In a recent decision, Bender v. Xcel Energy, Inc., the Eighth Circuit Court of Appeals suggested that attempts by executives to replace employer release agreements must comply precisely with contractual requirements. A unanimous panel affirmed the District Court’s grant of summary judgment to defendant Xcel Energy, Inc., on the claims of former executives of a subsidiary company of Xcel, NRG Energy, Inc. Most interesting to those in the non-compete/restrictive covenant arena was Xcel’s (successful) argument regarding the company release form. Xcel argued that because two of the executives did not use the provided form, and instead attempted to use their own, they had not satisfied their obligations under the contract. Thus, the executives could not participate in the severance plan.
For executives to receive their NRG stock options after its merger with Xcel, the severance plan then in effect for NRG executives required that they provide the company with a release “in a form to be provided by the Company.” Plaintiffs James Bender and Craig Mataczynski thought that the release language was too broad, and provided an alternative release, which they said satisfied the same obligations under the severance plan. Specifically, Bender and Mataczynski argued that the release they were asked to execute was much broader than a “standard release of claims.” The Eighth Circuit noted, however, that not only was it generally appropriate for employers to condition severance payments on releases, but, more importantly, the plain language of the severance plan clearly called for a release form “to be provided by the Company.” Accordingly, the Eighth Circuit affirmed the district court’s summary judgment against Bender and Mataczynski’s claims, because, simply put, they did not use the form provided by the company and there was nothing inherently wrong in requiring such a form.
By holding to a “plain language” understanding of the severance agreement, the Eighth Circuit did not undertake any significant analysis of the non-competition issues. It is fair to question whether the Court even cared whether the release form was too broad since it never posed that question. Moreover, the Court undertook no unconscionability test, nor did it evaluate the non-compete or confidentiality provisions, all issues raised by Bender and Mataczynski. In other words, while the Court was at least nominally concerned with the release and strict compliance with the form to be provided, it did not express any trepidation about confidentiality or non-competition issues.
The moral of the story for executives (and the companies for which they work): do not plan to rely on competition-related arguments in the Eighth Circuit where a strict textualist approach to severance plan contracts seems to carry the day.