Exxon Mobil Corp. v. Drennen

452 S.W.3d 319 (2014)

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Exxon Mobil Corp. v. Drennen

Texas Supreme Court
452 S.W.3d 319 (2014)

Facts

William Drennen, III (plaintiff) worked for Exxon Mobil Corporation (Exxon) (defendant) for over 30 years, primarily in Houston but also in New York for 10 years. Exxon was incorporated in New Jersey and headquartered in Texas. Drennen received deferred delivery of Exxon stock, traded on the New York Stock Exchange, as incentive compensation. The incentive-compensation contract permitted Exxon to terminate the stock’s delivery if Drennen engaged in detrimental activity, including accepting duties with an entity that competed with Exxon. The contract, executed in Texas, contained a New York choice-of-law clause. New York law was selected for consistency because Exxon employed people in many states and countries, New York had a well-developed and clearly defined body of law governing employee stock and incentive programs, and New York was the routine choice for securities-related contracts because it was home to the New York Stock Exchange. In 2006 Drennen resigned and accepted a position with another large energy company. Exxon invoked the detrimental-activity provision of the contract and canceled Drennen’s outstanding stock, valued at $5 million. Drennen sued for breach of contract in Texas state court, arguing that under Texas law, the detrimental-activity provision was unenforceable. The trial court applied New York law and held the provision was enforceable, but the appellate court held that Texas law applied and Drennen was entitled to the stock. Exxon appealed.

Rule of Law

Issue

Holding and Reasoning (Green, J.)

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