Opinion ID: 200447
Heading Depth: 2
Heading Rank: 2

Heading: Partial Rescission.

Text: 27 The plaintiff next posits that the defendant unlawfully canceled a portion of the unvested stock options. The facts are straightforward. On March 23, 2000, the defendant, disappointed with the plaintiff's job performance, rescinded unvested stock options for 27,500 shares of stock. The cancellation of these options was memorialized both in a written notice sent to the plaintiff and in a form signed by the plaintiff acknowledging the action. The acknowledgment form was executed on March 27, 2000, and the plaintiff continued to work for the defendant until his eventual ouster on July 10, 2000. 28 The plaintiff now claims that the defendant had no right to take unilateral action to alter the terms of his employment agreement and that, in any event, the modification is invalid due to lack of consideration. The defendant counters that it had an absolute right to tinker with the number of options before they vested. It adds that the plaintiff assented to the partial rescission and that his continued employment after receiving notice of the modification constituted valid consideration for the change in contractual terms. 29 As said, the offer letter and related documents established an at-will relationship. See supra Part III(A). While an at-will employment agreement does not bind the parties for a particular length of time, its terms nonetheless define the parties' rights and obligations during whatever period of time the employment relationship remains intact. See Sargent v. Tenaska, Inc., 914 F.Supp. 722, 726 (D.Mass.1996) (explaining that an agreement for at-will employment may contain terms that are binding and effective during the life of the contract); Simons v. Am. Dry Ginger Ale Co., 335 Mass. 521, 140 N.E.2d 649, 653 (1957) (similar). It appears, therefore, that the defendant's promise to grant stock options to the plaintiff constituted a term of the employment agreement (subject, of course, to the provisions of the vesting schedule, the company's stock plan, and the option agreement), and that the defendant did not have the unqualified right to alter that term. 30 Assuming that the defendant lacked a unilateral right to cancel unvested stock options, the question reduces to whether the partial rescission of the options was a valid consensual modification of the employment arrangement. Like the district court, Cochran, 2002 WL 1998248 at , 2002 U.S. Dist. LEXIS 16204, at , we answer that question affirmatively. 31 Under Massachusetts law, the parties to a contract must agree to a modification. New Engl. Mut. Life Ins. Co. v. Harvey, 82 F.Supp. 702, 706 (D.Mass. 1949). Such an agreement may be express or implied. Rogers v. Rogers & Brother, 139 Mass. 440, 1 N.E. 122, 122-23 (1885). In either event, however, the modification must be supported by consideration. Sargent, 914 F.Supp. at 727; Tri-City Concrete Co. v. A.L.A. Constr. Co., 343 Mass. 425, 179 N.E.2d 319, 320 (1962). 32 In order to establish a valid modification here, the defendant had to show that the plaintiff not only consented to the partial rescission of the stock options but also received legally sufficient consideration in exchange for accepting this reduction in future benefits. The record demonstrates incontrovertibly that the plaintiff acquiesced in the partial rescission. It is uncontradicted that, in January of 2000, he participated in a meeting with his immediate superior in which he was informed that the company was unhappy with his performance and was contemplating taking back some of the stock options. He concedes that he was aware of the partial rescission that followed and that he signed an acknowledgment memorializing the action. Consent is, therefore, established. 33 That leaves the question of consideration. After the partial rescission, the defendant forbore from ending the employment relationship and the plaintiff continued to work for the defendant for more than three months. We think that this constituted mutual consideration. Where, as here, the parties reach an agreement to modify the terms of an at-will employment contract, the employer's forbearance from ending the employment relationship, coupled with the employee's continued performance, can satisfy the consideration requirement. See Gishen v. Dura Corp., 362 Mass. 177, 285 N.E.2d 117, 121 (1972); 3 Patton v. Babson Statistical Org., Inc., 259 Mass. 424, 156 N.E. 534, 536 (1927). 34 When all is said and done, this is a classic case of consideration. When the modification took place, the employee had no right to continued employment and the employer had no right to the employee's future services. Thus, each party provided consideration to the other sufficient to support a continuation of the employment relationship, on modified terms, for an indeterminate future period. 35 For these reasons, we conclude that the plaintiff's employment agreement was duly modified by the partial rescission of his unvested stock options. Both parties thus were bound by the modification.