A.2d 463, 466 (Del. Ch. 1977). To constitute consideration, a performance or a return promise
must be bargained for. A performance or return promise is bargained for if it is sought by the
promisor in exchange for his promise and is given by the promisee in exchange for that promise.
The performance may consist of an act other than a promise, a forbearance, or the creation,

modification, or destruction of a legal relation. Restatement (Second) of Contracts, § 71.

Defendants argue that the Plan was a unilateral statement of policy and does not
constitute a contract under Delaware law. They cite a series of cases which hold that, in general,
employee handbooks do not create legally enforceable obligations. See £8 Heideck v. Kent
General Hosp,, 446 A.2d 1095, 1096-1097 (Del. 1982). However, under Delaware law, a policy
contained in an employee manual may become an enforceable obligation if four criteria are
satisfied. First, the language must be specific enough to constitute an offer. Second, the offer
must be communicated to the employee. Third, the employee must accept the offer. Fourth,
there must be consideration for the agreement. Crisco v. Board of Educ., 1988 WL 9082 1, at *4
(Del.Ch. Aug, 29, 1988). The Court will consider the facts of this case as they apply to all four
of these requirements.

A, Specificity of Language

The complaint alleges that Lucent made an offer to its employees to provide non-salary
compensation under the Plan. (Complt. at ¢ 45). Lucent argues that the plaintiffs could not have
reasonably believed that the Plan contained a promise or offer to provide certain benefits. Lucent
provides several textual provisions of the Plan to support this assertion. Section II(a) states that
the Plan does not alter the at-will employment relationship. (Complt., Ex. A, § I(a)). Section

VII(b) provides for the possibility that no payouts will be provided under the Plan. (Complt., Ex.

4



HI. Damages to Plaintiffs

The complaint clearly satisfies the requirements for pleading damages under Delaware
contract law. It alleges that the plaintiffs held 66,030 shares of phantom stock (Complt. at { 46),
that Lucent’s payout offer had no relationship to the increase in value of LPSS. during the life of
the Plan, and that the payout did not bear any relationship to the amount of phantom stock owned
by the plaintiffs. (Complt. at { 55). The complaint further states that the plaintiffs are entitled to
additional compensation under the Plan because they were damaged by Lucent’s breach of its
contractual obligations. (Complt. at J 56).

CONCLUSION

This complaint, construed in the light most favorable to the plaintiff, alleges a legally
cognizable breach of contract claim. The complaint alleges the existence of a contract, that
Lucent breached this contract, and that the plaintiffs were harmed by the breach. This satisfies
the “bare essentials” standard in Strathmore. The majority of Lucent’s arguments in this motion
involve determinations of fact that are better resolved following discovery. The motion to
dismiss is therefore denied.

It is so ordered.

Ca

Wayne R. Andersen
United States District Judge

Dated: J pvdreher. Ld,2b0 a



state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts warranting
relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99 (1957).

A motion to dismiss tests the sufficiency of the complaint, not the merits of the suit.
Weiler v. Household Fin. Corp., 101 F.3d 519, 524 n. 1 (7th Cir. 1996). Thus, for a breach of
contract claim to survive a motion to dismiss under Rule 12(b)(6), the plaintiff “need only plead the
bare essentials of offer, acceptance, consideration, performance by the plaintiff and breach by the
defendant causing the loss.” Strathmore Co, v. National R.R. Passenger Corp., 1992 WL 280509,
at *2 (N.D. Il. Oct. 5, 1992) (citing Derson Group Ltd. v. Right Mana: nsultants, Inc., 683
F, Supp. 1224, 1230(N.D. Ill. 1988)). At the pleading stage, plaintiffs need only allege - rather than
prove - the existence of a valid contract. Orix Credit Alliance, Inc. v. Taylor Mach, Works, Inc., 844
F. Supp. 1271, 1273-74 (ND. Ill. 1994); Holley v. Pansophic Sys., Inc., 1992 WL 137124, at *5
(N.D. Ill. June 12, 1992).

DISCUSSION

Both parties agree that the general contractual principles under Delaware law govern this
case. In order to properly plead a breach of contract under Delaware law, the plaintiff must
allege a contractual obligation, a breach of that obligation by the defendant, and resulting damage
to the plaintiff. Goodrich y. E.F. Hutton Group, Inc,, 542 A.2d 1200, 1204 (Del. Ch., Jan. 21,
1988).
L Existence of a Contractual Obligation

Pleading that a breach occurred without alleging the actual existence of a contract is
insufficient, To establish the existence of a contract, a party must prove both consideration and

mutual assent to the terms of the agreement by all parties. Faw, Casson, & Co. v. Cranston, 375



A, § VII(b)). Section III of the Plan provides Lucent the sole power and authority to make all
determinations and interpretations. (Complt., Ex. A, § IM). Section XII of the Plan reserves with
Lucent the right to modify or terminate the Plan at any time. (Complt., Ex. A, § XII).

None of the textual provisions cited by the Defendants conclusively demonstrate that the
language of the Plan was not specific enough to constitute an offer. The Plan contains definite
language, such as the use of the words “must” or “will,” to support the allegation in the
complaint that Lucent made an offer to its employees to participate in the Plan. Section VII(b) of
the Plan states that pay-outs “will be based on the gain in value . . . during the Performance
Period{,]” (Complt., Ex. A, § VII(b)), and Section VII states that “a Participant’s payout will be
computed.” (Complt., Ex. A, § VIII). Therefore, we conclude that the complaint has sufficiently
alleged that the language of the Plan was specific enough to constitute an offer under Delaware
law.

B. Communication and Acceptance of Offer

Paragraph 45 of the complaint alleges that Lucent communicated an offer to its
employees to provide non-salary compensation under the Plan and that employees were made
aware of the Plan. (Complt. at { 45). It also alleges that the plaintiffs accepted Lucent’s offer to
participate in the Plan. (id.) Because we are required to accept all allegations in the complaint as
true for the purposes of Rule 12(b)(6), the complaint satisfies the communication and acceptance
requirements under Delaware law.

c. Consideration

The complaint alleges that a performance was bargained for as consideration for the

purported contract between the plaintiffs and Lucent. Paragraph 45 asserts that Lucent created



= *

‘Minute Order Form (06/97)

United States District Court, Northern District of Illinois

“MorMegersteded | Wayne R. Andersen “than signed Judge
CASE NUMBER 2C 550 DATE 11/14/2002
CASE Ted Moulos et al vs. Lucent Technologies, Inc.
TITLE
[In the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state bricfly the nature
MOTION: of the motion being presented.)
DOCKET ENTRY:
(1) i) Filed motion of [ use listing in “Motion” box above,]
(2) QO Brief in support of motion due
(3) Oo Answer brief to motion due___. Reply to answer brief due.
(4) a Ruling/Hearingon__setfor__—_at
(5) Oo Status hearing[held/continued to] [set for/re-set for]on__—sset for Sat
(6) Oo Pretrial conference[held/continued to] (set for/re-setfor]on__—setfor_—at__—
(7) a Trial[set for/re-set for]on___at
(8) oO [Bench/Jury trial] [Hearing] held/continued to_____at
(9) a This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OFRCP4(m) O) Local Rule 41.1 CFRCP41(a)(1) ( FRCP41(a)(2).

ao) [Other docket entry) | Enter MEMORANDUM, OPINION AND ORDER: The motion to
dismiss [9-1] is denied.

(ail) @ [For further detail see order attached to the original minute order.]

No notices required, advised in open court.

No notices required.

umber of notices.

Notices mailed by judge's staff.

Notified counsel by telephone.

ov | Docketing to mail notices.

Mail AO 450 form. sorusia's0
Copy to judge/magistrate judge. yenod ya)
courtroom 16 0 won KON 20 dase riled noice
TSA deputy’
initials $a et
Aah oental Clerk's Office malling deputy initials



the Plan for the purpose of attracting management and employee participation in LPSS. (Complt.
at { 45). The complaint also alleges the existence of a retum promise. In exchange for
participation in the Plan, the plaintiffs agreed not to compete with Lucent for a period of nine
months after termination of their employment and they gave up their participation in all other
Lucent short and long-term incentive compensation plans as consideration for the phantom stock
provided under the Plan, (Complt. at ] 48). The complaint thus satisfies the consideration
requirement under Delaware law.

I. Breach of Contract

Lucent further argues in its motion that, even if a contract existed, no breach occurred.
Lucent maintains that the Plan did not guarantee the use of a particular method to calculate pay-
outs and that Lucent provided the employees with benefits determined pursuant to their
discretionary authority under Section II] and Section XII of the Plan.

The complaint, on the other hand, alleges that Lucent promised to administer the Plan in
good faith (Complt. at ¥ 52) and that Lucent was obligated to seek a fair and equitable resolution
of any disputes with Plan participants. (Complt. at (54). The plaintiffs have alleged that Lucent
breached these contractual provisions because it failed to act in good faith (Complt. at $57) and
it did not seek a fair and equitable resolution of the plaintiffs’ objections following termination of
the Plan. (Compl. at. | 55), Because we are required to accept all allegations in the complaint
as true for the purposes of Rule 12(b)(6), the complaint satisfies the requirements for pleading

breach of contract under Delaware law.



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
TED MOULOS, et al, ) Loe,
)
Plaintiffs, Noy 1
) — No.02. C550
v. )
) Wayne R. Andersen
LUCENT TECHNOLOGIES, INC. ) _ District Judge
)
Defendant. )
MEMORANDUM OPINION AND ORDER

This case is before the Court on the motion of the defendant, Lucent Technologies, Inc., to
dismiss the plaintiffs’ complaint for failure to state a claim upon which relief may be granted
pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the motion to
dismiss is denied.

BACKGROUND

The breach of contract allegations of the thirty-seven plaintiffs arise out of the formation of
Lucent Public Safety Systems (“LPSS”), an unincorporated division of Lucent Technologies, Inc.
(“Lucent”). Lucent formed LPSS in October, 1997 to commercialize emergency service
technologies, including network database software which allows automatic identification of 911
callers and provides call routing to the nearest public safety unit. Presumably to attract employee
participation in LPSS, Lucent created a program known as the Phantom Stock Plan (the "Plan"),
which gave participating employees phantom stock as non-salary compensation. The plaintiffs

participated in the Plan and held shares of phantom stock.



The Plan was not designed to be a permanent incentive program. It was designed to
terminate on September 30, 2000, unless it was ended earlier due to a change in business structure.
(Complt., Ex. A, § V). Approximately nine months prior to its scheduled termination, Lucent
unilaterally terminated the Plan and provided payouts to participating employees. This dispute
centers on whether these payouts satisfied Lucent's obligations, if any, under the Plan.

Plaintiffs allege that, at the end of the Plan, the fair market value of LPSS was to be
determined based on real market values and that, at that time, the holders of the phantom stock were
to be paid in cash their proportionate share of the increase in value of LPSS during the term of the
Plan. (Complt. at 51-52). Plaintiffs further allege that Lucent failed to seek to reach a fair and
equitable resolution and that Lucent did not act in good faith as required by the Plan. (Complt. at
q9 54, 57).

Defendants have moved for dismissal pursuant to Rule 12(b)(6) for two reasons. First, they
argue that the Plan did not create any contractual obligations on the part of Lucent. Second, they
argue that even if contractual obligations did exist under the Plan, Lucent fulfilled its obligations by
providing a payout upon termination of the Plan.

STANDARD OF REVIEW

When evaluating motions for dismissal pursuant to Rule 12(b)(6), the Court views all facts
alleged in the complaint, as well as any reasonable inferences from those facts, in the light most
favorable to the plaintiff. Doherty v. City of Chicago, 75 F.3d 318, 322 (7th Cir. 1996); Dawson v.
General Motors Corp., 977 F.2d 369, 372 (7th Cir. 1992). Any ambiguities are likewise resolved

in the plaintiffs favor. Dawson, 977 F.2d at 372. A complaint will not be dismissed for failure to