Court Opinion

ID: 179261
Source: CourtListenerOpinion
Date Created: 2010-11-16 14:57:56+00
Date Added: 2024-06-11T17:25:47.955387
License: Public Domain

[DO NOT PUBLISH]

               IN THE UNITED STATES COURT OF APPEALS

                       FOR THE ELEVENTH CIRCUIT
                        ________________________                  FILED
                                                         U.S. COURT OF APPEALS
                                                           ELEVENTH CIRCUIT
                               No. 10-12015
                                                           NOVEMBER 16, 2010
                           Non-Argument Calendar
                                                                JOHN LEY
                         ________________________                CLERK

                     D.C. Docket No. 1:08-cv-03379-ODE

GRAPHIC PACKAGING HOLDING COMPANY,

                                                 Plaintiff-Counter-Defendant-
                                                 Appellant,

                                    versus

STEPHEN M. HUMPHREY,

                                                 Defendant-Counter-Claimant-
                                                 Appellee.

                         ________________________

                  Appeal from the United States District Court
                     for the Northern District of Georgia
                        ________________________
                             (November 16, 2010)

Before BARKETT, HULL and COX, Circuit Judges.

PER CURIAM:

      Graphic Packaging Holding Company (“Graphic Packaging”) paid Stephen M.

Humphrey $1,208,392.55 for Restricted Stock Units (“RSUs”) after he retired from
the company. Graphic Packaging claims that it overpaid Humphrey, and seeks to

recover the amount of the alleged overpayment of $541,575.08 based on theories of

money had and received and, alternatively, unjust enrichment. Graphic Packaging

also asserts a claim for attorneys’ fees and expenses pursuant to O.C.G.A. § 13-6-11.

      The issue of overpayment hinges on whether Graphic Packaging made a

mistake by valuing the RSUs on the date of Humphrey’s retirement rather than on the

date the RSUs became payable. In ruling on the parties’ cross-motions for summary

judgment, the district court concluded that Graphic Packaging failed to produce

sufficient evidence showing that valuing the RSUs on the date of Humphrey’s

retirement was a mistake. Accordingly, the district court denied Graphic Packaging’s

motion for summary judgment and granted Humphrey’s motion for summary

judgment. The district court also concluded that Graphic Packaging was not entitled

to attorneys’ fees and expenses pursuant to O.C.G.A. § 13-6-11. After review, we

affirm the judgment of the district court.

                                   I. Background

A.    The 2004 Stock and Incentive Compensation Plan and Humphrey’s Restricted
      Stock Units

      Stephen M. Humphrey served as the President and Chief Executive Officer of

Graphic Packaging Corporation or one of its corporate predecessors from 1997

                                             2
through 2006, and served as its Vice Chairman in 2007.1 In 2004, the shareholders

of Graphic Packaging approved the 2004 Stock and Incentive Compensation Plan (the

“Stock Plan”). This plan, which is not covered by ERISA, provides for the award of

various types of stock incentives for eligible employees, including Restricted Stock

Units (“RSUs”). Humphrey earned participation rights in the Stock Plan during his

career. The Stock Plan provides that actual awards of RSUs are to be made in

subsequent Award Agreements.

       Humphrey received four Award Agreements throughout his career, and the

material terms of the agreements are the same.               Through these four Award

Agreements, Humphrey received a total grant of 1,158,186 RSUs. Each of the four

Award Agreements provided that the RSUs were to be paid out to Humphrey one-half

in cash and one-half in Graphic Packaging common stock. The parties agree that

each RSU is intended to be the value equivalent of one share of stock. This appeal

concerns when the RSUs should be valued for the cash portion of Humphrey’s RSU

award.

       1
        Graphic Packaging Corporation was the publicly-traded predecessor of Plaintiff Graphic
Packaging Holding Company. As the result of a merger with Altivity Inc. in March 2008, Graphic
Packaging Corporation became a wholly-owned subsidiary of Graphic Packaging Holding Company.

                                              3
      When Humphrey retired on December 31, 2007, all of his RSUs had vested.

Although all of Humphrey’s RSUs were vested on the date of his retirement, the four

Award Agreements provide that the vested benefits do not become payable until the

expiration of the “Mandatary Holding Period.” The expiration of the Mandatory

Holding Period could occur upon one of several different events, including the

participant’s retirement. The Award Agreements also provide, however, that if a

participant is a “key employee” under Internal Revenue Code § 409A (26 U.S.C. §

409A), the Mandatary Holding Period extends for six additional months beyond the

date of retirement. Humphrey was a § 409A “key employee,” so the Mandatory

Holding Period did not expire–and the RSUs thus did not become payable–until June

30, 2008. The parties agree that the Stock Plan and the Award Agreements are silent

as to whether the value of the RSU distribution should be determined at the

conclusion of § 409A’s Mandatory Holding Period, or at another time–specifically,

on the date of Humphrey’s retirement. Because each RSU is the equivalent of one

share of the company’s stock, the question in this case is whether the stock should be

valued on the date of retirement (December 31, 2007) or the date the stock became

payable (June 30, 2008).

                                          4
B.    Graphic Packaging’s Past Practice Regarding RSU Payouts Under the Stock
      Plan

      Humphrey’s retirement on December 31, 2007, marked the first time that

Graphic Packaging imposed the six-month holding period mandated by § 409A

following a key employee’s retirement. As a result, there is no historical practice that

speaks directly to the proper valuation date for RSUs when a § 409A holding period

is imposed. Nonetheless, both parties cite Graphic Packaging’s historical practice

regarding the valuation of RSUs to support their particular valuation date. Graphic

Packaging points out that in all prior instances the RSUs were valued on the date they

became payable, and Humphrey points out that in all prior instances the RSUs were

valued on the date of retirement. Without the six-month holding period mandated

by § 409A, both claims are true because the date of retirement and the date the RSUs

become payable are the same date. The only reason these events would happen on

different dates is if the § 409A holding period was applied.

C.    Humphrey’s Alleged Overpayment

      A somewhat elaborate series of events preceded the payment of benefits in this

case. Shortly after Humphrey’s effective date of retirement, on January 9, 2008,

Graphic Packaging’s Director of Compensation Kevin R. Wolff sent Humphrey a

letter explaining the impending payout of his RSUs. The letter stated that “all vesting

                                           5
restrictions lapsed and all holding periods expired on the date of your Retirement,”

and the value of Humphrey’s RSU award was to be determined based upon the

closing stock price of the company’s common stock as of December 31, 2007, which

was $3.69 per share. (R.2-40, Ex. 7 at 8.) Wolff and his staff failed to take account

of the fact that Humphrey was a key employee under § 409A, and that the payout of

his RSUs would therefore need to be delayed by six months.

      The next day Graphic Packaging’s Senior Vice President of Human Resources

Wayne E. Juby sent a second letter to Humphrey. Like the previous letter, the letter

indicated that Humprey’s RSUs would be valued as of the date of his retirement on

December 31, 2007, and the RSUs would be deposited in Humphrey’s bank account

by January 15, 2008.

      Shortly after Juby sent the letter to Humphrey, the Graphic Packaging Legal

Department brought to Wolff’s attention that the payout of Humphrey’s RSUs would

need to be delayed for six months because of the requirements of § 409A and the

RSU Award Agreements. Wolff telephoned Humphrey and told him that his award

was subject to a six-month holding period beyond his retirement date due to § 409A

because he was a “key employee.” Wolff did not, however, tell Humphrey anything

about recalculating the value of the RSUs.

                                         6
      Wolff sent Humphrey a third letter on June 24, 2008. This letter again

confirmed that Humphrey’s RSUs would be valued as of the date of his retirement on

December 31, 2007, and stated that that the money would be direct deposited by June

30, 2008, which was the end of the six-month holding period.

      On June 30, 2008, Graphic Packaging paid Humphrey $1,208,392.55 for the

cash portion of his RSUs. This figure was based on valuing the RSUs as of

Humphrey’s date of retirement–December 31, 2007.              The price of Graphic

Packaging’s common stock on this date was $3.69 per share.

      Several weeks after Graphic Packaging deposited Humphrey’s cash benefits

into his bank account, the Graphic Packaging Legal Department questioned the

valuation date used to determine Humphrey’s RSU payout. The Legal Department

took the position that the proper valuation date for Humphrey’s RSUs was the date

of distribution (June 30, 2008) rather that the date of retirement (December 31, 2007).

Because the price of the stock had dropped to $2.02 per share on June 30, 2008, the

Legal Department concluded that Humphrey had been overpaid by $541,575.08.

      Wolff notified Humphrey of the alleged overpayment by telephone on July 22,

2008, and two days later sent Humphrey a letter stating that he had been overpaid by

$541,575.08 due to an “administrative error.” The letter stated that the amount of

cash should have been determined based on the value of Graphic Packaging’s

                                           7
common stock on June 30, 2008, which was $2.02 per share. The letter demanded

repayment of the $541,575.08.

      Humphrey declined to refund the money. After the parties failed to resolve the

proper valuation date, Graphic Packaging submitted the issue to the Compensation

and Benefits Committee of the Graphic Packaging Board of Directors (the

“Compensation Committee”) for a final determination of the proper valuation date for

Humphrey’s RSU distribution. The Stock Plan provides that the Compensation

Committee “shall be responsible for administering the Plan” and that “[a]ll actions

taken and all interpretations and determinations made by the Committee shall be final

and binding upon Participants, the Company, and all other interested individuals.”

(R.2-40, Ex. 5 at 17.) Humphrey’s four Award Agreements contain similar grants of

authority.

      Graphic Packaging notified Humphrey that the Compensation Committee

would be resolving the valuation issue and invited him to submit any additional

documents or information he wanted the Committee to consider. Prior to the

Committee’s meeting, the three Committee members received a collection of

documents that included a memorandum outlining the pertinent facts and issues, the

relevant agreements, and the correspondence between the Company and Humphrey

(or their respective counsel) regarding the dispute. On September 16, 2008, the

                                         8
Committee met and received a presentation from Graphic Packaging’s outside and in-

house counsel regarding the dispute. The Committee determined that the proper

valuation date was June 30, 2008. Immediately after this meeting, Graphic Packaging

informed Humphrey of the Committee’s decision. Humphrey again declined to return

the $541,575.08.

                              II. Procedural History

      On September 17, 2008, Graphic Packaging filed this lawsuit in Georgia state

court, seeking to recover the amount of the alleged overpayment of $541,575.08

based on theories of money had and received and, alternatively, unjust enrichment.

Graphic Packaging also asserted a claim for attorneys’ fees and expenses pursuant to

O.C.G.A. § 13-6-11.

      Humphrey removed the case to federal court. In his Answer, he asserted a

counterclaim against Graphic Packaging for breach of contract in connection with

Graphic Packaging’s payout of the stock portion of his RSUs. Humphrey also

asserted a counterclaim for attorneys’ fees and expenses pursuant to O.C.G.A. § 13-6-

11.

      The parties filed cross-motions for summary judgment that the district court

granted in part and denied in part. The district court denied Graphic Packaging’s

motion for summary judgment with respect to its claims against Humphrey. The

                                         9
district court granted Humphrey’s motion for summary judgment with respect to

Graphic Packaging’s claims against him and dismissed these claims. With respect to

Humphrey’s counterclaims, the district court denied Humphrey’s motion for summary

judgment, granted Graphic Packaging’s motion, and dismissed the counterclaims.

The district court entered final judgment and ordered that each party bear its own

costs. Graphic Packaging filed a timely Notice of Appeal. Humphrey did not appeal

the dismissal of his counterclaims.

                                  III. Issues on Appeal

       Graphic Packaging raises the following issues on appeal: (1) whether the

district court erred in concluding that Graphic Packaging failed to produce sufficient

evidence showing that the company’s valuation of Humphrey’s RSU’s on the date of

his retirement was mistaken;2 and (2) whether the district court erred in concluding

that Graphic Packaging was not entitled to attorneys’ fees and expenses pursuant to

O.C.G.A. § 13-6-11.

       2
         The district court denied Graphic Packaging’s motion for summary judgment and granted
Humphrey’s motion for summary judgment on the ground that Graphic Packaging failed to submit
evidence showing that it made a mistake by valuing Humphrey’s RSUs as of the date of his
retirement. Because we ultimately affirm on this basis, both motions are discussed together.

                                             10
                                   IV. Discussion

A. Money had and received / unjust enrichment

      An action for money had and received is founded on the equitable principle

that no one ought to unjustly enrich himself at the expense of another. Gulf Life Ins.

Co. v. Folsom, 349 S.E.2d 368, 370-71 (Ga. 1986). Recovery in such an action is

authorized against one who holds the money of another that he ought in equity and

good conscience refund. Time Ins. Co. v. Fulton-DeKalb Hosp. Auth., 438 S.E.2d

149, 150-51 (Ga. Ct. App. 1993) (quotations and citations omitted). A plaintiff

prevails on an action for money had and received where (1) a payment was

mistakenly made as a result of the plaintiff’s lack of diligence and (2) the party

receiving payment would not be prejudiced by refunding the payment–subject to a

weighing of the equities between the parties. Folsom, 349 S.E.2d at 373. Claims for

unjust enrichment brought in an attempt to recover a mistaken overpayment are

analyzed by Georgia courts under the same framework as a claim for money had and

received. See D & H Constr. Co. v. City of Woodstock, 643 S.E.2d 826, 830 (Ga. Ct.

App. 2007).

      The district court denied summary judgment to Graphic Packaging and granted

summary judgment to Humphrey on Graphic Packaging’s claims for money had and

received and unjust enrichment because it found that Graphic Packaging could not

                                         11
show that it made a mistake by valuing the RSUs as of the date of Humphrey’s

retirement. Graphic Packaging contends that the district court erred in reaching this

conclusion in the following ways: (1) by failing to defer to the determination of the

Compensation Committee regarding the appropriate valuation date; (2) by rejecting

and misconstruing Kevin Wolff’s undisputed testimony regarding the events leading

to the alleged overpayment; and (3) by misinterpreting Graphic Packaging’s past

practice regarding RSU valuation. We address each contention in turn.

       Graphic Packaging first argues that the district court erred by failing to give

proper deference to the Compensation Committee’s determination that Humphrey’s

RSUs should have been valued as of the date they became payable (June 30, 2008).

According to Graphic Packaging, this deference is mandated by the language of the

Stock Plan and Award Agreements and by Delaware law.3

       The Stock Plan and Award Agreements do not address the appropriate

valuation date in the event RSUs vest and are paid out on different dates, as in

Humphrey’s case. The documents do, however, give the Compensation Committee

“full and exclusive discretionary authority” to interpret the Stock Plan and Award

       3
           The Stock Plan and the Award Agreements provide that they are to be interpreted in
accordance with Delaware law. Graphic Packaging claims that Delaware law governs the
interpretation of the Stock Plan and Award Agreements, and Humphrey does not dispute this
contention. We therefore assume without deciding that Delaware law is the proper choice of law in
interpreting the relevant documents.

                                               12
Agreements, and provide that the determinations of the Committee are “final and

binding.” (R.2-40, Ex. 5 at 17.) Delaware law, moreover, requires courts to give

deference to a committee that is granted interpretive and decision-making authority

under a corporate compensation plan. See, e.g., JPMorgan Chase & Co. v. Pierce,

517 F. Supp. 2d 954, 958 (E.D. Mich 2007) (quoting Schwartz v. Century Circuit,

Inc., 163 A.2d 793, 796 (Del. Ch. 1960)) (applying Delaware law and explaining that

“[w]here a contract vests a corporate administrative committee with the authority to

make ‘binding, final and conclusive’ decisions regarding an employee’s eligibility

under a corporate compensation plan, a court should accept the committee’s decision

as ‘conclusive in the absence of fraud, bad faith and the like.’”); Lieberman v. Becker,

155 A.2d 596, 600 (Del. 1959) (“We must assume that the committee of directors

charged with the administration of this plan will do so in the good faith exercise of

their considered business judgment. . . . A decision by responsible businessmen

reached after careful consideration . . . , without bad faith or fraud, is entitled to

weighty consideration by the courts.”).

      Based on the Compensation Committee’s authority to interpret the Stock Plan

and Award Agreements and the deference afforded to corporate compensation

committees under Delaware law, Graphic Packaging contends that analysis of the

Committee’s decision should be limited to assessing whether it was tainted by bad

                                          13
faith or fraud, and, in the absence of both, Delaware law requires deferring to the

Committee’s determination that Humphrey was overpaid.

      We cannot agree. In this case, Graphic Packaging has the burden to produce

evidence showing that it made a mistake when it valued and paid Humphrey’s RSUs

based on the date of his retirement. Graphic Packaging cannot meet this burden by

simply pointing to the Compensation Committee’s ultimate conclusion that

Humphrey’s RSUs should be valued on the date they became payable. Rather,

Graphic Packaging must produce evidence showing why one valuation date is correct

and the other date is incorrect. Further, the Delaware cases do not support Graphic

Packaging’s argument because those cases did not concern mistaken payments

whereby the corporate employer has the burden of proving that a payment was

mistaken in order to be entitled to equitable relief. Thus, the district court was correct

in analyzing the basis for the Compensation Committee’s conclusion in order to

determine whether Graphic Packaging met its burden of submitting evidence of a

mistaken payment.

      Graphic Packaging also argues that the evidence supporting the Compensation

Committee’s determination shows that a mistaken payment was made. We disagree.

Graphic Packaging has pointed to no specific document or testimony that shows why

valuing the RSUs on the date they became payable is correct and valuing the RSUs

                                           14
on the date of retirement is incorrect. While one committee member testified that

past practice supported valuing the RSUs on the date they became payable, there was

no past practice of valuing RSUs in the context of a § 409A key employee, like

Humphrey.

      Graphic Packaging next argues that the testimony of Director of Compensation

Kevin Wolff provides sufficient evidence that the company’s valuation of

Humphrey’s RSUs as of the date of his retirement was mistaken. Graphic Packaging

contends that the district court refused to credit Wolff’s testimony, and this refusal

amounted to an impermissible credibility determination. We disagree.

      The district court correctly concluded that Wolff’s testimony did not establish

that Graphic Packaging over-valued Humphrey’s RSUs by valuing them as of the date

of Humphrey’s retirement (December 31, 2007). While Wolff testified that valuing

the RSUs as of the date of retirement was a “mistake,” he did not explain the basis for

this conclusion. While Wolff testified that valuing the RSUs as of the date of

retirement was not in line with the company’s understanding of its past practice in

interpreting the Stock Plan, Graphic Packaging had never previously addressed how

RSUs should be valued in the context of a § 409A key employee, like Humphrey. We

agree with the district court’s conclusion that valuing Humphrey’s RSUs as of the

date of his retirement was a reasonable interpretation of the relevant agreements that

                                          15
was confirmed repeatedly through numerous letters and, ultimately, by paying

Humphrey accordingly.

      Graphic Packaging also argues that the district court erred in its assessment of

the Company’s past practice regarding the valuation of RSUs. According to Graphic

Packaging, prior to Humphrey’s retirement all RSUs paid out under the Stock Plan

were valued on the date the RSUs became payable regardless of vesting date.

      We agree with the district court that Graphic Packaging’s past practice does not

show that a mistake was made in valuing Humphrey’s RSUs. As the district court

correctly noted, in every instance prior to Humphrey’s retirement, the date of

retirement was the same date as the date the RSUs became payable under the Award

Agreements because the only reason the dates would differ is if the § 409A holding

period was imposed. Since there is no indication in the record that a § 409A holding

period had ever been imposed prior to Humphrey’s retirement, there is no historical

practice that could show that Humphrey’s RSU valuation was miscalculated.

      We conclude by noting, as the district court did, that Graphic Packaging’s

arguments are notable for what they do not say. First, neither the Stock Plan nor the

Award Agreements provide that Humphrey’s RSUs should have been valued on the

date the § 409A holding period expired. Although the § 409A holding period may

postpone the distribution of the payment, there is no indication in the Award

                                         16
Agreements that it operates to alter the value of Humphrey’s vested RSUs. Second,

nothing in § 409A suggests that the proper valuation date should be at the end of the

six-month holding period. Since it is clear that if § 409A had not been applied to

delay Humphrey’s RSU distribution the valuation date under the relevant agreements

would have been the date of Humphrey’s retirement, there is no basis for the

conclusion that § 409A somehow operates to change the valuation date.

      Accordingly, the district court correctly determined that Graphic Packaging

failed to submit evidence showing that its valuation of Humphrey’s RSUs on the date

of his retirement was a mistake.

B. Attorneys’ Fees

      Graphic Packaging argues that the district court erred in granting Humphrey’s

motion for summary judgment on Graphic Packaging’s claim for attorneys’ fees and

expenses pursuant to O.C.G.A. § 13-6-11.4 In order to prevail on such a claim, a

plaintiff must first prevail on its underlying claims. Ellis v. Gallof, 469 S.E.2d 288,

289 (Ga. Ct. App. 1996). Graphic Packaging has not done so in this case, and we

thus affirm the district court’s grant of summary judgment in favor of Humphrey on

Graphic Packaging’s claim for attorneys’ fees and expenses.

      4
         Graphic Packaging has withdrawn its appeal with respect to its motion for summary
judgment on its claim for attorneys’ fees and expenses pursuant to O.C.G.A. § 13-6-11.

                                           17
                            V. Conclusion

For the foregoing reasons, we affirm the judgment of the district court.

AFFIRMED.

                                  18