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Pollard v. Autotote

filed as amended april 26 1989.: July 18, 1988.

RICHARD C. POLLARD, APPELLANT
v.
AUTOTOTE, LTD.



On Appeal from the United States District Court for the Eastern District of Pennsylvania, (D.C. Civil Action No. 86-6555). Previously Reported at 852 F.2d 67.

Hutchinson, Scirica and Rosenn, Circuit Judges.

Author: Scirica

Opinion OF THE COURT

SCIRICA, Circuit Judge.

The issue in this appeal is whether a forfeiture provision in a deferred compensation management incentive plan is enforceable under Delaware law.

The facts developed thus far are undisputed. Appellant Richard C. Pollard worked for Autotote, Ltd. and its corporate predecessor for approximately sixteen years. Autotote designs, installs and maintains parimutuel betting machines at racetracks and other betting arenas. Pollard's last position with Autotote was general manager of field operations for the United States, Canada and Mexico. His primary responsibilities involved overseeing operations, trouble-shooting and maintenance of parimutuel betting machines. He earned approximately $55,000.00 annually.

In 1971, Autotote's predecessor adopted a "Management Incentive Compensation Plan" for selected key executives. The plan authorized an Executive Committee to select employees to receive incentive benefits. The employee would receive one-half the benefits in cash in the year after they were earned. The other one-half would be deferred compensation carried on the employer's books and payable on retirement, death, disability or termination of employment in accordance with the terms set out in the plan. See J.A. at 59 (1971 plan, §§ 1.1-1.2). Section 5 of the plan provided that

[i]n the event that an employee terminates his employment, there shall be distributed to him his vested interest . . . in the amount of his deferred compensation on or after the twelfth month following the termination of his employment . . . . Key executives who disclose company information or secrets, or who directly or indirectly accept employment with a competitor within twelve months from the date of their termination, shall also lose all vested rights.

J.A. at 63 (§ 5.1(c)).

The plan was revised in 1977. Section 6.5 of the revised plan provided for forfeiture of deferred compensation in certain circumstances:

[i]n the event that a Participating Executive voluntarily terminates his employment or is discharged other than for the reasons listed in Article 6.4 above [excessive drug or liquor use; conviction of certain crimes and commission of others; dishonesty, gross negligence or incompetence], he shall be paid his vested interest in the amount of his deferred compensation on or after the end of the twelfth month following such termination, provided however that should such executive disclose company information or secrets, or directly or indirectly accept employment as an employee or consultant or advisor or in any similar capacity with a competitor of the Participating Corporations within twelve months of such termination, he shall lose all of his vested interest in the deferred compensation and the same shall be forfeited.

J.A. at 24.

Pollard participated in the plan from 1975 through 1979, and was awarded total management incentive compensation of $104,223.00. He received one-half that amount, and one-half was deferred pursuant to the terms of the plans.*fn1

On August 2, 1985, Autote eliminated Pollard's position as General Manager, Field Operations, and terminated his employment. On September 24, 1985, Pollard accepted employment with United Tote, Inc., which also supplies parimutuel betting machinery and apparatus. Pollard's position with United Tote is Customer ...


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