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Patrick J. Mcgonagle v. Somerset Gas Transmission Company

November 8, 2011


APPEAL from the Franklin County Court of Common Pleas. (C.P.C. No. 08CVA8-11431)

The opinion of the court was delivered by: Sadler, J.

Cite as

McGonagle v. Somerset Gas Transm. Co., L.L.C.,



{¶1} Plaintiff-appellant, Patrick J. McGonagle, appeals from the judgment of the Franklin County Court of Common Pleas granting judgment as a matter of law in favor of defendant-appellee, Somerset Gas Transmission Company, LLC, on appellant's claim for declaratory judgment. For the reasons that follow, we sustain appellant's first and second assignments of error and reverse the judgment of the trial court.

{¶2} Through its subsidiary, North Coast Transmission, LLC ("North Coast"), appellee operates an intrastate natural gas pipeline in Ohio and currently provides natural gas transportation service for various local distribution companies, end-users, and market aggregators in northern Ohio. This litigation arises out of the employment relationship between appellant and appellee that began in June 2002.

{¶3} Prior to commencing employment, appellant and appellee's president and CEO, William A. Lang ("Lang"), engaged in discussions regarding appellant's employment with appellee as vice president of marketing and business development. Appellee sent appellant a letter confirming those discussions. The letter is dated May 31, 2002, and states, "RE: Offer of Employment with Somerset Gas Transmission Company, LLC." The second paragraph of the letter indicates that appellant would be entitled to an annual salary of $170,000, a "competitive benefit package," including four weeks of vacation, an annual incentive award, reimbursement of reasonable business expenses, and reimbursement for relocation expenses. Additionally, appellee indicated that appellant would be provided an opportunity to acquire shares of the company. With respect to this option, the letter states:

Somerset will also provide you the opportunity to participate in the growth of the company through an equity program that provides for the option to acquire shares at an early stage development of the company. Contemporaneously with the closing of the next round of equity financing of the Company, you will be granted options to purchase a number of shares of the Company equal to one percent (1%) of the outstanding shares of the company, on a fully diluted basis taking into account such equity financing and such options.

The exercise price per share for such options shall be equal to the price per share for the purposes of such equity financing. The options shall vest in four equal installments on January 1, 2003, July 1, 2003, January 1, 2004, and July 1, 2004. The options would vest immediately in the event that the Executive is terminated without cause or if the Executive is terminated within 180 days following a change of control of the Company. It shall not be deemed to be a change of control of the company if the Company goes public or receives an equity investment from financial or strategic investors, unless such investment is tantamount to a sale of the Company. It is understood that the form of the options provided for in this paragraph may be modified to accommodate or reflect the structure of the Company and it[s] business from time to time, provided that the essential economic benefits to the Executive are preserved. Additional option awards may be made from time to time at the discretion of the Board of Directors.

The letter goes on to state in the next paragraph:

The above terms will be components of a definitive employment agreement which will be provided as part of your employment with SGT. This agreement will contain provisions for termination with cause and without cause. In the event of termination without cause by the company within the first two years of employment, you will be entitled to a severance payment of $100,000, details of which will be detailed in the employment agreement.

{¶4} The letter is signed by Lang and provides that to indicate acceptance of the offer, appellant is to sign the letter. Appellant did so and, despite the letter's reference that a definitive employment agreement would be forthcoming, no additional agreements were executed.

{ΒΆ5} In early 2006, appellee presented appellant with a Management Grant Agreement ("MGA") that included specific terms regarding the stock option. Appellant did not sign the MGA and, ...

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