Opinion ID: 204143
Heading Depth: 2
Heading Rank: 1

Heading: Alleged Breach of the Severance Provision

Text: The Agreement's Severance Provision obligated Mueller to pay Bukuras upon termination one hundred fifty (150%) percent of the bonus paid or payable to the Employee for the fiscal year immediately preceding the fiscal year in which termination occurs. This dispute centers on the meaning of the bonus as used in this provision. Bukuras contends that the bonus captures both his FY 2005 annual bonus and the transaction bonus he received in connection with the successful merger with Walter in FY 2006. He takes two steps to reach this conclusion. First, he contends that the transaction bonus was paid or payable for FY 2005 because, according to Smith's September 2005 Letter, the transaction bonus was paid for his contribution to the successful merger with Walter, and all his work towards that end occurred in FY 2005. Second, Bukuras argues that, in contrast to the annual bonus described in the Bonus Provision, the parties left the term bonus in the Severance Provision undefined and therefore to its plain and ordinary meaning, which he asserts comprehends both his FY 2005 annual bonus and any additional funds over and above his salary which were paid or payable to him for that year. Therefore, he insists, Mueller breached its obligations under the Severance Provision when it failed to include 150% of the transaction bonus in his severance payment. Mueller counters, and the district court found, that the transaction bonus was properly excluded from the calculation of Bukuras's severance payment because (1) the transaction bonus was not paid or payable for FY 2005 due to the undisputed fact that payment of the bonus was contingent on the closing of the merger, which did not occur until FY 2006; and, in any event, (2) the Agreement, read as a whole, makes clear that the drafters intended the bonus referenced in the Severance Provision to refer, exclusively, to the annual bonus described in the Bonus Provision. We agree with the district court that Mueller was not required under the terms of the Agreement to include Bukuras's $1 million transaction bonus in the calculation of his severance payment. As Bukuras has acknowledged, the transaction bonus was paid, and became payable, in FY 2006 when the merger occurred. Nonetheless, Bukuras contends that when the bonus was paid or became payable is immaterial for purposes of determining what the bonus was paid for. Rather, he asserts that the plain language of the Severance Provision requires us to ask what the transaction bonus was in consideration or payment of. See Random House Dictionary of the English Language (2d. ed.1987) (defining for)(quoted in Appellant's Br. 17 n. 12). [3] Relying on Smith's September 2005 Letter, he maintains that the transaction bonus was for his significant extra time and energy in bringing [the] transaction to a successful close and for his contribution to the merger. There is no dispute that his efforts with respect to the merger wrapped up in the final hours of the last business day of FY 2005. Nonetheless, we reject the contention that the transaction bonus can reasonably be understood as for anything but the closing of the merger transaction in FY 2006. Indeed, the September 2005 Letter on which Bukuras relies specifically describes the transaction bonus as a one-time special bonus which would be paid, and would become payable, [u]pon completion of the transaction in FY 2006. Had the deal collapsed prior to closing, regardless of Bukuras's FY 2005 efforts or contribution, the bonus would never have been paid or become payable. We thus conclude that because the closing occurred in the same year in which Bukuras was terminated, the transaction bonus was not paid or payable . . . for the fiscal year immediately preceding his termination and was, therefore, outside the scope of the Severance Provision. In any event, we also agree with the district court that a comprehensive reading of the Agreement confirms that the parties intended the bonus in the Severance Provision to mean Bukuras's annual bonus. In plain English, Bukuras's bonus for the fiscal year immediately preceding his termination is most comfortably understood as his FY 2005 annual bonus. Mueller persuasively explains that the phrase the bonus paid or payable . . . for . . . the fiscal year was included to reflect the reality that annual bonuses were paid following the conclusion of the fiscal year in order to allow its auditors time to crunch the Company's annual earnings figures. This understanding of the term bonus as annual bonus is confirmed by the context in which the word was used; namely, an employment agreement containing an express Bonus Provision obligating the Company to pay an annual bonus, payable at the conclusion of each fiscal year. It also lines up with common sense. Mueller's historical practice of paying Bukuras an annual bonus based on annual earnings reinforces the conclusion that, when the parties referenced the bonus for the fiscal year, they had in mind the only bonus which Bukuras had received, and under the terms of his employment had an expectation to receive, at the time the Agreement was drafted. [4] As the district court noted, the Severance Provision references the bonus in the singular, and the reasonable inference is that by doing so the parties intended to refer back to, and incorporate, the only other bonus Bukuras's annual bonusdescribed within the four corners of the Agreement. Against this backdrop, Bukuras's contention that the bonus is a collective noun capable of comprehending the payment of multiple bonuses is a stretch too far. Finally, as Section 4(c) of the Agreement makes clear, when the agreement was signed Bukuras had expressly agreed to waive any right to Transaction Benefits associated with the then-contemplated sale of the Company in exchange for the severance benefits described in Section 4(d). This provision demonstrates that, at the time of drafting, the parties did not understand the term bonus to include Transaction Benefits. Even if the specific transaction referenced in Section 4(c) never materialized, Bukuras fails to explain why the parties would have understood special compensation associated with the FY 2006 transaction any differently. [5] Bukuras disputes this construction, emphasizing that unlike the term Salary, which is defined in Section 4(a) and expressly incorporated in the Severance Provision, the Agreement does not create bonus as a defined term. He thus asserts that the term bonus as used in the Severance Provision was intentionally left to its plain, ordinary, and expansive meaning of something given or paid over and above what is due. Random House Dictionary of the English Language (2d ed.1987) (quoted in Appellant's Br. 14), and not the more limited description of Bonus as annual bonus set forth in the Bonus Provision. However, the scope of a party's obligations cannot `be delineated by isolating words and interpreting them as though they stood alone.' Starr v. Fordham, 420 Mass. 178, 648 N.E.2d 1261, 1269 (1995) (quoting Comm'r of Corp. & Taxation v. Chilton Club, 318 Mass. 285, 61 N.E.2d 335 (1945)). As discussed, Bukuras's proposed construction strains the language of the contract, fails to account for the circumstances in which the Agreement was drafted, and is belied by a common sense reading of the document as a whole. The Agreement's failure to explicitly define bonus to the same extent as Salary fails to override these considerations. Cf. Wyner v. North Am. Specialty Ins. Co., 78 F.3d 752, 756-57 (1st Cir.1996) (applying Massachusetts contract law, and concluding that the inconsistent capitalization and usage of terms in an insurance contract failed to create an ambiguity where the contract's meaning could be reasonably discerned from other provisions). Finally, Bukuras makes much of the fact that the Bonus Provision only required payment of an annual bonus equivalent to not less than the specified share of the annual bonus pool, and did not tie the Company to any particular method for determining bonus levels. He argues, among other things, that because payment of the $1 million transaction bonus alone would have satisfied the Company's obligations pursuant to the Bonus Provision, the transaction bonus must fall within the ambit of bonus for purposes of the Severance Provision; otherwise, he maintains, the Company could satisfy its annual bonus obligations while leaving Bukuras with no bonus factor for purposes of his severance payment. Plainly, this is a false syllogism. While, in Bukuras's hypothetical, payment of the $1 million he received as the transaction bonus would have been at least equivalent to his annual bonus share and therefore satisfied Mueller's obligations under the Bonus Provision, it does not follow that the transaction payment should therefore be understood as his annual bonus. There is no dispute that Mueller paid Bukuras a substantial annual bonus for FY 2005 and included that annual bonus in the calculation of his severance payment. Accordingly, we agree with the district court, for essentially the same reasons, that the Company did not breach the terms of the Agreement when it failed to include Bukuras's transaction bonus in the calculation of his severance payment. We thus affirm the grant of summary judgment in favor of Mueller, and against Bukuras, on his claim for breach of the Agreement. [6]