943 F.3d 555
1st Cir.2019Background:
- Suzuki was hired in 2010 as Abiomed's VP of Asia; his offer letter promised equity awards tied to regulatory milestones (10,000 shares at Shonin submission; 20,000 shares at MHLW "general use" approval; 15,000 shares at reimbursement-level approval), payable only to active employees when milestones were achieved.
- He asked for a post-termination protection (ability to claim equity if milestone occurred within 3–6 months after dismissal); Abiomed refused. A nondisclosure agreement added a 28-day-notice term for post-six-month employment but otherwise preserved Abiomed's right to terminate.
- Suzuki led the Japanese approval effort for years; the Shonin application was submitted in March 2011. Progress was slow, relations became strained, and managers criticized Suzuki's conduct. Abiomed convened a Menkai meeting on June 9, 2015; the meeting helped but did not guarantee approval.
- On June 18, 2015, after rejecting revised terms, Suzuki was terminated (paid 28 days' salary later); Abiomed obtained MHLW approval in September 2016 after substantial additional testing and work.
- Suzuki sued under diversity jurisdiction alleging breach of the implied covenant of good faith and fair dealing (claiming Abiomed fired him to avoid paying the 20,000-share award). The district court granted summary judgment for Abiomed; Suzuki appealed.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Fortune/Gram framework governs implied-covenant claim | Suzuki: 28-day notice and other terms create enforceable expectations beyond at-will; he may pursue broader implied-covenant theories (unfair leveraging). | Abiomed: Contract and later NDA leave termination power intact; Fortune/Gram applies to claims that employer fired to avoid paying compensation tied to past services. | Court: Fortune/Gram applies; 28-day notice didn't convert arrangement into a fixed-term that displaces Fortune/Gram. |
| Whether the 20,000-share award was compensation "earned by virtue of past services" at termination | Suzuki: He had done the vast majority of work; Menkai meeting made approval imminent; equity was part of day-to-day compensation and thus reflective of past services. | Abiomed: Award was expressly contingent on active employment at final approval; approval was not assured and required significant post-termination work. | Court: Suzuki was not entitled to the award at discharge; milestone was not achieved or imminent and substantial post-firing work was required; no entitlement under Fortune/Gram. |
| Whether post-termination events can be considered when assessing whether compensation reflected past services | Suzuki: Courts should not rely on post-termination events to deny bad-faith inference. | Abiomed: Post-termination events (additional work, tests) are probative of whether the benefit was reflective of past services. | Court: Post-termination events may be considered; here they show substantial additional work before approval, undercutting Suzuki's claim. |
Key Cases Cited
- Fortune v. Nat'l Cash Register Co., 364 N.E.2d 1251 (Mass. 1977) (employer may not terminate to avoid paying compensation clearly connected to past services)
- Gram v. Liberty Mut. Ins. Co., 429 N.E.2d 21 (Mass. 1981) (extension of Fortune principles to at-will employee discharged without good cause)
- Gram v. Liberty Mut. Ins. Co., 461 N.E.2d 796 (Mass. 1984) (limit on recovery for at-will employees)
- Harrison v. NetCentric Corp., 744 N.E.2d 622 (Mass. 2001) (employer liable if termination in bad faith deprived employee of compensation clearly tied to past service)
- Ayash v. Dana-Farber Cancer Inst., 822 N.E.2d 667 (Mass. 2005) (scope and limits of implied covenant in employment context)
- Cataldo v. Zuckerman, 482 N.E.2d 849 (Mass. App. Ct. 1985) (employee interest in developer equity held sufficiently reflective of past services where ownership interest was part of day-to-day compensation)
- McCone v. New Eng. Tel. & Tel. Co., 471 N.E.2d 47 (Mass. 1984) (Fortune/Gram bars recovery for future compensation tied to future services)
- Cochran v. Quest Software, Inc., 328 F.3d 1 (1st Cir. 2003) (Fortune/Gram analysis applied; employer conduct must have deprived employee of compensation "fairly earned and legitimately expected")