McDonald’s Urges Judge to Let Easterbrook Clawback Suit Proceed

(Bloomberg) -- McDonald’s Corp.’s lawyers urged a judge not to throw out a lawsuit in which it seeks to claw back $37 million in stock from ex-CEO Steve Easterbrook, saying his claim that the case should have been filed in Illinois has no merit.

Easterbrook, who was ousted last year over a sexual relationship with an underling, is wrong in arguing that the terms of the stock grants require McDonald’s to sue him in his home state rather than in Delaware, the chain’s corporate home, John Spiegel, one of the company’s lawyers, told a judge Friday.

McDonald’s would have had a proper claim of breach of fiduciary duty against Easterbrook in Delaware even if “he’d never got a single share of stock,” Spiegel told Delaware Chancery Court Judge Joseph Slights III in a video hearing. The judge will rule later on whether the case can proceed.

The chain could have sued to recoup “his bonus and big salary” over his inappropriate relationships and alleged lies about them, Spiegel added. Easterbrook’s salary was $17 million when he was ousted, one of his lawyers told Slights.

The fight over Easterbrook’s compensation has become one of the highest-profile examples of a big corporation grappling with the #MeToo era. McDonald’s officials accuse Easterbrook of lying to them about how many subordinates he had sexual relationships with and destroying evidence of those liaisons.

The company, second in the world in number of global locations only to Subway Restaurants, says its bylaws require claims against executives and directors be heard in Delaware, the corporate home to more than 60% of Fortune 500 companies. Chancery court is the nation’s prime venue for resolving high-profile corporate disputes.

Easterbrook’s lawyers argue that the stock grants and their client’s severance agreement require all litigation over them to be heard in state court in Illinois.

“Apart from being McDonald’s state of incorporation, Delaware has no connection to this case,” Kristen Hudson, one of the former executive’s lawyers, told Slights.

Hudson also argued that the case should be dismissed, since the chain can’t show it was reasonable to rely on Easterbrook’s statements about his romantic liaisons when the board granted his severance. She noted that McDonald’s directors hired lawyers to review Easterbrook’s actions before they allowed him to keep the stock grants.

“The idea that McDonald’s shouldn’t be able to rely on statements, made as part of a board of directors investigation, by a CEO who has a duty to be truthful is a meritless position,” Spiegel countered.

The case is is McDonald’s Corp. v. Easterbrook, 2020-0658, Delaware Chancery Court (Wilmington).

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