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Nevill v. Johnson Controls International PLC

United States District Court, E.D. Wisconsin

January 23, 2019

TRENT NEVILL, Plaintiff,
v.
JOHNSON CONTROLS INTERNATIONAL PLC, Defendant.

          ORDER DENYING DEFENDANT'S MOTION TO STAY (DKT. NO. 9) AND GRANTING DEFENDANT'S ALTERNATIVE MOTION TO DISMISS IN FAVOR OF ABITRATION (DKT. NO. 9)

          HON. PAMELA PEPPER, UNITED STATES DISTRICT JUDGE

         Trent Nevill filed a complaint seeking to recover money and benefits from Johnson Controls International (JCI) under a Change of Control Executive Employment Agreement. That agreement provided for a lump sum payment if the plaintiff resigned for “Good Reason.” The plaintiff believed he had “Good Reason” for resigning, because the defendant reduced his responsibilities following the September 2016 merger between Johnson Controls and the Irish company Tyco; the defendant disagreed and has not paid the termination payment. The defendant has moved to stay the case pending arbitration, or in the alternative, to dismiss for improper venue under Federal Rule of Civil Procedure 12(b)(3), arguing that agreements between the plaintiff and the defendant require that the case be resolved through arbitration. The court concludes that the agreements requiring arbitration govern, and it will grant the defendant's motion to dismiss under Rule 12(b)(3).

         I. FACTS

         The plaintiff worked for the defendant and its affiliated companies for twenty-two years. Dkt. No. 12 at ¶2. By 2014, the plaintiff held the title Vice President and General Manager of Systems and Services North America, and was running a $4.5 billion segment of the company. Id. at ¶3.

         A. Contractual Terms of Equity Awards or Grants

         As the plaintiff advanced, the defendant increasingly compensated him in the form of equity awards or grants, which it issued subject to broad arbitration provisions. Dkt. No. 10-1 at ¶¶4-5, 7, 10. The 2012 Plan governing these “shares and incentives” explains that the programs had several purposes: recruiting and retaining directors and employees, giving them incentive to achieve short and long-term performance goals, providing them opportunities to participate in the defendant's growth and success, and aligning their interests with shareholders. Dkt. No. 10-4 at 2. The defendant's awards and incentives manager stated in her declaration that between November 14, 2000 (when the plaintiff was offered his first grant) and January 14, 2018 (when he accepted the last one), the plaintiff received thirty-three awards and grants. Dkt. No. 10-1 at ¶7. She averred that under the defendant's stock price as of August 22, 2018, “the total current value of [the plaintiff's] 33 equity awards and grants (if he had held them until August 22, 2018) would be over $6 million.” Id. at ¶10. The defendant granted seventeen of the awards under its two most recent incentive plans; these seventeen awards either were “outstanding” or “unvested” as of the date the plaintiff resigned. Id. at ¶8. The manager attested that the plaintiff's unvested equity as of August 22, 2018 was more than $4.5 million. Id. at ¶10.

         B. Documents Governing Awards or Grants

         The defendant's rewards and incentives manager averred that for over ten years, every award or grant of equity has been governed by two “complementary” documents: (a) a plan that applied to all equity awards that the defendant issued during a particular period, and (b) an individual agreement governing the specific grant or award. Id. at ¶11. She attested that between January 24, 2007 and September 25, 2012, the master plan was called the 2007 Stock Option Plan (“2007 Plan”). Id. at ¶12. From September 25, 2012 through September 2, 2016, the master plan was called the 2012 Omnibus Incentive Plan (“2012 Plan”). Id. at ¶13. On September 2, 2016- about the same time that the merger with Tyco was finalized, the defendant adopted, and amended, Tyco's plan (“2016 Plan”). Id. at ¶14. The defendant attached to the brief in support of its motion to stay or dismiss a compilation of the individual agreements for each of the plaintiff's awards. Dkt. No. 10-5.

         The 2012 Plan said it was governed by Wisconsin law. Dkt. No. 10-3 at ¶19(h). It included the following clause:

Notwithstanding anything to the contrary herein, if any individual (other than the Company) brings a claim involving the Company or an Affiliate, regardless of the basis of the claim (including but not limited to claims relating to wrongful discharge, Title VII discrimination, the Participant's employment or service with the Company or its Affiliates or the termination thereof, benefits under this Plan or other matters), such claim shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association (“AAA”) . . . .

Id. The 2016 Plan contained an almost identical provision:

[I]f any individual (other than the Company) brings a claim involving the Company or a Subsidiary, regardless of the basis of the claim (including but not limited to claims relating to wrongful discharge, Title VII discrimination, the Participant's employment or service with the Company or its Subsidiaries or the termination thereof, benefits under this Plan or other matters), such claim shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association (“AAA”) . . . .

Dkt. No. 10-4 at ¶7.16. The specific agreements for the individual awards or grants also contained arbitration agreements. See, e.g., Dkt. No. 10-5 at p. 5, ¶15; p. 9, ¶15; p. 16, ¶11 (“Arbitration will be conducted per the provisions in the Plan”); p. 22, ¶11; p. 26, ¶15; p. 32, ¶11; p. 37, ¶11; p. 45, ¶11.

         C. The Plaintiff Was Offered, and Accepted, Awards and Grants

         The defendant's rewards and incentives manager attested that between October 2009 and March 2015, the defendant used an “online interface” system called Benefit Access, managed by Morgan Stanley, to allow participants to “review, accept, and track” equity awards and grants. Dkt. No. 10-1 at ¶16-17. In March 2015, Morgan Stanley switched to a similar system, this one called StockPlan Connect. Id. at ¶17.

         From October 2009 to March 2015, the defendant required participants to follow a specific, step-by-step process to accept the award using Benefit Access. First, the participant received an email from human resources or the participant's manager, notifying him that he had been offered a grant or award. Id. at ¶18. A few days later, the participant would get a second email from the Shareholder Services Department, telling him that he could review the terms and conditions, and accept the award, only by logging into his Benefit Access account. Id. at ¶19. This second email provided “Step By Step Grant Acceptance Instructions, ” including a requirement that the participant review the terms of the grant, “including all documents pertaining to the grant.” Id. Once the participant logged in, Benefit Access alerted the participant that there was a grant or an award waiting to be accepted. Id. at ¶¶20-21. When a participant clicked on a grant or award that he wanted to accept, the participant was “navigated . . . to the next page in the acceptance process.” Id. at ¶22.

         The defendant provided screen shots of the Benefit Access website; the section labeled “B. Read and Acknowledge Grant Documents” displayed hyperlinks to documents and agreements participants had to open before they could accept or reject the award or grant. Id. at ¶24. A red-shaded box with an exclamation point in it appeared below the words “Read & Acknowledge Grant Documents;” the text in the box stated, “You must select the checkbox to indicate you have read all associated documents before you can proceed.” Id. at ¶22. The checkbox referred to in the red-shaded area “was accompanied by the statement ‘I have read all the documents below' and appeared above the space where plan and award agreements were listed, alongside hyperlinks used to open them.” Id. at ¶26. The system would not allow a participant to click the checkbox until he actually had opened the hyperlinked documents (such as the applicable plan and related documentation for the individual award or grant). Id. So, for example, in December 2014, the plaintiff accepted award number S108; when he clicked the hyperlinks, they would have opened a complete copy of the 2012 Plan as the “Plan Document” and a complete copy of the grant-specific agreement listed as the “Stock Option /SAR Agreement.” Id. at ¶25.

         After the participant had opened the relevant documents, and clicked the verification that he had read them, the participant had to enter an individual password, which operated as an electronic signature. Id. at ¶¶27, 28. Only then could the participant click on either an “accept” or “reject” option; “[i]t was mechanically impossible to accept or reject a grant or award without opening the relevant plan and individual award or grant agreement and attesting to having read them.” Id. at ¶28.

         According to the defendant's awards and incentives manager, the plaintiff used the Benefit Access system to accept one of the seventeen outstanding or unvested awards. Id. at ¶¶8, 42.

         From March 17, 2015 to December 31, 2017, when the StockPlan Connect Online System was in use, the process was similar. Id. at ¶29. The participant received an email notifying him of a pending grant or award, giving him instructions about how to learn more and advising him that another email would be coming with specific instructions on how to accept or reject the grant or award. Id. at ¶29. The second email provided the step-by-step instructions. Id. at ¶30. The participant then logged in to StockPlan Connect, and saw a pop-up box listing grants or awards that were “pending disposition.” Id. at ¶32. Once the participant clicked “accept” next to a pending award or grant, he was routed to a “Grant Acceptance” page. Id. Again, this page had a “Read and Acknowledge Grant Documents” section, with a hyperlink to the relevant plan and the agreement regarding the individual award or grant. Id. at ¶33. Beneath each hyperlinked document was an instruction that the participant had to “read through the entire document before accepting, ” along with a check box indicating, “I have read and agree to the above document.” Id. at ¶34. The participant could not click that checkbox unless he had opened the links to the documents. Id. Once he had opened the links to the documents and clicked that he had read them, the participant was required to enter a password as an electronic signature. Id. at ¶34-35. Only after the participant had done all these things could he accept or reject the award or grant. Id. at ¶36.

         According to the defendant's awards and incentives manager, the plaintiff used StockPlan Connect (either the original version, or the modified version) to accept sixteen of the outstanding or unvested awards/grants. Id. at ¶¶8, 42.

         D. The Defendant Recruited the Plaintiff for a New Position

         In January 2016, the defendant entered into an agreement to merge with Tyco International plc, an Irish public limited company. Dkt. No. 10-14. Around February of the same year, the defendant's leadership-including then-CEO Alex Molinaroli and Chief Human Resources Officer Simon Davis-started recruiting the plaintiff for the newly-formed, executive-level position of President of Asia Pacific (APAC). Dkt. No. 4 at ¶4. The APAC Presidency was unique; it had specific job duties, responsibilities and reporting requirements. Id. It was one of only a few positions that reported directly to the CEO. Id.

         The defendant's leadership prepared several documents outlining the APAC Presidency position, including a RASIC Chart[1] and a Position Brief, which detailed the specific duties, responsibilities and goals for the position. Dkt. Nos. 12-1, 12-2. The Position Brief specifically described the APAC Presidency position as

[A] critical leadership role responsible for strategic business growth, enterprise leadership and functional management for JCI in the region. As a member of the Executive Operating Team (EOT) this individual will ultimately define and deliver the strategic roadmap for APAC driving fast paced growth and market leadership for all of JCI's businesses. President-Asia Pacific will collaborate with the Business Unit (BU) leadership in the region to target and achieve both organic and inorganic growth across all market segments. This role will have direct responsibility for managing APAC based corporate and functional leadership resources.

Dkt. No. 12-2 at 2.

         The Position Brief also explained that the President of APAC would be responsible for strategic planning and overseeing all the defendant's then-existing business units in the APAC region; developing and supervising APAC strategic planning, corporate development and government relationships; and developing and overseeing all APAC corporate functions from the defendant's new Shanghai-based world headquarters. Id. at 1-2. According to the defendant's press release, the plaintiff would be responsible for managing “all of Johnson Controls' businesses across the Asia Pacific region.” Dkt. No. 12-3 at 1.

         As part of the recruitment process, the defendant provided the plaintiff with a Global Assignment Letter-really, an offer letter. Dkt. No. 12-4. The Global Assignment Letter laid out the specifics of the compensation and allowance package set up for the plaintiff in the new position of APAC President. Id. at 1. It listed the base salary, bonus, relocation allowance, host housing, furniture allowance, vacations and holidays, tax equalization, retirement and many other benefits of the position. Id. at 2-6. The Global Assignment Letter stated that it “should be read in conjunction with the Employment Agreement, ” and that the Global Assignment Letter controlled if there was a conflict between the terms of the letter and the terms of the Employment Agreement. Id. at 1. The Global Assignment Letter stated that the plaintiff's assignment as President of APAC would last two years, starting April 1, 2016. Id. It listed the “host location” as “Shanghai, China.” Id.

         The last paragraph of the Global Assignment Letter reads as follows:

         Disputes About this Letter

The parties agree that all disputes regarding this assignment letter or interpretation of the letter shall be governed by the laws of the State of Wisconsin and the parties further agree that the exclusive forum for resolving all such disputes shall be the courts of the State of Wisconsin.

Id. at 7. Below this paragraph are the words, “Accepted by:, ” followed by a signature line with the plaintiff's name typed beneath it. The plaintiff's signature appears above that line; the date to the right of the signature is March 4, 2016. Id. Below the plaintiff's signature, the words, “Approved by:” appear; Vice President and CHRO Simon Davis and Chairman and CEO Alex Molinaroli signed in that space. Id.

         The board of directors approved the plaintiff's promotion to the APAC Presidency at its meeting on March 16, 2016. Dkt. No. 12-10. CEO Molinaroli advised the plaintiff of the board's approval in a March 17, 2016 inter-office correspondence memo that reiterated the plaintiff's executive compensation package, including stock options. Id.

         The record includes a March 31, 2016 letter addressed to the plaintiff (“The Letter Agreement”). Dkt. No. 10-15. The Letter Agreement provided:

Although the Merger does not constitute a “Change of Control” within the meaning of that certain Change of Control Executive Employment Agreement, dated as of July 28, 2010[2] (the “COC Employment Agreement”), by and between the Company and you, the Company intends to activate certain of the provisions of the COC Employment Agreement in connection with the Merger as described in further detail in this letter agreement (“the Letter Agreement”).

Id. at 1. Somewhat paradoxically, the Letter Agreement also stated:

Notwithstanding the definition of Change of Control in the COC Employment Agreement, for the purposes of the COC Employment Agreement, the Merger shall be deemed to constitute a Change of Control and you shall be entitled to the rights and remedies, and have the obligations, set forth in the COC Employment Agreement as though a Change of Control occurred as of the Effective Time . . .

Id. Paragraph 5(b) of the Letter Agreement provided that “[t]his Agreement shall be governed by the laws of the State of Wisconsin, without reference to conflict of law principles thereof.” Id. at 3. The last sentence of the Letter Agreement instructed, “Please confirm your agreement to all of the foregoing by executing this Letter Agreement as indicated below.” Id. at 4. It is signed-oddly-“Very truly yours, JOHNSON CONTROLS, INC., ” followed by the word “By:, ” with a signature line for the plaintiff (and the title “VP & President, Asia Pacific). Id. Below are the words, “Acknowledged and Agreed:, ” and Alex Molinaroli's signature appears above his typed name and the title “CEO & Chairman of the Board.” Id.

         E. The Change of Control Agreement

         The plaintiff attached to the complaint a document entitled “Johnson Controls, Inc. Change of Control Executive Employment Agreement.” Dkt. No. 1-1. The first sentence of this documents says that it is an agreement between the defendant and the plaintiff “dated April 1, 2016.” Id. at 1. (At this point, while the defendant had agreed to merge with Tyco, the merger was not complete.) The prefatory paragraph explains the purpose of the agreement:

The Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits ...

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