Campbell v. Potash Corp. of Saskatchewan
United States Court of Appeals for the Sixth Circuit
238 F.3d 792 (2001)
In September 1996, Arcadian Corporation entered an agreement (merger agreement) with Potash Corporation of Saskatchewan, Inc. (PCS) (defendant) to merge Arcadian into PCS Nitrogen, a wholly owned subsidiary of PCS. Shortly thereafter, Douglas Campbell, Peter Kesser, and Alfred Williams (plaintiffs), senior executives of Arcadian, entered employment contracts with Arcadian entitling them to golden-parachute payments of three times their base salaries and three times their average bonus, profit sharing, and other incentive payments received during the two preceding years if, following the merger, their employment was involuntarily terminated or their positions were materially changed and they quit their jobs. The merger agreement and the employment contracts were approved by Arcadian’s board of directors on September 2, 1996, before those documents were signed. Although the terms of the employment contracts were agreed upon by PCS and Arcadian, after the contracts were signed but before the merger closed, a dispute arose between PCS and Arcadian over the types of compensation that constituted incentive payments for purposes of the golden-parachute provision. The employment contracts provided that if Arcadian was acquired without its successor expressly assuming Arcadian’s obligations under the employment contracts, the golden-parachute payments would automatically be triggered. On March 4, 1997, two days before the merger was scheduled to close, Arcadian demanded that PCS and PCS Nitrogen sign agreements (assumption agreements) to expressly assume Arcadian’s obligations under the employment contracts. After initially refusing, PCS and PCS Nitrogen signed the assumption agreements, and the merger closed on March 6, 1997. Prior to the closing, Campbell and Williams were offered positions with PCS Nitrogen that differed materially from their jobs with Arcadian, which they declined to accept. Kesser’s employment was involuntarily terminated at the time of the closing. Although PCS acknowledged that Campbell, Williams, and Kesser were entitled to golden-parachute payments under their employment contracts, PCS refused to pay even the undisputed portion of those payments within the time frame specified in the contracts. Campbell, Williams, and Kesser then sued PCS for breach of contract. PCS contended it should not be liable for the golden-parachute payments because there was insufficient consideration for the assumption agreements and because the payments violated public policy, arguing that an agreement promising to make the payments was void as a matter of law and that the payments served no legitimate corporate purpose. The district court disagreed and awarded damages to Campbell, Kesser, and Williams. PCS appealed.
Rule of Law
Holding and Reasoning (Boggs, J.)
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