Snyder v. Time Warner, Inc.

• Citation: 179 F.Supp.2d 1374
• Decision Date: 20 December 2001
• Docket Number: No. CIV.A.1:00-CV-2830-WT.,CIV.A.1:00-CV-2830-WT.
• Parties: RON M. SNYDER, Plaintiff, v. TIME WARNER, INC., Defendant.
• Court: U.S. District Court — Northern District of Georgia

179 F.Supp.2d 1374

RON M. SNYDER, Plaintiff, v. TIME WARNER, INC., Defendant.

No. CIV.A.1:00-CV-2830-WT.

United States District Court, N.D. Georgia, Atlanta Division.

December 20, 2001.

COPYRIGHT MATERIAL OMITTED

Mike Bothwell, Gregory Mark Simpson, Office of Mike Bothwell, Roswell, GA, Timothy Harold Kratz, Richard J. Paris, Jr., McGuireWoods, Atlanta, GA, for Plaintiff.

James Andrew Lamberth, Thomas Edward Reilly, Troutman Sanders, Atlanta, GA, for Defendant.

ORDER

THRASH, District Judge.

This is a diversity action alleging state law claims for breach of contract, fraud, promissory estoppel and negligent misrepresentation. It is before the Court on the Defendant's Motion for Summary Judgment [Doc. 15]. For the reasons set forth below, the Court grants in part and denies in part Defendant's motion.

I. BACKGROUND

Plaintiff is a former executive of Turner Broadcasting Company ("TBS"). On or about March 1, 1997, during his employment with TBS, Plaintiff had a seizure. Soon thereafter, Plaintiff took a temporary leave of absence from TBS and, on July 1 1997, voluntarily terminated his employment with TBS. During his employment with TBS, Plaintiff received options to purchase shares of TBS stock pursuant to written Stock Option Agreements. Plaintiff and TBS executed the four Agreements at issue in this litigation on or about December 23, 1993; May 23, 1994; January 5, 1995; and January 30, 1996. The 1993 and 1994 Agreements were entered into pursuant to the 1988 Stock Option Plan and expressly incorporated the Plan by reference. Similarly, the 1995 and 1996 Agreements were entered into pursuant to the TBS 1993 Stock Option and Equity-Based Award Plan, and also expressly incorporated the Plan by reference. Plaintiff signed each of the Agreements and received a copy of them at or about the time that he signed them. In addition, in each instance, Plaintiff expressly acknowledged receipt of a copy of the applicable Stock Option Plan and agreed to be bound by all of the terms and provisions thereof. Plaintiff admits that he reviewed the Agreements when he received them and recognized that they all had similar provisions.

Paragraph 3(a) of each of the Agreements is substantially identical and sets forth the exercise period for options granted thereunder as follows:

The exercise period for the Option shall expire, and all rights thereunder shall terminate, on the tenth anniversary of the [date hereof], subject to earlier termination as provided in Paragraph 6 [Paragraph 5 in the 1995 and 1996 agreements] hereof and as further specified in Section 10 [Section 11 in the 1995 and 1996 agreements] of the Plan.

(Affidavit of Mark A. Waigner, Exhibits 1-4, ¶ 3(a)). The remainder of Paragraph 3 sets forth the normal vesting schedule for the options and includes provisions regarding early vesting upon the occurrence of certain conditions, including a merger of TBS. Paragraph 6 of the 1993 and 1994 Agreements and Paragraph 5 of the 1995 and 1996 Agreements address the early termination of Plaintiff's stock options upon the termination of his employment with TBS. These paragraphs are identical in each of the Agreements and state that if Plaintiff voluntarily terminates his employment with TBS:

Optionee may exercise the Option, solely to the extent that he was entitled to do so at the date of termination of his employment, at any time or from time to time within ninety (90) days after the date of such termination of employment.

(Affidavit of Mark A. Wainger, Exhibits 1-2, ¶ 6(c), Exhibits 3-4, ¶ 5(c)).

The Stock Option Plans contain this exact provision regarding the early termination of Plaintiff's options upon the termination of his employment. These sections of the Plans also emphasize that "[t]o the extent an Option or any part thereof is not exercised within the limited period provided in ... this Section ..., all rights pursuant to such Option will cease and terminate at the expiration of such period." (Affidavit of Mark A. Waigner, Exhibit 5, § 10(d); Exhibit 6, § 11(e)). Both Plans also provide that "[e]xcept as otherwise provided in Section 10 of this Plan [regarding termination of employment], an Option may not be exercised in whole or in part unless the Optionee is, at the time of such exercise, an employee of the Company or a Subsidiary." (Id. Exhibit 5, § 7(c), Exhibit 6, § 7(c)).

The Stock Option Plans also make it clear that the company has the right to extend or increase the benefits given to an optionee under a Stock Option Agreement. For example, § 11 of the 1998 Stock Option Plan states that:

[T]he Committee in its discretion may modify, extend, or renew outstanding Options granted under the Plan ... Notwithstanding the foregoing however, no modification ... of an Option shall, without the consent of the Optionee, alter or impair any rights or obligations under any Option theretofore granted to such Optionee.

(Affidavit of Mark A. Waigner, Exhibit 5, § 11). Section 10 of the 1988 Plan, entitled "Death, Disability or Other Termination of Employment", also gives the company discretion to modify the terms of an option in ways favorable to the optionee. Subsection (c) sets forth the general rule that an option may be exercised within 90 days of an employee's termination. Subsection (f), however, which was added by amendment, goes on to state that:

Notwithstanding the provisions of paragraphs (a), (b) or (c) of this Section 10, the Committee, in its sole and absolute discretion, may, at the date an Option is granted or thereafter, establish different terms and conditions pertaining to the effect on that Option of the ... termination of employment of the Optionee.

(Affidavit of Mark A. Wainger, Exhibit 5, Amendment No. 2). The 1993 Plan has substantially identical provisions.

In October 1996, TBS merged with Defendant Time Warner. In connection with the merger, Plaintiff's outstanding options to purchase shares of TBS stock were treated as options to purchase shares of Time Warner stock. Pursuant to the terms of the Agreements, Plaintiff's stock options became fully vested at that time, meaning he no longer had to wait to exercise them in accordance with the Agreements' vesting schedules. Defendant contends that under the express provisions of the Stock Option Plans and Agreements, the merger had no effect on the expiration dates of Plaintiff's stock options or their early termination in connection with termination of Plaintiff's employment.

Plaintiff's voluntary termination on July 1, 1997, and the termination of Plaintiff's options on October 1, 1997, were not reflected in the Time Warner stock options computer system until September, 1998. Consequently, status reports generated from the computer system prior to September 1998 did not reflect the termination of Plaintiff's stock options on October 1, 1997. In fact, Plaintiff alleges that on August 14, 1997 — less than 90 days after his termination — Time Warner sent him an official Stock Option Status Report informing him that his options did not expire until specific dates from 2003 through 2006. This report was allegedly faxed to Plaintiff at his home by the director of Time Warner's stock options department in direct response to a request for information, and was received by Plaintiff just like all other reports sent to him by Time Warner.

Also in August 1997, Time Warner sent Plaintiff a memo informing him that it had negotiated a new arrangement with Paine Webber to provide option exercise services for holders of Time Warner stock options. (Deposition of Laura Pugliese, pp. 64-66; Deposition of Ron Snyder, pp. 154-57 and Exhibit 21). This memo "strongly encouraged" Plaintiff to use PaineWebber for option services because of, among other things, "the many advantages it will provide to ... the Company." Id. In an accompanying guide to exercising stock options, Time Warner informed Plaintiff that "[t]he timing of your exercise is an important decision" that is affected by factors such as financial requirements, income tax considerations, and option expiration dates. This same guide informed Plaintiff that "Time Warner Stock Plans Department will send you a report showing the exercise and remaining options outstanding ..." (Deposition of Ron Snyder, Exhibit 22, p. 2). Thus, Plaintiff alleges that in the document that Time Warner provided to explain how to exercise options, Time Warner vouched for the accuracy and reliability of its status reports by encouraging optionees to rely on the reports when deciding whether or not to exercise their options.

In October 1998, Plaintiff contacted PaineWebber to exercise options to purchase 500 shares of Time Warner stock. This transaction was completed despite Time Warner's current position that his stock options had expired a year earlier. In December 1998, Time Warner sent a form memorandum to Plaintiff reflecting the October 1998 transaction. Along with the form memorandum, Time Warner sent Plaintiff a status report generated by the Time Warner stock options computer system to reflect the October 1998 transaction. Defendant contends that because Plaintiff's status report was generated after his termination information had been entered into the stock options computer system, it necessarily would have shown the termination of Plaintiff's options on October 1, 1997 in accordance with the terms of the Agreements. Defendant admits, however, that it has no knowledge of what termination date was reflected in the status report. (Deposition of Maribel Torres, p. 32).

In July 1999, Plaintiff attempted to exercise options to purchase 250 shares of Time Warner stock. Time Warner did not allow Plaintiff to complete this transaction, and informed Plaintiff that all of his stock options had expired on October 1, 1997 pursuant to the terms of the Agreements. Subsequently, Plaintiff filed this lawsuit for breach of contract, fraud, promissory estoppel and negligent misrepresentation.

II. SUMMARY JUDGMENT...