The opinion of the court was delivered by: Goldberg, J.
In this consolidated action, Plaintiffs, former shareholders of Towers, Perrin, Forster & Crosby, Inc. ("Towers Perrin"), allege that the June 2009 merger with publicly-owned Watson Wyatt Worldwide, Inc. ("Watson Wyatt") violated Towers Perrin's promise to Plaintiffs that it would remain privately held in perpetuity. Plaintiffs have brought claims for breach of contract, breach of trust, breach of fiduciary duty, promissory estoppel and unjust enrichment.*fn1
Presently before the Court is Defendants' motion for summary judgment, which asserts that Plaintiffs have failed to establish an enforceable promise that Towers Perrin remain privately held. For the reasons that follow, we agree with Defendants and find that Plaintiffs' claims fail as a matter of law.
I. Factual and Procedural History
Towers Perrin was an international professional services firm specializing in human resources and financial consulting. (SOF ¶ 2.) The firm was first incorporated in Philadelphia in 1934, and grew to be one of the world's largest business consulting firms. On January 1, 2010, Towers Perrin and Watson Wyatt merged to form Towers Watson & Co. ("Towers Watson"), a publicly-traded consulting company. (Pl. RSOF ¶ 4.1-4.2.)
From its incorporation until its merger with Watson Wyatt, Towers Perrin was owned exclusively by active employees. (SOF ¶ 2.) The record generally reflects that management believed that private ownership was important to the firm's independence and ability to objectively serve its clients. (See, e.g., Q. Smith Tr., Pl.'s Resp. Ex. 122, pp. 2-3.) Outside ownership, on the other hand, carried the potential for conflicts between shareholders' interests and those of the firm's clients. (Id.)
Towers Perrin furthered its private-ownership philosophy by selling stock to select employees, known as "Principals," and requiring those employees to resell their shares back to the firm upon separation.In order to ensure that Towers Perrin would always have sufficient funds to repurchase shares from retiring Principals, stock was bought and sold at book value,*fn2 far less than the price which could have been obtained in the open market.*fn3 (Pl. RSOF ¶¶ 8-9, 29.) When Towers Perrin offered stock, the Principals were permitted to buy that stock at book value in exchange for a promise by the Principals to resell their shares to the firm at book value upon retirement. Plaintiffs' case hinges on the premise that underlying this arrangement was an additional promise by Towers Perrin to remain employee-owned indefinitely.*fn4 (Pl. RSOF ¶ 9.)
For a great deal of Towers Perrin's history, the philosophy that stock be employee-owned was embodied in written stockholder "Trust Agreements" ("Shareholders Agreements"). The first Shareholders Agreement was executed in 1935, and prohibited any transfer of stock without authorization by a majority of shareholders. (1935 Agreement, Ex. 111, ¶ 19.) Even with majority approval, a Principal was permitted only to "assign and transfer to any other person in the employ of the [firm] any portion of his interest." (Id.) The terms of the 1935 Agreement could be amended or terminated "by a written two-thirds vote of all the [Principals]," subject to the rights of retired Principals to receive payment for previously-redeemed shares. (Id., ¶ 22.) The Shareholders Agreements were signed by all Principals, set forth their relative ownership interests in the firm, and were revised whenever a new Principal was sold shares of the firm's stock. (See id., ¶ 16.) There were many subsequent revisions of the Shareholders Agreements, but each one contained the same transfer restrictions and amendment provisions as the 1935 Agreement. (SOF ¶¶ 249-255.)
In the 1970s, ownership of Towers Perrin ceased to be governed by a single written Shareholders Agreement.*fn5 In 1974, the board of directors voted to incorporate the provisions of the amended 1960 Shareholders' Agreement into Article VI of the Towers Perrin Bylaws ("Bylaws"). (Exs. 46-47.) Article VI, which remained substantially unchanged until the merger, provided that "[o]n the effective date of retirement (whether Normal or Other) each Shareholder will sell, and the Corporation will purchase, all stock of the Corporation then owned by such Shareholder, the total purchase price for each share of Common stock to be equal to the book value per share thereof." (Jan. 3, 2006 Bylaws, Ex. 88, Art. VI, § 6.15.) Article VI was "binding on the Corporation, [and] all Shareholders of the Corporation," and stated that its provisions could be amended or terminated only upon the written approval of "the owners of two-thirds of the shares of the Corporation . . . subject to the fulfillment of any obligations of the Corporation and Shareholders to any former Shareholder, or his estate, whose stock has theretofore been sold pursuant to the provisions" of Article VI. (Id., §§ 6.22, 6.27.)
Following the discontinued use of a single Shareholders Agreement, and throughout the time period relevant to Plaintiffs' claims, Towers Perrin offered to sell stock to new and existing Principals through "Stock Offer Letters" (alternately "Letters"). (SOF ¶ 277.) The Stock Offer Letters set forth "the terms on which Towers Perrin" offered to sell stock to Principals.*fn6 (See May 1, 1998 Letter, Ex. 166, p. 1.) The Letters included the number of shares being offered, the price per share, and instructions for accepting the offer and providing payment for the shares. (See, generally, Ex. 166.) Under a section titled "Shareholder Covenants,"the Stock Offer Letters also contained information regarding the rights and obligations of Towers Perrin shareholders. (May 1, 1998 Letter, p. 2.) This sectionsuggested that Principals "read Towers Perrin's Bylaws carefully, particularly Article VI which deals with stock ownership, so you re-familiarize yourself with the rights and responsibilities of Towers Perrin Shareholders." (Id.) Importantly, the letters stressed that,"[b]y purchasing the shares of Towers Perrin stock offered by this memorandum, you agree to be bound by the provisions of the Bylaws (including any future amendments)." (Id.) Neither the Stock Offer Letters nor the Bylaws contained a written promise by Towers Perrin to remain privately owned.
The Stock Offer Letters written after 1989, in a section titled "Information About Towers Perrin," also mentioned the "Principals' Manual," a pamphlet drafted that year that was provided to Principals and updated periodically. TheseLetters informed Principals that the "Manual should contain copies of the firm's Articles of Incorporation and Bylaws as amended and restated." (Apr. 15, 1999 Letter, Ex. 166, p. 1.)The Principals' Manual is not mentioned anywhere else in the Stock Offer Letters, and is noticeably absent from every section covering the terms of stock purchase, and the resale obligations of the Principals.
In addition to containing copies of the Articles of Incorporation and Bylaws, the Principals' Manuals provided a short summary of the Bylaws. The Manuals described Article VI of the Bylaws as covering "share repurchase provisions," "shareholder covenants that apply upon cessation of employment," "the rules for share valuation," and "[s]pecial amendment requirements that apply to the provisions of" Article VI. (1989 Principals' Manual, Ex. 80, p. 23.)
The purpose of the Principals' Manuals was also to provide "basic information about the privileges and responsibilities of a Towers Perrin principal." (Id., p. 3.) The Manuals explained that "Towers Perrin is committed to private ownership," which, according to the Manuals, was "the best vehicle through which our employees can objectively and effectively meet client needs," and offered "key employees the opportunity for ownership in the organization and a heightened sense of involvement." (Id.) The Manuals further described that private ownership continued the "collective commitment (honored by all past generations of principals) to continued employee ownership of the firm." (Id., p. 14.) The Manuals noted that "[t]he founders of the firm and succeeding principal groups have foregone substantial opportunities for financial gain to ensure continued employee ownership by future principals. They believed strongly in this moral compact, and they expected their successors to do so as well." (Id.)
The Principals' Manuals identified "four requirements" crucial for the "moral compact" to endure: (1) Principals "must resist the temptation to enrich themselves through a public sale of their shares at the expense of future generations;" (2) maintenance of "reasonable profit levels, developing a base of net worth that can overcome short-term business variability;" (3) "[s]hare valuation must remain at net book value, so that the firm and future principals can readily redeem the shares of terminating principals;" and (4) "[o]utstanding shares must remain widely distributed among employees of the firm." (Id., p. 14.)
The Principals' Manuals were distributed at Principals' meetings where Towers Perrin's senior management explained the rights and obligations of shareholders. At these meetings, "senior executives . . . communicated to the new Principals that when they bought Towers Perrin shares, the new Principals were agreeing to support the Firm's commitment to continued employee ownership and that by becoming a Principal, you were giving up your right to realize the market value of your shares." (Frank Decl., ¶ 5.) Mariano Leo, Vice President of Finance, described the presentations he gave to new shareholders between 1978 and 1990 as follows:
During these presentations . . . I explicitly reiterated [Towers Perrin's] promise to shareholders that Towers Perrin was committed to private ownership by active employees, and I explained that (1) principals were given the opportunity to purchase shares inexpensively at book value in exchange for participating in the commitment to private ownership and agreeing to sell those shares back to the Firm at book value upon retirement, and (2) that book value was set at a fraction of the value that could have been achieved by public sale of the firm, in order to enable young new principals to buy shares and therefore continue private ownership of the Firm. (Leo Decl. ¶ 5.)*fn7
Ownership of Towers Perrin continued in this fashion, with Principals buying shares at book value and reselling those shares to Towers Perrin at book value upon retirement, until 2005. In April of that year, Defendant Mark Mactas, then Chief Executive Officer of Towers Perrin, announced at a Principals' meeting that a public sale was being considered. (Mactas Dep., Ex. 19, p. 149.) Following this announcement, there was concern that Principals would delay normal retirement in order to participate in the firm's initial public offering (IPO), which would allow them to sell their shares at market value, rather than at book value upon retirement. (Guinn Dep., Ex. 211, p. 216.)
In order to encourage people to continue to retire at a normal age, in 2006 Towers Perrin instituted a Voluntary Separation Program (VSP), whereby eligible Principals who agreed to retire and sell their shares to the firm at book value would receive $200,000, and the right to purchase discounted shares of Towers Perrin stock if an IPO occurred within three years of their retirement. (Pl. RSOF, ¶ 328.) Participating Principals were also required to execute "General Releases" waiving any legal claims against the firm. (Id., ¶ 329; Ex. 329, p. 4.) Although some employees elected to participate in the VSP, there was a precipitous drop in retirement following the announcement that an IPO was being considered. (Ex. 296, p. 16.)
In Spring 2008, Towers Perrin began preliminary discussions with Watson Wyatt regarding a possible merger. (Ex. 258, p. 4.) Those discussions continued through 2008, and into 2009. On June 26, 2009, by unanimous vote of the boards of directors, the two firms agreed to combine in a "merger of equals," whereby the shareholders of each company would have an equal ownership interest in the combined company, Towers Watson. (Nov. 9, 2009 Joint Proxy Statement, Ex. 183.) Under the terms of the merger, Towers Perrin common stock would be converted to Towers Watson stock and listed on the New York Stock Exchange and NASDAQ Global Select Market. (Id.) The merger required amendment of the Towers Perrin ownership restrictions contained in Article VI of the Bylaws, which could only occur upon written approval by two-thirds of the shareholders. (Id., pp. 10-11; 2006 Bylaws, Art. VI, § 6.22.) On December 18, 2009, at a special meeting of Towers Perrin shareholders, the merger was approved with 97% of the shares voting in favor of amending the Bylaws and adopting the June 26, 2009 Merger Agreement. (Ex. 168.)
Between November 11, 2009, and January 15, 2010, Plaintiffs, all former shareholders of Towers Perrin, filed three separate complaints challenging the propriety of the merger.*fn8 The Dugan complaint asserts claims on behalf of former Towers Perrin shareholders who separated from the firm on or after January 1, 1971. (Dugan Compl., No. 09-cv-5099, Doc. No. 1, ¶ 44.) The Pao complaint was filed on behalf of former shareholders who sold their shares specifically in connection with the creation of ExcellerateHRO, a 2005 joint venture between Towers Perrin's Administration Solutions and Electronic Data Systems Corporation. (Pao Compl., No. 10-cv-207, Doc. No. 1.) Finally, the Allen complaint, as amended on August 29, 2011, asserts claims by shareholders who retired in mid- 2005, just prior to Towers Perrin's announcement that it was considering a public sale. (Am. Allen Compl., Doc. No. 90, ¶ 7.)
Each complaint asserts claims against Towers Perrin, and the directors and officers who were in place at the time of the merger. Plaintiffs have alleged claims for breach of contract, express trust and fiduciary duty, as well as for promissory estoppel and unjust enrichment. Plaintiffs assert that by amending the Bylaws, and agreeing to a merger that resulted in the public sale of stock, Towers Perrin and its shareholders breached a legal obligation to Plaintiffs to maintain Towers Perrin as an employee-owned firm. (Pl.'s Opp. Mem., p. 1.) More specifically, Plaintiffs assert that upon becoming Principals, they and Towers Perrin agreed to be bound by the following set of obligations:
(1) New and existing Principals had the right to purchase shares at book value, which was a fraction of their potential market value;
(2) Each Principal agreed to forgo the opportunity to enrich himself, and instead, upon retiring, sell his shares back to Towers Perrin for book value, which was a fraction of the potential market value; and
(3) Towers Perrin and each Principal agreed to keep the firm employee owned. (Pl. Opp. Mem., p. 7.)
It is the third of these obligations which Plaintiffs assert was breached by the merger, and which Defendants challenge in their summary judgment motion. Plaintiffs assert that this promise was communicated orally at Principals' meetings, and in more informal settings, and that this promise is evidenced by statements in the Principals' Manuals. Plaintiffs contend that they relied upon Towers Perrin's commitment to continued private ownership when they agreed to purchase shares, and when they retired and sold their shares back at book value.
Plaintiffs also point out that the shareholders who voted for the merger were equally bound by these obligations, and they were required to sell their shares at book value upon retirement to further continued private ownership. Plaintiffs allege that these shareholders nonetheless voted for the public sale, allowing them to sell at market value shares they had purchased at discounted book value. (Id., p. 5.) Plaintiffs assert that these shareholders were unjustly enriched by this windfall, which was possible only because of the contributions of previous shareholders and their agreement to forego similar opportunities to perpetuate employee ownership.
Defendants respond that there is no evidence of a legally-binding promise by Towers Perrin to keep the firm privately owned in perpetuity. Defendants argue that Article VI of the Bylaws, which does not contain any promise to remain private, and permits amendment by a two-thirds vote of the shareholders, constitutes the complete agreement between Towers Perrin and the Principals regarding the rights and obligations of stock ownership. As such, Defendants assert that Plaintiffs' evidence of oral representations are barred by the parol evidence rule.
Regarding the Principals' Manuals, Defendants posit that this document is not part of the parties' agreement, speaks only to "moral" obligations and was not approved by the board of directors. Defendants urge that neither the oral statements identified by Plaintiffs, nor the statements in the Principals' Manuals, constitute an enforceable promise to remain private. Rather, Defendants assert that these statements merely informed shareholders of the firm's policy of private ownership, which was the basis for selling ...