employees in France as well as those transferred to the United States.
Petitioner's U.S. counsel informed petitioner that he had several possible causes of action under Massachusetts law, including invasion of privacy, defamation, negligent and intentional infliction of emotional distress, and negligent firing.
On October 2, 1992, petitioner's U.S. counsel wrote Mr. Gilmartin formally rejecting Millipore's termination offer, as set forth in Mr. Gilmartin's September 22, 1992, letter. In the October 2, 1992 letter, petitioner's counsel referred to petitioner's rights under the Millipore S.A. collective bargaining...
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