Opinion ID: 755609
Heading Depth: 2
Heading Rank: 3

Heading: Counterclaims and Third-Party Claims

Text: 22 After determining that the 1987 Plan was the only valid plan by which stock options could have been granted to Hajjar, the district court turned to the counterclaims and third-party claims asserted by Hajjar against Munson and the third-party defendants. In Count I, 4 Hajjar alleged that Munson violated an implied duty of good faith in the employment contract by failing to perfect the stock options granted or promised to Hajjar in the contract and by terminating Hajjar's employment for the improper purpose of promoting a merger and avoiding the stock options granted to Hajjar. Count II asserted that Munson represented that Hajjar would have certain stock options by virtue of his employment and thereafter either negligently failed to take action necessary to perfect those options or intentionally and fraudulently promised the options while never intending to perfect them. It also states that Hajjar detrimentally relied on these representations of Munson. Count III alleges that Munson breached the terms of the employment contract with Hajjar by failing to do the necessary administrative and administerial acts to qualify Hajjar for stock options. Count IV charges that Courtney Munson, who was at all relevant times the president of Munson, hired Hajjar and promised him stock options on behalf of the company, and in so doing either misrepresented the terms of hiring or lacked the authority to commit to granting Hajjar stock options. Lastly, Count V alleges that Heartland and Acquisition, as a result of their subsequent merger with Munson, are liable for Munson's wrongful conduct. 23 The district court found that because the employment agreement did not constitute a valid stock option plan under Delaware law and because Hajjar stubbornly insist[ed] upon relying on it, Hajjar's counterclaims and third-party claims failed as a matter of law. With regard to Counts I, II, IV, and V, the court stated that [b]y continuing to insist that [the 1987] plan does not apply to his Employment Agreement, Hajjar has foreclosed any possible relief under the law on these counterclaims and third-party claims. Since we have found that material issues of fact exist on the subject of the employment agreement's validity as a stock option plan and whether the 1987 Plan otherwise controls Hajjar's options, the grant of summary judgment on these counts must be reversed. 24 In addition, the district court's judgment in favor of the appellees must be reversed because it is premised on an erroneous reading of Hajjar's claims. Hajjar's claims all are based on a breach of the employment agreement he entered with Munson, not (as the district court found and the appellees assert) on any breach of the 1987 Plan. For example, Count I claims that Munson violated an implied duty of good faith contained [a]s part of the Employment Agreement by either failing to perfect the options it purportedly had granted Hajjar under the agreement or by terminating Hajjar for an improper purpose (e.g., to thwart the exercise of his options). See App. at 42-43. The 1987 Plan is not mentioned at all in this Count. The same is true with Counts II, IV and V: Count II alleges that Hajjar detrimentally relied on the stock options promised in the employment agreement; Count IV charges, in essence, that Courtney Munson lied to Hajjar (during their negotiation of the employment agreement) to secure his employment; and Count V alleges that Heartland and Acquisition are liable for Munson's wrongful acts by virtue of their merger with Munson (successor liability). The district court erred in finding that these Counts alleged breaches of the 1987 Plan, and erroneously granted summary judgment to the appellees on that basis. 5 25 Hajjar's Third Counterclaim, which the district court discussed separately from the other counts, alleged that Munson failed to do the necessary administrative and administerial acts to qualify Hajjar for employee stock options ... and thereby breached the contract of employment between Hajjar and Munson Corporation. App. at 45. The district court granted Munson summary judgment on this Count because it did not allege a breach of contract claim--the employment agreement contained no express or implied terms detailing what Munson had to do to perfect Hajjar's stock options. See Mem. Op. at 11. Our reading of this Count, however, shows that Hajjar alleges, in essence, that even assuming that the 1987 Plan controls the grant of stock options, Munson failed to carry through on its promise to give him stock options by failing to validly create such options under the 1987 Plan. See Mem. Op. at 10 (quoting from Hajjar's brief in opposition to summary judgment). While the employment agreement did not outline how options were to be granted to Hajjar, the 1987 Plan does contain such terms, and Hajjar is claiming that Munson's failure to follow the procedures in the 1987 Plan breached its promise to grant him options. As Hajjar states in his brief, this is a claim for a breach of the employment agreement by failing to legally set up the promised options, not a claim for a breach of the 1987 Plan, and the district court was similarly erroneous in granting Munson summary judgment on this claim. 26 In summary, we find that the district court incorrectly interpreted Hajjar's counterclaims and third-party claims, and as a result erroneously granted summary judgment to the appellees. Accordingly, we reverse the grant of summary judgment to Munson, Courtney Munson, Acquisition, and Heartland on Hajjar's counterclaims and third-party claims.