Harrison v. NetCentric Corp.

Kevin Harrison (plaintiff) sued his former employer, NetCentric Corp. (defendant), which he cofounded; its two other founders, Sean and Donal O’Sullivan; its directors; and two venture-capital firms that invested in NetCentric (defendants). Harrison alleged he was terminated to prevent his shares in NetCentric from vesting and asserted claims for wrongful termination, breach of the duty of utmost good faith and loyalty, and breach of the implied covenant of good faith and fair dealing. NetCentric was a Delaware startup with offices in Massachusetts. Harrison was initially NetCentric’s president and later a director and vice-president of sales and marketing. Harrison’s stock and noncompetition agreements contained Massachusetts choice-of-law provisions. The stock agreement said Harrison would purchase nearly three million shares in NetCentric at $0.0001 per share, with 40 percent vesting in one year, followed by 5 percent each quarter until all his shares vested. If Harrison ceased working for NetCentric for any reason, NetCentric could buy back his unvested shares at the original purchase price by notifying Harrison in writing within 60 days. Both agreements specified they did not give Harrison any right to continued employment. Because NetCentric was hiring additional staff who received stock options from the employee stock-option pool, buying back outstanding shares to give to new employees prevented diluting the value of existing shares. When NetCentric terminated Harrison, 45 percent of his shares had vested. NetCentric wrote Harrison a month later exercising its right to buy back his unvested shares, but he refused to return them. Meanwhile, NetCentric hired three new executives, including two who replaced Harrison, and granted them stock options to buy a total of about 1.8 million shares. NetCentric counterclaimed for specific enforcement of the buyback provision. The trial court granted summary judgment awarding specific performance and against Harrison. Harrison appealed except with respect to wrongful termination. The Massachusetts Supreme Judicial Court transferred the case to itself on its own initiative.