proceed may please the court i'm jack edwards on behalf of appellants roger canel and richard ashcroft i will be arguing the vest and choice of law issues today and my colleague david segal will be arguing the other issues first the district court the one vested interest can be divided between spouses and creditors and as a practical matter if an unvested property right is large enough its forfeiture will have a chilling effect on employee mobility justice will it at oral dollars in restricted stock awards that's not a severe economic penalty even though the financial disincentive to compete is about one hundred times greater in the latter situation the same is true for the forfeiture of any unvested property right the case is whether the practical and economic reality of such a provision is that it inhibits competition virtually the same as a covenant not to compete it's a practical test it's irrelevant whether the property ri vested if the forfeiture are large enough the practical and economic effect will be to inhibit competition virtually the same as a cover to not to compete so the deferred compensation is this in this case is a property right worthy of protection second the district court erred in forced into north carolina choice of law provision because north carolina law is contrary to fundamental texas policy in applying north carolina law the district court relied exclusively on one case from the texas supreme court the stock and drennen was a loyalty award the executive there earned the stock by remaining loyal to exxon in the future and specifically not engaging in detrimental activity richard joining was not required to meet any performance goals to receive the stock and if you had a bad year he still received a loyalty stock so when he left exxon he did not forfeit anything that he had earned in contrast plaintiffs here earned their deferred compensation based on their past performance in achieving pre established performance goals if they did not achieve those goals they did not earn any deferred compensation but the agreement also said they were paid into a certain number of years had been reached so that's in the frank was case that's the only case that we found under texas law involving a forfeiture of deferred compensation and in that case the insurance agent earned the renewal commissions based on selling the original insurance policy and then he received renewal commissions every year that that client renewed their policy and the agreement in that case even if you're right that under texas law this would fit with and frank what's in the improper how do you get from that to saying it's such a strong texas policy there that you can't apply north carolina law i think when the parties agreed upon i think frankel which supports the proposition that an employee's right to receive compensation for work performed in the past as a fundamental texas policy you look at cases like the doll gender case and drennen where the violate fundamental texas public policy i think that the another point is that in this case the forfeiture clause required the employees to sign an invalid non computer agreement mr drennen didn't have to sign any not any non computer agreement invalid or not and there is a case the poca look ace or a doctor was required to resign from area hospitals and signed an invalid non computer agreement in the appeals court in that case said that that implemented that that was a non computer agreement and if it does not compute agreement then that is santas case applies and that is fundamental texas public policy condition to receive in his stock mr drennen going to go to the beach and so gotten his loyalty stock it still would have vested but our clients if they'd just worked hard and gone to the beach but not signed the invalid non computer agreement they would have forfeited deferred compensation additionally the forfeiture clause and brennan was narrow it was related to detrimental activity so mr durning could go to another energy company and as long as he didn't compete the forfeiture clause wasn't trigger our clients basically had to retire that they couldn't go to any financial services business three years anywhere in the world and not just work there or compete but they couldn't become associated with any financial services business for to go there they do go there but it's going to get the other them which wells fargo has an interest in prohibiting the exxon plan was narrowly tailored to exxon's interest in prohibiting detrimental activity i think it's important to distinguish between two types of awards in this case their performance awards and special awards on page one hundred eleven of the record the plan says performance awards are earned quote based on the participants performance relative to the performance goals and objectives established for him or her in the plan year that part of the definition was left out of the district court's opinion we've also listed the deferred compensation was part of their compensation package and paragraphs eleven on pages two hundred two and two hundred three of the record there was another type of award under this plan a special award and that was defined as  on page one hundred thirteen of the record special award shall quote be earned solely on the basis of his or her continuation in employee status for the designated service period that could be like a loyalty award and drennen but we haven't had discovery so we don't know the terms of any loyalty awards if they included wells fargo stock or just if you stay here for a certain amount of time you get the compensation we don't know we haven't had discovery we know that are two types of awards it's possible depending on the terms of a loyalty award the drennan could apply to it but we don't think drennan applies to the performance awards because they're based on past performance on past performance plus longevity right but under franco wittes the if those loyalty conditions you can attach invalid loyalty conditions to deferred compensation i think that's the lesson papers david segal for appellants your honour's i'd like to briefly address two arguments in addition to those raised by my colleague mr edwards first there is an obvious need for discovery in this case there's an underlying fact dispute about which plan or plans to govern the plaintiffs claims even though at the twelve the six stage the plaintiffs allegations were entitled to be taken as true the district court chose to accept wells fargo's allegation that a different version of the plan from the one plaintiffs alleged applied actually applied in their original complaint plaintiffs allege that a two thousand and eleven version of this deferred compensation plan applied frankly the reason for that allegation is it was one of the few plants that mr ashcroft could actually remember being a participant in he worked there from one nine hundred eighty three to two thousand and thirteen and of course he doesn't know every single plan that he was a participant in that plan was also available online which is which explains how plain that's actually attached it to their complaint it was part of litigation in california against wells fargo involving these same issues so it was actually the only plan that we were able to get our hands on and he remembered being a participant in that plan for some period of time so we alleged it was a political but firm from the very beginning from our opening petition through every argument we made on the motion to dismiss stage we notified the court that other plans were p al and that we were entitled to discovery to do to understand what the terms of those plans were the district court accepted wells fargo's assertion that the two thousand and twelve version of the plane applied without explaining why wells fargo simply attached t plan to its motion to dismiss papers that attach to a business records affidavit the testing that it was a true in for a copy of the business record but not attesting that it actually applied to mr ashcroft or mr canal or explaining which years they  believed it applied to them there was no further documentary proof of that point and no testimonial proof they simply attached a business records affidavit the district court chose to apply that plan the district court erred in doing that and  another plan from a g edwards dating to two thousand and two which plaintiff found during the course of the motion to dismiss briefing there is any allegation that they were entitled to money into the two thousand and two plan i saw where you put that in your briefing is that the only reason i don't know for sure your honor is that i don't know what the vesting period is under the two thousand and two plan it's conceivable that there was a very long vesting period mr ashcroft for example last left in two thousand and thirteen it's conceivable i would concede maybe not likely but we just don't know that he actually got an award under that plan but but it illustrates the larger point he doesn't know me most people have big money coming to him they don't know when it's supposed to be coming they don't have the they don't have the plans in their possession and they deferred compensation award was forfeited under a plan that did not contain a choice of law provision that that claim would be governed under texas law the only reason the district court was able to dismiss this case to north carolina law was because the plan that wells fargo's set applied forfeiture provision operates as a penalty the district court's dismissal order focus solely on whether or not forfeiture is worth forcible under north carolina law but completely ignored the penalty analysis plaintiffs rely on the east carolina internal medicine vs fate as case in that case dr fay has left her practice the practice sued her under a what was called the shared cost provision in her employment contract she'd made two arguments that it constituted a non compete that was invalid and that it also constituted a penalty the court rejected the non compete argument sound it was a forfeiture agreement reaffirmed the principle that forfeitures are generally enforceable under north carolina law but then the court also conducted the penalty analysis and found that the clause there was and forcible because the amount forfeited bore some reasonable relation to the harm that the practice would actually suffer they were able to demonstrate that they would lose money of having to rehire her to hire replacement lose money says she added with overhead that they had invested in her and the damages that were forfeited under that clause bore a reasonable relation to the damages that the that the practice actually suffered there's been no showing that that's the case here and discovery would be necessary to prove whether or not that nexus exists so you'd like to thank you please the court shawn jordan for apple lays i like to start with counsel's last point with regard to north carolina law because i think it can be addressed rather quickly the point is that under north carolina law it's quite clear that these type of forfeiture provisions are are  not a problem they are not considered a covenant not to compete or in restraint of trade in fact as judge rosenthal properly noted they're not considered a restraint of trade at all the reason being that these provisions operate to afford the employee a choice they can either accept  the additional compensation if they're loyal in their mates that does a service period or they can go and compete now with councils raising the same well but there is still a problem if that could be construed as invalid penalty but north carolina quite clearly shows as case after case that we cited say that that only applies when there's a breach of promise or breach of agreement and let me just cite to the two cases they cite the fight as case and the lack of case so the finest case that he just talked about it says this is the north carolina court in five s quote the crucial fact here is th defendant was only required to pay the liquidated damage upon breaching her promise not to compete with plaintiff in the described three county area the finest court also says it is undisputed that defendant breached the contract the la they cited in their reply brief and say and say again in north carolina these invalid penalty analysis applies in other circumstances arriving just breach of contract on the first page this is an eight circuit opinion  co breached the loan commitment agreement by failing to meet its obligations there under a prior to the expiration of the commitment here in the first page the court says it's a breach case and then on the second page of the opinion the eighth circuit notes that a liquidated damage provision is used to discourage a party from breaching a contract and to avoid later cause for concern the amount of actual damages and that opinion is based on north carolina law the nothing case will be side and others the point here is in this case there is no breach of agreement there is no breach of promise as you noted judge costa when when these plaintiffs went out to compete they were free to go and compete all that was going to happen was they were going to forfeit their own vested compensation that's perfectly appropriate and north carolina was no problem with that but it certainly wasn't a breach of your promise and it wouldn't invoke anything regarding penalty or north carolina law let me come back to texas to texas law and go back to the what the first counselor side was talking about in terms of texas law as you noted judge casa the the critical question here is not whether these provisions would be upheld under texas law the critical question of the restatement second conflict of laws as as under the santas and drennen we know is whether or not enforcing the parties choice of north carolina law would contradict some fundamental policy of text some typically be enforced the default as this courts and it is that it will be enforced because it ensures that the parties contractual expectations are met the restatements says only in rare cases will there be a fundamental public policy against the against a choice of law provision such that it can be enforced based on public policy the driving case clearly indicates that this does not as you noted just cause cost and you know judge graves in drag and we had virtually an identical situation you had an employee who was a long serving employee who was being given incentive awards just like these employees this is not their salary these are incentive based bonuses i'm going to go to your point those costs because you hit it exactly there are two aspects of these and in fact the  document that they relied upon and they submitted makes abundantly clear there are two aspects the performance or word that they mentioned here's the description in the document they submitted it's a page thirty nine of the record performance award description an incentive bonus credited to our participants plan account in an amount based on their performance relative to the performance goals and objectives established for him or her for the plan year and which vast and become payable only upon the participants continuation employee status for a designated term in other portions of the same document it says there are two aspects of this of the performance award you hit performance goals number one and number two you stay loyal for designated periods of time and the document says over and over again you do not vest this is not vested in till you stay for the designated period therefore the same isn't drawn in exactly the same address and drennen remember he was getting a bonus award that happened to be restricted stock the stock became unrestricted on a timetable on a timetable of three years half the stock that seven years the remaining stock during that time period similar to this drag in could not engage in quote unquote detrimental activity and this was in every one of these agreements that he was a party to and said you can't engage in detrimental activity which lo and behold included competing are going to competing company with exxon he went to hat's as as i think all three of you have noted these two individuals immediately went and started working with competing companies so they made a choice they made a business decision that they felt like they could that the money they would earn at this competing company was worth more than whatever was there on vested compensation drennan plainly indicates that that's not a covenant not to compete that doesn't run afoul of any fundamental texas public policy simply because the employees ability to go and get another job is not restricted they had an absolute choice to do that  and wells fargo couldn't take it you know had no reason to take legal action against against them because they would just forfeit their own vested compensation now i want to get to there are this goes back to the franklin's case i want to say they've offered three reasons to try to distinguish tran and i want to try to address those quickly the first is they rely principally on these pre drawn in cases that are basically in opposition and judge cost so you point out the one they were seemed wrong on most heavily in their reply brief which is the franklin's case as you noted the key difference in fra always renewal commissions the texas supreme court made clear those renewal commissions had vested they had all vested and so when and so what was happening in in frank was as their money was being clawed back the money that had been earned money that had been invested was being clawed back in terms of those real commissions that this is the opposite these are monies that there is no there is no disagreement that these individuals did not need to designate a service periods under the plain language of the document point that they submitted that they on it says these monies don't vest until you stay for the designated service period so frank was is simply an opposite the other thing that the other two other elements they try to say is they say that they now in their reply brief emphasize th santas case and they say that this court should not uphold judge rosenthal's decision because it be contrary to texas fundamental policy of uniform treatment of texas employees but importantly that contention ignores that that was specifically addressed in drainage and injury and in the texas supreme court said that texas is policy has shifted in the twenty four years since the santas in fact in dren and the texas supreme court specifically says that quote the policy concerns regarding uniformity of law raised into santas have changed in the past twenty four years meaning that thing that emphasize uniformity of treatment texas employees and dread of the texas supreme court went on to say with texas now hosting many of the world's largest corporations our public policy has shifted from a patriarchal one in which we valued uniform treatment of texas employees from one employer to the next above all else to one in which we also value the ability of a company maintain uniformity in its employment contracts across all employees wherever they may be and in fact if you look at the end of the drug in opinion the texas supreme court puts a exclamation point on that on the importance of uniformity and says uniformity is going to want to make sure that i have this exactly right uniformity is a worthy goal and a logical rationale for making a choice of law that's the point from driving it's a shift from to santa so their argument that this court should now go back and basically undo what this what what drennan clearly said about were texas public policy is that the court sh reject that invitation the third thing that the that the plaintiffs try to do is to is they make these factual distinctions between drennan and this situation and say see there's a factual distinction so drennan doesn't apply the problem for plaintiffs is all the distinctions they mention had nothing to do with the decision that decision rendered in turn on them so let me give you a few examples that they raise in their reply brief they say for example that drennan was a high level executive and these individuals were not but and they mentioned what somebody said of the oral argument they have pages of war well the problem is that that's great but the driving decision doesn't turn on that there's nothing in the rationale you won't find anything in the texas supreme court's rationale or holdings that says this would only apply to high level executives the same applies to the distinction they make about personal services they say well this you know these individuals were providing personal services to individuals and dragon wasn't again we don't disagree with that but it has nothing to do with the rationale for the dreaded decision the dreaded decision did not turn on that the surgeon turned on one seminal fact that is undisputed these individuals didn't meet the designated loyalty periods so therefore they wasn't vested which meant which meant they didn't have a right to it that's what it turned on didn't matter that it was personal services it didn't matter that it was a high ranking executive let me address briefly the collar case which he mentions there's two important i think it two important misconceptions that they have about the column the first is a procedural one which is which in their reply brief  you know with all due respect to my friends on the other side the they're just they're just mistaken they tell the court that the texas supreme court's denial of review equal holding the corpus christi court of appeals decision in that case that declining to review a case is not evidence that the court agrees with the law as decided by the court of appeals it also said quote the denial or dismissal of a petition does not give any indication of this court's decision on the merits of the issue in addition the supply to polka which they just denied review the texas rules of procedure provide an ample vehicle of the tech supreme court wanted to endorse the corpus christi court of appeals opinion they have a way to do it under texas rule puppies or fifty six point one c they would have said refused not denied fifty six point one b applies to denials which says if the text from court is not satisfied that the opinion of the court of appeals has correctly declared the law in all respects but determines that it presents no error that requires reversal or that is of such importance the jurisprudence of the state then it will to  not so the fact that it often refused issued they they are not the judge costly they are not issued frequently and that's why i think it is fair for the court to simply say what the texas supreme court has said over and over again which is at a bare minimum it is no evidence the tax print court agrees whatsoever with the court of appeals opinion and i would say this about the collar as well remember procol was absolutely dealing with a vested interest this was a doctor who had shares of stock that were he owned them it was a buy celebrate minute about how much he was going to be paid for them and the fact that he was competing was going to result in him getting paid less instead of two hundred thirty three dollars a share it's one hundred dollars a share again this is not the arguments they made at the end of their presentation first about whether judge rosenthal should have relied at the twenty six stage on just the two thousand and twelve agreement and then two more generally this question of whether they have a right to discovery of other documents to see if they have a choice of law provision right that right does cost the beginning of that is that first of all the judge rosenthal didn't just rely on wells fargo's submission in her he will see and i think it's footnote two of her opinion what she says is the plight of submitted a document and submitted a document and the court said look there's not a material difference between these documents and remember you know the plaintiff is the master of their complaint and in this case the plaintiffs relied throughout these proceedings on that document that they submitted over and over again in fact even in their briefing in this court they repeatedly referred to the plan they submitted as this agreement the agreement that issue this is the agreement these are the provisions they said it over and over and over again even in their amended complaint now and remember this was not a t complaint in february and still in the february many complaint they're not saying you know judge we can't do this you've got to do discovery there's no way we can respond we can't even do this they rely on the plan that they submitted and they go through you know and they say this is the plan and this is why you should rule in our favor is so the plaintiff is a master complaint should be held to the decision they made to rely on it and i would note that even in front of this court if you look at their opening brief they say over and over again in the first thirty to forty pages the agreement at issue in this case this is the agreement and so there's no dispute about that the second point judge costa is that judge rosenthal was right the plan we submitted in the plan they submitted there isn't any material difference between these provisions the forfeiture provisions operate the same way that the issue the issue here is the same the choice of law provisions operate operate the same way they've noted a reference to a receipt in one of them but as this court of word no one they have never said or they think applies in any way to this case and in any event that would be way record this court is well aware of any aggressive contention is waiver boy it's never been raised even before this court instead before this court below they've said north carolina choice of law provision at page i'm sorry this is their brief  page nine of their opening brief they say it's an carolina choice of law cause in their first amended complaint at page one eighty of the record they say it's a north carolina choice of law clause and they rely on that agreement throughout the court should hold them to the agreement to to what they what they have let a litigated litigated all the way through for months and months and months in judge rosenthal's court and we don't think it's appropriate for them after the fact to now say but judge rosenthal should have done something different when what they relied on and what wells fargo relied on there were no material differences between between those between those points so we think that is that is the clear answer on that point a point i'd like to distinguish is they noted that there are two types of awards there is the performance award and there is what they call this special award and both of them again you can look at the plan that they submitted both of them are plainly subject to the vesting requirement the difference the only difference is the performance award also has a performance requirement so the performance requirement is they would establish that you know for each plan year some objective performance you had to me but you would still have have to have a long jetty you you know throughout i would you know  forfeiting unvested balances each plan some account established for you will be subject to investing schedule and you will forfeit each such including the investment earnings credit that sub account if you voluntarily leave the company or your terminated for cause there and they they say they were totally repeatedly able to prevention so there's no issue here that they were aware of what the plans contained for all of these reasons we think the court should all hold and affirm joe's rosenthal's decision which clearly followed all of the cases cited by wells fargo's attorney we're decided at the motion for summary judgment stage or at trial after time for discovery into what documents governed the dispute at issue here in the record we have four different plans and a g edwards plan from two thousand and two it's possible that applies but we're not sure wells fargo has not told us we believe our clients were employed by a judge or so that time and it's possible if not likely that they earned awards under that plan there's no choice of law provision in that plan and i think the logical conclusion is it's possible if not likely that there are other a g plans that apply to our clients and our reply brief at the end we have represented that to the district court did you the two thousand and two going to be you from a junior i think in your applause i know we did the two thousand and two plan was attached to our response plan except the participants are different there but there are still financial advisors that was fargo but there are different types of participants and there's a risk the choice of law provision wells fargo has asked asked judge rosenthal and is asking this court to take their word that this one plan document applies to our clients when our clients still insist that the two thousand and eleven plan applies to them and it's possible the other two thousand and twelve plan applies to them and i think it's a credibility determination i think she made a fact the termination wells fargo before the district court attached an athlete a declaration those like a business records affidavit saying this is a true and correct copy of the two thousand and twelve plan then in a footnote in their motion to dismiss they mention or planned and then say but the operative plan is this other two thousand and twelve plant that they attached there's no explanation the fish she looked at two different plans and made a determination that there was no material difference between two that's just not correct that's not what happened there are different plans and one has a research was a law provision we don't know if they would allege that we don't know if that's proper to be to be in a recent plan it has to the plan would have to qualify as an a reception plan you can't just say a risk plies to this if it if it doesn't qualify to meet the statutory standard of the answer she did look at retroactively to all previous awards we haven't seen any any any clause like that and no explanation as to why a two thousand and twelve plan would govern previous awards earned in two thousand and eleven two thousand and ten two thousand arist applies and to the extent not preempted north carolina law prize and then the other plan says just north carolina law applies and i want to get to a few more points  so we need discovery to determine which plans apply also the uniformity concern in drennan was the uniform treatment of employees at one company and i think it made sense for exxon to have that kind of uniformity because they had a mobile workforce mr drennen worked in norway and texas and new york and other employees worked around the world and it made sense it demanded managing a plan like that would be very difficult with employees moving around the world in you say working in nigeria what law applies if i engage in detrimental activity and that plan is that nigerian law as it were you know north carolina law is a texas law i think that made sense for a mobile workforce there's no evidence in the record that we have a mobile workforce are these what these financial well but they they're not treated like because employees in california in north dakota are not subject to the forfeiture clause and so there's no uniform treatment to begin with in the plan and they want to bring the uniform concerns of drennan into this case but i really think that is the the santas uniformity concerns apply because you have some employees that signed invalid non computer berryman they're going to be governed by a texas law under santas and the ones that don't sign