Court Opinion

ID: 4345995
Source: CourtListenerOpinion
Date Created: 2018-11-30 15:41:11.939465+00
Date Added: 2024-06-11T14:48:15.746939
License: Public Domain

NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal
revision before publication in the Vermont Reports. Readers are requested to notify the Reporter of
Decisions by email at: JUD.Reporter@vermont.gov or by mail at: Vermont Supreme Court, 109
State Street, Montpelier, Vermont 05609-0801, of any errors in order that corrections may be made
before this opinion goes to press.

                                          2018 VT 124

                                          No. 2017-193

David Tanzer                                                   Supreme Court

                                                               On Appeal from
   v.                                                          Superior Court, Chittenden Unit,
                                                               Civil Division

MyWebGrocer, Inc., Richard E. Tarrant, Jr.                     March Term, 2018
and Jeremiah F. Tarrant

Helen M. Toor, J. (summary judgment); Robert A. Mello, J. (final judgment)

Karen McAndrew and Kendall Hoechst of Dinse, Knapp & McAndrew, P.C., Burlington, for
 Plaintiff-Appellee/Cross-Appellant.

Bridget C. Asay of Stris & Maher LLP, Montpelier, and Jerome F. O’Neill of Gravel & Shea, PC,
 Burlington, for Defendant-Appellant/Cross-Appellee MyWebGrocer, Inc.

PRESENT: Reiber, C.J., Skoglund, Robinson, Eaton and Carroll, JJ.

        ¶ 1.   CARROLL, J.           This case arises from a dispute between an employer,

MyWebGrocer, and an employee, David Tanzer, regarding the payment of phantom shares

MyWebGrocer promised in an agreement between the parties. MyWebGrocer appeals the trial

court’s decision on summary judgment finding that MyWebGrocer breached this agreement, a jury

verdict finding that the company breached the covenant of good faith and fair dealing, the jury’s

damages awards, and a post-verdict order awarding Tanzer attorney’s fees in connection with the

litigation between the parties. Tanzer appeals the trial court’s post-verdict decision on attorney’s

fees as well, arguing that the court erroneously limited the amount of fees that he could collect.
Tanzer also appeals the trial court’s decision on summary judgment that the amount he was due

under the phantom share plan did not fall within the definition of wages for purposes of Vermont’s

wage statutes. We reverse the trial court’s decision regarding whether MyWebGrocer breached the

parties’ agreement and vacate the jury’s verdict and damages awards in connection with Tanzer’s

claim that MyWebGrocer breached the covenant of good faith and fair dealing. We also reverse the

trial court’s decision at summary judgment on Tanzer’s statutory claim and conclude that the value

of the phantom shares falls within the relevant statutory definition of wages. We need not address

the court’s post-verdict decision regarding whether Tanzer could collect attorney’s fees.

                               I. Factual and Procedural Background

                             A. The Parties and the Phantom Share Plan

       ¶ 2.    MyWebGrocer is a company that provides web-based e-commerce systems for

grocery stores nationwide. Richard Tarrant and Jeremiah Tarrant are officers of the company.

MyWebGrocer hired David Tanzer in 2000 and he served as the company’s principal database

architect until his employment was terminated in 2008. MyWebGrocer was organized as an LLC

during the entirety of Tanzer’s employment. As part of Tanzer’s compensation package, he was

given membership in the company’s phantom share plan. Tanzer’s phantom share agreement

provided that his phantom shares would vest at a rate of 1/36 per month after successful completion

of an initial post-employment probation period. He also received lump sum phantom share awards

that vested over a specified period of years, and, for a period of his employment, also received vested

phantom shares per pay period in lieu of a portion of his salary.

       ¶ 3.    A phantom share plan gives employees a financial stake in the employing enterprise.

In the context of a corporation, “[p]hantom stock is the grant of a right to the appreciation in the

corporation’s stock, with a fixed exercise date and method of calculation.” 5A Fletcher Cyclopedia

of the Law of Corporations § 2137.20 (2018). The same principle applies to a phantom share plan,

with the distinction that the value of an interest in a phantom share plan is tied to a distributional

                                                  2
interest in an LLC, rather than the value of stocks. In contrast to an options plan, neither phantom

stock in a corporation, nor a phantom share in the distributional interest of an LLC, dilutes ownership

of the business entity as a whole. Id.; 18B Am. Jur. 2d Corporations § 1692 (2018) (“A phantom

stock plan is a bonus plan intended to give the management of a closely held corporation a financial

interest in a company without giving them an equity interest in the corporation.”).

       ¶ 4.    Several versions of MyWebGrocer’s phantom share plan were introduced in the trial

court and are part of the record on appeal, including plans from 2000, 2001, 2005, 2008, and 2009.

When Tanzer’s employment with MyWebGrocer was terminated in 2008, he was told that he had

103,576 vested shares in the plan. Tanzer was also given a summary of the phantom share plan from

the year 2000 and a summary version of the plan dated February 21, 2008. While some of the plan

language varied across iterations, each version of the plan included a provision stating that a change

in the control of the company would trigger conversion of vested phantom shares into a distributional

interest in the company. Each plan provided a formula by which such a distributional interest would

be calculated; each plan after 2000 included a separate provision stating that the plan’s administering

committee had the authority to issue phantom shares but that the total phantom shares issued could

not exceed ten percent of the company’s overall distributional interest. Each version of the plan also

included a provision stating that the plan would be amended if MyWebGrocer converted from an

LLC to a corporation other than through holding an initial public offering (IPO), and provided a

means for converting the distributional interest associated with vested phantom shares to shares of

stock in the event of an IPO.

       ¶ 5.    In 2009, in anticipation of a $13,000,000 investment, MyWebGrocer converted from

an LLC to an entity incorporated under the laws of Delaware. At the time of the conversion,

MyWebGrocer amended the phantom stock plan, changing the formula included in prior plans for

calculating the value of the distributional interest of the phantom shares to a formula calculating the

value of the phantom shares in terms of common stock ownership. The 2009 plan also capped the

                                                  3
number of phantom shares at the number of vested shares at the time of corporate reorganization—

a total of 2,544,160 vested phantom shares. When converted using the 2009 plan’s formula, the

phantom shares were equivalent to 254,416 shares of common stock.1 The former owners of

MyWebGrocer, now shareholders in the newly formed corporation, held the remaining shares in the

company, a total of 2,250,001 shares of common stock. Just after the corporate conversion,

MyWebGrocer issued 785,462 shares of preferred stock to the investor, thereby diluting the

percentage of the company owned by common stockholders and members of the phantom share

plan, although not diminishing the value of their respective stocks and shares.

       ¶ 6.    MyWebGrocer entered a merger agreement in 2013, which triggered a cashout of the

phantom shares. The value of the phantom shares was calculated using the 2009 plan’s formula for

valuation. MyWebGrocer offered Tanzer $538,667.45 for the phantom shares he had accrued during

his employment. He was also offered $50,885.81 from a $16,500,000 escrow account that the parties

to the merger had created by agreement and that would be paid out if certain conditions were met.

Tanzer disputed MyWebGrocer’s valuation of the phantom shares, arguing that the plan provided

that phantom shareholders collectively would receive ten percent of the total merger consideration

upon payout and that MyWebGrocer’s valuation gave phantom shareholders between seven and

eight percent of the merger consideration. After back and forth between the parties and the parties’

attorneys, MyWebGrocer offered to settle the dispute with Tanzer. Tanzer did not accept the terms

of the proposed settlement and instead filed a complaint in the superior court’s civil division.

                                   B. The Trial Court Proceedings

       ¶ 7.    Tanzer’s initial complaint included four counts, each essentially premised on

Tanzer’s argument that MyWebGrocer had undervalued his phantom shares. To that end, Tanzer’s

       1
          The reduction from 2,544,160 vested phantom shares to 254,416 shares of common stock
was the result of a ten-percent reverse share/stock split which applied to the distributional interests
in the company as well.
                                                  4
complaint alleged that (1) MyWebGrocer breached its contractual obligations to Tanzer by failing

to pay him the total due under the phantom share plan, (2) the company breached the covenant of

good faith and fair dealing by “engaging in conduct intended to deny him the benefit of his bargain

with” MyWebGrocer, (3) the company was unjustly enriched by its failure to pay Tanzer the total

due for his phantom shares, and (4) MyWebGrocer violated Vermont’s wage law by witholding

Tanzer’s “deferred compensation” in the form of the total value of his phantom shares and by

requiring Tanzer to sign a release as a condition of receipt of the value of his phantom shares. In

connection with these claims, Tanzer sought compensatory damages, statutory double damages for

the alleged violation of Vermont’s wage law, attorney’s fees, punitive damages, costs and interest,

and injunctive relief precluding MyWebGrocer from releasing escrowed funds pending resolution

of the dispute with Tanzer.

       ¶ 8.    MyWebGrocer’s answer set forth several affirmative defenses and raised six

counterclaims against Tanzer, including breach of contract, breach of the duty of loyalty, unfair

competition, two allegations of unjust enrichment, and breach of the duty of good faith and fair

dealing. Tanzer later amended his initial complaint to add a count based on promissory estoppel.

He amended his complaint again to clarify the relief sought for his claims, seeking compensatory

damages including attorney’s fees, double statutory damages and attorney’s fees for the alleged

Vermont wage law violation, punitive damages, and costs and interest.

       ¶ 9.    The parties filed cross motions for summary judgment. Tanzer sought summary

judgment for breach of contract and for his claim that MyWebGrocer violated Vermont’s wage and

compensation law by withholding the total amount due to him for his phantom shares.

MyWebGrocer sought summary judgment on all of its claims against Tanzer.

       ¶ 10.   The court ruled in Tanzer’s favor on his claim for breach of contract and on each of

MyWebGrocer’s counterclaims against him. The court ruled in MyWebGrocer’s favor on Tanzer’s

statutory claim. Regarding Tanzer’s contract claim, the court concluded that the 2008 phantom share

                                                5
plan given to Tanzer at the time of his termination was the controlling agreement between the parties

regarding valuation of Tanzer’s phantom shares. The court read the 2008 plan to set the total number

of phantom shares awarded at ten percent of the company’s value at the time of payout of the shares,

regardless of the intervening corporate reorganization and the plan’s provision permitting

amendment of the plan upon reorganization. The court further concluded that post-incorporation

issuance of new stock had diluted the ownership interests of all shareholders, including the phantom

shareholders, such that the phantom shareholders’ stake in the company was less than ten percent

when the value of the phantom shares were paid out. Accordingly, the court concluded that

MyWebGrocer had undervalued Tanzer’s phantom shares and breached the phantom shares

agreement between the parties.

       ¶ 11.   Concluding that Tanzer’s alternate claims against MyWebGrocer for unjust

enrichment and promissory estoppel were premised on the same underlying facts as his contract

claim, the court ruled that these two claims were moot. Regarding Tanzer’s statutory claim for

wages, the court concluded that the phantom shares “were more like a lottery ticket than a debt.”

The court understood the phantom shares to be essentially valueless unless a triggering event

occurred, and thus not within the scope of Vermont’s wage and compensation law. The court

accordingly granted summary judgment for MyWebGrocer on this claim.

       ¶ 12.   The court read MyWebGrocer’s counterclaims against Tanzer as premised on the

argument that Tanzer improperly used his special expertise to gain concessions from MyWebGrocer

during his employment with the company. Concluding that as a matter of law such an argument

could not support an action for breach of contract, breach of the duty of loyalty, unfair competition,

unjust enrichment, or breach of the duty of good faith and fair dealing, the court granted summary

judgment on each of these claims in Tanzer’s favor. The court’s decision on summary judgment left

a single claim alive—Tanzer’s claim against MyWebGrocer for breach of the covenant of good faith

and fair dealing, the basis of which concerned not only MyWebGrocer’s failure to pay him the

                                                  6
amount he claimed was due, but also MyWebGrocer’s conduct in connection with the payout and

the dispute which followed.

       ¶ 13.   Following discovery and several motions between the parties, a five-day jury trial on

the covenant of good faith and fair dealing claim commenced on March 20, 2017. Before the trial

began, MyWebGrocer filed a motion to exclude the use of or any reference to the court’s summary

judgment decision in Tanzer’s favor on his breach of contract claim. Tanzer argued in response that

he intended to rely on the substance of that decision to support his claim for breach of the covenant

of good faith and fair dealing. The court concluded that it would “likely be necessary to reference

previous court rulings to give the jury necessary background information and assist in the orderly

presentation of evidence” but that prior rulings could not be used to influence the jury one way or

another. The court ruled that it would instruct the jury at the start of trial that a breach of contract

claim had already been decided in Tanzer’s favor and stated that it would consider a limiting

instruction regarding prior rulings.

       ¶ 14.   The jury found in Tanzer’s favor on his covenant of good faith and fair dealing claim.

Tanzer was awarded $100 for emotional distress, $300,000 in compensatory damages other than

emotional distress, and $750,000 in punitive damages. These awards were in addition to the amount

awarded on Tanzer’s breach of contract claim as a result of the court’s decision on summary

judgment.

       ¶ 15.   After the trial concluded, Tanzer filed a motion requesting attorney’s fees in addition

to the awards he received in connection with the contract and covenant of good faith and fair dealing

claims. The court ordered that Tanzer could collect attorney’s fees in connection with some of

MyWebGrocer’s conduct during the course of the litigation, which the court found was dishonest

and done in bad faith. Tanzer was not permitted, however, to collect attorney’s fees in connection

with MyWebGrocer’s litigation positions, including fees expended in defense against

                                                   7
MyWebGrocer’s initial counterclaims. The court deferred determination of the actual amount of

attorney’s fees that could be collected until after an appeal to this Court.

        ¶ 16.   Both parties now appeal. MyWebGrocer appeals the court’s decision finding in

Tanzer’s favor on the contract claim, as well as the jury decision finding for Tanzer on the covenant

of good faith and fair dealing claim, the jury’s awards of compensatory and punitive damages, and

the court’s post-trial decision permitting Tanzer to recover attorney’s fees. Tanzer appeals the trial

court’s decision on summary judgment in MyWebGrocer’s favor on his claim that MyWebGrocer

violated Vermont’s wage and compensation law by withholding the amount Tanzer was due under

the phantom share plan. Tanzer also appeals the court’s post-trial decision permitting him to recover

attorney’s fees for some, but not all, of MyWebGrocer’s litigation conduct. We address each of

these issues in turn.

                                  II. The Breach of Contract Claim

        ¶ 17.   This Court reviews summary judgment decisions de novo, and applies the same

standard as the trial court. “The court shall grant summary judgment if the movant shows that there

is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of

law.” V.R.C.P. 56(a). The question presented here relates solely to the meaning of MyWebGrocer’s

phantom share plan, and whether the plan promised members ten percent of the equity of the

company at the time that phantom shares were paid out, regardless of the company’s organization

as an LLC or a corporation. We interpret contract provisions “to give effect to the intent of the

parties as that intent is expressed in their writing.” Hamelin v. Simpson Paper Co., 167 Vt. 17, 19,

702 A.2d 86, 88 (1997). “When the contract language is clear, the intent of the parties is taken to

be what the agreement declares.” Id. We conclude that there is no genuine dispute in this case: each

pre-2009 version of MyWebGrocer’s phantom share plan expressly contemplates the plan’s

amendment upon MyWebGrocer’s reorganization into a corporation in a manner other than by

holding an IPO; the pre-2009 plans’ share valuation formula became essentially meaningless upon

                                                   8
the company’s reorganization as a corporation; and the 2009 plan amendment, undertaken when the

company reorganized into a corporation, is consistent with the pre-2009 plans’ conversion of

phantom shares in the event of an IPO. Accordingly, we reverse the trial court’s decision on this

issue.

         ¶ 18.   The trial court’s decision began with consideration of which iteration of the phantom

share plan applied to Tanzer, and concluded that the February 2008 plan MyWebGrocer gave Tanzer

after his termination controlled. Tanzer argues on appeal that the court correctly concluded this was

the applicable plan. MyWebGrocer, by contrast, argues that the result in this case is the same

regardless of which plan applied. We agree with MyWebGrocer—whether the February 2008 plan

was controlling at the time of Tanzer’s termination does not control the eventual valuation of

Tanzer’s, or other employees’, phantom shares in the company. Thus, we will assume, without

deciding, that the February 2008 phantom share plan was effective at the time of Tanzer’s

termination. But as we explain more fully below, this does not translate into a valuation of Tanzer’s

phantom shares according to a formula in the 2008 plan or as a percentage valuation based on his

proportional interest in ten percent of the value of MyWebGrocer as a whole at the time shares were

paid out.

         ¶ 19.   Four provisions of the February 2008 plan are relevant here:

                 4.2 Number of Shares Awarded. The maximum number of Phantom
                 Shares that may be awarded under this Plan shall be determined by
                 the Committee, provided, however, that the maximum number of
                 Phantom Shares to be awarded under this Plan shall represent a ten
                 percent (10%) Distributional Interest in the Company.

                 ...

                 5.2 Change in Control of the Company. In the event of a Change in
                 Control of the Company, each Phantom Share credited to the Phantom
                 Share Account of a Participant shall immediately prior thereto or
                 coincident therewith be converted into a Distributional Interest in the
                 Company pursuant to the following formula:

                                 X ÷ N * 10% = Membership Interest

                                                   9
              Where X = The number of outstanding Phantom Shares credited to
              the Participant’s Phantom Share Account as of the date of such sale
              and N equals the maximum number of Phantom Shares that may be
              awarded under this Plan.

              For purposes of illustration, on the date of a Change in Control a
              Participant has received Awards of 20,000 Phantom Shares and the
              maximum number of Phantom Shares in the Plan is 2,500,000, the
              Participant’s Phantom Shares would be converted into a .08%
              Distributional Interest (20,000 ÷ 2,500,000 * 10% = 0.08%).

              5.3 Initial Public Offering. In the event that the Company will be
              reorganized as a corporation for the purpose of becoming publicly
              traded on an established securities exchange, each Phantom Share
              credited to the Participant’s Phantom Share Account shall
              immediately prior thereto or coincident therewith be converted into a
              Distributional Interest in the Company pursuant to the formula
              specified in Section 5.2. The Participant’s Distributional Interest shall
              then be converted into a sufficient number of shares of the common
              stock of the Company that will provide each Participant with the same
              ownership interest in, and rights to share in the profits of and
              distributions from the Company as would have been attributable to
              such Participant’s Distributional Interest.

              For purposes of illustration, on the date of the initial public offering a
              Participant had received Awards of 20,000 Phantom Shares, and the
              maximum number of Phantom Shares in the Plan is 2,500,000, the
              Phantom Shares would be converted into a .08% Distributional
              Interest (20,000 ÷ 2,500,000 [*] 10% = .08%). If there were
              25,000,000 shares of common stock of the Company outstanding on
              the date of the conversion of the Company from a limited liability
              company to a corporation, the Participant would, thus, receive 20,000
              shares of common stock of the Company.

              ...

              5.5 Conversion of the Company to a Corporation. This Plan shall be
              amended by the Committee if the Company, other than as
              contemplated in Section 5.3, converts from a limited liability
              company to a corporation so that the conversion of Phantom Shares
              shall be to common stock of the Company and not Distributional
              Interests.

These four provisions lay out the essential mechanics of the 2008 phantom share plan. First, under

Section 5.2, vested phantom shares shall be paid out upon a change in control of the company, an

event separately defined in the plan as either “a change in the ownership of the Company” or “a

                                                 10
change in the ownership of a substantial portion of the Company’s assets.” Under Section 4.2, the

total number of phantom shares awarded to the group of share recipients is left to the discretion of

the plan’s administering committee, but the value of that total number equals ten percent of the

distributional interest in MyWebGrocer. The value of each individual phantom share under this plan

is calculated according to Section 5.2’s formula, which, as with the bulk ten-percent interest of the

phantom shareholders as a group, is given in terms of distributional interest. As noted above,

MyWebGrocer was organized as an LLC during the course of Tanzer’s employment. Thus, had a

change in control occurred during Tanzer’s employment, the formula in Section 5.2 of the February

2008 plan would have had meaning, as it translated vested phantom shares into a proportional

distributional interest in ten percent of the company’s total distributional interest.

       ¶ 20.   Sections 5.3 and 5.5, on the other hand, provide for the possibility that MyWebGrocer

could reorganize as a corporation. Section 5.3 addresses the specific conversion of phantom shares

into common stock in the event of an IPO. The timing of Section 5.3’s conversion is significant for

the analysis here. Before the company converts from an LLC to a corporation, or at the time of

conversion, each phantom share is converted into a distributional interest according to Section 5.2’s

formula. Thus, the ten-percent total distributional value of all phantom shareholders is calculated

before or at the time of conversion to a corporation, as is the proportional interest in that ten percent

accorded to each individual phantom shareholder. After this initial conversion, each shareholder’s

proportional share of the distributional interest is converted into an equivalent proportional interest

in the total equity, or stock, of the newly formed corporation. In this way, each phantom shareholder

has, at the time of incorporation, the same interest in the company as the shareholder had before

incorporation, and the ten-percent bulk interest of the phantom shareholders as a group promised in

Section 5.2 is maintained at the time of incorporation. After this conversion, the IPO is held, and

newly issued shares in the company are offered on a securities exchange. The equity interest held

                                                   11
by participants in the phantom share plan at the time of incorporation is thus diluted immediately

after conversion and valuation of the phantom shares.

        ¶ 21.   Under Section 5.3 a phantom shareholder’s individual interest in the company is

converted into common stock. That is, the phantom shareholder does not simply receive a payout

for the value of the interest held in the company, as is the case for a distributional interest payout

under Section 5.2. Rather, the shareholder’s phantom shares are converted into an equity interest in

the company based on ownership of actual shares of stock. Section 5.3 thus necessarily requires a

fixed calculation of the total number of shares of stock that exist in the company. Without a fixed

number, the ten-percent interest of the phantom shareholders could not be calculated such that

ownership of actual shares could be transferred to individual phantom shareholders.

        ¶ 22.   Finally, Section 5.5 expressly states that the phantom share plan’s calculation formula

will be amended if the company incorporates other than through an IPO. A provision permitting

such an amendment allows the plan to accommodate the different financial and equity interests in

an LLC and a corporation. On one hand, an LLC calculates its members’ stake in the entity in terms

of a distributional interest. “Distributional interest” is a term of art that describes the financial value

of an interest in an LLC. 11 V.S.A. § 4001(8) (“ ‘Distribution’ means a transfer of money or

property from a limited liability company to a member in the member’s capacity as a member or to

a transferee of the member’s distributional interest.”); id. § 4001(9) (“ ‘Distributional interest’

means the right of a member or transferee to receive a distribution from a limited liability

company.”). On the other hand, a corporation’s financial and equity interests are founded on stock

ownership. A formula, such as that in Section 5.2 of the February 2008 plan, converting phantom

shares into a distributional interest in MyWebGrocer as an LLC would be essentially meaningless

for purposes of computing the stock-based valuation of those same phantom shares within a

corporate structure. Section 5.5 gets around this problem by permitting amendment of the plan to

account for a shift in the company’s organization.

                                                    12
       ¶ 23.   As contemplated by Section 5.5, MyWebGrocer amended the phantom share plan in

2009 when the company incorporated. The company did not hold an IPO, nor did a change in control

of the company occur at this time. Thus, neither Section 5.2 nor Section 5.3 came into play—

phantom shares were not actually converted to common stock as they would have been following an

IPO, and shareholders were not paid out as they would have been in the event of a change in control.

       ¶ 24.   Three provisions of the 2009 amended phantom share plan are relevant here:

               Section 4.2 Number of Shares Awarded. The number of Phantom
               Shares that have been awarded under this Plan is 2,544,160. No
               further awards of Phantom Share[s] shall be made.

               ...

               Section 5.2 Change in Control of the Company. In the event of a
               Change in Control of the Company, each vested Phantom Share
               credited to the Phantom Share Account of a Participant shall be
               converted into one-tenth (1/10th) of one Share.

               Section 5.3 Initial Public Offering. In the event that the Company
               becomes publicly traded on an established securities exchange (an
               “Initial Public Offering”), each vested Phantom Share credited to the
               Participant’s Phantom Share Account shall be converted into one-
               tenth (1/10th) of one Share.

Section 4.2 of the 2009 amended phantom share plan capped the total number of phantom shares at

the number of vested shares granted to phantom shareholders at that time. Section 5.2 provided a

conversion formula by which phantom shares would be converted to actual shares of MyWebGrocer

upon a change in control of the company.         Applying this formula, 254,416 total shares of

MyWebGrocer were essentially held in reserve for dispensation to phantom shareholders upon a

change in control of the company. Other shareholders held 2,250,001 shares in the company, which,

unlike the phantom shares at the time of incorporation, represented an actual equity interest in the

company. Thus, at the time of incorporation, just over ten percent of the company’s equity was

effectively held in reserve for the phantom shareholders. Section 5.2’s conversion formula likewise

applies under Section 5.3, and thus the phantom shares held in reserve post-incorporation would be

                                                13
converted into actual shares under the same formula if MyWebGrocer held an IPO. As mentioned

above, upon incorporating, and after the 2009 plan fixed the total number of phantom shares, and by

extension, the total number of shares of stock in the company, MyWebGrocer issued 785,462 new

shares of preferred stock to an investor, thereby diluting the equity interests of all previous

shareholders, including the phantom shareholders.

       ¶ 25.   Tanzer argues that each iteration of MyWebGrocer’s phantom share plan provided

that, upon a change in control of the company, phantom shares would be converted “to a fixed

percent of the equity of the company.” This argument reads Sections 4.2, 5.2, and 5.3 of the February

2008 plan to control the percentage of equity interest granted to phantom shareholders regardless of

whether the company remained an LLC or converted to a corporation, and, therefore, essentially

reads out Section 5.5’s provision permitting amendment of the plan upon incorporation. We

disagree with Tanzer’s interpretation for the following reasons.

       ¶ 26.   First, although the February 2008 plan grants phantom shareholders ten percent of

the company’s distributional interest, this is not plainly equivalent to ten percent of the company’s

equity, or stock, if the company is reorganized as a corporation. “Distributional interest” is a term

of art used to describe the monetary payments made to a member in an LLC. 11 V.S.A. § 4001(9).

Had the parties intended for § 5.2 to govern the phantom share payout in the event of a change of

control in the company if it later converted to a corporation, they would have used a term consistent

with that intention, such as “equity” or “stock.”

       ¶ 27.   Second, the 2008 plan, and each preceding iteration of the plan, permitted amendment

of the plan in the event that MyWebGrocer reorganized as a corporation other than through an IPO.

Even assuming that this provision related solely to the plan’s formula for valuation of phantom

shares, the 2009 amendment altered the phantom shares calculation to maintain the ten-percent

equity of phantom shareholders upon corporate organization. This is consistent with Section 5.3 of

the 2008 plan and that Section’s formula for conversion of phantom shares to stock in the event of

                                                    14
an IPO. The phantom shares conversion set out in Section 5.3 of the February 2008 plan preserves

ten percent of the interest in the company at the instant of conversion for phantom shareholders, but

this ten percent is more or less immediately diluted. Section 5.3 plainly contemplates a timeline

wherein phantom shares convert to common stock such that phantom shareholders keep the same

proportional interest in ten percent of the corporation’s stock that they would have had in the LLC’s

distributional interest, and that conversion is immediately followed by an IPO in which new shares

are issued for sale on a securities exchange. Thus, even though phantom shareholders would hold

ten percent of the equity in the company at the instant of incorporation, that percentage would be

immediately diluted as a result of the issuance of preferred stock. This is essentially what happened

here. MyWebGrocer amended the phantom share plan to set aside ten percent of the stock issued

upon incorporation for Tanzer and other phantom shareholders, and MyWebGrocer then issued new

shares in the company just as it would have done in an IPO.

        ¶ 28.   Common law offers no protection against the dilution of equity interests, so anti-

dilution protection must be provided by contract. M. Kahan, Anti-Dilution Provisions in Convertible

Securities, 2 Stan. J. L. Bus. & Fin. 147, 148 (1995). The trial court read Section 4.2 of the 2008

plan as, essentially, an anti-dilution provision, a conclusion that Tanzer reiterates on appeal. But

this conclusion relies on a construction that equates a ten-percent distributional interest with ten

percent of the stock issued by a corporation, ignoring the plain meaning of both Sections 4.2 and 5.3

in the 2008 plan. Therefore Section 4.2 cannot be read as an anti-dilution provision and, absent any

other anti-dilution provision in the phantom share plan, the common law rule permitting dilution

controls. “Contracts . . . are enacted against a background of common-sense understandings and

legal principles that the parties may not have bothered to incorporate expressly but that operate as

default rules to govern in the absence of a clear expression of the parties’ intent that they not govern.”

Wal-Mart Stores, Inc. Assocs. Health & Welfare Plan v. Wells, 213 F.3d 398, 402 (7th Cir. 2000).

Here, the parties’ intent regarding treatment of the phantom shares upon incorporation associated

                                                   15
with an IPO is set forth in Section 5.3 of the 2008 plan. That Section does not provide for payout of

the phantom shares, but rather their conversion into actual shares of stock in the newly formed

corporation—shares that are subject to immediate dilution pursuant to the IPO. Therefore, Section

4.2’s payout provision cannot be read to guarantee a fixed ten-percent interest in MyWebGrocer

despite the company’s reorganization.

       ¶ 29.   Given that the dilution that actually occurred here is consistent with the dilution

contemplated in Section 5.3 of the 2008 plan, we cannot say that the 2009 plan reduced the interests

of phantom shareholders impermissibly. Accordingly, we cannot conclude that MyWebGrocer

breached the phantom share agreement with Tanzer by offering to pay him the value of his phantom

shares as calculated under Section 5.2 of the 2009 plan. We therefore reverse the trial court’s

decision granting Tanzer summary judgment on his breach of contract claim against MyWebGrocer.

       ¶ 30.   The court concluded that the resolution at summary judgment in favor of Tanzer on

his contract claim rendered Tanzer’s alternate claims for unjust enrichment and promissory estoppel

moot. Neither party had moved for summary judgment on those two claims, and neither party has

appealed that specific decision. Nonetheless, because we reverse the trial court’s decision on the

contract claim, we necessarily also reverse the trial court’s decision on the unjust enrichment and

promissory estoppel claims.

               III. The Breach of the Covenant of Good Faith and Fair Dealing Claim

       ¶ 31.   Our decision on Tanzer’s breach of contract claim controls the outcome of several of

the remaining issues on appeal, beginning with the jury verdict on Tanzer’s claim that

MyWebGrocer breached the covenant of good faith and fair dealing and the jury’s awards to Tanzer

related to that claim. We conclude that allowing the jury to consider the court’s decision on summary

judgment clouded the evidence presented to the jury regarding Tanzer’s breach of covenant claim

and therefore vacate the jury’s verdict on this claim.

                                                  16
       ¶ 32.   The covenant of good faith and fair dealing is implied in every contract. Carmichael

v. Adirondack Bottled Gas Corp. of Vt., 161 Vt. 200, 208, 635 A.2d 1211, 1216 (1993). Thus, “[a]

cause of action for breach of the covenant of good faith can arise only upon a showing that there is

an underlying contractual relationship between the parties, but breach of that underlying contract is

not necessary before bringing a tort action under the covenant.” Monahan v. GMAC Mortg. Corp.,

2005 VT 110, ¶ 54, n.5, 179 Vt. 167, 893 A.2d 298 (citation omitted). We have explained that the

covenant acts to protect the parties to a contract, and to ensure that they “act with faithfulness to an

agreed common purpose and consistency with the justified expectations of the other party.”

Carmichael, 161 Vt. at 208, 635 A.2d at 1216 (quotation omitted). The covenant’s protection does

not extend simply to actions taken in fulfillment of a contract, but also actions taken in terminating

a contract and winding up the contractual relationship between the parties. Id. at 210, 635 A.2d at

1217. The covenant likewise “covers not only contract performance, but also contract enforcement,”

including “settlement and litigation of contract claims and defenses.” Langlois v. Town of Proctor,

2014 VT 130, ¶ 61, 198 Vt. 137, 113 A.3d 44 (quotation omitted). The covenant of good faith and

fair dealing “is violated by dishonest conduct such as conjuring up a pretended dispute, asserting an

interpretation contrary to one’s own understanding, or falsification of facts.” Id.

       ¶ 33.   A breach of the covenant may be shown by evidence that a party to a contract acted

in such a way as to “violate[] community standards of decency, fairness or reasonableness,

demonstrate[] an undue lack of diligence, or [take] advantage of [other parties’] necessitous

circumstances.” Monahan, 2005 VT 110, ¶ 3. A party may collect punitive damages under the

covenant where the party can show that the other party acted with actual malice. Id. ¶ 54 n.5.

“Actual malice may be shown by conduct manifesting personal ill will, evidencing insult or

oppression, or showing a reckless or wanton disregard of plaintiff’s rights.” Id. ¶ 4. Where a party

alleges both breach of contract and breach of the implied covenant of good faith and fair dealing,

dual causes of action are permitted only where the different actions are premised on different

                                                  17
conduct—“we will not recognize a separate cause of action for breach of the implied covenant of

good faith and fair dealing when the plaintiff also pleads a breach of contract based upon the same

conduct.” Id. ¶ 54, n.5 (emphasis in original); see Ferrisburgh Realty Inv’rs v. Schumacher, 2010
VT 6, ¶ 26, 187 Vt. 309, 992 A.2d 1042.

       ¶ 34.   As we have explained, whether conduct breaches the covenant is a question of fact

that depends heavily on the context of the conduct alleged to have breached the covenant.

Carmichael, 161 Vt. at 209, 635 A.2d at 1217. So a jury instruction concerning a breach of the

covenant will list few “precise analytical elements,” but will instead ask the jury to determine

whether, given the surrounding context of the alleged conduct, that conduct constitutes a breach. Id.

       ¶ 35.   The problem in this case arises from the context-dependent nature of an action for

breach of the covenant. Although the court’s written decision on summary judgment was not

admitted into evidence, the court did instruct the jury that the court had previously decided a breach

of contract claim in Tanzer’s favor.      The court also permitted witness testimony regarding

MyWebGrocer’s phantom share plans, dilution of the phantom shareholders’ stake in the company,

and the different amounts payable to Tanzer under the parties’ warring interpretations of the

phantom share plan and the court’s decision in Tanzer’s favor on the plan interpretation.

       ¶ 36.   For example, during MyWebGrocer’s cross examination of Tanzer, the following

exchange regarding MyWebGrocer’s pretrial attempt to settle the dispute with Tanzer occurred:

               Attorney: And MyWebGrocer has tried to resolve this case with you,
               has it not?

               Tanzer: I would strongly disagree with that.

               Attorney: Would you agree with me that in March of 2014, that
               MyWebGrocer made an offer to you—

               Tanzer: Um-hum.

               Attorney: —through your attorney—

               Tanzer: Um-hum.

                                                 18
                Attorney: —to pay you the—to keep the amount you already had—no
                question about that—to pay you another fifty thousand dollars and to
                pay you your attorneys’ fees, to date?

                Tanzer: That was two hundred thousand dollars below the amount that
                was clearly delineated, in the phantom share plan, owed to me. I
                didn’t consider that to be a valid offer.

                Attorney: Okay. That was before there was a decision as to whether
                or not that phantom share plan should be read the way that you believe
                it should be read?

                Tanzer: Well, so here we have a problem.

                Attorney: Excuse me. My question is—

                Tanzer: Um-hum.

                Attorney: —you interpreted the plan that way and eventually, the
                court did agree with you?

                Tanzer: Absolutely, it did.

                Attorney: That’s no question, okay.

MyWebGrocer’s settlement attempt followed the company’s intial offer to pay Tanzer in accordance

with the amount due under Section 5.2 of the 2009 phantom share plan, which we have decided here

was the correct amount due under the parties’ agreement. Tanzer’s claim for breach of the covenant

was premised in part on his argument that MyWebGrocer unreasonably delayed litigation between

the parties. And in response to that argument, MyWebGrocer attempted to elicit testimony that it

had tried to settle the parties’ dispute pretrial, but in eliciting that testimony, Tanzer also testified as

to the court’s decision finding that his interpretation of the phantom share plan was correct and the

substantial sum of money at issue under the different plan interpretations. In this way, the summary

judgment decision on the breach of contract claim clouded the issues in the breach of covenant claim.

        ¶ 37.   The parties’ alternate interpretations of the phantom share plan came up again during

Tanzer’s cross examination of Jeremiah Tarrant, one of the named defendants and a MyWebGrocer

corporate officer. Here, Tanzer’s attorney states the amount that Tanzer would have been due under

                                                    19
the 2008 plan if that plan’s ten-percent distributional interest payable to phantom shareholders upon

a change in control of the company was equivalent to a ten-percent equity interest post-incorporation

and controlled the amount due to Tanzer. The exchange is as follows:

               Attorney: Because if you had paid him under the 2008 plan, you would
               have paid him the 734,000 plus the 69,000 that [Tanzer’s attorney]
               asked for, wouldn’t you?

               Tarrant: No. That’s not accurate.

               Attorney: What’s inaccurate about that?

               Tarrant: Your statement was—he got treated the same as everybody,
               ourselves included. Everybody was handled identically.

               Attorney: So you mean you cheated everybody else as well? You
               short changed them?

               Tarrant: No, I wouldn’t cheat anybody.

               Attorney: Okay. Thanks, that’s all I have.

This exchange seems to invite the jury to conclude that MyWebGrocer breached the covenant of

good faith and fair dealing based on MyWebGrocer’s failure to pay Tanzer the amount the court

incorrectly concluded he was due under the 2008 phantom shares plan. Again, in this way, the

court’s summary judgment decision on Tanzer’s breach of contract claim was interwoven with the

remainder of the evidence before the jury and likely affected the jury’s verdict on Tanzer’s claim for

breach of the covenant of good faith and fair dealing.

       ¶ 38.   The court’s instructions to the jury included a limiting instruction—that although the

court’s prior ruling regarding interpretation of the phantom share plan should be assumed correct,

“that ruling [had] nothing whatsoever to do with . . . the entirely separate claim of whether the

defendant, MyWebGrocer, breached the implied covenant of good faith and fair dealing.” The court

also correctly instructed the jury regarding the implied covenant of good faith and fair dealing—

“that MyWebGrocer made an implied promise not to do anything to destroy or impede Mr. Tanzer’s

ability to get the benefits of his agreement with MyWebGrocer under the phantom share plan” and

                                                   20
that “bad faith implies an intention to mislead or deceive another, or a neglect or refusal to fulfill

some duty or other contractual obligation not prompted by an honest mistake or disagreement.” But

the jury was also asked to draw inferences within the context of the entire field of evidence presented,

including testimony such as that included above regarding the parties’ different interpretations of

the phantom shares plan. The court’s summary judgment decision on the breach of contract claim

thus colored the background of the breach of the covenant claim and filled in at least part of the

context within which the jury made its decision. Because the summary judgment decision was

incorrect, and the context of the covenant claim was accordingly incorrect, the jury’s verdict cannot

stand.

         ¶ 39.   This is not to say that Tanzer may not be able to pursue a claim for breach of the

covenant of good faith and fair dealing. Tanzer presented evidence beyond that relating to the breach

of the contract between the parties, and the conduct alleged to underpin Tanzer’s contract and

covenant claims does not completely overlap.

         ¶ 40.   As noted above, the covenant covers not just contract fulfillment, but also contract

enforcement, including settlement and litigation. Langlois, 2014 VT 130, ¶ 61. Even so, there is a

distinction between litigation conduct that violates the covenant and litigation conduct that is an

aggressive prosecution or defense. Litigation conduct that reflects dishonesty—“such as conjuring

up a pretended dispute, asserting an interpretation contrary to one’s own understanding, or

falsification of facts”—violates the covenant of good faith and fair dealing. Id. Litigation conduct

falling below this high bar does not. Because we are remanding Tanzer’s covenant claim, we need

not consider the trial court’s decisions in the first trial regarding whether particular acts alleged by

Tanzer as violating the covenant fell within the umbrella of litigation conduct suggesting dishonesty.

Nevertheless, we emphasize that any litigation conduct alleged to have breached the covenant must

fall within the narrow scope of dishonest conduct.

                                                  21
       ¶ 41.   We likewise need not consider MyWebGrocer’s arguments related to the jury’s

damages awards or the parties’ arguments related to whether Tanzer could recover attorney’s fees.

Any damages awards that may follow a new trial on the covenant claim will need to be considered

in light of the evidence presented in a new trial. It nonetheless bears repeating that a party may only

pursue punitive damages on a breach of the covenant claim when the party has presented evidence

that the other party acted with actual malice—as “shown by conduct manifesting personal ill will,

evidencing insult or oppression, or showing a reckless or wanton disregard of plaintiff’s rights.”

Monahan, 2005 VT 110, ¶ 4 (quotation omitted). Any request for attorney’s fees will also need to

be considered in light of the evidence presented in a new trial. Though here again, we emphasize

that attorney’s fees are only recoverable upon a showing of bad faith litigation conduct. See id.

¶¶ 76-80. As we explained in In re Gadhue, “where the wrongful act of one person has involved

another in litigation . . . or has made it necessary for that other person to incur expenses to protect

his interests, litigation expenses, including attorney’s fees, are recoverable.” 149 Vt. 322, 327, 544
A.2d 1151, 1154 (1987) (quotation omitted).2

                                      IV. The Statutory Claim

       ¶ 42.   This brings us to the final issue on appeal. Tanzer argues that MyWebGrocer violated

Vermont statutes governing the payment of wages, 21 V.S.A. §§ 341-348, when the company did

       2
           Because we are vacating the jury’s verdict, we also need not consider MyWebGrocer’s
argument that Tanzer’s trial counsel impermissibly inserted her own testimony into the record during
her cross examination of a MyWebGrocer witness leading to prejudice to MyWebGrocer’s defense.
Professional Rule of Conduct 3.7 recognizes the possible prejudice inherent in permitting an attorney
to give testimony in a proceeding in which the attorney represents a client. As the comment to the
Rule states: “Whether the tribunal is likely to be misled or the opposing party is likely to suffer
prejudice depends on the nature of the case, the importance and probable tenor of the lawyer’s
testimony, and the probability that the lawyer’s testimony will conflict with that of other witnesses.”
Comment, V.R.Pr.C. 3.7. In this case, MyWebGrocer argues that Tanzer’s attorney effectively
testified regarding settlement negotiations between the parties through the questions she asked
MyWebGrocer’s witness during cross examination. We need not fully address this here, but we do
note that Rule 3.7 counsels strongly against permitting an attorney to ask a witness questions that
introduce the attorney’s personal knowledge of the subject of the witness’s testimony.
                                                  22
not pay him the amount Tanzer claimed was due under the phantom share agreement. The trial court

granted summary judgment to MyWebGrocer on this claim, concluding that the payment due under

the phantom share agreement was uncertain—“more like a lottery ticket than a debt”—and thus did

not fall within the definition of wages. We disagree, and therefore reverse.

       ¶ 43.   Wages are defined as “all remuneration payable for services rendered by an

employee, including salary, commissions, and incentive pay.” Id. § 341(5). We have not previously

considered whether payout of phantom shares according to the kind of agreement in play here falls

within the scope of wages for purposes of this statutory scheme. We have held that the purpose of

Vermont’s wage statutes “is to ensure that workers are paid in a timely manner.” Stowell v. Action

Moving & Storage, Inc., 2007 VT 46, ¶ 8, 182 Vt. 98, 933 A.2d 1128. We have also explained that

the wage statutes, “[a]s remedial statutes, . . . must be liberally construed.” Id. The question

presented here is one of statutory interpretation, and our review of statutory language is de novo.

State v. Love, 2017 VT 75, ¶ 9, __ Vt. __, 174 A.3d 761. When we construe a statute, we begin

with the plain language of the statute. Id. If the plain language does not speak to the question

presented, we look to the legislative purpose behind the statute. Id.

       ¶ 44.   The statutory definition of wages is broad, though it is not without parameters. In

other contexts, we have defined wages as earnings. Perrault v. Chittenden Cty. Transp. Auth., 2018
VT 58, ¶ 18, __ Vt. __, 192 A.3d 381; Quinn v. Pate, 124 Vt. 121, 124, 197 A.2d 795, 797 (1964).

The definition of earnings is likewise broad—“earnings are something earned as compensation for

labor or the use of capital, a broader definition than the conventional definition of wages, which are

ordinarily defined as amounts of money paid daily or weekly for labor.” Perrault, 2018 VT 58, ¶ 18

(quotations omitted). We relied on this definition of wages in Stowell, and it guides our analysis in

this case. 2007 VT 46, ¶ 10. The precise question before us, then, is whether payout of Tanzer’s

phantom share award qualifies as compensation earned through Tanzer’s service to MyWebGrocer.

                                                 23
       ¶ 45.   Other states that have considered similar questions have identified two factors as

relevant to this question: (1) whether the compensation at issue is awarded because of the

employee’s service, or because of the growth and financial success of the employer, and (2) whether

the employer has discretion regarding whether to award the compensation. See, e.g., Weems v.

Citigroup, Inc., 961 A.2d 349, 357 (Conn. 2008); Truelove v. Ne. Capital & Advisory, Inc., 738
N.E.2d 770, 771-72 (N.Y. 2000); Coen v. SemGroup Energy Partners G.P., LLC, 2013 OK CIV

APP 75, ¶ 21, 310 P.3d 657. For example, in Truelove, a New York court held that an employee’s

bonus, which “if paid, w[ould] reflect a combination of the individual’s performance and Northeast

Capital’s performance,” did not fall within a statutory definition of wages, which was similar to

Vermont’s. 738 N.E.2d at 771-72 (alteration in original) (quotation omitted). The court explained

that the bonus was “in the nature of a profit-sharing arrangement and [was] both contingent and

dependent, at least in part, on the financial success of the business enterprise.” Id. at 772. The

amount of the bonus was not fixed, but rather depended on the financial success of the company.

Just as importantly, the terms of the bonus distribution in the employee’s compensation agreement

stated that bonuses would be paid at the employer’s discretion and the employee forfeited the right

to any distributed bonus upon ceasing employment with the company. Id. at 771-72. The Truelove

claimant had resigned before payment of the bonus, and thus, though the bonus was scheduled to be

paid, the company had discretion to cancel payment. The bonus did not fall within the statutory

definition of wages because payment of the bonus was tied to the company’s financial success as

much as the employee’s contributions to the company, and payment of the bonus was in the sole

discretion of the employer.

       ¶ 46.   The Connecticut Supreme Court followed Truelove’s reasoning in Weems to

conclude, similarly, that employee bonuses did not fall within the statutory definition of wages. 961
A.2d at 356. In that case, the corporate defendant paid portions of employee bonuses in restricted

stock in the company. And as in Truelove, the relevant compensation agreement between employees

                                                 24
and the company provided that bonuses were awarded at the discretion of the company and

employees forfeited bonuses upon ceasing employment with the company. Id. at 353. The

Connecticut court adopted Truelove’s statement that the relevant wage statutes, “ ‘in expressly

linking earnings to an employee’s labor or services personally rendered, contemplate[d] a more

direct relationship between an employee’s own performance and the compensation to which that

employee is entitled.’ ” Id. at 356 (quoting Truelove, 738 N.E.2d at 770). On the other hand,

“bonuses that are awarded solely on a discretionary basis, . . . not linked solely to the ascertainable

efforts of the particular employee, are not wages.” Id. at 357.

       ¶ 47.   An Oklahoma court employed similar reasoning in Coen in deciding whether

phantom units, paid out upon a change in control of the company, qualified as wages under an

Oklahoma law analogous to Vermont’s wage statutes. The court held that they did not for three

primary reasons. 2013 OK CIV APP 75, ¶ 23. First, the plan under which the phantom units were

issued was an incentive compensation plan that the court concluded was meant to increase the

performance of both the company and individual employees, thus the award of phantom units did

not depend solely on the employee’s performance. Id. ¶ 22. And to the extent that an award under

the plan was based on the employee’s performance, any award was linked to the employee’s future

performance, not to services the employee had already rendered to the company. Id. Second, the

plan under which units were issued reserved discretion in plan administrators regarding whether to

award phantom units until the units had vested. Id. And finally, phantom units, like the phantom

shares in this case, were payable only upon a change in control of the company. Id. ¶ 23. In other

words, whether the phantom units were payable at all depended entirely on factors outside of an

individual employee’s control.

       ¶ 48.   With a single caveat, we find the reasoning of these courts persuasive. Vermont’s

wage statutes are directed at “ensur[ing] that workers are paid in a timely manner.” Stowell, 2007
VT 46, ¶ 8. Thus, the statutes govern an employer’s duty to pay an employee wages that are actually

                                                  25
due; the way in which wages may become due is beside the point. That is, if a payment falls within

the definition of wages for purposes of the wage statutes, the triggering event that renders that

payment due is irrelevant. We accordingly find the Oklahoma court’s final argument unpersuasive.

And thus, in this case, the fact that the phantom share plan predicated any payment on a change in

control of MyWebGrocer is not relevant to consideration of whether, once the phantom shares were

actually payable, the amount due under the phantom share plan met the definition of wages.

         ¶ 49.   That said, the core reasoning of Truelove, Weems, and Coen is otherwise in

agreement with our definition of wages as earnings and the remedial purpose of Vermont’s wage

statutes. And here, we conclude that the phantom share payout satisfies the necessary criteria for

wages.

         ¶ 50.   It is undisputed that Tanzer received phantom shares as part of his compensation

package. Shares vested at a set rate during Tanzer’s employment, they were given in bulk

installments, and, for a period of time during Tanzer’s employment, he received phantom shares in

exchange for a reduced salary. Like the bonus plans at issue in Truelove and Weems, the actual

monetary value of the phantom shares was tied to MyWebGrocer’s financial success, but unlike the

bonus plans at issue in those cases, Tanzer’s receipt of the phantom shares upon a change in control

of MyWebGrocer was tied neither to Tanzer’s service to the company nor to MyWebGrocer’s

financial success. That is, payout of the phantom shares did not directly depend on MyWebGrocer’s

growth, but rather on the occurrence of a specified triggering event. Although the occurrence of that

triggering event, a change in control of the company, did in this case flow from the financial success

of the company, the plan itself did not predicate a change in control upon growth of the company.

Thus, we cannot say that payout of the phantom shares was linked solely to the success of

MyWebGrocer, and characterizing the phantom shares as incentive pay would accordingly go too

far. Rather, payout under the phantom share plan was guaranteed simply on a change in control,

regardless of the causes of that change in control. And once a change in control occurred,

                                                 26
MyWebGrocer had no discretion under the phantom share plan to decline to pay Tanzer or other

phantom shareholders the value of their phantom shares. For these reasons, we conclude that the

value of Tanzer’s phantom shares meets the definition of wages for purposes of Vermont’s wage

statutes. We accordingly reverse the trial court’s decision on summary judgment and remand for

further proceedings consistent with this opinion.

        The trial court’s summary judgment decision on the breach of contract claim is reversed.
The trial court’s summary judgment decisions on the unjust enrichment, promissory estoppel, and
wage statute claims are reversed and remanded for proceedings consistent with this opinion. The
jury’s verdict on the breach of the covenant of good faith and fair dealing claim is vacated.

                                               FOR THE COURT:

                                               Associate Justice

                                                    27