Wilgus v. Cybersource Corporation

SUPREME COURT CASES

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State: Illinois

Court: 5th District Appellate

Docket No: 5-08-0057 Rel

Case Date: 08/27/2009

Preview:NO. 5-08-0057
N O T IC E Decision filed 08/27/09. The text of this dec ision m ay b e changed or corrected prior to the P e t i ti o n for filing of a or the

IN THE APPELLATE COURT OF ILLINOIS

Re hea ring

FIFTH DISTRICT ________________________________________________________________________ BRIAN E. WILGUS, Individually and on Behalf of All Others Similarly Situated, ) Appeal from the ) Circuit Court of ) Madison County. Plaintiffs-Appellants, ) ) v. ) No. 02-L-995 ) CYBERSOURCE CORPORATION, ) Honorable ) Daniel J. Stack, Defendant-Appellee. ) Judge, presiding. ________________________________________________________________________ JUSTICE GOLDENHERSH delivered the opinion of the court: Plaintiff Brian E. Wilgus, individually and on behalf of all others similarly situated, appeals from an order of the circuit court of Madison County granting a summary judgment in favor of defendant, CyberSource Corp., on plaintiffs' class action claim for breach of contract. The complaint was originally filed on July 19, 2002. After years of litigation and discovery, defendant moved for a summary judgment, which the trial court granted on January 21, 2008. In this appeal, plaintiffs contend the trial court erred in granting a summary judgment in favor of defendant because (1) there are genuine issues of material fact regarding whether defendant breached the contract, (2) the hearsay rule was improperly used to exclude competent evidence of a breach of contract, and/or (3) the parol evidence rule was improperly used to exclude competent evidence of a breach of contract. We reverse and remand. BACKGROUND Plaintiffs are members of a certified class who were formerly employed by PaylinX Corp. (PaylinX), a St. Louis company, which merged with defendant. 1 There are

disposition of the same.

approximately 75 members of the class. W ilgus, the named plaintiff, joined PaylinX as a senior test engineer in March 2000. PaylinX no longer exists but was once a privately held company that designed computer software to process credit card transactions. Defendant is a publicly traded corporation on the NASDAQ. Defendant helps businesses process payment transactions over the Internet. During their employment with PaylinX, plaintiffs were identified as "key" employees who were rewarded by PaylinX with stock options in order to entice them to remain employed with PaylinX. The "PaylinX Corporation 2000 Stock Option Plan" (Plan)

specifically states that its purpose is to "provide incentive to directors, officers, key employees[,] and consultants of the Corporation by providing those persons with opportunities to purchase shares of the Company's Common Stock." In determining

eligibility for the Plan, PaylinX took into account "the duties of the respective officers, key employees[,] and consultants, their present and potential contributions to the success of the Company[,] and such other factors as the Board (or the Committee) shall deem relevant in connection with accomplishing the purposes of the Plan." The options under the Plan vested over time, thereby encouraging key employees to continue their employment with the company. Once a stock option vested, the employee was required to pay to convert his or her options to common stock. The "strike price" was the price that the employee was required to pay to the company in order to convert a vested stock option to a common stock. The value of the option, therefore, was the difference between the strike price and the price of the common stock at the time the option was converted to common stock. The Plan contained a provision that would be triggered by a merger: "If while unexercised Options remain outstanding under the Plan (i) the Company executes a definitive agreement to merge or consolidate with or into another

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corporation or to sell or otherwise dispose of substantially all its assets ***, all Options shall be exercisable in full, whether or not otherwise exercisable." The Plan required that an option be exercised "by giving written notice of such exercise to the Board." The "Board" was the board of directors of PaylinX. The Plan also required that "the Option Price shall be paid in full, at the time of exercise." Under the Plan, "[a]n optionee or a transferee of an Option shall have no rights as a shareholder with respect to any shares covered by his Option until the date of the issuance of a stock certificate to him for such shares." The merger agreement between PaylinX and defendant was signed on July 9, 2000, but the merger was not actually completed until September 18, 2000. The merger agreement specified that defendant would assume the PaylinX employee stock options, which would then become options to buy defendant's stock. The parties agree that plaintiffs were presented with amended stock option agreements under which the vesting schedules changed; however, the parties disagree with regard to when these amendments were presented. Defendant contends that in June 2000, Wilgus agreed with PaylinX to a "First Amendment Stock Option." Plaintiffs assert that after the merger agreement was signed on July 9, 2000, plaintiffs were presented with the amended stock option agreements. In any event, under the old Plan, all unvested options would vest, while under the new plan, only one-half the options would vest. Plaintiffs were also given additional options. For example, with regard to Wilgus, the "First Amendment Stock Option" states that his previous option to purchase 7,500 shares would become an option to buy 9,000 shares. PaylinX options would be exchanged for defendant's options at a ratio of 1:1.2. The options for one-half of the 9,000 shares (4,500 shares) would accelerate or vest when the merger closed. The new vesting schedules also provided that the employees' stock options would vest in six months and every month thereafter.

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According to plaintiffs, once the merger had taken place, they were required to rely on defendant to give them directions regarding how to exercise their stock options, because PaylinX ceased to exist. Plaintiffs could no longer give written notice to the board according to the original contract because the board also ceased to exist. Defendant instructed plaintiffs to exercise their options using an electronic trading method. This direction came via an email written and sent by Phil Cooper, defendant's director of operations. The e-mail was sent on September 14, 2000, and explained that there was a blackout period, "a period of time during which the company has restricted its employees from trading the company's stock" in order to reduce the risk of violating federal securities regulations against insider trading. The e-mail stated as follows: "Once I'm out of the blackout period, how do I exercise my options and trade the stock? A very convenient vehicle has been established to do this. Each employee will be able to do this on-line with Options Link

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