Court Opinion

ID: 4193120
Source: CourtListenerOpinion
Date Created: 2017-08-03 20:01:25.186352+00
Date Added: 2024-06-11T07:47:26.670697
License: Public Domain

NOT FOR PUBLICATION                          FILED
                       UNITED STATES COURT OF APPEALS                       AUG 3 2017
                                                                        MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS
                              FOR THE NINTH CIRCUIT

 SOONHEE JANG, individually, and on                No.   15-17431
 behalf of all others similarly situated,
                                                   D.C. No. 5:15-cv-03719-NC
                   Plaintiff-Appellant,

   v.                                              MEMORANDUM*

 E. I. DU PONT DE NEMOURS &
 COMPANY,

                   Defendant-Appellee.

                     Appeal from the United States District Court
                         for the Northern District of California
                   Nathanael M. Cousins, Magistrate Judge, Presiding

                          Argued and Submitted April 21, 2017
                               San Francisco, California

 Before: THOMAS, Chief Judge, MURGUIA, Circuit Judge, and BAYLSON,**
 District Judge.

        Soonhee Jang (“Jang”) appeals the district court’s decision to dismiss her

claims against E.I. du Pont de Nemours and Company’s (“Du Pont”) for breach of

         *
              This disposition is not appropriate for publication and is not precedent
 except as provided by Ninth Circuit Rule 36-3.
         **
              The Honorable Michael M. Baylson, United States District Judge for
 the Eastern District of Pennsylvania, sitting by designation.
contract and violation of California’s Unfair Competition Law (“UCL”). We have

jurisdiction under 28 U.S.C. § 636(c)(3). We review the district court’s determination

de novo,1 and we AFFIRM.2

      The pertinent Paragraph of the disputed Contract, which the parties agree is

governed by Delaware law, states,

              Termination of Employment . . . Due to Lack of Work

              If you are an active employee for six months following
              the Date of Grant, the Options will be exercisable
              through the date that is one year after the date of
              your termination of employment, or, if earlier, the
              Expiration Date set forth above. After that date, any
              unexercised Options will expire. Any unvested
              Options as of the date of termination will continue to
              vest in accordance with the Vesting Schedule set forth
              above.

(emphasis added).

      Jang was terminated from DuPont in June 2014, at which point some of the

Options she had been awarded were not scheduled to vest until a time that was more

 1
        Dismissals for failure to state a claim under Federal Rule of Civil Procedure
 12(b)(6), In re Cutera Sec. Litig., 610 F.3d 1103, 1107 (9th Cir. 2010), and
 “determinations of whether contract language is ambiguous,” U.S. Cellular Inv.
 Co. v. GTE Mobilnet, Inc., 281 F.3d 929, 934 (9th Cir. 2002), are reviewed de
 novo.
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        We agree with Jang, over DuPont’s objections, that she did not waive her
 argument that the employment Contract was ambiguous, since (1) she raised this
 argument as an alternative argument in her opposition to DuPont’s motion to
 dismiss, (2) she raised this argument at oral argument, and (3) the district court
 made an explicit finding that the Contract was not ambiguous.

                                          2
than one year after June 2014. She claims that DuPont’s refusal to permit her to

exercise those Options amounts to a breach of contract, for which she is entitled to

damages and equitable relief.

      While DuPont’s Contract is certainly not a model of clarity, we hold, applying

principles of Delaware corporate law, that the Contract is not ambiguous, and that it is

logically capable of only DuPont’s interpretation.

      Rhone-Poulenc Basic Chemicals Co. v. Am. Motorists Ins. Co., 616 A.2d 1192

(Del. 1992) is the leading Delaware case regarding determinations of contractual

ambiguity, and articulates the following “objective person” test:

              A contract is not rendered ambiguous simply because the
              parties do not agree upon its proper construction. Rather,
              a contract is ambiguous only when the provisions in
              controversy are reasonably or fairly susceptible of
              different interpretations or may have two or more
              different meanings. Ambiguity does not exist where the
              court can determine the meaning of a contract without
              any other guide than a knowledge of the simple facts on
              which, from the nature of language in general, its
              meaning depends. Courts will not torture contractual
              terms to impart ambiguity where ordinary meaning
              leaves no room for uncertainty. The true test is not what
              the parties to the contract intended it to mean, but what a
              reasonable person in the position of the parties would
              have thought it meant.

Id. at 1196 (citations and quotation marks omitted).

        Applying the Rhone-Poulenc test, it is clear that the Contract is susceptible to

only DuPont’s interpretation. That is, as the district court concluded, the term “any”

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in “any unexercised Options will expire after [one year from the termination date]”

refers both to “unexercised Options” that have already vested, and to “unexercised

Options” that have not yet vested. While Jang is correct that unvested options are not

exercisable, there is no basis under Delaware law to conclude that a contract cannot

provide for the expiration of a stock option before it vests, for example before it is

exercisable.

       Nor is there any legal principle prohibiting the expiration of options before their

vesting. See, e.g., Butvin v. DoubleClick, Inc., 2001 WL 228121, at *9 (S.D.N.Y.

Mar. 7, 2001), aff’d, 22 F. App’x 57 (2d Cir. 2001) (applying Delaware corporate law,

and explaining that an employee “ha[s] no ownership interest in stock options before

they vest[]” and therefore an employee with unvested stock options “cannot argue that

he had been deprived of anything to which he was entitled”). Here, even if the phrase

“any unexercised Options will expire” did, as Jang contends, refer only to vested

Options, then any unvested Options that subsequently vested after one year from her

termination—“in accordance with the Vesting Schedule”—would be meaningless,

because they would simply become “unexercised Options” that had already expired.

In that case, Jang could not successfully argue that she was denied the benefit of the

unvested Options, because they were a benefit to which she had never been entitled in

the first place.

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      Concluding that the Contract is susceptible only to DuPont’s interpretation does

not, as Jang contends, render the last sentence of the Paragraph superfluous. Instead,

the only logical function of the last sentence of the Paragraph is to explain that

Options that had not vested by the date of Jang’s termination would continue to vest

until one year after her termination, such that she would be entitled to exercise any

Options that vested in that one-year window.

      Accordingly, the district court properly dismissed Jang’s breach of contract

claim. See VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 615 (Del. 2003)

(A trial court may dismiss a claim for failure to state a claim upon which relief can be

granted if it “appears with reasonable certainty that the plaintiff cannot prevail on any

set of facts which might be proven to support the allegations in the complaint.”).

Because, as Jang concedes, her UCL claim is derivative of her breach of contract

claim, that claim was also properly dismissed.

      AFFIRMED.

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