Nevill v. Johnson Controls Int'l PLC, Case No. 18-cv-986-pp

Decision Date23 January 2019
Docket NumberCase No. 18-cv-986-pp
Citation364 F.Supp.3d 932
Parties Trent NEVILL, Plaintiff, v. JOHNSON CONTROLS INTERNATIONAL PLC, Defendant.
CourtU.S. District Court — Eastern District of Wisconsin

Susan G. Schellinger, Ryan M. Wiesner, Davis & Kuelthau SC, Milwaukee, WI, for Plaintiff.

Edward J. Bennett, Sarah Lochner O'Connor, Emily A. Rose, Williams & Connolly LLP, Washington, DC, for Defendant.

ORDER DENYING DEFENDANT'S MOTION TO STAY (DKT. NO. 9) AND GRANTING DEFENDANT'S ALTERNATIVE MOTION TO DISMISS IN FAVOR OF ABITRATION (DKT. NO. 9)

HON. PAMELA PEPPER, United States District Judge

Trent Nevill filed a complaint seeking to recover money and benefits from Johnson Controls International (JCI) under a Change of Control Executive Employment Agreement. That agreement provided for a lump sum payment if the plaintiff resigned for "Good Reason." The plaintiff believed he had "Good Reason" for resigning, because the defendant reduced his responsibilities following the September 2016 merger between Johnson Controls and the Irish company Tyco; the defendant disagreed and has not paid the termination payment. The defendant has moved to stay the case pending arbitration, or in the alternative, to dismiss for improper venue under Federal Rule of Civil Procedure 12(b)(3), arguing that agreements between the plaintiff and the defendant require that the case be resolved through arbitration. The court concludes that the agreements requiring arbitration govern, and it will grant the defendant's motion to dismiss under Rule 12(b)(3).

I. FACTS

The plaintiff worked for the defendant and its affiliated companies for twenty-two years. Dkt. No. 12 at ¶ 2. By 2014, the plaintiff held the title Vice President and General Manager of Systems and Services North America, and was running a $ 4.5 billion segment of the company. Id. at ¶ 3.

A. Contractual Terms of Equity Awards or Grants

As the plaintiff advanced, the defendant increasingly compensated him in the form of equity awards or grants, which it issued subject to broad arbitration provisions. Dkt. No. 10-1 at ¶¶ 4–5, 7, 10. The 2012 Plan governing these "shares and incentives" explains that the programs had several purposes: recruiting and retaining directors and employees, giving them incentive to achieve short and long-term performance goals, providing them opportunities to participate in the defendant's growth and success, and aligning their interests with shareholders. Dkt. No. 10-4 at 2. The defendant's awards and incentives manager stated in her declaration that between November 14, 2000 (when the plaintiff was offered his first grant) and January 14, 2018 (when he accepted the last one), the plaintiff received thirty-three awards and grants. Dkt. No. 10-1 at ¶ 7. She averred that under the defendant's stock price as of August 22, 2018, "the total current value of [the plaintiff's] 33 equity awards and grants (if he had held them until August 22, 2018) would be over $ 6 million." Id. at ¶ 10. The defendant granted seventeen of the awards under its two most recent incentive plans; these seventeen awards either were "outstanding" or "unvested" as of the date the plaintiff resigned. Id. at ¶ 8. The manager attested that the plaintiff's unvested equity as of August 22, 2018 was more than $ 4.5 million. Id. at ¶ 10.

B. Documents Governing Awards or Grants

The defendant's rewards and incentives manager averred that for over ten years, every award or grant of equity has been governed by two "complementary" documents: (a) a plan that applied to all equity awards that the defendant issued during a particular period, and (b) an individual agreement governing the specific grant or award. Id. at ¶ 11. She attested that between January 24, 2007 and September 25, 2012, the master plan was called the 2007 Stock Option Plan ("2007 Plan"). Id. at ¶ 12. From September 25, 2012 through September 2, 2016, the master plan was called the 2012 Omnibus Incentive Plan ("2012 Plan"). Id. at ¶ 13. On September 2, 2016—about the same time that the merger with Tyco was finalized, the defendant adopted, and amended, Tyco's plan ("2016 Plan").Id. at ¶ 14. The defendant attached to the brief in support of its motion to stay or dismiss a compilation of the individual agreements for each of the plaintiff's awards. Dkt. No. 10-5.

The 2012 Plan said it was governed by Wisconsin law. Dkt. No. 10-3 at ¶ 19(h). It included the following clause:

Notwithstanding anything to the contrary herein, if any individual (other than the Company) brings a claim involving the Company or an Affiliate, regardless of the basis of the claim (including but not limited to claims relating to wrongful discharge, Title VII discrimination, the Participant's employment or service with the Company or its Affiliates or the termination thereof, benefits under this Plan or other matters), such claim shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association ("AAA") ....

Id. The 2016 Plan contained an almost identical provision:

[I]f any individual (other than the Company) brings a claim involving the Company or a Subsidiary, regardless of the basis of the claim (including but not limited to claims relating to wrongful discharge, Title VII discrimination, the Participant's employment or service with the Company or its Subsidiaries or the termination thereof, benefits under this Plan or other matters), such claim shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association ("AAA") ....

Dkt. No. 10-4 at ¶ 7.16. The specific agreements for the individual awards or grants also contained arbitration agreements. See, e.g., Dkt. No. 10-5 at p. 5, ¶ 15; p. 9, ¶ 15; p. 16, ¶ 11 ("Arbitration will be conducted per the provisions in the Plan"); p. 22, ¶ 11; p. 26, ¶ 15; p. 32, ¶ 11; p. 37, ¶ 11; p. 45, ¶ 11.

C. The Plaintiff Was Offered, and Accepted, Awards and Grants

The defendant's rewards and incentives manager attested that between October 2009 and March 2015, the defendant used an "online interface" system called Benefit Access, managed by Morgan Stanley, to allow participants to "review, accept, and track" equity awards and grants. Dkt. No. 10-1 at ¶ 16-17. In March 2015, Morgan Stanley switched to a similar system, this one called StockPlan Connect. Id. at ¶ 17.

From October 2009 to March 2015, the defendant required participants to follow a specific, step-by-step process to accept the award using Benefit Access. First, the participant received an email from human resources or the participant's manager, notifying him that he had been offered a grant or award. Id. at ¶ 18. A few days later, the participant would get a second email from the Shareholder Services Department, telling him that he could review the terms and conditions, and accept the award, only by logging into his Benefit Access account. Id. at ¶ 19. This second email provided "Step By Step Grant Acceptance Instructions," including a requirement that the participant review the terms of the grant, "including all documents pertaining to the grant." Id. Once the participant logged in, Benefit Access alerted the participant that there was a grant or an award waiting to be accepted. Id. at ¶¶ 20-21. When a participant clicked on a grant or award that he wanted to accept, the participant was "navigated ... to the next page in the acceptance process." Id. at ¶ 22.

The defendant provided screen shots of the Benefit Access website; the section labeled "B. Read and Acknowledge Grant Documents" displayed hyperlinks to documents and agreements participants had to open before they could accept or reject the award or grant. Id. at ¶ 24. A red-shaded box with an exclamation point in it appeared below the words "Read & Acknowledge Grant Documents;" the text in the box stated, "You must select the checkbox to indicate you have read all associated documents before you can proceed." Id. at ¶ 22. The checkbox referred to in the red-shaded area "was accompanied by the statement ‘I have read all the documents below’ and appeared above the space where plan and award agreements were listed, alongside hyperlinks used to open them." Id. at ¶ 26. The system would not allow a participant to click the checkbox until he actually had opened the hyperlinked documents (such as the applicable plan and related documentation for the individual award or grant). Id. So, for example, in December 2014, the plaintiff accepted award number S108; when he clicked the hyperlinks, they would have opened a complete copy of the 2012 Plan as the "Plan Document" and a complete copy of the grant-specific agreement listed as the "Stock Option /SAR Agreement." Id. at ¶ 25.

After the participant had opened the relevant documents, and clicked the verification that he had read them, the participant had to enter an individual password, which operated as an electronic signature. Id. at ¶¶ 27, 28. Only then could the participant click on either an "accept" or "reject" option; "[i]t was mechanically impossible to accept or reject a grant or award without opening the relevant plan and individual award or grant agreement and attesting to having read them." Id. at ¶ 28.

According to the defendant's awards and incentives manager, the plaintiff used the Benefit Access system to accept one of the seventeen outstanding or unvested awards. Id. at ¶¶ 8, 42.

From March 17, 2015 to December 31, 2017, when the StockPlan Connect Online System was in use, the process was similar. Id. at ¶ 29. The participant received an email notifying him of a pending grant or award, giving him instructions about how to learn more and advising him that another email would be coming with specific instructions on how to accept or reject the grant or award. Id. at ¶ 29. The second email provided the step-by-step instructions. Id. at ¶ 30. The participant then logged in to StockPlan Connect, and saw a pop-up box listing grants or awards that were "pending disposition." Id. at ¶ 32. Once the...

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    ...Accordingly, Wisconsin's prohibition on such arbitration clauses is displaced by federal statute. See Nevill v. Johnson Controls Int'l PLC, 364 F. Supp. 3d 932, 952–53 (E.D. Wis. 2019) (explaining how Wisconsin's state statute is displaced by the FAA). With the State statute preempted, thou......
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    ...with nothing left to do, the suit is dismissed.") aff'd, 556 F. App'x 543 (7th Cir. 2014); see also Nevill v. Johnson Controls Int'l PLC, 364 F. Supp. 3d 932, 953 (E.D. Wis. 2019) (dismissing the case under Fed. R. Civ. P. 12(b)(3) for improper venue where "the issue referable to arbitratio......

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