Creel v. Houston Industries, Inc.

124 S.W.3d 742, 2003 WL 22511499
CourtCourt of Appeals of Texas
DecidedNovember 6, 2003
Docket01-02-01076-CV
StatusPublished
Cited by13 cases

This text of 124 S.W.3d 742 (Creel v. Houston Industries, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Creel v. Houston Industries, Inc., 124 S.W.3d 742, 2003 WL 22511499 (Tex. Ct. App. 2003).

Opinion

OPINION

ADELE HEDGES, Justice.

In this appeal from a final summary judgment, the central issue is whether the trial court erred in determining as a matter of law that appellant/appellee Houston Industries, Inc. d/b/a Reliant Energy, Inc. (“Reliant”) correctly computed the amount of severance compensation paid to appellants/appellees Michael Creel, Albert Zim-merebner, and Robert Jones (sometimes collectively called “the plaintiffs”) under the severance agreements that are the subject of this dispute. The secondary issues are whether the trial court erred in rendering summary judgment (1) in favor of Reliant on Creel’s tort claims and (2) in favor of the plaintiffs for their attorneys’ fees incurred in the litigation, whether or not the plaintiffs prevailed in the litigation and subsequent appeals.

We affirm.

*745 Background

1. The Severance Agreements

The plaintiffs are former executives with NorAm Energy Corp. (“NorAm”) or its subsidiaries. On or about July 16, 1996, in anticipation of a probable merger by No-rAm with Houston Industries, Inc., all three plaintiffs entered into separate, but substantially similar, severance agreements with NorAm.

The severance agreements provided that, if a “Change in Control” occurred at NorAm during the “Severance Period,” and if the signatory executive was terminated, the signatory executive would receive the severance compensation set forth in section 5 of the agreements. Additionally, if the signatory executive terminated his employment during the Severance Period because one or more enumerated events had occurred, the signatory executive would also receive the section 5 severance compensation.

Under section 5, the terminated executive was entitled to receive:

in a single lump sum, an amount equal to 2.99 times the sum of (A) Base Pay (at the highest rate in effect for any period prior to the Termination Date) plus (B) Incentive Pay (determined in accordance with the standards set forth in Section 1(h)).

Section 1(h) of the severance agreements defined “Incentive Pay” as follows:

“Incentive Pay” means an annual amount equal to not less than the annual bonus that would have been paid for the year in which the Change in Control occurred if the performance goals had been achieved at the opportunity (i.e., maximum) level, pursuant to any bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement (whether or not funded) of the Company [NorAm], or any successor thereto providing benefits at least as great as the benefits payable thereunder prior to a Change in Control.

(Emphasis added.)

The severance agreements also provided that if the signatory executive was required to incur legal fees to enforce his rights under the agreement, NorAm (or its successor) would be obligated to pay such legal fees. To secure such payment, the severance agreements required NorAm (or its successor) to fund a trust account. Section 8 of the severance agreements provided:

(a) It is the intent of the Company that the Executive not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense of Executive’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if it should appear to the Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, the Executive the benefits provided or intended to be provided to the Executive hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of Executive’s choice, at the expense of the Company as hereafter provided, to advise and represent the Executive in connection with any such interpretation, enforcement or defense, including without limitation the initiation or defense of any litigation or other legal action, whether by or *746 against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. ... Without respect to whether the Executive prevails, in whole or in part, in connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all attorneys’ and related fees and expenses incurred by the Executive in connection with any of the foregoing.
(b) Without limiting the obligations of the Company pursuant to Section 8(a), in the event a Change in Control occurs, the performance of the Company’s obligations under this Section 8 will be secured by amounts deposited or to be deposited in trust pursuant to certain trust agreements to which the Company will be a party .... Any failure by the Company to satisfy any of its obligations under this Section 8(b) will not limit the rights of the Executive hereunder. Subject to the foregoing, the Executive will have the status of a general unsecured creditor of the Company and will have no right to, or security interest in, any assets of the Company or any Subsidiary.

2. Merger and Termination

On August 6, 1997, NorAm and its subsidiaries completed a merger with Houston Industries, which was later renamed Reliant Energy, Inc. It is undisputed that Reliant assumed NorAm’s obligations under the severance agreements and under the trust agreements. It is also undisputed that Creel, Zimmerebner, and Jones were terminated and entitled to severance compensation under their respective severance agreements. 1 What is disputed is whether Reliant paid all the severance compensation due the plaintiffs under their respective agreements.

At the time of their respective terminations, Reliant paid a lump sum to each plaintiff under section 5 of the severance agreements, based on its interpretation of what was meant by “annual amount” in the definition of “Incentive Pay” under section 1(h) of the severance agreements. 2 According to Reliant, whether the “Incentive Pay” came under NorAm’s annual incentive plan or under Reliant’s short-term incentive plan that replaced it, the “annual amount” consisted of the annual cash bonus that was paid, and did not include the value of restricted stock or stock options that were long-term or multi-year compensation.

3. Litigation

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Bluebook (online)
124 S.W.3d 742, 2003 WL 22511499, Counsel Stack Legal Research, https://law.counselstack.com/opinion/creel-v-houston-industries-inc-texapp-2003.