James Petter (Claimant Appellant in 2015/1646 Respondent in 2015/1759) v (1) EMC Europe Ltd (First Defendant) (2) EMC Corporation (Second Defendant Respondent in 2015/1646 Appellant in 2015/1759)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moore-Bick,Lord Justice Vos,Lord Justice Sales |
| Judgment Date | 27 July 2015 |
| Neutral Citation | [2015] EWCA Civ 828 |
| Docket Number | Case No: A2/2015/1646 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 July 2015 |
[2015] EWCA Civ 828
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr. Justice Cooke
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Moore-Bick
Vice-President of the Court of Appeal, Civil Division
Lord Justice Vos
and
Lord Justice Sales
Case No: A2/2015/1646
Mr. Paul Goulding Q.C. and Mr. Andrew Scott (instructed by Allen & Overy LLP) for Mr. Petter
Mr. Selwyn Bloch Q.C. and Mr. Sam Neaman (instructed by DAC Beachcroft LLP) for EMC Corporation
Hearing dates : 14 th & 15 th July 2015
Background
There are two appeals before the court which arise out of interlocutory skirmishing between the parties to the substantive proceedings. The claimant in those proceedings is Mr. James Petter who until recently was employed by EMC Europe Ltd ("EMC Europe"), an English company whose ultimate parent is a Massachusetts company, EMC Corporation ("EMC"). EMC's business is the provision worldwide of data storage hardware and services.
From 1 st January 2009 Mr. Petter was employed by EMC Europe as Director, Global Accounts — EMEA. As such he was regarded as an important employee who could be expected to make a significant contribution to the success of EMC's overall business. In order to reward and encourage such employees EMC operated a share distribution scheme known as a "Stock Plan", under which awards of common stock of EMC were made available to them on a deferred basis. The value of such awards could be substantial and in the years immediately preceding his departure from EMC Europe they formed a significant part of Mr. Petter's total remuneration.
In early 2015 Mr. Petter decided to leave EMC Europe and take up employment with a local subsidiary of another American company, Pure Storage Inc., a competitor of EMC. On 15 th January 2015 he gave notice to EMC Europe of his intention to resign and began his job with the new company on 16 th February 2015. As a result, on 27 th February 2015 EMC started proceedings against Mr. Petter in Massachusetts seeking declarations that it was entitled under the terms of the Stock Plan and related agreements to rescind the most recent awards of stock to him. On 13 th March 2015 Mr. Petter responded by starting proceedings against EMC and EMC Europe in the High Court seeking declarations that the restrictive covenants in his contract of employment were unenforceable as being an unreasonable restraint on trade, that the provisions of the Stock Plan under which EMC purported to rescind awards of stock were unenforceable and that he had not acted in breach of his contract of employment. He also sought an interim injunction prohibiting EMC from pursuing the proceedings against him in Massachusetts.
The claim form in the High Court action was served on EMC abroad without the permission of the court pursuant to CPR rule 6.33(2)(b)(iii). Following service of the proceedings, EMC challenged the jurisdiction of the English court on the grounds that the contracts between itself and Mr. Petter under which stock had been awarded to him contained an express choice of Massachusetts law and an exclusive jurisdiction agreement in favour of the courts of Massachusetts.
The scene was thus set for the two competing applications which were heard by Cooke J. over two days in May this year. For reasons I shall explain shortly, both applications turned to a considerable degree on the effect of Section 5 of Regulation (EU) No. 1215/2012 on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters (recast), known for convenience as ' Brussels I (Recast)', as interpreted and applied by this court in Samengo-Turner v J & H Marsh and McLennan (Services) Ltd [2007] EWCA Civ 723, [2008] I.C.R. 18. The judge held that by virtue of Articles 22, 23(1) and 25(4) of the Regulation as interpreted in Samengo-Turner the Massachusetts exclusive jurisdiction clause was of no effect and that the court had jurisdiction over EMC. However, he declined to grant an anti-suit injunction to prevent EMC from pursuing the proceedings in Massachusetts. EMC appeals against the judge's decision on jurisdiction; Mr. Petter appeals against his refusal to grant an anti-suit injunction.
The contracts
Before going any further it is necessary to examine a little more closely the terms of the various contracts between Mr. Petter and the EMC companies. They are described in paragraphs 11–13 of the judgment below, which I need not repeat in full. The following are the salient features for the purposes of the present appeal:
(i) Mr. Petter's contract of employment was with EMC Europe. It incorporated the company's standard Statement of Terms and Conditions and its Employee Handbook. The Terms and Conditions included a restrictive covenant in the form of a non-competition clause, by which Mr. Petter agreed not to market or sell products or services which competed with those being offered by EMC Europe for a period of 12 months. The Handbook contained a Key Employee Agreement which formed part of the terms of his employment.
(ii) The Key Employee Agreement contained an undertaking in favour of EMC and its subsidiaries not to compete with them for a period of 12 months following the termination of his employment nor during that period to solicit any of EMC's employees to terminate their employment.
(iii) The Stock Plan established a scheme under which EMC as the parent company of the group awarded stock to employees who were thought to be in a position to make a significant contribution to the success of EMC itself and its subsidiaries. Awards were made by the acceptance by an employee in writing of an offer contained in a document known as a Restricted Stock Unit Agreement ("RSU agreement"). The Stock Plan contained provisions governing the exercise, vesting and termination of awards. Clause 6.7 provided for the cancellation and rescission of awards if a recipient engaged in "Detrimental Activity", defined as including a failure to comply with the terms of the Key Employee Agreement. Clause 13 contained an express choice of Massachusetts law and an exclusive submission to the jurisdiction of the Massachusetts courts.
(iv) Each offer of an award was contained in a separate RSU agreement which the employee had to accept in order to become entitled to receive it. It was common ground, at least for the purposes of the appeal, that until he accepted the offer contained in an RSU agreement an employee had no legal right to receive a stock award, whatever his expectations might have been. By signing and accepting the RSU agreement the employee formally acknowledged that he thereby became bound by its terms, which included the following:
"I … hereby:
• understand that neither the Plan nor this Restricted Stock Unit Agreement gives me any right to any Service Relationship with the Company or any Company subsidiary, as the case may be, and that the Award is not part of my normal or expected compensation; and
• understand and acknowledge that the grant of the Award is expressly conditioned on my adherence to, and agreement to the terms of, the Key Employment Agreement with the Company."
The Regulation
Section 5 of the Regulation contains provisions governing the exercise of jurisdiction in relation to individual contracts of employment. It re-enacts, with some amendments, provisions which appeared in Section 5 of the original Regulation, Council Regulation (EC) No 44/2001, but for all practical purposes the provisions are the same. The following are of particular importance in relation to this appeal:
"Article 21
1. An employer domiciled in a Member State may be sued:
…
(b) in another Member State:
(i) in the courts for the place where or from where the employee habitually carries out his work or in the courts for the last place where he did so …
…
2. An employer not domiciled in a Member State may be sued in a court of a Member State in accordance with point (b) of paragraph 1.
Article 22
1. An employer may bring proceedings only in the courts of the Member State in which the employee is domiciled.
Article 23
The provisions of this Section may be departed from only by an agreement:
(1) which is entered into after the dispute has arisen;
Section 7
Prorogation of jurisdiction
Article 25
…
4. Agreements … conferring jurisdiction shall have no legal force if they are contrary to Articles … 23 …"
Questions very similar (Mr. Goulding Q.C. would say identical) to those which arise in this case were considered by this court in Samengo-Turner. The claimants in that case were employed by an English subsidiary of the Marsh McLennan group, of which the third defendant, Marsh & McLennan Companies Inc. ("MMC") was the holding company. MMC operated an incentive plan under which awards of cash and stock in MMC were made to attract, retain and motivate senior employees of the various companies within the group. Each claimant signed a bonus agreement with the second defendant, Guy Carpenter & Co LLC ("GC"), another company in the group, under the auspices of the plan. The agreements contained an express choice of New York law and a New York exclusive jurisdiction clause and also provided for cancellation and rescission if the recipient engaged in detrimental activity, which included attempting to recruit or solicit any employee of the company to work for a...
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