Nadherny v. Roseland Property Company, Inc.

Decision Date23 November 2004
Docket NumberNo. 04-1516.,No. 04-1563.,04-1516.,04-1563.
Citation390 F.3d 44
PartiesJeffrey NADHERNY, Plaintiff, Appellee/Cross-Appellant, v. ROSELAND PROPERTY COMPANY, INC.; Roseland/Portside at Pier One, LLC; Roseland/Overlook, LLC; Canton Property Holding, LLC; Randolph Property Holding, LLC; and Roseland Hingham, LLC., Defendants, Appellants/Cross-Appellees.
CourtU.S. Court of Appeals — First Circuit

Laura R. Studen, with whom Shepard Davidson and Burns & Levinson LLP were on brief, for plaintiff, appellee/cross-appellant.

Kenneth M. Bello, with whom Josiah M. Black and Bello Black LLP were on brief, for defendants, appellants/cross-appellees.

Before LYNCH, Circuit Judge, CAMPBELL and STAHL, Senior Circuit Judges.

LYNCH, Circuit Judge.

This is a contract dispute between a real estate development company, Roseland Property Company ("Roseland"), and the former head of its Boston Office, Jeffrey Nadherny. The district court, on cross-motions for summary judgment, entered judgment for Nadherny on his claims for declaratory judgment on the meaning of the contract. It also entered summary judgment for Roseland on Nadherny's claim of breach of the implied covenant of good faith and fair dealing. Finally, it found Nadherny's suit for damages under the contract to be premature and dismissed that claim. Both sides appeal.

While the district court's construction of the contract may or may not in the end be correct, the rules of summary judgment preclude resolution of the issue now. We reverse entry of summary judgment for Nadherny on his declaratory judgment claims, affirm entry of summary judgment for Roseland on Nadherny's implied covenant claims, and vacate the dismissal of the contract damages claim.


Roseland, a New Jersey based real estate development firm, opened a Boston office in 1999 in order to develop real estate projects in the Boston area. In doing so, they hired Nadherny to head the Boston office as their main developer. The employment contract at issue in this case was the result of months of negotiation between Nadherny and Marshall Tycher, one of the principals of Roseland. The relevant portions of Nadherny's employment contract with Roseland are set forth below. Key provisions, inter alia, in dispute are found in the employment and vesting clause at Paragraph Eight and the termination clause at Paragraph Fifteen and are underlined.

1. Your employment will start May 1, 1999 and will continue until terminated by you or Roseland as provided below.


4. Your title will be that of "Partner", although your relationship to Roseland, and your interests in projects, will be established and governed by the provisions of this agreement.


8. You will be entitled to a participation interest in all new projects which originate out of Roseland's Boston office during the period of your employment. Roseland usually participates in projects through an affiliated entity (the "Roseland Entity") established for each project. Your participation interest in each applicable project will be equal to 15% of the cash distributed to the Roseland Entity after the Roseland Entity has received cash distributions equal to the Roseland Entity's capital contributions plus an eight percent (8%) return on such contributions for such project. Your interest in such new projects will vest at the same time that the Roseland Entity's interests vest. Your participation percentage is subject to review each year.


14. Your position will include the development of new business for Roseland. Roseland will have and retain sole ownership and control of all new business developed by you while at Roseland, whether based on your own efforts or on leads supplied by Roseland ("Roseland Business"). You will have no proprietary or other rights in any Roseland Business other than as specifically provided in this agreement, and all Roseland Business will remain with Roseland following termination of our relationship for any reason.



The relationship between you and Roseland is and at all times will be strictly an "at will" relationship, and either you or Roseland may terminate your employment and this relationship at any time with or without cause, for any reason or no reason, and with or without notice.

Roseland terminated Nadherny's employment on February 8, 2002. At that time, both parties agree, there were four projects that began to be developed during the time of Nadherny's employment but that had not "vested" within the meaning of the contract terms, because the closing or construction start dates had not yet passed. Roseland informed Nadherny that he would not be entitled to a 15% participation interest in these projects since none of them had vested prior to his termination. Nadherny disagrees.


Nadherny filed a diversity action on June 28, 2002 in federal court against Roseland and various project-specific entities. He sued for breach of contract and sought both damages and declaratory relief stating that he is entitled to a 15% participation interest in the four projects that began during the term of his employment but had not yet vested prior to the termination of his employment. He also sued Roseland for breach of the implied covenant of good faith and fair dealing, charging it with having terminated his employment solely for the purpose of depriving him of his participation interests in the above deals. Both parties moved for summary judgment on all counts. They did not submit the case as a case stated.

The district court granted Nadherny's motion for summary judgment on his declaratory judgment claim, dismissed his breach of contract claim as unripe, and granted Roseland's motion for summary judgment on Nadherny's breach of the implied covenant of good faith and fair dealing claim. On the declaratory judgment claim, the court held that the evidence supported Nadherny's interpretation of the contract as to when Nadherny's interests in the development projects were required to vest in order for him to be entitled to a participation interest. Nadherny argued that the contract entitled him to a participation interest in all projects originating out of the Boston office while he was employed and that the "vesting" language referred only to the time of payment. The district court recounted Roseland's argument that:

(1) plaintiff admitted in deposition testimony that "vesting" occurs at the moment of "project closing/start": when the financing is secure and construction is about to begin; (2) none of the four projects for which plaintiff seeks declaratory relief was even close to "project closing/start" when he was fired; and (3) the Contract expressly requires that vesting occur during the period of employment because, in addition to plaintiff's employment, it allows the parties to terminate at will "this relationship."

The first two of Roseland's argument points were undisputed, save as to one project.1

The court interpreted the contract by looking at the contract language as well as context and "other factors." As to contract language, the court concluded that the employment clause in Paragraph Eight gave Nadherny a participation interest in the projects, because they "originat[ed] out of Roseland's Boston office during the period of [his] employment," and that language was neither negated nor made ambiguous by the termination clause or any other clause.

The "other factors" utilized by the court included the fact that other reported decisions showed that other contracts denying employees' rights to unvested stocks and other property options had far more explicit language accomplishing those ends. The court held that the lack of such language here suggests "that the vesting of plaintiff's interests is not contingent upon continued employment." The court also considered the circumstances leading up to the execution of the contract, concluding that "it makes perfect sense that plaintiff would forgo his up-front money in exchange for a larger amount down the line." The court finally looked at the nature of the duties and risks each party bore and stated: "If plaintiff's interests had been contingent upon continued employment, Roseland was bearing very little risk at all." In short, the court concluded:

Taken as a whole, the language of the Contract and absence of a termination provision as to plaintiff's unvested real estate interests (construed against Roseland, which drafted the agreement), the circumstances leading up to the Contract, and the case law concerning analogous contracts all demonstrate that there is no genuine issue of material fact as to the interpretation of the Contract.

The court also granted summary judgment for Roseland on Nadherny's claim for breach of the covenant of good faith and fair dealing. The court held that there was no genuine issue of material fact with respect to the bad faith element of the claim, because Roseland had submitted ample evidence of "concern over plaintiff's performance and that the risk they had taken in hiring someone with limited development experience was not working in their favor."

Finally, the court dismissed Nadherny's breach of contract claim as unripe, since none of the projects in question had yet vested, and any attempt to "quantify those interests in present value [was] speculative at best."

Each side has appealed. Nadherny appeals the dismissal of his breach of contract claim, arguing that once Roseland repudiated the contract by stating its refusal to pay him any participation interests, he was entitled to recover damages immediately. Nadherny also appeals the grant of summary judgment to Roseland on his breach of the covenant of good faith and fair dealing claim, arguing that there was ample evidence that he had performed well prior to his hiring which raised a genuine issue of material fact as to Roseland's bad faith in firing him.

Roseland appeals the grant of summary judgment to Nadherny on his...

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