According to a report by Washington legal publisher BNA, US District Judge William Hibbler of the Northern District of Illinois ruled that F. John Stark III was wrong when he sued PPM, PPM Holdings and the PPM Holdings Inc. Change in Control Severance plan to force the benefit payments.
Stark’s claim for a bonus was also dismissed by the court. Stark insisted he was entitled to a bonus since he had received one in previous years and there was an unwritten policy to pay all employees, including those who were terminated, an annual bonus. In previous years, Stark had received up to 270% of his salary as a bonus, the court said
According to court records, Stark was general counsel for PPM America Inc. Special Investments, reporting to PPM’s president. On November 1, 2000, Leandra Knes became president and one month later she and PPM’s general counsel informed Stark he was being terminated from his position due to the organization losing trust in him.
In January 2001, Stark hired an attorney to represent him in his settlement negotiations. The attorney asked for 2.5 times Stark’s salary in severance under PPM Holdings Inc. Change in Control Severance Plan. When PPM refused, Stark sued to get the benefit payment.
Stark claimed that a series of transfers of company stock to various subsidiaries of Prudential, but where Prudential retained direct and indirect control of PPM Holdings, the parent company of PPMA, represented a change in control. A change in control meant he should get benefits under the plan, Stark argued.
Hibbler disagreed, saying the December 1999 transfer of PPM Holding’s shares to a partnership did not alter Prudential’s status as the ultimate parent company, and therefore there was no control change. Therefore, Stark’s entitlement to severance benefits was never triggered, the court said.
The case is Stark v. PPM America Inc., N.D. Ill., No. 01 C 1494, 9/23/02.
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