Opinion ID: 2821610
Heading Depth: 2
Heading Rank: 1

Heading: The December 2011 Reorganization.

Text: Mason's flagship claim is that the district court erred in granting summary judgment on his breach of contract claim - 9 - arising out of the 2011 reorganization and the concomitant cessation of his employment with Tejas. He argues that the relevant contractual provisions are ambiguous and that a genuine issue of material fact exists regarding the contracting parties' understanding of the Agreement's termination clause. Termination is not defined in the Agreement, and the drafters obviously used the word in more than one sense. At various places, the termination clause refers to termination of employment generally, termination of [the employee's] employment specifically, and termination of employment with the Company. Mason insists that one reasonable interpretation of the Agreement is that the parties intended for termination to have the relatively narrow meaning of termination of employment with Tejas. He suggests that construing a termination clause to require severance payments regardless of new employment comports with the norm for companies in Tejas's industry and with other surrounding language in the Agreement. TSA demurs. It argues that the plain meaning of terminate is to discontinue or sever, and that Mason's employment was neither discontinued nor severed but, rather, transferred seamlessly from Tejas to TSA. Thus, Mason's employment could not have terminated because he was never without a job.4 4There is some inherent tension in TSA's position. On the one hand, it argues that it is not a successor entity to Tejas and - 10 - [W]ords are like chameleons; they frequently have different shades of meaning depending upon the circumstances. United States v. Romain, 393 F.3d 63, 74 (1st Cir. 2004). This adage is relevant because the termination clause in the Agreement is imprecise and, as such, is susceptible to either of the competing interpretations urged by the litigants. After all, the Agreement uses the word termination loosely, in reference to termination of employment, termination of [the employee's] employment, and termination of employment with the Company. Then, too, with respect to the continuation of benefits, the contracting parties appear to have contemplated the possibility of new employment following termination, yet they did not make clear how that new employment would relate to severance benefits. Finally, the Agreement contemplates the possibility of termination due to acquisition, merger, or buyout but does not expressly preclude severance payments even in the event of employment by the successor entity. In our estimation, TSA's invocation of dictionary definitions does not assist its cause. Even if we assume that the language of the Release (which TSA drafted) indicates that it sought to hire Tejas employees free and clear of obligations owed by Tejas. On the other hand, TSA argues that Mason's employment with Tejas transferred seamlessly from Tejas to TSA without any termination of Mason's employment. Having one's cake and eating it, too, is not in fashion in this circuit, United States v. Tierney, 760 F.2d 382, 388 (1st Cir. 1985), and we are skeptical that TSA can have it both ways. - 11 - terminate means discontinue or sever, as TSA insists, Mason's employment with Tejas could reasonably be found to have been discontinued or severed regardless of any transfer to TSA. Moreover, our doubts about the meaning of terminate must be weighed in light of a legal regime prescribing that unemployment is not a prerequisite to the right to separation pay. Chapin v. Fairchild Camera & Instrum. Corp., 107 Cal. Rptr. 111, 115 (Cal. Ct. App. 1973). Rather, such a right may, and frequently does, exist where there is no interruption whatever in the continuity of employment. Id. The upshot is that the Agreement fails to make clear whether the contracting parties intended that a termination sufficient to trigger the payment of severance benefits could occur even in the event of immediate reemployment by another entity as part of a company-to-company transaction. Consequently, the termination clause is ambiguous as a matter of law. The question, then, reduces to whether the extrinsic evidence relating to the meaning of the clause is so conclusive that it dispels the ambiguity. See Torres Vargas, 149 F.3d at 33; Bos. Five Cents, 768 F.2d at 8. In ascertaining the meaning of a contract term, evidence of the contracting parties' intent at the time of contract formation is most significant. See People ex rel. Lockyer v. R.J. Reynolds Tobacco Co., 132 Cal. Rptr. 2d 151, 158 (Cal. Ct. App. 2003). This principle applies even where, as - 12 - here, one of the litigants was not a signatory to the Agreement: under California law, a successor in interest to a contract who has not renegotiated the terms of the contract is bound by the meaning assigned to its terms by the original parties. See Applera Corp. v. MP Biomeds., LLC, 93 Cal. Rptr. 3d 178, 196 (Cal. Ct. App. 2009); Spector v. Nat'l Pictures Corp., 20 Cal. Rptr. 307, 312 (Cal. Ct. App. 1962). TSA is therefore bound by the shared intent of the contracting parties to the Agreement (Mason and Tejas).5 See Spector, 20 Cal. Rptr. at 312. Of course, postformation, pre-dispute conduct also may bear on the meaning of a contract's terms. Under California law, evidence of such conduct may be relevant in ascertaining the contracting parties' shared understanding of a contract's original meaning. See Oceanside 84, Ltd. v. Fid. Fed. Bank, 66 Cal. Rptr. 2d 487, 492-93 (Cal. Ct. App. 1997). Here the record is largely devoid of any extrinsic evidence showing a shared understanding between Mason and Tejas about the meaning of termination as that term is used in the Agreement. What extrinsic evidence exists is not so one-sided as to cure the ambiguity and compel a finding against Mason. For 5 We note that the Amendment did not alter any of the substantive terms of the Agreement. It merely memorialized the parties' understanding that TSA would assume Tejas's rights and duties under the Agreement and effectuated that assumption by substituting TSA for Tejas in the Agreement's text. - 13 - example, there is conflicting evidence anent the nature of the 2011 reorganization and whether the contracting parties thought at the time of the reorganization that Mason's employment with Tejas was being terminated without cause. The post-formation evidence on which TSA relies (principally, Mason's failure to seek severance payments during the first two months of his employment with TSA) is subject to varying interpretations. Furthermore, one of Mason's sworn statements avers that he and Tejas's president (who signed the Agreement on Tejas's behalf) understood the 2011 reorganization to constitute a termination under the Agreement, regardless of whether Mason decided to cast his lot with the successor firm.6 As post-formation, pre-dispute evidence, the Amendment itself (although signed by Mason, Tejas, and TSA) tells us very little. Its preamble states that as part of [a] corporate consolidation and reorganization, Tejas will be merged into and with [TSA] or will be dissolved as a corporate entity after January 1, 2012, and [Mason] will become employed by [TSA] as of January 1, 2012. Withal, the Amendment is totally silent as to the 6 We note that Mason also relies upon the sworn statement of the former Tejas president as evidence that Tejas terminated Mason's employment within the meaning of the Agreement. As the admissibility of this affidavit was controverted in the court below, we give it no weight in our analysis. Similarly, we leave open the relevance of a document composed by TSA as part of the 2011 reorganization (colloquially known as Exhibit A). - 14 - mechanics of how Mason would cease to work for Tejas and start to work for TSA. It is equally silent as to the implications of those actions, including whether Mason was entitled to severance benefits as a result. The short of it is that ascertaining the meaning of the termination clause in the context of the 2011 reorganization hinges largely on the credibility of Mason's claims as to the contracting parties' shared intent and the inferences to be drawn from the circumstances surrounding the signing of the Amendment and the parties' conduct. Such matters are open to reasonable dispute and, therefore, are not the stuff of summary judgment. Rather, they are squarely within the province of the factfinder. See, e.g., Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Mandel v. Bos. Phoenix, Inc., 456 F.3d 198, 206 (1st Cir. 2006). TSA has a fallback position. It argues that even if Mason's employment with Tejas was terminated in December of 2011, the Release operated to absolve TSA of any liability for severance benefits owed to Mason. This argument lacks force. By its terms, the Release discharged TSA from any and all claims that Mason may have had, including any claims resulting from his separation from employment effective December 31, 2011. TSA posits that this instrument extinguished any claim that Mason may have had against TSA for severance benefits as a result of the termination of his Tejas employment. Although this argument has - 15 - a certain superficial appeal, it fails to take into account Mason's handwritten coda to the Release, which stated EXCEPT AS AMENDED IN 'AMENDMENT TO EMPLOYMENT AGREEMENT.' According to one of Mason's sworn statements, this coda was intended to exempt from the Release any severance obligations Tejas owed to him under the Agreement — and its wording is reasonably susceptible to that interpretation. And if those obligations were exempted from the Release — a matter on which we take no view — TSA might have assumed them by operation of the Amendment. To sum up, the handwritten coda, though not compelling Mason's construction, renders the Release susceptible to more than one reasonable interpretation. Extrinsic evidence in the record does not relieve this uncertainty. It follows that the Release does not, as a matter of law, bar Mason's claim for severance benefits arising out of the 2011 reorganization. See Torres Vargas, 149 F.3d at 33; Allen, 967 F.2d at 698 n.3. That ends this aspect of the matter. Because genuine issues of material fact permeate the record, the district court should not have granted TSA's motion for summary judgment on Mason's claim for severance benefits arising out of the 2011 reorganization.