Gone With the Wind Turbines

The world’s largest wind turbine company, Vestas Wind Systems A/S, recently terminated its former CFO’s severance agreement after it discovered that he entered into unauthorized deals in India.  When Vestas announced its termination of its Henrik Noerremark’s severance agreement, it said that his unauthorized contracts cost the company about 18 million euros and that it is seeking to void the deals.  The company said it was also considering whether to bring claims against Noerremark.

What kinds of claims might Vestas pursue? 

It may depend on whether Vestas is able to avoid the contracts.  Even though it says that Noerremark didn’t have contracting authority, it might still be bound under the doctrine of apparent authority if it created the impression that Noerremark was authorized to enter into the contracts and the Indian third parties reasonably relied on that authority.  If Vestas cannot void the deals, then it may be likely to pursue claims for breach of fiduciary duty or negligence against Noerremark.  Under general agency principles, Noerremark, as agent of Vestas, could be liable to Vestas for “loss caused . . . by any breach of duty.”  Rest. of Agency (Second) § 401.  Thus, if Noerremark failed to conduct himself with reasonable care (such as by not doing the things a reasonable officer would have done to avoid entering into the contracts), or if he failed to act honestly and loyally in his relationship with Vestas (such as by lying to Vestas about what he was doing or taking kickbacks for the contracts), he could be forced to pay to any harm for Vestas that resulted.  If he didn’t do any of those things, then Vestas might have a steeper hill to climb.

And for Noerremark, who is now deprived of the benefits of his severance agreement?  Tomorrow is another day.  The WSJ reports that he plans to file his own lawsuit.

• Breach of Contract
• Fiduciary Duties