Pride Intern., Inc. v. Bragg

Decision Date03 April 2008
Docket NumberNo. 01-07-00188-CV.,01-07-00188-CV.
Citation259 S.W.3d 839
PartiesPRIDE INTERNATIONAL, INC., Appellant, v. Paul A. BRAGG, Appellee.
CourtTexas Court of Appeals

Charles Lee Winkelman, Jones Day, Neil G. Martin, Houston, TX, for Appellant.

Caren Schmulen Sweetland, Robin C. Gibbs, Gibbs & Bruns, L.L.P., Houston, TX, for Appellee.

Panel consists of Chief Justice RADACK and Justices JENNINGS and BLAND.

OPINION

JANE BLAND, Justice.

This case arises from a falling out between a corporate CEO and his former employer. After Pride International, Inc. fired Paul Bragg and paid him a severance owed under his employment agreement, Bragg sued Pride for breach of that contract, contending that the Pride owes him three times as much in severance as it had paid him. Pride counter-claimed against Bragg for breach of fiduciary duty, contending that Bragg had misrepresented his opinion of the value of the severance package to Pride and its shareholders, in that he never disclosed that he thought the agreement (and others like it) was worth so much. The trial court granted summary judgment both to Pride and to Bragg, so that both received a take-nothing judgment. Both appeal the trial court's judgment. We conclude that the employment agreement is not ambiguous, and that Bragg failed to raise a fact issue as to breach of the agreement. We further conclude that Pride has raised no issue of fact under Delaware law as to any material breach of fiduciary duty. We therefore affirm.

Background
Bragg's Employment with Pride

Pride hired Bragg as its chief financial officer ("CFO") in July 1993. In 1998, Pride promoted Bragg to President and Chief Operating Officer. In February 1999, the parties executed an employment agreement. The following month, Pride promoted Bragg to Chief Executive Officer ("CEO"), after the current CEO, Ray Tolson, retired.

Bragg served as Pride's CEO from March 1999 until June 2005, when Pride asked for, and received, Bragg's resignation. Pride's board chairman provided Bragg with a "Summary of Separation Benefits" term sheet, which outlined the termination benefits that Bragg would receive pursuant to the February 1999 employment agreement. The following day, Bragg executed a resignation letter agreement. Thirty days following his resignation, Pride paid Bragg $8 million in severance, as contemplated in the letter of resignation.

The Employment Agreement

The provisions in the agreement that govern Bragg's term of employment and termination are sections 3.03 and 3.05. They read:

3.03 TERM OF EMPLOYMENT ("EMPLOYMENT PERIOD"). Executive's regular employment (no Change in Control being presently contemplated) will commence on the Effective Date of this Agreement and will be for a term of two (2) years ending at 12:00 o'clock midnight February 4, 2001; thereafter, the Term of Employment of Executive will be automatically extended for successive terms of one (1) year each commencing February 5, 2001, and on February 5 of each year thereafter, unless Company or Executive gives written notice to the other that employment will not be renewed or continued after the next scheduled expiration date which is not less than one year after the date that the notice of non-renewal was given. All extended employment terms will be considered to be within the Employment Period while Executive is employed with the Company.

3.05 TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the right to terminate Executive at any time during the Employment Period (including extended term). Should the Company choose not to renew or extend the Employment period of this Employment Agreement or choose to terminate the Executive during, or at the end of, the Employment Period, or in the event of death or disability of the Executive, if the termination is not after a Change of Control and is not for cause, the Company shall, within thirty (30) days following such termination, pay and provide to the Executive:

a. An amount equal to two full years of his base salary ...

b. The Company shall provide to Executive for a period of two (2) full years following the Date of Termination, life, health, accident and disability insurance....

c. An amount equal to two (2) times the target award for the Executive under the Company's annual bonus plan for the fiscal year in which the termination occurs....

The section 3.05 severance benefits also include the value of the Executive's retirement plan, stock options, and life, health, hospitalization, medical, and accident benefits to the Executive's spouse and dependents for same term as the Executive's benefits.

Though Bragg acknowledges that he received severance pay pursuant to the agreement's provision dealing with termination, he contends that he is entitled to $17 million in additional compensation. He urges that, under section 3.03 of the agreement, the term of his employment had "renewed" the February before he resigned, and thus, Pride's termination was not effective until the end of the renewal period for the purpose of calculating his severance. Under his reading of section 3.03 of the agreement, Bragg contends that he should have continued to receive the salary and benefits he received as a current employee, listed in section 3.04 of the agreement, through the end of his renewal period, plus the severance. Section 3.04 of the agreement sets forth Bragg's compensation during the Employment Period. It reads:

3.04 COMPENSATION AND BENEFITS. During the Employment Period the Executive shall receive the following compensation and benefits:

a. He shall receive an annual base salary of not less than his [sic] annual base salary which is $334,000, with the opportunity for increases, from time to time thereafter, which are in accordance with the Company's regular executive compensation practices. Executive's salary will be reviewed at least annually by the Compensation Committee of the Board of Directors.

b.... [H]e shall be eligible to participate on a reasonable basis, and to continue his existing participation, in annual bonus, stock option and other incentive compensation plans which provide opportunities to receive compensation in addition to his annual base salary which are the greater of: (i) the opportunities provided by the Company for Executives with comparable duties, or (ii) the opportunities under any such plans in which he was participating immediately prior to the Effective Date of this Agreement.

c.... [H]e shall be entitled to receive and participate in salaried employee benefits including, but not limited to: medical, life, health, accident and disability insurance and disability benefits....

Section 3.04 benefits also include retirement benefits, paid vacations, use of Company car, and participation in incentive stock and benefit plans.

Pride denies that section 3.03 requires it to compensate Bragg beyond the amount set forth in section 3.05. It observes that section 3.05 grants it the "right to terminate [Bragg] at any time (including any extended term)."

The Breach of Fiduciary Duty Claim

During Bragg's tenure, he rejected claims against Pride advanced by two departing officers, under sections 3.03 and 3.05 of the employment agreement, which urged the very interpretation he now makes against Pride. These former officers, John O'Leary, a former president of Pride, and Jonathan Talbot, a former vice-president of marketing, had employment agreements similar to Bragg's agreement. Both O'Leary and Talbot advanced claims for additional compensation under the same interpretation of section 3.03 that Bragg now advances, and Bragg, as CEO, rejected them. In addition, In March 1999, the head of the compensation committee asked Bragg to summarize the severance due to the outgoing CEO, Ray Tolson, if Pride terminated him without cause. Bragg included in Tolson's benefits only the severance outlined in section 3.05.

In response to Pride's contract defenses, Bragg testified that he had always understood his contract to require additional compensation under the section 3.03 renewal provision. Bragg's assertion that he had held this opinion while CEO but did not advise Pride of it or otherwise act to clarify the language prompted Pride to counter-sue him for breach of fiduciary duty, contending that Bragg had failed to disclose material information to Pride— namely, Bragg's understanding of the employment agreement.

The Trial Court's Ruling

In October 2006, the trial court granted summary judgment dismissing with prejudice Bragg's breach of contract claim for additional compensation under section 3.03 of the agreement. In December 2006, the trial court granted summary judgment dismissing with prejudice Pride's counterclaim against Bragg for breach of fiduciary duty. The trial ordered that both parties take nothing by their suits.

Summary Judgment

We review a trial court's summary judgment de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.2005); Provident Life Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex.2003). Under the traditional standard for summary judgment, the movant has the burden to show that no genuine issue of material fact exists and that the trial court should grant a judgment as a matter of law. TEX.R. CIV. P. 166a(c); KPMG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex.1999). In our review, we take as true all evidence favorable to the nonmovant, and indulge every reasonable inference and resolve any doubts in the nonmovant's favor. Dorsett, 164 S.W.3d at 661; Knott, 128 S.W.3d at 215; Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex.1997). Our task is to "consider whether reasonable and fairminded jurors could differ in their conclusions in light of all of the evidence presented." Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755-56 (Tex.2007) (citing Wal-Mart Stores, Inc. v. Spates, 186 S.W.3d 566, 568 (Tex.2006); City of Keller v. Wilson, 168 S.W.3d 802, 822-25 (Tex.2005))....

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