Weaver v. American Power Conversion Corp.

• Decision Date: 15 December 2004
• Docket Number: No. 2004-44-Appeal.,2004-44-Appeal.
• Citation: 863 A.2d 193
• Parties: Scott WEAVER v. AMERICAN POWER CONVERSION CORPORATION.
• Court: Rhode Island Supreme Court

863 A.2d 193

Scott WEAVER v. AMERICAN POWER CONVERSION CORPORATION.

No. 2004-44-Appeal.

Supreme Court of Rhode Island.

December 15, 2004.

Brooks A. Magratten, Providence, for Plaintiff.

Stephen A. Rodio, Providence, for Defendant.

Present: WILLIAMS, C.J., GOLDBERG, FLAHERTY, SUTTELL, and ROBINSON, JJ.

OPINION

PER CURIAM.

This matter came before this Court for oral argument on October 27, 2004, pursuant to an order directing the parties to appear and show cause why the issues raised by this appeal should not summarily be decided. After hearing the arguments of counsel and examining the memoranda filed by the parties, we are of the opinion that cause has not been shown and that the case should be decided at this time.

Facts and Procedural History

The plaintiff, Scott Weaver, appeals from a Superior Court entry of summary judgment in favor of defendant, American Power Conversion Corporation (APC or defendant). The plaintiff contends that summary judgment was improper because a genuine issue of material fact existed as to whether plaintiff, a former employee of defendant corporation, accepted a stock option offering from defendant to satisfy a preexisting obligation owed him by the corporation. The plaintiff also asserts that the motion justice misconstrued the doctrines of accord and satisfaction and novation in the summary disposition of his claim. For the reasons set forth herein, we deny plaintiff's appeal and affirm the judgment of the Superior Court.

In June 1991, APC offered plaintiff a position as a "sales application engineer" at its Rhode Island headquarters. Because plaintiff was residing in Colorado at the time of the offer, APC sales manager Asa Davis (Davis) telephoned plaintiff and informed him of the compensation and benefits for the position, which included an option to purchase 2,000 shares of APC stock if he left his current employment to accept the position at APC. Davis confirmed that offer in a letter sent to the plaintiff on June 19, 1991. In that letter, Davis wrote, in pertinent part:

"[t]his position involves an annual salary of $43,000. Salary reviews will occur at your first six-month anniversary of employment, with annual reviews thereafter. You will also be nominated [sic] to the Board of Directors to receive options to purchase 2,000 shares of APC stock under our Incentive Stock Option Program. This program gives you the option to purchase APC stock over a 4-year period at a price which is fixed at the closing price on the day you begin work at APC. Actual inclusion in the program is determined by a vote of the Board of Directors."¹

The plaintiff accepted the offer and began work at APC on or about July 1, 1991. Later that fall, Davis informed plaintiff that he could expect paperwork for the option within the upcoming months. By December 1991, however, not having received any confirmation to that effect, plaintiff confronted Davis and asked about the status of his stock option. Davis informed him that his option was pending before the board and was probably "tied up in the lawyer's[,]" but assured plaintiff that it was forthcoming. In May 1992, still not having received any notification, plaintiff asked APC Chief Executive Officer Roger Dowdell about the status of his options. According to plaintiff, Dowdell "acted like he had no idea what I was talking about." Troubled with Dowdell's reaction, Weaver again contacted Davis, who promised him that he would look into the situation.

In June 1992, Davis informed Weaver that the APC board would be unable to grant the stock option as set forth in the June 19, 1991 letter because Weaver's name had not been included on the nominee list previously submitted to the board. To compensate plaintiff for that mistake, however, Davis ensured Weaver that he would be nominated at the next board meeting to receive an option to purchase 6,000 shares of APC stock. Davis testified that the offer for 6,000 shares was intended to "help [plaintiff] feel better" for not receiving the options earlier, considering that the stock had split two for one in December 1991.

The plaintiff was unhappy with Davis's offer and believed that it was not commensurate with the original proposal outlined in the June 19, 1991 letter confirming his employment. After preparing a spreadsheet detailing the fluctuating values of the stock, Weaver concluded that 12,000 options were necessary to equal the original offer and he informed Davis that he would "be willing to settle for" 12,000 shares if the new option grant was intended to be replacement for the original offer. On July 13, 1992, however, Davis e-mailed the following response: "Scott, I wish I had a better answer, but the best I can do is what I've outlined already. I think that, given time, the higher number of shares [6,000] will mean a much better result, especially over the long run."

In May 1992, APC tendered an Incentive Stock Option Agreement granting Weaver the option to purchase up to 6,000 shares of APC stock at $27.75 per share. Although plaintiff did not sign the stock option agreement, APC credited him for 6,000 shares in his employee account. Weaver thereafter began exercising his options, and he sold a vast majority of the stocks that he bought pursuant to the agreement, turning a profit of $394,958.96 in the process. Weaver terminated his employment with APC in September 1997 and commenced this action in June 2001.

The plaintiff's five-count amended complaint alleged breach of contract, unjust enrichment, estoppel, misrepresentation, and negligence, all stemming from defendant's failure to honor the promise made in the July 15, 1991 letter. In response, APC moved for summary judgment on two specific grounds. First, defendant maintained that the "second" offer of the option to purchase 6,000 shares was intended by APC to be a replacement for its original 2,000- share commitment, and plaintiff's exercise and acceptance of the 6,000-share option thus created an accord and satisfaction or a novation of the original contract between the parties. Secondly, defendant asserted that even if there was no accord and satisfaction or novation, the offer confirmation letter was insufficient to create a binding legal obligation on APC to grant plaintiff stock options for 2,000 shares. On that point, defendant argued that the letter fixed no date upon which plaintiff would be nominated to the board and specifically conditioned any stock option award on the vote of the board of directors. According to defendant, the letter merely guaranteed that plaintiff would be nominated to receive stock options. The motion justice granted defendant's motion on the first ground, finding that the series of negotiations between the parties indicated that APC's 6,000-share offer was "in lieu of," "instead of," and "in place of" the original 2,000-share agreement, and that plaintiff's exercise of the options constituted a valid accord and satisfaction or novation of the previous agreement. The plaintiff filed a timely appeal to this Court.

Standard of Review

"This Court reviews a grant of summary judgment on a de novo basis." Johnson v. Newport County Chapter for Retarded Citizens, Inc., 799 A.2d 289, 291 (R.I.2002) (citing Marr Scaffolding Co. v. Fairground Forms, Inc., 682 A.2d 455, 457 (R.I.1996)). "Accordingly, if our review of the admissible evidence viewed in the light most favorable to the nonmoving party reveals no genuine issues of material fact, and if we conclude that the moving party was entitled to judgment as a matter of law, we shall sustain the trial justice's granting of summary judgment." Id. (quoting Accent Store Design, Inc. v. Marathon House, Inc., 674 A.2d 1223, 1225 (R.I.1996)). "[A] party who opposes a motion for summary judgment carries the burden of proving by competent evidence the existence of a disputed material issue of fact and cannot rest on allegations or denials in the pleadings or on conclusions or legal opinions." Accent Store Design, Inc., 674 A.2d at 1225. "The purpose of the summary-judgment procedure is to identify disputed issues of fact necessitating trial, not to resolve such issues." Rotelli v. Catanzaro, 686 A.2d 91, 93 (R.I.1996).

Analysis and Discussion

The critical question in this case is whether plaintiff presented evidence sufficient to create a genuine issue of material fact as to whether the 6,000- share stock option agreement was intended by the parties to act as anything other than an accord and satisfaction or a novation of APC's original promise to nominate plaintiff to receive options to purchase 2,000 shares of APC stock. Because plaintiff has failed to present any such evidence, we are of the opinion that APC was entitled to summary judgment.

Black's Law Dictionary defines an "accord and satisfaction" as "[a]n agreement to substitute for an existing debt some alternative form of discharging that debt, coupled with the actual discharge of the debt by the substituted performance." Black's Law Dictionary 17 (7th ed. 1999). This Court has recognized that the "doctrine of accord and satisfaction provides that when two parties agree to give and accept something in satisfaction of a right of action which one has against the other, and that agreement is performed, the right of action is subsequently extinguished." ADP Marshall, Inc. v. Brown University, 784 A.2d 309, 313 (R.I.2001). A novation, on the other hand, is generally defined as "[t]he act of substituting for an old obligation a new one that either replaces an existing obligation with a new obligation or replaces an original party with a new party." Black's Law Dictionary 1091 (7th ed. 1999). A novation is therefore a "species" of accord and satisfaction. Long v. Weiler, 395 S.W.2d 234, 237 (Mo.Ct.App.1965). See also 66 C.J.S. Novation §§ 1-32 (1998). This Court has also characterized a novation as a "substituted contract." Salo Landscape & Construction Co. v. Liberty Electric Co., 119 R.I. 269, 274 & n. 2,...