## Facts

- Arcadian Corporation agreed to be acquired in a merger in which Arcadian would be merged into PCS Nitrogen, a wholly owned subsidiary of Potash Corporation of Saskatchewan, Inc. (PCS).
- Arcadian entered change-in-control employment/severance agreements with three senior executives: J. Douglas Campbell (President/CEO), Peter H. Kesser (General Counsel), and Alfred L. Williams, Jr. (CFO).
- The agreements provided qualifying severance benefits following a change in control, calculated as three times base salary plus three times the average of specified incentive compensation over the prior two years.
- The Arcadian board approved the merger and the executive agreements on September 2, 1996.
- The agreements included a successor provision under which failure of the successor to expressly assume Arcadian’s obligations would trigger the severance payments.
- Before closing, the parties disputed what compensation counted as “bonus, profit sharing, and other incentive payments” under the severance formula.
- Two days before closing, Arcadian demanded that PCS and PCS Nitrogen execute assumption agreements expressly assuming Arcadian’s obligations; they did so, and the merger closed on March 6, 1997.
- After closing, Kesser was terminated at closing; Campbell and Williams were offered positions that materially differed from their prior roles and declined.
- PCS acknowledged the executives were entitled to severance benefits but did not pay even the undisputed amounts within the contractual timeframe.
- The executives sued PCS for breach of contract; PCS sought dismissal for failure to join PCS Nitrogen and later challenged enforceability and damages; the district court ruled for the executives and awarded severance, fees, and certain tax-related amounts.

## Issues

1. Whether PCS’s express assumption of Arcadian’s severance obligations was supported by consideration and thus enforceable against PCS.
2. Whether the severance (“golden parachute”) agreements were void as against public policy for allegedly lacking a legitimate corporate purpose.
3. Whether the severance formula’s multiplier clause was correctly interpreted to determine what compensation components were included and what damages were recoverable.
4. Whether the action should have been dismissed for failure to join PCS Nitrogen as an indispensable party.

## Decision

- The Sixth Circuit affirmed the judgment enforcing the severance agreements against PCS.
- The court held the assumption agreements were supported by consideration because PCS obtained transactional benefits (including avoiding automatic payment triggers and facilitating closing).
- The court rejected PCS’s public-policy challenge, treating board-approved change-in-control severance arrangements as enforceable contracts serving legitimate corporate purposes.
- The court upheld the finding that post-merger termination/material job change conditions were satisfied and that PCS breached by failing to pay as required.
- The court largely upheld the district court’s construction of the multiplier clause and resulting damages award, addressing specific calculation disputes without disturbing the core liability and enforceability rulings.
- The court did not require dismissal for nonjoinder of PCS Nitrogen where PCS itself expressly assumed the relevant obligations and could be held liable.

## Legal Principles

- An acquirer’s express assumption of a target’s employment or severance obligations is enforceable when the assumption is part of the merger bargain and confers a concrete benefit on the acquirer; separate new consideration running directly to each employee is not required.
- Change-in-control severance agreements approved by a corporation’s board are not invalid per se on public-policy grounds; they may serve legitimate corporate purposes in merger transactions.
- Where severance benefits are conditioned on post-transaction involuntary termination or material diminution of duties leading to resignation, those conditions are enforced according to contract terms when supported by the record.
- Contract interpretation of compensation formulas turns on the agreement’s language and admissible evidence of intent; a trial court’s reasonable construction is generally upheld on appeal absent clear error or legal mistake.
- A defendant that has assumed contractual obligations may be sued directly without mandatory joinder of an affiliated entity when complete relief can be afforded against the assuming party.

## Conclusion

The Sixth Circuit held PCS liable for board-approved change-in-control severance payments after PCS expressly assumed Arcadian’s obligations, received transactional benefits constituting consideration, and then failed to pay benefits triggered by termination or materially altered job offers; broad public-policy attacks and joinder objections did not defeat enforcement.


Campbell v. Potash Corp. of Saskatchewan, Inc., 238 F.3d 792 (6th Cir. 2001)