Pride International, Inc. v. Paul A. Bragg

Opinion Issued April 3, 2008

Opinion Issued April 3, 2008

In The

Court of Appeals

For The

First District of Texas

NO. 01-07-00188-CV

PRIDE INTERNATIONAL, INC., Appellant

V.

PAUL A. BRAGG, Appellee

On Appeal from the 295th District Court

Harris County, Texas

Trial Court Cause No. 2005-63586

O P I N I O N

This

case arises from a falling out between a corporate CEO and his former

employer. After Pride International,

Inc. fired Paul Bragg and paid him a severance owed under his employment

agreement, Bragg sued Pride for breach of that contract, contending that the

Pride owes him three times as much in severance as it had paid him. Pride counter-claimed against Bragg for

breach of fiduciary duty, contending that Bragg had misrepresented his opinion

of the value of the severance package to Pride and its shareholders, in that he

never disclosed that he thought the agreement (and others like it) was worth so

much. The trial court granted summary

judgment both to Pride and to Bragg, so that both received a take-nothing

judgment. Both appeal the trial court’s

judgment. We conclude that the

employment agreement is not ambiguous, and that Bragg failed to raise a fact

issue as to breach of the agreement. We

further conclude that Pride has raised no issue of fact under Delaware law as to any material breach of

fiduciary duty. We therefore affirm.

Background

Bragg’s Employment with Pride

Pride

hired Bragg as its chief financial officer (“CFO”) in July 1993. In 1998, Pride promoted Bragg to President

and Chief Operating Officer. In February

1999, the parties executed an employment agreement. The following month, Pride promoted Bragg to

Chief Executive Officer (“CEO”), after the current CEO, Ray Tolson,

retired.

Bragg served as Pride’s CEO from

March 1999 until June 2005, when Pride asked for, and received, Bragg’s

resignation. Pride’s board chairman

provided Bragg with a “Summary of Separation Benefits” term sheet, which

outlined the termination benefits that Bragg would receive pursuant to the

February 1999 employment agreement. The

following day, Bragg executed a resignation letter agreement. Thirty days following his resignation, Pride

paid Bragg $8 million in severance, as contemplated in the letter of

resignation.

The Employment Agreement

The provisions in the agreement that

govern Bragg’s term of employment and termination are sections 3.03 and

3.05. They read:

3.03 TERM OF EMPLOYMENT (“EMPLOYMENT PERIOD”).

Executive’s regular employment (no Change in Control being presently

contemplated) will commence on the Effective Date of this Agreement and will be

for a term of two (2) years ending at 12:00 o’clock midnight February 4, 2001;

thereafter, the Term of Employment of Executive will be automatically extended

for successive terms of one (1) year each commencing February 5, 2001, and on

February 5 of each year thereafter, unless Company or Executive gives written

notice to the other that employment will not be renewed or continued after the

next scheduled expiration date which is not less than one year after the date

that the notice of non-renewal was given.

All extended employment terms will be considered to be within the

Employment Period while Executive is employed with the Company.

3.05 TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the right to terminate

Executive at any time during the Employment Period (including extended

term). Should the Company choose not to

renew or extend the Employment period of this Employment Agreement or choose to

terminate the Executive during, or at the end of, the Employment Period, or in

the event of death or disability of the Executive, if the termination is not

after a Change of Control and is not for cause, the Company shall, within

thirty (30) days following such termination, pay and provide to the Executive:

a. An amount equal to two full years of

his base salary . . .

b. The Company shall provide to Executive for a period

of two (2) full years following the Date of Termination, life, health, accident

and disability insurance. . . .

c. An amount equal to two (2) times the target award

for the Executive under the Company’s annual bonus plan for the fiscal year in

which the termination occurs . . . .

The section 3.05 severance benefits

also include the value of the Executive’s retirement plan, stock options, and

life, health, hospitalization, medical, and accident benefits to the Executive’s

spouse and dependents for same term as the Executive’s benefits.

Though Bragg acknowledges that he

received severance pay pursuant to the agreement’s provision dealing with

termination, he contends that he is entitled to $17 million in additional

compensation. He urges that, under

section 3.03 of the agreement, the term of his employment had “renewed” the

February before he resigned, and thus, Pride’s termination was not effective

until the end of the renewal period for the purpose of calculating his

severance. Under his reading of section

3.03 of the agreement, Bragg contends that he should have continued to receive

the salary and benefits he received as a current employee, listed in section

3.04 of the agreement, through the end of his renewal period, plus the

severance. Section 3.04 of the agreement

sets forth Bragg’s compensation during the Employment Period. It reads:

3.04 COMPENSATION AND BENEFITS. During the Employment Period the Executive

shall receive the following compensation and benefits:

a. He shall receive an annual base salary of not less

than his [sic] annual base salary which is $334,000, with the opportunity for

increases, from time to time thereafter, which are in accordance with the

Company’s regular executive compensation practices. Executive’s salary will be reviewed at least

annually by the Compensation Committee of the Board of Directors.

b. . . . [H]e shall be eligible to participate on a

reasonable basis, and to continue his existing participation, in annual bonus,

stock option and other incentive compensation plans which provide opportunities

to receive compensation in addition to his annual base salary which are the

greater of: (i) the opportunities provided by the Company for Executives with

comparable duties, or (ii) the opportunities under any such plans in which he

was participating immediately prior to the Effective Date of this Agreement.

c. . . . [H]e shall be entitled to receive and

participate in salaried employee benefits including, but not limited to:

medical, life, health, accident and disability insurance and disability

benefits . . . .

Section 3.04 benefits also include

retirement benefits, paid vacations, use of Company car, and participation in

incentive stock and benefit plans.

Pride denies that section 3.03

requires it to compensate Bragg beyond the amount set forth in section

3.05. It observes that section 3.05

grants it the “right to terminate [Bragg] at any time (including any extended

term).”

The Breach of Fiduciary Duty Claim

During Bragg’s tenure, he rejected

claims against Pride advanced by two departing officers, under sections 3.03

and 3.05 of the employment agreement, which urged the very interpretation he

now makes against Pride. These former

officers, John O’Leary, a former president of Pride, and Jonathan Talbot, a

former vice-president of marketing, had employment agreements similar to

Bragg’s agreement. Both O’Leary and

Talbot advanced claims for additional compensation under the same

interpretation of section 3.03 that Bragg now advances, and Bragg, as CEO,

rejected them. In addition, In March

1999, the head of the compensation committee asked Bragg to summarize the

severance due to the outgoing CEO, Ray Tolson, if Pride terminated him without

cause. Bragg included in Tolson’s

benefits only the severance outlined in section 3.05.

In response to Pride’s contract

defenses, Bragg testified that he had always understood his contract to require

additional compensation under the section 3.03 renewal provision. Bragg’s assertion that he had held this

opinion while CEO but did not advise Pride of it or otherwise act to clarify

the language prompted Pride to counter-sue him for breach of fiduciary duty,

contending that Bragg had failed to disclose material information to

Pride—namely, Bragg’s understanding of the employment agreement.

The Trial Court’s Ruling

In

October 2006, the trial court granted summary judgment dismissing with

prejudice Bragg’s breach of contract claim for additional compensation under

section 3.03 of the agreement. In

December 2006, the trial court granted summary judgment dismissing with

prejudice Pride’s counterclaim against Bragg for breach of fiduciary duty. The trial ordered that both parties take

nothing by their suits.

Summary Judgment

We review a

trial court’s summary judgment de novo. Valence Operating Co. v.

Dorsett , 164

S.W.3d 656 , 661 ( Tex. 2005); Provident

Life & Accident Ins. Co. v. Knott , 128 S.W.3d 211, 215 (Tex.

2003). Under the traditional

standard for summary judgment , the movant has the burden to

show that no genuine issue of material fact exists and that the trial court

should grant a judgment as a matter of law . Tex. R. Civ. P . 166a(c); KPMG Peat Marwick

v. Harrison

County

Hous. Fin. Corp. , 988

S.W.2d 746, 748 (Tex.

1999) . In our review , we take as true all evidence favorable to the nonmovant,

and indulge every reasonable inference and resolve any doubts in the

nonmovant’s favor. Dorsett , 164 S.W.3d at 661;

Knott , 128 S.W.3d at 215 ; Sci. Spectrum, Inc. v. Martinez , 941 S.W.2d 910, 911 (Tex. 1997). Our task is to “consider whether

reasonable and fair-minded jurors could differ in their conclusions in light of

all of the evidence presented.” Goodyear

Tire & Rubber Co. v. Mayes, 236 S.W.3d 754 , 755–56 (Tex.

2007) (citing Wal-Mart

Stores, Inc. v. Spates ,

186 S.W.3d 566, 568 (Tex . 2006); City of Keller v. Wilson, 168 S.W.3d

802 , 822–25 (Tex.

2005)). When, as here, a summary

judgment does not specify the grounds on which it was granted, we will affirm

the judgment if any one of the theories advanced in the motion is meritorious. Joe

v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 157 (Tex. 2004).

BRAGG’S APPEAL

Bragg

contends that Pride breached its employment agreement with him by (1) failing

to compensate Bragg for its failure to give him notice of non-renewal of the

agreement before terminating his position as CEO; (2) awarding $400,000 as his

2004 bonus rather than $1.023 million; and (3) requiring him to pay the

employee portion of the insurance premiums for the benefits provided to him

after his termination. Bragg contends

that the agreement is, at a minimum, ambiguous on these matters, thus

precluding summary judgment. Pride

responds that section 3.05 of the agreement unambiguously provides that Pride

may terminate Bragg at any time without notice, including during any extended

term, and expressly sets forth all severance compensation, whether the

termination be “during, or at the end of, the Employment Period.”

Contract Interpretation

Our primary concern in interpreting a contract

is to ascertain and give effect to the intent of the parties as it is expressed

in the contract. Seagull Energy E & P, Inc.

v. Eland Energy, Inc. , 207 S.W.3d 342, 345 (Tex. 2006) . To

achieve this objective, “courts should examine and consider the entire writing

in an effort to harmonize and give effect to all the provisions of the contract

so that none will be rendered meaningless.”

Dorsett , 164

S.W.3d at 662 .

Whether a contract is

ambiguous is a question of law for the court.

Heritage Res., Inc. v. NationsBank , 939 S.W.2d 118, 121 (Tex.

1996). If the contract is so worded that

it can be given a certain or definite legal meaning or

interpretation, then it is not ambiguous, and a court should construe

the contract as a matter of law. SAS Inst., Inc. v. Breitenfeld , 167 S.W.3d 840, 841 (Tex. 2005) (quoting Coker

v. Coker , 650 S.W.2d 391, 393 (Tex. 1983));

ACS Investors, Inc. v. McLaughlin ,

943 S.W.2d 426, 430 (Tex.

1997). An unambiguous contract is construed

according to the plain meaning of its express wording.

Dorsett ,

164 S.W.3d at 662 .

Unambiguous contracts are enforced as written. Heritage Res., Inc. , 939 S.W.2d at 121 .

In contrast, “ [a] contract is ambiguous

when its meaning is uncertain and doubtful or is reasonably susceptible to more

than one interpretation.” Id. We determine whether a contract is ambiguous by examining

it as a whole, in light of the circumstances present when the parties entered the

contract. Universal Health Servs.,

Inc. v. Renaissance Women’s Group, P.A. , 121 S.W.3d 742, 746 (Tex.

2003). If a court

determines a contract is ambiguous, then a factfinder may consider extraneous

evidence to ascertain the true meaning of the instrument. Nat’l

Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI Indus., Inc. , 907 S.W.2d 517,

520 (Tex.

1995). If an ambiguity exists, either

patent or latent, contract interpretation becomes a fact issue, resolved by

deciding the parties’ true intent. Coker , 650 S.W.2d at 394 ; Quality

Infusion Care, Inc. v. Health Care Serv. Corp. , 224 S.W.3d 369, 379 (Tex. App.—Houston

[1st Dist.] 2006, no pet.).

Analysis

Here, the parties agree that Pride

did not notify Bragg of the expiration of the employment agreement as

authorized in section 3.03. The dispute concerns whether Pride was required to

give one-year’s notice under pain of continuing to pay Bragg a salary or

whether, as expressed in section 3.05, Pride could terminate at any time

(including during the Employment Period) so long as it provided the agreed-upon

severance. Bragg reads sections 3.03 and

3.05 as enumerating separate obligations, triggering multiple remedies,

requiring Pride to provide salary and compensation under section 3.04 of the

agreement as if he remained in Pride’s employ, in addition to severance

benefits until the agreement expired.

Pride observes, however, that notice of non-renewal does not trigger any

compensation other than that defined in section 3.05 because section 3.05

expressly allows Pride to terminate an executive at any time, including “during

the Employment Period,” provided that it compensates the Executive with the

severance benefits enumerated in that section.

We agree with the trial court that

sections 3.03 and 3.05 are not ambiguous.

Section 3.03 sets forth the period of Bragg’s employment, or as the

agreement defines it, the “Employment Period.”

It declares: “All extended employment terms will be considered to be

within the Employment Period while the Executive is employed with the

Company.” Bragg asserts that this

sentence relates only to an employee’s voluntary departure, but the provision

contains no limiting language. Section

3.03 says that when an employee is employed with the company, he is within his

employment period, and thus is entitled to compensation under section

3.04. It does not suggest that a fired

employee nonetheless continues to be within the employment period. Under section 3.03, an executive who is not

employed with the company is not within any “employment period.”

Tacitly conceding this interpretation

of section 3.03 to be reasonable, Bragg claims that section 3.04 suggests

otherwise. Section 3.04, which outlines

an executive’s compensation and benefits, during employment, states: “During

the Employment Period, the Executive shall receive the following compensation

and benefits. . . .” Bragg urges us to

construe this language in conjunction with yet another section of the

agreement, section 2.06, which defines “termination” as used in the agreement:

“[T]ermination shall mean termination, prior to the

expiration of the Employment Period, of the employment of the Executive with

the Company {including death and disability (as described below)} for any

reason other than cause (as described below) or voluntary resignation (as

described below). Termination includes

“Constructive Termination” as described below.

Termination includes non-renewal or failure to extend this Agreement at

the end of any employment term, except for cause.

The agreement then elaborates on the

various kinds of termination, including disability, cause, constructive

termination, and voluntary resignation.

Section 2.06 concludes by stating:

Termination that entitles the Executive to the

payments and benefits provided in the “Termination Payments and Benefits”

Section hereof shall not be deemed or treated by the Company as the termination

of the Executive’s employment or the forfeiture of his participation, award, or

eligibility, for the purpose of any plan, practice or agreement of the Company

referred to in the Compensation and Benefits Section hereof.

Bragg suggests that the word

“agreement” in this last sentence includes the employment agreement

itself. Thus, he asserts, his

termination under section 3.05 should not be deemed a termination of his

employment for the purpose of his employment agreement, but instead, he

remained within his Employment Period even after termination for purposes of

calculating the money owed to him until the expiration of the period following

renewal of the agreement. Like the trial

court, we disagree with Bragg’s interpretation. Section 2.06 refers to the compensation and

benefits in section 3.04; it does not modify “termination” as defined under the

agreement. The only reasonable

construction of “plan, practice or agreement” in section 2.06 is as a reference

to the insurance, stock, and retirement plans for which Bragg continues to be

eligible under his severance package as described in section 3.05. If we applied Bragg’s interpretation and construed

“agreement” in section 2.06 to include the Employment Agreement as a whole, it

would render the last sentence of section 3.03 and the entirety of section 3.05

meaningless. That is not a reasonable

interpretation. See Dorsett , 164 S.W.3d at 662 (“Courts should examine and consider the entire

writing in an effort to harmonize and give effect to all the provisions of the

contract so that none will be rendered meaningless.”).

Bragg further relies on section 3.05(j), a

savings clause, which states: “The Company’s obligation under this Section to

continue to pay or provide . . . insurance to the Executive and [his

dependents] during the remainder of the Employment Period shall be reduced”

when Executive is provided these benefits by another employer. According to Bragg, if the employment period

were over, section 3.05(j) would be meaningless, because there would be no

employment period during which to provide insurance benefits. Section 2.06, however, states that the

Employment Period is not treated as terminated with respect to the employee

benefit plans made a part of the severance package under section 3.05. Bragg thus is treated as within his

Employment Period under section 3.05(j) only for purposes of the insurance and

other benefits expressly provided as a part of his severance.

Finally,

Bragg contends that sections 3.03 and 3.05 are ambiguous when read together

because section 3.03 requires notice of termination, while section 3.05 allows

an employee to be terminated at any time.

We conclude that these sections can be harmonized without creating any

ambiguity.

Section 3.03 creates a term of employment for

Bragg, or an Employment Period. The

contract guaranteed Bragg a term of at least one, and as much as two years’

employment under his extended term. [1] Section

3.05 allows Pride to terminate an executive at any time, including “during, or

at the end of the Employment Period,” as long as it pays the executive the

benefits enumerated in section 3.05.

Bragg contends that an interpretation that section 3.05 is the sole

compensation when Pride terminates an employee without notice renders section

3.03 meaningless. We disagree. The severance provided in s ection 3.05 provides Bragg with two

years’ salary and benefits, which is the maximum amount of time that an

employee could have received salary and benefits under the agreement upon

automatic renewal. Section 3.05 thus

provides salary and benefits for at least the same amount of time that an

employee would receive them if he had been provided notice under section 3.03. “W hen an employment contract

requires a certain period of notice, the employment may be cancelled on shorter

notice or upon none at all if the employee is paid wages or salary for the

specified notice period.” Hussong v. Schwan's Sales Enter., Inc. ,

896 S.W.2d 320, 326 (Tex. App.—Houston [1st Dist.] 1995, no writ); see also

Stolz v. Wells, 43 S.W.2d 163, 165 (Tex. Civ. App.—Beaumont 1931, no writ). With the severance payment, Pride paid Bragg

his salary for the specified notice period.

Section 3.05 contemplates the

possibility that an executive could be terminated “during” his employment

period and outlined the benefits owed in such an event. A severance pay provision serves “ to assure a worker whose employment

has terminated certain funds while he seeks another job.” Martin v. Mann Merchandising, Inc ., 570 S.W.2d 208, 209 (Tex. Civ. App.—Eastland

1978, writ ref’d n.r.e.). Section 3.05

accomplishes that purpose by unambiguously enumerating the benefits

available in the event of termination regardless of whether it occurs due to

expiration of the employment period or earlier, due to Pride’s exercise of its

right to fire an executive at any time during the employment period. We hold that the exercise of an express

right to terminate without cause terminates an agreement that is then in effect

because there has been no notice of non-renewal. Because the contract does not require Pride

to pay $17 million additional compensation under section 3.03, Pride did not

breach the contract by failing to provide additional compensation beyond the $8

million it paid pursuant to its obligation under section 3.05.

2004 Annual Bonus

Bragg

contends that Pride also breached its contract by improperly reducing his 2004

incentive bonus. According to Bragg’s

summary judgment evidence, his target bonus was $1,023,000, yet he received

only $400,000 from Pride. Bragg asserts

that although Pride had discretion to award bonuses, its discretion is limited,

and Pride was required to treat Bragg on the same basis that it treated other

Pride executives of comparable duties who received proportionally larger

bonuses. With respect to bonuses,

Section 3.04 contract states:

“[Bragg] shall be eligible to participate on a

reasonable basis . . . in incentive compensation plans which provide

opportunities to receive compensation in addition to his annual base salary

which are the greater of: (i) the opportunities provided by the Company for

Executives with comparable duties; or (ii) the opportunities under any such

plans in which he was participating immediately prior to the Effective Date of

this Agreement.”

Bragg does not contend that he was

not given comparable participation opportunities in incentive compensation

plans, only that his bonus was lower than comparable executives. Pride’s proxy statements state that any bonus

is discretionary. The employment

agreement merely provides that Bragg is eligible to receive bonuses, but it

does not require that they be paid; rather, it refers to incentive plans that

are separate from the agreement. Bragg

has failed to raise a fact issue that his 2004 bonus was nondiscretionary under

the employment agreement. We thus hold

that the trial court properly granted summary judgment on this claim.

Insurance Benefits

Bragg’s

final issue is that Pride breached its employment agreement by not paying the

employee portion of his insurance benefits provided under section 3.05(b),

which states: “The Company shall provide to Executive for a period of two (2)

full years following the Date of Termination, life, health, accident, and

disability insurance. These benefits are

not to be less than the highest benefits furnished to the Executive during the

term of this Agreement.” This section

does not support Bragg’s contention that Pride must pay the employee’s share of

insurance premium costs. It merely

obligates Pride to provide coverage and benefits that match those Bragg

received while in Pride’s employ, which it has done. We hold that the contract does not require

Pride to pay Bragg’s share of his insurance costs if he paid them as an

employee, and thus, Pride did not breach its contract. The trial court therefore properly granted

summary judgment on this claim.

PRIDE’S APPEAL

Pride contends that Bragg breached

his fiduciary duty by failing to disclose to Pride his personal opinion that

his employment agreement obligated Pride to pay him both severance pay under

section 3.05 and a salary until his employment period otherwise would

expire. It further contends that Bragg

misrepresented the extent of Pride’s potential liability for his and similar

employment agreements in failing to disclose his interpretation of the

agreement. We agree with the trial court

that Bragg is entitled to summary judgment on Pride’s claim.

Breach of Fiduciary Duty Under Delaware Law

Because Pride is incorporated in Delaware, Delaware

law governs Pride’s breach of fiduciary duty claim. [2] In a breach of fiduciary duty case, the

plaintiff must prove that: (1) a fiduciary duty exists; and (2) a fiduciary

breached that duty. See O’Malley v. Boris ,

742 A.2d 845 , 849–50 (Del. 1999) (analyzing breach of fiduciary duty claim

based on two-part test). In addition to

his CEO title, Bragg also served as a director.

Directors of Delaware

corporations have a fiduciary relationship with both the stockholders and the

corporation upon whose board they serve. [3] Malone

v. Brincat , 722 A.2d 5, 10 (Del. 1998). The director’s fiduciary duty to both the

corporation and its shareholders is a “triad: due care, good faith, and

loyalty.” Id. ; see also Cede

& Co. v. Technicolor, Inc., 634 A.2d 345, 361 (Del. 1993).

These general fiduciary

duties specifically include a duty of disclosure. Malone ,

722 A.2d at 10 . This duty obligates

directors to provide the stockholders with accurate and complete information

material to a transaction or other corporate event. Id. ; see also Mills Acquisition Co.

v. Macmillan, Inc. , 559

A.2d 1261, 1283 (Del. 1988) (fiduciaries may not “use superior information or

knowledge to mislead others in performance of their own fiduciary obligations”). Disclosure does not mean, however, that a

board must know every fact, and directors have no duty to disclose speculative

or contingent information. See Benihana of Tokyo, Inc. v. Benihana, Inc. , 891 A.2d 150, 179 (Del. Ch. 2005);

Arnold v. Soc’y for Sav. Bancorp, Inc. , 650

A.2d 1270, 1280 (Del. 1994) ( Generally, “Delaware law does not

require disclosure of inherently unreliable or speculative information which

would tend to confuse stockholders or inundate them with an overload of

information.”) . Rather, directors

are responsible for considering material facts that are reasonably available,

not those that are immaterial or out of the board’s reasonable reach.

Benihana , 891 A.2d at 179 . ; Brehm v. Eisner, 746 A.2d 244, 259 (Del. 2000). The term “material” in this context means

“relevant and of a magnitude to be important to directors in carrying out their

fiduciary

duty of

care in decision-making.” Benihana , 891 A.2d at 179

(quoting Brehm , 746 A.2d at 260

n.49). This meaning is distinct from the

use of the term “material” in the quite different context of disclosure to

stockholders in which “[a]n omitted fact is material if there is a substantial

likelihood that a reasonable shareholder would consider it important in

deciding how to vote.” Brehm , 746 A.2d at 260 n.49; O’Malley v. Boris, 742 A.2d 845, 850

(Del. 1999). In other words, “there must

be a substantial likelihood that the disclosure of the omitted fact would have

been viewed by the reasonable investor as having significantly altered the ‘total

mix’ of information made available.” Rosenblatt

v. Getty Oil Co. , 493

A.2d 929, 944 (Del. 1985) (quoting TSC

Indus., Inc. v. Northway, Inc. , 426 U.S. 438, 449 (1976)). A threshold question, therefore, is whether the

information that Pride alleges should have been disclosed, or was disclosed but

was allegedly false and misleading, is material. If this information is not material as a

matter of law, the allegations will not support a claim that Bragg violated his

disclosure duties.

Analysis

Pride contends that Bragg’s opinion

concerning his employment agreement is material because: (1) if Bragg’s opinion

as to the interpretation of the agreement were correct, Pride’s potential

liability under his and similar agreements could have been increased by sixty

to one-hundred million dollars; (2) Bragg’s opinion concerned employment

contracts other than his own, and as CEO, his opinion was material to the

negotiation of those contracts; and (3) if Pride had known about Bragg’s

opinion, it would have taken actions to expressly nullify such an

interpretation. We hold that, in this

context, these reasons are insufficient to raise an opinion to the level of a

material disclosure.

First, Bragg did not fail to disclose

factual information not otherwise available to Pride. On the contrary, Pride drafted the disputed

employment contract in consultation with legal counsel. Moreover, Pride’s directors knew that

conflicting views concerning the interpretation of section 3.03 existed because

former directors and employees had unsuccessfully pursued claims based on the

same understanding of the contract during Bragg’s tenure with the company. Bragg’s opinion, therefore, would not have

provided new information to the Board and would not have assisted the Board in

its decision-making duties.

Pride contends that Bragg’s opinion

is material because if it had known about Bragg’s opinion, it would have taken

corrective action. Pride, however, did

not take any corrective action when former president O’Leary advanced a claim

consistent with Bragg’s opinion. Bragg’s

opinion thus was not material to the Board or the shareholders in its

decision-making process, as it already had the opinion of another high-ranking

officer that the employment agreement was ambiguous.

Pride further contends that Bragg

made false representations to the shareholders when he signed proxy statements

that were inconsistent with his true opinion regarding section 3.03. When confronted with the former directors’

claims, Pride maintained its belief that section 3.03 did not provide

compensation for terminated employees beyond that expressed in section

3.05. Bragg adopted proxy statements on

behalf of Pride that reflected Pride’s position in regard to its employment

agreements. He was not required to

provide the shareholders with speculative information based upon his personal

opinion about the contract’s interpretation when Pride already had determined

that this was an incorrect interpretation.

See Cede & Co. v. Technicolor,

Inc. , 634 A.2d 345, 372 (Del. 1993) (affirming trial court’s finding that

there was no need to disclose share value which target director initially

deemed acceptable, without consulting investment advisors, because non-disclosure

was “plainly not material”); see also In

re Best Lock Corp. S’holder Litig. , 845 A.2d 1057 , 1070–75 (Del. Ch. 2001) (dismissing

disclosure claims because alleged misrepresentations were immaterial); In re Lukens Inc. S’holders Litig. , 757

A.2d 720 , 735–36 (Del. Ch. 1999) (granting motion to dismiss because alleged

omission or misrepresentation did not meet materiality test).

Second, Bragg had no duty to disclose

his private views as to the interpretation of the agreement in the context of

negotiating and renewing his own employment.

In such a context, a corporate officer acts in his individual capacity,

as it is evident that the company and the employee are adverse to each other in

the context of negotiating that employee’s compensation. See In

re Walt Disney Co. Derivative Litigation , 906 A.2d 27 , 49–51 (Del. 2006) ( holding president did not breach his fiduciary duty when he

negotiated and accepted severance provisions of employment agreement or when he

accepted a full payout upon termination).

Because the shareholders and directors

had prior knowledge that conflicting views existed regarding its employment

agreement and chose not to take corrective action, Bragg’s opinion would not

have “significantly altered the ‘total mix’ of information.” TSC

Indus. , 426 U.S.

at 449 . We thus hold that Bragg’s

opinion was not material. Bragg

therefore did not breach his fiduciary duty by failing to disclose it.

Conclusion

We

conclude that the employment agreement in dispute is not ambiguous as to the

severance the company owes upon firing its chief executive, and that Bragg has

failed to raise a fact issue as to his claim that Pride breached the

agreement. We further conclude that

Pride has raised no issue of fact under Delaware

law that Bragg materially breached his fiduciary duty to the company. We therefore affirm the judgment of the trial

court.

Jane Bland

Justice

Panel consists of Chief Justice

Radack and Justices Jennings and Bland.

[1] The contract required Pride to give Bragg notice of

termination at least one year prior to the renewal date of February 5. Thus, if Pride did not give Bragg notice of

non-renewal until the renewal date, Bragg’s employment period would continue

for two years. This is because the

notice would be one day less than one year from the date of the notice of

non-renewal, so the notice would not take effect until February 4 of the

following year.

[2] Under

article 8.02 of the Texas Business Corporation Act, the rights and duties of

directors and stockholders in corporate matters are governed by the laws of the

state of incorporation. Tex. Bus. Corp.

Act Ann . art 8.02 § A (Vernon 2003); Hollis

v. Hill , 232 F.3d 460 , 464–65 (5th Cir. 2000).

[3] Texas law recognizes a similar relationship between a

corporation and its director. See Myer v. Cuevas , 119 S.W.3d 830 , 835–36 (Tex. App.—San Antonio

2003, no pet.) (corporate officers owe fiduciary duties to the corporations

they serve); see also Hughes v. Houston Northwest Medical Center ,

Inc. , 680 S.W.2d 838, 843 (Tex.

App.—Houston [1st Dist.] 1984, writ ref’d n.r.e.) ( corporate

officers and directors owe corporation and shareholders duty to act only in

their best interest).