Is the Management Committee Obliged to Follow the Guidelines That Are to Be Followed by the Compensation Committee ?
In Roan v. Keck. Mahin & Cate, 962 F.2d 10 (7th Cir. 1992), a magistrate judge dismissed the plaintiff's complaint for failure to state a breach of contract cause of action. Roan, 1992 U.S.
The plaintiff was a capital partner in the defendant law firm.
The plaintiff alleged the firm and its partners breached the compensation provisions of the partnership agreement.
These required the firm's compensation committee to use certain guidelines in developing its recommendations to the firm's management committee.
The guidelines required the compensation committee to consider:
"The quality of each lawyer's work; the initiative and responsibility displayed in handling Firm clients; the industry and application displayed; the lawyer's judgment and experience in the practice of law; the new business, if any, attracted and the profitability of his work to the firm; and the client development and preservation and other significant contributions, if any, to the operation and success of the Firm." Roan, 1992 U.S.
But the compensation committee's recommendations were not final.
The management committee could make changes, unrestrained by the guidelines.
The decisions of the management committee would be final absent amendment by a consensus of the capital partners. Roan, 1992 U.S.
The magistrate judge concluded the plaintiff had received the benefit of the bargain and dismissed the complaint. on appeal, the circuit court found the plaintiff's breach of contract claim failed for two reasons. Roan, 1992 U.S.
First, only the compensation committee and not the management committee was subject to the guidelines. Roan, 1992 U.S.
The plaintiff did not allege that the compensation committee failed to follow the guidelines. Instead he alleged the firm and its partners failed to follow the guidelines.
The firm and partners were not obliged to follow the guidelines and so the plaintiff's complaint failed. Roan, 1992 U.S.
The circuit court further found the guidelines were "too indefinite to create any enforceable contract rights," the management committee had "unlimited discretion" in making the final determination. Roan, 1992 U.S.