Opinion ID: 1057781
Heading Depth: 2
Heading Rank: 1

Heading: Change in Control

Text: Whether the language of a contract is ambiguous is a question of law that we review de novo. Preferred Sys. Solutions, Inc. v. GP Consulting, LLC, 284 Va. 382, 391, 732 S.E.2d 676, 680 (2012). We have said that [c]ontract language is ambiguous when 'it may be understood in more than one way or when it refers to two or more things at the same time.' Id. (quoting Eure v. Norfolk Shipbuilding & Drydock Corp., 263 Va. 624, 632, 561 S.E.2d 663, 668 (2002)). Ordinarily, it is the duty of the court to construe a written contract when it is clear and unambiguous on its face, but when a contract is ambiguous it is necessary to resort to parol evidence to ascertain the intention of the parties. In such cases, if reasonable people could draw different conclusions, the meaning of the contract upon the evidence presented should be submitted to the jury. See Greater Richmond Civic Recreation, Inc. v. A.H. Ewing's Sons, Inc., 200 Va. 593, 596, 106 S.E.2d 595, 597 (1959).
The 1999 and 2005 Plans as well as the Severance Agreement contain provisions requiring that these instruments be interpreted under Delaware law. However, at trial the parties 15 offered a potpourri of citations from Virginia and Delaware and elsewhere making it difficult to ascertain what law the parties thought controlled a particular issue. Additionally, on appeal ORC cites Delaware law on matters which at trial it did not advance. Throughout this opinion such discrepancies will be noted.
Lawlor advances two primary grounds for his assertion that there was a change in control sufficient to support the jury's award: (1) The 1999 Plan and the Severance Agreement include a change of a nature that would be required to be reported in response to section 1 of SEC Form 8-K, 6 and (2) The 1999 and 2005 Plans and the Severance Agreement each provided that a change in control would occur when the Incumbent Board members ceased to have a majority. ORC maintains that, as a matter of law, there was no change in control and the question never should have been submitted to the jury. Much of ORC's argument involves interpretation of Delaware corporate law. However, this case is fundamentally a contract dispute. Predominantly, in this case, whether there 6 It is unnecessary to address this basis for change of control because we resolve this question upon the second basis advanced. 16 was a change in control is a factual determination. Additionally, to the extent that the contractual provisions are ambiguous, it is proper to submit the question to the jury for consideration. See Greater Richmond Civic Recreation, 200 Va. at 596, 106 S.E.2d at 597. A threshold question is presented: For determination of the number of directors required, does the term Board in these contract provisions unambiguously mean only the directors then sitting, or does it mean the total number of seats irrespective of whether the seat is filled? Lawlor's argument on this question is two-fold: (1) the plain meaning of the contractual provisions provide that Board refers to the total number of directorships, and (2) at best, the provisions are ambiguous and the jury was permitted to resolve the matter. Considering the Severance Agreement, Lawlor notes that the term Incumbent Board refers to individuals who are defined and that a change in control occurs when the Incumbent Board ceases for any reason to be a majority of the Board. He further argues that after he and Spalluto resigned, at most only five Incumbent Board members remained on the ten seat Board of Directors. Arguing that six seats are required for a majority under the 17 contract provisions, Lawlor asserts that a change of control took place. Additionally, Lawlor points to the testimony of Michael Bisignano, ORC's General Counsel and the principal drafter of the language in question. He testified that unlike the term Incumbent Board, the term Board did not refer to individuals, although he could have drafted the agreement in such a manner to so provide. Also, Lawlor introduced into evidence the ORC Board of Directors Manual (Manual) and argued that the Manual repeatedly used the term Board of Directors to refer to all seats. ORC seeks to incorporate Delaware corporate law into the Severance Agreement by asserting that majority of the Board has a default meaning that excludes vacant seats. The record does not show that anyone intended such a meaning and the testimony of ORC's general counsel is contrary to such an interpretation of the contractual provisions. The resolution of the change in control question in this contractual dispute based upon Board membership is not a matter of Delaware corporate law. Rather, it is a matter of contract interpretation. 7 The trial court determined that the term 7 ORC states in its brief that the Delaware standards of contract interpretation are the same as Virginia standards, which may account for the citation of no Delaware cases on the subject. 18 Board was ambiguous, and that he could not decide as a matter of law that incumbent Board members did or did not cease to constitute a majority of the Board. Counsel for ORC conceded in his argument on the motion to strike that the issue of is it seats or is it people, I think reasonable people can disagree on that. On the evidence presented, we cannot say that the trial court erred in submitting the question to the jury, and we cannot say that the jury verdict was plainly wrong or without evidence to support it. See Code § 8.01-680.