Vespremi v. Tesla Motors, Inc.
| Decision Date | 30 October 2017 |
| Docket Number | A143550,A142391 |
| Court | California Court of Appeals Court of Appeals |
| Parties | DAVID VESPREMI, Plaintiff and Respondent, v. TESLA MOTORS, INC., Defendant and Appellant. DAVID VESPREMI, Plaintiff and Appellant, v. TESLA MOTORS, INC., Defendant and Respondent. |
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(San Mateo County Super. Ct. No. CIV-474656)
Defendant Tesla Motors, Inc. (Tesla) appeals from a judgment entered against it after a bench trial on a single breach of contract claim by its former employee, David Vespremi. Vespremi contended Tesla breached a provision of the offer letter that became the parties' employment contract by requiring him, when Tesla terminated his employment, to surrender shares of Tesla stock he had purchased some months earlier through the exercise of his stock options. Vespremi did not claim his termination was pretextual, to prevent him from keeping his Tesla stock; he and 25 other Tesla employees lost their jobs in a layoff driven by financial difficulty, two-and-a-half years before Tesla's eventual public offering. The central dispute below was whether Vespremi's right to own the stock had vested by the time he was terminated, which was less than a year into his new job. After a four-day trial, the trial court resolved that issue in Vespremi's favor and entered the judgment from which Tesla has appealed. Vespremi separately appeals from the trial court's denial of his request for an award of prevailing party attorney fees under Labor Code section 218.5.
This is the third time this case has come before us. Of relevance here, we previously reversed a judgment dismissing Vespremi's breach of contract cause of action after the trial court sustained Tesla's demurrer to it without leave to amend, and remanded the case for further proceedings concerning that claim. (Vespremi v. Tesla Motors, Inc. (May 5, 2011, A127008) [nonpub. opn.].) We affirmed the trial court's dismissal of Vespremi's defamation claims in the prior appeal, but we reinstated Vespremi's claim for breach of contract because we held the employment contract was ambiguous as to when Vespremi's right to purchase and hold Tesla stock would vest. (Ibid.)1
We now reverse the judgment entered against Tesla after the bench trial on Vespremi's breach of contract claim. We conclude the stock option provision of the offer letter that the trial court concluded Tesla had breached, which we previously held is ambiguous, was superseded by later agreements; thus, it was inoperative and could not support a claim against Tesla for breach of contract. We also affirm the order denying Vespremi's request for attorney fees since he is no longer the prevailing party.
Tesla is a San Mateo County-based automobile manufacturer, founded in 2003. On February 1, 2007, Tesla and Vespremi executed a 3-page letter agreement in which Tesla extended, and Vespremi accepted, an offer of employment as Tesla's Director of Public Relations, terminable at will by either party. The trial court referred to this agreement as the "[o]ffer letter," and we will do the same. The letter specified that the effective date of Vespremi's employment would be February 19, 2007, which is approximately when he began working there.
At the time Tesla and Vespremi executed the offer letter, Tesla had in place a stock incentive program, which its board of directors had approved in 2003 shortly after the company was incorporated, that was set forth in an 18-page document entitled, "Tesla Motors, Inc. 2003 Equity Incentive Plan" ("Plan"). The Plan's purpose was to enable Tesla to secure and retain the services of employees, directors and consultants, and to incentivize them to exert maximum efforts toward the company's success, by providing a means for them to benefit from increases in the company's stock value. The Plan set forth the terms and conditions upon which Tesla's board of directors could grant various types of stock awards, including incentive stock options and nonstatutory stock options.2 We refrain from summarizing its provisions because they are not at issue; the trial court determined that Vespremi's position as to when his stock would vest "is not inconsistentwith the terms of the Plan," Tesla does not contend otherwise, and neither party's position relies on the vesting parameters prescribed by the Plan.3 (Italics omitted.)
Pursuant to Tesla's stock option program, Vespremi's offer letter contained a stock option provision. It stated: (Italics added.) The vesting language we have italicized lies at the heart of the parties' dispute.
Referencing yet a second agreement, another provision of the offer letter stated, "You further represent and warrant that you have read, understand, and accept the terms of your Stock Option Agreement, in particular the vesting schedule of the shares of Tesla's Common Stock thereof."
The offer letter also contained an integration clause. It states:
Vespremi is a graduate of Hastings Law School. His wife, who would later assist him during severance negotiations by reviewing and revising another proposed agreement with Tesla, is a lawyer too. Vespremi signed the offer letter without actually having received either of the two documents referenced in the letter, the Equity Incentive Plan orthe Stock Option Agreement, the terms of which he represented and warranted he was "accept[ing]."
Earlier during his interviews with Tesla, Vespremi had been asked if he would be willing to accept a lower salary than his current one but receive stock options, but there had been no discussion about any vesting terms, a grant notice, or a stock option agreement.
Vespremi began working for Tesla on February 19 or 20, 2007. The following month, on March 20, 2007, Tesla's board of directors authorized and approved a grant to Vespremi of 40,000 stock options at $.30 per share. Cross-referencing the same two agreements as Vespremi's earlier offer letter, the board's resolution authorized and approved "the grant of incentive stock options or nonstatutory stock options to purchase Common Stock pursuant to and under the terms set forth in the Company's 2003 Equity Incentive Plan (the 'Plan')" for Vespremi and 22 other employees, and stated that "the terms of the above grants shall be in accordance with the terms of the Company's standard Stock Option Agreement, vesting over four (4) years, with 25% of the shares subject to the option vesting one (1) year from the vesting commencement date, and thereafter, 1/48th of the shares subject to the option vesting monthly for the next three (3) years . . . ." (Italics added.) The resolution also states that the "vesting start" date for Vespremi was "2/20/2007."
About two months later, on or about May 8, 2007, Vespremi executed three more documents pertaining to his stock options (which we will collectively refer to hereafter as "the later agreements"). The trial court found he did this at a mass meeting with Tesla's Human Resources personnel where documents were presented to employees en masse for signing, without negotiation or explanation.4
The Option Grant Notice. The first of the three documents he executed was an "Option Grant Notice" ("Grant Notice"), also signed by Tesla's CEO, Martin Eberhard, which granted Vespremi an option to purchase 40,000 of Tesla's shares at $0.30 per share (for a total exercise price of $12,000), and characterized the option as an incentive stock option. (See footnote 2, ante.) The notice specified March 20, 2007, as the date of the incentive option grant, and the option expired on March 19, 2014. The Grant Notice described the "Vesting Schedule" as follows: "1/4th of the shares vest one year after the Vesting Commencement Date," which the Grant Notice defined as February 20, 2007, and "1/48th of the shares vest monthly thereafter over the next three years." (Italics added.) And it stated that the option's "Exercise Schedule" was, (Italics added.)
The final paragraph of the notice, entitled "Additional Terms/Acknowledgements," provided as follows: ...
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