Judge sides with Oversee.net on narrow issue in lawsuit.
The Honorable Stephen V. Wilson has issued a verdict in the first trial between Monte Cahn and his former employer, Oversee.net.
The decision was extremely narrow, covering just one aspect of Cahn’s claims against the company.
Cahn had a bonus plan that was essentially an earnout from when Oversee.net bought Moniker from Seevast. It provided up to $13 million over three years.
One of the bonus measures was an overall Oversee EBITDA number that was to be set each year by the board. When business conditions deteriorated, the board never ended up setting the goal specific to the incentive plan.
However, it did set a company budget that had an EBITDA goal. This goal was used for other management at the company. Cahn argued that this is the number he should have been held to under his incentive plan.
The judge issued his findings solely about one question:
“whether Oversee promised Cahn that his Performance Goal under the MIP [incentive plan] would be identical to a target (the “Company Budget”) used as part of the process for determining bonuses for Oversee legacy management employees.”
The court decided that Oversee did not make this promise.
Oversee.net provided evidence from its negotiations with Cahn before he joined the company that showed the company explicitly said it would not hold Cahn’s bonus measures to be consistent with the rest of management. Its goal, as stated in the incentive plan, was to reward “significant contributions toward the continued or improved profitability and growth of the Company ”
MonikerOversee.net’s 2008 EBITDA “budget” goal was $51.1 million. That goal was reduced by more than 50% to $23.9 million for 2009. Since the earnout was designed to reward growth, the judge said it wouldn’t make sense for this budget number to apply to Cahn’s bonus plan.
Oversee.net later offered Cahn an alternative bonus plan when it realized the existing one wouldn’t give him much of an incentive because he was unlikely to hit the lofty numbers. Afterall, the company slashed its own projections by half. Cahn was able to receive a bonus under the old plan or the new plan.
In 2009, Cahn received a bonus under the new plan (with reduced targets) that was about 10% of what he would have gotten under the old plan.
The judge questioned how Cahn would have accepted this reduced bonus if he thought he was due $1 million or more under the original bonus plan.
As I stressed at the beginning of this post, this is just one narrow issue in the case Cahn brought against Oversee. There will be much more to come.
You can read the judge’s decision here.
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