A state court judge in Delaware on Tuesday refused to dismiss McDonald’s lawsuit to recover millions in severance payments from former CEO Steve Easterbrook.
The decision will enable the lawsuit, which was filed in August, to proceed against Easterbrook, who was fired in November 2019 over a consensual relationship with an employee.
The Chicago-based burger giant filed the lawsuit to recover a severance package, likely worth more than $40 million, after it discovered Easterbrook had multiple additional relationships with subordinates. The company said that Easterbrook did not inform the company’s board of those relationships, and that had they known, they would have fired him “for cause” and wouldn’t have allowed him to keep stock options and other grants when he left.
Easterbrook sought to dismiss the lawsuit, arguing that it was filed in the wrong court. He also argued that the company only did a limited investigation of its former CEO and should have known about the other relationships—which were discovered through photos of the employee sent from Easterbrook’s company email to his personal address.
Joseph Slights, vice chancellor in the Delaware Court of Chancery, agreed with McDonald’s in the case, saying “there is no other basis to imply a restriction on McDonald’s presumptive right to choose its forum.”
Slights also said that the separation agreement between McDonald’s and Easterbrook “is not so broad that it would deny McDonald’s the right to hold its former CEO and member of its board of directors accountable for breach of fiduciary duty and fraud on the company.”
In a statement, McDonald’s said it can now “move forward with our case.”
“With the court’s denial of Steve Easterbrook’s motion to dismiss, we can now move forward with our case seeking the return of his severance payment and to hold him accountable for his lies and his efforts to destroy evidence,” the company said in a statement. “He violated the company’s policies, disrespected its values, and abused the trust of his coworkers, the board, our franchisees and our shareholders. We look forward to bringing the evidence of Easterbrook’s misconduct before the court and to proving our case.”
McDonald’s lawsuit, and comments and its legal filings, have taken the company’s relationship with its former CEO in a surprising direction—before the matter arose in October 2019 Easterbrook was widely considered one of the most relevant executives in the industry.
But the company has been taking numerous steps over the past year to distance itself from Easterbrook and his apparent conduct—it has completely overhauled its human resources function, for instance, and has promised to operate with a different set of values under CEO Chris Kempczinski.
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