Bevington v. Comverse Technology, Inc.

Citations: 796 F. Supp. 2d 257; 2011 U.S. Dist. LEXIS 64287; 2011 WL 2462478Docket: Civil Action 10-10085-NMG

Court: District Court, D. Massachusetts; June 16, 2011; Federal District Court

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Robert Bevington filed a lawsuit against his former employer, Comverse Technology, Inc., alleging breach of contract, fraudulent misrepresentation, and violation of the Massachusetts Consumer Protection Act due to his inability to exercise stock options granted between 1996 and 2001. Each stock option agreement allowed exercise only while employed or within three months post-employment, with a 10-year expiration from the grant date. 

On April 17 and 24, 2006, Comverse notified employees via email that the SEC had suspended the company's ability to deal in stock options due to unreliable financial statements, clarifying that any extension of the exercise period could not exceed ten years from the grant date. Bevington was informed of his termination effective June 22, 2007, and received a separation package that included a pamphlet detailing his rights concerning stock option exercises, reiterating the same limitations on extensions.

The package also contained a letter emphasizing the 30-day window for exercising options after the prohibition was lifted, along with a signed 'Agreement and Full and Final Release' which confirmed a 30-day extension of the 90-day post-separation exercise period due to the stock trading prohibition. However, it explicitly stated that this extension would not surpass the 10-year limit from the original grant date. The Release functioned as a comprehensive waiver of all employee rights and claims related to his separation from Comverse.

The agreement became effective on July 3, 2007, with Bevington releasing Comverse from claims including breach of contract, fraud, misrepresentation, and promissory estoppel, in exchange for $55,000, equivalent to 26 weeks of salary. After his termination, Bevington inquired on November 21, 2007, about the status of his stock options as trading had not resumed. Shefali Shah, Comverse's Associate General Counsel, informed him that Comverse could not extend the expiration of the options and that the matter would be considered post-expiration. Unable to exercise his stock options, Bevington filed a lawsuit in Massachusetts Superior Court on December 16, 2009, which Comverse later moved to federal court. On April 28, 2011, Comverse filed a motion for summary judgment opposed by Bevington.

Summary judgment aims to assess whether a trial is necessary by evaluating the evidence. The burden lies with the moving party, Comverse, to demonstrate no genuine issue of material fact exists, and if successful, the burden shifts to Bevington to show otherwise. The court must view the evidence favorably for the non-moving party. Comverse contends the complaint should be dismissed based on four arguments: Bevington knowingly released claims regarding the stock options, Comverse complied with governing documents, Bevington did not identify any relied-upon misrepresentations, and Chapter 93A does not apply to employer-employee relationships. Bevington's opposition lacks case law or supporting evidence, leading Comverse to argue for summary judgment based on Bevington's failure to properly dispute the material facts. The court treats uncontested facts as admitted, concluding the Release is enforceable as it was knowingly and voluntarily executed with adequate compensation.

Broad and general releases are enforceable even if not all potential claims were considered at the time of signing (Schuster v. Baskin). The First Circuit employs a six-factor "totality of the circumstances" test to assess enforceability: 1) the plaintiff's education and business acumen, 2) the roles of employer and employee in drafting the waiver, 3) clarity of the agreement, 4) time for review, 5) availability of independent legal advice, and 6) consideration provided for the waiver (Rivera-Flores v. Bristol-Myers Squibb Caribbean). 

Bevington contends he was misled into signing the Release, believing it only pertained to his termination. He also claimed a lack of clarity regarding his stock options. However, the Court determined that no reasonable fact-finder could support Bevington's alleged misunderstanding, as claims of subjective misunderstanding do not invalidate a valid release (Myricks v. Fed. Reserve Bank of Atlanta). Bevington, an educated professional earning approximately $110,000 with a graduate degree, was capable of understanding the Release, which explicitly addressed his stock options and released Comverse from various claims, including breach of contract and fraud. 

The Release contained a merger clause stating it superseded prior agreements, affirming its clarity, particularly for someone of Bevington’s educational level (Morais v. Cent. Beverage Corp). Bevington had 45 days to review the Release and could revoke it for seven days post-signing; he took six days to sign, indicating a deliberate review process. He acknowledged reading the document multiple times and understanding its terms, including the expiration of his stock options. Although he did not seek independent legal counsel, he recognized the suggestion in the Release to do so. Comverse provided $55,000 in consideration for the Release, which is deemed adequate compensation (Barton v. Brassring, Inc.). Overall, the Court found the Release clear, unambiguous, and valid, supported by sufficient consideration.

Bevington knowingly and voluntarily signed the Release, leading to the conclusion that his claims related to conduct prior to the Release's effective date are barred. Regarding the breach of contract claim involving stock option agreements, Bevington argues that the suspension of trading due to misconduct by Comverse executives made the Release unenforceable and disrupted his employment contracts. However, the trading suspension occurred before the Release was signed and was addressed within it, thus not affecting its enforceability. Bevington's theory that Comverse's actions caused his inability to exercise stock options before expiration is deemed plausible but lacks legal support, and any related claims are barred due to their occurrence before the Release's effective date.

For the misrepresentation claim, Bevington alleges he was led to believe accommodations would allow him to exercise stock options after the S.E.C. lifted the trading suspension. Although the Release bars claims of misrepresentation arising before its effective date, the Court finds no evidence of actionable misrepresentation before or after the Release. To succeed in a misrepresentation claim in Massachusetts, a plaintiff must show a false statement of material fact that induced action and reliance to their detriment. Comverse has provided documentation indicating that the ten-year expiration period for stock options was clearly communicated to employees, including details in the stock option agreements and policy documents. Bevington's assertion that communications suggested compensation if no solution was found before expiration is unsupported, as he admitted in deposition that no one stated the expiration provision would be ignored. He cites an email from Associate General Counsel Shefali Shah as a misrepresentation, but her statements clarify that Comverse cannot extend the expiration date and no actions would be taken before it.

Ms. Shah's email dated February 13, 2008, clarifies that Comverse cannot extend exercise rights beyond the ten-year anniversary of the grant date, a point reiterated in a March 3, 2008 email. The court determined that Bevington's reliance on statements made in meetings or by Ms. Shah was unreasonable, citing that false statements of opinion or future conditions are not actionable. Bevington could not demonstrate misrepresentation or reliance, leading to the dismissal of his misrepresentation claim.

For a Chapter 93A claim, the plaintiff must prove unfair or deceptive acts in commerce and a causal link to losses. The conduct must stem from a commercial transaction between parties engaged in trade. Employment-related disputes do not qualify, as established in prior cases. Bevington's claims arise from his employment context regarding stock options and his separation agreement, failing to meet the trade and commerce requirement of Chapter 93A, thus he cannot succeed on this claim.

The court's order grants the defendant's motion for summary judgment. Additionally, Bevington's confusion about compensation compared to other employees is addressed; he was not compensated similarly because he was no longer an employee at the time the options expired.