Consol Energy, Inc. v. Hummel

792 S.E.2d 613, 238 W. Va. 114, 2016 W. Va. LEXIS 764
CourtWest Virginia Supreme Court
DecidedOctober 26, 2016
DocketNo. 15-1040
StatusPublished
Cited by11 cases

This text of 792 S.E.2d 613 (Consol Energy, Inc. v. Hummel) is published on Counsel Stack Legal Research, covering West Virginia Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Consol Energy, Inc. v. Hummel, 792 S.E.2d 613, 238 W. Va. 114, 2016 W. Va. LEXIS 764 (W. Va. 2016).

Opinion

Chief Justice Ketehum:

This action is before this Court upon the appeal of CONSOL Energy, Inc. (“CON-SOL”), defendant below, from the July 27, 2015, order of the Circuit Court of Marshall County granting summary judgment for Michael Hummel and other coal miners (collectively the “plaintiffs”) who worked in coal mining operations under Consolidated Coal Company, a wholly-owned subsidiary of CONSOL.1 CONSOL sold Consolidated Coal Company to Murray Energy Corporation in December 2013.

Prior to the sale to Murray Energy Corporation, the plaintiffs’ terms of employment included CONSOL’s Equity Incentive Plan. The Equity Incentive Plan provided for the award of CONSOL common stock to the plaintiffs in units known as Restricted Stock Units (“RSUs”). The award of RSUs was [116]*116subject to a three-year vesting schedule. For example, if CONSOL granted an RSU award in 2011, a third of the awarded shares would vest on each of the award date anniversaries in 2012, 2013, and 2014, if the plaintiff was employed with CONSOL and its subsidiaries on that date. When RSUs were awarded, CONSOL presented each plaintiff with an Award Agreement which set forth the terms and conditions of the award and the vesting schedule.

Pursuant to the Award Agreement, the vesting of RSUs would accelerate upon the occurrence of certain events, such as a plaintiffs retirement or death. The acceleration event in controversy is the phrase “change in control,” triggered herein by CONSOL’s sale of Consolidated Coal Company to Murray Energy Corporation.

The issue before this Court is whether CONSOL or whether its subsidiary, Consolidated Coal Company, must undergo a “change in control” to accelerate the vesting of the plaintiffs’ RSUs under CONSOL’s Equity Incentive Plan and Award Agreement. CONSOL contends that “change in control” relates solely to CONSOL itself, not its subsidiary, and, therefore, the sale of Consolidation Coal Company was not an accelerating event under the Equity Incentive Plan and Award Agreement. CONSOL therefore asserts that the plaintiffs’ unvested RSUs are forfeited.

The plaintiffs, who were never directly employed by CONSOL, emphasize that the Equity Incentive Plan and Award Agreement were all about the RSUs the plaintiffs could earn through their work with CONSOL’s subsidiary, Consolidation Coal Company. The plaintiffs therefore insist that the phrase “change in control” necessarily includes CONSOL’s subsidiaries, not just CONSOL alone. Consequently, the sale to Murray Energy Corporation triggered accelerated vesting of the RSUs. Moreover, the plaintiffs point out that the Award Agreement expressly refers to CONSOL, “including its subsidiaries.”

This Court is of the opinion that CON-SOL’s sale of Consolidated Coal Company constituted a “change in control” under CONSOL’s Equity Incentive Plan and Award Agreement, the occurrence of which accelerated the vesting of the plaintiffs’ RSUs. Accordingly, the July 27, 2015, order of the Circuit Court of Marshall County granting summary judgment for the plaintiffs is affirmed.2

I, Factual Background

CONSOL is a Delaware corporation engaged in the natural gas and coal business and conducts mining operations in West Virginia. The plaintiffs are coal miners who were employed by CONSOL’s subsidiary, Consolidated Coal Company, or by one of Consolidated’s own subsidiary corporations. Each plaintiff worked at one of five underground mines in northern West Virginia.

The plaintiffs were participants in CON-SOL’s Equity Incentive Plan. Under the Plan, the plaintiffs were awarded units of CONSOL’s common stock which vested in three equal, annual installments, measured from the award date, over the plaintiffs’ period of continued employment. Only CONSOL and not any of its subsidiaries issued the stock under the Plan. For example, if CON-SOL awarded units (RSUs) in 2011, one-third of the awarded units would vest on the award date anniversaries in 2012, 2013 and 2014.3 Thus, complete vesting would occur in 2014, three years after the date of the award (subject to four possible acceleration events set forth in the Award Agreement, discussed infra).

[117]*117A. Consol’s Equity Incentive Plan

CONSOL’s Equity Incentive Plan provides its Board of Directors with broad discretion in the administration of the Plan and employee RSU awards. The Equity Incentive Plan also defines certain terms and phrases. The relevant provisions of the Plan are as follows: Section 1 states, in part, that its purpose is to promote the interests of “the Company” and its shareholders by attracting and retaining eligible directors, officers “and other key employees of the Company and its Affiliates.” Section 2(b) provides that “all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Board, may be made at any time and shall be final, conclusive, and binding[.]”

Eligibility for participation in the Equity Incentive Plan is addressed in Section 4 which states that “[a]ny Employee, including any officer or employee-director of the Company or any Affiliate, who is not a member of the Committee, shall be eligible to be designated a Participant.” Section 7(a) provides CONSOL’s Board of Directors with discretionary authority specific to RSUs:

Subject to the provisions of the Plan, the Board shall have sole and complete authority to determine the Participants to whom Shares of Restricted Stock and Restricted Stock Units shall be granted, the number of Shares of Restricted Stock and/or the number of Restricted Stock Units to be granted to each Participant, the duration of the period during which, and the conditions under which, the Restricted Stock and Restricted Stock Units may be forfeited to the Company, and the other terms and conditions of such Awards.

Addressing “change in control,” Section 12 provides that “in the event that the Company engages in a transaction constituting a Change in Control, the Board shall have complete authority and discretion, but not the obligation, to accelerate the vesting of outstanding Awards and the termination of restrictions on Shares.”

Finally Section 16 of the Equity Incentive Plan sets forth the following relevant definitions, “as used in the Plan”:

“Affiliate” shall mean (i) any entity that, directly or indirectly, is controlled by the Company, (ii) any entity in which the Company has a significant equity interest ... in either case as determined by the Committee. * * *
“Change in Control” shall mean, unless otherwise defined in the applicable Award Agreement, ... the sale of all or substan-, tially all of the Company’s assets. Notwithstanding the foregoing or any provision of this Plan to the contrary, it is intended that the foregoing definition of Change in Control qualify as a change in the ownership or effective control , of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation, within the meaning of Treas. Reg. § 1.409A~3(i)(5), and shall be interpreted and construed to effectuate such intent. * * *
“Company” shall mean CONSOL Energy Inc. * * *

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Bluebook (online)
792 S.E.2d 613, 238 W. Va. 114, 2016 W. Va. LEXIS 764, Counsel Stack Legal Research, https://law.counselstack.com/opinion/consol-energy-inc-v-hummel-wva-2016.