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Walter Nye, et al v. Ingersoll Rand Company

September 8, 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. The Court has granted summary judgment as to liability against Defendant with respect to all but three of the plaintiffs. (Doc. Nos. 355, 529). The claims of the remaining plaintiffs and the calculation of damages remain for a jury.

Presently before the Court are multiple motions concerning the upcoming trial. Plaintiffs have filed a motion to bifurcate the trial (Doc. No. 546), and a motion in limine to exclude testimony and evidence concerning the 2004 Plan. (Doc. No. 564). Defendant has filed a motion in limine to bar discussion of the gross sale price of Dresser-Rand for the purpose of computing damages. (Doc. No. 566). For the reasons set forth below, Plaintiffs' motion for bifurcation is DENIED. Plaintiffs' motion to exclude the 2004 Plan is GRANTED. Defendant's motion to exclude the gross sale price is GRANTED.


The facts of this case stem from efforts by Ingersoll Rand to sell Dresser-Rand, a former subsidiary. The facts of the case are long familiar to the parties and 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 a subsidiary corporation, Dresser-Rand. To improve performance at Dresser-Rand and obtain the best possible sale price for the company, Ingersoll Rand adopted the Sales Incentive Plan ("2000 SIP") (Doc No. 366-3).*fn1 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." 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.

Awards under the 2000 SIP are calculated on the basis of a 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 sale price is subject to several modifications. In addition to reductions for banker fees and liabilities transferred to Ingersoll Rand, 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."

In spite of high hopes, subsequent efforts to sell Dresser-Rand initially failed. When the company could not be sold by the end of 2002, Ingersoll Rand temporarily abandoned its sale efforts. Years past without significant attempts to market the subsidiary to potential buyers. Then, in 2004, Ingersoll Rand received an unsolicited offer from a would-be acquirer, 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 for Ingersoll Rand executives which highlighted the thrift of the new arrangement relative to the 2000 SIP.

Ingersoll Rand announced the terms of the 2004 Plan in a letter distributed to Dresser-Rand employees at a July 16, 2004 meeting. Other similar letters were sent to a broader group of employees on August 26, 2004 (the "Henkel Letters"). 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." The Henkel Letters promised cash, bonus opportunities, and in some cases stock options for employees who elected to enroll in the 2004 Plan. The letters required the recipients to sign and return the letters promptly or they would not be eligible for the benefits. However no portion of the letters suggested that the recipients were giving up any rights by enrolling. 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.*fn2

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, totaling approximately $23.5 million. In addition, approximately $11 million in stock options vested early due to the sale.

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.*fn3 Ingersoll Rand contends that the 2000 SIP expired prior to the sale of Dresser-Rand and that in any event, the Plaintiffs surrendered any right to payment under the 2000 SIP by accepting payments under the 2004 Plan. On October 25, 2010 and May 10, 2011, the Court issued a set of Opinions and Orders granting summary judgment with respect to liability on behalf of each of the Bond, Nye and Brown plaintiffs except for Titus, Rostan, and Johnson.*fn4

Trial of this matter is currently scheduled for October. In preparation for trial, the parties have filed a series of motions concerning the structure of the proceedings and the scope of permissible argument.*fn5 Plaintiffs have filed a motion to bifurcate*fn6 the trial, in effect seeking to obtain a damages verdict before the presentation of evidence concerning potential Ingersoll Rand liability to plaintiffs Titus, Rostan, and Johnson. Plaintiffs have also filed a motion in limine seeking to preclude Ingersoll Rand from arguing that payments made pursuant to the 2004 Plan may be deducted from damages owed under the 2000 SIP. In turn, Defendant has filed a motion in limine seeking to bar any argument that the proper value of an SVU under the 2000 SIP should be calculated using a "gross sale price" rather than a "net sale price."


A. Reverse ...

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