792 S.E.2d 613
W. Va.2016Background
- CONSOL Energy, Inc. maintained an Equity Incentive Plan that awarded Restricted Stock Units (RSUs) to employees subject to a three-year vesting schedule; awards were evidenced by signed Award Agreements.
- Plaintiffs were coal miners employed by CONSOL’s subsidiary, Consolidated Coal Company, not by CONSOL directly, but were participants in CONSOL’s Plan.
- The Award Agreements provided four events that accelerate vesting, the fourth being "completion of a Change in Control (as such term is defined in the Plan)."
- CONSOL sold Consolidated Coal Company to Murray Energy on December 5, 2013; CONSOL declined to accelerate unvested RSUs and declared them forfeited.
- Plaintiffs sued for breach of contract; the circuit court granted summary judgment for plaintiffs, and CONSOL appealed.
- The Supreme Court affirmed, holding the sale of the subsidiary constituted a Change in Control that triggered accelerated vesting.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether sale of Consolidated Coal (a CONSOL subsidiary) is a "Change in Control" that accelerates vesting | The Award Agreement and Plan govern employees of CONSOL "including its subsidiaries"; Change in Control must include subsidiaries; sale triggered acceleration | Plan defines "Company" as CONSOL and "Change in Control" as sale of Company’s assets; sale of subsidiary did not transfer substantially all CONSOL assets (<20%) so no Change in Control | Held: Sale of the subsidiary constituted a Change in Control under the Plan/Award Agreement and accelerated vesting of RSUs |
| Whether contract language is ambiguous (conflict between Plan and Award Agreement) | Ambiguities exist (conflicting clauses about which document governs); must be construed in plaintiffs’ favor because CONSOL drafted documents | CONSOL argues Plan controls and its definitions limit Change in Control to CONSOL itself | Held: Award Agreement contains a patent ambiguity; ambiguity resolved against drafter (CONSOL), favoring plaintiffs |
| Whether CONSOL’s board discretion precludes judicial relief (board chose not to accelerate) | Plaintiffs contend awards and signed agreements fixed rights; board discretion could not retroactively deny already-granted entitlements | CONSOL argues Plan gives board full discretion to accelerate vesting and it declined to do so as a business judgment | Held: Board discretion did not absolve CONSOL of contractual obligations once Award Agreements were issued and signed; failure to accelerate was breach |
| Proper interpretation rule of construction (scope of "Company" and "Affiliate") | "Company (including its subsidiaries)" language and Plan references to "Affiliates" show intent to cover employing subsidiaries | CONSOL emphasizes defined term "Company" = CONSOL Energy Inc. to limit scope | Held: Court reads "Company" to include subsidiaries in context; interpreting narrowly would produce absurd result and render provisions incoherent |
Key Cases Cited
- Aetna Cas. & Sur. Co. v. Fed. Ins. Co. of N.Y., 148 W.Va. 160 (1963) (summary judgment standard).
- Painter v. Peavy, 192 W.Va. 189 (1994) (summary judgment reviewed de novo).
- Grant Thornton, LLP v. Kutak Rock, LLP, 228 W.Va. 226 (2011) (contract interpretation on summary judgment).
- Berkeley Cnty. Pub. Serv. Dist. v. Vitro Corp. of Am., 152 W.Va. 252 (1968) (whether a contract is ambiguous is a question of law).
- Charlton v. Chevrolet Motor Co., 115 W.Va. 25 (1934) (ambiguities construed against drafter).
- O’Brien v. Progressive N. Ins. Co., 785 A.2d 281 (Del. 2001) (contract interpretation is a question of law).
- Estate of Osborn v. Kemp, 991 A.2d 1153 (Del. 2010) (unreasonable contract interpretation disfavored).
- Kaiser Aluminum Corp. v. Matheson, 681 A.2d 392 (Del. 1996) (ambiguities construed against drafter).