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England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Petter v EMC Europe Ltd & Anor [2015] EWHC 1498 (QB) (22 May 2015)
URL: http://www.bailii.org/ew/cases/EWHC/QB/2015/1498.html
Cite as: [2015] EWHC 1498 (QB)
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
| Petter |
Claimant |
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| - and - |
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| (1) EMC Europe Ltd (2) EMC Corporation |
Defendants |
____________________
S. Bloch QC, S. Neaman and Miss K. Apps (instructed by DAC Beachcroft) for the second defendant
Hearing dates: 14th and 15th May 2015
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Crown Copyright ©
- There are two applications before the Court: (i) the Second Defendant (EMC Corporation) applies to challenge the Court's jurisdiction over the claimant's (Mr Petter's) claim against it (the Part 11 Application); and (ii) Mr Petter applies for an interim anti-suit injunction against EMC Corporation restraining, pending determination of Mr Petter's claim, further prosecution of its proceedings against him in Massachusetts (the Massachusetts Proceedings) (the Anti-Suit Application).
- EMC Corporation is a publically traded Massachusetts corporation with headquarters in Hopkinton, Massachusetts. Its business is that of information storage, management and protection. It has numerous direct and indirect subsidiaries globally. EMC Europe Limited (EMC Europe) is one such indirect UK subsidiary. At all material times Mr Petter was employed by EMC Europe in a senior role within the Europe, Middle East and Africa (EMEA) region, most recently within the UK and Ireland. From 2009, his role was Director, Global Accounts, EMEA and then from 2011, he was promoted to Vice President and Country Manager, UK & Ireland. Mr Petter was subsequently promoted again to Senior Vice President and Country Manager, UK & Ireland on 14th April 2014. EMC Europe's business is to provide centralised sales and service support and general and administrative support for various other indirect subsidiaries of EMC Corporation that trade in EMEA. EMC Europe did not provide any such services for EMC Corporation. As Senior Vice President and Country Manager, Mr Petter's job was as managing director of all business in the UK and Ireland.
- Pure Storage Inc (Pure) is a California-based competitor of EMC Corporation, with a UK subsidiary, Pure Storage Ltd (Pure Storage). Pure has (EMC Corporation claims) been targeting employees of EMC Corporation and its subsidiaries, lawfully or unlawfully to "poach" them, and unlawfully to obtain confidential information and trade secrets.
- At some point in 2014 Pure approached Mr Petter, and Mr Petter was actively in discussion with Pure from November 2014 at the latest.
- It appears that Mr Petter was orally offered a position at Pure Storage on 9th January 2015 and accepted a written offer on 12th January, following which he resigned from EMC Europe on 15th January. Thereafter he was on garden leave until his termination notice expired on 14th February 2015. He commenced employment at Pure Storage on 16th February.
- The issues which arise in the present applications relate to the ambit of section 5 of Chapter II to the Brussels I (Recast) Regulation (1215/2012) which sets out provisions for "jurisdiction over individual contracts of employment". Article 20 provides that "in matters relating to individual contracts of employment, jurisdiction shall be determined by this Section" whilst Article 21 provides as follows:
- Article 22 provides that "An employer may bring proceedings only in the courts of the Member State in which the employee is domiciled."
- Recitals 15, 18 and 19 of the Recast Regulation read as follows:
- Put shortly, the essential issue between the parties is whether or not EMC Corporation, the Massachusetts company which is not domiciled in a Member State is to be considered "an employer" of Mr Petter and whether his contract with EMC Corporation relating to the grant of Restricted Stock Units (RSUs) is to be considered a contract of employment or part of a contract of employment for the purposes of Section 5. The RSU Agreements (of which there are 11) incorporate the Stock Plan issued by EMC Corporation which contains, at clause 13, a jurisdiction and governing law clause providing for submission to the exclusive jurisdiction and venue of the federal or state courts of The Commonwealth of Massachusetts and for the Plan to be governed by its laws. Mr Petter contends that this provision is of no effect as a matter of English law because of the terms of section 5 of the Recast Regulation, and that its terms entitle him to sue EMC Corporation here and require it to sue him here too, rather than in Massachusetts.
- In 2004 Mr Petter entered into an employment contract with EMC Computer Systems (U.K.) Limited (EMC UK) to work as a district sales manager within the UK. Subsequently, in November 2008, Mr Petter entered into a new employment contract with EMC Europe for a new position with responsibilities across the EMEA region (this being the contract that subsisted until its termination in February 2015 upon the expiry of Mr Petter's notice period following his resignation the previous month).
- The letter of engagement dated 12th November 2008 confirmed Mr Petter's appointment as Director, Global Accounts - EMEA and referred to the "Main Statement of Terms and Conditions of Employment" with further details contained in the Employee Handbook. Included in the Main Terms and Conditions were the various provisions which applied following termination or employment. These included clauses 13-18 providing for the return of company materials, a restriction on competition, a restriction on recruiting company employees and other provisions relating to confidentiality and intellectual property. It has been accepted, as between Mr Petter and EMC Europe that the post-termination restrictions in clauses 14 and 15 are unenforceable as a matter of English law, as being in unreasonable restraint of trade. It is accepted by EMC Europe that Mr Petter has not breached clause 14 by working for Pure.
- The Employee Handbook, to which the letter of engagement referred, stated that it was applicable "to all Employees of EMC Computer Systems (UK) Ltd and all UK based employees of all Associated Companies as listed in Addendum A." Addendum A referred to two companies only, EMC Europe and RSA Security UK Ltd. The handbook was therefore specifically referable to the UK employees of three particular subsidiary companies of EMC Corporation. At paragraph 10.15 of the handbook appeared a heading "EMC's Key Employee Agreement". There the following wording appeared:
- It will be noted that, in the "Key Employee Agreement", reference is made to "employment with the Company, competing with the Company and recruiting employees of the Company". The confidentiality provisions also referred to the Company and paragraph D constituted an agreement that any breach of the restrictions would cause immediate and irreparable harm to the Company which would give rise to an entitlement on the part of the Company to obtain injunctive relief. "The Company" was defined specifically in the Key Employee Agreement as EMC Corporation, together with its subsidiaries. Its provisions appeared at pages 18-20 of the 38 page Handbook, which as I have already said, related to employees of three specific UK subsidiaries of EMC Corporation. The post termination terms of the various provisions mirrored those in the Main Terms and Conditions, but included some extension or amplification of them, without inconsistency.
- In the years 2009-2014, Mr Petter's base salary increased from £150,000 per annum to £231,000 per annum. His bonus/commission ranged from £210,000 to £261,000, so that his total remuneration from EMC Europe amounted to £360,000-£492,000 over the period in question. During this period he was also granted RSU awards by EMC Corporation. On the available evidence, the value of these to him ranged between approximately £49,000 and £651,000 and, save for one year, represented approximately 35%-57% of the total rewards he received in each of the relevant years. Those figures are disputed but there is no doubt that the award of RSUs was of significant value.
- The EMC Corporation 2003 Stock Option Plan Description included the following:
- The EMC Corporation Amended and Restated 2003 Stock Plan itself, which included the law and jurisdiction clause in favour of Massachusetts, to which I have already referred, defined RSUs as rights "to receive Common Stock in the future with the right to future delivery of the Common Stock subject to a risk of forfeiture or other restrictions that will lapse upon the satisfaction of specified conditions". The Plan was said to have been established "to advance the interests of the Company by providing for the grant to Participants of incentive Awards", the Company itself being defined as EMC Corporation. Clause 3.5 made it clear that nothing in the Plan should be deemed to give any officer or employee any right to participate in the Plan, except to such extent as may have been determined by the Committee or Board of Directors pursuant to the provisions of it.
- Nonetheless, in order to be eligible for an award, a "Participant" had to be a key employee of, or a consultant or advisor to, the company (EMC Corporation) or its subsidiaries who, in the opinion of the Committee was "in a position to make a significant contribution to the success of the Company and its subsidiaries". Whilst the Plan was in effect, the Committee had absolute discretion to select, from the persons eligible to receive Awards, the Participants to whom awards were to be granted.
- The Stock Plan referred to Award Agreements, providing in clause 6.3 that each award granted under the Plan should be evidenced by a written agreement and that, as a condition of receiving an Award, the Committee might require the proposed Participants to agree to the terms and conditions set forth in the Award by physically and/or electronically acknowledging acceptance and agreement. In the case of each Award granted to Mr Petter, there was such acknowledgement and agreement.
- The key provisions of the Stock Plan for current purposes are those which appear in clause 6.6.4 and 6.7.
- Each of the RSU Agreements by which Mr Petter accepted the Award of RSUs stated that the Participant's right to the shares of the Company's Common Stock underlying the Units were subject to the restrictions described in the RSU Agreement and the Plan and to the forfeiture restrictions described. Paragraph 3 of the RSU Agreements provided as follows:
- Paragraph 10 of the RSU Agreements was an Entire Agreement provision and in the section dealing with Acceptance, Acknowledgement and Receipt, Mr Petter agreed to be bound by the terms and conditions of "this Performance Restricted Stock Unit Agreement and the Plan (including but not limited to section 6.7 Cancellation and Rescission of Awards). He acknowledged his understanding that neither the Plan nor the RSU Agreement gave him any right to any Service Relationship with the Company or any Company subsidiary and that the Award was "not part of my normal or expected compensation". He also acknowledged his understanding that the grant of the Award was expressly conditioned on his adherence to and agreement to the terms of the Key Employment Agreement with the Company. The Company was defined as EMC Corporation in the RSU Agreements.
- The last two bullet points of the "Acceptance, Acknowledgement and Receipt" signed by Mr Petter provided that:
- understand that neither the Plan nor this Restricted Stock Unit Agreement gives me any right to any Service Relationship with the Company or any Company subsidiary, as the case may be, and that the Award is not part of my normal or expected compensation; and
- understand and acknowledge that the grant of the Award is expressly conditioned on my adherence to, and agreement to the terms of, the Key Employment Agreement with the Company."
- Each of the RSU Agreements was therefore expressly made between Mr Petter on the one hand and EMC Corporation on the other but was conditional upon his observance of the Key Employment Agreement, which was expressed to be with EMC Corporation, ("The Company" in the RSU Agreements) thus tying in with the Key Employee Agreement in the Employee Handbook, incorporated as part of Mr Petter's terms and conditions of employment with EMC Europe (see paragraph 11 above).
- It is clear from the contractual arrangements, that Mr Petter had no entitlement of any kind to any award of RSUs. His evidence was that he had an expectation of being awarded RSUs as a form of performance related bonus, in addition to the commission/bonus he otherwise received under his contract with EMC Europe. Evidence before the court sets out Mr Petter's subjective understanding that he fully expected to receive RSUs in return for remaining an employee and was consistently granted them within the parameters of the scheme that was operated. The indirect evidence from him is that, without it or something similar, his employment package would have been uncompetitive and that in reality the RSUs were a form of deferred consideration for the work which he did.
- The exact mechanism by which the Awards were made is not clear but there was some evidence to support the suggestion that allocation of RSUs was made with some involvement of the subsidiary companies, including EMC Europe. Although Awards could be made to individuals who were not employees of EMC Corporation or its subsidiaries, the only basis for any Award to be made to Mr Petter was his employment by EMC Europe and his past or future performance which could constitute a "significant contribution to the success of the Company and its Subsidiaries".
- It is EMC Corporation's case that Mr Petter engaged in numerous acts that constitute Detrimental Activity within the meaning of section 6.7 of the Stock Plan, details of which appear in paragraphs 60-67 of the Amended Complaint in the Massachusetts proceedings which were commenced on 27th February 2015. It is EMC Corporation's case that, in consequence, having set a date of termination of his Service Relationship for the purposes of the RSUs at 15th January 2015, when Mr Petter gave notice, any RSUs which were issued to him which had not vested as at that date had expired and/or were forfeited. Because of the Detrimental Activity in which he had been involved, the Committee for the Stock Plan rescinded 8,721 shares in EMC Corporation (vested RSUs) issued within the six months prior to January 15th 2015 and ratified the cancellation of the RSUs that had not vested as at that date. That case was advanced in the complaint in Massachusetts.
- On 13th March 2015 Mr Petter issued proceedings in this country and served them on EMC Europe that day and on EMC Corporation in Massachusetts on 16th March, on the basis of CPR 6.33(2)(b)(iii), contending that the latter was his employer and party to a contract of employment within Article 20 of the Recast Regulation, in the Claim Form and Particulars of Claim.
- Mr Petter sought (inter alia) declarations that:
- On 6th April 2015 EMC Corporation served an Amended Complaint in the Massachusetts proceedings in which reference was made to the proceedings launched by Mr Petter in England. It referred to the final anti-suit injunction which was also claimed in those proceedings and which required EMC to take all reasonably available steps to discontinue the Massachusetts proceedings and prohibiting it from pursuing any proceedings except in England or a court of another Member State party to the Regulation. Relying upon clause 13 of the Stock Plan, EMC Corporation sought, additionally in the Amended Complaint, a declaration that clause 13 was enforceable and that any disputes regarding the enforceability, interpretation and application of the Stock Plan should be adjudicated in Massachusetts and nowhere else. It also sought damages for breach of the exclusive jurisdiction agreement and rescission and restitution of all RSUs and EMC stock granted to Petter at any time in consequence of such "total" breach of contract. In extending the terms of the Complaint, the new amended form included paragraph 19 in the following terms:
- At paragraph 65 of the Amended Complaint, it was stated that EMC Corporation was not a party to Mr Petter's employment with EMC Europe but took no position as to whether the non-competition provisions in it were enforceable under the laws of England. The Amended Complaint went on to say that, "regardless of the enforceability of provisions contained in the contract between Petter and EMC Europe it [EMC Corporation] is entitled to treat conduct that is prohibited by the employment contract as another non-exclusive example of Petter's Detrimental Activity under the Stock Plan."
- EMC Corporation issued its application challenging the jurisdiction of this court on 21st April, contending that it was not party to any contract of employment with Mr Petter, that it was not his employer and that the Recast Regulation did not therefore apply. On 23rd April, Mr Petter issued his challenge to the jurisdiction of the Massachusetts court.
- On 28th April, Mr Petter sought an interim anti-suit injunction in England on the basis of the Recast Regulation and the decision of the Court of Appeal in Samengo-Turner & ors v J&H Marsh & McLennan (Services) Ltd & ors [2007] EWCA Civ 723, [2008] ICR 18. Although the claim for a final anti-suit injunction had been sought in the proceedings originally served, no claim for an interim injunction was made before this date. It is said that the decision to seek an interim injunction was made "once it became clear that EMC Corporation was determined to pursue the Massachusetts proceedings as confirmed by the Amended Complaint dated 6th April 2015 in which EMC Corporation added claims for breach of the exclusive jurisdiction clause and sought rescission and/or restitution in respect of all eleven RSU Awards and not merely those which had vested in the six months prior to January 15th 2015".
- Service of proceedings on EMC Corporation was made without the permission of the court, on the basis that the claim was one which the court had power to determine under Article 20 of the Recast Regulation. It is common ground that jurisdiction is established by a claimant showing a "good arguable case" that the court has power to determine it under the Recast Regulation. This means showing that the claimant has, on the material before the court, "the better of the argument" or "a much better argument" than the defendant, on the point. On the merits of the case, a claimant has only to show that there is a serious issue to be tried, a point which does not arise here because it is accepted that there are arguments as to whether or not Mr Petter was guilty of Detrimental Activity, whether the provisions in the Stock Plan are unenforceable and/or operate as a penalty and whether or not there is entitlement to a final anti-suit injunction.
- The question thus arises as to whether or not there is a good arguable case that Mr Petter's claim against EMC Corporation relates to a contract of employment with the latter and whether EMC Corporation is an employer not domiciled in a Member State for the purposes of Article 21.1(b)(i) and Article 21.2. EMC Corporation is domiciled in Massachusetts and Mr Petter habitually carried out his work in England. The sole issues are therefore whether EMC Corporation was Mr Petter's employer and whether his claim relates to a contract of employment with that Corporation.
- It is common ground that the concept of an "individual contract of employment", as enshrined in Section 5 of the Recast Regulation, should be given an autonomous EU meaning. It is equally clear that the respect to be shown to the autonomy of the parties to a contract is limited in the case of employment contracts and that the employee as the weaker party to such a contract is to be protected by rules of jurisdiction more favourable to his interests than the general rules which are intended to be highly predictable and founded on the principle that jurisdiction is generally based on the defendant's domicile (see Recitals 13, 18 and 19 of the Recast Regulation). EMC Corporation contends that none of this justifies any departure from the ordinary rules of ascertaining whether there is a contract of employment and who is to be considered a party to it.
- On any ordinary meaning of the word, as a matter of English law, Mr Petter had a contract of employment with EMC Europe and not with EMC Corporation. In WPP Holdings Italy SRL & ors v Benatti [2006] EWHC 1641 (Comm) Field J held that the objective criteria of an individual contract of employment for the purposes of Article 5 of the Brussels Convention consisted of three elements. The first was the provision of services by one party over a period of time for which remuneration was paid. The second was control and direction over the provision of the services by the counterparty. The third was integration to some extent of the provider of the services within the organisational framework of the counterparty. Mr Petter provided services to EMC Europe and was paid remuneration by it. EMC Europe controlled and directed his services and he operated within its organisational framework. The RSU Agreements did not require Mr Petter to work for EMC Corporation but regulated the terms upon which Mr Petter received and retained RSUs which EMC Corporation had, in its absolute discretion, decided to grant to him. Awards under the Stock Plan came about when a Committee of the Board of Directors of EMC Corporation decided, in their discretion to award RSUs to a Participant who might be an employee of EMC Europe or an employee of one of its subsidiaries or a consultant, advisor or non-employee director. The recipient would be someone who was "in a position to make a significant contribution to the success of the Company (EMC Corporation) and its Subsidiaries" and the Plan was established to advance the interests of the company (EMC Corporation) by providing for the grant to Participants of Incentive Awards. It is clear that no Participant had any right to an Award and that the terms of the RSUs governed the position once the decision to make an Award and/or an Award had been made.
- The ability to participate in the Stock Plan was dependent upon the Participant being in a "Service Relationship" which meant, so far as Mr Petter was concerned, being an employee of EMC Corporation or its subsidiaries. The manner of termination of the "Service Relationship" had an effect on the Participants' entitlements under the RSU Agreement as set out in clause 6.6 of the Stock Plan, which distinguished between termination by reason of death, by reason of disability, by reason of retirement and for any other reason.
- There is unchallenged material showing that Mr Petter lived and worked exclusively in England and that at all material times he worked within the organisation of EMC Europe and never worked for, or within, the organisation of its ultimate parent company EMC Corporation. Mr Petter's case therefore requires him to show that, for European jurisdiction purposes, he had more than one employer and that a document which does not contain the usual elements of employment is a contract of employment or part of a contract of employment for those purposes.
- I have already referred to Mr Petter's evidence as to his expectation and understanding that the award of RSUs was a form of deferred remuneration for services rendered to EMC Europe. I have also set out paragraph 19 of the Amended Complaint in which EMC Corporation stated that the design of the Stock Plan was in part to reward employees of EMC subsidiaries for their contributions and to align the interests of those employees with the interests of the EMC shareholders. It is clear from the terms of clause 2 of the Stock Plan itself that the object of the Plan is to advance the interests of EMC Corporation by providing for the grant to Participants of Incentive Awards. In the case of Mr Petter, there can be no doubt that the Awards were made to him by virtue of his position as an employee in respect of his past performance and/or as an incentive to future performance as such an employee of EMC Europe.
- I am bound by the decision of the Court of Appeal in Samengo-Turner, for what it decides. The reasoning in this decision was explored fully in argument. It was Mr Petter's contention that the reasoning in Samengo-Turner applied equally to the present case and that there was no material factual distinction which would allow this court not to follow it. EMC Corporation, however, drew attention to differences in the factual situations in the two cases.
- In Samengo-Turner the parent company of the employer company had instituted a Senior Executive Incentive and Stock Award Plan and another subsidiary had made a Special Long Term Incentive Grant under the auspices of that Plan, subject to its terms and conditions and to further additional terms and conditions. All these terms and conditions were set out in a document which the Court of Appeal referred to as "the Bonus Agreement" which was signed by each of the employees of the English company which employed the claimant brokers. The Bonus Agreement was subject to New York law and exclusive jurisdiction. The English employing company was not party to it. Awards made under it were of cash rather than stock and were to be paid in instalments over a period of years, subject to cancellation and rescission if the recipient engaged in detrimental activity. Details of these arrangements, so far as material (as Schedule IID was in fact inapplicable) appear at paragraphs 6-10 of the Court of Appeal judgment. There are obvious parallels with the Stock Plan which is the subject of the current action, although the wording of relevant provisions is not identical.
- The key questions with which the Court of Appeal grappled are set out from paragraph 29 onwards in the judgment of Tuckey LJ.
- The court found that the terms of the Bonus Agreement became part of the claimants' contracts of employment for the reasons set out in paragraph 31 of the judgment. The conclusion was reached that the terms upon which the claimants were employed could not be ascertained without looking at both the original contracts with the London subsidiary and the Bonus Agreements with the parent company and/or other subsidiaries. The links with the Bonus Agreement to the employment of the claimants were set out in that paragraph, including the reference in the agreement recitals to the awards as incentives "to remain with" the parent company or its subsidiaries, the conditionality of payment of an award subject to "your continued employment" and the fact that in the Bonus Agreement there were notice, non-solicitation, confidentiality, disclosure and co-operation covenants given to the parent company and its subsidiaries which added to and in some case differed from the terms of the employment contracts with the English subsidiary. The Bonus Agreement provided that its terms should prevail over that of the contract of employment with the English subsidiary, where there was a conflict.
- On the evidence before me, the following features are clear in the present case:
- As emerges from the decision in Samengo-Turner, the addition, variation or substitution of terms found in a document or agreement with a different party than the "employer" in the classic English law sense, can represent terms of a contract of employment of the employee whose contract or contracts thereby involve two or more employers. Regard is to be had to the substance of the arrangements between the parties, however strained the contractual analysis.
- The decision of Field J in Duarte v The Black & Decker Corporation & anor [2007] EWHC 2720 (QB); (2008) 1 AER (Comm) 401 is of relevance here. There, the judge, referring to Samengo-Turner found that a Long Term Incentive Plan issued by the Parent Company, which included non-competition and non-solicitation provisions binding on the employee of a subsidiary company, were to be seen as part of "the overall package" of Mr Duarte's employment terms. He held that the Long Term Incentive Plan Agreement was a contract of employment for the purposes of Article 6 of the Rome Convention. He considered that Article 6 could not be circumvented by hiving off certain aspects of an employment relationship into a side agreement with a different party which contained none of the usual elements of employment to which he had referred in Benatti (ibid.). He referred to the Court of Appeal's view that the terms of the Bonus Agreement in Samengo-Turner (which included non-solicitation covenants) related to and were part of the contract of employment so that one could not ascertain the terms upon which the employee was engaged without looking at both the original employment contract and the Bonus Agreement. In my judgment there is a good arguable case that the terms of Mr Petter's employment cannot be ascertained without looking at both the EMC Europe contract and the RSU Agreements.
- As to the distinguishing features upon which EMC Corporation relied, in particular in its skeleton argument at paragraphs 59-68, I find that these either do not hold good or are insufficient to make any material difference. Mr Petter's entitlement to obtain and retain the RSUs was dependent upon his being and/or remaining an employee of EMC Europe in a "Service Relationship" and the terms of the RSU Agreements, as set out earlier in this judgment, specifically referred to the Key Employment Agreement as being made with EMC Corporation and required his acknowledgement both of the agreement with EMC Corporation and adherence to it in the terms of the Key Employment Agreement covenants (non-competition, confidentiality, non-solicitation). Whilst those obligations are not identical to those in the Samengo-Turner Bonus Agreement (there is no co-operation clause), there is no material distinction for current purposes. It is not true to say that the RSU Agreements are entirely self-contained agreements which govern only the terms under which the Participant may receive units of stock in a Massachusetts corporation, because they come into existence only because Mr Petter is an employee, may be cancelled or rescinded if he ceases to be an employee and contained terms in the Key Employment Agreement which can only be said to relate to his employment, whether during its currency or after its termination. It is breach of these terms upon which EMC Corporation relies as Detrimental Activity which is said to deprive Mr Petter of his entitlement to stock or stock units. Whilst it is true that EMC Corporation does not sue in Massachusetts as the employer of Mr Petter as such, it is clear that the whole basis of the claim depends upon the fact that he is an employee of EMC Europe and that his failings in that respect disentitle him from receiving awards that he would otherwise be given and entitle EMC Corporation to recover awards already given. There is an implicit recognition that the award of RSUs is inextricably bound up with Mr Petter's employment, whatever the language used which seeks to distance the award from any employment contract. For the reasons given, however, notwithstanding such efforts, the RSU Agreements, with their cross-reference to the Key Employment Agreement, not only failed to achieve this but specifically link EMC Corporation to Mr Petter as the Company in the contract with him whilst also talking of his employment under the Key Employment Agreement with itself.
- In my judgment Mr Petter has a good arguable case that the terms of the RSU Agreement became part of the claimant's contract of employment, despite the entire agreement clause and the penultimate bullet point which stated that he understood it to give him no right to any service relationship with EMC Corporation or any of its subsidiaries and that the award was not part of his normal or expected compensation. The terms of the RSU Agreement did add to the terms of his contract of employment with EMC Europe because, by them, he undertook an obligation to EMC Corporation to observe the various restrictions set out in the Key Employee Agreement which also referred in paragraph A in several places expressly to "employment with the Company", which was defined as EMC Corporation. There was therefore a variation or amendment to the contract of employment with EMC Europe by the addition of a further party in the context of the employee obligations undertaken by Mr Petter.
- When combined with the other seven features set out in paragraph 44 above, in the light of Samengo-Turner, Mr Petter has the better argument or much the better of the argument (whichever test is employed) in relation to all three questions posed by the Court of Appeal. His claim in respect of entitlement to the RSUs and non-rescission/cancellation of them is based on the RSU Agreement which is designed to be a reward and an incentive to employees, which refers to employment by EMC Corporation and which provides for undertakings by him to EMC Corporation, in the capacity of an employee. In the light of the reasoning set out in Samengo-Turner, EMC Corporation can be seen as an employer for the purposes of section 5 of the Recast Regulation, although it would not be such as a matter of English law. It follows that both Mr Petter's claim and EMC Corporation's claim are, so far as the Recast Regulation is concerned, matters relating to Mr Petter's individual contract of employment being based upon that contract of employment seen in the wider sense required by the Recast Regulation.
- In my judgment I am therefore bound by the reasoning in Samengo-Turner which applies equally to the facts of this case and certainly sufficiently so to give rise to a good arguable case on the part of Mr Petter. In consequence, Mr Petter is entitled to bring his claim against EMC Corporation in this country under Article 21.1(b)(i) and Article 21.2 and EMC is only entitled to bring proceedings in courts of this country against Mr Petter under Article 22. By reason of the terms of Articles 23 and 25.4 the agreement between EMC Corporation and Mr Petter to the jurisdiction of the courts of Massachusetts is of no legal force, so far as the courts of this country are concerned. It has therefore to be ignored even though it is, as found already by the court in Massachusetts, as a matter of Massachusetts law, binding upon the parties to it. This creates a difficulty in relation to the relief sought by Mr Petter, to which I shall now come.
- In Samengo-Turner an anti-suit injunction was granted because it was held to be the only way in which to make the claimants' statutory right to be sued in this country effective. Damages would not be an adequate remedy. If no injunction was granted, then it is to be presumed that both the Massachusetts and the English proceedings will continue covering much the same ground.
- In Samengo-Turner, the position was much the same as appears from paragraph 39 of Tuckey LJ's judgment. The unambiguous terms of the Massachusetts law and jurisdiction clause would have been upheld in this country in the ordinary way but cannot be because the RSU Agreements are to be treated as employment contracts with EMC Corporation and "our law says that we cannot give effect to it". Tuckey LJ posed the question "What shall we do? The only choice it seems to me is between an anti-suit injunction or nothing."
- Having then referred to the need for caution in dispensing an anti-suit injunction because of the requirements of comity, he decided (and the other Lords Justices agreed) that doing nothing was not an option. The foreign court could not give effect to the Regulation and the only way to give effect to the English claimants' statutory rights was to restrain the foreign proceedings. He stated that a multi-national business must expect to be subject to the employment laws applicable to those they employ in different jurisdictions. Whilst he did not accept that, where an exclusive jurisdiction was mandated by statute, the position was as strong as the situation where the parties had agreed to the exclusive jurisdiction of that court (paragraph 41) and the case for an injunction was not so strong where the statute in question had provided that an agreed exclusive jurisdiction clause between the parties was of no effect, he nonetheless granted the injunction, referring in passing to the decision of the Court of Appeal in OT Africa Line v Magic Sportwear Corporation [2005] 2 Lloyd's Rep 170.
- There was argument before me as to whether or not I was bound by the decision in Samengo-Turner to grant an injunction in this case. As injunctions are always discretionary, I do not consider that I am bound but I must have regard to the reasoning in Samengo-Turner which, it was said by Mr Petter, applied equally to this case. It was said to be a principle of law that where there is a statutory scheme of exclusive jurisdiction, the court would not do nothing but must lend its support to protect that jurisdiction. I reject that submission because the requirement for an injunction must always turn on the particular facts of any case.
- On 13th May 2015, the day before the first day of the hearing of these applications the US District Court of Massachusetts ruled on Mr Petter's motion to dismiss EMC Corporation's amended complaint or to stay its action against him. Count 4 of the Amended Complaint had sought a declaratory judgment regarding the Massachusetts court's jurisdiction, seeking a declaration that clause 13 of the Stock Plan was enforceable and that disputes, including those at issue in the action regarding the enforceability, interpretation and application of the Plan, including the issue of Mr Petter's alleged Detrimental Activity, should be adjudicated in the courts of Massachusetts alone.
- The court denied Mr Petter's motion to dismiss EMC Corporation's Amended Complaint or to stay the action and instead granted summary judgment in favour of EMC Corporation on count 4. It specifically ruled that clause 13 of the Stock Plan was enforceable and that disputes arising out of it, including those at issue in the action, were subject to the exclusive jurisdiction of the courts of Massachusetts.
- I was informed by counsel for EMC Corporation that, until this court ruled on its own jurisdiction, there would be no basis for any application for a Temporary Restraining Order against Mr Petter but that the Massachusetts court had, unsurprisingly in the light of clause 13, unambiguously made a final decision that it had exclusive jurisdiction over the substance of the dispute between EMC Corporation and Mr Petter in respect of the Stock Plan which related to stock in the Massachusetts incorporated company. I was told that this had constitutional implications in the sense that, if the English court granted an anti-suit injunction, the Massachusetts court might consider that it had no option, regardless of the position of the parties who were enjoined, to proceed with the case or to refer the matter to a higher court for its decision as to whether or not the case should proceed in Massachusetts.
- It is clear, in the light of my decision earlier in this judgment and that of the Massachusetts court on 13th May 2015 that there is an irreconcilable clash between the two courts in respect of the question of jurisdiction. Under Massachusetts law, which is the governing law of the RSU Agreements, the Massachusetts court has jurisdiction. Under English law, by virtue of the Recast Regulation, this court has exclusive jurisdiction though it will apply the law of Massachusetts. I have to take into account the consequences of granting or not granting an interim injunction in the context of this clash.
- Although Mr Petter seeks an interim injunction pending the determination of the dispute about the RSUs in this country and the determination of his entitlement to a final injunction, the reality of this, as with most interim anti-suit injunctions, is that it would almost certainly be final in its effect. It would not in any real sense "hold the ring" since the English court would decide the matters in issue between Mr Petter and EMC Corporation in relation to the Stock Plan. It is highly unlikely that there would be any new factors to take into account in the context of granting a final injunction, above and beyond those which come into play in relation to the interim injunction and it is noteworthy that, in Samengo-Turner, the Court of Appeal granted a final injunction. The effect of the interim injunction would therefore, almost certainly be, that EMC Corporation would be prevented from pursuing its claim in Massachusetts in the forum chosen by the parties.
- Given that there is plainly a serious issue to be tried, in the light of Samengo-Turner, in relation to the grant of a final anti-suit injunction (which was what in fact was granted in Samengo-Turner, since all the relevant material was before the court) the question of balance of convenience arises in the context of familiar American Cyanamid principles.
- Mr Petter contends that, as in Samengo-Turner, an anti-suit injunction is the only remedy available to the court which will protect Mr Petter's claimed rights and ensure that the English courts' jurisdiction is not undermined by parallel proceedings in Massachusetts which, in his submission, are being pursued contrary to his rights. In this connection it is said that there is a distinction to be drawn between exclusive jurisdiction clauses on the one hand and permissive jurisdiction clauses on the other but since under the different systems of law, both the English and Massachusetts courts consider the matters in dispute should be litigated solely in their own jurisdiction, this does not assist Mr Petter's argument. It is right to say that the effect of Article 23 and Article 25.4 has the effect of rendering the exclusive jurisdiction clause in favour of Massachusetts of no legal force here (see also Mahamdia v Algeria [2013] ICR 1) but this does not mean that an anti-suit injunction should follow as a matter of course. It is right to say that the Court of Appeal in Samengo-Turner gave consideration to issues of comity and concluded that doing nothing was not an option because it failed to give effect to the statutory rights of exclusive jurisdiction conferred by the Convention. It is also right to say that courts have a natural aversion to duplication of proceedings in more than one jurisdiction with the risk of inconsistent decisions or an ugly rush to judgment in the hope of establishing res judicata.
- Where does the balance of convenience lie? What will happen in the event that an injunction is granted or is not granted? As matters stand, proceedings will continue in this country and the court here will be asked to make declarations as to the rights of Mr Petter in relation to the Stock Plan, but not to give any monetary judgment. If a declaratory judgment was given in Mr Petter's favour, he would either need to obtain recognition of that judgment in Massachusetts in order to obtain an order relating to the stock or stock units in question or to make a further claim in this country for damages in respect of breach of contract, in the event that EMC Corporation did not recognise the decision of this court or award stock or stock units on the basis of it. The Massachusetts court would, it is clear, consider that the English court had no jurisdiction to determine the rights of the parties under the Stock Plan and would therefore not recognise any judgment of this court in relation to stock in a Massachusetts company, unless EMC Corporation submitted to the jurisdiction of the English court which, of course, it has not yet done, seeking only to challenge that jurisdiction in the current application. I cannot speculate as to EMC Corporation's future decisions but, given the stance already taken in Massachusetts, such a submission appears unlikely.
- I should therefore work on the assumption, it seems to me, that although this court does not lightly assume that its orders will not be observed, EMC Corporation is likely to continue with proceedings in the court of Massachusetts and not play any part in proceedings in this country. If proceedings continue in both courts, the losing party in each jurisdiction would be likely to resist enforcement in the other jurisdiction and to succeed in doing so because of the perceived lack of jurisdiction of the other court, and issues of public policy, res judicata and issue estoppel would be unlikely to apply.
- Whilst I can understand the desire of the Court of Appeal to grant a final anti-suit injunction in Samengo-Turner in similar circumstances, it seems to me that the requirements of comity do not allow such a solution in the present case. The decision to grant such an injunction in Samengo-Turner has been the subject of criticism which, to my mind, is well-grounded. Although the Recast Regulation differs from the earlier Regulation which applied at the time of Samengo-Turner because of the inclusion of Article 21.2 in relation to employers not domiciled in a Member State, there is nonetheless force in the points which are made in a number of Articles.
- I was referred to an article by Professor Adrian Briggs in [2007] LMCLQ at page 433 "Who is bound by the Brussels Regulation?" which proceeded on the basis of the old Regulation and the absence of any provision in it dealing with jurisdiction agreements for non-Member States. The points made however go wider than that and rely on a number of factors including the following:
- Similar points are made in an article by Andrew Dickinson in [2008] ICLQ at page 1 "Resurgence of the Anti-Suit Injunction: the Brussels I Regulation as a source of civil obligations?" In commenting on Samengo-Turner the author there pointed out that the court was deploying a remedy which triggers acute hostility in civil law jurisdictions and which the ECJ has excluded where breach takes place in Member States. As pointed out, the Court of Appeal's decision has two surprising consequences. First, it would appear strongly arguable that other Member State courts should do likewise to restrain breaches of the Regulation committed in non-Member States, if it followed from the existence of the court's exclusive jurisdiction. Secondly, it was not just section 5 of the Regulation which gave rise to exclusive jurisdiction. Article 2, as it then was (now Article 4) was expressed in mandatory terms and anti-suit injunctions on the logic of Samengo-Turner, should be sought by persons domiciled in the EC who are sued in non-Member States.
- In an article entitled "The English approach to jurisdiction and choice of law in employment covenants not to compete", Mr Goulding QC who appeared here for Mr Petter, together with his co-author Mr Vinall, pointed out that the ECJ had held that injunctions to restrain proceedings before the courts of other Member States were inconsistent with the Regulation so that it was surprising to see the Regulation being enforced by the grant of an injunction at all. Furthermore, the Regulation creates public law obligations binding on Member State courts in their decisions whether to accept or decline jurisdiction, rather than private law rights and obligations for litigants which can be enforced by injunctions.
- All these points have, to my mind, considerable force. The decision by this court that it has exclusive jurisdiction because of the terms of the Recast Regulation does not put EMC Corporation in breach of any contractual obligation it has undertaken, particularly where it has in fact agreed to the exclusive jurisdiction of the courts of Massachusetts. It is Mr Petter who is in breach of contract in pursuing the claim elsewhere, as a matter of the proper law of that contract, which is not challenged, although he is entitled as a matter of English law, by reference to the Regulation to insist on bringing his claim here.
- I consider that the grant of anti-suit injunctions is essentially inimical to the Regulation which certainly does not allow such in the context of jurisdictional disputes where the jurisdictions in question are the courts of Member States. Common Law jurisdiction may grant anti-suit injunctions outside the context of the Recast Regulation but, once matters are governed by the Regulation, even if it is open to the court, it would not seem appropriate to do so on the grounds of a jurisdiction granted solely by the Recast Regulation, as opposed to jurisdiction founded on an agreement between the parties.
- This is not a case where it is said that the existence of proceedings in Massachusetts is vexatious and oppressive and it cannot be said that the rulings of the Massachusetts court on its own jurisdiction are in breach of customary international law. Regard must be had to the parties' free choice of law which applies, namely Massachusetts law, and the requirements of comity in relation to the decision of that court.
- Applying the relevant considerations for the grant of an interim injunction, I come to the clear conclusion that it would not be appropriate to grant the anti-suit injunction sought. Furthermore, since the effect of it is likely to preclude any future decision by the Massachusetts court at all, so that it is, to all intents and purposes, final in its effect, a higher threshold may be necessary to grant such an injunction. If what was being sought was a final injunction, I would not consider the case made out.
- EMC Corporation's challenge to the court's jurisdiction therefore fails and Mr Petter's claim for an interim injunction also fails. Absent special considerations, costs should follow the event in respect of both applications and I do not see why there should be any real difficulty in apportioning costs between them. I will not be summarily assessing the costs and would expect to order an interim payment in one direction or the other of a sum which I can be confident would be recoverable by one party against the other after the costs have been agreed or determined by detailed assessment. It may be that the parties will be able to agree on figures, but if not, brief submissions can be made in writing, or if necessary at an oral hearing when this judgment is handed down.
- The only points made before me in relation to costs at the end of the hearing were as follows:
- Subject therefore to any special considerations of which I am unaware and any further submissions of the parties, my order would be costs to follow the event in relation to each application, such costs to be subject of detailed assessment if not agreed. I would be prepared to order an interim payment in the circumstances outlined above.
- Having heard all the arguments presented, I grant both parties leave to appeal against my decision.
Mr Justice Cooke:
The applications
Background
"1. An employer domiciled in a Member State may be sued:
(a) in the courts of the Member State in which he is domiciled; or
(b) in another Member State:
(i) in the courts for the place where or from where the employee habitually carries out his work or in the courts for the last place where he did so
2. An employer not domiciled in a Member State may be sued in a court of a Member State in accordance with point 9(b) of paragraph 1."
"15. The rules of jurisdiction should be highly predictable and founded on the principle that jurisdiction is generally based on the defendant's domicile. Jurisdiction should always be available on this ground save in a few well-defined situations in which the subject-matter of the dispute or the autonomy of the parties warrants a different connecting factor. The domicile of a legal person must be defined autonomously so as to make the common rules more transparent and avoid conflicts of jurisdiction.
18. In relation to insurance, consumer and employment contracts, the weaker party should be protected by rules of jurisdiction more favourable to his interests than the general rules.
19. The autonomy of the parties to a contract other than an insurance, consumer or employment contract where only limited autonomy to determine the courts having jurisdiction is allowed, should be respected subject to the exclusive grounds of jurisdiction laid down in this Regulation."
The contracts
"14. LIMITED NON-COMPETITION
During your employment with the Company and for the twelve month period following the effective date of your termination of resignation from the Company, you agree not to directly or indirectly develop, produce, market, solicit or sell products or services competitive with products or services being offered by the Company. (You shall not be considered in competition unless you have an ownership interest amounting to at least 1% in the enterprise, whether direct or indirect by way of opinion or otherwise, or an officership, directorship or other policy making executive position with the competing enterprise).
15. RECRUITING COMPANY EMPLOYEES
For the twelve month period following the effective date of your termination for any reason or resignation from the Company, you agree not to directly or indirectly, recruit, solicit, induce or attempt to induce any employees of the Company to terminate, alter or modify their employment relationship with the Company."
"10.15 EMC'S KEY EMPLOYEE AGREEMENT
A. In view of the highly competitive nature of the business of EMC Corporation (together with its subsidiaries, the "Company"), the need of the Company to maintain its competitive position through the protection of its goodwill, trade secrets and confidential and proprietary information, and in consideration for being provided with access to certain trade secrets and/or confidential and proprietary information in conjunction with employment with the Company, every Employee accepts that it is necessary: -
1. Non-Competition. For as long as you are employed by the Company, to devote your full time and efforts to the Company and not to participate in any business or activity that is in competition with the Company. For the 12 month period following the effective date of termination, for any reason, from the Company, you will not directly or indirectly compete with the Company in any manner, including but not limited to directly or indirectly developing, producing, marketing, soliciting or selling products or services competitive with products or services being developed, produced, marketed or sold by the Company as of the date of your termination. For the purposes of the immediately preceding sentence you shall not be considered to be competing with the Company unless you have an ownership interest amounting to at least 1% in the competing enterprise (whether direct or indirectly by way of stock options (vested or unvested) or otherwise) or an officership, directorship or other policy making position with the competing enterprise.
2. Customer and Vendor Confidentiality
3. Confidentiality of Company Materials You must recognise that both during your employment with the Company and thereafter
4. Recruiting Company Employees. For the 12 month period following the effective date of your termination, for any reason, from the Company, you must not directly or indirectly recruit, solicit or induce, or attempt to recruit, solicit or induce any Employees, consultants or independent contractors of the Company to terminate, alter or modify their employment relationship with the Company.
5. [Further provision for and restrictions regarding confidential information] during the period of your employment with the Company
B.
C
D. You agree that any breach of this section on restrictions will cause immediate and irreparable harm to the Company not compensatable by monetary damages and that the Company will be entitled to obtain injunctive relief, in addition to other relief in any court of competent jurisdiction, to enforce the terms of this section.
E "
"PLAN INFORMATION
The Plan was established to advance the interests of the Company by providing for the grant of certain equity awards to key employees of, and consultants and advisors to, the Company or its subsidiaries who, in the opinion of the Committee (as defined below), are in a position to make a significant contribution to the success of the Company and its subsidiaries. To accomplish this purpose, the Plan authorizes the granting to such participants of the following awards: (i) options to purchase shares of Common Stock; (ii) restricted stock awards; (iii) awards of restricted stock units
Eligibility. Under the Plan, employees of, or consultants or advisors to, the Company or its subsidiaries are eligible for selection to participate. In addition, each non-employee Board member who is not a 5% shareholder of the Company or a person in control of such a shareholder (each, an "Eligible Director") is also eligible to participate in the Plan.
Awards of Restricted Stock and Restricted Stock Units. Restricted stock is Common Stock that is subject to a risk of forfeiture or other restrictions that will lapse upon satisfaction of specified conditions. Restricted stock units represent the right to receive shares of Common Stock in the future, with the right to future delivery of the shares subject to a risk of forfeiture or other restrictions that will lapse upon satisfaction of specified conditions."
"6.6.4 Termination of Participant's Service Relationship for any Other Reason. If a Participant's Service Relationship terminates for any reason other than death, Disability or Retirement, all (a) vested Options held by the Participant shall remain exercisable and shall not expire until 5:00pm United States eastern time on the earlier to occur of (i) the date that is three months after the date of termination or (ii) the date upon which the term of the Award expires; provided, however, that all Awards by a Participant shall immediately expire if the Participant's Service Relationship terminates for Cause or if the Participant engages in "Detrimental Activity" (as defined in Section 6.7), and (b) unvested Options held by the Participant shall thereupon expire at 5:00pm United States eastern time on the date of termination unless the Award by its terms, or the Committee or the Board of Directors by resolution, shall expressly allow the Participant to exercise any or all of the Awards held by the Participant after termination; The Company shall have the sole discretion to set the date of termination for the purposes of the Plan, without regard to any notice period or other obligation under the applicable laws of the jurisdiction where the Participant is employed or engaged ...
6.7 Cancellation and Rescission of Awards. The following provisions of this Section 6.7 shall apply to Awards granted to (a) Participants who are classified by the Company or a Subsidiary as an executive officer, senior officer, or officer (collectively, "Officers") of the Company or a Subsidiary, ( referred to collectively as "Senior Participants"). The Committee or the Board of Directors may cancel, rescind, suspend or otherwise limit or restrict any unexpired Award at any time if the Senior Participant engages in "Detrimental Activity" (as defined below). Furthermore, in the event that the Senior Participant engages in Detrimental Activity at any time prior to or during the six months after any exercise of an Award, lapse of a restriction under an Award or delivery of Common Stock pursuant to an Award, such exercise, lapse or delivery may be rescinded until the later of (i) two years after such exercise, lapse, or delivery or (ii) two years after such Detrimental Activity. Upon such rescission, the Company at its sole option may require the Senior Participant to (A) deliver and transfer to the Company the shares of Common Stock received by the Senior Participant upon such exercise, lapse or delivery, (B) pay to the Company an amount equal to any realized gain received by the Senior Participant from such exercise, lapse or delivery, or (C) pay to the Company an amount equal to the market price (as of the exercise, lapse or delivery date) of the Common Stock acquired upon such exercise, lapse or delivery minus the respective price paid upon such exercise, lapse or delivery, if applicable. The Company shall be entitled to set-off any such amount owed to the Company against any amount owed to the Senior Participant by the Company. Further, if the Company commences an action against such Senior Participant (by way of claim or counterclaim and including declaratory claims), in which it is preliminarily or finally determined that such Senior Participant engaged in Detrimental Activity or otherwise violated this Section 6.7, the Senior Participant shall reimburse the Company for all costs and fees incurred in such action, including but not limited to, the Company's reasonable attorneys' fees. As used in this Section 6.7, "Detrimental Activity" shall include: (I) the failure to comply with the terms of the Plan or certificate or agreement evidencing the Award; (II) the failure to comply with any term set forth in the Company's Key Employee Agreement (irrespective of whether the Senior Participant is a party to the Key Employee Agreement); (III) any activity that results in termination of the Senior Participant's Service Relationship for Cause; (IV) a violation of any rule, policy, procedure or guideline of the Company; or (V) the Senior Participant being convicted of, or entering a guilty plea with respect to a crime whether or not connected with the Company."
"3. Forfeiture Restrictions
The Units are subject to certain forfeiture restrictions, as described below. These restrictions are referred to in this Restricted Stock Unit Agreement as the "Forfeiture Restrictions". The Forfeiture Restrictions lapse with respect to Units as set forth in Section 4 below and the applicable provisions of the Plan. To the extent Units are no longer subject to the Forfeiture Restrictions, they are referred to in this Restricted Stock Unit Agreement as "Vested Units" and are treated as set forth in Section 5 below. Units subject to the Forfeiture Restrictions are referred to in this Restricted Stock Unit Agreement as "Unvested Units."
... In the event that the Participant's Service Relationship terminates for any reason, except as otherwise provided with respect to termination by reason of Death or Disability, all Unvested Units shall be automatically and immediately forfeited.
4. Lapse of Forfeiture Restrictions
The Forfeiture Restrictions shall lapse in accordance with this Section 4 and the applicable provisions of the Plan as follows:
(a) (i) On first anniversary of the Grant Date, the Forfeiture Restrictions with respect to one-quarter (1/4) of the Units shall lapse and such Units shall constitute Vested Units.
(ii) On the second anniversary of the Grant Date, the Forfeiture Restrictions with respect to one-quarter (1/4) of the Units shall lapse and such Units shall constitute Vested Units.
(iii) On the third anniversary of the Grant Date, the Forfeiture Restrictions with respect to one-quarter (1/4) of the Units shall lapse and such Units shall constitute Vested Units.
(iv) On the fourth anniversary of the Grant Date, the Forfeiture Restrictions with respect to one-quarter (1/4) of the Units shall lapse and such Units shall constitute Vested Units.
(b) Except as otherwise provided in the Plan or this Restricted Stock Unit Agreement, none of the Forfeiture Restrictions shall lapse with respect to any Units on any date specified above unless the Participant's Service Relationship is then in effect. Section 6.6.3 of the Plan (Termination of a Participant's Service Relationship by Reason of Retirement) shall not apply to this Award. Accordingly, if a Participant's Service Relationship terminates by reason of Retirement, Units shall be governed by Section 6.6.4 of the Plan (Termination of a Participant's Service Relationship for any Other Reason)."
"By accepting this Restricted Stock Unit Agreement, I, the Participant, hereby:
The dispute and proceedings
i) Clauses 6.6.4 and 6.6.7 (an apparent reference to 6.7, since there is no 6.6.7) of the Stock Plan incorporated in the RSUs were unenforceable as an unlawful penalty and/or as an unreasonable restraint of trade, insofar as Detrimental Activity entailed a breach of clauses 14 or 15 of the contract with EMC Europe.
ii) He had not breached the contract with EMC Europe and had not engaged in Detrimental Activity within the meaning of the Stock Plan.
iii) EMC Corporation's purported cancellation and rescission of RSUs granted to him was wrongful, void and of no effect.
"The financial performance and operating results of EMC's subsidiaries contribute to and are accounted for in the results reported by EMC [where the pleading defines EMC Corporation as EMC]. The Stock Plan is designed in part to reward among others, employees of EMC subsidiaries (including its international subsidiaries) for their contributions and to align the interests of those employees with the interests of EMC shareholders."
Analysis of the Part 11 Application
i) Is the claim made in New York a matter relating to the claimants' individual contracts of employment? The question is simply whether the claim is based on a contract of employment.
ii) Did the terms of the Bonus Agreement become part of the claimants' contracts of employment?
iii) Has the claim in New York been brought by an employer within the meaning of Article 20?
To all these questions, the Court of Appeal gave affirmative answers on the facts before it.
i) Mr Petter was selected to receive RSUs because he was a key employee.
ii) The Stock Plan was designed to reward or incentivise employees and therefore represented a form of remuneration for work done.
iii) An RSU Award was dependent upon Mr Petter's continued employment, as can be seen from the definition of Service Relationship.
iv) The RSU was expressly conditional upon Mr Petter's agreement to and observance of the Key Employee Agreement which was not only incorporated in the contract of employment between Mr Petter and EMC Europe but, by reason of the last bullet point in the RSU Agreement, and a definition in that Agreement of "the Company" as EMC Corporation, was incorporated in it. As the Key Employee Agreement itself defined "the Company" as EMC Corporation and its subsidiaries, references within it to the Company as set out in paragraph 12 of this judgment, operated to restrict Mr Petter from competing and recruiting and breaching other terms in relation to each of those bodies. The effect of the last bullet point of the RSU Agreement is to incorporate in the RSU Agreement between Mr Petter and EMC Corporation each of the provisions in the Key Employee Agreement in circumstances where paragraphs A, A1, A3 and A5 talk of employment with the Company, as defined, as EMC Corporation.
v) The RSU Awards were substantial in the light of the remuneration paid to Mr Petter by EMC Europe.
vi) The grounds for cancellation or rescission based on Detrimental Activity specifically included a failure to comply with the terms of the RSU Agreement which incorporated the Key Employee Agreement, a failure to comply with the Key Employee Agreement per se and a violation of any rule, policy, procedure or guideline of EMC Corporation.
vii) EMC Corporation specifically relied on the failure of Mr Petter to observe the various restrictive covenants which appear in the EMC Europe contract of employment, as justifying rescission of the RSU Awards.
The Anti-Suit Application
i) The ECJ's ruling in Turner v Grovit [2004] 1 ECR 3565 (C-159/02) held that anti-suit injunctions had no part to play in the scheme of the Regulation, which by necessary implication denied that the "right to have the Regulation applied properly" could form the basis for an anti-suit injunction.
ii) The employees had "trousered" the benefits of the incentive agreement only to claim to be free of its burdens when this was inconvenient for them. They were thus seeking an injunction to enforce their right to break a contract, valid under its own law and "to take the money and run". There could be no equity to breach a contract.
iii) The employees could not be said to come to the court with clean hands when "blowing hot and cold" or "approbating and reprobating the incentive agreement".
iv) When the foreign proceedings began, there were no proceedings in England to guard and no jurisdiction to protect.
v) Doing nothing was the only right answer. For the court to invoke equity because of a perception that "something must be done" reduces equity to little more than a technique for cross-border case management which was painfully insufficient.
Conclusion
i) Mr Goulding QC for Mr Petter submitted that the vast majority of the costs had been incurred on the jurisdiction application rather than the anti-suit injunction.ii) Mr Bloch QC submitted that the argument that EMC Corporation had entered into a direct contract involving employment terms by reference to the Key Employee Agreement was taken late. This in fact emerged in a witness statement dated 28th April 2015 but was scarcely pursued in Mr Petter's skeleton but was taken up forcefully in oral argument. I do not see how this can affect the issue of costs since the point was there to be taken and it cannot be said that EMC Corporation was unaware of the terms of the RSUs nor would have yielded had the point been taken earlier.