Opinion ID: 779792
Heading Depth: 2
Heading Rank: 1

Heading: Lucente's Breach of Contract Claim

Text: 41 We review a district court's grant of summary judgment de novo. Republic Nat'l Bank of New York v. Delta Air Lines, 263 F.3d 42, 46 (2d Cir.2001). 42 Although misapplied in this case, the standards governing summary judgment are well-settled. Summary judgment is appropriate only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits... show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The party seeking summary judgment has the burden to demonstrate that no genuine issue of material fact exists. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Gallo v. Prudential Residential Servs., L.P., 22 F.3d 1219, 1223-24 (2d Cir.1994). 43 In determining whether a genuine issue of material fact exists, a court must examine the evidence in the light most favorable to, and draw all inferences in favor of, the non-movant, in this case IBM. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d Cir.2000). Stated more succinctly, [t]he evidence of the non-movant is to be believed. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute regarding a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Id. at 248. Therefore, summary judgment is improper if there is any evidence in the record that could reasonably support a jury's verdict for the non-moving party. Pinto v. All-state Ins. Co., 221 F.3d 394, 398 (2d Cir. 2000). 44 In deciding a motion for summary judgment, the district court's function is not to weigh the evidence or resolve issues of fact; it is confined to deciding whether a rational juror could find in favor of the non-moving party. Anderson, 477 U.S. at 249, 106 S.Ct. 2505. In short, [c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.... Id. at 255, 106 S.Ct. 2505.
45 The bedrock question in this case is whether Lucente quit or was fired. IBM contends that the district court's grant of summary judgment to Lucente on his breach of contract claim was erroneous because there are genuine issues of fact surrounding this question. We agree. 46 The parties agree on one thing: New York law governs this diversity action. New York courts disfavor restrictive covenants in the employment context and will generally enforce them only to the extent they are reasonable and necessary to protect valid business interests. BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 690 N.Y.S.2d 854, 856-57, 712 N.E.2d 1220 (1999); Post v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 48 N.Y.2d 84, 421 N.Y.S.2d 847, 848, 397 N.E.2d 358 (1979). There is, however, one salient exception: New York courts will enforce a restrictive covenant without regard to its reasonableness if the employee has been afforded the choice between not competing (and thereby preserving his benefits) or competing (and thereby risking forfeiture). Post, 421 N.Y.S.2d at 848-49, 397 N.E.2d 358; Kristt v. Whelan, 4 A.D.2d 195, 164 N.Y.S.2d 239, 243 (1st Dep't 1957) (It is no unreasonable restriction of the liberty of a man to earn his living if he may be relieved of the restriction by forfeiting a contract right or by adhering to the provisions of his contract.), aff'd without opinion, 5 N.Y.2d 807, 181 N.Y.S.2d 205, 155 N.E.2d 116 (1958). 4 This employee choice doctrine assumes that an employee who elects to leave a company makes an informed choice between forfeiting a certain benefit or retaining the benefit by avoiding competitive employment. Kristt, 164 N.Y.S.2d at 243. 47 Although New York courts have not sketched out every detail of the employee choice doctrine, three strokes are bold and clear. First, an employer can rely on the doctrine only if it can demonstrate its continued willingness to employ the party who covenanted not to compete. Post, 421 N.Y.S.2d at 849, 397 N.E.2d 358. Second, when an employee is involuntarily discharged without cause, the employer cannot invoke the benefits of the doctrine. Id. Enforcing the non-competition provision under such circumstances would be unconscionable because it would destroy the mutuality of obligation on which a covenant not to compete is based. Id. Third, the factual determination whether an employee was involuntarily terminated is generally not appropriate for summary judgment. Id. 48 Applying these standards to the present case, the district court's grant of summary judgment on Lucente's breach of contract claim was erroneous. In finding that Lucente had been involuntarily terminated by IBM (and therefore that the employee choice doctrine was inapplicable), the district court resolved numerous factual discrepancies in Lucente's favor. In so doing, the court usurped the jury's province as fact-finder. 49 In concluding that Lucente was fired, the district court relied on selective and incomplete deposition testimony while ignoring substantial evidence that Lucente's departure from IBM was indeed voluntary. For example, the district court credited Lucente's testimony that Akers told him that IBM would not have a job for him when he returned from Tokyo. Akers, however, testified that he discussed with Lucente the different job opportunities that were available to him at IBM, including various senior staff jobs. (R. at 206-08). Further, Akers maintained that it was perfectly all right by me [for Lucente] to stay in the IBM Company if that was his choice. (R. at 206). Indeed, Akers was adamant that [Lucente] knew he had a job in IBM if he wished to stay. (R. at 208). While it is undisputed that Akers never offered Lucente a specific job at IBM, Akers stated that he was work[ing] on that. (R. at 206). That Lucente agreed to take a job at Northern Telecom before Akers offered him a specific job at IBM does not compel the conclusion that Lucente was involuntarily terminated. It may well undercut Lucente's claim of involuntary termination in the face of Akers's testimony that Lucente had a job at IBM if he wanted one. In any event, this is a jury question. 50 Likewise, the district court relied on selective testimony from Akers regarding his belief that it was in IBM's best interests if Lucente sought employment outside of the company. In so doing, the district court ignored Akers's testimony qualifying this statement in which he noted that IBM's best interest was served only insofar that [Lucente] find an opportunity that excites him, that energizes him, that gives him a chance to succeed from his point of view as opposed to working in the IBM Company knowing that he has topped out, at least temporarily. (R. at 209). 51 Moreover, the district court ignored evidence presented by IBM that Lucente's move to Northern Telecom was voluntary. It is undisputed that Northern Telecom offered an extremely lucrative compensation package to Lucente, with a base salary approximately $100,000 higher than his IBM salary. It is also significant that Northern Telecom offered Lucente the opportunity to succeed the CEO after a few years, an opportunity that Lucente acknowledged was highly unlikely at IBM. 52 Finally, it is undisputed that Lucente met with the CEO of Northern Telecom in the summer of 1990, several months before he began to sense that he was no longer in favor at IBM. The district court chose to credit Lucente's explanation that this meeting was merely an exploratory meeting arranged at the request of a headhunter. Lucente I, 117 F.Supp.2d at 345 n. 3. Putting aside the fact that the district court was required to construe all reasonable inferences in favor of IBM, the non-moving party, it is naive to believe that such a meeting is always so innocuous. It is equally plausible that long before he was replaced in Tokyo Lucente, who had expressed interest in becoming the CEO of some corporation, felt that he was not going to achieve that position at IBM and sought out a company to provide that opportunity. 53 In any case, the substantial evidence presented by IBM that it was willing to continue to employ Lucente upon his return from Tokyo, coupled with the evidence suggesting that Lucente's leap to Northern Telecom was long-planned and extremely advantageous to him, both in terms of monetary reward and career satisfaction, require that we reverse the district court's determination that the employee choice doctrine is inapplicable.
54 Lucente continues to press the argument, raised unsuccessfully before the district court, that his restricted stock was not subject to forfeiture under the terms of the 1982 Plan. He relies on paragraph 13 of that Plan, which provides that IBM's obligation to make any payment under the Plan is subject to the condition that for the entire period of deferral or restriction the employee shall not render services for any organization that competes with IBM. Lucente argues that the delivery of restricted stock does not fall under paragraph 13. This argument need not detain us long. 55 As the district court correctly found, the 1982 Plan is replete with references to payment in conjunction with restricted share awards. Lucente I, 117 F.Supp.2d at 343. Moreover, the preamble to the 1982 Plan states that all awards are subject to the [r]estrictions on transferability, and conditions of forfeiture set out in paragraphs 7(c), 8, 12, and 13 of the Plan. (R. at 62) (emphasis added). In short, the terms of the 1982 Plan unambiguously establish that restricted stock awards are indeed subject to forfeiture. 56 Equally unavailing is Lucente's claim that awards under the 1982 Plan are not forfeitable because the Plan is a pension plan covered by ERISA. This argument was not properly preserved for appeal, as Lucente never raised it below and the district court did not address it in any of its opinions. Caiola v. Citibank, N.A., 295 F.3d 312, 327 (2d Cir.2002). Even if the issue were ripe for review, however, the 1982 Plan is clearly exempted from ERISA's non-forfeitability provisions. See 29 U.S.C. § 1051(2) (exempting plans that are unfunded and designed primarily to provide deferred compensation for select executives); Demery v. Extebank Deferred Comp. Plan(B), 216 F.3d 283, 287-88 (2d Cir.2000). 57
58 Our reversal of the district court's grant of summary judgment to Lucente obviates any need to examine its conclusion that the forfeiture provisions of the 1982 and 1989 Plans were unreasonable as a matter of law. The factual inquiry into the reasonableness of these provisions cannot be undertaken until a jury determines whether Lucente had a choice to remain at IBM or was involuntarily terminated, and therefore whether the employee choice doctrine applies to this case.