Bennett v. Sterling Planet, Inc.
546 F. App'x 30
2d Cir.2013Background
- In Dec. 2005 Bennett was offered employment with "Sterling Planet" and accepted an offer letter promising "25,000 shares from the management stock options pool." She began work in March 2006.
- In early 2008 the original Sterling Planet reorganized: the original entity became Sterling Planet Holdings, Inc. (Holdings) and a new operating subsidiary was formed and named Sterling Planet, Inc. (new Sterling Planet), wholly owned by Holdings.
- All shares of the original Sterling Planet were reissued on a share-for-share basis by Sterling Planet Holdings; Bennett remained employed by the operating company until her termination in July 2009.
- Bennett sued the new Sterling Planet in Oct. 2009 for breach of contract for failure to deliver the promised 25,000 shares; at trial the jury found liability and the magistrate judge awarded specific performance in the form of 25,000 shares of Sterling Planet Holdings stock.
- Defendant moved (orally, on the eve of trial) to amend its pleadings to reflect the reorganization; the court allowed the amendment. Bennett argued the amended pleading contained judicial admissions that the promise was for shares of the new operating company and sought post-trial relief to require issuance of new Sterling Planet stock.
- The district court denied Bennett’s post-trial requests; the Second Circuit affirmed, holding the award of Holdings stock consistent with the contract parties’ reasonable expectations and New York law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Identity of the stock to be awarded | Bennett: offer was by defendant (new Sterling Planet) and thus she is entitled to 25,000 shares of the new operating company | Sterling Planet: the original promise was to shares of the pre-reorg company, now represented by Holdings; fair remedy is 25,000 Holdings shares | Court: Award of Holdings stock affirmed — aligns with parties’ expectations and avoids an undeserved windfall |
| Effect of pleadings/judicial admission | Bennett: defendant’s answer admitted it made the offer, creating a judicial admission that the promise was for defendant’s (new Sterling Planet) stock | Sterling Planet: pleadings were amended at trial to reflect the reorganization; Rule 15(b)(1) amendment was proper and aided presentation of the merits | Court: Trial amendment was permitted; any claimed error about inconsistent pleadings was harmless because specific performance was equitable and for the court to decide |
| Liability of non-party/third-party asset award | Bennett: a non-party (Holdings) cannot be compelled to perform a contract made with defendant | Sterling Planet: corporate reorganization and doctrines of corporate identity permit awarding Holdings stock to place plaintiff in the position she would have been in | Court: Accepted (without deciding fully) that awarding Holdings stock was within bounds to avoid inequitable result; plaintiff did not challenge veil-piercing/alter-ego authority on appeal |
| Jury trial / Seventh Amendment concern | Bennett: inconsistent pleadings should have been given to jury; damages determination implicates right to jury | Sterling Planet: specific performance is equitable — court (not jury) decides remedy; amendment aided merits | Court: Plaintiff did not press Seventh Amendment challenge; issue deemed waived and any error was harmless |
Key Cases Cited
- Abrahamson v. Bd. of Educ. of Wappingers Falls Cent. Sch. Dist., 374 F.3d 66 (2d Cir.) (standard of review for specific performance awards)
- In re Sims, 534 F.3d 117 (2d Cir.) (definition of abuse of discretion)
- Am. Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130 (2d Cir.) (choice-of-law may be limited by parties’ agreement)
- Lucente v. Int’l Bus. Machines Corp., 310 F.3d 243 (2d Cir.) (expectation damages principle — put plaintiff in position had contract been performed)
- Gibbs ex rel. Estate of Gibbs v. CIGNA Corp., 440 F.3d 571 (2d Cir.) (judicial admissions bind a party)
- TNS Holdings, Inc. v. MKI Sec. Corp., 92 N.Y.2d 335 (N.Y.) (disregarding corporate form in appropriate circumstances)
- Andrews v. Metro N. Commuter R.R. Co., 882 F.2d 705 (2d Cir.) (improper refusal to inform jury of inconsistent pleadings may be substantial abuse of discretion)