294 A.3d 1039
Del.2023Background
- Tracey Weinberg, former CMO of Waystar, received three option grants (Oct 2019–Aug 2020) under Derby TopCo’s 2019 Stock Incentive Plan; 107,318.96 options had vested when Waystar terminated her on Aug 16, 2021.
- Weinberg exercised those vested options on Nov 12, 2021; the exercised Derby Inc. stock immediately converted into partnership units in Derby LP ("Converted Units").
- Each Option Agreement contained an identical Call Right: Appellees could repurchase Converted Units “during the six (6) month period following (x) the (i) Termination of [employment] . . . and (y) a Restrictive Covenant Breach.”
- On Nov 18, 2021 Appellees repurchased all Converted Units; there had been a termination but no Restrictive Covenant Breach. Weinberg sued for declaratory/injunctive relief; the Court of Chancery granted judgment for Appellees.
- The Delaware Supreme Court affirmed, holding the Call Right could be exercised upon satisfaction of either triggering event (the Court adopted a "several"/distributive reading of "and" and found the provision unambiguous).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of "and" in the Call Right provision — must both events occur to trigger call right? | Weinberg: "and" is conjunctive/joint; both termination and a Restrictive Covenant Breach are required. | Appellees: "and" is several/distributive in permissive context; either termination or a Restrictive Covenant Breach can trigger the Call Right. | Court: "and" is several/distributive here; Call Right validly exercisable after termination alone within six months. |
| Is the Call Right provision permissive or mandatory (affecting the meaning of "and")? | Weinberg: provision is mandatory; supports conjunctive reading. | Appellees: provision is permissive (gives a discretionary repurchase right), supporting a several reading. | Court: provision is permissive; permissive contexts favor several meaning of "and," but the court’s dispositive reason was surplusage avoidance. |
| Would Weinberg’s reading render other contract provisions surplusage (repurchase-price tiers / "if later" clause)? | Weinberg: First Option Agreement lacks two-tier price so agreements should be read separately; her reading does not create surplusage across agreements. | Appellees: Reading requiring both events would make the Repurchase Price Provision’s first tier (non-Forfeiture price) meaningless in Second/Third agreements and conflict with "if later"/Forfeiture definitions. | Court: Reading "and" several preserves meaning of the two-tier repurchase-price clause and the "if later" timing; all three agreements should be read consistently. |
| Is the Call Right ambiguous such that contra proferentum should apply? | Weinberg: provision ambiguous and adhesive; ambiguity should be construed against drafters. | Appellees: provision unambiguous under objective interpretation; contra proferentum not applicable. | Court: provision unambiguous; contra proferentum does not apply. |
Key Cases Cited
- Salamone v. Gorman, 106 A.3d 354 (Del. 2014) (Delaware courts apply objective contract interpretation and give effect to plain language).
- Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153 (Del. 2010) (words given their ordinary meaning; court determines ambiguity as a matter of law).
- Manti Holdings, LLC v. Authentix Acquisition Co., Inc., 261 A.3d 1199 (Del. 2021) (read contract as whole and avoid rendering terms meaningless).
- Chicago Bridge & Iron Co. N.V. v. Westinghouse Elec. Co. LLC, 166 A.3d 912 (Del. 2017) (interpret provisions in light of entire contract to effect parties’ intent).
- Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, L.P., 624 A.2d 1199 (Del. 1993) (standard of review for judgment on the pleadings and contract interpretation principles).
- E.I. du Pont de Nemours & Co. v. Shell Oil Co., 498 A.2d 1108 (Del. 1985) (contract interpretation must align with agreement’s overall scheme).
- United States v. Lopez, 998 F.3d 431 (9th Cir. 2021) (conjunctive reading of "and" in the Safety Valve statute; discussion of ordinary meaning).
- United States v. Pulsifer, 39 F.4th 1018 (8th Cir. 2022) (distributive/several reading of "and" to avoid surplusage).
- United States v. Haynes, 55 F.4th 1075 (6th Cir. 2022) ("and" read conjunctively and distributively; context distributes predicate over elements).
- United States v. Garcon (Garcon III), 54 F.4th 1274 (11th Cir. 2022) (en banc) (adopts ordinary conjunctive meaning of "and"; rejects distributive reading urged by other circuits).