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Bartoli v. Foster Wheeler

December 5, 2008


On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2565-05.

Per curiam.


Argued September 23, 2008

Before Judges Wefing, Parker and Yannotti.

In this case alleging breach of a separation agreement (agreement), defendants Foster Wheeler, Ltd., Foster Wheeler Holdings, Ltd., Foster Wheeler, LLC, Foster Wheeler North America Corp. and Foster Wheeler Corporation (collectively referred to as Foster Wheeler) appeal from a final judgment entered on September 10, 2007 awarding plaintiff a bonus in the amount of $218,742 for 2002 but denying his claim for additional bonus compensation for 2003; and an order entered on October 10, 2007 amending the final judgment to clarify certain provisions. We affirm in part and reverse in part.


Plaintiff Henry Bartoli was Vice-President and Group Executive of Foster Wheeler's Power Systems Group from December 1992 until April 15, 2002. In April 2001, Richard Swift, Foster Wheeler's then-CEO and president, announced his retirement, effective December 2001. In order to "lend stability to Management for the benefit of the Company during the search for a new CEO," Foster Wheeler offered employment agreements to key senior executives, including plaintiff. Plaintiff entered into such an agreement on May 29, 2001 (2001 contract). The 2001 contract expired on December 31, 2003 and provided certain benefits in the event Foster Wheeler terminated plaintiff's employment before December 31, 2003 for any reason "other than (i) death; (ii) disability (as defined in the Company's long-term disability plan), or (iii) conviction of, indictment for, or the entry of a guilty plea . . . with respect to a felony offense."

In addition to certain other benefits, the 2001 contract provided salary continuation for a terminated employee for two years from the date of termination and all target bonuses under the annual and long-term segments of the Company's Incentive Compensation Plan (or any successor similar plan which may be adopted in lieu of such Incentive Compensation Plan) for all calendar years within the Salary Continuation Period. Such bonuses shall be paid at the same time as payments are made to the other participants in such Incentive Compensation Plan or successor plan.

In March 2002, Foster Wheeler was in serious financial difficulty when its new CEO, Raymond Milchovich, discovered that plaintiff's group would have to take significant write-downs on several contracts because of inadequate financial performance. These losses in plaintiff's group precluded Foster Wheeler "from developing a credible plan, which delayed . . . negotiations with a senior lender . . . a key priority of [the Company]." Since plaintiff was the senior executive responsible for his group's performance, Milchovich asked him to explain the losses. After Milchovich was dissatisfied with plaintiff's performance at a meeting to address each contract, Milchovich advised the Board of Directors (Board) of his intent to terminate plaintiff's employment.

Milchovich had two meetings with plaintiff, one on April 11 and the other on April 15, 2002.*fn1 According to Milchovich, at the April 11 meeting, plaintiff advised Milchovich that "[t]his situation is not working for either of us and I think it is time for me to leave. I want you to cash me out." Milchovich told plaintiff that plaintiff's performance "was a serious failure amounting to gross negligence and gross misconduct and would have very significant material negative implications on the negotiations with lenders and the delay would cause a serious material negative reaction in the marketplace." Milchovich informed plaintiff that he was not prepared "to take a position in terms of what [plaintiff's] termination benefit levels, if any, would be in the event of his termination for cause."

On April 15, Milchovich met again with plaintiff and informed plaintiff that he was being terminated for cause. He explained again that plaintiff's failures in his area of accountability "would have a material negative impact on [the Company's] ability to obtain future business during this period of uncertainty." Milchovich then provided plaintiff with a draft separation agreement to which plaintiff objected, claiming that another terminated employee received different benefits. Milchovich said the other employee was terminated under different "business facts and circumstances." The first draft of plaintiff's separation agreement was dated April 17, 2002. Thereafter, Milchovich had no direct communications with plaintiff regarding negotiation of the separation agreement.

The negotiations continued, however, and after several drafts were exchanged, plaintiff executed the separation agreement and a release and waiver agreement on June 6, 2002. The separation agreement provided for, among other things, salary continuation for 104 weeks; health insurance coverage for two years from the April 15 separation date; full vesting of stock options and removal of any restrictions on shares of the company's capital stock in plaintiff's possession; use of a company car for one year after his separation date; and "career transition assistance services" by a firm of his choice.

The following provision in the separation agreement is the subject of this dispute:

(viii) For calendar years 2002 and 2003, you shall be eligible to receive a bonus under the Company's Incentive Compensation Plan (or any successor plan which may be adopted in lieu of such Incentive Compensation Plan). Such bonus shall be that percentage amount of your annual base salary equal to the average percentage of base salaries paid as bonuses under the annual segment of the Company's Incentive Compensation Plan (or successor plan) to the senior executive officers of the Company at your former executive level during each such calendar year. For purposes of such bonus determination, such senior executive officers of the Company are the Company's Senior Vice President and General Counsel, Senior Vice President Human Resources and Administration, Treasurer, ...

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