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Lucente v. IBM

United States Court of Appeals for the Second Circuit

June 5, 2002, Argued ; November 4, 2002, Decided

Docket Nos. 01-7857, 01-7993


 [*247]  McLAUGHLIN, Circuit Judge:

IBM appeals from a decision of the United States District Court for the Southern District of New York (McMahon, J.) granting summary judgment to Edward E. Lucente on his breach of contract claim and dismissing IBM's breach of contract [**2]  counterclaim. IBM contends that the district court's action was improper principally because there are disputed issues of fact regarding Lucente's departure from IBM. IBM also challenges the district court's grant of leave to Lucente to amend his Complaint, as well as the court's method of calculating damages. In his cross-appeal, Lucente challenges the district court's damages calculation.

Because the district court inappropriately resolved numerous issues of material fact in Lucente's favor and abused its discretion in granting Lucente leave to amend his Complaint, we reverse.


I. Facts

This being an appeal from a grant of summary judgment to Lucente, we view the deposition testimony, affidavits, and documentary evidence in the light most favorable to IBM, the non-moving party. Roge v. NYP Holdings, Inc., 257 F.3d 164, 165 (2d Cir. 2001).

Plaintiff worked for IBM for about thirty years before he retired in February 1991. When he retired, Lucente was the President of IBM's Asia-Pacific Division, based in Tokyo, and he reported directly  [*248]  to John Akers, IBM's Chief Executive Officer ("CEO").

A. Lucente's Restricted  [**3]    Stock and Stock Option Awards

During his tenure at IBM, Lucente participated in several incentive compensation plans, including the 1982 Variable Compensation Plan (the "1982 Plan") and the 1989 Long-Term Performance Plan (the "1989 Plan") (collectively, the "Plans"). Under these Plans, IBM awarded Lucente stock options and restricted stock as part of his compensation. These Plans, of course, were designed to retain key executives and to give them a proprietary interest in the company by linking their compensation to IBM's profitability and growth. For these reasons, both Plans contained "forfeiture-for-competition" provisions, permitting IBM to cancel an employee's unexercised stock options and restricted stock if he went to work for an IBM competitor after leaving IBM. The forfeiture provisions contained no limitations for time, place, or scope. Both Plans provided that New York law governs all determinations made under the Plans.

When he retired, Lucente had been awarded 12,283 shares of restricted stock (11,162 under the 1982 Plan and 1,121 under the 1989 Plan) as well as 126,739 stock options (under the 1989 Plan). Lucente's stock options were freely exercisable from the [**4]  first anniversary of the date of the award until ten years after that date. IBM had awarded Lucente's options between May 1983 and January 1991 at exercise prices ranging between $ 96.69 and $ 159.50 per share. Thus, his options were set to expire at various dates between May 1993 and the end of January 2001. Lucente had not exercised any of his stock options prior to his retirement.

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310 F.3d 243 *; 2002 U.S. App. LEXIS 23049 **; 29 Employee Benefits Cas. (BNA) 2414

EDWARD E. LUCENTE, Plaintiff-Appellee-Cross-Appellant, v. INTERNATIONAL BUSINESS MACHINES CORPORATION, Defendant-Appellant-Cross-Appellee.

Subsequent History: On remand at, Motion granted by Lucente v. IBM, 2003 U.S. Dist. LEXIS 7847 (S.D.N.Y., May 2, 2003)

Prior History:  [**1]  Appeal by defendant and cross-appeal by plaintiff from a judgment entered pursuant to a grant of summary judgment in the United States District Court for the Southern District of New York (McMahon, J.) awarding damages to Edward E. Lucente on his breach of contract claim and dismissing defendant's counterclaim.

Lucente v. IBM, 117 F. Supp. 2d 336, 2000 U.S. Dist. LEXIS 14808 (S.D.N.Y., 2000)Lucente v. IBM, 146 F. Supp. 2d 298, 2001 U.S. Dist. LEXIS 6516 (S.D.N.Y., 2001)Lucente v. IBM, 151 F. Supp. 2d 484, 2001 U.S. Dist. LEXIS 10186 (S.D.N.Y., 2001)



district court, stock, damages, stock option, cancellation, election, summary judgment, options, provisions, Plans, anticipatory repudiation, conversion, retired, breach of contract, amended complaint, non-competition, calculated, measure of damages, original complaint, letter agreement, awards, matter of law, leave to amend, counterclaim, non-moving, terminated, measured, parties, escrow, grant of summary judgment

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