On October 27, 2016, Chief Judge Brendan L. Shannon of the Delaware Bankruptcy Court issued an opinion overruling objections to the claims of Seegrid’s former CEO. A copy of the Opinion is available here.
This is a relatively short Opinion considering the number of issues that it discusses. The first issue was whether Mr. Horbal, the CEO at the relevant time had authority to use the Debtors; private jet. The second issue was whether Mr. Horbal was under contract at the time of his termination, and whether such termination was for cause.
The first issue hinges upon what the applicable policies of the Debtor were at the time of Mr. Horbal’s use of the jet. In this case, the applicable corporate policy required the approval of the CEO prior to using the corporate jet. In this instance, the Court held that as the CEO, Mr. Horbal had the authority to approve of his use of the jet.
The second issue was the more interesting one. The essential facts are as follows: Mr. Horbal was a President at the Debtor prior to becoming its CEO. During his time as a President, he was employed under a contract that provided specific remuneration and benefits upon termination. However, when he accepted the role of CEO, his contract was never revised.
While the Debtors argue that the change in position effected the termination of the agreement, Opinion at *14, Mr. Horbal argued that the parties continued to comply with the terms of the agreement, thereby ratifying it, despite the change in position, Id. In this instance, Judge Shannon held that “Mr. Horbal has the better argument.” Id.
This case provides a solid reminder of the importance of documentation. In this case, the Debtors did not have documentation to support the allegations made in their claim objection. The Debtors argued that the policy concerning the corporate jet was recently changed – but failed to produce any evidence to support the allegation. The Debtors also argued that Mr. Horbal was fired for cause – but failed to produce any evidence to support the allegation. As Judge Shannon noted, “when a company (and especially a company as actively represented by counsel as Seegrid) fires a senior executive for cause, somebody usually writes it down.” Opinion at *17.