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An agreement where the length of performance is based on a company’s sale or issuance of an initial public offering of stock is too indefinite to be enforceable as a contract, a New York judge has ruled. Manhattan Civil Court Judge Paul G. Feinman granted summary judgment to an employer being sued by a former employee for breach of contract. He said that tying contractual obligations to the occurrence of a potential — but not inevitable — event created an agreement that was “not sufficiently detailed or definite” to be binding. An initial public offering or outright sale of a company are too dependent on market forces to be relied upon to set the length of performance, the judge said. In Mandel v. O’Connor, Allison Mandel said she had a written agreement and an oral agreement of employment with Independent Professional Services Inc., which was a new company when she joined the firm. Independent Professional Services and its president, Michael O’Connor, said that Mandel was always an at-will employee, and that she left the company voluntarily. Judge Feinman agreed with the defendants and dismissed Mandel’s lawsuit. The alleged oral agreement was made, Mandel claimed, in October 1997, when she was being courted to join Independent Professional Services. O’Connor allegedly promised that once the company began to realize a monthly profit, Mandel and all other employees who invested in the company would see salary increases at the same rate as the rise in corporate profits, and that Mandel’s salary could reach an upper limit of $150,000. The formula for salary increases was never spelled out, however. O’Connor also allegedly told Mandel that he expected the company to show a substantial profit within six months of inception, and that an initial public offering of stock would take place, or the company sold, within five years. O’Connor also said, according to Mandel, that she could expect to make $150,000 per year, with an even greater amount forthcoming when the IPO or sale occurred. In a key term, O’Connor also allegedly promised Mandel job security for five years, the expected time frame for the IPO or sale. The court also examined a December 1997 letter from O’Connor to Mandel in which, among other things, he promised $50,000 in cash compensation in her first year on the job, and 100,000 stock options that would vest over the first four years of employment. She was also entitled to 175,000 shares of common stock in exchange for an investment of $15,000. Mandel said she accepted employment as the manager of a subsidiary of Independent Professional Services called Prime Meridian Inc., based on O’Connor’s oral and written promises. She began her employment on Jan. 5, 1998, and resigned in April 1999. In her lawsuit, Mandel said she was owed $150,000 per year for five years under the terms of O’Connor’s promises. Mandel also said that O’Connor refused to supply her with corporate profitability reports. According to defendants, the company never became profitable during Mandel’s employment, nor has it been sold or made an initial public offering of stock. Judge Feinman reviewed the courtship process and terms of employment, and said he could not find an enforceable contract. First, the plaintiff testified in her deposition that she did not know what the precise percentage increase would be in her salary as the company attained greater monthly profits, Judge Feinman said. Since such a material term was left without a final, concrete determination, Judge Feinman reasoned, at most the parties had an “agreement to agree,” which is not enforceable. Second, the guarantee of job security does not have a fixed duration and is therefore not enforceable, the court ruled. Mandel said she was guaranteed a job until the day the company was sold or made an initial public offering of stock. But these triggering events are hypothetical, since they may never happen, Judge Feinman pointed out. “When IPS was founded, during one of the years of great economic expansion and speculation by American businesses and the stock market, the investors apparently assumed that their plans would quickly and easily come to fruition,” Judge Feinman wrote. “Evidently that has not happened [and] it is certainly not inevitable.” The court added that the triggering events in O’Connor’s alleged promise to Mandel were “dependent on market forces and the existence of willing buyers and investors which may never materialize.” A contract conditioned on such a time frame does not have terms that are “definite or capable of being determined,” he concluded. Lead defense counsel was Karen F. Lederer, of Jenkens & Gilchrist Parker Chapin. The plaintiff was represented by Neil W. Cohen, of Kaplan Gottbetter & Levenson.

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