Chorman v. Foamex International, Inc. (In re Foamex International, Inc.)

491 B.R. 100, 35 I.E.R. Cas. (BNA) 720, 2013 WL 1386161, 2013 Bankr. LEXIS 1366
CourtUnited States Bankruptcy Court, D. Delaware
DecidedApril 4, 2013
DocketBankruptcy No. 05-12685 (KG); Adversary No. 06-50824 (KG)
StatusPublished
Cited by3 cases

This text of 491 B.R. 100 (Chorman v. Foamex International, Inc. (In re Foamex International, Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Chorman v. Foamex International, Inc. (In re Foamex International, Inc.), 491 B.R. 100, 35 I.E.R. Cas. (BNA) 720, 2013 WL 1386161, 2013 Bankr. LEXIS 1366 (Del. 2013).

Opinion

OPINION

KEVIN GROSS, Bankruptcy Judge.

Before the Court is the Amended Complaint filed by Plaintiff Thomas Chorman (“Plaintiff’ or “Chorman”) (D.I. 53) (the “Amended Complaint”), the Motion for Summary Judgment filed by Defendants Raymond Mabus, Jr. (“Mabus”) and Gregory Christian (“Christian”) (collectively, the “Defendants”) (D.I. 90 and 91) (the “Motion”), the Response in Opposition to the Motion filed by Plaintiff (D.I. 97) (the “Response”), and Defendants’ Reply thereto (D.I. 103). The Court conducted oral argument on December 10, 2012. For the reasons set forth below, the Court finds that Defendants are entitled to summary judgment on Plaintiffs tortious interference claim.

[103]*103 JURISDICTION

By order dated February 22, 2012, the Court determined that this proceeding is non-core pursuant to 28 U.S.C. § 156(b)(3). (D.I. 118). The parties thereafter moved to withdraw the reference, and by order dated April 5, 2012, the District Court referred the matter back to this Court for discovery and resolution of pending motions. (D.I. 121). Therefore, the Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157(a) and (c)(1), and § 1334(e). Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.

BACKGROUND

Plaintiff commenced this adversary proceeding on September 13, 2006, and filed the Amended Complaint on September 27, 2007. (D.I. 53). Among other claims, Plaintiff asserted a cause of action for tortious interference with contract against Mabus and Christian.1 The parties have completed discovery, and the tortious interference with contract claim is ripe for adjudication.

In setting forth the facts underlying this dispute, the Court has the benefit of affidavits from Defendants that are unrefuted by Plaintiff. In 2002, by at-will employment agreement, Chorman became president and chief executive officer (“CEO”) of Foamex under the active guidance of Marshall Cogan (“Cogan”), the founder of Foa-mex and Chair of the Foamex Board of Directors (the “Board”). Mabus Aff. at If 6, PI. ’s Resp. Ex. B. When Cogan resigned in February 2004, Mabus was elected the new Chair of the Board. Id. at ¶ 7. Following his election, the Board members raised concerns regarding Chorman’s ability to perform his duties as CEO absent guidance because his performance in the previous 1.5 years was unimpressive. Id. at ¶ 7-8. However, the Board was desirous of stability in the CEO position, which had significant turnover in previous years; therefore, Mabus took on an uncharacteristically active supervisory role of Chor-man’s performance in the hopes Chorman would “grow into” the position. Id. at ¶ 8. Mabus mentored Chorman on a daily basis regarding the operations and business of Foamex, for which he received additional compensation of $150,000, taking his total compensation package at the time to $300,000. Id. at ¶ 9-10.

Despite this guidance, Chorman continued to underperform. His presentations to the Board were “inadequate” and his communication skills were “poor.” Id. at ¶ 10. He consistently provided inaccurate financial data and forecasts to the Board. Id. at ¶ 11, 13, 19. Faced with fledgling performance and mistrust in the numbers presented by Chorman, the Board formed a Special Committee for Restructuring and engaged Miller Buckfire as financial consultants to prepare for the reality of a bankruptcy filing. Id. at ¶ 11-12. Miller Buckfire was chosen over Chorman’s recommendation of Lehmann Brothers due to its restructuring expertise. Id. at ¶ 15. During this time, Chorman also recommended the current chief financial officer, Doug Ralph (“Ralph”), for the role of chief restructuring officer. But due to the Board’s perception of Ralph’s role in the years of inaccurate financial reporting provided to the Board, the Special Committee recommended, and the Board selected, Foamex’s General Counsel, Christian, to act as chief restructuring officer. Id. at ¶ 14. Christian Aff. at ¶ 5.

[104]*104Despite Chorman’s assertions that “failure [was] not an option,” due to concerns over the company’s ability to service its debt, the Board voted in favor of a Chapter 11 bankruptcy filing on September 18, 2005, and filed the next day. Mabus Aff. at ¶ 16. Post-filing, Chorman continued to present inaccurate financial forecasts, ranging from overly optimistic to overly pessimistic, and voiced his fear about strategic changes designed to enhance profitability, including price increases. Id. at ¶ 19-22. Foamex then engaged Alvarez & Marsal (“AM”) to develop a business plan and a plan to exit from bankruptcy. Id. at ¶ 19. In April and May of 2006, AM made several presentations with findings and recommendations to the Board, including: (1) the current business plan in place by Chorman was not well thought-out or understood by Chorman; (2) during Chor-man’s tenure as CEO, Foamex spent more than $40 million on J.D. Edwards reporting software that had realized little to no value; (3) Chorman was not supportive of the business ventures that would ultimately contribute to Foamex’s long-term profitability; and (4) Chorman should not be the president/CEO of Foamex because he “did not have the right skills or the necessary command of the business and financial information to lead Foamex through a business plan and an exit out of bankruptcy.” Id. at ¶ 24-25. Based in part on these reports, coupled with the ongoing concerns related to Chorman’s inability to perform, on June 1, 2006, Mabus informed Chorman that the Board was asking him to resign. Id. at ¶ 25, 28.

At the time, Mabus was the Board’s Chairman, and Christian served as executive vice president, general counsel and chief restructuring officer. Id. at ¶ 26, 30. Following Plaintiffs departure, Mabus became president and CEO, and Christian became a member of the Board and chief administrative officer — roles previously held by Plaintiff — and both obtained commensurate increases in compensation. Id.; Christian Aff. at ¶ 12-13.

In his Amended Complaint and Response, Chorman alleges that he was forced to resign without good cause. Namely, he claims that Defendants, acting outside the scope of their official duties, orchestrated his removal in pursuit of personal financial gain and professional advancement. Plaintiff draws this conclusion despite a complete lack of evidence in support of his position. Aside from pointing to an absence of formal reprimands regarding his performance, Chorman produced only one email, sent by Christian on June 7, 2006, stating that matters would turn “ugly” if Chorman failed to resign because the Board would be forced to consider resolutions to remove him. Pl.’s Resp. Ex. T.

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491 B.R. 100, 35 I.E.R. Cas. (BNA) 720, 2013 WL 1386161, 2013 Bankr. LEXIS 1366, Counsel Stack Legal Research, https://law.counselstack.com/opinion/chorman-v-foamex-international-inc-in-re-foamex-international-inc-deb-2013.