As someone should have said, The price of freedom from ambiguity is eternal vigilance.
Today’s lesson comes to you thanks to the eternally vigilant Glenn D. West, the what-to-say yin to my how-to-say-it yang. He alerted me to the recent opinion of the Delaware Court of Chancery in Batty v. UCAR International, Inc. (PDF here).
Here’s the relevant bit (footnotes omitted):
Defendants argue that “accrued Incentive Compensation” is limited to cash compensation and thus excludes equity awards. Defendants rely on Section 1(f), which defines “Incentive Compensation” as “any compensation, variable compensation, bonus, benefit or award paid or payable in cash under an Incentive Compensation Plan.” According to Defendants, Section 1(f)’s phrase “paid or payable in cash” modifies all preceding nouns (“compensation, variable compensation, bonus, benefit or award”). In the alternative, Defendants argue that they prevail even if “paid or payable in cash” modifies only the nearest noun, “awards,” because equity awards are “awards” and thus subject to the cash limitation.15 To bolster their interpretation, Defendants point to the definition of “Incentive Compensation Award,” which too is limited to “cash payment or payments awarded to [Batty] under any Incentive Compensation Plan.”
Defendants’ interpretation of Section 2(a)(ii) is reasonable, but it is not the only reasonable interpretation. Just as conceivable, the term “Incentive Compensation” could mean certain items that may be paid in cash or equity (“compensation, variable compensation, bonus, benefit”) as well as one item that is only paid or payable in cash (“award”). Under this interpretation, regardless of whether the equity awards are “paid or payable in cash,” they are included in Batty’s accrued Incentive Compensation.
Yes, friends, what we have here is yet another instance of syntactic ambiguity. You want other examples? Search for the word “syntactic” on this blog, or check out the chapter on the subject in MSCD.
Syntactic ambiguity isn’t the most complex form of ambiguity, but it seems to result in more litigation than other kinds of ambiguity. Copy-and-paste monkeys aren’t wise to the ways of ambiguity. With your indulgence, I’m not going to suggest how I would have redrafted the language at issue to eliminate the ambiguity. That would involve a bigger project than just tinkering with the few words quoted in the opinion.
3 thoughts on “Another Steaming Helping of Syntactic Ambiguity”
Until she knows which interpretation applies, a drafter ‘fixing’ an ambiguous provision must draft two new provisions, one embodying each interpretation.
In the Batty case, here are two fixes, cribbed from the useful court opinion:
1/ Accrued Incentive Compensation is limited to cash compensation and excludes equity awards.
2/ Accrued Incentive Compensation is not limited to cash compensation and includes equity awards.
Once the decider picks one, the drafter sticks it into the contract and the ambiguity joins the choir invisible. How is that a big project? –Wright
Now multiply by the number of sentences in the document!
One way to fix the ambiguity would be to add the words in italics:
“Incentive Compensation” means any compensation, variable compensation, bonus, benefit or award, all of which is paid or payable in cash under an Incentive Compensation Plan.”