Private Equity

When does the conjunction “and” actually have the disjunctive meaning of “or”? In terms of express meanings, the correct answer, apparently, is never. But in terms of implied meanings in a particular context: “the two words [may be] reciprocally related in that the implied meaning of one is the same as the expressed meaning of the other.”^[1] In a recent Delaware Court of Chancery decision, Weinberg v. Waystar, Inc., 2022 WL 2452141 (Del. Ch. July 6, 2022), Vice Chancellor Glasscock had occasion to explore this phenomenon in interpreting a “Call Right” in favor of the company in connection with the grant of stock options to an employee.

Waystar involved the interpretation of a Call Right in a stock option grant to a company’s employee that, stripped to its essence, permitted the company to repurchase the equity interests acquired by the employee (a Participant) upon the exercise of the stock option “during the six (6) month period . . . following . . . (x) . . . the Termination of such Participant’s employment . . . for any reason . . . , and (y) a Restrictive Covenant Breach.”

The bolded “and” created the interpretive issue for Vice Chancellor Glasscock. The company took the position that it could exercise the Call Right within six months of the employee’s termination “and also” within six months following a Restrictive Covenant Breach. Thus, the company purported to exercise the Call Right within six months following the employee’s termination of employment, even though there had been no Restrictive Covenant Breach. The employee, on the other hand, argued that “and” means “and,” and, unless there had been both a termination of the employee and a Restrictive Covenant Breach, the Call Right was not triggered. Otherwise, according to the employee, the conjunction “and” had been converted into the disjunctive “or.”

Vice Chancellor Glasscock sided with the company, holding that, “in context” “the use of ‘and’ is permissive and several; it describes a pair of periods when a call right may be exercised.” According to Vice Chancellor Glasscock, who relied in part upon a 1960 ABA Journal article by Professor Reed Dickerson,^[2] the word “and” can be used in either a “joint” (or mandatory) sense (both A and B, but neither alone) or in a “several” (or permissive) sense (either of A and B, or both). As an example of the “several” (or permissive) sense of “and” Vice Chancellor noted that the following sentence “invites, but does not mandate gluttony”: “You can take a doughnut, a Danish and a bagel.” In other words, in context it is clearly understood that the “and” in that sentence allows a choice of any or all of the options but does not require that all three be taken in order to get the benefit of any one or more.

So, in the context of the Call Right, Vice Chancellor Glasscock noted that the provision was permissive in the sense that it granted the company the right to exercise the call “in its sole discretion;” and being permissive the natural reading of the word “and” was in its “several” not “joint” sense. Thus, Vice Chancellor Glasscock held that the Call Right unambiguously (in context) allowed the company to “exercise the Call Right during ‘the six (6) month period’ following [the employee’s] ‘Termination . . . for any reason,’ during ‘the six (6) month period’ following ‘a Restrictive Covenant Breach,’ or both.”

It is important to note, however, that Vice Chancellor Glasscock added another reason why, in context, this particular “and” conveyed its “several” rather than “joint” meaning. And that reason was that there were separate prices for the Call Right depending on whether a “Forfeiture Event” had occurred. Forfeiture Event was defined as a termination of the employee’s employment for cause, or a Restrictive Covenant Breach. If the “and” here was indeed intended to be joint, there would be no need for a separate price for the exercise of the Call Right following a without cause termination because any termination would need to be coupled with a Restrictive Covenant Breach.

Hmm. Not sure what to make of all of this. It seems instinctively clear that Vice Chancellor Glasscock’s interpretation was the correct one. But it seems risky to rely on a judge to correctly discern that the use of the word “and” is intended to carry its permissive (several) meaning (either of A and B, or both), rather than its mandatory (joint) meaning (both A and B, but neither alone). And isn’t the permissive (several) meaning of “and” effectively the same as the “inclusive” (either “A or B, or both”), rather than “exclusive” (either “A or B, but not both”) meaning of “or”?^[3] Indeed, Vice Chancellor Glasscock begins his opinion by noting:

Bad—unclear—contractual drafting is not rare, in my experience. Of course, as a judge, I see a skewed subset. In any event, bad drafting keeps judges and lawyers gainfully employed. Whether the contractual language here is an example is of no moment; the provision in question is clear (and unambiguous) read in context. 

While the court declined to declare the drafting here “bad,” because, in the end, the court found the clause “unambiguous,” it seems clear that with a few extra words the intent could have been crystal clear and hopefully avoided the dispute. Further I sayeth not. I leave to linguistic experts like contract drafting guru, Ken Adams, the specific means of avoiding all of the potential ambiguities the use of “and” or “or,” without other clarifying language, can potentially create.^[4]