                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


7-16-2004

Moses v. Corning Inc
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-3003




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"Moses v. Corning Inc" (2004). 2004 Decisions. Paper 495.
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                                                NOT PRECEDENTIAL


UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT




                         No. 03-3003




                    THOM AS D. MOSES,
                                   Appellant

                              v.

                CORNING INCORPORATED




        On Appeal from the United States District Court
           for the Western District of Pennsylvania
                 (D.C. Civil No. 01-cv-01287)
           District Judge: Hon. Gary L. Lancaster




          Submitted Under Third Circuit LAR 34.1(a)
                       July 15, 2004

     Before: SLOVITER, BARRY and WEIS, Circuit Judges

                    (Filed: July 16, 2004 )




                 OPINION OF THE COURT
SLOVITER, Circuit Judge.

       Thomas Moses appeals from the District Court’s order granting summary

judgment in favor of defendant Corning Incorporated in Moses’ suit alleging Corning

breached its contract to provide M oses certain stock options.

                                             I.

A.     Employment History

       Moses was the executive director and chief executive officer of Clinical Pathology

Facility, Inc. (“CPF”). In November 1991, CPF was acquired by Corning and merged

with an indirect subsidiary of Corning. Also in November, Moses signed an employment

agreement with CPF (“1991 Employment Agreement”) pursuant to which M oses would

continue his employment with CPF as president for three years, with automatic successive

extensions of 18 months each unless sooner terminated in accordance with the contract.

Moses was also designated as the general manager of MetPath, Inc. (“MetPath”) for the

region covering parts of Pennsylvania, Ohio, New York, and West Virginia.

       Two years after the 1991 Employment Agreement was signed, Moses advised

Dennis Jilot, then president of MetPath, that he wished to step down as president of CPF

and general manager of M etPath. Although Moses’ retirement was announced in a press

release on April 14, 1994, he remained an active employee under different terms and with

less responsibility.

       Under the terms of Moses’ second employment contract with CPF effective May 1,



                                             2
1994 (“1994 Employment Contract”), Moses received an annual salary of $200,000 and

certain fringe benefits, such as insurance coverage and the use of a car. In exchange,

Moses maintained some of his former responsibilities, such as coordinating the

consolidation of laboratories in Youngstown and Cleveland.

       As of December 31, 1996, CPF and MetPath were spun-off as subsidiaries of a

new, independent company, Quest Diagnostics, Inc. (“Quest”) and, as a result, CPF and

MetPath ceased to be subsidiaries of Corning. But Moses continued his employment with

Quest under the 1994 Employment Contract until it expired on May 25, 1997.

B.     Stock Options

       On December 1, 1993, while the 1991 Employment Agreement was in effect,

Corning granted Moses an option to purchase 5,000 shares of Corning common stock

under Corning’s 1989 Stock Option Plan. In particular, the agreement provided:

       (a)    Commencing [February, 1 1996], such option may be exercised by
              the Optionee to the extent of fifty percent of the aggregate number of
              shares optioned by this Agreement; and

       (b)    Commencing [February 1, 1997], such option may be exercised by
              the Optionee to the extent of an additional fifty percent of the
              aggregate number of shares optioned by this Agreement.

App. at 96.

       Section 3 of the stock option agreement provides that the option shall terminate

upon the happening of any of four listed events: (1) the expiration date of the options,

listed as November 30, 2003; (2) termination of Moses’ employment, except in the case



                                             3
of his death or retirement with the consent of Corning; (3) the expiration of three months

after Moses’ retirement with Corning’s consent (except if he were to die during that

three-month period); and (4) the expiration of twelve months after Moses’ death provided

that he was employed at Corning at the time of his death or he had retired with consent

less than three months prior to his death. Importantly, the agreement also stipulated that

if Moses worked for a subsidiary of Corning, and that subsidiary ceased to be a subsidiary

of Corning during the course of Moses’ employment, then the options would be

terminated.

       In 1994, Corning established its 1994 Employee Equity Participation Program for

“executive, managerial, technical, and other employees” of Corning and its Subsidiaries.

App. 145. Moses fell into this category. The program consisted of two plans: the 1994

Stock Option Plan and the 1994 Incentive Stock Plan.

       On December 7, 1994, Corning granted Moses an option to purchase 2,208

additional shares pursuant to an Incentive Stock Option Agreement and 2,792 additional

shares pursuant to a Non-qualified Stock Option Agreement, with both agreements

subject to Corning’s 1994 Employee Equity Participation Program. Under the terms of

these agreements, fifty percent of the options could be purchased on or after December 7,

1996, and all the shares could be purchased on or after December 7, 1997. Under these

agreements, as under the prior Stock Option Plan, the options would terminate if the

subsidiary “shall cease to be a [Corning] subsidiary company and [Moses] is not



                                             4
thereupon transferred to and employed by [Corning] or another subsidiary company.”

App. at 42, 44.

       On December 11, 1996, while the 1994 Employment Contract was in effect, Moses

exercised his option to purchase 5,000 shares of Corning stock comprised of half of each

set of options that he had received, i.e., the 1993 options, the 1994 incentive options, and

the 1994 non-qualified options. After exercising these options, Moses had remaining the

options to purchase 2,500 shares from the 1993 agreement, 1,396 shares from the 1994

incentive options, and 1,104 shares from the 1994 non-qualified options.

C.     Corporate Changes

       Effective December 31, 1996, CPF and MetPath, Moses’ employers under the

1994 Employment Agreement, ceased being subsidiaries of Corning. Under the explicit

language of the agreements containing the option programs, Moses’ unexpired options to

purchase Corning stock would have terminated on December 31, 1996.

       To alleviate this result, Corning, by two memos authored by A. John Peck and

dated November 15, 1996 (“The Peck Memos”), notified the option holders that the

options would not terminate but that the options would be “tied to future employment and

will be forfeited if your employment with Quest Diagnostics (instead of Corning) is

terminated for any reason after the [spin off].” App. at 105. The Peck Memos also

explained changes in the number of options and the exercise price of those options due to

changes in the number of Corning shares outstanding as a result of the spin off. Moses



                                             5
admits that he received these memos and he signed and returned the accompanying

consent form.

       Moses’ 1994 Employment Agreement expired on May 25, 1997. By the terms of

the various stock option agreements and by the terms of the Peck Memos, the options

terminated as of that date. Moses then entered into negotiations with Kurt Fischer to

arrange the terms of his departure. These negotiations ran until November when an

agreement was reached.

       In a letter dated March 26, 1999, Moses attempted to exercise the remaining

options, which, as a result of the adjustments described in the Peck Memos, were now to

purchase 5,989 shares of Corning stock. He tendered the amount of $141,878.05 but was

notified by Peck that his options had expired. Moses then brought this action to recover

damages caused by Corning’s alleged wrongful action in denying his exercise of the

options.

                                             II.

       The District Court granted summary judgment for Corning. The court, after noting

that the contracts and the parties’ intent were clear, explained as follows:

              Under both stock option agreements, Mr. Moses would lose his
       options where the company he worked for ceased to be a subsidiary of
       Corning. After the Quest transaction, Corning’s compensation committee,
       deeming the loss of options of the part of many Corning employees as too
       harsh, amended the stock option agreements.

              The amendment, as described in the Peck Memos, could not be
       clearer. When an employee left Quest, for any reason, he or she could lose

                                              6
       their unexercised options. When Mr. Moses left Quest following the
       second employment agreement, he lost his unexpired options.

              As there is no material dispute regarding the nature of the contracts,
       and that their meaning could not be plainer, summary judgment is
       appropriate. Mr. Moses was properly denied the ability to exercise his stock
       options and therefore, the court will grant Corning’s motion for summary
       judgment.

App. at 10.

       We subject a district court’s grant of summary judgment to plenary review, and

therefore we apply the same standard that the District Court should have applied. Farrell

v. Planters Lifesavers Co., 206 F.3d 271, 278 (3d Cir. 2000). Summary judgment is

appropriate “if there is no genuine issue of material fact and if, viewing the facts in the

light most favorable to the non-moving party, the moving party is entitled to judgment as

a matter of law.” Smathers v. Multi-Tool, Inc., 298 F.3d 191, 194 (3d Cir. 2002).

       We agree with the District Court that the 1993 Options Agreement and the two

1994 Options Agreements were clear and unambiguous. According to Pennsylvania

contract law, when interpreting a contract the court must determine the intent of the

parties and give effect to all provisions of the contract. Commonwealth v. Manor Mines,

Inc., 565 A.2d 428, 432 (Pa. 1989). In this case, the three options agreements contained

clauses stating that the options to purchase Corning stock terminated if the Corning

subsidiary that Moses worked for ceased to be a Corning subsidiary. This is the exact

situation that occurred when Corning spun off CPF and MetPath, Moses’ employers, to

create Quest. Therefore, but for the Peck Memos, Moses’ options would have been

                                              7
terminated immediately following the spin-off. The amendment provided by the Peck

Memos imposed the following condition on the extension of the options:

       Your Corning stock options will continue to be tied to future employment
       and will be forfeited if your employment with Quest Diagnostics (instead of
       Corning) is terminated for any reason after the Distributions.

App. at 105 (emphasis added). Moses signed and returned the consent form showing that

he had understood the memos. Therefore, upon the termination of Moses’ employment

with Quest on May 25, 1997, all of his outstanding stock options were terminated.

Because Moses’ right to the stock options was created by the agreements, and the

agreements themselves provided for termination upon certain events, Moses’ claim that

he had a vested interest in those options must fail.

       However, we are not prepared to dispose of Moses’ claim of equitable estoppel in

similar fashion. Moses claims that when he exercised half of his options in December

1996, he was told by a representative of Corning’s Legal Department that he could not

exercise the remainder of his options until December 1997. As we read the agreements,

this information, if given, would not have been accurate, for Moses could have exercised

the options he was granted in 1993 any time following February 1997. Moses alleges that

he reasonably relied upon this information in delaying the exercise of his options, and that

he lost the value of his 1993 options because of that reliance.

       The District Court did not discuss this claim, and we therefore do not know

whether the District Court believed that the claim was not properly preserved or whether



                                              8
the District Court rejected it sub silentio because Moses, a highly experienced executive,

could not reasonably rely on information that varied from the written agreements. Under

these circumstances, we will remand the matter to the District Court for its consideration

in the first instance. We intimate no view on the matter.

                                            III.

       For the reasons set forth, we will affirm the District Court’s judgment insofar as it

rejected Moses’ contract claim and will vacate the summary judgment to the extent that it

rejected Moses’ putative equitable estoppel claim.




                                             9
