Bukuras v. Mueller Group, LLC

592 F.3d 255, 30 I.E.R. Cas. (BNA) 225, 2010 U.S. App. LEXIS 1169, 2010 WL 175085
CourtCourt of Appeals for the First Circuit
DecidedJanuary 20, 2010
Docket08-2160, 08-2161
StatusPublished
Cited by30 cases

This text of 592 F.3d 255 (Bukuras v. Mueller Group, LLC) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bukuras v. Mueller Group, LLC, 592 F.3d 255, 30 I.E.R. Cas. (BNA) 225, 2010 U.S. App. LEXIS 1169, 2010 WL 175085 (1st Cir. 2010).

Opinion

TORRUELLA, Circuit Judge.

This is a contract dispute between the Mueller Group, LLC (“Mueller” or the “Company”) and its former general counsel, George P. Bukuras, over the interpretation of the severance and general release provisions of Bukuras’s employment agreement. The district court granted summary judgment against Bukuras on his claim that the Company breached the terms of his employment when it failed to include in the calculation of his severance compensation a $1 million transaction bonus he received in connection with a sale of the Company, which the district found unsupported by the plain terms of the agreement. See Bukuras v. Mueller Group, LLC, No. 06-11790, 2008 WL 3978210, at *6, 2008 U.S. Dist. LEXIS 64517, at *17 (D.Mass. Aug. 14, 2008). The district court also granted summary judgment against Mueller on its counterclaim alleging that Bukuras’s suit violated a general release of claims executed by Bukuras at the time of his termination, finding that Bukuras’s claim was outside the scope of the release and that, in any event, the *258 release did not support an independent claim for breach which would entitle Mueller to recover its litigation expenses incurred in defending against Bukuras’s claims. Id. at **8-9, 2008 U.S. Dist. LEXIS 64517, at *23-25. On appeal, both parties challenge these determinations. We affirm in all respects.

I. Background

A. Facts

In August 2000, Mueller chief executive officer Dale Smith offered Bukuras a position as the Company’s general counsel. Smith’s offer letter provided for a base salary of $180,000, an annual bonus equal to four percent of the Company’s shared bonus pool, and other benefits, including severance benefits as outlined in Mueller’s draft executive severance pay policy. A copy of that policy was attached to the offer letter. Bukuras accepted, and began work as Mueller’s general counsel in October 2000.

Two years later, in the fall of 2002, Mueller’s owners, DLJ Merchant Banking Partners (“DLJ”), contemplated selling the Company through a private auction. In connection with this effort, Bukuras informed Smith in January 2003 that, in his opinion, the Company was legally obligated to pay him upon termination the benefits described in the severance policy attached to Smith’s August 2000 offer of employment, and that those payments were among the obligations that needed to be disclosed to prospective bidders. Smith, who had never submitted the draft policy to Mueller’s board of directors for approval, disagreed with Bukuras and the conflict became heated. Smith invited Bukuras to resign.

Looking to resolve the matter, Bukuras sent a memorandum to Mueller’s board of directors in which he summarized his version of the disagreement with Smith and informed the board of his preference to remain with the Company through the proposed sale, provided he could execute a new employment agreement so that everyone would be on the same page regarding his severance benefits. The board agreed and, after negotiations in which both Bukuras and the Company were represented by counsel, the parties executed a new employment agreement, which became effective in early February 2003.

Under the terms of the 2003 employment agreement (the “Agreement”), Mueller undertook, among other things, to pay Bukuras an increased annual salary of at least $200,000 and, under the heading “Bonus,” “an annual bonus, payable at the conclusion of each fiscal year, equivalent to not less than 5% of the bonus pool applicable to compensate executive management of the company.” Agreement, § 4 [hereinafter, the “Bonus Provision”]. In addition, the Agreement provided that if the Company terminated Bukuras for any reason other than cause:

[T]he employee shall be entitled to severance compensation in an amount equal to the sum of (A) eighteen (18) months Salary (at the rate then in effect), plus (B) one hundred fifty (150%) percent of the bonus paid or payable to the Employee for the fiscal year immediately preceding the fiscal year in which termination occurs.

Id. § 4(d) (emphasis added)[hereinafter, the “Severance Provision”]. Receipt of this severance payment was expressly conditioned on Bukuras’s execution of a general release of claims against the Company, and a model release was appended to the Agreement. Further, in exchange for the severance benefits described in the Agreement, Bukuras agreed to forgo certain “Transaction Benefits” that the board was then considering awarding to certain employees “in connection with a change of control transaction expected to be consum *259 mated during [fiscal year (‘FY’) 2003].” Id. § 4(c). 1

At the time he entered into the Agreement, Bukuras had received annual bonuses for each of his two years at Mueller. In both years, the bonuses were conditioned on the Company meeting certain financial targets, measured in terms of earnings before interest, taxes, depreciation, and amortization (or, “EBITA”). Based on those targets, the Company allocated a pool of money for division among eligible senior executives according to the terms of their employment. For example, for FY 2001 the Company set an earnings target of $180 million EBITA and a bonus pool of $4,797,000. When the Company hit its mark, Bukuras received a $192,000 bonus, which was equal to four percent of the pool, per the terms outlined in Smith’s initial offer letter. For FY 2002, Bukuras received a bonus of $240,000, calculated according to the same methodology. Following the execution of the revised Agreement, under which Bukuras was entitled to a larger (five percent) share of the annual bonus pool, he received a $245,000 bonus for FY 2003 and a $210,000 bonus for FY 2004, with both bonuses calculated according to the same EBITA-based formula used in previous years. In every year of his employment, Bukuras received his annual bonus following the conclusion of the fiscal year, a delay which was necessary to allow the Company’s auditors to review its earnings.

The auction process contemplated by DLJ was unsuccessful and did not result in the sale of the Company in 2003. As a result, Smith and Bukuras’s strained relationship continued. However, in late 2004, DLJ began the process for another private auction in a second attempt to sell the Company. In April 2005, anticipating the sale, Mueller’s board passed several resolutions relating to the compensation of key executives, including a resolution setting the EBITA target and bonus pool for FY 2005 according to the same methodology used in previous years.

Walter Industries (“Walter”) emerged as the successful bidder at auction and, on June 17, 2005, Mueller and Walter signed a definitive merger agreement, which was conditioned on, among other things, HartScotNRodino antitrust review by the Federal Trade Commission (“FTC”), see 15 U.S.C. § 18a, a process expected to take several months. Closing was set to occur within two days of the satisfaction of all conditions set forth in the merger agreement.

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Bluebook (online)
592 F.3d 255, 30 I.E.R. Cas. (BNA) 225, 2010 U.S. App. LEXIS 1169, 2010 WL 175085, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bukuras-v-mueller-group-llc-ca1-2010.