Executive Summary: Key Legal and Evidentiary Issues

• Scope of reasonable notice and severance entitlements for a senior IBM employee terminated without cause, including a 24-month common law notice period.
• Treatment of bonus, RSUs and stock options on termination, and whether equity awards that would vest during the notice period remain recoverable as damages.
• Interpretation and enforceability of IBM’s Equity Award Agreement and Terms and Conditions, particularly termination clauses alleged to extinguish rights to unvested equity.
• Effect of binding appellate authority (Milwid v. IBM) on IBM’s ability to deny equity-related damages, given that the same termination wording had already been held insufficient to bar vesting during the notice period.
• IBM’s litigation conduct in maintaining legally untenable positions until shortly before trial, and whether this warranted substantial indemnity costs.
• Assessment of fair and reasonable costs under s. 131 Courts of Justice Act and Rule 57.01, including the impact of conduct that increased litigation expense and pressured the plaintiff to settle.

Background and employment relationship

Jason Adelman was a long-serving employee of IBM Canada Limited whose employment ended in circumstances that gave rise to a wrongful dismissal action. The dispute focused on what he was owed at common law following termination, particularly the length of reasonable notice and the treatment of his variable compensation and equity awards. As a senior, well-compensated employee, his claim engaged significant sums tied to salary, bonus, restricted stock units (RSUs), and stock options that would have vested had his employment continued through a reasonable notice period.

Termination and claims for wrongful dismissal

Following his dismissal, Mr. Adelman sued IBM Canada Limited in the Ontario Superior Court of Justice for wrongful dismissal. He alleged that IBM failed to provide adequate reasonable notice or pay in lieu and that the company wrongfully cut off his entitlement to bonus, RSUs, and stock options. He sought:

• Common law reasonable notice;
• Bonus for his last year of active employment and during the notice period;
• Damages for RSUs and stock options that would have vested during the notice period; and
• Aggravated, moral or punitive damages, particularly relating to IBM’s cancellation of his equity awards.

IBM initially defended the case on the basis that it had not wrongfully dismissed him and that he was not owed common law notice at all. It also maintained that, under the governing equity plan documents, he had no entitlement to RSUs or stock options vesting after termination.

Policy terms on equity awards and the Milwid precedent

A central evidentiary and legal issue involved documents governing Mr. Adelman’s RSUs and stock options, including IBM’s Equity Award Agreement and its Terms and Conditions. These documents contained termination-related provisions that IBM said extinguished his right to any further vesting once employment ended.

However, these same termination clauses had already been scrutinized in another case, Milwid v. IBM Canada Ltd. In Milwid, the Ontario Superior Court held that IBM’s termination-related provisions did not unambiguously remove an employee’s common law right to damages for RSUs vesting during the reasonable notice period, and that finding was later upheld by the Court of Appeal. The court in Mr. Adelman’s case noted that the RSU and stock option language at issue was identical to the language previously considered in Milwid and that Milwid constituted binding appellate authority directly adverse to IBM’s position. Approximately 40% of Mr. Adelman’s total damages award related to this equity component, underscoring the financial significance of the equity-plan wording and its interpretation.

Trial decision on notice, bonus and equity

In Reasons for Judgment dated January 27, 2026, the trial judge (Parghi J.) ruled in Mr. Adelman’s favour on the core wrongful dismissal issues. The court held that:

• Mr. Adelman was entitled to 24 months of reasonable notice;
• He was owed a bonus payment for his last year of employment; and
• He was entitled to damages in relation to RSUs and stock options that would have vested during the 24-month notice period.

The court rejected IBM’s contention that the plan documents extinguished these equity entitlements, aligning the outcome with the analysis in Milwid. However, not all aspects of the plaintiff’s claim succeeded. The judge declined to award:

• A bonus for the notice period itself (beyond the last active year’s bonus already granted); and
• Aggravated, moral, or punitive damages in relation to IBM’s cancellation of his RSUs and stock options.

After weighing the successful and unsuccessful components, the court fixed Mr. Adelman’s damages at $682,151.18. The judge then invited the parties to attempt to agree on costs, but they were unable to do so, prompting written costs submissions and the separate costs endorsement delivered on May 5–6, 2026.

IBM’s litigation conduct and the road to the costs decision

The costs endorsement scrutinized IBM’s conduct in the litigation, particularly its persistence with positions described by the court as entrenched and legally incorrect. For a significant part of the case, IBM’s formal pleading asserted that Mr. Adelman was not wrongfully dismissed and owed no reasonable notice, even though in its opening submissions at trial IBM for the first time acknowledged he was owed notice and, in closing, proposed a 20–22 month notice period. IBM never amended its pleading to reflect this shift in position, and even when it did amend in October 2025, shortly before trial, it maintained the pleading that Mr. Adelman was not owed notice at all.

On the equity issue, IBM continued, well after the Milwid trial and appeal decisions, to assert that Mr. Adelman was not entitled to damages flowing from cancellation of his RSUs and stock options. At discoveries, plaintiff’s counsel directly raised Milwid and obtained an undertaking response from IBM that there were “no differences” between the award terms applicable to Mr. Adelman and those considered in Milwid. Despite this, IBM maintained its denial of liability on the equity component until very late.

It was only after Mr. Adelman sought to amend his claim to seek punitive damages over the equity cancellation that IBM amended its defence (in October 2025) to concede, conditionally, that if he was entitled to reasonable notice, then under Milwid he would be entitled to damages for the cancelled equity. Even then, IBM continued to plead that he was not entitled to any common law notice. The judge found that this late and conditional concession did little to reduce the costs burden on Mr. Adelman, who had been forced to litigate the equity issue for nearly the entire life of the proceeding.

The court rejected IBM’s argument that Mr. Adelman should have “demanded” IBM comply with Milwid, emphasizing that binding appellate authority is the law, and IBM had a duty to align its litigation position with that law without requiring a protest from the plaintiff. The judge concluded that IBM’s strategy had an “aura of lawlessness” and appeared designed to pressure Mr. Adelman into accepting a settlement for less than his legal entitlement.

Costs ruling and substantial indemnity award

In the May 6, 2026 costs endorsement, the court applied s. 131 of the Courts of Justice Act and Rule 57.01 of the Rules of Civil Procedure. It considered factors such as:

• The clear overall success of Mr. Adelman in the action;
• The significant amounts claimed and ultimately recovered;
• The complexity and importance of the issues, especially the high-value equity component;
• The principle of indemnity;
• Conduct by IBM that unnecessarily increased the length and expense of the proceeding; and
• The reasonable expectations of the unsuccessful party concerning potential costs exposure.

After a “step back” assessment of fairness and reasonableness, the court determined that substantial indemnity costs – a higher-than-usual level of cost recovery – were justified. The key reasons were IBM’s insistence on legally untenable positions in the face of clear appellate authority, the resulting increase in Mr. Adelman’s litigation costs, and the appearance that IBM’s strategy was aimed at leveraging its position to extract a discounted settlement.

The court found that Mr. Adelman’s claimed costs were reasonable in terms of hourly rates, time spent and disbursements. It rejected IBM’s criticism of a production motion that Mr. Adelman had brought and later abandoned, noting that IBM itself sought to rely at trial on the documents that were the subject of that motion, which strongly suggested the motion was not unreasonable.

Accordingly, the court awarded Mr. Adelman substantial indemnity costs of $215,000, inclusive of legal fees, disbursements and HST, payable within 30 days.

Overall outcome and monetary award

Taken together, the January 27, 2026 trial decision and the May 6, 2026 costs endorsement produced a comprehensive outcome in favour of the plaintiff. Mr. Adelman obtained a 24-month reasonable notice period, a bonus for his final year of employment, and substantial damages for RSUs and stock options that would have vested during the notice period, as well as a robust costs award recognizing the impact of IBM’s litigation conduct. IBM succeeded only in resisting a notice-period bonus and aggravated, moral or punitive damages. In total, the court ordered $682,151.18 in damages plus $215,000 in substantial indemnity costs, for a combined monetary outcome of $897,151.18 in favour of the successful party, Mr. Adelman.