Unrealized Gains: Integrated Employment Agreement Bars Employee's Recovery of Additional Compensation

by Sheppard Mullin Richter & Hampton LLP
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In Volpe v. Interpublic Group of Companies, Inc., No. 652308/2012, Judge Eileen Bransten granted defendant The Interpublic Group of Companies, Inc.’s (“IPG”) motion to dismiss plaintiff Ray Volpe’s (“Volpe”) complaint, finding that Volpe’s employment agreement with IPG barred him from recovering revenue generated from an agreement he allegedly facilitated between IPG and Facebook, Inc. (“Facebook”). Volpe, who served as the CEO of two wholly-owned IPG subsidiaries, entered into his initial employment agreement with IPG on March 1, 2000 (the “Employment Agreement”).

On July 2, 2013, Volpe commenced an action against IPG, claiming as follows: In 2006, Volpe brought to IPG an opportunity to invest $2.5 million in Facebook on the condition that IPG purchase at least $10 million in advertising from Facebook over an eighteen-month period. In June 2006, two IPG executives provided oral assurances that Volpe would receive any profit from any future sale of the Facebook stock in exchange for Volpe assuming the downside risk that IPG would not be able to satisfy the $10 million guarantee (the “Oral Agreement”). IPG only agreed to the investment because Volpe committed to satisfy the $10 million guarantee. Subsequently, despite Volpe’s ability to fulfill the $10 million guarantee, IPG failed to pay him $380 million in “realized gains” in connection with its eventual sale of the Facebook stock. IPG claimed it did not have to honor the Oral Agreement because it was superseded by the integration clause in the Employment Agreement, which stated that it was the “entire understanding” between IPG and Volpe.

IPG moved to dismiss the complaint, arguing that the Employment Agreement, and the integration clause in particular, barred Volpe’s claims. Volpe argued that the Oral Agreement should be enforced because it was not covered by his Employment Agreement or, in the alternative, that the Oral Agreement modified the Employment Agreement.

The Court agreed with IPG and granted IPG’s motion to dismiss, holding that where a written contract is clear and unambiguous—such as the Employment Agreement—its plain language governs the parties’ intent. The integration clause in the Employment Agreement clearly stated that it superseded “any and all previous agreements . . . concerning [Volpe’s] employment and/or compensation.” Further, the Employment Agreement was supplemented several times, and the final supplement from 2008 incorporated all previous versions of the Employment Agreement. Therefore, even if the Court were to afford every reasonable inference regarding the truth of the Oral Agreement, the plain terms of the Employment Agreement nonetheless precluded enforcement of the Oral Agreement. Additionally, the Employment Agreement’s clear prohibition of oral modifications (it stated “[t]his Agreement may not be changed orally”) mooted Volpe’s argument that the Oral Agreement somehow modified the terms of the Employment Agreement.

The Court found Volpe’s quasi-contractual arguments equally unavailing. Volpe argued that he had a reasonable expectation to be compensated for his work on the $10 million guarantee that was separate from his compensation pursuant to the Employment Agreement. The Court disagreed, holding again that Volpe’s claims were foreclosed by the existence of the Employment Agreement because it was an express contract governing the same subject-matter as the quasi-contractual claims.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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