Fired Employee Loses "Change of Control" Benefits Claim

July 31, 2003 ( - A former employee doesn't deserve benefits under a special severance plan designed to trigger in the event of a "change in control," if the employee was fired before the firm changed hands, a judge ruled.

>US District Judge W. Harold Albritton of the US District Court for the Middle District of Alabama ruled that the employee did not prove he detrimentally relied on misrepresentations of his employer, according to Washington-based legal publisher BNA. Therefore, Albritton said, the company can’t be prevented from denying payment under the special severance plan.

>David Beasley was employed by Bestfoods for over 15 years. In May 2000, Bestfoods issued a news release announcing that an offer had been made by Unilever P.L.C. to acquire all of the outstanding shares of Bestfoods from stockholders.

>Beasley’s employment was terminated in July 2000. Beasley then made a claim for benefits under a special severance plan that paid benefits upon a change in control and provided for one year of salary and benefits. As evidence of his eligibility for benefits under this plan, Beasley submitted a recording of a conference call in which Bestfoods’s vice president of human resources told employees there had been a change in control.

>Beasley was paid under Bestfoods’s old severance plan, which gave him 19 weeks of pay. Conopco Inc., Bestfoods’s successor corporation, argued that there was no tender offer or exchange triggering a change in control and that the only change in control was a consensual merger that occurred after Beasley was discharged.

A Tender Offer

>Under the terms of the special severance plan, an employee became eligible for benefits if a change in control occurred and the employee was fired. The plan defined a change in control as occurring when a corporate entity kicked off a tender offer or exchange offer.

>The court said that in this case, a change in control occurred when the merger was approved by the stockholders, which happened in October 2000. Beasley’s firing in July 2000 preceded the change in control, Albritton said. Therefore, only if a tender offer had been made prior to July 2000 would Beasley be eligible for the special severance plan.

>Albritton rejected Beasley’s argument that a tender offer was made, since under the definition of a tender offer, an offer must involve a public invitation to a corporation’s shareholders to purchase their stock for a specified amount. There was no evidence that an offer was made to the shareholders directly, the court said.

“As Conopco’s evidence that there was no tender offer, but instead that there was a merger, is unrebutted, there was no breach of the special severance plan when Beasley was denied coverage under that special provision and the plan administrator’s interpretation is correct,” Albritton wrote.

>Beasley said that in reliance on his understanding that he would be entitled to the salary and benefits for a year upon his termination, he did not seek and accept similar employment, but remained employed with Bestfoods.  

The case is Beasley v. Conopco Inc., M.D. Ala., No. 01-A-1524-N, 7/21/03.