Unambiguous Contract Terms Are Enforced As Written
LEWITTON v. ITA SOFTWARE (October 28, 2009)
ITA Software offers information technology and services to online travel agents. ITA began the development of a new product that would allow the agents to make reservations and purchase airline tickets online. Derrick Lewitton joined the organization in 2005 to supervise the development and marketing of the new product. In his employment contract, ITA granted Lewitton options to purchase up to 200,000 shares of ITA stock. Up to 150,000 of the options could be forfeited, however, based on a formula that was to be applied during an assessment period after product rollout. The assessment period was scheduled to run from mid-2006 through May 2007, but was to be deferred if the rollout of the new product was delayed. The product development turned into a failure and was scaled back considerably. In fact, it was never rolled out. Lewitton left ITA in mid-2007. Shortly thereafter, he sought to exercise the full amount of his vested options. ITA took the position that most of the options were forfeited as a result of the product failure. Lewitton brought an action for the options. The court granted summary judgment to Lewitton. ITA appeals.
In their opinion, Judges Bauer, Kanne and Evans affirmed. The Court stated that its primary goal was to give effect to the terms of the agreement. If it is unambiguous, the Court noted that it would enforce it as written. The Court agreed with the district court that the "deferred" term in the contract was unambiguous. Since it is not a technical term, it should be given its ordinary meaning -- significantly delayed. The Court found no dispute that the program had been delayed. In fact, the rollout of the new product had never occurred. Under the unambiguous terms of the contract, the assessment period never occurred and the forfeiture provision was never triggered. The Court rejected ITA's position that such a conclusion ignored the principal objective of the contract -- that Lewitton would be rewarded with options if he generated significant revenue. ITA's position relied on extrinsic evidence, which the Court would not allow given the unambiguous nature of the contract.
