Joe Whitcomb
Corporate Transactions and Incentive Plan
Michael Evans served as Chief Executive Officer of The Waddington Group, Inc. for more than twenty years before retiring in early 2017. Prior to and following his retirement, the company underwent a series of mergers and acquisitions. In 2015, The Waddington Group was acquired by Jarden Corporation, which implemented a Special Incentive Plan designed to reward executives based on company performance from 2016 through 2019.
After the plan was established, Newell Brands, Inc. acquired Jarden and assumed responsibility for the incentive plan. During this period, Newell reorganized business operations, including moving and later returning a division known as the Tabletop division. In 2018, Newell sold The Waddington Group to Novolex Holdings, LLC. As part of that transaction, incentive plan participants received a partial payout based on performance through the date of the sale. Evans received a payment and was informed that any remaining amount would depend on whether the plan’s conditions were satisfied after the performance period ended.
Dispute Over Final Payment
After the performance period concluded in December 2019, the Administrative Committee responsible for the incentive plan reviewed the company’s financial performance. In April 2020, the Committee adjusted the performance calculations to account for the return of the Tabletop division before the sale to Novolex. Based on this adjustment, the Committee determined that no additional payments were owed to participants under the plan.
Evans filed suit against Novolex Holdings, LLC and The Waddington Group, asserting a breach of contract claim. He alleged that the adjustments to the incentive plan were improper and that he was entitled to additional compensation under the plan.
Procedural History
The case proceeded through multiple motions to dismiss, which narrowed the claims to a single breach of contract theory. The parties then engaged in discovery. Following discovery, Novolex and The Waddington Group moved for summary judgment, asserting that the plan allowed the adjustments and that no additional payment was owed.
Court’s Analysis
The court reviewed the terms of the incentive plan and the applicable standards for breach of contract under Kentucky law. The plan permitted the Administrative Committee to adjust performance targets to reflect the impact of mergers, acquisitions, and other business changes, provided that the adjustments reflected actual financial results.
The court determined that the plan did not require the Committee to make adjustments within a specific timeframe or follow a particular process. It found that the Committee had authority under the plan to adjust performance metrics after the performance period, including in response to the reacquisition of the Tabletop division.
The court then considered whether the adjustments reflected the actual financial results of the acquisition. Evans presented evidence from separate litigation in which Novolex asserted that the Tabletop division had declined in value. The court found that this evidence created a genuine dispute of material fact as to whether the Committee properly calculated the financial impact of the acquisition when adjusting the incentive plan.
The court also addressed Evans’s claim that the defendants failed to act in good faith. It determined that the plan expressly allowed adjustments based on acquisitions and that Evans did not present evidence showing that the Committee acted in bad faith in exercising that authority.
The court further examined the issue of damages. It noted that while the amount of any potential damages was uncertain, that uncertainty did not bar recovery if a breach were established.
Court’s Decision
The court granted the motion for summary judgment in part and denied it in part. It dismissed the claim based on alleged bad faith but allowed the breach of contract claim to proceed on the issue of whether the incentive plan adjustments properly reflected the financial results of the acquisition.
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