Readers who have been around for the past couple of decades will recall well a simpler time in our national politics, when the leader of the free world contended that he had not lied when telling aides, regarding a relationship with a White House intern, that “There’s nothing going on between us” because “It depends on what the meaning of ‘is’ is.”
Although most speakers of the English language may not have realized that there were multiple possible definitions of “is,” the same might be true of the common conjunction “and.” That belief may be shaken, however, by Vice Chancellor Glasscock’s recent decision in Weinberg v. Waystar, Inc. et al. In that case, the court decided that a company was entitled to exercise a call right relating to a former employee’s stock options. The decision turned entirely upon the court’s resolution of the parties’ different interpretations of the word “and” in the option agreements at issue and the court’s conclusion that “and” should be interpreted in the “several” (or permissive) sense rather than the “joint” (or mandatory) sense.
A little background: Plaintiff Tracey Weinberg had accumulated Waystar stock options during her three years of employment with the company, more than 100,000 of which had vested at the time that she was terminated without cause. (The options allowed for the purchase of common stock that was immediately converted into “converted units” of an affiliate company.) The agreements governing the options each contained a “call right” providing:
The Converted Units shall be subject to the right of repurchase (the “Call Right”) exercisable by Parent …, as determined in its sole discretion, during the six (6) month period following (x) the Termination of such Participant’s employment . . . for any reason (or, if later, the six (6) month anniversary of the date of the exercise of the Options in respect of which the Option Stock was issued, and (y) a Restrictive Covenant Breach….
After Plaintiff was terminated, she exercised her options. A few days later, the company notified her that it was exercising the Call Right. Plaintiff promptly sued, seeking a declaratory judgment that the company was not entitled to exercise the Call Right in the absence of a restrictive covenant breach (which the parties agreed had not occurred). In short, Weinberg argued that the six-month period for repurchase only began if and when both conditions were satisfied: termination and a restrictive covenant breach. The company’s position, on the other hand, was that its right was exercisable at any time during the six-month period after Weinberg’s termination and also during the six-month period following a restrictive covenant breach. Both parties contended that the agreement was unambiguous and could be construed as a matter of law (of course, to opposite results).
In a decision citing scant caselaw, but relying heavily upon a 1960 American Bar Association article by Professor F. Reed Dickerson (“the dean of American legislative drafting”) titled The Difficult Choice Between “And” and “Or,” Vice Chancellor Glasscock sided with the company. The court noted that Prof. Dickerson had explained that “it is not always clear whether the writer intends the several ‘and’ (A and B, jointly and severally) or the joint ‘and’ (A and B, jointly but not severally)” and that the distinction hinged in large part on whether the conjunction was used “in a permissive or mandatory sentence.”
The court found that applying these principles to the agreement in question supported the company’s right to repurchase:
The Call Right is permissive: Waystar may exercise it “in its sole discretion.” It is thus natural to read the word “and” in its “several” sense, to mean that Waystar can exercise the Call Right during “the six (6) month period” following Weinberg’s “Termination . . . for any reason,” during “the six (6) month period” following a “Restrictive Covenant Breach,” or both. This comports not only with the sources referred to above; more importantly, it complies with colloquial understanding of English as commonly used. “You can take a doughnut, a Danish, and a bagel” invites, but does not mandate, gluttony.
Baked goods aside, the court’s analysis and consideration of context to construe what both parties contended was an unambiguous provision is notable. Among other things, the court landed on an interpretation of “and” that is identical for all practical purposes to “or”: the company was permitted to repurchase within six months of termination or a restrictive covenant breach. Here, the court’s practical approach seems to have landed on what the parties intended at the time of contracting, but practitioners should be careful that their use of these seemingly straightforward conjunctions leads unambiguously to the desired result. No one should need to debate what the meaning of “and” is.
This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.