Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-03-01098/USCOURTS-ca8-03-01098-0/pdf.json

Parties Involved:
Dana B. Badgerow
Appellant
John E. Bohan
Appellant
Honeywell International
Appellee

Document Text:

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 03-1098

___________

John E. Bohan; Dana B. Badgerow, *

individually, and as representatives *

of a class, *

*

Appellants, *

* Appeal from the United States

v. * District Court for the 

* District of Minnesota.

Honeywell International, Inc., *

a Delaware corporation, *

*

Appellee. *

*

___________

Submitted: February 13, 2004

Filed: May 3, 2004

___________

Before BYE, HEANEY, and SMITH, Circuit Judges.

___________

BYE, Circuit Judge.

John Bohan and Dana Badgerow, both former Honeywell employees, filed this

class action suit contending their rights to accelerated benefits under Honeywell's

Stock Plan were triggered by a shareholders' vote approving a merger between

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The Honorable Joan N. Ericksen , United States District Judge for the District

of Minnesota.

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Honeywell and General Electric (GE). The district court1

 granted Honeywell's motion

to dismiss under Fed. R. Civ. P. 12(b)(6), determining the language of the controlling

stock plan is unambiguous and government regulators' successful efforts to block the

merger prevent acceleration. We affirm.

I

As part of appellants' compensation, each received stock grants and separate

options pursuant to Honeywell's stock plan for high performing employees. The

employees' stock grants are governed by its "1993 Stock Plan for Employees of

Honeywell International Inc. and its Affiliates" (1993 Stock Plan) and the

corresponding "Restricted Unit Agreement." The 1993 Stock Plan and Restricted

Unit Agreement specify the granted stock shall be converted into cash upon the

occurrence of designated circumstances which trigger an "Acceleration Date." The

employees' stock options are governed by the 1993 Stock Plan and corresponding

Option Agreement. The employees contend Honeywell promised in the 1993 Stock

Plan and the Option Agreement to provide them with stock options for ten years from

the date of issuance upon acceleration caused by the approval of a merger. 

The primary question on appeal is whether the circumstances in this case

triggered acceleration under the 1993 Stock Plan. On January 10, 2001, Honeywell's

shareholders approved a merger between it and GE which would have resulted in

Honeywell becoming a wholly-owned GE subsidiary upon conversion of its stock to

shares of GE. Ultimately, the GE-Honeywell merger was blocked by regulators and

not consummated. Honeywell did not convert plaintiffs' stock grants into cash and

maintains some or all of plaintiffs' stock options have expired or will before the 10-

year term ends.

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Both parties agree the case turns on paragraph 12(a) of the 1993 Stock Plan.

It defines the events causing acceleration and provides in pertinent part:

A Stock Option shall become immediately exercisable as to all Shares

remaining subject to the Stock Option and all restrictions shall lapse or

terminate and all conditions shall be waived with respect to all restricted

Shares or restricted Units on or following . . . (iii) a merger in which the

Company will not survive as an independent publicly owned

corporation, a consolidation, or a sale, exchange or other disposition of

all or substantially all of the Company's assets which, in each instance,

is approved by the Company's shareowners eligible to vote on the

transaction, other than Section 16 Employees, whether or not the

transaction is conditioned on such approval. . . 

The district court granted Honeywell's motion to dismiss, concluding this

language unambiguously contemplates acceleration only following the consummation

of a merger which results in Honeywell no longer existing as a separate publicly

owned entity. The court concluded shareholder approval of a merger is necessary, but

insufficient, to trigger acceleration. The district court concluded because it is

undisputed no merger took place there was no acceleration of benefits under the 1993

Stock Plan. We agree.

 

II

We review the district court's dismissal de novo, applying the same standards

as those employed by the district court. Grey v. Wilburn, 270 F.3d 607, 608 (8th Cir.

2001). Thus, this court would affirm the decision below if appellants cannot prove

any set of facts that would entitle them to relief. Knapp v. Hanson, 183 F.3d 786, 788

(8th Cir. 1999). In ruling on a motion to dismiss a complaint for failure to state a

claim upon which relief can be granted, a court must accept the complaint's factual

allegations as true and construe them in the light most favorable to the plaintiff.

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Midwestern Mach., Inc. v. Northwest Airlines, Inc., 167 F.3d 439, 441 (8th Cir.

1999). 

Both of the operative contracts here contain Delaware choice of law provisions,

and the employees concede the district court properly applied Delaware law to their

claims. Under Delaware law, the interpretation of a contract is a question of law,

Pellaton v. Bank of N.Y., 592 A.2d 473, 478 (Del. 1991), and if the contractual

language is "clear and unequivocal, the parties are to be bound by its plain meaning."

See O'Brien v. Progressive N. Ins. Co., 785 A.2d 281, 288 (Del. 2001). 

We agree the district court's analysis and conclusion wherein the 1993 Stock

Plan language, being clear and unambiguous, favors Honeywell. Under the plain

contract language, acceleration occurs "on or following . . . a merger . . ." ¶ 12(a) of

1993 Stock Agreement (emphasis added). In this case, it is undisputed there was no

merger. The employees argue the January 2001 shareholder approval of the proposed

GE-Honeywell merger constituted an acceleration event under subheading (iii). They

base their argument on a reading of the clause near the end of subheading 12(a)(iii)

of the Stock Plan, stating "which, in each instance, is approved by the Company's

shareowners . . . ." The employees attempt to elevate the dependent clause of

shareholder approval of a merger to the triggering event for acceleration. We find,

however, shareholder approval is a necessary but not sufficient condition for

acceleration. The shareholder approval clause functions to clarify the type of merger

which would be a triggering event for acceleration. Based on a plain reading of the

Stock Plan, we conclude the merger itself is the triggering event for acceleration, and

in this case such did not occur.

We affirm the district court's grant of Honeywell's motion to dismiss.

______________________________

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