CASE CITE: LISA M. JONES vs. ANDREW D. JONES
DATES: March 2015
KEYWORD: bonus, severance payment, stock options, child support, alimony, exercise stock options, executive compensation
NOTICE: Summary decisions issued by the Appeals Court pursuant to its rule 1:28, as amended by 73 Mass. App. Ct. 1001 (2009), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel’s decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).
COMMONWEALTH OF MASSACHUSETTS APPEALS COURT 13-P-1122 LISA M. JONES vs. ANDREW D. JONES MEMORANDUM AND ORDER PURSUANT TO RULE 1:28 The issue presented is whether a judge of the Probate and Family Court correctly determined, as a matter of summary judgment, that certain incentive stock options were to be considered “bonus” income under the terms of the parties’ separation agreement. We conclude that the issue was one of fact, not properly the subject of summary judgment, and reverse.1
The plaintiff, Lisa Jones, and the defendant, Andrew Jones, were married on July 15, 1995.2,3 On April 11, 2006, they executed a separation agreement (agreement) which was incorporated and made part of the judgment of divorce nisi. 1 By memorandum and order entered on July 24, 2014, we dismissed the appeal on procedural grounds. On August 21, 2014, having addressed the procedural deficiency, the parties filed a joint motion to reconsider dismissal and to reinstate the appeal. The motion is hereby allowed. 2 Because they share a last name, we refer to the parties by their first names. 3 Two minor children were born of the marriage.
Under the terms of the agreement, Andrew was to pay weekly alimony and weekly child support. He also agreed to pay Lisa, “as child support and alimony, [thirty-one percent] of the gross amount of any manner of bonus paid by his employer, to him, within [ten] days of his receipt of said payment, [sixteen percent] as child support and [fifteen percent] as alimony.”4 At the time the parties executed the agreement, Andrew was employed by TrueAdvantage; as part of the marital property division, he retained all of his stock options from TrueAdvantage. Lisa received other assets and the overall division of the marital assets was nearly equal.
A little more than a year later, on July 31, 2007, Andrew, then in negotiations with Integrity Interactive (Integrity) for possible employment, signed an offer letter and a stock option agreement, which granted him an option to purchase 106,883 shares of Integrity’s common stock; the stock options were subject to an accelerated vesting schedule if Integrity was sold or merged. Shortly after he was hired, Andrew requested, and Integrity’s board of directors agreed, that his stock options in the company be increased to make up for an inadequacy in the initial grant. The increase was postponed until the incoming 4 On October 5, 2009, a judgment of modification, by stipulation of the parties, was entered, reducing Andrew’s alimony obligation to $600 per week. At the time, Andrew was employed by Integrity. 2 chief executive officer, Thomas Anderson, had an opportunity to assess Andrew’s job performance.
By the time Anderson was able to make that assessment, Integrity was in the process of being sold, thus preventing Integrity from issuing to Andrew additional stock options. Instead, Integrity issued to Andrew “a one-time severance payment in the amount of $1,000,000, minus all proceeds that [Andrew] realized from his exercise of [Integrity’s] Stock Options” to “true up” any deficiency. On September 13, 2010, Integrity was acquired by a third party. Two days later, Andrew exercised his option to sell his now vested stock in Integrity; in so doing, he realized $628,453 in additional pretax income. Integrity then paid to Andrew a pretax “one-time severance payment” of $371,547 which, combined with the sale of the stock, produced for Andrew $1,000,000.
On August 17, 2011, Lisa filed a complaint in equity, seeking a determination as to whether Andrew’s proceeds from the exercise of his Integrity stock options, combined with the additional severance payment, constituted a bonus under the terms of the agreement, which would have triggered a payment to her of additional child support and alimony. Both parties filed cross motions for summary judgment.
On May 2, 2012, after a nonevidentiary hearing, Lisa’s motion for summary judgment was allowed and Andrew’s motion was 3 denied. A judgment in equity entered, ordering Andrew to pay Lisa $310,000 (or thirty-one percent of the $1,000,000 Andrew had received). In the memorandum and order allowing the motion, the judge ruled that “there is no genuine issue as to any material fact surrounding [Andrew]’s receipt of additional proceeds being considered a bonus.” Because the agreement did not define the term “bonus,” the judge adopted the dictionary definition, concluding that “[t]he receipt of additional money derived from [Andrew]’s exercise and sale of his stock options as well as the payment representing his increased equity were in addition to his usual compensation (salary),” constituting a “bonus.”
Discussion. Our review of a ruling on a motion for summary judgment is de novo. Chi-Sang Poon v. Massachusetts Inst. of Technology, 74 Mass. App. Ct. 185, 194 (2009). “Contract language is ambiguous where the phraseology can support a reasonable difference of opinion as to the meaning of the words employed and the obligations undertaken.” Bank v. Thermo Elemental, Inc., 451 Mass. 638, 648 (2008) (citations and quotations omitted).
In this case, we are persuaded the word “bonus”, as used in the agreement, is “susceptible of more than one meaning and reasonably intelligent persons . . . differ as to which meaning is the proper one.” Bercume v. Bercume, 428 Mass. 635, 641 4 (1999) citation omitted). This in and of itself renders the term ambiguous. In addition, because the complex language of executive compensation comprises many variations with collateral consequences intended to achieve particular results in the context of overall compensation packages, a broad dictionary definition may not address adequately all of the intended meanings. Finally, and most importantly, the use of the term “bonus” in the stock option documents may or may not hold the same meaning as that the parties attributed to the term “bonus” in their agreement. In the context of this case, therefore, further fact finding is required to determine how the parties meant to apply the term at the time they executed the agreement. See Brigade Leveraged Capital Structures Fund Ltd. v. PIMCO Income Strategy Fund, 466 Mass. 368, 374 (2013), quoting from General Convention of the New Jerusalem in the United States of America, Inc. v. MacKenzie, 449 Mass. 832, 836 (2007). For this reason, summary judgment to either party is inappropriate.
The intent of the parties in dividing the options at the time of divorce and their intention with respect to the treatment of options received postdivorce must be developed through an evidentiary hearing. To determine the “objective sought to be accomplished by the parties,” the parties may submit extrinsic evidence and the court also may consider their 5 postdivorce behavior. Parrish v. Parrish, 30 Mass. App. Ct. 78, 86 (1991), quoting from Feakes v. Bozyczko, 373 Mass. 633, 635 (1977).5
For the reasons explained, we are satisfied that Lisa did not meet her burden of establishing the absence of a triable issue and therefore was not entitled to a judgment as a matter of law. See Mass.R.Civ.P. 56(c), as amended by 436 Mass. 1404 (2002). See also Department of Rev. v. Mason M., 439 Mass. 665, 674 (2003); Nutt v. Florio, 75 Mass. App. Ct. 482, 485 (2009). Nor should Andrew have been granted summary judgment pursuant to rule 56(h) of the Massachusetts Rules of Domestic Relations Procedure. The judgment is vacated and the matter is remanded to the Probate and Family Court for further proceedings consistent with this memorandum and order.
Order allowing wife’s motion for summary judgment vacated. By the Court (Green, Hanlon & Blake, JJ.6 ), Clerk Entered: March 17, 2015. 5 We note that all stock options divided at the time of the parties’ divorce were awarded to Andrew in exchange for Lisa’s receipt of assets of comparable value. 6 The panelists are listed in order of seniority.