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James P. Erlandson v. Conocophillips Co. and

December 30, 2011

JAMES P. ERLANDSON,
PLAINTIFF,
v.
CONOCOPHILLIPS CO. AND, BURLINGTON RESOURCES, INC.,
DEFENDANTS.



The opinion of the court was delivered by: Herndon, Chief Judge:

MEMORANDUM & ORDER

Plaintiff James P. Erlandson brought this breach of contract suit, seeking to recover a retention bonus in the amount of $115,373 from his former employer Burlington Resources, Inc (Burlington) who merged with ConocoPhillips Company (ConocoPhillips) (collectively defendants). Both parties moved for summary judgment. For the reasons that follow, plaintiff's motion for summary judgment (Doc. 74) is denied, and defendants' motion for summary judgment (Doc. 76) is granted.

I. Background

At issue in this case is whether plaintiff is entitled to a retention bonus offered to him at or around the time Burlington and ConocoPhillips merged together in 2006. Prior to the merger, plaintiff was employed by Burlington as an engineer, earning an annual salary plus any money he earned in bonuses through Burlington's annual "incentive compensation plan." Under this plan, at the beginning of each year, a bonus target percentage was established, and Burlington had discretion to award bonuses that were up to 150% of the bonus target percentage, that would be paid to the employee during February of the following year. While Burlington had discretion to pay bonuses in amounts more or less than the target bonus opportunity, depending on a number of factors, the target bonus opportunity percentage did not change unless an employee's job grade level changed. In 2006, plaintiff's target bonus opportunity percentage was thirty percent of plaintiff's annual salary.

ConocoPhillips also offered its employees a bonus program, which ConocoPhillips referred to as the "variable cash incentive program" or VCIP. Like the incentive compensation plan at Burlington, ConocoPhillips company personnel established bonus target percentages at the beginning of each year that varied by the grade levels of employees. Unlike the Burlington incentive compensation plan, however, ConocoPhillips management had discretion to award bonuses that were up to 250% of the bonus target percentage. Both bonus programs used different standards for determining the amount of bonus to be given.

One day prior to the merger, on March 31, 2006, Burlington sent plaintiff a retention letter (the "retention letter") acknowledging that Burlington had entered into a merger with ConocoPhillips and providing the following relevant information:

This Retention Letter provides that, on the first anniversary of the effective time of the Merger (the "Payment Date"), you will receive a cash payment of $115,373 (the "Retention Bonus"), subject to your continued employment with [Burlington] (or any of its affiliates) through the Payment Date.

Notwithstanding the foregoing, in the event that, prior to the Payment Date, April 1, 2007, your employment with the Company and its affiliates is terminated (A) without Cause or (B) by reason of your death or permanent disability or (y) you resign from the Company and its affiliates for Good Reason, you shall be paid the Retention Bonus within (10) days following the date of such termination of employment. If, however, at any time prior to the Payment Date, you resign from the Company and its affiliates without Good Reason or your employment with the Company and its affiliates is terminated for Cause, you will immediately forfeit any then-unpaid portion of your Retention Bonus.

The retention letter further provided that it would be "governed by, and construed in accordance with, the laws of the State of Texas, without reference to its conflict of law rules," and asked plaintiff to sign and return a copy within ten days following receipt. Exhibit A attached to the letter defined "Good Reason" to mean"without your prior written consent, (i) the relocation of your place of employment by more than 50 miles,(ii) any reduction in your annual rate of base salary from your annual rate of base salary in effect on the date hereof, or (iii) any reduction in your target bonus opportunity percentage from your target bonus opportunity percentage in effect on the date hereof." The next day, ConocoPhillips and Burlington merged.

A few days later, on April 3, 2006, ConocoPhillips sent a continuation of employment letter (the "continuation letter") to plaintiff, confirming plaintiff's continuation of employment with ConocoPhillips, and informing plaintiff that Burlington's compensation programs will transition into ConocoPhillips programs over the next 18 months to two years. The letter also contained the following relevant information:

2006 Compensation

Monthly Salary: $9,615.00 In no event will your base salary be lower than your current level as of March 1, 2006. You will have received your 2005 bonus and 2006 equity awards prior to the merger. Additionally, Burlington Resources will pay your 2006 bonus 30 days after closing and this will be full and final payment of the 2006 bonus under the Burlington Resources Incentive Compensation Plan.

Future Compensation Structure It is ConocoPhillips intent to move all employees to ConocoPhillips compensation structure as soon as practical. For your grade ...


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