Opinion ID: 518814
Heading Depth: 2
Heading Rank: 2

Heading: The Good Reason Clause

Text: 49 My disagreement with the majority also extends to its consideration of the so-called Good Reason or Demotion clause which provides that following a takeover an officer may voluntarily trigger termination with Eastern for Good Reason and still receive the severance package. Good Reason, in pertinent part, means: 50 a change in your status or position(s) as an officer of the Company which, in your reasonable judgment, does not represent a promotion from your status and position(s) as was in effect immediately prior to the Change in Control of the company or the assignment to you of any duties or responsibilities which, in your reasonable judgment, are inconsistent with this status or position(s), or any removal of you from or any failure to reappoint or reelect you to such position(s), except in connection with the termination of your employment for Cause, Disability or Retirement or as a result of your death or by you other than for Good Reason. 51 Agreement, at 4. The clause requires at a minimum that Eastern demote or reassign an officer to some employment position that arguably represents a detrimental change in his status or position. 52 The majority agrees with Eastern's argument that the inclusion of this Good Reason provision was presciently inserted into the Agreement to apply in the situation at hand. In the majority's view, the Good Reason clause requires that Shipner terminate all employment with Eastern by voluntarily renouncing his right to return to his safeguarded pilot's position to receive his golden parachute. 53 I disagree with the majority's view that Shipner must voluntarily invoke the Good Reason or Demotion clause in order to receive benefits under the Agreement. Eastern could not nullify Shipner's right to return as a pilot and the record and the Agreement are devoid of any indication that Shipner bargained away or renounced his valuable right to remain as an Eastern pilot by accepting the Agreement. In fact, the majority recognizes that the contrary is true--Shipner maintained his right to his pilot position during his tenure as an Eastern officer. Consequently, Eastern exercised the total extent of its power by terminating Shipner from his position as an officer; it could not further deprive him of his pilot position. Thus, Eastern did not demote or reassign Shipner, it terminated him within the meaning of the Agreement. 1 The majority's reliance on the Good Reason or Demotion clause is, therefore, unnecessary. 54 The majority, however, goes on to misconstrue the purpose of this clause which is to protect officers from successful corporate raiders who could deprive incumbent management of their golden parachutes by shifting (i.e. demoting) these officers from their current positions to less desirable ones without incurring the costs of the severance packages. The clause, therefore, protected Shipner from Eastern's new management demoting him from his position as an officer to some less desirable position following a takeover. This situation contrasts with what actually occurred. 55 Prior to the Eastern takeover, Shipner was entitled to both his officer and pilot positions. After the takeover, Eastern terminated Shipner from his officer position. Shipner, however, retained his rights in his formerly-established pilot position. Thus, Eastern did not demote Shipner to his pilot position because Shipner already was entitled to the position. A demotion would have necessarily required Eastern to voluntarily retain Shipner in a position from which it could have terminated him. Instead, Eastern terminated Shipner as an officer of the company and did not re-appoint him to another position. 56 Had Eastern demoted Shipner after the takeover from his senior officer's position to a mid-management position, Shipner could have invoked the Good Reason clause and argued that there was a change in his status or position. In this situation, he is demoted because Eastern shifted him from his position as an officer to another less-desirable position and one to which he was not previously entitled. Instead, Eastern terminated Shipner in his officer's position and he returned voluntarily to his safe-guarded pilot position. The Good Reason clause simply does not apply in this instance.