dissenting.
This case involves employment contracts between IBP and two former executives of IBP, John L. Schwieger and Dwayne Vande Stouwe. These contracts provided that, in addition to other compensation, the employees would receive options to purchase IBP stock. Stock options were given to Schwieger and Vande Stouwe under their contracts subject to a provision in the contracts known as a “blockage rule”. This provision reads as follows:
The option granted by this Agreement shall not be exercisable while there is outstanding [within the meaning of Inters nal Revenue Code Section 422(c)(2) ] any qualified stock option, which was granted, before the granting of such option, to such individual to purchase stock in his employer corporation or in a corporation which (at the time of the granting of such option) is a parent or subsidiary corporation of the Company, or is a predecessor corporation of any such corporations at a price higher than that provided in this Agreement.
This “blockage rule” provision was enforced by IBP when Schwieger and Vande Stouwe attempted to exercise later issued, lower-priced options without having exercised earlier issued, higher-priced options. Schwieger and Vande Stouwe then filed this suit, with Schwieger alone asking for almost two million dollars in damages.
The district court held that IBP could not be sued for abiding by the terms of its contract. A panel of this court reversed that decision based on the majority’s view that “the terms of the blockage rule served only as an inducement to attract key employees with an investment plan which provided compensation with capital gains treatment.” Schwieger v. Iowa Beef Processors, Inc., 802 F.2d 1032, 1035 (8th Cir.1986). Operating under that premise, the court then looked to Iowa law and found, in Langer v. Iowa Beef Packers, Inc., 420 F.2d 365 (8th Cir.1970), authority for the principle that provisions in stock option contracts can be deleted where the provision “would result in a forfeiture of vested rights.” Schwieger, supra, 802 F.2d at 1035.
I disagree first with the majority’s interpretation of the blockage rule. In my view, the blockage rule does more than “attract key employees” by giving them *1221compensation with capital gains treatment. It operates also
to advance the interests of the Company by providing officers and other key employees having substantial responsibility for the direction and management of the Company with an additional incentive and to encourage stock ownership, to increase their proprietary interest in the success of the Company, and to encourage them to remain in its employ.
Id. at 368 n. 6 (quoting from IBP’s stock option plan). Of these stated purposes, the blockage rule most plainly advances the employer’s goal of giving employees a true proprietary interest in the success of the company. In fact, that is the objective which Congress was attempting to further when it passed the blockage rule and the other statutory requirements of I.R.C. § 422. See, e.g., Rev.Rul. 73-26, 1973-1 C.B. 204, 205 (by passage of I.R.C. § 422, “Congress intended an optionee to occupy a position similar to a shareholder”). Thus, contrary to the majority’s view, the blockage rule is not solely for the employee’s benefit, as it also advances the employer’s interest in giving employees a proprietary interest in the company and thereby motivates employees to work harder to make the company a success.
I also disagree with the majority’s application of Langer to this case. In Langer, an employee was faced with losing his IBP stock option rights because IBP had unilaterally assigned his employment contract to Oscar Mayer & Company. At that time, IBP’s stock option agreement provided that the options terminated where the employee’s employment ceased “for any reason, whether voluntary, [or] involuntary”. This court ruled that this provision did not apply, stating: “As we interpret * * * [the provision], it does not mean that termination of the option could result from the sale of the optionee’s employment contract without prior notice thereof to the optionee.” Langer, supra, 420 F.2d at 369.
In the case at bar, the majority does not even pretend to interpret the blockage rule provision. Instead, the majority writes the provision out of the contract entirely. That decision is certainly not supported by Langer.
The majority also based its holding on a rule that a party may waive a condition precedent where the condition exists solely for his own benefit and where the other party has no interest in the performance of the condition. This rule has no application to the case at bar because, as discussed above, the blockage rule is not for the sole benefit of the employee. The blockage rule is an important part of the stock option plan which, among other things, advances the employer’s interest in giving its employees a proprietary interest in the company. Moreover, it is certainly odd to say that IBP has no interest in the blockage rule where its nonperformance may ultimately cost the company almost two million dollars as to just one employee.
Because the majority’s panel decision (1) is clearly wrong, (2) if permitted to stand, will serve as precedent for the proposition that courts may freely delete contractual provisions whenever the court dislikes a particular provision, and (3) may have adverse contractual and tax effects far beyond this case, I respectfully dissent from the denial of the petition for rehearing.