By Anne Sherry, J.D.
Waystar, Inc. had the contractual right to repurchase partnership units from a recently terminated executive, the Delaware Supreme Court held. The contract dispute turned on an interpretation of the word “and,” a question that has engendered a split among circuits interpreting a federal statute. In this case, however, “and” was unambiguously meant in the several, rather than joint, sense (Weinberg v. Waystar, Inc., March 16, 2023, Valihura, K.).
Tracey Weinberg was terminated from her position as Chief Marketing Officer of Waystar, Inc. in August 2021. In November, she timely exercised her vested options, which converted to units in a related limited partnership. Five days after Weinberg exercised the options, Waystar exercised a call right contained in the options agreement. This right allowed Waystar to repurchase the LP units “during the six (6) month period following (x) the (i) [t]ermination of [Weinberg’s] employment with the Service Recipient for any reason … and (y) a Restrictive Covenant Breach.” Weinberg sued, arguing that the “and” meant Waystar could not repurchase the units in the absence of a restrictive covenant breach.
Ultimately agreeing with the Court of Chancery that Waystar did have that right, the Supreme Court observed that the interpretation of the word “and” is a deceptively thorny issue. “And” usually has a conjunctive meaning, but courts will interpret it in the disjunctive sense when required by the context. As a distinct issue, “and” can be used in the joint or the several sense. Interpretation of a provision in the federal First Step Act has led to a circuit split around the function of the word “and.”
The chancery court’s interpretation of the “and” in the option agreements as several and distributive was the only interpretation that gave effect to all of the option agreements’ provisions. The agreements provided that upon a forfeiture event—including a restrictive covenant breach—vested options would immediately expire. This means that an award recipient could never exercise options after the date of a restrictive covenant breach. But the agreements also limited the call right’s exercise window to the six months following Weinberg’s termination “or, if later, the six (6) month anniversary of the date of the exercise of the options.” Weinberg’s interpretation of the call right would give no meaning to this “if later” clause.
Furthermore, Weinberg’s reading would render a two-tiered repurchase price provision surplusage. Two of the three option agreements set two different exercise prices for the call right, depending on whether a “forfeiture event”—again, including a restrictive covenant breach—has occurred. This two-tiered structure demonstrated that the drafters contemplated that the call right could be triggered absent a restrictive covenant breach. Although one of the option agreements, the one governing 83 percent of Weinberg’s options, did not have the two-tier provision, the court rejected the argument that it should be interpreted any differently from the other agreements entered into nearly contemporaneously among the same parties.
The “several” reading of “and” is the only reasonable one, suggested by the fact that the call right is a permissive one. The court likened this to a meeting host telling the parties permissively, “You may have a yogurt, a muffin, and a bagel,” which would be understood to mean that the parties could take anywhere between zero and three items. In contrast, “You must take a yogurt, a muffin, and a bagel” would require the parties to take all three items, and “You may take a yogurt, a muffin, or a bagel” could be seen as limiting them to a single item of the three. A reasonable third party would expect that Waystar had a broad right to repurchase the LP units, and the joint reading of “and” would produce an illogical result by preventing a company from exercising a call right even if the employee was terminated for cause. The “several” reading aligned with the plan’s scheme and purpose to retain key personnel.
The case is No. 274, 2022.