McDonalds May Challenge “Without Cause” Termination Of Former CEO

The Delaware Court of Chancery has concluded that McDonalds has properly pleaded a claim against its former CEO for a misrepresentation that allegedly led to a “without cause”  termination agreement that conferred substantial benefits

The Complaint alleges a constellation of facts that allow a reasonable inference the Company relied on Easterbrook’s statements when deciding to terminate him without “cause.” It is alleged that Easterbrook lied to investigators regarding his prior sexual relationships with employees.  As part of the investigation, Easterbrook turned over his company phone to be searched. While this search revealed nothing, it later became evident that Easterbrook had deleted incriminating evidence from his phone. This active concealment makes it at least reasonably conceivable the Company had no way of knowing the full extent of Easterbrook’s misconduct.

The initial complaint involved conduct that

was consensual, non-physical and involved mainly provocative text messages and video calls on her and Easterbrook’s cell phones.

But it was allegedly  later learned

After his separation, McDonald’s discovered Easterbrook had engaged in several other inappropriate work-place relationships with subordinates notwithstanding his representation that the relationship that prompted his termination was an isolated transgression. McDonald’s also learned that Easterbrook had orchestrated a substantial grant of equity to one of the employees with whom he was having a sexual relationship in clear violation of Company policy. This litigation followed.

Policy 

The form of an agreement will not defuse this court’s abhorrence of fraud or alter the public policy that animates this court’s insistence that anti-reliance provisions use clear terms to reflect the parties’ mutual understanding that neither is relying upon the truth (or not) of the other’s extracontractual promises or statements. Easterbrook’s argument to the contrary is difficult to follow and, in any event, not even remotely supported by our law.

Motion to dismiss denied.

CNBC reported on the litigation. (Mike Frisch)