Shruhan v. Apple Inc.

Background

Donald K. Shruhan sued his former employer, Apple Inc., alleging six claims: age discrimination under California’s Fair Employment and Housing Act; failure to prevent discrimination; retaliation under that Act; retaliation under the California Labor Code; breach of contract; and violations of California’s Unfair Business Practices Act.

Shruhan alleged that Apple awarded him restricted stock units, or RSUs, in every year except 2019, despite his positive performance reviews. He alleged that Apple’s Fiscal Year 2019 Manager Compensation Guidelines required at least a $7,000 RSU refresh grant and that the guidelines were part of an implied-in-fact employment contract. He also alleged that Apple’s RSU Adjustment Policy required prior approval from Apple’s Compensation Committee and the employee’s signed agreement before RSUs could be adjusted.

Apple previously obtained dismissal of Shruhan’s breach-of-contract claim with permission to amend. In the amended complaint at issue here, Apple again moved to dismiss that claim. Apple did not move to dismiss Shruhan’s contract theory based on the alleged Repatriation Agreement.

The 2019 Guidelines

The court held that Shruhan sufficiently alleged the existence of an implied-in-fact contract based on the 2019 Guidelines. An implied-in-fact contract is an agreement inferred from the parties’ conduct rather than stated entirely in words. The court found that Shruhan identified the specific policy, alleged that it required a minimum $7,000 RSU grant, and provided allegations about his long employment, Apple’s practice of awarding RSUs, and the relationship between performance and RSU awards.

The court rejected Apple’s argument that the alleged implied promise conflicted with the written employment agreement. The court explained that an implied agreement promising future RSU grants did not conflict with a written agreement that was silent about future RSU grants. The court also found that Shruhan adequately alleged breach because he claimed Apple failed to award him any RSUs in 2019 despite the alleged $7,000 minimum requirement.

The court therefore denied Apple’s motion to dismiss the contract claims arising from the 2019 Guidelines.

The RSU Adjustment Policy

The court reached a different conclusion concerning the RSU Adjustment Policy. Shruhan alleged that the policy governed the adjustment or recovery of RSUs and that Apple failed to obtain his signed agreement. But Shruhan also alleged that Apple never awarded him a 2019 RSU grant and that his claim arose from Apple’s failure to award RSUs in 2019, rather than from an adjustment or recovery of previously granted RSUs.

The court concluded that, because Shruhan alleged he received no 2019 RSU grant, he had not plausibly alleged that he was a party to a 2019 RSU grant agreement containing the RSU Adjustment Policy. The court granted Apple’s motion to dismiss the claims arising from that policy. Because Shruhan had already been given an opportunity to correct the deficiency and had failed to do so, the court did not grant further permission to amend.

Disposition

The court granted in part and denied in part Apple’s motion to dismiss. It dismissed with prejudice Shruhan’s claims arising from breach of the RSU Adjustment Policy. The court otherwise denied Apple’s motion.