Timian vs. Johnson & Johnson

Filing 8

-CLERK TO FOLLOW UP-DECISION AND ORDER granting 2 Defendant's Motion to Dismiss for Failure to State a Claim and dismissing 1 Plaintiff's Complaint. The Clerk of Court is directed to close this case. Signed by Hon. Michael A. Telesca on 10/26/15. (AFB)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK

SUSAN TIMIAN,
Plaintiff,

No. 6:15-cv-06125(MAT)
DECISION AND ORDER

-vsJOHNSON & JOHNSON,
Defendant.

INTRODUCTION
Represented by counsel, Susan Timian (“Plaintiff”) instituted
this

action

against

her

former

employer,

Johnson

&

Johnson

(“Defendant”), seeking declaratory relief and monetary damages
under the Employee Retirement and Income Securities Act, 29 U.S.C.
§1001 et seq. (“ERISA”) and New York State contract law. Plaintiff
alleges

that

Defendant

improperly

withheld

certain

unvested

Restricted Stock Units awarded to Plaintiff pursuant to Defendant’s
Long-Term

Incentive

Plan.

Plaintiff

invokes

federal

question

jurisdiction, diversity jurisdiction, and jurisdiction under ERISA.
Defendant has filed a Motion to Dismiss the Complaint pursuant
to Rule 12(b)(6) of the Federal Rules of Civil Procedure (“Rule
12(b)(6)”). Plaintiff filed a Memorandum of Law in Opposition, and
Defendant

filed

a

Reply

Memorandum

of

Law.

For

the

reasons

discussed below, Defendant’s Motion to Dismiss is granted, and the
Complaint is dismissed.
-1-

FACTUAL BACKGROUND
In January 2006, Plaintiff commenced employment with Defendant
as a patent attorney, providing legal services to one of its
subsidiaries, Ortho-Clinical Diagnostics, Inc. (“OCD”). Defendant
maintained a Long-Term Incentive Plan (“the LTI Plan” or “the
Plan”)

to

including

provide

“long-term

Restricted

Stock

incentives”

Unit

(“RSU”)

for

its

awards,

employees,
which

are

“[a]ward(s) of a right to receive an amount based on the Fair
Market Value of a share of Common Stock [of Defendant], subject to
such terms and conditions as the Administrator may establish.” LTI
Plan, attached to Defendant’s Motion to Dismiss as Exhibit A
(“Def’s Ex. A”).1

For all the years that Plaintiff received a

ranking of “performance consistently meets and sometimes exceeds
job standards,” she was awarded RSUs for her past performance, and
her new annual compensation was presented to her with a calculation
of the RSUs for that year.
The LTI Plan provides that the RSU awards have a vesting
period of three years. With various exceptions not relevant here,
an employee was required to be employed by Defendant on the three-

1

Though Plaintiff did not attach the LTI Plan to her Complaint, Defendant
submitted the LTI Plan, the LTI Plan Prospectus, and an RSU Certificate in
support of its motion to dismiss. The Court properly may consider these documents
in resolving Defendant’s motion to dismiss. See Rothman v. Gregor, 220 F.3d 81,
88–89 (2d Cir. 2000) (“For purposes of a motion to dismiss, we have deemed a
complaint to include any written instrument attached to it as an exhibit or any
statements or documents incorporated in it by reference, . . . and documents that
the plaintiffs either possessed or knew about and upon which they relied in
bringing the suit[.]”) (internal and other citations omitted).

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year vesting date in order to receive the value of the RSUs.
In early 2013, Defendant began discussions to sell OCD. The
patent attorneys supporting OCD, including Plaintiff, were included
as assets to the sale and were not allowed to look for work within
Defendant or any of its companies. Plaintiff indicates that the
patent attorneys were forced to either leave Defendant’s employment
or become an employee of OCD after the sale.
In January 2014, Defendant announced its formal intention to
sell OCD to The Carlyle Group. In February 2014, Defendant awarded
Plaintiff RSUs based on her 2013 work performance.
On June 29, 2014, Defendant’s sale of OCD became final,
Plaintiff’s employment with Defendant terminated, and she became an
employee of OCD. Upon the sale of OCD, Defendant terminated the
RSUs granted to Plaintiff in 2012, 2013, and 2014, on the basis
that

these

RSUs

had

not

vested

prior

to

the

termination

of

Plaintiff’s employment. That is, Plaintiff’s employment ended prior
to the three-year vesting period for all of the RSUs awarded.
Plaintiff alleges she lost the full value of the RSUs awarded in
2012, 2013, and 2014, which exceeds $75,000.
RULE 12(b)(6) STANDARD
In reviewing a motion to dismiss pursuant to Rule 12(b)(6),
the Court must accept “all factual allegations in the complaint and
draw . . . all reasonable inferences in the plaintiff’s favor.”
Ruotolo v. City of New York, 514 F.3d 184, 188 (2d Cir. 2008)

-3-

(internal quotation marks omitted). “While a complaint attacked by
a Rule 12(b)(6) motion to dismiss does not need detailed factual
allegations, a plaintiff’s obligation to provide the grounds of
[her]

entitlement

to

relief

requires

more

than

labels

and

conclusions, and a formulaic recitation of the elements of a cause
of action will not do[.]” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007) (citation omitted). In order to withstand dismissal, the
complaint must plead “enough facts to state a claim to relief that
is plausible on its face.” Id. at 570. Conclusory allegations are
not entitled to any assumption of truth and will not support a
finding that the plaintiff has stated a valid claim. Lundy v.
Catholic Health System of Long Island, Inc., 711 F.3d 106, 113 (2d
Cir. 2013) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678, 679
(2009)). As the Second Circuit has noted, “at a bare minimum, the
operative standard requires the ‘plaintiff [to] provide the grounds
upon which [her] claim rests through factual allegations sufficient
to raise a right to relief above the speculative level.’” ATSI
Communications, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.
2007) (quoting Twombly, 550 U.S. at 555).
DISCUSSION
I.

ERISA Claims (First and Second Causes of Action)
Plaintiff alleges that “upon information and belief,” the LTI

Plan is an ERISA-governed plan, and that “upon information and
belief,”

Defendant

is

the

fiduciary

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of

that

plan.

Complaint

(“Comp.”) ¶ 23. She asserts claims for breach of fiduciary and
estoppel under ERISA § 502(a), without specifying a particular
subsection.2 Plaintiff seeks to recover damages for “the amount of
the RSUs that were not paid to [Plaintiff] at the time of her
separation of employment.” Comp. ¶¶ 45, 52. Defendant has moved to
dismiss these claims on the bases that the LTI Plan is not an
ERISA-governed plan; that Plaintiff’s request for monetary damages
is

not

cognizable

under

the

ERISA provision that

allows

for

individual, rather than plan, relief; and that the Complaint fails
to state causes of action for fiduciary duty and estoppel. As
discussed further below, the Court finds that the LTI Plan is not
an ERISA-governed plan, and it therefore need not reach Defendant’s
alternative grounds for dismissal.
A.

Determining the Existence of an ERISA Plan on a Rule
12(b)(6) Motion

Where, as here, “the record contains the undisputed terms of
the disputed plan, . . . a [c]ourt may decide the applicability of
ERISA as a matter of law.’” Kuhbier v. McCartney, Verrino &
Rosenberry Vested Producer Plan, --- F. Supp.3d ----, 2015 WL
1332354, at *5 (S.D.N.Y. Mar. 25, 2015) (quoting Foster v. Bell
Atl. Tricon Leasing Corp., No. 93–CV–4527, 1994 WL 150830, at *1

2

The only subsection of ERISA § 502(a) that provides a cause of action for
individual, rather than plan, relief based on a breach of fiduciary duty is ERISA
§ 502(a)(3), 29 U.S.C. § 1132(a)(3). See Coan v. Kaufman, 457 F.3d 250, 262-63
(2d Cir. 2006). ERISA § 502(a)(3) provides only for “equitable relief.” See 29
U.S.C. § 1132(a)(3); Coan, 457 F.3d at 262-63.

-5-

(S.D.N.Y. Apr. 20, 1994) (ellipsis, brackets, and emphasis in
original; citing Albers v. Guardian Life Ins. Co. of Am., No.
98–CV–6244, 1999 WL 228367, at *2 (S.D.N.Y. Apr. 19, 1999) (Chin,
D.J.) (noting that the applicability of ERISA “is cognizable on a
Rule 12(b)(6) motion” where the record contains the undisputed
terms of a disputed plan) (collecting cases)).
“To state a claim under ERISA, a plaintiff must allege and
establish the existence of an ‘employee benefit plan’ that is
governed by ERISA.” Albers, 1999 WL 228367, at *2 (citing 29 U.S.C.
§ 1003(a)). For purposes of the statute, a covered “employee
benefit plan” is either an “employee pension benefit plan,” an
“employee welfare benefit plan,” or a plan that is both. See 29
U.S.C. § 1002(1)-(3). The Court accordingly must determine whether
the LTI Plan is an “employee pension benefit plan,” 29 U.S.C. §
1002(1), or an “employee welfare benefit plan,”
B.

id. § 1002(2).

The LTI Plan is Not a Welfare Benefit Plan

The definition of “employee welfare benefit plan” in 29 U.S.C.
§ 1002(1) “can be broken down into five elements: (1) a ‘plan,
fund, or program’ (2) established or maintained (3) by an employer
. . . (4) for the purpose of providing medical, surgical, [or]
hospital care . . . benefits . . . (5) to participants or their
beneficiaries.” Peckham v. Gem State Mut. of Utah, 964 F.2d 1043,
1047 (10th Cir. 1992) (quoting Donovan v. Dillingham, 688 F.2d
1367, 1371 (11th Cir. 1982); citing Wickman v. Northwest Nat’l Ins.

-6-

Co., 908 F.2d 1077, 1082 (1st Cir.), cert. denied, 498 U.S. 1013
(1990); other citation omitted)). Even assuming that elements (1),
(2), (3), and (5) are satisfied, Plaintiff cannot satisfy element
(4), the “purpose” requirement, as discussed further below.
The LTI Plan indicates that its purposes are
to provide long-term incentives to those persons with
responsibility for the success and growth of the Company
and its subsidiaries and affiliated entities, to
associate more closely the interests of such persons with
those of the Company’s shareholders, to assist the
Company and its subsidiaries and affiliated entities in
recruiting, retaining and motivating a diverse and
talented group of employees on a competitive basis, and
to ensure a pay for performance linkage for such persons.
LTI Plan, § 1. The Plan provides for the granting of several types
of “equity awards[,]” including restricted shares and RSUs,3 as
well as stock options, stock appreciation rights, performance
shares, and performance share units. See LTI Plan Prospectus, p. 3;
LTI Plan, § 7. In contrast, an ERISA “welfare benefit plan” is
established for the purpose of providing its participants or their
beneficiaries benefits such as health care, vacation, disability,
and unemployment. See 29 U.S.C. § 1002(1). While the Second Circuit
has not yet addressed this issue, Federal appellate and district
courts consistently have held that incentive plans premised on the

3

“A Restricted Share Unit is an Award of a right to receive an amount based
on the Fair Market Value of a share of Common Stock, subject to such terms and
conditions as the Administrator may establish. . . . Any person who holds
Restricted Share Units shall have no ownership interest in the shares of Common
Stock to which such Restricted Share Units relate until and unless payment with
respect to such Restricted Share Units are actually made in shares of Common
Stock.” LTI Plan, § 7(c)(iv).

-7-

award of stock options to employees, similar to the LTI Plan, are
not “employee welfare benefit plans.” See, e.g., Oatway v. American
Int’l Group, Inc., 325 F.3d 184, 189 (3d Cir. 2003) (stock option
incentive

plan

intended

to

improve

employee

performance

and

retention was not “employee welfare benefit plan”); Emmebegger v.
Bull Moose Tube Co., 197 F.3d 929, 932-33 (8th Cir. 1999) (stockbased incentive plan designed to encourage employee retention was
“bonus program” and not “employee welfare benefit plan”); Murphy v.
Inexco Oil Co., 611 F.2d 570, (5th Cir. 1980) (bonus plan intended
to reward employees for service was not “employee welfare benefit
plan”); Hahn v. National Westminster Bank, N.A., 99 F. Supp.2d 275,
278 n. 2 (E.D.N.Y. 2000) (“phantom stock plan” created to provide
employees

with

financial

incentives

“does

not

fall

into

the

statutory definition of . . . a[n] [employee welfare benefit] plan
since it was clearly not established to provide the benefits
referred to [in 29 U.S.C. § 1002(1)]”); other citation omitted). In
Murphy, for example, the employer instituted a bonus program for
selected employees by assigning an interest in a drilling prospect
on their behalf to a third party to administer the interest. 611
F.2d

at

572.

The

interest,

which

the

employee

owned

after

retirement, was based on factors including the employee’s length of
service and nature of his or her contribution to the company. Id.
at 572-73. In the event of termination, the employee was divested
of the interest. Id. at 573 n. 3. The Fifth Circuit held that the

-8-

plan was not an ERISA-governed “employee benefit plan” because the
bonuses were discretionary and were awarded in addition to the
employee’s regular salary. Id. at 574 (noting that it was “evident”
the “primary purpose of the [bonus plan] was to reward employees
for their service with present benefits”). Here, as in Murphy, the
LTI Plan is discretionary and has the stated purpose of providing
long-term incentives to those employees “with responsibility for
the success and growth of the Company[.]” The plain language of the
LTI Plan is clear that it was not “established or maintained for
the purpose of providing for its participants . . . medical,
surgical, or hospital care or benefits, or benefits in the event of
sickness, accident, disability, death or unemployment, or vacation
benefits, apprenticeship or other training programs, or day care
centers, scholarship funds, or prepaid legal services[,]” 29 U.S.C.
§ 1002(1)(A), or similar benefits. Therefore, the Court finds that
the LTI Plan is not an “employee welfare benefit plan” as defined
by ERISA.
C.

The LTI Plan is Not a Pension Benefit Plan

For purposes of ERISA, an “employee pension benefit plan” is
“any plan, fund, or program which . . . is . . . established or
maintained by an employer . . . to the extent that by its express
terms or as a result of surrounding circumstances such plan, fund,
or program—(i) provides retirement income to employees, or (ii)
results in a deferral of income by employees for periods extending

-9-

to the termination of covered employment or beyond, regardless of
the method of calculating the contributions made to the plan, the
method of calculating the benefits under the plan or the method of
distributing benefits from the plan.” 29 U.S.C. § 1002(2)(A)
(emphases supplied). Thus, bonus and incentive plans are excluded
from the umbrella of ERISA coverage unless certain conditions are
met.

The

Department

of

Labor

(“DOL”)

has

issued

regulations

indicating that “the terms ‘employee pension benefit plan’ and
‘pension plan’ shall not include payments made by an employer to
some or all of its employees as bonuses for work performed, unless
such payments are systematically deferred to the termination of
covered employment or beyond, or so as to provide retirement income
to employees.”

29 C.F.R. § 2510.3-2(c) (emphasis supplied). The

question for the Court therefore is whether payments under the LTI
Plan

are

“systematically

deferred”

to

the

termination

of

Plaintiff’s employment, or deferred so as to provide retirement
income. See id.
Plaintiff

asserts

the

LTI

Plan

allows

for

deferral

of

payments and argues that whether any plan gives rise to the
“systematic” deferral of payment of benefits to termination or
beyond depends on the specific facts and circumstances of the plan.
Plaintiff urges the Court to conclude that, at this stage, it
cannot undertake the necessary analysis because discovery has not
occurred. See Pl’s Mem. at 6-7. Defendant asserts that the LTI

-10-

Plan’s

express

terms

establish

that

there

is

no

“systematic

deferral” because RSUs, with limited exceptions not applicable
here, can vest only during employment. See RSU Certificates, §
2(a), (b), Def’s Ex. B. Defendant notes that the RSU Certificates
provide in pertinent part as follows:
(a) General. Except as otherwise provided in this Section
2, each RSU granted herein shall be vested on the Vesting
Date, provided that on the Vesting Date, you are, and
have been at all times since the Grant Date, an employee
of the Company. . . .
(b) Termination of Employment. If, prior to the Vesting
Date, you cease to be employed by the Company for any
reason, including termination for cause, then unless
otherwise provided in Section 2(c), 2(d), 2(e), or 2(f)4
hereof, the RSUs shall become null and void on the Date
of Termination.
. . .
RSU Certificate (“RSU Cert.”), § 2(a), (b) (italics supplied;
underlining in original).
The Court finds that the express terms of the LTI Plan dictate
that in the event an employee “cease[s] to be employed by the
Company for any reason” “prior to the Vesting Date,” the “RSUs
shall become null and void on the Date of Termination.” RSU Cert.,

4

The enumerated exceptions in the RSU Certificate address employment
termination due to death, disability, and retirement. With regard to termination
due to retirement, the RSU Certificate provides for the vesting of unvested RSUs
only if the employee retires from Defendant without being terminated “for
[c]ause” and either the employee has “at least ten (10) years of [s]ervice with
at least five (5) consecutive years of [s]ervice before” the date of termination,
or the employee has “attained age 62 as of” the date of termination. See RSU
Cert. § 2(e). Plaintiff
characterizes her termination in June 2014, as a
“retirement,” Comp. ¶ 35. However, she neither had ten years of service nor had
she reached age 62, see id. ¶¶ 9, 35, as required for vesting-by-retirement under
Section 2(e) of the RSU Certificate. And, none of the other enumerated exceptions
possibly apply to Plaintiff’s case.

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§ 2(b) (emphasis supplied). Therefore, the LTI Plan does not
provide for the “systematic[ ] deferr[al] [of RSU awards] to the
termination of covered employment or beyond;” rather, termination
of employment nullifies and voids an RSU award, except under
circumstances not applicable here. Furthermore, as noted above, the
LTI Plan’s

stated

purpose

does

not

include

the

provision

of

retirement benefits or benefits after termination of employment. To
the contrary, “it is clear that the [LTI Plan] was created to
provide additional compensation to current employees in recognition
of their value to [Defendant][,]” Hahn, 99 F. Supp.2d at 279, and
to “assist” in “retaining” valued employees, see LTI Plan § 1.
LTI Plan’s

The

“express statement of purpose” “is entitled to weight

when determining the nature of the plan.” Hahn, 99 F. Supp.2d at
279. Courts consistently have found similar incentive or bonus
plans not to be ERISA-governed “employee pension benefit plans.”
See, e.g., Murphy, 611 F.2d at 575; Copley v. Medpace, Inc., No.
1:12-cv-426, 2013 WL 589158, at *6 (S.D. Ohio Feb. 14, 2013), R&R
adopted, 2013 WL 1196609 (S.D. Ohio Mar. 25, 2013); Prieto v.
Election.com, No. 04–CV–4413(DRH)(MLO), 2005 WL 3560596, at *4
(E.D.N.Y. Dec. 29, 2005); Goodrich v. CML Fiberoptics, Inc., 990 F.
Supp. 48, 50 (D. Mass. 1998); Int’l Paper Co. v. Suwyn, 978 F.
Supp. 506, 511 (S.D.N.Y. 1997); Laflan v. Electr. Data Sys. Corp.,
856 F. Supp. 339, 345 (E.D. Mich. 1994).
Plaintiff cites Tolbert v. BBC Cap. Markets Corp., 758 F.3d

-12-

619 (5th Cir. 2014), in which the circuit court addressed whether
an employer’s “wealth accumulation plan” was an “employee pension
benefit plan” and found it to be governed by ERISA. In contrast to
the LTI Plan, the plan in Tolbert explicitly stated it was a
“deferred compensation plan,” and it allowed participants the
option to defer any account distribution until the termination of
their employment, as well as provided them with an option to
receive installment payments during retirement. Although the LTI
Plan contemplates the possibility of the deferral of awards, such
deferral

lies

within

the

sole

discretion

of

the

LTI

Plan

Administrator,5 and the deferral period cannot extend past the
termination of employment. The “mere fact that some payments under
a plan may be made after the employee has retired or left the
company does not result in ERISA coverage.” Hahn, 99 F. Supp.2d at
279 (quoting Murphy, 611 F.2d at 575). Therefore, the Court finds
that Tolbert does not alter its conclusion that the LTI Plan is not
an employee pension benefit plan.
II.

Breach of Contract (Third Cause of Action)
A.

Choice of Law

Although Plaintiff purports to assert her breach of contract
claims under New York law, see Comp. ¶¶ 58, 63, the LTI Plan and
RSU Certificate specify that they are governed by New Jersey law.

5

The LTI Plan states that the Administrator “may, in its sole discretion,
approve deferral elections made by Participants.” LTI Plan a§ 9.

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See LTI Plan § 16(o), RSU Cert. § 9(b). Although Defendant argues
that these choice-of-law

provisions should be given effect, it

does not cite any New Jersey law in support of its argument, and
argues that the result is the same whether New Jersey or New York
law is applied. See Def’s Mem. at 12-13 & n. 4.

Plaintiff does not

argue that the result is different with regard to her claim
regarding the alleged breach of the LTI Plan.
B.

Alleged Breach of LTI Plan

Under New York law, to state a claim for breach of contract,
a plaintiff must allege (1) a contract between the parties; (2)
performance of the contract by one party; (3) breach by the other
party; and (4) damages flowing from the breach. E.g., Rexnord
Holdings, Inc. v. Bidermann, 21 F.3d 522, 525 (2d Cir. 1994)
(citation omitted). “When pleading these elements, a plaintiff must
identify the specific provision of the contract that was breached
as a result of the acts at issue.” Wolff v. Rare Medium, Inc., 210
F. Supp.2d 490, 494 (S.D.N.Y. 2002) (citing Lew v. Bessemer Trust
Co., N.A., No. 97 Civ. 1785(JFK), 1997 WL 431079, at *5 (S.D.N.Y.
1997)).
Plaintiff asserts that Defendant “breached the terms of [the
LTI] Plan when it terminated [her] RSUs upon the sale of [OCD].”
Comp. ¶ 57. Although Plaintiff seeks to base this claim on the
express terms of the “LTI Plan and incorporated Restrictive [sic]
Stock Certificate[,]” id. ¶ 55, the Complaint does not identify any

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terms of the LTI Plan or RSU Certificate that were breached. The
Court thus is required to examine the LTI Plan’s terms to see if
Plaintiff is contractually entitled to payment of her RSU awards
from 2012, 2013, 2014.
“It

is

well

established

under

New

York

law

that

‘[a]n

employee’s entitlement to a bonus is governed by the terms of the
employer’s bonus plan.’” O’Dell v. Trans World Entm’t Corp., 153 F.
Supp.2d 378, 397 (S.D.N.Y. 2001) (quoting Hall v. United Parcel
Serv. of Am., Inc., 76 N.Y.2d 27, 36 (1990)); accord Karmilowicz v.
Hartford Fin. Servs. Group, No. 11 Civ. 539(CM)(DCF), 2011 WL
2936013, at *7 (S.D.N.Y. July 4, 2011), aff’d, 494 F. App’x 153 (2d
Cir. 2012). It is similarly well-established that “an employee
cannot recover for an employer’s failure to pay a bonus under a
plan

that

provides

the

employer

with

absolute

discretion

in

deciding whether to pay the bonus.” Smith v. Railworks Corp., No.
10 Civ. 3980(NRB), 2011 WL 2016293, at *3 (S.D.N.Y. May 17, 2011)
(citing Namad

v.

Salomon Inc.,

74

N.Y.2d 751,

752–53 (1989)

(affirming dismissal where “the bonus clause unambiguously vests
discretion regarding the amount of bonus compensation to be awarded
in defendants’ management”); Bessemer Trust Co., N.A. v. Branin,
618 F.3d 76, 92 (2d Cir. 2010) (affirming dismissal where the bonus
provision “reserve[d] to the Salary Committee the decision to award
or not to award a bonus, and in what amount”)). In Karmilowicz v.
Hartford Fin. Servs., Inc., 494 F. App’x 153 (2d Cir. 2012)

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(unpublished opn.), the plaintiff attempted to bring a breach of
contract claim based on certain long-term incentive plans, each of
which “expressly stated that potential payments were within the
sole, absolute, and exclusive discretion of The Hartford, that no
employee had a right to any such payment until it was, in fact,
paid, and that active employment6 with The Hartford was a condition
precedent to receiving payment.” Id. at 157. The Second Circuit
found that “[g]iven the plain language in the compensation plans,
the District Court was clearly correct to conclude that Karmilowicz
could not state a claim for breach of contract under New York law.”
Id. (footnote omitted).
Here, the LTI Plan similarly invests the Plan Administrator
with wide-ranging and exclusive authority “to do all things that it
determines to be necessary or appropriate in connection with the
administration of the Plan,” including, “without limitation,” the
authority to select the employees to be granted awards under the
Plan; to determine the timing of awards and any conditions that
must be satisfied before an award is granted; to determine the
circumstances under which awards become exercisable or vested or
are forfeited to expire; and to establish and verify the extent of
satisfaction

of

any

performance

goals

or

other

conditions

6

The plans at issue “conditioned the receipt of any payment by mandating
that only ‘active employees . . . [with] continued employment through the payout
date’ are eligible to receive incentive awards.” Karmilowicz, 494 F. App’x at 157
(alteration and ellipsis in original).

-16-

applicable to the grant, issuance, exercisability, vesting, or
ability to retain such awards. See LTI Plan § 3(b). According to
the LTI Plan, the “decisions, determinations, interpretations and
actions taken by the Administrator regarding the [LTI] Plan . . .
shall be conclusive and binding on all parties concerned[.]” Id. §
4. In addition, the RSU Certificate governing each of the RSU
awards to Plaintiff specifically provides that “[i]f, prior to the
Vesting date [of the RSU],” Plaintiff “cease[s] to be employed by
the Company for any reason,” “the RSUs shall become null and void
on the Date of Termination.” RSU Cert., § 2(b) (emphasis supplied).
As noted above, Plaintiff does not and cannot argue that any of the
exceptions to the nullification-upon-termination provision apply to
her situation. The Court must conclude that the plain terms of the
RSU

Certificates,

incorporated

into

the

LTI

Plan,

preclude

Plaintiff from stating a plausible breach of contract claim based
on Defendant violating any provision of the LTI Plan.
Plaintiff

also

asserts

that

the

LTI

Plan’s

language

is

ambiguous insofar as it is “silent on how the RSUs should be
treated in the event of a sale of the business.” Pl’s Br. at 13.
The Court agrees with Defendant that the LTI Plan does address the
terms and conditions of unvested RSUs if an employee “cease[s] to
be employed by the Company for any reason[,]” RSU Cert. § 2(b)
(emphasis supplied), that is, it unequivocally states that the
unvested RSUs “shall become null and void[.]” Id. The Court cannot

-17-

find the phrase, “cease[s] to be employed by the Company for any
reason[,]” to be ambiguous. First, Plaintiff’s allegations indicate
that she “ceased to be employed” by Defendant when OCD was sold.
See Comp. ¶ 34 (when Defendant’s sale of OCD became final, and she
“became an employee of OCD”); see also id. ¶¶ 1 (referring to
Plaintiff’s “separation of employement”); 27 (employees of OCD
“were forced to either voluntarily leave Defendant’s employment or
become an employee of OCD after the sale” of Defendant), 29 (noting
that Plaintiff “was inevitably going to become an OCD employee
based on the terms of the sale”). As there can be no dispute that
Plaintiff ceased to be employed by Defendant upon the sale of OCD,
the only possible ambiguity could reside in the phrase, “for any
reason.”
“Language is ambiguous when it is capable of more than one
meaning when viewed objectively by a reasonably intelligent person
who has examined the context of the entire integrated agreement[.]”
O’Neil v. Ret. Plan for Salaried Employees of RGO Gen., Inc., 37
F.3d 55,

58–59

(2d

Cir.

1994)

(internal

quotation

marks

and

citations omitted). In the context of statutory interpretation, the
Supreme Court has observed that use of the word “any” generally
indicates a legislative “intent to sweep broadly to reach all
varieties of the item referenced.” Cohen v. JP Morgan Chase & Co.,
498 F.3d 111, 117 (2d Cir. 2007) (citing, inter alia, United States
v.

Gonzales,

520

U.S. 1,

5

(1997)

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(concluding

that, “[r]ead

naturally, the word ‘any’ has an expansive meaning, that is, ‘one
or some indiscriminately of whatever kind’”) (quotation omitted)).
Viewing the phrase “any reason” objectively and in the context of
the LTI Plan and RSU Certificate, the Court simply cannot find
ambiguity. There is no reasonable inference from the context of the
pertinent documents that “any” was intended to have a limited as
opposed

to

an

expansive

meaning.

Plaintiff

has

suggested

no

plausible basis for finding ambiguity apart from the documents’
alleged silence. However, “[s]ilence, or omission of a term,
however, does not generally create ambiguity.” Spinelli v. Nat’l
Football League, --- F. Supp.3d ----, 2015 WL 1433370, at *34
(S.D.N.Y. Mar. 27, 2015) (quotation and citations omitted)). The
Court declines to equate silence with ambiguity in this case and
finds that the LTI Plan and RSU Certificate are not ambiguous.
B.

Breach of Implied Contract Between Employee and Employer
(New Theory)

Plaintiff
memorandum

of

asserts

for

law

breach

a

the

first

of

time

contract

in

her

claim

opposition

premised

on

Defendant’s alleged breach of the employer-employee relationship.
See

Pl’s

represented

Br.

at

that

13-14.7
the

According

RSUs

were

to
“an

Plaintiff,
integral

Defendant

portion

of

[Plaintiff]’s compensation package,” which “became an inherent part

7

Plaintiff acknowledges that this theory of relief was not pled explicitly
in the Complaint but argues that Defendant had sufficient notice of it.
Alternatively, Plaintiff requests leave to amend. See id. n. 3.

-19-

of her contract of employment.” Id. at 14. This argument is
untenable in light of the plain terms of the LTI Plan, which has a
provision titled, “Rights to Employment or Service; No Rights to
Awards,” LTI Plan § 16(d), and states explicitly that
Awards are not a constituent part of salary . . . [and]
. . . the value of Awards received under the Plan shall
be excluded from the calculation of termination
indemnities or other severance payments. . . .
Id.

§

16(d)(ii)-(iii).

Plaintiff

also

asserts

that

Defendant

breached the contract “by deeming her RSUs forfeited upon the
separation of her employment.” Pl’s Mem. at 14. The terms of the
LTI Plan likewise renders

this argument unsupportable, given that

Section 16 further states that
[n]either the Plan nor any action taken hereunder shall
be construed as giving any person any right to be
retained in the employ or service of [Defendant] or any
of its subsidiaries or affiliates, and the Plan shall not
interfere with or limit in any way the right of the
[Defendant] or any of its subsidiaries or affiliates to
terminate any person’s employment or service at any time.
Except as set forth herein, no employee or other person
shall have any claim or right to be granted an Award
under the Plan.
LTI Plan § 16(d). Finally, Section 16 states that “[b]y accepting
an Award, the Participant acknowledges and agrees that . . . the
Award shall be exclusively governed by the terms and conditions of
the Plan. . . .” Id. Here, Plaintiff accepted awards of RSUs on
multiple occasions and, in so doing, agreed that the LTI Plan would
“exclusively govern[ ]” those awards. Thus, even assuming there was
an implied contractual relationship between herself and Defendant

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based on the employer-employee relationship, Plaintiff has no basis
for arguing that any alleged oral representations made by Defendant
superseded the written terms of the integrated and unambiguous LTI
Plan and incorporated RSU Certificate. See Investors Inc. Co. of
Am. v. Dorinco Reins. Co., 917 F.2d 100, 104 (2d Cir. 1990) (“Parol
evidence may be admitted to explain a writing only when the terms
of the writing itself are ambiguous.”) (citing Hanam, B.V. v.
Kittay, 589 F.Supp. 1042, 1047 (S.D.N.Y. 1984) (“Parol may not be
used to create an ambiguity where none exists.”)).
IV.

Breach of Implied Covenant of Good Faith and Fair Dealing
(Fourth Cause of Action)
Plaintiff essentially reiterates her allegations supporting

her breach of contract claim in support of her claim for breach of
the implied covenant of good faith and fair dealing. A part of
every contract under New York law is an “implied undertaking on the
part of each party that [it] will not intentionally and purposely
do anything to prevent the other party from carrying out the
agreement on his part.” Kader v. Paper Software, Inc., 111 F.3d
337, 342 (2d Cir. 1997) (quotation and citation omitted). Plaintiff
cannot state a claim for implied covenant of good faith and fair
dealing.
As noted above, Section 16 of the LTI Plan provides that RSU
awards are not a part of an employee’s salary, and any awards
received under the LTI Plan are to be excluded from termination or
severance payments. Also, Section 16 states that employees have no
-21-

“rights” to awards under the LTI Plan. Therefore, Plaintiff’s
assertion

that Defendant

“deprived

[her]

of

her right

to

be

compensated for her performance awarded RSUs when it terminated her
RSUs

upon

the

sale

of

the

business,”

Comp.

¶¶

60-61,

is

contradicted by the express terms of the LTI Plan. Plaintiff also
urges an inference of bad faith on Defendant’s part, asserting that
Defendant wrongfully awarded her RSUs for 2013, despite knowing the
award would never vest due to the imminent sale of OCD. Id. ¶ 62.
Again, this argument is undercut by the LTI Plan’s terms. By
accepting an RSU award, Plaintiff agreed that, among other things,
Defendant reserved the right to amend or cancel the LTI Plan at any
time without incurring liability except to the extent provided by
the

terms

of

awards

already

granted

under

the

LTI

Plan.

As

discussed above, the terms of the awards provided are contained in
the RSU Certificates, which set forth the three-year vesting period
and the condition that unvested awards are nullified when the
employee ceases to become employed by Defendant. “[A]lthough the
obligation of good faith is implied in every contract, it is the
terms of the contract which govern the rights and obligations of
the parties.” Nat’l Westminster Bank, U.S.A. v. Ross, 130 B.R. 656,
679 (Bankr. S.D.N.Y. 1991) (citing, inter alia, Murphy v. Amer.
Home Prod. Corp., 58 N.Y.2d 293 (1983)). Here, the terms of the LTI
Plan set forth the parties’ “contractual rights and liabilities,”
which may not be varied or ignored based simply on a claim that one

-22-

party has exercised a contractual right but has failed to do so in
good faith. Id. (citations omitted).
V.

Conclusion
For the reasons discussed above, Defendant’s Motion to Dismiss

the Complaint For Failure to State Claim (Dkt #2) is granted, and
the Complaint (Dkt #1) is dismissed in its entirety. The Clerk of
the Court is directed to close this case.
IT IS SO ORDERED.

________________________________
Honorable Michael A. Telesca
United States District Judge
DATED: Rochester, New York
October
, 2015

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