Ackley v. Honeywell Int'l Inc.

KEITH A. ACKLEY v. HONEYWELL INTERNATIONAL INC.

CIVIL ACTION NO. 2:15-1188

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA LAKE CHARLES DIVISION

April 3, 2019

JUDGE ROBERT G. JAMES

MAGISTRATE JUDGE KAY

RULING ON OBJECTIONS

Before the Court are cross-motions for summary judgment filed by Plaintiff Keith Ackley ("Ackley") and Defendant Honeywell International Inc. ("Honeywell").¹ The Magistrate Judge has issued a Report and Recommendation wherein she recommends each motion be granted in part and denied in part.² Specifically, the Magistrate Judge recommends: (1) Ackley's claim for breach of an oral option contract should be dismissed for failure to meet statutory requirements; (2) Ackley's claim for breach of the written Option Agreement should be dismissed because Ackley failed to exercise the option within the time stipulated in that contract; (3) Ackley's claim for detrimental reliance should be dismissed, because it was unreasonable for Ackley to believe he could wait eleven years to exercise the option and Honeywell neither represented nor induced Ackley to believe the expiration term was eleven years; and (4) Honeywell's counterclaim for breach of the parties' Separation Agreement should be dismissed based upon the law-of-the-case doctrine. For the reasons provided in the Report and Recommendation, as supplemented herein, the Court adopts the recommendation of the Magistrate Judge over the objection of the Parties.

Ackley was hired by Honeywell as an account manager in 1993. In July 2001, Ackley called his supervisor, Guy Grumbles, to express his dissatisfaction with his employment and advised Grumbles he was considering looking elsewhere for work. Ackley alleges shortly thereafter, Grumbles offered him 1,000 shares of Honeywell stock options in exchange for his continued employment. Ackley accepted Grumbles offer and agreed to continue his employment with Honeywell. Ackley contends he never received any written documentation setting forth the terms of the option agreement and was never notified the options had to be exercised by July 15, 2011.³ According to Ackley, the only documentation he ever received regarding the stock options were his periodic statements for his 401(k) portfolio with Honeywell, which, until some unknown time before March or April of 2012, reflected he had 1000 shares of outstanding and exercisable Honeywell stock available.

On April 29, 2009, Honeywell terminated Ackley as part of a reduction in force. Shortly thereafter Ackley was provided with a proposed severance package, memorialized in a document entitled "Separation Agreement." Ackley signed the Separation Agreement on June 10, 2009, and in exchange for severance pay, he agreed to release Honeywell from claims arising out of his employment and termination. Of significance, the Separation Agreement incorporated an attached an exhibit which expressly provided that any stock options had to be exercised within "the lesser of (i) three years from your Termination of Employment Date, or (ii) the full remaining option term."⁴ In March or April of 2012, Ackley made his first inquiries to Honeywell about exercisingthe stock options.⁵ On April 9, 2012, Ackley was advised that the stock options had expired on July 15, 2011.

Ackley's Objections

Ackley contends pursuant to his conversation with Grumbles, "Ackley and Honeywell agreed to a grant of 1,000 stock options to Ackley in return for Ackley agreeing to remain in Honeywell's employ."⁶ Apparently recognizing this oral agreement could not create a binding option contract under applicable law, Ackley insists by his Objections that he is not relying upon the verbal agreement with Grumbles as a conveyance of the stock options to him.⁷ Rather, Ackley asserts the agreement with Grumbles "is what caused Honeywell to enter into the binding written Option Agreement which conveyed the stock options to Ackley."⁸ Ackley argues "his effort to exercise his options should be treated as timely by Honeywell because it was Honeywell's failure to provide information to Ackley informing him of the option's expiration date is [sic] what caused his efforts to exercise the options to be made after July 15, 2011."⁹ In other words, Ackley asks this Court to enforce all aspects of the "binding written Option Agreement" except the term setting forth the deadline for exercise of the option. If the Court finds the option term set forth in the Option Agreement is not enforceable, then Honeywell's refusal to allow Ackley's 2012 attempt to exercise the options constitutes a breach of the Option Agreement. For the reasons provided herein,as well as those previously set forth in the Report and Recommendation, the Court agrees with the Magistrate Judge that Ackley's position is untenable.

Ackley first objects to the Magistrate Judge's statement in the Background section of the Report and Recommendation that Honeywell disputes Ackley's assertion that he did not receive the Option Agreement. Ackley directs the Court to footnote 23, page 6, of Honeywell's Memorandum in Support of Summary Judgment which states, "Honeywell does not dispute Ackley's claim that he never received the Option Agreement for purposes of this Motion."¹⁰ As both the Magistrate Judge and the undersigned have presumed for purposes of analyzing these motions that Honeywell did not provide Ackley with a written copy of the Option Agreement, this objection has no bearing on the outcome of the Court's decision.¹¹

Ackley objects to the Magistrate Judge's decision to limit her analysis of Honeywell's arguments to those presented in Honeywell's briefing, to the exclusion of defenses asserted by Honeywell elsewhere in the record.¹² Ackley contends had the Magistrate Judge considered these other defenses, the evidence would have established that Honeywell would have denied any request to exercise the stock options, even a timely one. The Court finds no error here. The Magistrate Judge addressed Honeywell's narrow grounds for summary judgment - that Ackley'sbreach of contract claim failed due to expiration of the term - and her findings disposed of Ackley's claims. The Court finds no error here. See e.g. U.S. v. Houston Pipeline Co., 37 F.3d 224, 227 (5th Cir. 1994) (a district court is permitted to grant summary judgment "on the basis of any facts shown by competent evidence in the record").

Ackley objects to the Magistrate Judge's statement that "the breach of contract claim fails as to the Option Agreement because Ackley does not identify any term of any agreement breached by Honeywell."¹³ Ackley argues Honeywell breached the Option Agreement when it refused to allow Ackley to exercise the stock options in 2012. As noted by Honeywell, paragraph 3 of the Option Agreement expressly states that the option must be exercised prior to July 15, 2011. Definitionally, an option contract requires a party "to accept an offer to sell, or to buy, a thing within a stipulated time." La. Civ. Code art. 2620. An option for an indefinite period is void. Crawford v. Deshotels, 359 So.2d 118, 122 (La. 1978). In order to invoke a sale under an option to buy, the acceptance must be "in accordance with the terms and conditions of the proposal, . . . and formally exercised and tendered to the proposer prior to the expiration date of the stipulated term." Rushing v. Glover, 91 So.3d 1169, 1172 (La.App. 2 Cir. 2012) (emphasis added). Because Ackley did not exercise the option in accordance with the terms of the Option Agreement - i.e., he did not exercise the option prior to the expiration of the option deadline - any obligation owed by Honeywell was extinguished as of July 15, 2011 due to Ackley's failure to perform in accordance with the terms of the agreement. See e.g. La. Civ. Code art. 1773; Baro Controls, Inc. v. Prejean, 634 So.2d 46, 48 (La.App. 1 Cir. 1994).

Ackley objects to the following statement of the Magistrate Judge:

Courts considering detrimental reliance claims under Article 1967 have held that it may not be used to trump statutory contract requirements. . . Here, as shown above,Grumbles' representations did not meet form requirements under Delaware law because it was not in writing or under Louisiana law because no term was specified. Accordingly, Ackley cannot claim detrimental reliance on the existence of stock options based on his conversation with Grumbles.¹⁴

Ackley's objection reads as follows:

The Court erred by finding that Ackley cannot claim detrimental reliance on the existence of stock options because his conversation with Grumbles did not include a set term as required by Louisiana law or because under Delaware law the promise is not in writing. Here again, the Court erred when it concluded that the verbal agreement between Grumbles and Ackley was the contract that conveyed the stock options to Ackley. The Ackley/Grumbles agreement is what caused Honeywell to include Ackley as one of more than 5,000 employees to be granted options. It (the verbal agreement) is what caused Honeywell to enter into the binding written Option Agreement which conveyed the stock options to Ackley. The terms of the Option Agreement complied with all Delaware and Louisiana law requirements. As well the terms of the Option Agreement provided Ackley the right to exercise the options.¹⁵

The Court agrees with the Magistrate Judge that this position is untenable. Again, Ackley is asking this Court to enforce all terms of the written Option Agreement, save the term providing the deadline by which the option had to be exercised. While Ackley never states what belief he held as to the expiration of the option, Ackley insists he is not arguing the option was for a perpetual term.¹⁶ Thus, it appears Ackley contends that due to Honeywell's failure to provide him with the written Option Agreement, by virtue of the Separation Agreement he had three years from his termination to exercise the option. This argument is unpersuasive because it does not comport with the terms of the...