Lemmon v. United Waste Systems, Inc.

958 S.W.2d 493, 1997 Tex. App. LEXIS 6529, 1997 WL 778264
CourtCourt of Appeals of Texas
DecidedDecember 18, 1997
Docket2-96-290-CV
StatusPublished
Cited by8 cases

This text of 958 S.W.2d 493 (Lemmon v. United Waste Systems, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lemmon v. United Waste Systems, Inc., 958 S.W.2d 493, 1997 Tex. App. LEXIS 6529, 1997 WL 778264 (Tex. Ct. App. 1997).

Opinion

OPINION

LIVINGSTON, Justice.

I. INTRODUCTION

Appellant S. Craig Lemmon (Lemmon) appeals from the trial court’s decision to grant Appellee United Waste Systems, Inc.’s (United Waste) two separate summary judgment motions in Lemmon’s underlying wrongful termination and breach of employment agreement suit. In nine points, Lemmon argues the trial court erred in granting summary judgment because: (1) New York law controls and New York law does not allow an employer to terminate an employee who has signed an employment contract for a definite term absent a showing of good cause, even when the contract by its terms purports to reserve to the employer the right to terminate the employee without cause; and (2) fact issues exist as to the intent of the parties concerning the term of and rights under the employment contract and the propriety of *495 Lemmon’s claims for promissory estoppel and breach of an oral contract to extend the period Lemmon had to exercise his stock options.

II. FACTUAL BACKGROUND

A. The Employment Agreement

United Waste and Lemmon entered into a written employment agreement (the agreement) on February 27, 1992. Lemmon was hired as a Business Development Manager to find acquisition candidates for the expansion of United Waste’s solid waste disposal business. Section 6 of the agreement covered the term of employment and the termination rights of the parties, providing, in part:

Term; Termination; Rights of Termination. The term of this Agreement shall begin March 2, 1992 and continue for a term of three (3) years, and, if mutually agreed in writing prior to the expiration of the term, shall continue thereafter on the same terms and conditions herein. This Agreement and Employee’s employment may be terminated in any one of the following ways:
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(b) The company may terminate the Agreement after ten (10) days written notice to Employee for good cause, including, but without limitation: (1) Employee’s material breach of this Agreement, including, without limitation, failure to perform his obligations hereunder in a manner reasonably satisfactory to the Board of Directors of the Company;....
(c) The Company may terminate this Agreement without cause at any time, provided that in the event of a termination of this Agreement without cause, Employee shall be entitled to a severance payment equal to three (3) months at his then current base salary,.... In the event that Employee obtains other employment during the three-month severance period, the Company’s severance obligation shall be reduced by the amount of Employee’s new compensation with his new employer. Employee agrees to use his good faith best efforts to obtain new employment during such severance period in order to mitigate the Company’s severance obligation hereunder. [Emphasis added.]

Section 2 of the agreement covered Lem-mon’s compensation and provided him with potentially valuable stock options. The pertinent portion of the compensation section provided, in part:

(ii) The Company agrees that, on or prior to the date of the initial public offering, if there is an initial public offering of the Company’s common stock (the “IPO”), the Company will grant to Employee, provided Employee is employed by the Company pursuant to this Agreement on such date, a non-qualified stock option (the “Option”) to purchase shares of the Company’s publicly traded common stock, subject to the following provisions:
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c) Vesting and Exercise Periods—The Option can be exercised at the rate of 33-1/3% on the later of the first anniversary of the date of this Employment Agreement or 90 days after the date of the IPO, and 33-1/3% on each succeeding anniversary date of the initial option date. The Option cannot be exercised after termination of employment, provided, however, that upon termination of employment other than for death or for cause, the portion of the Option vested on the termination date may be exercised for 30 days after termination. ...
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Notwithstanding the foregoing, the Option must be exercised in all events no later than the 10th anniversary date of this Agreement. [Emphasis added.]

The agreement also contained a provision stating that, “[t]his Agreement shall in all respects be construed according to the laws of the State of New York.”

B. Lemmon’s Employment at United Waste

Lemmon signed the agreement in Tarrant County, Texas and performed all aspects of the agreement from his offices in Tarrant County. Soon after he began, he was promoted to President of Acquisitions and then *496 later to Vice President of the Southern Region. However, United Waste repeatedly rejected Lemmon’s acquisition prospects and later sought to restructure part of the agreement in early 1998. Lemmon acquiesced and a probationary agreement was created whereby Lemmon would take a reduced salary for a sixty-day period. This probationary period ended, and the agreement was reinstated.

On July 9, 1992, United Waste granted Lemmon another stock option as part of its newly-created, eompany-stock-option plan. On December 10, 1992, United Waste sold 3,000,000 shares of its common stock on the NASDAQ National Market System. Lem-mon’s right to exercise his stock options vested, under the agreement, on March 10,1993.

C. Lemmon’s Termination and the Present Suit

United Waste fired Lemmon on April 29, 1993. The termination letter did not specify whether the termination was for cause but it did state that United Waste would honor its severance package. 1 United Waste claims the termination was for good cause, namely unsatisfactory performance of his job obligations.

Lemmon and United Waste entered into post-termination settlement negotiations after disagreements arose concerning disposition of several provisions of the agreement. Lemmon asserted a right to severance pay and accrued vacation pay while both sides argued over the application of the agreement’s covenant not to compete and the status of the stock options. Lemmon claims that, during the negotiations, John Milne and Bradley Jacobs, two officers of United Waste, promised to extend the stock option exercise period of his agreement for one year in consideration for not filing suit. As evidence of this oral agreement, Lemmon presented a draft severance agreement sent by Milne on May 23, 1993, in which United Waste proposed canceling the original agreement and creating new duties and obligations on its behalf including a one-year extension of the time period Lemmon had to exercise his vested stock options. United Waste denies the existence of any formal agreement to extend the option period.

The existence of an agreement to extend the option period is crucial to Lemmon because the stock options were worthless at the time he was fired and for the thirty day period afterwards.

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Cite This Page — Counsel Stack

Bluebook (online)
958 S.W.2d 493, 1997 Tex. App. LEXIS 6529, 1997 WL 778264, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lemmon-v-united-waste-systems-inc-texapp-1997.