| People v Grasso |
| 2008 NY Slip Op 03722 [50 AD3d 535] |
| April 24, 2008 |
| Appellate Division, First Department |
| The People of the State of New York, by Eliot Spitzer, as AttorneyGeneral, Respondent, v Richard A. Grasso et al., Defendants, and Kenneth G. Langone,Appellant. (And Other Actions.) |
—[*1] Andrew M. Cuomo, Attorney General, New York (Avi Schick of counsel), forrespondent.
Order, Supreme Court, New York County (Charles E. Ramos, J.), entered August 4, 2006,which denied defendant Kenneth Langone's motion for summary judgment dismissing thecomplaint as against him, affirmed, without costs.
The Attorney General brought this action to challenge compensation and benefits awarded tothe former CEO of the New York Stock Exchange (NYSE), Richard Grasso. A detaileddiscussion of the background of the litigation and the substance of the complaint is set forth inour decision in People v Grasso (42AD3d 126 [2007]).
This appeal is from the denial of defendant Kenneth G. Langone's motion for summaryjudgment to dismiss the seventh cause of action. In that claim, the Attorney General alleges thatdefendant Langone, a NYSE director and chair of its Compensation Committee from June 1999until May 2003, breached his fiduciary duties to the NYSE by failing to make complete andaccurate disclosures of Grasso's compensation to the NYSE Board of Directors.[FN1]
In the early 1990s, the NYSE Compensation Committee determined that the Exchange was ata competitive disadvantage because it was unable to offer its senior executives stock-based formsof deferred compensation. To remedy this problem, in 1997, the Board of Directors approved theNYSE's Capital Accumulation Plan (CAP) for four of its most senior executives. Originally CAPprovided a 25% match of variable compensation awards for eligible executives in a given year.The variable compensation to which it applied was the NYSE's Incentive Compensation Plan(ICP) and its Long Term Incentive Plan (LTIP). CAP payments were [*2]deferred until retirement or termination.
In May 1999, the NYSE Compensation Committee and Board of Directors approved, andGrasso executed, his second employment agreement as chairman and CEO of the NYSE. The1999 agreement modified Grasso's 1995 contract and extended his term to May 31, 2005. In fact,Grasso's 1999 employment agreement set forth five components of his annual compensation,which, for the first time included CAP. These were: (1) a base salary of $1.4 million; (2) adiscretionary ICP bonus with a minimum target amount of $1 million annually; (3) a LTIPaward; (4) a CAP award equal to 50% of his total variable compensation (ICP and LTIP); and (5)a Supplemental Executive Retirement Plan (SERP) award.
The annual compensation for all of the NYSE senior executives was set each February forthe prior calendar year. Between the 1997 institution of CAP awards and Grasso's 2003resignation, the process for setting executive compensation was as follows: Frank Ashen, thehead of human resources, would collect median target compensation for a group of comparatorcompanies from NYSE's compensation consultant, Hewitt Associates. He would also prepare asummary of each NYSE executive's performance for the year, based upon input from operatingmanagers. Next, Ashen compared his raw data against 65 quantitative measurements to reach ascore for each executive. That score comprised 65% of the individual's compensation. The chairof the Compensation Committee then had discretion to determine the remaining 35% ofcompensation figures. Thus, during his tenure as chair of the Compensation Committee, Langonewas directly responsible for determining 35% of the compensation of NYSE executives. Also, heinteracted with the NYSE Department of Human Resources by making his yearly proposals toFrank Ashen. After the chair made his recommendations, Ashen met individually with each ofthe members of the Compensation Committee to present and discuss the salary proposals. On thefirst Thursday of each February, the Compensation Committee would meet for a collectivediscussion and vote on all of the executives' compensation. Later that same day, the full Board ofDirectors would meet and vote on the same matters. It was the role of the CompensationCommittee chair to make oral presentations to the Committee and the full Board before theyvoted.
The first time the Board of Directors had to approve CAP awards was in February 1998. Thewritten materials prepared for the 1998 and 1999 Compensation Committee meetings, under theleadership of then chair Bernard Marcus, provided the Committee Members with worksheets thatgave an exact value of the recommended CAP award for each participant. The "totalcompensation" column of those worksheets also displayed the recommended sum of eachexecutive's base salary, ICP, LTIP and CAP award for the year. For example, the 1997 salaryworksheet for Robert Britz, a NYSE executive vice-president who received a 25% CAP award,contained the following information (emphasis supplied):
After Langone became chair of the Compensation Committee in June 1999, the values ofrecommended CAP awards were removed from the worksheets distributed to Committeemembers. In addition, the values for "total variable compensation" and "total compensation" nolonger included the recommended CAP awards. For example, the worksheet outlining Grasso'srecommended 1999 compensation was as follows:
Grasso's February 2000 recommended 1999 compensation worksheet had the followingstatement underneath the chart: "Grasso will receive 50% of his variable compensation in theCapital Accumulation Plan." However, the document did not give a value for his 1999 CAPaward, which was $3,300,000. The worksheet similarly failed to set forth that his actualrecommended compensation was $11,300,000.
After the Committee voted to approve Grasso's compensation, a worksheet quantifying all ofthe components of Grasso's compensation, including the CAP award, and their sum total, wassent to the NYSE CFO to effect payment:
Dale Bernstein, the deputy head of NYSE's Human Resources Department, testified at herdeposition that it was her job to prepare the worksheets of executives' compensation. She relatedthat after Langone became chair of the Compensation Committee, Frank Ashen told [*4]her to remove the CAP column from the materials distributed to theCompensation Committee. Bernstein stated that she told Ashen that she thought the worksheetswere clearer with the CAP awards displayed. However, she testified that she deferred to Ashen,who told her that Grasso did not want the CAP columns displayed. Thus, from February 2000 toFebruary 2003, the materials distributed to the Compensation Committee did not have a CAPcolumn. Bernstein stated that after the compensation packages were approved, she gave thefinance division worksheets which displayed the values of CAP and total compensation figures.
In February 2000, the Compensation Committee[FN4]was given materials indicating that Grasso's total 1999 compensation was $8 million,notwithstanding that his actual total compensation was $11.3 million. The minutes from theFebruary 2000 Compensation Committee meeting do not indicate that Grasso's CAP award wasdiscussed. However, speaking points prepared for Langone's remarks at the February 3, 2000Board meeting indicate that Langone specifically told the Board that Grasso's 2000 CAP awardwas $3.3 million.
One member of the Compensation Committee, D. Maughan, testified at his deposition thatthe worksheet he was given at the February 2000 Committee meeting would have been clearer ifit included a CAP column and a "real total compensation" figure. Two other members of theCompensation Committee gave deposition testimony that they thought Grasso had been awardedapproximately $8 million in total compensation for 1999, when in fact, the actual totalcompensation approved for Grasso in 1999 was $11.3 million. Notably, the $3.3 milliondiscrepancy was the exact value of the CAP award (which, again, was not disclosed on thecompensation worksheet). However, four Board members (M. Karmazin, L. Wachner, G. Levin,and R. Murphy), testified at their depositions that it was clear to them, before they voted, thatLangone was recommending that Grasso receive a $3.3 million CAP award for 1999.
Similar to the format for the prior year, the February 2001 worksheet for Grasso'scompensation indicated a recommended "total 2000 Cash Comp" of $15 million.
The 2001 and 2002 worksheets added the word "also" to the CAP statement under the chart.They both stated: "Grasso will also receive 50% of his variable compensation in the CapitalAccumulation Plan." However, the February 2001 worksheet did not reveal: (1) that Grasso's2000 recommended CAP award was $6.8 million, (2) that a $5 million special award wasrecommended for Grasso for 2000; or (3) that Grasso's total recommended compensation for2000 was $26.8 million. The minutes from the February 2001 Compensation Committee meetingdo not indicate that Grasso's CAP award was discussed. C. Bocklet, a member of the [*5]Compensation Committee,[FN5]testified at his deposition that he believed that Grasso's total 2000 compensation was $15 million.This was the value in the "total compensation" column of the worksheet, not the $26.8 millionGrasso was actually awarded.
The same procedures were followed in February 2002. The worksheet given to theCommittee was as follows:
The notations under the chart on the February 2002 worksheet indicated that: (1) Grassowould also receive a CAP equal to 50% of his variable compensation; (2) in February 2001,Grasso was granted a special award of $5,000,000; and (3) in February 2002 Mr. Grasso wasproposed for a special award of $10,500,000. Thus, the worksheet (including the table and theproposed $10.5 million special award) itemized a recommended compensation for Grasso of$22.5 million in 2001.[FN6]Again, neither Langone's speaking points nor the Compensation Committee minutes indicate adiscussion of Grasso's CAP award. Thus, the actual value of Grasso's proposed compensation for2001, including the $8.05 million CAP award, was $30.55 million.
Compensation Committee member R. Murphy, and Board members W. Harrison and J.Duryea all testified at their depositions that they believed they had voted to approve 2001compensation for Grasso in the $20 million range. C. Bocklet and R. Murphy also testified thatthe members of the NYSE would not be happy if they knew that the Compensation Committeewas approving paying Grasso $30 million for his work in 2001.
Grasso's employment contracts also entitled him to a lump-sum Supplemental ExecutiveRetirement Plan (SERP) distribution upon his departure from the NYSE. This SERP award wasdetermined based upon the length of his service at the NYSE and the amount of his variablecompensation during that time. In the summer of 2002, Grasso sought to extend his contract andaccelerate payment of some of his deferred compensation. The Compensation Committee held aspecial meeting during which some members first learned that Grasso's SERP would be $152million as of the date of his projected retirement. The Committee was concerned about the rapid,substantial growth of Grasso's deferred compensation, and they decided that a third party shouldbe retained to review the issue. Langone hired Vedder, Price, Kaufman & Kammholz, aconsulting firm, for this purpose. Vedder, Price requested a copy of the materials provided to theCompensation Committee for their February 2002 meeting. However, Ashen provided Vedder,[*6]Price with the worksheets that were prepared for the CFO;namely, those which included the actual recommended CAP awards and compensation totalsincorporating CAP awards, rather than the worksheet provided to the Committee, which did notdisplay these figures.
Grasso then made a proposal to cap his final pay at $12 million, extend his contract to 2006,and to move $56 million of his accrued SERP benefit into his Supplemental Executive SavingsPlan (SESP). The Compensation Committee considered this proposal, because it would lessenthe NYSE's accrual expenses, but it made no determination on the matter. Then, in January 2003,Grasso revised his proposal to request the immediate payment of approximately $140 million indeferred compensation, including more than $11 million in CAP benefits.
At its February 2003 meeting, the Compensation Committee was given worksheets whichincluded, for the first time under Langone's leadership, a figure for Grasso's proposed CAPaward. The "Total Compensation" figures in this worksheet also included, again, for the first timeunder Langone's leadership, the CAP awards. Thus, the format of the February worksheet wasinconsistent with those distributed to the Compensation Committee in February 2000, February2001, and February 2002.
On August 27, 2003 Grasso executed his third employment agreement with the NYSE. Thesame day the NYSE issued a press release revealing that $139.5 million would be immediatelypayable to Grasso. The press release did not reveal that $48 million was also due to be paidGrasso upon his retirement. In September 2003, the Chairman of the Securities and ExchangeCommission contacted the NYSE and requested information concerning Grasso's compensation.In response to increasing internal and external pressure, Grasso agreed to forgo future benefitpayments. Several weeks later, he resigned.
The Attorney General then brought this action. The complaint alleges that the NYSE paidGrasso an unlawful amount of compensation and seeks the return of such sums to the NYSE. Theseventh cause of action alleges that as an officer of the NYSE and chair of its CompensationCommittee, Langone violated N-PCL 717 (a) by, "among other things," misleading the Boardabout the CAP awards. Paragraph 207 of the complaint quotes the relevant portion of N-PCL 717(a), a codification of the fiduciary duty owed by all officers and directors of [*7]not-for-profit corporations. That section provides in pertinent part:"Directors and officers shall discharge the duties of their respective positions in good faith andwith that degree of diligence, care and skill which ordinarily prudent men would exercise undersimilar circumstances in like positions." (Id.) In paragraph 208 of the complaint, theAttorney General asserts that as chair of the Compensation Committee, Langone breached hisfiduciary duties under section 717 (a) by misleading its Board of Directors, "which had delegatedto him the task of explaining the proposed compensation." Langone's digressions, the complaintcontinues, are actionable under N-PCL 720 (b)[FN7]and 720 (a) (1).[FN8]
After substantial discovery, including 61 depositions and the exchange of approximately onemillion documents, Langone moved for summary judgment dismissing the seventh cause ofaction. Langone asserted that he was falsely accused of misleading the NYSE Board as toGrasso's CAP award. He averred that he personally disclosed Grasso's CAP program to the Boardand was present for similar disclosures by others. He stated that Grasso's $3.3 million 1999 CAPaward was disclosed to the Board at their February 2000 meeting. Langone also asserted that hispresentations in 2001 and 2002 fairly and accurately represented all of the components ofGrasso's compensation. He claimed that the "undisputed facts" demonstrated that "[he] andothers repeatedly disclosed Grasso's CAP awards, both orally and in writing." Langone's motioncontained 45 exhibits. These included Langone's speaking points for various Board meetings,minutes from February 1997, 1999-2002 Compensation Committee meetings, excerpts from thedeposition testimony of various Board members, and salary worksheets for the 2000-2002Compensation Committee meetings. In support of Langone's contention that the Board was fullyinformed about Grasso's CAP awards, his counsel also annexed, as required by rule 19-a of theRules of the Commercial Division of the Supreme Court (22 NYCRR 202.70 [g]), a 23-page"Statement of Material Undisputed Facts."[*8]
In opposition, the Attorney General submitted excerptsfrom the depositions of 26 individuals, including Board members, NYSE employees, Grasso andLangone. He also presented 58 exhibits, a 14-page response disputing aspects of Langone's"Statement of Material Undisputed Facts," and a 32-page "Counter-Statement of MaterialUndisputed Facts." The Attorney General's submissions pointed to the necessity of annualdisclosure of the CAP awards. The Attorney General also submitted excerpts from the depositiontestimony of a number of the Board members, including Deryck Maughan, Charles J. Bocklet,David Komansky, James Duryea, William Harrison, Robert Murphy, and H. Carl McCall. Thesewitnesses' testimony, much of which is set forth in the factual recitation, indicatedmisconceptions as to the magnitude of the compensation that they had voted to approve forGrasso in February 2000—February 2002.
In reply, Langone submitted 29 additional exhibits, including documents and depositiontestimony. These were to establish that Langone met his duty to fully inform the Board aboutGrasso's compensation.
At oral argument and on the record, before deciding the motion, the IAS court inquired as towhy, upon Langone's succession to leadership as chair of the Compensation Committee,compensation worksheets circulated to the Committee members no longer itemized the exactvalues of CAP awards. Langone's counsel responded that his client had nothing to do with theformatting of the worksheets shown to the Compensation Committee, and that he should not befaulted for those documents' failure to disclose the CAP awards. The Attorney General counteredthat Langone was the only NYSE director who interacted with the Department of HumanResources, and that he was also responsible for recommending compensation to the remainingmembers of the Compensation Committee. The Attorney General added that in his role as chairof the Compensation Committee, Langone had a duty to ensure that the Committee was providedwith a complete and accurate presentation of proposed compensation.
Langone's counsel then asserted that the speaking points from the February 2000Compensation Committee meeting showed, unequivocally, that Langone disclosed the exactamount of Grasso's recommended CAP award to the Committee. However, the Attorney Generalproduced evidence that Grasso's CAP award was not included in Langone's speaking points forthe February 2001 or 2002 meetings. The Attorney General also asserted that there was noevidence that the exact values of Grasso's 2000 or 2001 CAP awards were disclosed to anymember of the Compensation Committee or the Board prior to voting to approve hiscompensation packages.
The IAS court denied Langone's motion. It found issues of fact as to whether Langonebreached his duties to the Board. The court held that the worksheets omitting the exact values ofGrasso's CAP awards constituted evidence that Langone may have breached his obligation tofully and accurately disclose his salary recommendations to the Board. The court noted thatLangone's speaking points for Compensation Committee meetings were inconsistent from year toyear. The court also observed that Board members' deposition testimony indicated that somedirectors were not aware of the magnitude of the total compensation that they were approving forGrasso.
On appeal, Langone contends that the Attorney General failed to raise an issue of fact as tothe claim that he violated his fiduciary duties. He asserts that he had no duty to annually remindthe Compensation Committee that it had approved a 50% CAP award for Grasso, and that even ifhe had such a duty, the undisputed facts reveal that he fulfilled it. Langone also [*9]claims that the element of causation has not been met because noBoard members could have "reasonably relied" upon the worksheets to conclude that Grasso wasnot entitled to his contractual CAP award. Finally, Langone contends that any claims which relyupon his purported failure to apprise the Board of Grasso's SERP awards were not pleaded in thecomplaint, and cannot be a basis for a determination that Langone breached his duties.
In response, the Attorney General asserts that Langone had a duty to disclose Grasso'scompensation to the Committee and the Board. He claims that the record is replete with evidencethat Langone did not fulfill his obligations, and that his failures led the Board to vote in favor ofcompensation packages which were substantially higher than what they had understood. TheAttorney General asserts that omissions regarding Grasso's CAP and SERP both precludesummary judgment in favor of Langone.
Pursuant to CPLR 3212 (b) a court will grant a motion for summary judgment upon adetermination that the movant's papers justify holding, as a matter of law, "that there is nodefense to the cause of action or that the cause of action or defense has no merit." Further, all ofthe evidence must be viewed in the light most favorable to the opponent of the motion(Marine Midland Bank v Dino & Artie's Automatic Transmission Co., 168 AD2d 610[1990]).
The proponent of a motion for summary judgment must make a prima facie showing ofentitlement to judgment as a matter of law, tendering sufficient evidence to eliminate anymaterial issues of fact as to the claim or claims at issue (Alvarez v Prospect Hosp., 68NY2d 320, 324 [1986]; Zuckerman v City of New York, 49 NY2d 557, 562 [1980];Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957]). Failure to makesuch a showing requires denial of the motion, regardless of the sufficiency of the opposing papers(Matter of Redemption Church of Christ of Apostolic Faith v Williams, 84 AD2d 648,649 [1981]; Greenberg v Manlon Realty, 43 AD2d 968, 969 [1974]; Winegrad v NewYork Univ. Med. Ctr., 64 NY2d 851, 853 [1985]).
Once the prima facie showing has been made, the party opposing a motion for summaryjudgment bears the burden of "produc[ing] evidentiary proof in admissible form sufficient torequire a trial of material questions of fact" (Zuckerman, 49 NY2d at 562; see alsoRomano v St. Vincent's Med. Ctr. of Richmond, 178 AD2d 467, 470 [1991]; Tessier vNew York City Health & Hosps. Corp., 177 AD2d 626 [1991]). The substantive lawgoverning a case dictates what facts are material, and "[o]nly disputes over facts that might affectthe outcome of the suit under the governing law will properly preclude the entry of summaryjudgment." (Anderson v Liberty Lobby, Inc., 477 US 242, 248 [1986].)
Here, Langone's motion sought dismissal of the seventh cause of action, which alleged thathe violated N-PCL 717 (a), a codification of the fiduciary duty of corporate officers anddirectors. The elements of the Attorney General's seventh cause of action are (1) the existence ofa fiduciary duty; (2) breach of that duty; (3) and a showing that the breach was a substantialfactor in causing an identifiable loss. The first element of the cause of action is not controverted.N-PCL 717 (a) expressly provides, and Langone concedes, that as a NYSE director and chair ofthe Board's Compensation Committee, he had a fiduciary obligation to discharge his duties, "withthat degree of diligence, care and skill which ordinarily prudent men would exercise undersimilar circumstances in like positions."
The dissent correctly recognizes that the scope of Langone's duties present a question of lawfor the court (532 Madison Ave. Gourmet Foods v Finlandia Ctr., 96 NY2d 280, 288[2001]). In 532 Madison Ave., the Court of Appeals aptly summarized [*10]our role in making this determination, which is to: "fix the dutypoint by balancing factors, including the reasonable expectations of parties and society generally,the proliferation of claims, the likelihood of unlimited or insurer-like liability, disproportionaterisk and reparation allocation, and public policies affecting the expansion or limitation of newchannels of liability. At its foundation, the common law of torts is a means of apportioning risksand allocating the burden of loss. In drawing lines defining actionable duty, courts must thereforealways be mindful of the consequential, and precedential, effects of their decisions" (id.at 288-289 [internal quotation marks and citations omitted]).
As chair of the Compensation Committee, Langone had discretion to recommend 35% ofNYSE executives' variable compensation. With that discretion, Langone had the responsibility,under N-PCL 717 (a), to accurately and completely convey his compensation recommendationsto the Board. Langone also had a duty to make compensation recommendations which were inthe interest of the NYSE, in good faith and with "conscientious fairness, morality and honesty inpurpose" (see Kavanaugh v Kavanaugh Knitting Co., 226 NY 185, 193 [1919]; seealso Pebble Cove Homeowners' Assn. v Shoratlantic Dev. Co., 191 AD2d 544, 545 [1993],lv dismissed 82 NY2d 802 [1993] ["directors of a corporation have the fiduciaryobligation to act on behalf of the corporation in good faith and with reasonable care so as toprotect and advance its interests"]).
The issue of whether Langone breached his duties to the Board and to the Exchange is factbased, and it cannot be determined on the record before us: "New York courts have long heldfiduciaries to a standard 'stricter than the morals of the market place. Not honesty alone, but thepunctilio of an honor the most sensitive, is . . . the standard of behavior.'Meinhard v. Salmon, 249 N.Y. 458, 464, 164 N.E. 545 (1928) (Cardozo, C.J.). Acorporate officer's fiduciary duty includes discharging corporate responsibilities 'in good faithand with conscientious fairness, morality and honesty in purpose' and displaying 'good andprudent management of the corporation.' Alpert v. 28 Williams St. Corp., 63 N.Y.2d 557,569, 483 N.Y.S.2d 667, 473 N.E.2d 19 (1984) (internal quotations omitted)" (Gully vNational Credit Union Admin. Bd., 341 F3d 155, 165 [2d Cir 2003]).
In support of summary judgment, Langone submitted excerpts from deposition testimony,minutes from Compensation Committee and Directors meetings, and other documentaryevidence. These purported to conclusively establish that Langone effectively communicatedGrasso's proposed compensation to the Board in conformity with his duties to his codirectors andthe Exchange. Langone asserted that because CAP was a component of Grasso's 1999employment agreement, a reminder of yearly CAP awards was not a material element of hispresentations to the Board. He alternatively asserted that the Board members were all aware ofCAP, that the participants' yearly CAP award was "an automatic contractual consequence" of theBoard's other compensation decisions, and that Langone nonetheless made adequate disclosuresof recommended CAP awards at the annual February compensation meetings. Langone submittedexcerpts from the depositions of a number of Board members who related that they were fullyinformed as to their compensation decisions under Langone's leadership.
However, in opposition, the Attorney General submitted deposition testimony, minutes fromCompensation Committee and Board meetings, and documentary evidence, which demonstratedthat while he was chair of the Compensation Committee, Langone may not have [*11]effectively communicated Grasso's compensation to the Board. Inaddition, the record raises questions as to whether Langone's executive compensationrecommendations were in the best interest of the NYSE. The Attorney General's submissionsincluded deposition testimony from seven Board members, which indicated that they did notunderstand the impact of their votes in favor of Grasso's compensation awards.
First, it is uncontested that the Department of Human Resources was directed to remove boththe CAP award column and the total compensation column incorporating CAP awardscontemporaneous with Langone's succession to the position as chair of the CompensationCommittee. It is unclear from the extant record who was responsible for the changes to theformat of the compensation worksheets. However, it is also unclear whether Langone adequatelyexplained the newly formatted written materials to the Compensation Committee. Further, someof the Board members testified that they believed Grasso's total compensation for a given yearwas an amount which, the record reveals, was equal to the value displayed in the totalcompensation column in the worksheet for that year (a figure which excluded the CAP awardreferenced in the notations). Whether this was confusion or coincidence is an issue to be exploredat trial.
As to damages, the Attorney General asserts that Grasso received exorbitant, unwarrantedcompensation awards between 2000 and 2002, while Langone was the chair of the CompensationCommittee, at the expense of the NYSE. On this issue, the Attorney General's submissionsincluded the testimony of two Board members who opined that they knew that the NYSEmembers would not be happy if they had been made aware of the total compensation Grasso wasawarded for his work in 2001.
Finally, the relevant inquiry on the present motion is whether, viewing the submissions in thelight most favorable to the Attorney General, Langone has established, as a matter of law, that hisactions did not constitute a breach of his duties as Compensation Committee chair (seeN-PCL 717).
Further, the court's role is limited to identifying whether there are material issues of fact, notto determine them (Sillman, 3 NY2d at 404). Thus, whether any of the directors whotestified that they did not comprehend the implications of their votes either could, or should, haveeither done additional research or asked questions before approving Grasso's compensation is anissue to be explored at trial. The dissent concludes that the notations describing Grasso's CAPaward on the 2000-2002 worksheets adequately apprised the Board that Grasso's actualcompensation was the "total compensation" figure in the chart plus 50% of the recommendedICP and LTIP awards. However, deposition testimony in the record indicates that the disclosuresand the postulated mathematical calculations may not have been as clear to some of the directorsvoting to approve Grasso's compensation as they are to the author of the dissenting opinion.
This record exemplifies the general rule that "comparison of a party's conduct with thefiduciary standard of care is a question of fact" (Cramer v Devon Group, Inc., 774 F Supp176, 185 [SD NY 1991]). For example, the record shows that there were changes in the format ofthe worksheets under Langone's leadership which may have required explanation to theCompensation Committee; there is inconsistent deposition testimony about Langone's oralpresentations to the Compensation Committee and the Board between 2000 and 2002; and thereis deposition testimony indicating that Committee members were confused. Thus, Langone hasnot established as a matter of law that he fulfilled his obligations under N-PCL 717. Accordingly,we affirm the order appealed [*12]denying his motion forsummary judgment. Concur—Mazzarelli, J.P., Saxe and Sweeny, JJ.
Buckley and McGuire, JJ., dissent in a memorandum by McGuire, J., as follows: DefendantKenneth G. Langone appeals from the denial of his motion for summary judgment dismissing thecomplaint as to him. The principal issue on this appeal is a simple one: whether there is a triableissue of fact about whether Langone, who was a member of the Board of Directors (the Board) ofthe New York Stock Exchange (the Exchange) and the chair of its Compensation Committee atthe time of the Board meetings at issue, failed to inform or remind the Board during threemeetings of the Board (in February of 2000, 2001 and 2002) about a contractually-mandatedconsequence of the decision the Board was to make at each of these meetings on the amount ofthe bonus it was awarding to its chair and chief executive officer, Richard A. Grasso. Inconcluding that there is such an issue of fact, the majority relies on: (1) allegedly misleadingworksheets prepared by Exchange staff, and (2) purported contradictory deposition testimony ofcertain directors of the Exchange. However, the worksheets were never presented to the Board,and thus could not possibly have misled the members of the Board, and the deposition testimonythe majority relies upon either expressly supports Langone's position or fails to call it intoquestion. Accordingly, there is no triable issue of fact and Langone is entitled to summaryjudgment for this reason alone. In addition, as discussed below, the majority fails to come togrips with the two other, independent grounds for reversal advanced by Langone.
On March 4, 1999, during a meeting of the Board, the Board met in "executivesession"—i.e., outside the presence of Grasso—to discuss the terms of a newemployment agreement with Grasso. Earlier that day, the Compensation Committee of the Board,which was then chaired by Bernard Marcus, had reviewed the agreement and voted torecommend it to the full Board. One of the key provisions of that agreement, Grasso'sparticipation in the Capital Accumulation Plan (CAP or the CAP Program), is central to thisappeal. And the central concept of CAP, as one of the directors, Gerald Levin, stated when hewas deposed in this litigation, is "not at all" difficult. That simple concept is that each yearGrasso would be entitled under the agreement to an award of deferred compensation (payableupon retirement or termination) in the amount of 50% of his annual "variable compensation," i.e.,the annual bonus awarded to him by the Board. Thus, each year the Board would decide theamount of Grasso's bonus and, by operation of law, the employment agreement would dictate anadditional benefit set at one half of the bonus in the form of the deferred CAP award.
As the minutes of the Board meeting state, Director Marcus addressed the Board regardingthe proposed employment agreement with Grasso, reviewed its terms and informed the Boardthat the Compensation Committee had reviewed the agreement and recommended it to the Board.As was testified to by numerous attendees of the Board meeting, both directors and Exchangestaff, one of the terms that Director Marcus expressly disclosed to the Board was that Grassowould participate in the CAP Program and receive a deferred 50% match of his annual bonus.Significantly, there is no testimony or any other evidence that Director Marcus did not make thisdisclosure concerning a central feature of the proposed agreement. The Board unanimouslyapproved the proposed agreement.
In addition to being uncomplicated, the CAP Program was familiar to the Board. In [*13]September 1997, some 18 months earlier, the CAP Program wascommenced when the Board approved the program, which was then limited to four "GroupExecutive Vice Presidents" and provided for a deferred 25% match of their variablecompensation. As the minutes of the September 1997 Board meeting make clear, and as isundisputed, the CAP Program was explained to the Board by Frank Ashen, the Exchange'svice-president for human resources, and he informed the Board, inter alia, that the fourparticipants would receive a deferred 25% match of their annual variable compensation. Inaddition, the then chair of the Compensation Committee, Ralph Larsen, who at the time was alsothe chair of Johnson & Johnson, told the Board that the Compensation Committee had reviewedthe CAP Program and recommended its adoption. By unanimous vote, the Board approved theprogram.
In June 1999, shortly after Grasso's new employment agreement was approved by the Board,Langone became chair of the Compensation Committee. By then, a three-step process wasalready in place for determining and approving the annual incentive compensation awards for theprior year for senior Exchange executives, including Grasso. First, Ashen would meetindividually with members of the Committee. The materials Ashen brought to these meetingsincluded worksheets he prepared with proposed incentive compensation amounts for seniorexecutives other than Grasso. During the one-on-one meetings, however, Ashen also reviewedthe components of Grasso's possible compensation (the annual salary fixed by the agreement at$1.4 million and his incentive or variable compensation), and his potential CAP award. As Ashentestified, "I would say that he [Grasso] would get 50 percent of his variable compensationwherever it ended up." Second, in early February, the Compensation Committee met to discussand approve the variable (i.e., incentive) compensation of senior executives, including Grasso. Inmost years, Ashen circulated a worksheet to Committee members with the proposed variablecompensation for Grasso after Grasso left the room. Third, after the Committee approvedrecommendations for incentive compensation awards for Grasso and other senior executives, thefull Board would meet later that same day. Assisted by "Speaking Points" prepared by Ashen, theCommittee chair summarized the recommendations and the Board voted on and approved thecompensation awards for the senior executives. When Grasso's compensation was underdiscussion, Grasso would leave the room and the Board would meet in executivesession.[FN1]
At meetings of the Board on February 3, 2000, February 1, 2001 and February 7, 2002 (theFebruary meetings) the Board, in accordance with recommendations of the CompensationCommittee, approved variable compensation awards for Grasso of $6.6 million (for 1999), $13.6million (for 2000) and $16.1 million (for 2001). At the latter two meetings, the Board alsoapproved a "special award" to Grasso of $5 million, a payment that would be excluded from both[*14]his variable compensation (and thus from the CAP Program)and his pension plans. Accordingly, pursuant to the 1999 employment agreement, the Board'sactions at the February meetings resulted in CAP awards to Grasso of $3.3 million, $6.8 millionand $8.05 million.
The crux of the Attorney General's allegations against Langone are set forth as follows inparagraph 208 of the complaint: "Langone breached his fiduciary duty to the NYSE bymisleading the NYSE Board of Directors—which had delegated to him the task ofexplaining the proposed compensation—about the amount of the annual compensation theCompensation Committee was recommending be approved by the Board, through, among otherthings, his failure to disclose that Grasso would be receiving as deferred compensation anadditional 50 percent of his bonus or ICP [Incentive Compensation Plan] award" (emphasisadded).
In moving for summary judgment dismissing the complaint as to him, Langone relied in parton testimony and documentary evidence relating both to the meetings on March 4, 1999 of theCompensation Committee and the Board approving Grasso's employment agreement and to theSeptember 1997 meeting of the Board at which the CAP Program was established. In addition,and in particular, Langone relied on testimony from directors and other attendees at the Februarymeetings of the Board and the Compensation Committee, and on documentary evidence relatingto these meetings. For present purposes, suffice it to say that numerous directors and otherspresent at the February meetings testified that Langone expressly referred to Grasso's CAPaward, and that no director or other person present at the February meetings testified thatLangone failed to disclose the CAP award. In short, the evidence relating to the Februarymeetings provided further support for Langone's position that: (1) the Board was fully aware thatits decisions on Grasso's variable compensation entailed an additional benefit under the CAPProgram of an award of deferred compensation in the amount of 50% of his bonus, and (2) hespecifically informed the Board at each of the February meetings of the additional CAP award.
Another meeting of the Board, on April 5, 2001, is relevant. At the meeting both Ashen andLangone made presentations to the Board regarding a proposal, approved earlier that day by theCompensation Committee, to eliminate one of the bonus programs and expand the CAP programbeyond the six senior executives who were then participating in it. As the Speaking Pointsprepared for Langone by Ashen state:
"The Committee recommends expanding the participation in the Capital Accumulation Plan. . .
"There are presently six participants in the Plan. Dick Grasso, Bob Britz and Cathy Kinneyparticipate at the 50% of variable compensation level."
Ashen and Board members Gerald Levin and Robert Murphy testified that Langone,consistent with the Speaking Points, stated that Grasso was one of the executives participating inthe CAP plan at the 50% level. Ashen and Board members Murphy and Mel Karmazin alsotestified that no Board members stated at the April 2001 meeting that he or she had been unawaretwo months earlier, when Grasso's 2000 variable compensation was approved, that Grasso alsowas getting a CAP award of 50% of his bonus. On Langone's motion for summary judgment,none of this testimony was controverted.[*15]
As discussed below, Supreme Court denied Langone'smotion, ruling that material issues of fact existed that precluded granting the motion and that thetestimony Langone relied on "drips of credibility [issues]." On this appeal, Langone argues thathis motion should have been granted for three reasons: (1) he was under no duty to remind theBoard each year of what the Board unquestionably knew when it approved Grasso's 1999employment agreement, viz., that Grasso would receive an additional benefit under the CAPProgram of an award of deferred compensation in the amount of 50% of his bonus, (2) theundisputed evidence submitted on the motion demonstrated that he did so remind the Board atthe February meetings, and (3) the Attorney General failed to raise an issue of fact concerningcausation, because the Board did understand that Grasso was entitled to an additional CAP awardand thus any alleged failure so to remind the Board could not have been the cause of any injury tothe Exchange. I need not reach the first and third of these arguments as Langone's motion shouldhave been granted on the second of these three grounds.
As Langone correctly maintains, the evidence he presented on his motion for summaryjudgment demonstrates that he did inform the Board of the amount of Grasso's CAP award ateach of the February meetings. The Attorney General, however, failed to meet his burden (seeZuckerman v City of New York, 49 NY2d 557, 562 [1980]) of producing evidentiary proofin admissible form sufficient to establish the existence of a material issue of fact requiring a trialon the question of whether Langone so informed the Board.
The Attorney General and the majority maintain that the worksheets presented to theCompensation Committee members are sufficient to establish a material issue of fact as towhether Langone so informed the Board at the February meetings. To understand why that isincorrect, the worksheets must be discussed in some detail.
The worksheet prepared by Ashen relating to Grasso for the February 3, 2000 meeting of theCompensation Committee contains columns for his 1999 "Base Salary," "ICP" (IncentiveCompensation Plan) and "LTIP" (Long Term Incentive Plan), i.e., the two components of hisbonus or variable compensation, "Total Compensation" and "Total Variable Compensation."Immediately below these columns a notation states as follows: "In 1999 Mr. Grasso will receive50% of his variable compensation in the Capital Accumulation Plan." The worksheets preparedby Ashen relating to Grasso for the other two February meetings of the Compensation Committeecontain columns for his 2000 and 2001 "Base Salary," "ICP" and "LTIP," "VariableComp[ensation]" and "Total Cash Comp[ensation]." On both worksheets, immediately belowthese columns a notation prominently states (in type identical in size to the preceding text) asfollows: "Mr. Grasso will also receive a capital accumulation award equal to 50% of the VariableCompensation."[FN2][*16]
At most, the first worksheet is ambiguous in thatsomeone not knowledgeable about Grasso's participation in the CAP Program pursuant to the1999 employment agreement might understand the notation to mean that the $6.6 million figurein the "Total Variable Compensation" column included a CAP award of $3.3 million. For that tobe the case, however, Grasso's award of deferred compensation under the CAP Program wouldhave to have been set at 100% (rather than 50%) of his variable compensation.[FN3]Moreover, the amount of "Total Variable Compensation" exactly matches the sum of ICP andLTIP (the two components of Grasso's bonus or variable compensation) and the figure set forthas "Total Compensation" equals that amount plus the "Base Salary," thus indicating that CAPmust be an additional category.
Putting aside that the notations in the latter two worksheets unequivocally state that the CAPaward is an additional 50% of the variable compensation, the first worksheet is irrelevant in anyevent. In the first place, even if the worksheet could have been ambiguous to a director on theCompensation Committee, it does not affirmatively misstate the CAP award, let alone negate[*17]or cast doubt on the testimonial and documentary proof boththat the Board correctly understood Grasso's participation in the CAP Program and that Langonespecifically informed the Board at the February 3, 2000 meeting that Grasso would receive a $3.3million CAP award in addition to his bonus of $6.6 million. Perhaps most notable in this regardis the testimony of Linda J. Wachner, a member of the Board. Her uncontradicted testimony wasthat Langone "was careful to articulate each piece, including the CAP award, the 1999compensation will be $8 million, and that Dick will also receive another $3.3 [million]." Inaddition, after making his presentation to the Board, Langone asked the members of theCompensation Committee "if there were any things he left out."[FN4]
The second reason the worksheet is irrelevant is that only Compensation Committeemembers received the worksheets. The full Board never received either the lone and ostensiblyambiguous worksheet or any of the other worksheets prepared by Ashen. This undisputedfact—the majority ignores it—is critical because, as noted above, the operativeallegation of the complaint is that Langone "misle[d] the NYSE Board of Directors. . . through . . . his failure to disclose that Grasso would bereceiving as deferred compensation an additional 50 percent of his bonus" (emphasis added).
Unfortunately, despite their irrelevance, further discussion of the worksheets is necessarygiven that they are so critical to the majority's position. The majority takes pains to note that"[a]fter Langone became chair of the Compensation Committee in June 1999, the values ofrecommended CAP awards were removed from the worksheets distributed to Committeemembers" and that "the values for 'total variable compensation' and 'total compensation'[columns] no longer included the recommended CAP awards." The majority also maintains that"[i]t is unclear from the extant record who was responsible for the changes to the format of thecompensation worksheets."
Why the majority makes these statements and places such reliance on the changes in theworksheets is bewildering. Langone had nothing whatsoever to do with these changes in theworksheets. Not a shred of evidence is to the contrary. In fact, Ashen testified that Langone nevertold him "how to do" or "set . . . up" the worksheets. The only other relevanttestimony on this subject is that of Bernstein. As the majority also notes, Bernstein testified thatAshen told her to remove the CAP column from the worksheets. But Bernstein offered only thehearsay explanation that Ashen told her that Grasso, not Langone, did not want "CAPAccumulation" and "Total Compensation" columns to be displayed. It may be unclear whetherGrasso played a role in the changes to the format of the worksheets, but the record is not unclearwith respect to Langone. Nothing but rank speculation and a blatant fallacy—posthoc, ergo propter hoc—would support linking to Langone the hearsay-basedattribution of these changes to Grasso. [*18]Immediately beforeits claim that the record is unclear with respect to who was responsible for the format changes,the majority stresses that "it is uncontested that the Department of Human Resources wasdirected to [make the changes] contemporaneous with Langone's succession to the position asChairman of the Compensation Committee." The majority may not overtly commit this fallacy,but it plainly intends to suggest that the mere fact that the changes occurred after Langonebecame chair of the Compensation Committee raises an issue of fact regarding who decided tomake the changes.
The majority also states that "Bernstein stated that she told Ashen that she thought theworksheets were clearer with the CAP awards displayed." In the first place, however, merelybecause a statement can be made more clearly, it hardly follows that the statement actually madeis not clear, let alone that it is false or misleadingly incomplete. As noted above, the worksheetsfor the February 2001 and 2002 meetings unambiguously support Langone's position and theworksheet for the February 2000 meeting does not create a material issue of fact. Moreover, themajority fails to mention that Bernstein also testified that she did not "feel uncomfortable" withthe changes in the worksheets "because the CAP was footnoted, so I felt that the information wasthere."
On the subject of the worksheets, finally, the majority also is wrong in asserting that I"conclude[ ] that the notations describing Grasso's CAP award on the 2000-2002 worksheetsadequately apprised the Board that Grasso's actual compensation was the 'total compensation'figure in the chart plus 50% of the recommended ICP and LTIP awards." To the contrary, myposition is that the worksheets do not create a material issue of fact precluding summaryjudgment for at least two reasons. First, and most importantly, the worksheets submitted to theCommittee members do not undercut or create a material issue of fact regarding theevidence submitted by Langone that he specifically informed the full Board at each of theFebruary meetings of the additional CAP award. Second, and as I have noted withoutcontradiction by the majority, the worksheets for the February 2001 and 2002 meetings of theCommittee unambiguously support Langone's position while the worksheet for the February2000 meeting is at most ambiguous.
In its oral decision denying Langone's motion for summary judgment, Supreme Court reliedon the absence of any statement in the minutes of the February meetings of either the Board orthe Compensation Committee evidencing a discussion of Grasso's CAP award. Indeed, SupremeCourt went so far as to opine that "the Attorney General probably makes a prima facie case byjust showing the minutes." In attempting to defend its contention that material issues of factprecluded the granting of Langone's motion, the majority does not rely on the minutes. In statingits view of the facts, however, the majority repeatedly notes that the minutes from each of thethree February meetings of the Compensation Committee do not indicate that Grasso's CAPaward was discussed. On appeal, moreover, the Attorney General continues to rely on theminutes in this regard.
The absence of any reference in the minutes to a discussion of Grasso's CAP award is asunsurprising as it is irrelevant. As Langone correctly observes, it is hornbook law that boardminutes are meant to reflect the board's actions, not all of its discussions (see 5AFletcher, Cyclopedia of Corporations § 2190, at 155-156 [Perm ed] [minutes "shoulddefinitely and positively show what action was taken by the corporation in the mattersthat they purport to memorialize," but the "secretary is not obligated to include everything that issaid in the minutes as long as the secretary accurately transcribes what has taken place"(emphasis [*19]added)]; see also Fletcher, Cyclopedia ofCorporations § 3:27, at 74 [2005 Supp] ["Ordinarily the secretary makes no record of thediscussions that take place in the meeting, the action which is taken following thediscussion being the important thing" (emphasis added)]). The majority offers nothing by way ofresponse to this basic point of corporate law and procedure.
The minutes of the February meetings of the Compensation Committee and the Board doreflect the relevant actions taken, i.e., approval of the incentive compensation awards made toGrasso and other senior executives. By contrast, approval of the CAP award to Grasso or to anyother executive was neither an action that the Committee or the Board did take nor an action thateither was required to take. Rather, in each year the approval of the incentive compensationaward automatically dictated the CAP award (by virtue of the terms of the 1999 employmentagreement in Grasso's case and by virtue of the terms of the CAP Program for the otherexecutives). And as Langone notes, when an action was taken with respect to CAP, the minutesso reflect. Thus, when the CAP award was increased for two executives (from a 25% to a 50%match) in February 2000, the Compensation Committee minutes so reflect, and the April 2001minutes similarly reflect an expansion of the CAP Program to include additional executives.
In short, the absence of any reference in the minutes to a discussion of Grasso's CAP award isdevoid of any significance. It neither undercuts nor creates a material issue of fact regarding thedocumentary proof and uncontradicted testimony of participants at the February meetings of theBoard (and of the Compensation Committee) that Langone did remind the Board anew (and theCommittee) about Grasso's CAP award.[FN5][*20]
Nor is the Attorney General persuasive in urging that amaterial issue of fact on whether Langone misled the Board is raised by a sentence in theSpeaking Points prepared by Ashen for Langone's use at the February 2002 meeting of the Boardin presenting the Compensation Committee's recommendations for Grasso's 2001 compensation.At most, the last sentence of these Speaking Points is ambiguous. The third "bullet-point" notesthat in 2000 Grasso received his contractually fixed salary of $1.4 million and "variablecompensation of $13.6 million and a Special Payment of $5 million that will vest fully inFebruary 2006." The Speaking Points then continue as follows:
" This year, the Committee recommends that Dick receive, in addition to his salary:
"-$16.1 million in variable compensation
"(up $2.5 million from last year)
"-A Special Payment of $5 million that he will receive when he leaves the Exchange that willalso be placed in his SESP account—The Exchange's non-qualified Savings Plan
"-Like the Special Payment we made last year, the $5 million will not be eligible for theCapital Accumulation Plan,[FN6]nor will it be a part of Dick's retirement calculation
" As a result, all in, the Committee recommends that Dick's compensation be raised $2.5million, including a deferred special payment of $5 million."
If one understands the term "compensation" in the last sentence to include the CAP award,the Speaking Points would be to this extent misleading in that the $2.5 million increase in thevariable compensation dictated a $1.25 million increase in the CAP award so that the increase intotal "compensation" would be $3.75 million. On the other hand, if one understands the term"compensation" to exclude the CAP award and include only the compensation the Committeewas recommending for approval (the funds which, in contrast to the CAP award, were payable[*21]immediately) the Speaking Point would not bemisleading.[FN7] Moreover, anyone who understood the basic elements of Grasso's participation in the CAP plan(which is mentioned in the preceding sentence of the Speaking Points) would understand that a$2.5 million increase in "variable compensation" would dictate an increase of $1.25 million inthe CAP award.
The extent to which the last sentence of these Speaking Points is ambiguous, however, neednot be explored any further. First, there is no evidence that Langone read the Speaking Points aswritten to the Board. To the contrary, and no evidence contradicts him, Langone testified withrespect to these and other Speaking Points prepared for him by others, "I don't read [to theBoard]." The Attorney General focuses on one snippet of Langone's testimony and asserts thatLangone "conceded that he made the 'all in' statement from the speaking points." In fact, the lastsentence was read to Langone during his deposition and he was then asked: "Did you tell theBoard that?" Langone's response was: "Words to that effect, I did. I wouldn't have read it."Putting aside that the words "in effect" undermine the fatal concession the Attorney Generaldiscovers in that one response by Langone, a subsequent question by the Assistant AttorneyGeneral focused specifically on whether Langone had said "all in" during his presentation to theBoard. His response was: "Well, first of all, I did not say all in." Of course, a witness's testimonymust be viewed as a whole and one snippet of testimony cannot be taken out of its context andused to support or oppose a motion for summary judgment (see Baillargeon v Kings County Waterproofing Corp., 29 AD3d838, 838-839 [2006]; Mitchell v Route 21 Assoc., 233 AD2d 485, 486 [1996]).Furthermore, as Langone also repeatedly made clear during the questioning on the last sentenceof the Speaking Points, the term "compensation" did not include the CAP award.
During this same line of questioning, Langone gave other relevant testimony. With respect tohis presentation to the Board, Langone repeatedly stated that the amount of Grasso's CAP awardwas "give[n]" or "broke[n] . . . out" "very clearly." In this regard, Langone alsostressed that there was a "full discussion" of the special $5 million payment that, as is reflected inthe penultimate sentence of the very Speaking Points on which the Attorney General relies, wasnot included in the CAP award. Indeed, at other points in the deposition, Langone testified moregenerally that he always gave to the Board the dollar amount of Grasso's CAP award at all of theFebruary meetings.
Contrary to what the Attorney General argues in his brief, Langone's testimony about hispresentation to the Board at the February 2002 meeting was not contradicted by the testimony ofGerald Levin, another director. When Levin was asked at his deposition (more than three yearsafter the meeting) whether Langone had said during the meeting how much the CAP award was,[*22]Levin answered: "Either [Langone] did identify thenumber, or it wasn't necessary because he was identifying the variable compensation againstwhich the 50 percent CAP was taken. And the fact that the $5 million [special award] wasexcluded for CAP purposes made it very clear that it [i.e., the CAP award] was $8,050,000."
By not excluding the possibility that Langone had not belabored the obvious, Levin did notwith this answer, as the Attorney General argues, "thereby confirm[ ] the existence of at least afactual question about whether Langone made the necessary disclosures to his fellow directors."To the contrary, it confirms that at least for Levine all that was necessary was for Langone tostate the amount of the variable compensation. Even assuming without any evidentiary supportthat this simple concept (divide variable compensation by two to determine the CAP award) wasnot obvious to all of the other directors, Levine's answer certainly does not preclude summaryjudgment.[FN8] Like the last sentence of the February 2002 Speaking Points, it merely "g[i]ve[s] rise to nothingmore than a shadowy semblance of an issue" insufficient to defeat summary judgment (Hooke v Speedy Auto Ctr., 4 AD3d110, 112 [2004] [internal quotation marks omitted]).
The majority relies in crucial part on numerous assertions it makes about the excerpts fromthe deposition testimony of members of the Board that were submitted by the Attorney Generalin opposition to the motion. These assertions are erroneous at best. The broadest of them are thefollowing:
"The Attorney General also submitted excerpts from the deposition testimony of a number ofthe Board members, including Deryck Maughan, Charles J. Bocklet, David Komansky, JamesDuryea, William Harrison, Robert Murphy, and H. Carl McCall. These witnesses' testimony,much of which is set forth in the factual recitation, indicated misconceptions as to the magnitudeof the compensation that they had voted to approve for Grasso in February2000—February 2002."
"The Attorney General's submissions included deposition testimony from seven Boardmembers, which indicated that they did not understand the impact of their votes in favor ofGrasso's compensation awards."
These assertions are notable in at least four aspects. First, the majority does not quote orparaphrase even a single example of this supposed testimony. Rather, the majority assertsonly that "much" of it is "set forth" elsewhere in its writing. As discussed below, however, the[*23]majority can eke no support for its position from theexcerpts of the deposition testimony that are referred to elsewhere in its writing. Second, themajority again makes claims only about what is "indicated," not what was testified to, by theseBoard members. Third, the majority makes no claim that when they voted to approve Grasso'sbonus any of these seven Board members had misconceptions about or failed to understand themagnitude or effect of their votes on Grasso's CAP award. Rather, the majority speaks in farmore general terms about alleged misconceptions and failures to understand relating to Grasso's"compensation." Fourth, the majority implicitly and illogically assumes that any suchmisconception or failure to understand by a Board member reflects a disclosure failure byLangone.
The truth is that none of the excerpts contain testimony from any of these directors that at thetime of the votes in favor of Grasso's bonus awards, he or she was not aware of or did notunderstand that Grasso also would receive a CAP award of 50% of the amount of the bonus. Theonly testimony from any of the excerpts (the Attorney General submitted excerpts from thedeposition testimony of 16 members of the Board) that remotely bears on these assertions by themajority was given by David Komansky and Linda Wachner. Mr. Komansky testified thatwithout seeing the relevant documents, he could not remember (not that he did not understand atthe time) what the impact of the compensation awards in 2000 and 2001 was on a pension benefitGrasso received, the "Supplemental Executive Retirement Plan" or "SERP" (not the CAPaward). Ms. Wachner testified only that she did not know how much money was being saved interms of SERP benefits when the determination was made in February 2001 that the special $5million bonus would not count for purposes of Grasso's SERP benefits.[FN9]
The majority's other assertions about supposed deposition testimony or other ostensibleevidence supporting its position also are baseless. The majority writes: "[I]t is also unclearwhether Langone adequately explained the newly formatted written materials to theCompensation Committee. Further, some of the Board members testified that they believedGrasso's total compensation for a given year was an amount which, the record reveals, was equalto the value displayed in the total compensation column in the worksheet for that year (a figurewhich excluded the CAP award referenced in the notations)."[*24]
The first sentence is unsupported and irrelevant. Theworksheets were given to Compensation Committee members by Ashen when he met on aone-on-one basis with the members. Whether Ashen or Langone explained the changes in theformat of the worksheets either before or at the February 2000 meeting of the Committee is of nomoment at all. The complaint alleges a failure by Langone to make adequate disclosure to theBoard, not the Committee, of Grasso's CAP award. Even assuming some unknown member ormembers of the Committee were confused by the format change in the worksheet prepared byAshen for the February 2000 meeting of the Committee, any such confusion would be irrelevantto Langone's alleged liability. The relevant and decisive point is that no testimony ordocumentary evidence creates a material issue of fact that undercuts Langone's evidentiaryshowing that: (1) the Board understood that Grasso would receive an additional benefit under theCAP Program in the form of deferred compensation in the amount of 50% of his bonus, and (2)he specifically informed the Board at each of the Board meetings of the additional CAP awards.
As for the second sentence, the majority fails to identify the witnesses who purportedly gavesuch testimony. Presumably, however, the majority is referring to certain testimony (from eitherDeryck Maughan, Charles Bocklet, Robert Murphy, William Harrison or James Duryea, or all ofthese Board members) to which it refers, directly or indirectly, elsewhere in its writing. Asdiscussed below, none of that testimony comes close to raising a material issue of fact thatprecludes summary judgment.
Before discussing that testimony, other particularly inscrutable references by the majority tothe deposition testimony should be noted. At the end of its writing, as if by way of summary, themajority relies on both "inconsistent deposition testimony about Langone's oral presentations tothe Compensation Committee and the Board between 2000 and 2002" and "deposition testimonyindicating that Committee members were confused." Once again, the majority does not provideany details that would explain what testimony it is relying on or who gave the testimony. Nordoes the majority provide any reason to conclude that the "inconsistent deposition testimony"relates to a material issue of fact concerning Langone's statements to the full Board aboutGrasso's CAP award. The majority is just as uninformative about the "testimony indicating thatCommittee members were confused." What were they confused about, when in point of time theywere confused and why their confusion is relevant all are matters about which the majority iscompletely silent.
That silence reflects the simple reality that no member of the Board testified that when votingon Grasso's bonus he or she was "confused" or did not understand Grasso's CAP award. Therepeated failures by the majority to provide any relevant particulars are telling. None are providedbecause they do not exist.
Putting aside the majority's unsupported generalizations about the deposition testimony, nomaterial issue of fact is raised by any of the deposition excerpts the majority paraphrases orquotes. True, Deryck Maughan testified that the February 2000 worksheet prepared by Ashen"would have been clearer for everybody if there had been a column called 'CAP' and then a realtotal displayed." As already noted, however, any purported ambiguity in the worksheet preparedby Ashen and presented only to Compensation Committee members (who presumably would beeven more knowledgeable about the CAP program than other Board members) cannot sensiblybe equated with a disclosure failure by Langone, let alone such a failure in the presentationLangone made to the full Board. Moreover, Maughan left the Board in June 2000 andunderstandably did not have a "good memory of a CAP conversation" in the February 2000 [*25]meeting.[FN10] Nonetheless, despite his "poor memory of the CAP conversation," he knew that it "took [Grasso'scompensation] to some higher number." The perhaps more decisive point about Maughan'sdeposition is that he never testified that Langone failed to mention Grasso's CAP award in hispresentation to the Board in February 2000.
In an apparent reference to Maughan and Charles Bocklet, another director, the majoritystates that "[t]wo other members of the Compensation Committee gave deposition testimony thatthey thought Grasso had been awarded approximately $8 million in total compensation for1999." Similarly, after stating that Bocklet "testified at his deposition that he believed thatGrasso's total 2000 compensation was $15 million," the majority immediately goes on to writethat "[t]his was the value in the 'total compensation' column of the worksheet, not the $26.8million Grasso was actually awarded."[FN11] In substance, during their depositions these directors were asked by the Assistant AttorneyGeneral to guess, years after the relevant meetings of the Board, what Grasso's total"compensation" was in the years in question. Their incorrect "belief" or recollection is notadmissible proof of anything (other than the understandable fallibility of their memories). As amatter of logic, moreover, from their incorrect "belief" about Grasso's total"compensation"—even putting aside the potential ambiguity (discussed above) in thatterm—it does not follow that any one component of that "compensation" was not disclosedto them. For these reasons, the raw recollections or beliefs of these two directors "g[i]ve[s] rise tonothing more than a shadowy semblance of an issue" (Hooke v Speedy Auto Ctr., 4AD3d at 112). Furthermore, like all the other directors and staff who were present at the Februarymeetings, neither Maughan nor Bocklet testified that Langone did not disclose Grasso's CAPaward.
The majority also writes that "Compensation Committee member R. Murphy, and Boardmembers W. Harrison and J. Duryea all testified at their depositions that they believed they hadvoted to approve 2001 compensation for Grasso in the $20 million range." For the reasons juststated, what these directors "believed" years later does not raise a material issue of fact aboutwhether Langone disclosed Grasso's CAP award. Furthermore, even if these directors had suchan erroneous belief at the time they voted to approve the compensation—none of them sotestified—that error cannot rationally be equated with a failure of Langone to makeadequate disclosure (not, unless, Langone's duty to make adequate disclosure made him aguarantor that all Board members would understand him correctly).[FN12][*26]
Another reason the majority's reliance on these snippetsof deposition testimony is misplaced is that the belief of these directors was correct. The amountof compensation that the Board "voted to approve" ($21.1 million) was in the $20 millionrange. The other components of Grasso's "compensation" (his salary of $1.4 million and his CAPaward of $8.05 million) were not voted on but were, respectively, specified in or dictated by hisemployment agreement.[FN13]
That the majority relies on such an irrelevant snippet from Murphy's testimony is particularlyunfortunate given other testimony from Murphy that is highly relevant both to an understandingof that snippet and the core allegation of the complaint that Langone failed to make adequatedisclosures to the Board about Grasso's CAP award. With specific reference to his testimony thathe believed he had voted in 2002 for compensation for Grasso in 2001 in the "low 20s," Murphytestified he had been focusing on the discretionary components of Grasso's compensation that theCompensation Committee actually was approving, that he knew Grasso had other elements of hiscompensation that were not discretionary and that the CAP award was one of the componentsthat the Committee and the Board did not have to vote on. He also testified that at the February2002 meeting of the Compensation Committee he understood that by approving an incentivepayment to Grasso of $16.1 million, "there would also be a payment into Mr. Grasso's CAP."Indeed, he testified that he understood all the elements of Grasso's compensation for each of theyears he was on the Board and voted to approve it.
The majority ignores other highly relevant testimony from Murphy. Back in 1999, whenGrasso's employment agreement was approved, Murphy understood that the 50% match of theCAP benefit to Grasso was in addition to his bonus. Asked if the 50% match was a difficultconcept to understand and to apply, Murphy answered, "[n]o." Murphy never heard or sawanything that suggested to him that there was any confusion among Board members about whatthe 50% match meant. Asked if Langone ever said anything about CAP at any meeting of theBoard or the Compensation Committee that he viewed as misleading, Murphy answered "[n]o."In short, far from creating a material issue of fact supporting denial of Langone's motion forsummary judgment, Murphy's testimony supported that motion in every relevantrespect.[FN14][*27]
That leaves only the majority's reliance on the excerptfrom the deposition testimony of H. Carl McCall that the Attorney General submitted inopposition to the motion. That excerpt consists of three pages of deposition testimony in whichMcCall testified only that "as a member of the board, we did not receive full information,detailed information about the various components of the compensation" and that it was his"understanding that we did not always receive details about the components, including deferredincome as one of the components." But even putting aside the ambiguous scope of the term"compensation," it hardly follows from the asserted fact that full or detailed information was notreceived, or that members of the Board did not receive even the basic information about Grasso'sCAP award. McCall gave testimony on that very subject which was not included within theexcerpt submitted by the Attorney General. Specifically, McCall testified that there "werediscussions about a CAP program" but that he could not remember the details. Moreover, in theabove-quoted testimony, McCall was referring to a memorandum captioned, "H. Carl McCall,Summary Of Events Regarding NYSE Executive Compensation." In another portion of thememorandum, one that the majority and the Attorney General do not mention, McCall states that"[a]lthough the board knew about and voted on annual salaries and awards, it was notinformed about accumulated benefits and how particular salary actions would lead to pensionon [sic] long-term accumulations" (emphasis added). In short, nothing in McCall'stestimony undercuts Langone's evidence that he disclosed the CAP award. If anything, thetestimony and memorandum actually support Langone's position.
In the course of denying Langone's motion for summary judgment, Supreme Court stated thatthe issue of the sufficiency of the disclosure was a case of "he said, she said." To the contrary,however, just the opposite is true. As noted above, and as the majority does not dispute,numerous directors and others present at the February meetings of the Board testified thatLangone expressly referred to Grasso's CAP award; no director or other person present at themeetings testified that Langone failed to disclose the CAP award. Nor does any documentaryevidence raise a triable issue of fact with respect to whether Langone disclosed Grasso's CAPaward. Thus, as Langone correctly observes, this is a case of "everyone said, no one said."
One last aspect of the majority's writing warrants a response. Although the complaint allegesthat Langone failed to make adequate disclosures regarding Grasso's CAP award, the majoritymints an entirely new theory of liability. Thus, the majority writes, "[i]n addition, the recordraises questions as to whether Langone's executive compensation recommendations were in thebest interest of the NYSE." This unsupported assertion—the majority refers to nothing inthe record—is as irrelevant as it is conclusory and inscrutable. The Attorney General hasnever asserted that Langone is liable on this ground, not in his complaint, not in opposingLangone's motion and not in the brief he submitted to this Court.
One other contention by the Attorney General must be addressed. In opposing Langone'smotion for summary judgment, the Attorney General charged that Langone also had breached hisfiduciary duty to the Exchange by: (1) misleading the Compensation Committee regarding theforfeitable character of Grasso's CAP awards, and (2) failing to disclose Grasso's accumulatedpension benefit, the "Supplemental Executive Retirement Plan" or "SERP." On this appeal,Langone asserts in his main brief that these two allegations stating new theories of liability wereraised by the Attorney General for the first time in the brief he submitted to Supreme Court inopposition to Langone's motion for summary judgment.[*28]
The Attorney General, however, argues that Langonehad "adequate notice" of these two theories of liability by virtue of, in part, paragraph 208 of thecomplaint. Although I have quoted it in full already, paragraph 208 bears repeating here given thespecific argument the Attorney General makes. It provides: "Langone breached his fiduciary dutyto the NYSE by misleading the NYSE Board of Directors—which had delegated to himthe task of explaining the proposed compensation—about the amount of the annualcompensation the Compensation Committee was recommending be approved by the Board,through, among other things, his failure to disclose that Grasso would be receiving as deferredcompensation an additional 50 percent of his bonus or ICP award." According to the AttorneyGeneral, in light of the phrase "among other things" and "numerous other allegations regardingSERP in the complaint, . . . Langone was on notice that his failure to disclose SERPwas included as a fundamental aspect of his breach of duty." With respect to the theory ofliability premised on the charge that Langone misled the Compensation Committee regarding theforfeitable character of the CAP awards, the Attorney General does not similarly point to anyother allegations in the complaint regarding their forfeitable character. Rather, the AttorneyGeneral relies only on the words "among other things" in paragraph 208 and interrogatoryresponses which assertedly "disclose" the charge that Langone had "[c]onceal[ed] the unvestedstatus" of the CAP awards.[FN15]
For numerous reasons, the two theories of liability charging that Langone had misled theCommittee regarding the forfeitable nature of the CAP awards and failed to disclose accumulatedSERP benefits are untimely and thus cannot support denial of Langone's motion for summaryjudgment. First, I agree with the reasoning of the panel of the United States Court of Appeals forthe Federal Circuit in Korody-Colyer Corp. v General Motors Corp. (828 F2d 1572[1987]) in rejecting the plaintiff's relation-back argument premised in part on the words "amongother things" in the complaint. As the panel stated, these words constitute a "catchall andmeaningless phrase" (id. at 1575) and accepting the plaintiff's relation-back argument onthe basis of that phrase "would undermine the notice pleading approach of the Federal Rules ofCivil Procedure" (id. at 1575-1576), and similarly the pleading requirements of the CPLR(see CPLR 3013, 3014). In short, the phrase gives fair notice of nothing.
Second, the phrase is particularly unhelpful to the Attorney General because it refers to [*29]the allegation that Langone misled the Board "about the amount ofthe annual compensation the Compensation Committee was recommending be approved by theBoard." Thus, at most this phrase purports to indicate that Langone misled the Board aboutGrasso's "annual compensation" through means other than the one specifically alleged. The newallegations relate to different subjects, the forfeitability of the deferred CAP awards andthe accumulated retirement benefit.
Third, the "other allegations regarding SERP in the complaint" did not give Langone fairnotice that he was being charged with breaching his fiduciary duty by failing to disclose Grasso'saccumulated SERP benefit. Some of those "other allegations regarding SERP" merely state thefact that SERP was one of the benefits Grasso received (paragraph 37), explain background factsrelating to SERP-type benefits generally, Grasso's contractual entitlement to "SERP-likebenefits," and the total of the SERP benefit for Grasso as of 2002 (paragraphs 46-48), or relate toand are contained within one of the causes of action against Grasso (paragraphs 167-172).Another alleges the nondisclosure—it does not say anything identifying the person orpersons responsible for the nondisclosure—of certain SERP benefits pursuant to Grasso's1995 and 1999 employment agreements, both of which were entered into before Langone becamechair of the Compensation Committee (paragraphs 70, 78-82). This allegation, moreover, appearsto relate to one or more of the six causes of action against Grasso, as it asserts as well that thisallegedly undisclosed benefit "unlawfully enriched Grasso by providing him with an interest-freeloan at a corresponding cost to the NYSE" (paragraphs 70).
Similarly, another of the allegations merely alleges that "information was withheld from theBoard" about the effect the compensation awards would have in increasing Grasso's SERPbenefit and the amount of the accumulated benefit (paragraph 20 [ii], [iii]). Again, nothing isalleged about the identity of the person or persons responsible for withholding thisinformation.[FN16] To the extent the complaint alleges any entity or person to be responsible for not disclosingSERP benefits, paragraph 85 refers to an analysis prepared in February 2001 of "the multipliereffect" that a bonus award could have on Grasso's SERP benefit and to an accompanying"spreadsheet detailing the amount of Grasso's accumulated SERP." It then goes on to allege onlythat "[t]he NYSE did not transmit the . . . analysis, the informationit contained, or the spreadsheet to the members of the Compensation Committee or Board ofDirectors" (emphasis added). Obviously, Langone is not the "NYSE" but was a member ofboth of the entities to which the information was not transmitted. At no point does the complaintallege that Langone ever received either the analysis, the information it contained, or thespreadsheet.[FN17] The apparent point of these allegations, moreover, is stated in paragraphs 88 and 89. That is, theysupport certain of the causes of action against Grasso asserting that the SERP benefit awards areinvalid under N-PCL 715 (f) and are "void and subject to rescission" (paragraph 89).[*30]
Fourth, the Attorney General's reliance on theinterrogatory responses to save the two unpleaded theories of liability is meritless. Langonemoved for summary judgment by notice of motion dated January 23, 2006. The interrogatoryresponses are dated May 12, 2006, nearly five months later, a little over a month before theAttorney General's opposing papers were submitted. By the time Langone received theinterrogatory responses, the massive discovery efforts of the parties were virtually if not actuallycompleted.[FN18]
For these reasons, the two unpleaded theories of liability are untimely and cannot support thedenial of Langone's motion (see Abalolav Flower Hosp., 44 AD3d 522, 522 [1st Dept 2007] ["Plaintiff's physician expert alsoimproperly raised, for the first time in opposition to the summary judgment motion, a new theoryof liability . . . that had not been set forth in the complaint or bills of particulars"];Mathew v Mishra, 41 AD3d1230, 1231 [4th Dept 2007] ["a plaintiff cannot defeat an otherwise proper motion forsummary judgment by asserting a new theory of liability . . . for the first time inopposition to the motion" (internal quotation marks and brackets omitted)]; Pinn v Baker's Variety, 32 AD3d463, 464 [2d Dept 2006] ["(r)aised for the first time in opposition to the motion for summaryjudgment, this theory (of liability) should not have been considered as a basis for defeatingsummary judgment"]).[FN19]
Finally, as noted earlier, given my conclusion that Langone is entitled to summary judgmenton the ground that the Attorney General failed to raise a material issue of fact on the question ofwhether he made disclosure of Grasso's CAP award at the February meetings, I need not reachLangone's arguments that he also is entitled to summary judgment on the grounds that he had noduty to remind the Board about the CAP benefit and the Attorney General failed to raise an issueof fact concerning causation. Because it affirms the denial of Langone's motion, however, themajority must come to terms with Langone's additional arguments.
With respect to the issue of the scope of the duty owed by Langone, none of the cases citedby the majority in its brief discussion of the issue hold that the high standard fiduciaries mustobserve (which, of course, applies as well to the other Board members) required Langone toremind the members of the Board of what they either actually knew about Grasso's CAP benefit(as the submissions on the motion demonstrate) or should have known. After all, each of theother Board members had an independent duty in approving Grasso's compensation awards to acton a reasonably informed basis after making a reasonable inquiry into material matters (seeHanson Trust PLC v ML SCM Acquisition, Inc., 781 F2d 264, 274-275 [2d Cir 1986]). Themajority similarly fails to meet Langone's causality argument. Suffice it to say that it is far fromobvious that, even assuming a majority of the Board did not know of Grasso's participation in theCAP program, the Exchange was injured by a breach of a duty that Langone owed rather than a[*31]breach by the directors who did not know.
Footnote 1: Members of the NYSECompensation Committee were all members of the NYSE Board of Directors.
Footnote 2: Britz's CAP award was 25% ofhis variable compensation.
Footnote 3: Grasso was not eligible for aCAP award until after the execution of the 1999 employment agreement.
Footnote 4: The 1999 CompensationCommittee (as of June 1999) included: K. Langone (chair), C. Bocklet, R. Fuld, M. Greenberg,M. Karmazin, D. Komansky, C. Marshall, D. Maughan, A. Trotman, and L. Wachner.
Footnote 5: The 2000 CompensationCommittee (as of June 2000) included: K. Langone (chair), C. Bocklet, R. Fuld, M. Greenberg,M. Karmazin, D. Komansky, A. Trotman, and L. Wachner.
Footnote 6: The 2001 CompensationCommittee (as of June 2001) included: K. Langone (chair), R. Fuld, M. Greenberg, M.Karmazin, D. Komansky, G. Levin, R. Murphy, and A. Trotman.
Footnote 7: N-PCL 720 (b) authorizes theAttorney General to bring an action against an officer or director of a not-for-profit corporationunder N-PCL 720 (a) (1).
Footnote 8: N-PCL 720 (a) provides that
"[a]n action may be brought against one or more directors or officers of a corporation. . .
"(1) To compel the defendant to account for his official conduct in the following cases:
"(A) The neglect of, or failure to perform, or other violation of his duties in the managementand disposition of corporate assets committed to his charge.
"(B) The acquisition by himself, transfer to others, loss or waste of corporate assets due toany neglect of, or failure to perform, or other violation of his duties."
Footnote 1: The majority makes repeatedreferences to Langone having "discretion to recommend 35% of NYSE executives' variablecompensation." Nothing in the record, however, would support the notion that Langone'sauthority to make a recommendation was tantamount to the authority to make a determination. Infact, the record evidence is to the contrary. Thus, for example, Ashen testified that the membersof the Committee were "[h]igh powered, sophisticated, very savvy executives, not bashful at all."Moreover, "[e]ach meeting [of the Committee] was something of a challenge, because you wouldget questions sometimes out of left field."
Footnote 2: The majority pays only lipservice to this notation in both worksheets, noting only that the worksheets "added the word 'also'to the CAP statement under the chart." With respect to the February 2001 worksheet, the majorityimmediately goes on to make the erroneous assertion that the worksheet "did not reveal: (1) thatGrasso's 2000 recommended CAP award was $6.8 million[;] (2) that a $5 million special awardwas recommended for Grasso for 2000; or (3) that Grasso's total recommended compensation for2000 was $26.8 million." In fact, it was the Committee that first recommended the special $5million bonus that was to be excluded from the CAP Program and thus it is hardly surprising thatthe worksheet prepared by staff before the Committee met did not "reveal" that component ofGrasso's "compensation." The majority's reference to a "recommended CAP award" is misleadingbecause neither the Committee nor the Board was asked or required to approve a"recommend[ation]" on the CAP award. But the more important point is that the worksheetcertainly did "reveal" that Grasso would receive "Total Cash Compensation" of $15 million plusa CAP award of $6.8 million. For anyone who can divide by two, the worksheets for theCompensation Committee meeting in February 2001 and 2002 provided just that figure. After all,both worksheets expressly stated the full value of Grasso's proposed "Variable Compensation"and clearly noted that "Mr. Grasso will also receive a capital accumulation award equal to 50%of the Variable Compensation." Accordingly, the majority also errs when it states that at theFebruary 2003 meeting of the Compensation Committee the members were given worksheets"which included, for the first time under Langone's leadership, a figure for Grasso'sproposed CAP award" (emphasis added).
Footnote 3: The majority ignores thispoint. Moreover, the majority is simply wrong in stating that this worksheet"indicat[ed] that Grasso's total 1999 compensation was $8 million,notwithstanding that his actual total compensation was $11.3 million" (emphasis added). In fact,it "indicat[ed]" no such thing. Nor is the February 2000 worksheet misleading simply because itdoes not include the deferred CAP award within the term "compensation." As noted above, theworksheets for the Compensation Committee meetings in February 2001 and 2002 refer to "TotalCash Comp[ensation]" rather than "Total Compensation." As discussed below, any allegedambiguity in the February 2000 worksheet (to someone not knowledgeable about the CAPProgram) is of no moment in any event.
Footnote 4: Another document preparedby Ashen, Speaking Points for Langone's use in presenting the Committee's recommendations onGrasso's compensation to the Board at the February 2000 meeting, should be noted, especially inlight of the Attorney General's reliance on a sentence from other Speaking Points prepared byAshen for the February 2002 meeting. The February 2000 Speaking Points state that Grasso's"total compensation will be $8,000,000" and that he "will also receive a Capital AccumulationAward of 50% of his variable compensation (or $3,300,000) per his contract to be deferred untilhis retirement."
Footnote 5: The Attorney Generalcontends that Langone's "argu[ment] that CAP awards did not have to be approved by the[Board] . . . is undercut by the minutes of the February 2003 meeting of theCompensation Committee," because those minutes state that the Committee had approved"Incentive Compensation of $7,066,666 and a Capital Accumulation Plan Award of$3,533,333 for Mr. Grasso" (emphasis added). But it is indisputable (i.e., not an"argu[ment]"), that as a result of the 1999 employment agreement Grasso's CAP awards did nothave to be approved by the Board. In fact, a breach of contract would have occurred if the Boardhad awarded an amount less than that prescribed by the CAP formula set forth in Grasso'semployment agreement. Nor does the italicized sentence fragment from the minutes of aCompensation Committee meeting occurring a year after the last of the three Februarymeetings of the Board (the meetings the complaint puts in issue) create a material issue of factabout Langone's prior disclosures to the Board at the February meetings. Moreover, thiscontention about the minutes of the February 2003 meeting of the Committee ignores that theminutes of each of the February meetings (in 2000, 2001 and 2002) reflect other "discussion[s]"regarding Grasso's compensation that were not further described. Finally, as Langone correctlymaintains, both sides can speculate about why this fragment appears in the February 2003minutes of the Compensation Committee. But there is no evidence explaining it (such astestimony from the person who prepared the minutes) and the Attorney General's speculation isnot a proper basis for denying Langone's motion for summary judgment (see Batista v Rivera, 5 AD3d 308[2004]; Warden v Orlandi, 4 AD3d239, 242 [2004]; Leggio v Gearhart, 294 AD2d 543, 544-545 [2002]).
Footnote 6: The majority states that theseSpeaking Points do not "indicate a discussion of Grasso's CAP award." Of course the SpeakingPoints would not indicate any "discussion" by the Board but only the subjects about whichLangone was to speak. As is evident, the subject of Grasso's participation in CAP is "indicate[d]"in the Speaking Points.
Footnote 7: Speaking Points prepared byAshen two years earlier did so exclude the CAP award from the term "total compensation." Thus,Speaking Points he prepared for Langone's use in February 2000 in presenting the CompensationCommittee's recommendations for Grasso's compensation do not include the CAP award as partof the "total 1999 compensation." As noted above, after stating the amount of that "totalcompensation," the Speaking Points specifically state that "Dick will also receive a CapitalAccumulation Award of 50% of his variable compensation (or $3,300,000) per his contract to bedeferred until his retirement."
Footnote 8: Of course, the notion that thesophisticated business leaders and other prominent persons who comprised the Board did notgrasp this elementary concept is risible. The majority nonetheless maintains that "depositiontestimony in the record indicates that the disclosures and the postulated mathematicalcalculations may not have been as clear to some of the directors voting to approve Grasso'scompensation as they are to the author of the dissenting opinion." Suffice it to say that themajority does not and cannot quote or paraphrase the testimony of anyone to support this claimabout what is "indicate[d]" by this unspecified deposition testimony.
Footnote 9: Presumably, the majority doesnot rely on testimony given by Komansky during a prelitigation investigation conducted by theAttorney General at which Langone was neither present nor represented by counsel. Although theAttorney General also submitted an excerpt from this testimony in opposition to Langone'smotion, it is not admissible evidence against Langone (see Bigelow v Acands, Inc., 196AD2d 436, 439 [1993]). In any event, to the extent that excerpt suggests that at the time he wasdeposed during the investigation Komansky erroneously understood from a document shown tohim that the $8 million in "compensation" stated to have been received by Grasso in 1999included the CAP award, that misunderstanding was refuted in the admissible depositiontestimony given by Komansky in this litigation that Langone submitted in reply. Again,moreover, any isolated misunderstanding that a director may have had cannot be equated with adisclosure failure by Langone.
Footnote 10: The record on appeal isunclear as to whether Maughan is referring to the February meeting of the CompensationCommittee or the Board.
Footnote 11: To be clear, Bocklet nevertestified that his belief (more accurately, his guess) that Grasso's total compensation was $15million was derived from or connected to the "total compensation column of the worksheet."Bocklet gave no such testimony. Rather, years after the February 2001 meeting, he simplytestified, without reference to the worksheet or any column in it, that he believed Grasso's totalcompensation for 2000 "[w]as 15 million."
Footnote 12: Nor for that matter, couldthe "confusion" the majority relies upon be equated with such a disclosure failure by Langone.
Footnote 13: Moreover, Harrison testifiedthat he was not in a position to deny that Langone made the CAP disclosures contained in theSpeaking Points. Because the majority emphasizes what certain directors "believed," it bears notethat Duryea answered "I do not" to a question asking him if he "ha[d] any reason to believe thatMr. Langone misled you in any way concerning Mr. Grasso's compensation." Finally, themajority also relies on opinion testimony from Bocklet and Murphy to the effect, as the majorityputs it, that the members of the Exchange "would not be happy" if they knew the CompensationCommittee was approving $30 million in compensation for Grasso in 2001. This opiniontestimony adds some color to the majority's position but is manifestly irrelevant to the issue ofwhat Langone said to the Board about Grasso's CAP award.
Footnote 14: Langone asserts in his brief,and the Attorney General does not contend otherwise, that the Assistant Attorney Generaldeposing Maughan and Bocklet never even asked either witness whether Langone had disclosedGrasso's CAP award.
Footnote 15: In the course of announcingits ruling on the motion for summary judgment, Supreme Court made no mention of either ofthese two theories of liability; it neither ruled on whether the Attorney General properly hadraised them in opposition to the motion nor on whether there was a material issue of fact thatprecluded granting summary judgment to Langone on either or both of these two theories. At alater proceeding that same day, however, Supreme Court ruled that the Attorney General wouldbe permitted to pursue at trial the allegation relating to the SERP benefits. In doing so, SupremeCourt stated that it regarded the Attorney General's interrogatory responses as "the equivalent ofan amplification of a pleading."
Footnote 16: From the immediatelypreceding paragraph, it would appear that the complaint alleges that Langone was one of thepersons from whom the information was withheld. Thus, the complaint asserts that Ashen andone of the Exchange's consultants "have confirmed that the Compensation Committee and Boardwere misled."
Footnote 17: Paragraph 86 makesreference to another report prepared by a different consultant to the Exchange. The complaintalleges neither that Langone withheld it from anyone nor that he ever received it.
Footnote 18: At oral argument onLangone's motion, his attorney stated that when the motion was made in January, 36 witnesseshad been deposed; that the Attorney General wanted more time to respond; and that ultimately 61witnesses were deposed—resulting in 29,000 pages of deposition testimony—andmore than a million pages of documents were produced.
Footnote 19: Presumably, the majorityagrees with this conclusion. After all, the majority has nothing to say about it and does not evenmention the Attorney General's effort to oppose Langone's motion on the basis of unpleadedtheories of liability.