The opinion of the court was delivered by: DEBEVOISE
This matter is before the court on cross-motions for summary judgment. The parties seek a determination of plaintiff Jimmie L. Winders' employment status with defendant People Express, and his rights to ownership of stock purchased pursuant to defendant's stock purchase plan.
Statement of Facts and Procedure
Plaintiff became employed by defendant on March 9, 1981 as a Flight Manager or Pilot, a full time, non-temporary position. At the time of his employment with defendant, plaintiff was a member of the Air National Guard and held the rank of Major. Plaintiff informed defendant of this fact at the time he was hired. Plaintiff flew regularly as a pilot for defendant beginning on its first day of operation (April 3, 1981) and also operated as a check pilot, which involved the examination of new pilots who went through pilot training at the United Airlines facility in Denver, Colorado.
As a condition of his employment with defendant, plaintiff was required to, and, on May 31, 1981, did, purchase 500 shares of defendant's common stock. At the same time, plaintiff also voluntarily subscribed to 2,000 shares of common stock. He executed two promissory notes, one in the amount of $1,495 for the mandatory 500 shares and the second in the amount of $10,980 for the 2,000 optional shares. Plaintiff paid a total of $305 toward the $1,495 promissory note through payroll deductions. His total payment on the $10,980 promissory note was $5,519 which consisted of a $20 (par value) cash payment, a down payment of $3,667 and payroll deductions of $1,832. On August 14, 1981, plaintiff fully paid for an additional 500 shares of optional stock for a purchase price of $4,250.
Plaintiff purchased all stock pursuant to defendant's Restricted Stock Purchase Plan. The pertinent provisions of the plan read as follows:
Restrictions on Stock Purchased. FOR A PERIOD OF TIME PRESCRIBED BY THE BOARD OF DIRECTORS PURSUANT TO THE PLAN, A PARTICIPANT MAY NOT SELL, ASSIGN, TRANSFER, PLEDGE OR OTHERWISE ENCUMBER OR DISPOSE OF ANY SHARES OF COMMON STOCK ACQUIRED PURSUANT TO THE PLAN. If a participant leaves the employ of People Express or, in the case of directors who are not also employees of the Company, ceases to be a director (other than by reason of death, disability or retirement at normal retirement age) at any time prior to a date fixed by the Board, the Company may, but is not obligated to, purchase any shares then held by such participant that are subject to such restrictions on transferability. If the Company elects not to purchase such shares, all restrictions on such shares will thereupon lapse, and such shares thereafter will not be subject to forfeiture under the Plan.
The Board of Directors has determined that, with respect to any shares of Common Stock that an employee is required to purchase pursuant to the Plan, restrictions as to 20% of such shares will lapse on the second anniversary of his award. Restrictions as to an additional 20% of such shares will lapse on each subsequent anniversary, and all restrictions will lapse on the sixth anniversary of the employee's award. The Board of Directors has also determined that all restrictions on the transferability of shares acquired pursuant to the Plan at the option of a participant will lapse two years after the date on which the purchase price of such shares was fully paid. If a participant dies, becomes disabled or retires at normal retirement age, all restrictions on shares then held by such participant, regardless of whether or not the participant was required to purchase such shares, will lapse automatically.
Rights as Stockholders. Subject to the restrictions on transferability referred to above, a participant has all the rights of a stockholder with respect to shares acquired under the Plan from the date of acceptance of his award, including the right to vote such shares and to receive any dividends paid thereon.
At the time that plaintiff ceased working as a pilot for defendant in May 1982, he had paid a total of $10,074 toward the purchase of the 3,000 shares for which he had subscribed. Of that amount, $4,250 was full payment for the 500 optional shares purchased by plaintiff on August 14, 1981.
In early 1982, plaintiff was asked by Colonel Jack Keir of the National Guard Bureau in Washington, D.C., if he would consider returning to active duty with the Air National Guard to work on a special project called the National Air Space Review. Colonel Keir advised plaintiff that the position would become vacant in April or May 1982, and that it would be a 42 month program. After considering the offer, plaintiff informed Colonel Keir sometime between April 9th and April 14th that he would accept the position.
From May 17, 1982 to May 28, 1982, plaintiff was on paid vacation with defendant. By orders dated April 16, 1982 plaintiff was directed to commence extended active duty on May 17, 1982 for a period of 24 months at Air National Guard Support Center, Andrews Air Force Base, Maryland. Plaintiff duly reported for duty pursuant to those orders.
On May 28, 1982, the last day of plaintiff's paid vacation, plaintiff spoke with Mr. Harold J. Pareti, Chief of defendant's Flight Operations, and Mr. Jim Barral, defendant's Chief Pilot. Plaintiff requested of them a 48 month military leave of absence and also inquired whether he could continue in the stock plan while in military service. Plaintiff did not at that point, however, inform Mr. Pareti and Mr. Barral that he was already on active military duty with the Air National Guard. Mr. Pareti told plaintiff that he was expected to report for work on May 31, 1982, after plaintiff's vacation was over. Plaintiff replied that he would not be there, and has not performed as a pilot for defendant since then. In a letter dated May 28, 1982, the same date on which the above described conversation took place, plaintiff repeated his request for a 48 month military leave of absence and stated that he had been assigned to the National Guard.
In a number of letters dated July 26, August 16, and November 9, 1982, plaintiff, through his counsel, made inquiries of defendant as to the status of his request for military leave. On August 3, 1982, Mr. Pareti requested that plaintiff supply a copy of his "orders to active duty", which plaintiff duly supplied. Plaintiff received no further communication from defendant until September 6, 1983 when, by letter from its counsel, defendant informed plaintiff's counsel that plaintiff's request for military leave was denied. With that letter, defendant also tendered to plaintiff a check for $10,074, the total amount that plaintiff had paid toward the purchase of the stock. Defendant also informed plaintiff that his promissory notes were cancelled.
On January 9, 1984, plaintiff was issued new orders which extended his tour of active duty for two years. Thus, plaintiff is now on active duty and will remain on active duty until May 16, 1986. His period of active duty will therefore extend for the full 48 months for which he requested a military leave of absence.
On July 18, 1983, defendant's common stock was the subject of a two-for-one stock dividend for shareholders of record on June 17, 1983. On September 6, 1983, the date that defendant repurchased plaintiff's shares, defendant's common stock was being traded at $21-7/8 per share. Thus, the 3,000 shares that plaintiff claims to own would have become ...