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Schultze v. ABN Amro, Inc.

Court of Appeals of Illinois, First District, Second Division

July 18, 2017

ROBERT D. SCHULTZE, Plaintiff-Appellee,
ABN AMRO, INC. and THE ROYAL BANK of SCOTLAND, N.V., Defendants-Appellants.

         Appeal from the Circuit Court of Cook County No. 10 L 7045 Honorable Margaret Ann Brennan, Judge Presiding.

          JUSTICE MASON delivered the judgment of the court, with opinion. Presiding Justice Hyman and Justice Neville concurred in the judgment and opinion.



         ¶ 1 Plaintiff-appellee Robert D. Schultze filed a complaint alleging defendants-appellants ABN AMRO, Inc. (ABN) and The Royal Bank of Scotland, N.V. (RBS) (formerly known as ABN AMRO Bank, N.V.) violated the Illinois Wage Payment and Collection Act (Act) (820 ILCS 115/1 et seq. (West 2008)) by failing to pay him the proper amount of his earned bonus and severance pay. After trial, the trial court ruled in favor of Schultze, ordering ABN to pay $2 million as an earned bonus and $375, 000 as severance, offset by amounts already paid, plus 5% interest and attorney fees.[1] On appeal, ABN contests the judgment award because it contends (1) the bonus paid to Schultze was discretionary and not pursuant to a contract and (2) Schultze failed to execute a separation agreement and general waiver that was a prerequisite to receiving any severance in accordance with ABN's written policy. Finding no merit in ABN's claims, we affirm.

         ¶ 2 BACKGROUND

         ¶ 3 In 1983, Schultze began working for LaSalle National Bank (LaSalle), formally a subsidiary of ABN. Through his many promotions and advancements at ABN, Schultze was never offered a written employment contract detailing his salary and bonus; instead, his employment agreements were always oral. Even after he became an officer of the bank, Schultze did not receive a written contract detailing his bonus. When ABN later promoted Schultze to vice president, there again was no written contract, but Schultze knew the range of what a bonus would be if he performed satisfactorily.

         ¶ 4 Although Schulze's salary was fixed, his annual performance bonus was not. But because onuses were calculated as a multiple of an executive's salary and given the history of his employment at ABN, Schultze knew that if he and his team met their performance goals, he would receive a multiple of his salary as a bonus. An employee's performance was objectively analyzed annually using specific, measurable, achievable, realistic targets (referred to internally at ABN as SMART), which provided the employee with measurable goals to attain during the performance year that would be assessed for achievement at year-end. Each aspect of the SMART analysis was weighted based on varying levels of importance. To determine a bonus amount for senior executives, ABN also considered (1) personal performance, (2) team performance, (3) the larger group (bank) performance, (4) compensation paid to executives in similar roles globally, (5) competitors' bonuses (because ABN was a highly competitive organization), (6) performance of the overall market, and (7) bonuses paid the previous year for the same position. For nearly 25 years, ABN adopted the same process to determine bonuses except for performance year 2008. Historically, the bank's profitability was an important component used to evaluate performance, but starting in performance year 2007 and in anticipation of an upcoming sale of LaSalle to Bank of America, goals were focused on safety, soundness, meeting regulatory hurdles, disintegrating operations and information technology platforms, and managing the rotation of risk.

         ¶ 5 Computation of a specific employee's bonus began by reviewing a spreadsheet provided by human resources detailing the employee's history of bonus awards, predecessors' bonuses for the same position, benchmark bonuses from competitors (third-party sources) and the employee's SMART performance rating. The individual determining bonuses used this spreadsheet along with ABN's profitability and the pool of bonuses allocated to a business unit to determine an employee's bonus, which was then submitted to division leaders for approval.

         ¶ 6 In 2000, ABN promoted Schultze to executive vice president and chief financial officer (CFO) of ABN Wholesale Client Services Division for North America. Schultze served in that position from late 2000 to approximately the first quarter 2006. During that time, Schultze's base salary increased approximately $100, 000 through a series of raises. Typically, Schultze allocated his salary increase to the pool of funds available for raises for his team, finding it unnecessary to take a one or two percent salary increase for himself. But Schultze was compensated, as he always had been, with a bonus and salary.

         ¶ 7 For approximately six months in 2006, Schultze acted as interim CFO of LaSalle while the bank searched for a permanent CFO. After LaSalle filled the position, Schultze returned to his position as CFO of the Wholesale Client Services Division of ABN. Schultze remained in that position until February 2007 when ABN promoted him to managing director and chief operating officer (COO) of ABN's Global Markets North America Division. When Schultze accepted this position, ABN provided him with a range of what his bonus would be, which was more than his salary as CFO but something less than $1 million because he would no longer be running a trading desk. Schultze's understanding was that his combined salary and bonus would be around $1 million if he performed satisfactorily. Schultze remained in the managing director and COO of ABN's Global Markets North America positions until he was terminated by ABN in April 2009.

         ¶ 8 In spring 2007, ABN announced that LaSalle would be sold to Bank of America with an anticipated closing date of October 1, 2007. In mid-October 2007, a consortium of banks, which included RBS along with two other banks, won a tender offer and began the process of acquiring ABN. John Nelson, head of ABN Global Markets North America and chief executive officer (CEO) of ABN North America, asked Schultze to manage both the $21 billion sale of LaSalle to Bank of America and the $93 to $94 billion sale of ABN to the consortium. Schultze's title became executive vice president and executive lead of the ABN North America Transition Leadership Team.

         ¶ 9 For the year ending December 2007, Schultze's base salary was a little over $300, 000 and his combined salary and bonus was approximately $1 million to $1.1 million. Also during 2007, Schultze received two retention bonuses, which were intended to keep him at the bank while the bank was undergoing its divesture, but not to compensate him for his performance.[2]Schultze received (1) $200, 000 relating to the sale of LaSalle to Bank of America and (2) $1 million relating to the sale of ABN to the consortium if Schultze remained at the bank or its successor until December 31, 2008.

         ¶ 10 The sale of ABN was the largest financial services transaction up to that time. ABN was being dismantled, broken up into pieces, and sold to four different counterparties, all within a predetermined period of time. Nelson offered Schultze the $1 million retention bonus because he believed that ABN was exposed to a series of systematic risks and needed someone with a high degree of business acumen who was intelligent, capable, knew the organization well, and could work in a very complex regulatory environment. Nelson considered it essential for Schultze to remain at ABN as long as possible. Schultze became the technical expert and dealt with the purchasing banks, many of the regulatory bodies, and his own people in accomplishing the sale. Nelson described Schultze's job during that time as "a huge job with a massive amount of responsibility and highly complicated." Nelson explained that the purpose of the retention bonuses was to ensure that ABN had the best possible people in the organization through the transition and sale of ABN to the purchasing banks. According to Nelson, all of the transition issues that ABN faced supported Schultze's $1 million retention bonus.

         ¶ 11 In March 2008, Dennis McHugh, head of ABN Global Markets North America, left ABN and Brad Kopp, an RBS executive "seconded"[3] to ABN as CEO of ABN North America, asked Schultze to assume McHugh's duties, which included transitioning the global markets business from ABN to RBS. Nelson left ABN a few weeks before McHugh left and Kopp replaced Nelson as CEO of ABN North America. Schultze retained all of his current responsibilities as COO of ABN Global Markets North America and executive lead of the ABN North America ...

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