Opinion ID: 36872
Heading Depth: 3
Heading Rank: 1

Heading: Sole Discretion clause unambiguous; introduction of parol evidence denied

Text: 31 Section B(3)(ii) of the Separation Agreement, called the Sole Discretion Clause by the parties, allows Dell to terminate these Transition Agreements with immediate effect if Dell has determined, in Dell's sole discretion, that [Rodriguez's] conduct is creating, or has created, a negative impact on Dell or on Dell's reputation in the Spanish market and Dell has provided [Rodriguez] with written notice of such negative impact (emphasis added). In ruling on Dell's motion for partial summary judgment, the district court stated: 32 Rodriguez argues that the Separation Agreement's sole discretion clause only applies to his performance as a consultant and not his previous conduct as a Dell employee. Unfortunately for Rodriguez, this theory contradicts the plain language of the agreement. The Separation Agreement covers past behavior when it states that if Rodriguez' conduct is creating, or has created, a negative impact on Dell, Dell may terminate the agreement and withhold any stock that was going to be released pursuant to the agreement. Rodriguez attempts to overcome the plain language of the Separation Agreement by offering parol evidence including deposition testimony and email correspondence. The Court, however, cannot look to parol evidence for the purpose of creating ambiguity.... The Court, therefore, finds that the plain language of the contract allowed Dell to look to Rodriguez' past conduct as a Dell employee in determining whether he had created a negative impact on Dell. 33 (emphasis added). The district court subsequently granted Dell's motion in limine, prohibiting Rodriguez from introducing any parol evidence to interpret the Separation Agreement. 34 On appeal, Rodriguez's first contention is that the district court erred in ruling that the Separation Agreement's Sole Discretion clause unambiguously permitted Dell to terminate Rodriguez's severance rights based on conduct that occurred either (1) before execution of the Separation Agreement (while Rodriguez was employed as Dell's managing director) or (2) after its execution (while Rodriguez would be serving as a consultant to Dell). It is evident from the above-quoted ruling that the district court placed dispositive importance on the presence of the words has created in the Sole Discretion clause. 35 Rodriguez maintains that the Sole Discretion clause only refers to Dell's right to terminate these Transition Arrangements, which addresses his future role as consultant. Rodriguez further contends that the Separation Agreement provides for the structured, periodic release of stock options, with the release of the shares corresponding to Rodriguez's two different roles. He insists that this further supports his interpretation of the Sole Discretion clause as applicable only to his conduct as consultant on a going-forward basis. 36 Rodriguez thus argues that the district court's ruling — that the Sole Discretion clause was unambiguous as a matter of law — was error. He charges that the term has created covers only those circumstances in which Dell learns of prior actionable conduct taken after Rodriguez signed the Separation Agreement. Rodriguez insists that, as the subject clause is susceptible to two reasonable but different interpretations — the one ascribed to it by the district court and the one he advances — the clause is ambiguous, entitling him to introduce parol evidence to support his interpretation. In addition to his own testimony, the key parol evidence that Rodriguez claims was improperly excluded includes (1) deposition testimony of Eric Meurice, the Dell employee who negotiated the Separation Agreement, indicating that the Sole Discretion clause was forward-looking only, and (2) an e-mail written by Nicholas Taylor (the Taylor Memo), the lawyer for Dell who drafted the Separation Agreement, noting only some penny stock as held back on good conduct conditions. 15