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Walter Nye, et al v. Ingersoll Rand Company

May 10, 2011


The opinion of the court was delivered by: Debevoise, Senior District Judge



This consolidated action incorporates three separate cases: Nye, et. al. v. Ingersoll Rand Company, Civ. No. 08-3481, Brown, et. al. v. Ingersoll Rand Company, Civ. No. 08-4260, and Bond, et. al. v. Ingersoll Rand Company, Civ. No. 08-5371. Plaintiffs, who number over one hundred, are each former employees of the Dresser-Rand Company ("Dresser-Rand"), a former subsidiary of Defendant Ingersoll-Rand Company ("Ingersoll Rand"). Plaintiffs allege that Defendant breached the terms of a Sales Incentive Plan ("2000 SIP") when it failed to pay them benefits due upon the sale of Dresser-Rand. Defendant claims both that the 2000 SIP expired prior to the sale and that by agreeing to a new incentive plan (the "2004 Plan") Plaintiffs surrendered their rights under the 2000 SIP. Plaintiffs contend, in part, that they were fraudulently induced into accepting the less generous 2004 Plan.

Presently before the Court are separate motions for Partial Summary Judgment from the Nye and Brown Plaintiffs, the Bond Plaintiffs, and Individual Brown Plaintiffs Johnson, Rostan, and Titus (the "Individual Brown Plaintiffs"). The Nye and Brown Plaintiffs seek an order declaring that: (1) the 2000 SIP did not expire; (2) the letters sent by Ingersoll Rand executives Henkel and Butler did not constitute a release or accord and satisfaction; (3) Ingersoll Rand's failure to pay benefits due under the 2000 SIP was a breach of the contract; (4) none of Ingersoll Rand's Affirmative Defenses are supported by the evidence; and (5) the Hanover Transaction, Volvo Transaction, and cash removed from Dresser-Rand by Ingersoll Rand should be included in calculating the gross sale price for Dresser-Rand.*fn1 The Individual Brown Plaintiffs seek an order holding that the 2000 SIP did not expire and that they should be treated as retirees for the purposes of determining eligibility for benefits under the 2000 SIP.

Defendant claims that disputed issues of material fact exist which preclude any grant of summary judgment. Defendant has also filed a motion to bifurcate the trial into liability and damages phases. At oral argument, Defendant also suggested the possibility of limited "bellwether" trials as to liability. Plaintiffs have filed a motion to strike some of the evidence submitted by Defendant in connection with its opposition papers.

For the reasons set forth below, The Nye and Brown Plaintiffs' motion for partial summary judgment is GRANTED as to each liability issue except with respect to Brown Plaintiffs Rostan, Titus, and Johnson. The Nye and Brown Plaintiffs' motion for partial summary judgment is DENIED with respect to each damages issue. The Individual Brown Plaintiffs' motion is DENIED. Plaintiffs' motion to strike is GRANTED as to the expert reports and otherwise DENIED. Defendant's motion to bifurcate the trial is DENIED as moot.


The facts of this case stem from efforts by Ingersoll Rand to sell Dresser-Rand, a former subsidiary. The background of Defendant's efforts and the procedural history of the ensuing litigation are discussed at length in this court's prior Opinions. See, e.g., Doc. No. 355. The relevant facts are as follows.

In early 2000, Ingersoll Rand began to solicit buyers for Dresser-Rand, a recently acquired subsidiary.*fn2 To further that purpose and to achieve a desirable sale price for Dresser-Rand, Ingersoll Rand adopted the Sales Incentive Plan ("2000 SIP") (Pl. Ex. 3). The 2000 SIP was meant "to reward key employees for their contributions toward maximizing [earnings] and consequently, a desirable sale price for Dresser-Rand Company." Id. It did so by providing Sale Value Units ("SVUs") to select employees that would trigger payments from Ingersoll Rand once Dresser-Rand was sold. The size of the payments increased linearly with the ultimate sale price, in accordance with a predetermined formula.

The 2000 SIP included a section setting forth the duration of the agreement. That provision states, in its entirety:


The Plan is effective September 1 2000 and will remain in effect until Dresser-Rand Company is sold.

No other portion of the 2000 SIP provides any other limitation on the length of the agreement. Nor does the contract permit unilateral cancellation by either party. However a "Termination" provision reduces or eliminates awards for employees who leave Dresser-Rand before the company is sold. That provision states, in its entirety:


An employee who voluntarily terminates or is involuntarily terminated by the company for any reason before the closing date of the sale, with the sole exceptions of death, disability, or retirement shall not receive or be entitled to any award from this plan. For those employees who leave the Company for the reason of death, disability or retirement will receive a pro-rated award based on the time they were actively employed during the period from the effective date of this plan to December 31, 2002. Any payment due will be made within 90 days from December 31 2002.

Awards under the 2000 SIP are calculated on the basis of a linear payout function which rewards sale prices above "$500MM net of retained liabilities and sale expenses." Payouts begin at $1.25 per SVU and increase to $13.58 at $600MM and $38.24 at $800MM. The 2000 SIP also provides that "[t]he sale of any major Dresser-Rand assets prior to the complete sale of the Company will be included in the overall net sale price. This overall net sale price will be used to determine the value of an SVU." Finally, the 2000 SIP contains a payment section which states, in part, that "[a]ny award under this plan will be paid no later than 90 days following the closing date of the sale of Dresser-Rand Company."

While Ingersoll Rand executives were confident in 2000 that Dresser-Rand could be quickly sold, no suitable buyer was forthcoming. When Dresser-Rand could not be sold by the end of 2002, Ingersoll Rand abandoned its sale efforts. Several years past with no significant attempts to sell the subsidiary. Ingersoll Rand contends that during this time substantial efforts were made to integrate the two companies. Then, in 2004, Ingersoll Rand received an unsolicited offer from a potential buyer, First Reserve. In light of this new offer, management restarted the sales process and instructed its agents to formulate a deal.

In spite of the intervening years, executives at Ingersoll Rand were cognizant of 2000 SIP and the payout schedule that it mandated upon sale. While management wanted Dresser-Rand employees to continue to work hard and boost Dresser-Rand's financial performance, it also wished to limit the amount of money that it would be required to pay in the event that a sale was consummated. In addition, Ingersoll Rand did not want the defection or retirement of critical employees to jeopardize the sale. In this vein, Ingersoll Rand devised a new incentive plan (the "2004 Plan"). Various materials were prepared which highlighted the thrift of the new arrangement relative to the 2000 SIP. (Pl. Exs. 11, 12). The 2004 Plan was first announced to Dresser-Rand employees in a July 16, 2004 meeting between Herbert Henkel, CEO of Ingersoll Rand, and members of Dresser-Rand's executive staff.

Ingersoll Rand detailed the terms of the 2004 Plan in a letter distributed to Dresser-Rand employees at the meeting. Other similar letters were sent to a broader group of employees on August 26, 2004. (Pl. Ex. 10, the "Henkel Letters"). *fn3 In each letter, Ingersoll Rand claimed that the 2000 SIP was no longer in effect, writing that "the sale value units awarded for 2001, 2002 and 2003 have expired, as have all rights under that plan." Id. The Henkel Letters promised cash, bonus opportunities, and in some cases stock options for employees who elected to enroll in the 2004 Plan. Id. The letters required the recipients to sign and return the letters promptly or they would not be eligible for the benefits. Employees receiving the letters were also instructed to keep them secret from others. No portion of the letters suggested that the recipients were giving up any rights by enrolling. However each letter contained language just above the signature line stating:

To acknowledge your acceptance of the terms of this letter, please sign the enclosed duplicate copy in the space provided below and return it to Rob Butler by September 30, 2004. *fn4

All of the Nye Plaintiffs signed and returned the Henkel letters. All of the Brown Plaintiffs except for Arthur Titus, William Rostan, and Gregg Johnson also signed the Henkel letters.*fn5

On October 31, 2004, Ingersoll Rand sold Dresser-Rand to First Reserve for approximately $1.2 billion. After the sale was finalized, Ingersoll Rand paid Dresser-Rand employees the benefits due under the 2004 Plan. Enclosed with each benefit check was a cover letter from Robert Butler. (Pl. Ex. 23, the "Butler Letters"). The Butler Letters expressed gratitude to the employee and described the amount enclosed. The letters also stated:

By endorsing this check you again agree, unconditionally and without reservation, that this payment represents payment in full for any and all amounts owed to you under the Program and its predecessors.

In 2005 Ingersoll Rand entered into litigation with a number of employees who had left the company prior to the sale date (the "Antoun" and "Barnett" actions) (Ingersoll Rand Company v. Barnett,, and Antoun, et. al. v. Ingersoll-Rand, Consol. Civ. No. 05-1636 (DRD)). The Antoun and Barnett plaintiffs claimed that the 2000 SIP had not terminated and that as retirees, they were entitled to pro-rated benefits under the plan. On October 26, 2006, this Court ruled that the 2000 SIP had not expired and that the Barnett and Antoun Plaintiffs were each "retirees" as contemplated under the agreement. Following the decision, on January 15, 2008, both cases were dismissed pursuant to a confidential settlement.

The consolidated action currently before the court asserts claims for breach of the same agreement that was at issue in Antoun and Barnett- the 2000 SIP. However, unlike the retirees in Antoun and Barnett, many of the Nye and Brown plaintiffs worked for Dresser-Rand until it was sold.*fn6 Ingersoll Rand contends that by signing and returning the Henkel Letters and by endorsing the checks enclosed by the Butler Letters, the Plaintiffs surrendered any right to payment under the 2000 SIP. Plaintiffs contend that the Henkel and Butler Letters did not modify the 2000 SIP and that they were compelled to ...

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