The opinion of the court was delivered by: Newman, Senior Judge of the United States Court of International Trade sitting as a United States District Court Judge by designation.
OPINION, FINDINGS OF FACT AND CONCLUSIONS OF LAW
Andre Launois ("Launois"), a resident and citizen of France,
brings this diversity action alleging breach of an Employment
Agreement entered into between Launois and defendant
Midland-Ross Corporation ("Midland-Ross") dated July 16, 1986.
Launois requests recovery of: (1) cash bonuses of between
$70,000 and $120,000 per annum for 1987 and 1988, with
interest, pursuant to the Second Proviso in § 3.1(b) of the
1986 Employment Agreement as it applies to the FL Aerospace
Corporation Executive Incentive Compensation Plan (the "1987
Plan")*fn1; (2) a declaratory judgment that Launois' pension
benefits in accordance with § 4.2 of the 1986 Employment
Agreement should be calculated by including the bonuses
mentioned heretofore as well as $360,000 compensation Launois
was paid in 1987 for assisting in the sale of Midland-Ross'
thermal systems businesses and assets to Compagnie de Fives
Lille ("Fives Lille"); (3) miscellaneous benefits amounting to
$92,000 under § 3.1(d) of the 1986 Employment Agreement; and
(4) recompense for legal fees and disbursements of $127,000 in
compliance with § 11.4(b) of the 1986 Employment Agreement.
Launois seeks a joint and several judgment against defendants
contending that Forstmann Little & Co. ("Forstmann Little")
assumed Midland-Ross' contractual obligations following
Forstmann Little's acquisition of Midland-Ross by means of a
leveraged buyout consumated in September of 1986.
Defendants respond that Launois is not entitled to any
bonuses for 1987 and 1988, any miscellaneous benefits, or
recompense for legal fees under the terms of the 1986
Employment Agreement. Further, defendants argue that Launois
erroneously contends that the allegedly unpaid bonuses and
payment of $360,000 should be included in the base for
determining Launois' pension calculations pursuant to § 4.2 of
the 1986 Employment Agreement, and that Launois' request for a
declaratory judgment to that effect should be denied.
Defendants therefore request dismissal of all claims.
Jurisdiction is founded on diversity of citizenship,
28 U.S.C. § 1332(a) (1982). The amount in controversy, exclusive of
interest and costs, exceeds $10,000, the jurisdictional amount
required at the time this action was instituted. Venue is
proper in accordance with 28 U.S.C. § 1391(a), (c) (1982).
Under § 11.5 of the 1986 Employment Agreement which
stipulates that the parties are to be governed by the laws of
the state of Ohio, the substantive law of Ohio applies. As a
matter of course, New York courts give effect to contractual
choice of law clauses. See e.g., Freedman v. Chemical Constr.
Corp., 43 N.Y.2d 260, 372 N.E.2d 12, 401 N.Y.S.2d 176 (1977);
Compagnia de Inversiones Internacionales v. Industrial Mortgage
Bank of Finland, 269 N.Y. 22, 198 N.E. 617 (1935), cert.
denied, 297 U.S. 705, 56 S.Ct. 443, 80 L.Ed. 993 (1936);
Restatement (Second) of Conflicts of Laws § 187.
This matter was tried to the court without a jury. In
accordance with Rule 52, Fed.R.Civ.P., the court makes the
following Findings of Fact and Conclusions of Law:
The 1984 Employment Agreement
In 1984 Launois moved to Cleveland, Ohio from Paris, France
to become Executive Vice President in charge of Midland-Ross'
worldwide thermal business segment, which included
Stein-Heurtey. While it was not typical at that time for
Midland-Ross executives to have employment agreements, Launois
was very concerned about relocating his family from Europe
without job security, and hence Launois and Midland-Ross
entered into a formal Employment Agreement designed to assure
Launois that he would work in Midland-Ross' Ohio office for at
least three years. The Agreement guaranteed Launois a starting
annual salary of $175,000, making him eligible to be awarded
bonuses in accordance with Midland-Ross' various bonus
programs: Management Incentive Compensation Plan ("MICP"),
Executive Performance Plan ("EPP"), and its predecessor,
Executive Incentive Compensation Plan ("EICP").
In addition, the 1984 Employment Agreement enabled Launois to
participate in Midland-Ross Corporation Pension Plan for
Salaried Employees ("Salaried Pension Plan") for the duration
of his employment with Midland-Ross which would entitle him to
monthly pension benefit payments.
In April or May of 1986, Midland-Ross was offered for sale,
and during May and June of 1986 Harry J. Bolwell ("Bolwell"),
the Chief Executive Officer and Chairman of the Board of
Directors of Midland-Ross, negotiated with several groups
interested in acquiring Midland-Ross. In due course, Forstmann
Little contracted to purchase a controlling interest in
Midland-Ross in conformance with a certain Agreement and Plan
for Merger, dated June 30, 1986. Thereafter in September of
1986, a controlling interest in Midland-Ross was acquired by
Forstmann Little through one or more of its affiliates.
Midland-Ross' name was changed to FL Aerospace, Inc. ("FL"),
and Richard Veiser ("Veiser") became the President and Chief
Executive Officer of the successor company.
The 1986 Employment Agreement
In May 1986, during the period that the sale of a controlling
interest in Midland-Ross to Forstmann Little was in the process
of negotiations, Bolwell suggested to, inter alios, Launois
that he might wish to enter into a new Employment Agreement in
order to provide Forstmann Little with flexibility in modifying
existing bonus plans and to provide Launois with job security
in light of the likely change of ownership of Midland-Ross. The
parties agreed that Midland-Ross' attorneys, Jones, Day, Reavis
& Pogue of Cleveland would draft the new Employment Agreement
(Pre-Trial Order "PTO" 7).
On June 26, 1986 Frank N. Fittipaldi ("Fittipaldi"), Vice
President and General Counsel of Midland-Ross, provided Launois
with a draft of a proposed Employment Agreement for his review.
Thereupon, Launois retained an attorney Frank Rasmussen
("Rasmussen"), of the law firm of Squire, Sanders & Dempsey of
Cleveland. Launois and Rasmussen consulted on June 30, 1986 and
again on July 2, 1986.
Prior to the execution of the new Employment Agreement,
Launois traveled to France and during his stay received from
Fittipaldi a second draft. Launois noted that the changes he
requested had been incorporated into the second draft, and also
that Article III on compensation, specifically § 3.1(b)
relating to incentive compensation plans and arrangements,
contained substantial modifications from the first draft.
Launois did not take issue with the modified language contained
in the second draft until he returned to Cleveland on July 30,
1986 and met with William Ludwig ("Ludwig"), Senior Vice
President of Human Resources for FL Industries, Inc., which
company was responsible for, inter alia, overseeing and
coordinating the acquisition of Midland-Ross on behalf of
Forstmann Little. During the course of discussions relating to
the modified second draft, Ludwig explained that the revisions
reflected in § 3.1(b) of the new 1986 Employment Agreement had
been made to provide Forstmann Little with more flexibility to
modify, amend or terminate existing bonus programs.
Launois also met with his attorney, Rasmussen, on July 30 to
further review the new Employment Agreement, especially in
light of the various proposed revisions incorporated into the
second draft by Midland-Ross. Launois was advised by Rasmussen
to sign the modified second draft of the 1986 Employment
Agreement, and therafter Launois and Midland-Ross entered into
the new 1986 Employment Agreement. The effective date was July
16, 1986 although the Agreement was actually executed sometime
after July 30, 1986 when Launois had returned from Paris to
Sale of Thermal Systems Group (Stein-Heurtey)
In September 1986, Morgan Stanley & Co. ("Morgan Stanley")
was retained by Forstmann Little and FL to market certain of
FL's divisions, including Stein-Heurtey. On January 20, 1987
Nicholas Forstmann ("Forstmann"), one of the principals of
Forstmann Little, met with Launois and requested that he assist
Morgan Stanley in selling the divisions comprising the thermal
systems group. Indeed, Forstmann offered to pay Launois a fee
of $360,000 for assisting Morgan Stanley and Midland-Ross with
the sale of the various divisions (Tr. 40-42).
Launois assisted Morgan Stanley by drafting offering
materials for these divisions and by meeting with potential
buyers, viz, with more than seven prospective buyers, including
Banque Paribas (Tr. 51). On January 30, 1987 — ten days after
Launois was brought in to assist Morgan Stanley — FL
contracted to sell a controlling interest in Stein-Heurtey and
its subsidiaries to Fives Lille, a subsidiary of Banque
Paribas*fn2. The actual sale was consummated on March 16,
1987, and on March 25, 1987 Midland-Ross paid Launois the
$360,000 compensation that Forstmann had promised Launois for
assisting Morgan Stanley and Midland-Ross. After March 16, 1987
Launois did not actively work for FL, but the 1986 Employment
Agreement was in effect through December 31, 1988.
The court turns to a discussion of Launois' various claims
for relief. In bringing this contract action, fundamentally,
Launois bears the burden of proving, by a preponderance of the
evidence, breach of contract terms and damages suffered
thereby. See e.g., Capitol Equipment Enterprises, Inc. v.
Wilson Concepts Inc., 19 Ohio App.3d 233, 484 N.E.2d 237 (Ohio
Ct. App. 1984); List & Son Co. v. Chase, 80 Ohio St. 42,
88 N.E. 120 (Ohio 1909).