Lewitton was an employee of ITA Software, the Defendant. Three months after he stopped working for ITA Lewitton attempted to exercise options to purchase 138,900 shares of ITA's stock. ITA allowed Lewitton to purchase 34,722 shares, but blocked his effort to exercise the remaining options.
In April 2005, ITA and Lewitton entered into an employment contract under which Lewitton was to serve as ITA's vice president of sales. The contract granted Lewitton the right to purchase up to 200,000 shares of stock. According to the contract the options "'will vest...in equal monthly installments of 4,556 shares each... except that the first twelve months of options will all vest at Lewitton's one-year anniversary.'" The contract also provided that certain of the options were subject to forfeiture depending on whether ITA met certain performance goals. Under the contract, there was to be an assessment period during which sales would be calculated to determine if the company met its revenue goals. However, the contract also specified that the Assessment period would not apply if it were "materially deferred."
Lewitton's job was to supervise the development of the 1U program, a computer program that would apparently allow users to make online reservations for air travel. The software program was not successful and was not accepted by either travel agents or airlines.
The District Court granted summary judgment for Lewitton, holding that the contract unambiguously granted him the right to exercise the options. Under Illinois law, "our primary goal in construing the contract is to give effect to the parties' intent as expressed in the terms of their written agreement." The Court stated: "We first ask if the language of the contract is ambiguous, which is a question we determine as a matter of law...A contract is ambiguous if its terms are indefinite or have a double meaning...If the contract is unambiguous, we must enforce it as written."
ITA argued that the options were subject to forfeiture because the U1 software program did not meet performance goals.
The District Court and the Court of Appeals disagreed. They held that the Assessment Period did not apply (to allow forfeiture) because the U1 program was "materially deferred." "As the district court noted, 'materially deferred' is not a technical term; its ordinary meaning is 'significantly delayed.'" Because the U1 program was not rolled out on time, "the Assessment Period never began and, accordingly, ...the forfeiture provision does not apply."
Accordingly, Lewitton was entitled to exercise the options.
Edward X. Clinton, Jr.
Copyright 2009
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