Walden v. Affiliated Computer Services
| Decision Date | 16 January 2003 |
| Docket Number | No. 14-99-00075-CV.,14-99-00075-CV. |
| Parties | Patrick A. WALDEN, Charles Ackerman, John Averett, Sam Baughman, Robert Butler, Ralph Cannady, Mike Clendennen, Milton Cowden, William Delong, Leslie Flynne, Linda Hewlett, James Hurst, Donald Imrie, Geoffrey Johnston, Larry Kershner, Jerry Killingsworth, Myra Mayer, Don Rice, Linnea Rose, James Shield, and Jere Shopf, Appellants and Cross-Appellees, v. AFFILIATED COMPUTER SERVICES, INC. f/k/a Affiliated Computer Systems, Inc., Appellee and Cross-Appellant. |
| Court | Texas Court of Appeals |
John O'Quinn, Kyle Longhofer, Randy J. McClanahan, Helen Cassidy, Houston, for appellants.
David E. Keltner, Fort Worth, Ladawn Horn Conway, W. Alan Wright, Dallas, for appellees.
Panel consists of Justices YATES, EDELMAN, and WITTIG.*
MAJORITY OPINION ON MOTIONS FOR REHEARING
We grant in part appellants/cross-appellees' motion for rehearing and overrule appellee/cross-appellant's motion for rehearing. We withdraw our opinion and judgment of August 29, 2002, and substitute the following in their place.
This case involves a dispute between a data-processing company and twenty-one individuals holding stock options in that company. When the option holders attempted to exercise those options, the company refused to issue the stock. The option holders sued for breach of contract, fraud, and negligent misrepresentation. The trial court entered judgment for the option holders, awarding them an aggregate amount of $14,138,588 plus interest and attorneys' fees. Both parties appealed. We conclude the trial court erred in holding as a matter of law that an amendment to the stock option plan, signed by twenty of the twenty-one option holders, was void for lack of consideration. In addition, one option holder's options expired as a matter of law before they were exercised. We reverse the trial court's judgment in favor of the option holders who signed the amendment and remand for further proceedings consistent with this opinion. As for the remaining option holder, we affirm the court's judgment regarding liability but we reverse and remand for a recalculation of his damages.
Affiliated Computer Services, Inc., formerly known as Affiliated Computer Systems, Inc. ("ACS"), was formed in July 1988 through the efforts of two jointly managed savings-and-loan associations, Gibraltar Savings Association ("Old Gibraltar") and First Texas Savings Association ("First Texas"), together with a group of investors led by Darwin Deason. The savings associations provided data-processing facilities, computer equipment, software, and personnel to ACS, while the Deason group provided cash. In exchange, the savings associations and the Deason group received the bulk of ACS's stock. ACS ultimately entered into a ten-year data-processing agreement with Old Gibraltar and First Texas.
ACS also agreed to grant stock options to senior managers and key employees at Old Gibraltar and First Texas. Accordingly, ACS adopted a Non-Qualified Stock Option Plan (the "Original Plan"), and the ACS board of directors appointed a special committee to prepare a list of Old Gibraltar and First Texas officers and employees to receive stock options. All twenty-one appellants (collectively, the "option holders") were included on this list. In November 1988, ACS delivered to each option holder a Non-Qualified Stock Option Agreement (the "Original Agreement"), along with a copy of the Original Plan. Each option holder executed the Original Agreement and returned it to ACS.
On December 27, 1988, Old Gibraltar and First Texas were declared insolvent and the Federal Savings and Loan Insurance Corporation ("FSLIC") was appointed as receiver. The same day, FSLIC organized a new bank, First Texas Bank, F.S.B., which later became known as First Gibraltar Bank, F.S.B. ("First Gibraltar"). Many of the assets formerly owned by Old Gibraltar and First Texas were transferred to First Gibraltar.
On December 28, 1988, ACS's board of directors amended ACS's stock option plan, retroactive to November 1988. By letters dated January 20, 1989, ACS sent each option holder an amendment to the Original Agreement (the "Amendment"), attaching a copy of the Amended and Restated Non-Qualified Stock Option Plan (the "Amended Plan").1 All the option holders except one, Robert Butler, signed the Amendment.
First Gibraltar later sued ACS, seeking to repudiate the data-processing agreement. FSLIC intervened, and the lawsuit eventually settled. As part of the settlement, on August 30, 1991, the Office of Thrift Supervision ("OTS") issued a Cease and Desist Order relating to the issuance of ACS stock to former employees of Old Gibraltar and First Texas. Among other things, this order provided: "[ACS] shall henceforth not issue any stock or make any payments to ... former employees of [Old] Gibraltar/First Texas who received such options, rights, contracts or interests from or at the direction of [Old] Gibraltar/First Texas and who might seek to exercise any such options, rights, contracts or other interests, unless required to do so by a court order." The Cease and Desist Order remained in effect until it was terminated by an OTS order signed September 26, 1997.
In 1993, Patrick Walden attempted to exercise his ACS options. ACS rejected this attempt. On May 22, 1996, Walden filed suit against ACS in the 127th District Court. Walden alleged breach of his amended agreement with ACS (the "Amended Agreement"), fraud, and negligent misrepresentation. In the alternative, Walden sought a declaration that the Amendment failed for lack of consideration or fraud and alleged breach of the Original Agreement. Both parties moved for summary judgment. On November 15, 1996, the trial court denied both parties' motions, except it granted Walden's motion for summary judgment on ACS's affirmative defense that Walden's claims were barred for alleged failure to exercise his options in accordance with the Amended Agreement.
While Walden's lawsuit was proceeding, a group of twelve other option holders filed suit against ACS in the 113th District Court, alleging fraud, negligent misrepresentation, and breach of the Original Agreements.2 The lawsuits were eventually consolidated, and additional option holders were added as plaintiffs.3 The option holders' lawsuit ultimately consisted of the following claims against ACS:
• fraud;
• negligent misrepresentation;4
• breach of the Original Agreements; and
• breach of the Amended Agreements.5
The option holders (except Robert Butler) also sought a declaratory judgment that the Amendments failed for want of consideration or, in the alternative, did not release the option holders' status as fully vested in their options.
The parties each filed motions for summary judgment. On September 22, 1998, the trial court signed a Partial Summary Judgment Order that had the following effect:
(1) it declared all option holders became 100% vested in their options to purchase ACS stock on December 26, 1988, subject to the affirmative defenses of mutual mistake, frustration of purpose, failure of consideration, and illegality, which remained to be decided;
(2) it set aside and rescinded the Amendments for lack of consideration;
(3) it ordered that the option holders take nothing on their negligent misrepresentation claims; and
(4) it stated the option holders' fraud claims were rendered moot by virtue of the court's ruling that the Amendments were not supported by consideration.
The order further stated all other issues raised in the summary judgment motions had been taken under advisement.
The same day, the trial court conducted voir dire of the jury panel. The court also continued to hear argument and allowed the parties to supplement their summary judgment evidence on other pending issues. On its docket sheet, the court described this proceeding as a "hearing to narrow issues per Rule 166." The next morning, September 23, 1998, the trial court faxed each party a letter announcing its rulings on several issues. The parties then entered into a stipulation regarding the amount of attorneys' fees. Believing no fact issues remained to be decided, the trial court excused the jury panel.
On November 5, 1998, the trial court again met with the attorneys "to conclude all remaining legal issues." The trial court signed two orders reflecting its September 23 rulings. First, the court signed a "Partial Summary Judgment Order Ruling on Defendant's Motion for Summary Judgment," in which the trial court denied ACS's motion for summary judgment on the following grounds: (1) the options were void ab initio; (2) the Original Plan as construed by the trial court was unenforceable as illegal or against public policy; and (3) the options expired or were untimely exercised. Second, the court signed an "Order on Rule 166 and Rule 166a Hearing," in which the court:
(1) granted the option holders' no-evidence motion for summary judgment and held there were no contested material facts supporting ACS's defenses of failure of consideration, frustration of purpose, and waiver;
(2) held there was no defense of mutual mistake as a matter of law;
(3) denied all summary judgment motions not otherwise ruled upon in this or any prior orders;
(4) ruled damages were to be calculated based on the value of ACS stock as of the time of trial; and
(5) held no contested material issues remained for ACS to present evidence in opposition to the option holders' claims for breach of the option agreements and the only issue that remained for a jury to decide was the amount of the option holders' attorneys' fees.6
At the November 5 conference, ACS's counsel indicated ACS believed a jury question remained as to the proper measure...
To continue reading
Request your trial
-
Barrand, Inc. v. Whataburger, Inc.
...(Tex.1986); Rhoads Drilling Co. v. Allred, 123 Tex. 229, 70 S.W.2d 576, 583 (1934); Walden v. Affiliated Computer Servs., 97 S.W.3d 303, 314-15 (Tex.App.-Houston [14th Dist.] 2003, pet. denied). As demonstrated above, BurgerWorks failed to address the element of consideration in its respons......
-
R.R. Comm'n of Tex. v. Gulf Energy Exploration Corp.
...of a benefit that accrues to one party or a detriment incurred by the other party. Walden v. Affiliated Computer Servs., Inc., 97 S.W.3d 303, 315 (Tex.App.-Houston [14th Dist.] 2003, pet. denied) (citing Roark, 813 S.W.2d at 496 ). "The existence of a written contract presumes consideration......
-
Sharifi v. Steen Auto., LLC
...just compensation for any loss or damage actually sustained as a result of the breach. Walden v. Affiliated Computer Servs., Inc., 97 S.W.3d 303, 328 (Tex.App.-Houston [14th Dist.] 2003, pet. denied);Abraxas Petroleum Corp. v. Hornburg, 20 S.W.3d 741, 760 (Tex.App.-El Paso 2000, no pet.). B......
-
Quinlan v. AFI Servs., LLC (In re Afi Servs., LLC)
...when, because of some supervening cause after an agreement is reached, the promised performance fails.” Walden v. Affiliated Computer Servs., Inc., 97 S.W.3d 303, 320 (Tex.Ct.App.2003). Failure of consideration can be either partial or total. River Prod. Co. v. Webb (In re Topco, Inc.), 894......
-
Liquidated Damages - When Is the Claimant Entitled to Prejudgment Interest?
...interest where negligent misrepresentations were made by potential corporate investor); Walden v. Affiliated Computer Services, Inc., 97 S.W.3d 303 (Tex. App. 2003) (involving negligent misrepresentation by corporation to stock option holders). 84 273 Kan. 97, 41 P.3d 814 (2002). 85 Id. at ......