Legal Cases

ExecuCite provides actual court decisions to further explain concepts discussed throughout the database. Court decisions are excellent tools for understanding complex factual and legal issues. Each of the Court decisions reported will be listed under their relevant topic headings, some having multiple headings. ExecuCite does not report on every decision, just the most popular ones and those cases which provide detailed analysis of important topics.

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• Federal Judiciary and US Courts - This link provides a map and detailed links to each individual circuit and district courts. Information on reported cases is also available through each court.

Corporate Governance Issues

• In Re Disney Case

• Integrated Health Services v Elkins et al

Executive Compensation Issues · Change In Control Agreements

• Campbell v Potash Corp Of Saskatchewan - Executive brought breach of golden parachute/change in control agreement against successor company have merger. Court awarded judgment for executive.

• Cline v Commissioner Internal Revenue - Former executive challenged IRS ruling on bonus payments received from employment as taxable income. Court held against executive because the bonus payments constituted excess parachute payments subject to taxation under 280G.

• Cvelbar v CBI Illinois Inc - Executive sued former employer over the continuation of his severance benefits. Court held against executive on the basis that his severance agreement was an ERISA plan and company properly characterized severance payment as parachute payment and terminated continuation of benefits.

• Hemingway v US - Estate of former executive involved in merger brought action contesting tax penalty assessed. Court held against estate because payments received constituted parachute payments under 280G.

• In re CRYSTAL APPAREL, INC - Holding:(1) those portions of DIP's postpetition extension letters that provided for increase in executives' salaries and for extension of their employment terms for one year were in the ordinary course of business and, thus, did not require court approval; (2) those portions of DIP's postpetition extension letters that incorporated prepetition "golden parachute" provisions were out of the ordinary course of business and, absent court approval, were unenforceable and could not give rise to expense of administration; (3) new severance agreements entered into by executives upon sale of debtors' assets replaced all former severance provisions, including "golden parachute" clauses; and (4) executives' "golden parachute" payments did not constitute "severance." Debtors' motion for summary judgment granted.

• Square D Company v IRS - Corporate taxpayer petitioned for redetermination of deficiencies arising from its acquisition in reverse subsidiary merger, and related golden parachute payments. The Tax Court, Gale, J., held that: (1) taxpayer was entitled to amortize payments for loan commitment and legal fees related to its merger; (2) lump sum payments to taxpayer's executives were golden parachute payments; and (3) a portion of payments was deductible as reasonable compensation. Decision for taxpayer in part, and for IRS in part.

• Szomjassy v. OHM Corp - Executive brought breach of contract claim for failure to pay sums due upon change in control.

Executive Compensation Issues · Contract Negotiation and Contract Terms · CONTRACT PROVISIONS · Annual Compensation

• Marquardt v. Luxor Corporation - This is a good example of a meritless breach of contract claim based on an offer letter containing compensation terms of annual salary and incentive pay. The Court held the offer letter only created an at-will employment relationship because it lacked a definite statement of duration, regardless of the way compensation was going to paid out.

Executive Compensation Issues · Contract Negotiation and Contract Terms · CONTRACT PROVISIONS · Employment Term

• Steinke v. Sungard Financial Systems Inc - Executive brought breach of contract claim on written employment contract.

Executive Compensation Issues · Contract Negotiation and Contract Terms · CONTRACT PROVISIONS · Severance Pay

• In Re Dornier Aviation - Executives with employment agreements claim severance pay in bankruptcy proceeding. Court held executives were entitled to 90 day severance payments pursuant to bankruptcy code.

Executive Compensation Issues · Contract Negotiation and Contract Terms · CONTRACT PROVISIONS · Termination Of Employment

• Atherton Online Video Network Inc. - Former executive failed to provide notice of "good reason" for terminating the employment agreement, thus executive was not entitled to compensation under agreement. Case went to arbitration and was not reversed in District Court.

• Birdall v. Suit Kote Corp - Employee signed stock option agreement containing various provisions causing a forfeiture if he voluntarily resigns. However, if employee sought retirement under company plan, he would have three months following retirement to exercise options. Court held against both parties on summary judgment. Case provides a good discussion about what it means to voluntarily resign employment.

• Needham v Candie's Inc - Employee brought breach of contract action against former employer. Court held against employee because failed to show notice provision and opportunity to cure were not futile.

• Tredway v. Merck & Co. Inc - Employee entered stock option agreement with employer. Employer then enters into joint 50/50 venture with another company. Employee chose to leave and claim all unvested stock options. Court ruled against employee, holding that under the stock option agreement, he terminated his employment "for any reason."

Executive Compensation Issues · Long Term Pay · Executive Life Insurance

• American National Bank and Trust Co of Rockford Illinois v. US - Suppose a life insurance policy is assigned to the insured's spouse, and later the spouse relinquishes all rights under the policy as a condition of the insured's being allowed to obtain a bigger policy, and the new policy is not assigned. Can the spouse nevertheless be deemed the owner of the new policy, in whole or part, whether as a matter of contractual interpretation or by virtue of the rules relating to constructive trusts or to resulting trusts, and thereby keep the proceeds of the new policy out of the estate of the insured for federal estate tax purposes? Court answered no.

• AON Corporation Accidental Death and Dismemberment Plan v. Hohlweck - The late Thomas Hohlweck was an executive at Aon Corporation. Like hundreds of Aon employees, he lost his life on September 11, 2001 in the World Trade Center attack. Hohlweck was survived by his second wife Pamela, three adult children from his first marriage, his sister Mary Judge, and an illegitimate daughter, Olivia, who was born in 1996. Aon purchased two insurance policies on Hohlweck's behalf. The question raised by this lawsuit in interpleader is who among his survivors is entitled to receive 90% of the benefits payable under those policies. After reviewing the law and the evidence (which is undisputed), I conclude that Robin, Todd and Randolph Hohlweck are entitled to the disputed benefits, as their late father intended.

• Liberty Life Assurance Co. of Boston v. Kennedy - Former widow of Executive won an appeal by former spouse as to proper designation of beneficiary under ERISA executive life insurance plan. Court held that deceased executive's will could serve as valid beneficiary designation under plan.

• Roberton v. Citizens Utilities Co. - Resigning Executive claimed benefits pursuant to company split dollar life insurance plan. Court held for plaintiff in part, that his plan benefits vested 100% after a material change in his job duties, demotion, was sufficient for purposes of plan language.

Executive Compensation Issues · Long Term Pay · Long Term Cash Incentive Plans

• Dabertin v. HCR Manor Care Inc

Executive Compensation Issues · Long Term Pay · Nonqualified Deferred Compensation Plans

• Demery v. Extebank Deferred Compensation Plan - Former bank officers of Extebank brought a civil action for breach of contract and ERISA claim for breach of fiduciary duties. Court held against officers in that deferred compensation plan qualified for exemption from ERISA as a Top Hat Plan and Extebank did not breach any contract.

• Goldstein v. Johnson & Johnson - Executive in unfunded deferred compensation top hat plan brought claim to compel recalculation of pension amount due to commissions. Circuit court affirmed lower court decision to deny claim and held that commission payments were not pensionable under top hat plan was not inherently unreasonable.

• Olander v. Bucyrus-Erie Co. - On Appeal, Court held: supplemental pension plan was an ERISA "top hat" plan subject to to the act; calculation of participant's benefits was subject to arbitrary and capricious standard of review; payout from previous supplemental pension plan was excluded from benefits calculation under terms of supplemental pension plan; payout from executive deferred compensation agreement was excluded from benefits calculation under terms of supplemental pension plan; payment to extinguish participant's rights under employment consulting agreement was excluded from benefits calculation under terms of supplemental pension plan; payment in exchange for options to purchase employer's stock was excluded from benefits calculation under terms of supplemental pension plan; but was not excluded from benefits calculation under terms of supplemental pension plan.

Executive Compensation Issues · Long Term Pay · Preferred Unit Award Plans

• Austin v. RJR Nabisco Inc - Executive filed suit over long term incentive pay provisions contained in the severance agreement. This is a good example and discussion about how severance agreements fall into ERISA and how courts treat subsequent unilateral changes by company/plan administrator.

• Carr v. First Nationwide Bank - Retired bank executives claimed benefits under company performance share plan after company amended plan to deny coverage. Court held for retired executives and enforced the original plan against the company.

• Soule v. Retirement Income Plan For Salaried Employees of Rexham Corporation - This was an action by Plaintiff alleging that the failure to include sums received by Plaintiff from stock options in calculating Plaintiff's retirement benefits was an abuse of discretion and contrary to the provisions of the Retirement Income Plan for Salaried Employees of Rexham Corporation (the "Plan"). Whether tested by the de novo standard or "the abuse of discretion standard," the Court finds for the Plaintiff.

Executive Compensation Issues · Long Term Pay · Restricted Stock

• McCormack v. Computer Sciences Corp. - Former executive officer of target company in merger brought suit to recover severance and restricted stock under target company's restricted stock ownership plan. Court ruled against executive on restricted stock plan benefits pursuant to ERISA, because all of the stock of target company was acquired through merger.

Executive Compensation Issues · Long Term Pay · Stock Options

• Campbell v National Media Corp - Executive Vice President and Corporate Secretary sue employer for fraud in the inducement to purchase stock options during hostile takeover attempt. Court held company violated SEC Act Rule 10b-5 and grant of stock of stock options in employment agreement was considered a purchase of securities.

• Rudinger v Insurance Data Processing Inc - Former COO sued company for failure to pay stock options pursuant to "offer to purchase" contained in employment agreement, pursuant to SEC Act Rule 10b-5. Court held in favor of executive because company committed fraud in the offering.

Executive Compensation Issues · Rule 144 Selling Restricted and Control Securities

• Ackerberg v. Johnson - Court held that seller of unregistered securities was entitled to Rule 144 exemption, because he was neither an "issuer", "underwriter" or "dealer".

• SEC v. Cavanagh - Court upheld district court's judgment that defendants violated Section 5 of the Securities Act of 1933 by selling and offering to sell unregistered securities, not exempted under Rule 144.

• SEC v. Lybrand - Court held in favor of the SEC. "In sum, dendants' transactions fall squarely within the ambit of Section 5 and are not entitled to exemption pursuant to Section 4(1) or Rule 144."

• SEC v. Ralston Purina Co. - In this seminal Supreme Court opinion, the Court established the precedent for complying with the Securities Act of 1933 reguiring the registration of securities and full disclosure to the public regarding private placement of securities.

Executive Compensation Issues · Severance Negotiation

• Barton v Elexsys International Inc - A executive vice president of Elexsys International brought a breach of contract claim against company. Executive claimed that he was entitled to exercise his stock options during severance period of twelve months, due to company's president's alleged oral promise that would allow him to exercise his stock options after the expiration of thirty days after his termination. Court held against executive because severance plan made no mention of stock options and president's alleged oral promise was too vague to be binding upon the company.

• Campbell v. Potash Corp of Saskatchewan - Former executives brought contract action against surviving company after merger, alleging breach of contract for failure to pay severance/change in control payments after merger occurred. Court held in favor of executives. Case is a good example of the effect of a change in control and assumption provisions contained in severance agreements.

• Cline v Commissioner Internal Revenue - Court of Appeals held that executive's bonus constituted component of executive's parachute payment for income tax purposes.

• Cvelbar v. CBI Illinois Inc - Former executive vice president of bank sued successor company, after a merger took place, for severance/change in control payments. The district court held against former executive and the former executive appealed. The Seventh Circuit Court of appeals held that the severance/change in control agreement constituted a one person severance plan governed by the Employee Retirement Income Security Act (ERISA). In establishing an ERISA plan, derived from a severance agreement, the Court held against the former executive because the successor company's counsel had discretion to interpret the plan, thus creating an arbitrary and capricious review. The successor company's action to terminate severance payments was reasonable. The case is an excellent discussion of how severance agreements can be viewed as ERISA benefit plans and not contract disputes. Thus, a severance agreement could rise to an ERISA plan and its required standard of review. The successor company in this case argued the severance agreement was an ERISA plan, thus providing it with discretion to determine the availability of benefits.

• Leberman v. John Blair & Co. - Former Vice President and Chief Financial Officer brought action to enforce his severance payment pursuant to severance and change in control agreements. The district court granted an award in favor of executive and former employer appeal. The Second Circuit Court of Appeals reversed, holding that the severance and change in control agreements were ambiguous as to the specific terms. The holding is a good discussion of contract interpretation, severance and change in control. There is a minor discussion of excise tax and parachute payments (defined by regulations). There is also a discussion of good faith on the part of the executive in calculating the amount owed under the agreement.

• Simon v. Pfizer Inc. - Pfizer argues that the District Court erred in failing to dismiss Simon’s four-count complaint concerning allegedly improper refusal of, and interference with the attainment of, benefits under the Warner- Lambert Company Enhanced Severance Plan (“ESP”) because the ESP mandates that such disputes be decided in an arbitral, not judicial, forum and because Simon failed to exhaust internal administrative remedies. We REVERSE, in part, AFFIRM, in part, and REMAND for the reasons set forth in this opinion.

Executive Employment Law Issues · Age Discrimination

• Reeves v Sanderson Plumbing Products Inc - Employee brought age discrimination case pursuant to the Age Discrimination In Employment Act (ADEA). Court held in favor of employee and stated that so long as employee can deduce sufficient evidence to demonstrate that an employer is dissembling to cover up discriminatory practices, then discrimination is proven. This is a good case that explains the law as it applies to the ADEA.

Executive Employment Law Issues · Breach Of Employment Agreement

• In Re FBI Distribution Corp - Claim for breach of contract in light of bankruptcy proceeding.

• Miller v Tawil Swisse American Products Inc - Potential executive sued to enforce oral contract and subsequent breach of contract and fraud. Court held for employer under New York Law.

• Neiman Marcus Group v David Dworkin - Breach of Executive Employment Agreement and Damages. David Dworkin sued his former employer, Neiman-Marcus, for breach of his employment contract. Dworkin recovered judgment for $790,000 on a jury verdict in his favor. Neiman-Marcus contends that Dworkin resigned and should be estopped to claim wrongful discharge, and that no evidence supports the award of damages. Affirmed.

• O'Shea v. Bidcom Inc - Executive brought breach of contract claim against employer.

Executive Employment Law Issues · Constructive Discharge Termination

• Pennsylvania State Police v. Suders - The United States Supreme Court reviewed a case involving an employee's constructive discharge from employment due to sexual harassment. Decision for employer.

Executive Employment Law Issues · Defamation

• Ives v Guilford Mills Inc - Former executive brought tortious interference with employment contract and slander (defamation) claims against company. Court held in favor of executive on slander claim on defendant's motion to dismiss.

Executive Employment Law Issues · Disability Discrimination

• Murphy v United Parcel Service Inc - Employee sued employer for disability discrimination pursuant to the Americans With Disabilities Act (ADA). The Court held in favor of employer and stated that employee did not meet the threshold requirement that she be substantially limited in a major life activity due to the fact her disability could be mitigated by medication.

• Toyota Motor Manufacturing v. Williams - Employee sued employer pursuant to the Americans With Disabilities Act (ADA). The Court held in favor of employer. This case is important because the Court defined what is meant by the phrase "substantially impaired in a major life activity."

• US Airways Inc. v. Barnett - Employee requested a reasonable accommodation for his disability. The Court held in favor of the employer. This case was important, because the Court further defined what is meant by the phrase "reasonable accommodation" pursuant to the Americans With Disabilities Act (ADA).

Executive Employment Law Issues · Fraud Claims

• Cook County v. U.S. - False Claims Act case against county operated hospital which the U.S. Supreme Court held fraudulently obtained research grants from the federal government.

• Hughes Aircraft Co. v. United States - A False Claims Act by former employee of government subcontractor alleging claims of overbilling for fixed priced contracts.

• Rockwell International Corp. v. United States - False Claims Act (FCA) decision: Holding: 1. Section 3730(e)(4)’s original-source requirement is jurisdictional.Thus, regardless of whether Rockwell conceded Stone’s original-source status, this Court must decide whether Stone meets this jurisdictional requirement. Pp. 8–11. 2. Because Stone does not meet §3730(e)(4)(B)’s requirement that arelator have “direct and independent knowledge of the information onwhich the allegations are based,” he is not an original source.

• US Ex Rel James Stone v. Rockwell International Corp - A False Claims action against governmental contractor Rockwell International Corp, court held against contractor.

• US v. Sakura Global Capital Markets Inc. - Relator plaintiff brough False Claims Act case based on "yield burning scheme" involving tax-free municipal bonds. Second Circuit Court of Appeals (NY) affirmed district court decision denying FCA claim because of the "Tax Bar" to such claims based on the U.S. Tax Code.

Executive Employment Law Issues · Freedom Of Speech

• Garcetti v. Ceballos - This decision changed the way we view freedom of speech in the workplace. Simply, if you express your speech about a matter of public concern and that speech falls within the "exepected" scope of your job duties, your speech is not protected.

Executive Employment Law Issues · Long Term Disability Benefits

• AETNA HEALTH INC. v. DAVILA - U.S. Supreme Court held that ERISA's premption doctrine barred state tort law claim for unlawful denial of medical coverage under employer health insurance plan.

Executive Employment Law Issues · Negligent Misrepresentation

• Miller v. NTN Communications Inc

Executive Employment Law Issues · Non-Competition Agreements

• Anita Walia v. Aetna Inc. - Former employee brought wrongful termination claim against Aetna because she refused to sign employers' non-competition agreement, in violation of state statute. Trial court awarded damages to employee. Aetna appeal and the Court of Appeals affirmed.

• Cherena v. Coors Brewing Co. - Former employee sued employer over unenforceability of non-competition agreement. Court held that employer's non-competition covenant was unenforceable due to lack of geographic scope and lack of consideration.

• First Health Group Corp v National Prescription Administrators - Former employer brought trade secrete misappropriation, breach of contract and tortious interference case against former executive. Court held for former employer, but not injunctive relief because injury to former employer already took place

• Lucente v. IBM - This case is one of the most cited examples of an effective "bad boy" "claw back" case dealing with non-competition covenant. Employee asserted breach of contract on employment agreement. Second Circuit Court of Appeals reversed lower court decision in favor of employee, and remanded case.

• Michael Tatom v. Ameritech Corporation - Former executive brought breach of contract action against employer for withholding his incentive compensation and cancellation of his employment stock options. Court held against executive because the company did not make a promise to pay bonus; company was within its rights to enforce the forfeiture provision upon unlawful competition, contained in his long term incentive compensation agreement; company did not violate covenant of good faith and fair dealing.

Executive Employment Law Issues · Non-Solicitation Agreements

• Datatype International Inc v Puzia - Employer sued former employee to enforce restrictive covenants in employment agreement. Court held for employer and order employee not to solicit or compete for a period of two years.

Executive Employment Law Issues · Pension Benefits

• CENTRAL LABORERS’ PENSION FUND v. HEINZ - ERISA §204(g) prohibits a plan amendment expanding the cate-gories of postretirement employment that triggers suspension of the payment of early retirement benefits already accrued.

Executive Employment Law Issues · Sex And Gender Discrimination

• Burlington Industries Inc v Ellerth - Employee sued employer for sexual harassment discrimination pursuant to Title VII of the 1964 Civil Rights Act (Title VII). The Court held in favor of employee because she could demonstrate vicarious liability and actionable adverse job consequences, although such consequences were non-pecuniary in nature.

• Faragher v. City of Boca Raton - Employee brough sexual harassment discrimination case against employer, pursuant to Title VII of the 1964 Civil Rights Act. The Court held that the employer was vicariously liable for the acts of the discriminating supervisor, because the employer could not demonstrate that it acted with reasonable care to prevent the harassment.

• PENNSYLVANIA STATE POLICE v. SUDERS - U.S. Supreme Court decision on hostile work environment sexual harassment case. Court provided guidance on hostile work environment and constructive discharge standards.