Case 2:19-cv-08927-ES-CLW Document 50 Filed 06/20/19 Page 1 of 4 PageID: 590 Gavin J. Rooney LOWENSTEIN SANDLER LLP One Lowenstein Drive Roseland, NJ 07068 973.597.2500 Andrew J. Levander (admitted pro hac vice) Jeffrey A. Brown (admitted pro hac vice) DECHERT LLP 1095 Avenue of the Americas New York, NY 10036 212.698.3500 Attorneys for Defendant Mark Frissora UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY THE HERTZ CORPORATION and HERTZ GLOBAL HOLDINGS, INC., Plaintiffs, v. Civil Action No. 2:19-cv-08927 NOTICE OF DEFENDANT MARK FRISSORA’S MOTION TO DISMISS PLAINTIFFS’ COMPLAINT Return Date: August 19, 2019 MARK FRISSORA, ELYSE DOUGLAS, and JOHN JEFFREY ZIMMERMAN, Defendants. ORAL ARGUMENT REQUESTED Case 2:19-cv-08927-ES-CLW Document 50 Filed 06/20/19 Page 2 of 4 PageID: 591 Herbert Biegel LAW OFFICES OF HERBERT BEIGEL 5641 N. Chieftan Trail Tucson, Arizona 85750 520.825.1995 TO Douglas E. Motzenbecker GORDON & REES LLP 18 Columbia Turnpike – Suite 220 Florham Park, New Jersey 07932 973.549.2500 PLEASE TAKE NOTICE that at 9:00 a.m. on August 19, 2019, or such other time and date set by the Court, Defendant Mark Frissora, by and through his undersigned attorneys, will move before the Honorable Esther Salas, U.S.D.J., United States District Court for the District of New Jersey, Martin Luther King Jr. Federal Bldg. and U.S. Courthouse, Room 2060, 50 Walnut Street, Newark, New Jersey, for entry of an Order granting Defendant Frissora’s Motion to Dismiss Plaintiffs’ Complaint, pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(g). PLEASE TAKE FURTHER NOTICE that Defendant Frissora will rely upon the accompanying brief in support of his motion to dismiss. PLEASE TAKE FURTHER NOTICE that Defendant Frissora respectfully requests oral argument on this motion. PLEASE TAKE FURTHER NOTICE that a proposed form of Order is submitted herewith. 2 Case 2:19-cv-08927-ES-CLW Document 50 Filed 06/20/19 Page 3 of 4 PageID: 592 Dated: June 20, 2019 Respectfully submitted, LOWENSTEIN SANDLER LLP /s/ Gavin J. Rooney Gavin J. Rooney One Lowenstein Drive Roseland, NJ 07068 973.597.2500 Attorneys for Defendant Mark Frissora Andrew J. Levander (admitted pro hac vice) Jeffrey A. Brown (admitted pro hac vice) DECHERT LLP 1095 Avenue of the Americas New York, NY 10036 212.698.3500 Attorneys for Defendant Mark Frissora 3 Case Document 50 Filed 06/20/19 Page 4 of 4 PageID: 593 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 1 of 37 PageID: 594 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY THE HERTZ CORPORATION and HERTZ GLOBAL HOLDINGS, INC., Civil Action No. 2:19-cv-08927 Plaintiffs, Hon. Esther Salas, U.S.D.J. Hon. Cathy L. Waldor, U.S.M.J. v. MARK FRISSORA, ELYSE DOUGLAS, and JOHN JEFFREY ZIMMERMAN, Oral Argument Requested Defendants. MEMORANDUM OF LAW IN SUPPORT OF MARK FRISSORA’S MOTION TO DISMISS PLAINTIFFS’ COMPLAINT Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 2 of 37 PageID: 595 TABLE OF CONTENTS Page PRELIMINARY STATEMENT ...............................................................................1 STATEMENT OF FACTS ........................................................................................6 STANDARD OF REVIEW .....................................................................................12 ARGUMENT ...........................................................................................................13 I. II. HERTZ’S CLAWBACK CLAIMS FAIL AS A MATTER OF LAW ........................................................................................................13 A. Hertz Failed To Implement The Clawback Policies And They Are Therefore Unenforceable Against Frissora ....................................13 B. Plaintiffs Fail Adequately To Allege That The Conduct Standards In the Clawback Policies Have Been Triggered...................15 C. Plaintiffs Have Not Adequately Alleged That Frissora’s Conduct Caused Or Contributed To The Restatement ........................................20 PLAINTIFFS’ COUNT IV IS LEGALLY FLAWED AND MUST BE DISMISSED................................................................................21 A. Hertz Fails To State A Claim For Breach Of The Separation Agreement..............................................................................................21 B. Hertz Has Failed Adequately To Plead Consequential Damages .........23 C. Hertz Improperly Seeks Tort Damages For A Breach Of Contract Claim.......................................................................................26 D. Hertz Has Failed Adequately To Plead Its Claimed Special Damages Under Rule 9(g) .....................................................................28 CONCLUSION........................................................................................................31 i Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 3 of 37 PageID: 596 TABLE OF AUTHORITIES Page CASES Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)............................................................................................12 Connelly v. Steel Valley Sch. Dist., 706 F.3d 209 (3d Cir. 2013) ...............................................................................12 Deauville Hotel Mgmt., LLC v. Ward, 219 So. 3d 949 (Fla. 3d DCA 2017)...................................................................24 Delzotti v. Morris, Civ. No. 14-7223 JBS/AMD, 2015 WL 5306215 (D.N.J. Sept. 10, 2015) .............................................................................................................28, 29 Dittman v. Univ. of Pittsburg Med. Ctr., 196 A.3d 1036 (Pa. 2018)...................................................................................27 Dolan Title & Guar. Corp. v. Hartford Accident & Indem. Co., 395 So.2d 296 (Fla. 5th DCA 1981)...................................................................24 Falat v. County of Hunterdon, No. 12-6804 (SRC), 2013 WL 1163751 (D.N.J. Mar. 19, 2013).......................18 Feldkamp v. Long Bay Partners, LLC, 773 F. Supp. 2d 1273 (M.D. Fla. 2011), aff’d, 453 F. App’x 929 (11th Cir. 2012).............................................................................................23, 24 Fialkowski v. Greenwich Home for Children, Inc., 921 F.2d 459 (3rd. Cir. 1990) .............................................................................16 Frissora v. Hertz Global Holdings, Inc., C.A. No. 2019-0246-KSJM (Del. Ch. May 23, 2019) .........................................3 Galicki v. New Jersey, No. CIV.A. 14-169 JLL, 2015 WL 3970297 (D.N.J. June 29, 2015) ..................6 General Motors Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296 (3d Cir. 2001) ...............................................................................15 ii Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 4 of 37 PageID: 597 Hager v. Live Nation Motor Sports, Inc., 665 F.Supp.2d 1290 (S.D. Fla. 2009) .................................................................16 HTP, Ltd. v. Lineas Aereas Costarricenses, S.A., 685 So.2d 1238 (Fla. 1996) ................................................................................27 Huyler’s v. Ritz–Carlton Rest. & Hotel Co., 6 F.2d 404 (D. Del. 1925)...................................................................................28 In re Burlington Coat Factory Sec. Lit., 114 F.3d 1410 (3d Cir. 1997) .............................................................................12 In re Hertz Global Holdings Inc., 905 F.3d 106 (3d Cir. 2018) ...............................................................................17 In re Hertz Global Holdings, Inc., No. 2:13-cv-07050MCA/LDW (D.N.J. Mar. 24, 2016).....................................10 In re Lear Corp. S’holder Litig., 967 A.2d 640 (Del. Ch. 2008) ............................................................................16 In re TIBCO Software Inc. Stockholders Litig., No. 10319-CB, 2015 WL 6155894 (Del. Ch. Oct. 20, 2015) ............................16 Ingris v. Borough of Caldwell, No. 14-855 (ES), 2015 WL 3613499 (D.N.J. June 9, 2015) ..............................18 Institutional Inv’rs. Grp. v. Avaya, Inc., 564 F.3d 242 (3d Cir. 2009) ...............................................................................17 Instructional Sys., Inc. v. Comput. Curriculum Corp., 614 A.2d 124 (1992)...........................................................................................21 Japhet v. Francis E. Parker Mem’l Home, Inc., No. 14-01206 (SRC), 2014 WL 3809173 (D.N.J. July 31, 2014)......................18 KBZ Commc’ns Inc. v. CBE Technologies LLC, 634 F. App’x 908 (3d. Cir. 2015) .......................................................................27 Land Title of Cent. Fla., LLC v. Jimenez, 946 So. 2d 90 (Fla. 5th DCA 2006)....................................................................24 iii Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 5 of 37 PageID: 598 Lindon v. Dalton Hotel Corp., 49 So.3d 299 (Fla. 5th DCA 2010)...............................................................23, 24 Maidmore Realty Co. v. Maidmore Realty Co., 474 F.2d 840 (3d Cir. 1973) ...............................................................................30 Matrix Capital Mgmt. Fund, LP v. BearingPoint, Inc., 576 F.3d 172 (4th Cir. 2009) ..............................................................................17 McPadden v. Sidhu, 964 A.2d 1262 (Del. Ch. 2008) ....................................................................16, 17 Morse v. Lower Merion School Dist., 132 F.3d 902 (3d Cir. 1997) ...............................................................................26 Nami v. Fauver, 82 F.3d 63 (3d Cir. 1996) ...................................................................................12 Neal v. Honeywell, Inc., 191 F.3d 827 (7th Cir. 1999) ..............................................................................28 Oran v. Stafford, 226 F. 3d 275 (3d Cir. 2000) ................................................................................7 Pension Benefit Gaur. Corp. v. White Consol. Indus., 998 F.2d 1192 (3d Cir. 1993) .............................................................................12 Ramirez v. Hertz Global Holdings, Inc. et al.............................................................9 Sheeran v. Blyth Shipholding S.A., No. 14-5482, 2015 WL 9048979 (D.N.J. Dec. 16, 2015) ..................................18 Solash v. Telex Corp., 13 Del. J. Corp. L. 1250 (Del. Ch. 1988). ....................................................16, 17 Street-Works Dev. LLC v. Richman, No. 13CV774 (VB), 2015 WL 872457 (S.D.N.Y. Feb. 3, 2015).......................30 United Indus., Inc. v. Simon-Hartley, Ltd., 91 F.3d 762 (5th Cir. 1996) ................................................................................30 iv Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 6 of 37 PageID: 599 STATUTES FLA. STAT. ANN. § 1.120 .....................................................................................29 OTHER AUTHORITIES 5A Wright & Miller, Federal Practice & Procedure § 1310 (4th ed. 2019) ...................................................................................................................28 5A Wright & Miller, Federal Practice & Procedure § 1311 (4th ed. 2019) ...................................................................................................................29 Restatement (Second) of Conflicts of Laws § 187 (Am. Law Inst. 1969) ...................................................................................................................21 Rule 9(g)...................................................................................................1, 28, 29, 30 Rule 12(b)(6)............................................................................................................12 v Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 7 of 37 PageID: 600 Defendant Mark Frissora (“Frissora”) respectfully submits this Memorandum of Law in support of his Motion to Dismiss Hertz Global Holdings, Inc.’s and the Hertz Corporation’s (hereinafter collectively referred to as “Plaintiffs,” “Hertz” or the “Company”) Complaint (“Complaint”) with prejudice pursuant to Rules 12(b)(6) and 9(g) of the Federal Rules of Civil Procedure (“Rules”). PRELIMINARY STATEMENT In 2014, Hertz announced and ultimately issued in 2015 a restatement of its financial results for the years 2011, 2012, and 2013 (the “Restatement”), noting financial adjustments based on a myriad of small mistakes and accounting misjudgments in a company that had just completed a merger and headquarters relocation that resulted in significant turnover of accounting personnel. Even though neither Hertz nor any other court or regulator has alleged that a fraud was committed, today Hertz unfairly seeks to single out and blame a small number of its former executives, including Frissora, for the Restatement and subsequent events. Hertz also seeks damages beyond the return of compensation paid to those executives, requesting more than $200 million in consequential damages in the form of legal and other expert costs paid to finalize the Restatement and to defend itself against government investigations and shareholder litigations arising therefrom. Strikingly, this is not a fraud case. Years of investigative efforts by Hertz, the Government, and private plaintiffs have not uncovered any indication of fraud or Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 8 of 37 PageID: 601 intentional wrongdoing by anyone, including Frissora. Hertz has consistently defended the Company’s and Frissora’s conduct and made clear in other proceedings that the Restatement resulted from genuine errors, and not from any intentional misconduct. As further discussed herein, those arguments have been successful – no regulator or court has found wrongdoing connected to the Restatement. Having navigated the various lawsuits and investigations that followed the Restatement, Hertz has stopped defending Frissora and is now attacking him. Lacking any proof of intentional wrongdoing by Frissora but nonetheless seeking to cast blame somewhere, Hertz alleges that he and other officers of the Company engaged in “gross negligence” and that their conduct caused the Restatement. Hertz claims that Frissora’s conduct breached Hertz’s 2010 Clawback Policy (Count I) and its 2014 Clawback Policy (Count III) (together referred to as “the Clawback Policies”). Hertz also alleges that Frissora falsely certified, in connection with his resignation, that he had not acted with “willful gross neglect” during his time at the Company nor at the time of resignation knew of or “facilitated . . . financial or accounting improprieties or irregularities,” and therefore alleges Frissora breached his September 2014 separation agreement with the Company (the “Separation Agreement”) (Count IV).1 1 Hertz also sought in its Complaint a declaratory judgment barring the advancement of Frissora’s costs in defending against Hertz’s claims (Count V). Shortly after the commencement of this action, Frissora, Defendant John Jeffrey Zimmerman, and 2 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 9 of 37 PageID: 602 Hertz’s claims have no merit. First and foremost, Frissora did not act with gross negligence, and Hertz’s conclusory allegations to the contrary are inadequate. Gross negligence is an exacting standard to allege and, ultimately, to prove. When Hertz’s bald and conclusory allegations regarding Frissora’s conduct as CEO are stripped away and the remaining descriptions of what Frissora actually did are clearly and fairly seen, they depict an engaged and dedicated CEO acting in the Company’s interest, seeking to drive employee performance and to deliver shareholder value. The allegations do not portray the irrational, indifferent carelessness that is the hallmark of the gross negligence standard. It is telling that Frissora’s time at the Company marked a long run of growth and success – even accounting for the Restatement, which was modest in impact to Hertz’s financials – and that since his departure, Hertz’s results have consistently declined and its shares Defendant Elyse Douglas filed petitions for advancement and indemnification in Delaware Chancery Court. The Delaware Chancery Court has since granted advancement of expenses to all Defendants, including Frissora, explicitly in connection with, among other things, defending against Hertz’s clawback claims and the claims in the matter at hand. See Ex. A, Order Granting Plaintiffs’ Motion for Partial Summary Judgment, Frissora v. Hertz Global Holdings, Inc., C.A. No. 20190246-KSJM (Del. Ch. May 23, 2019) (filed contemporaneously herewith). Hertz sought an interlocutory appeal of that order or, in the alternative, the entry of an appealable final order. Hertz’s request was denied. Hertz has represented that it will abide by the Delaware Court’s ruling on advancement and Frissora’s indemnification claim remains pending in Delaware Chancery Court. 3 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 10 of 37 PageID: 603 have decreased in value. Notably, Frissora has served as a successful public company CEO since leaving Hertz. Second, even if Frissora’s conduct constituted gross negligence, which it did not, the Clawback Policies that Hertz claims Frissora breached are not contracts enforceable against him. The Clawback Policies each state on their face that their enforceability depends on their having been separately implemented in other instruments and agreements. Hertz does not adequately allege, conclusory assertions to the contrary notwithstanding, that it appropriately implemented the Clawback Policies. As such, the Clawback Policies cannot be enforced against him. Third, Hertz’s Count IV, which seeks more than $200 million in consequential damages on the basis of alleged misrepresentations in Frissora’s Separation Agreement, is a tort claim masquerading as a contract claim. The claim is thoroughly flawed as a legal matter and is inadequately pled. Consequential damages for breach of contract are only available in circumstances where they are foreseeable and causally connected to the alleged beach – circumstances not present here. Hertz has utterly failed to plead that its claimed damages were foreseeable, and Hertz’s allegations of causation are not only vague but also facially implausible. Setting aside for present purposes that Hertz cannot prove that Frissora’s Separation Agreement certifications were false (because it cannot prove that his conduct was grossly negligent or similarly that he facilitated or knew of financial or 4 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 11 of 37 PageID: 604 accounting improprieties), Hertz’s theory that the alleged misrepresentations – and not some other act or decision in the years preceding and subsequent to the Restatement – caused over $200 million in expenditures is ridiculous. Hertz cannot deny that hundreds of acts and decisions by other employees of the Company, many of which acts Frissora had no participation in or knowledge of, contributed to the Restatement. As set forth herein, the reason Hertz cannot deny these realities is that they have argued as much in this very Court. Hertz similarly cannot deny that the decisions by the Company to expend money in the wake of the Restatement were made not by Frissora but by auditors, third-party experts, outside counsel, internal counsel, institutional shareholders, and current and former members of the Hertz Board of Directors. To isolate Frissora’s contractual representations regarding his historical conduct as CEO as the cause of the Restatement and the cause of subsequent expenditures when the actions of so many others in a company of thousands and a wide range of outside experts had much more direct impact on the decisions that led to those expenditures truly strains credulity. The claim fails as a matter of law and Hertz’s pleading is vague, conclusory, and utterly inadequate. Ultimately, the convoluted and implausible nature of Hertz’s allegations betrays a simple truth – the Company is casting about for a scapegoat in the wake of a difficult and costly period. It is appropriately, but unintentionally, clear from the face of Hertz’s Complaint that Frissora did not cause the Company’s difficulties and 5 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 12 of 37 PageID: 605 that after resigning he had no causal role – nor could he – in what the Company chose to do in response to the Restatement. Hertz’s Complaint is a blatant attempt to place blame where it does not belong, and the Court should not abide it. The Complaint fails in its entirety to state a claim for which relief can be granted. It should be dismissed with prejudice for the reasons stated herein. STATEMENT OF FACTS Mark Frissora served as the Chief Executive Officer (“CEO”) and Executive Chairman of Hertz for approximately eight years before resigning on September 8, 2014. Compl. ¶¶ 19, 48.2 Hertz Clawback Policies During his tenure, Hertz’s Joint Board of Directors (“the Board”) passed two policy resolutions relevant to this litigation. First, in November 2009, the Board passed a resolution seeking to amend Hertz’s Standards of Business Conduct to include a clawback policy styled as a “Compensation Recovery Policy” (the “2010 Clawback Policy” or “Ex. B,” filed contemporaneously herewith). The 2010 Clawback Policy required that in order for Hertz to enforce the policy, “each award 2 Frissora denies the allegations in the Complaint and reserves the right to challenge the allegations if the Court denies this motion. The background contained herein is drawn from the allegations in the Complaint and the exhibits attached thereto, which are accepted as true solely for the purposes of this motion. See Galicki v. New Jersey, No. CIV.A. 14-169 JLL, 2015 WL 3970297, at *1 n.1 (D.N.J. June 29, 2015). 6 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 13 of 37 PageID: 606 agreement” covering any incentive compensation “shall include a provision incorporating the requirements of this [Clawback Policy] with respect to such award.” Ex. B, at 4. Despite the resolution in the 2010 Clawback Policy to amend Hertz’s Standards of Business Conduct, the 2010 Clawback Policy was never incorporated into the Standards of Business Conduct. Notably, the Standards of Business Conduct were subsequently amended to reflect other policies and resolutions, but not the 2010 Clawback Policy.3 The Board later passed a resolution updating and superseding the 2010 Clawback Policy (the “2014 Clawback Policy” or “Ex. D,” filed contemporaneously herewith). The 2014 Clawback Policy also required by its terms that “each award agreement” covering incentive compensation “shall include a provision incorporating the requirements of this [Clawback] Policy with respect to such award.” Ex. D, at 2. The 2014 Clawback Policy similarly was never incorporated into Hertz’s Standards of Business Conduct.4 3 On November 17, 2011, Hertz approved and adopted a revised Standards of Business Conduct which did not incorporate or reference the 2010 Clawback Policy. See Ex. C, November 22, 2011 Form 8-K for Hertz Global Holdings, Inc., at Ex. 14.1 (filed contemporaneously herewith). The Court may take judicial notice of SEC filings on a motion to dismiss. Oran v. Stafford, 226 F. 3d 275, 289 (3d Cir. 2000). 4 The current version of Hertz’s Standards of Business Conduct, available on its website, does not include or reference any Clawback Policy. See Ex. E, Hertz Standards of Business Conduct, accessible through the Internet at 7 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 14 of 37 PageID: 607 Frissora’s Separation From Hertz On September 8, 2014, Frissora resigned from the Company. Compl. ¶ 48. He and Hertz subsequently entered into the Separation Agreement, dated September 15, 2014 (“Ex. F,” filed contemporaneously herewith). The Separation Agreement, unlike any other agreement pursuant to which Frissora received compensation, explicitly subjected the compensation provided thereunder to the terms of the 2014 Clawback Policy. See Ex. F, § 8(b) (“such claw back and compensation recovery provisions contained [in the 2014 Clawback Policy] shall apply to the compensation, payments and benefits provided under Section 4 of this Agreement.”). The Separation Agreement also included a representation by Frissora incorporating similar conduct standards as those set forth in the Clawback Policies. Id. at § 9(b). It is important to note that at the time Frissora and Hertz executed the Separation Agreement in September of 2014, the decision to restate was all but assured and the causes of the accounting errors identified in the Restatement and any role Frissora may have played in such errors had been investigated by the Company with the help of numerous outside experts. With sufficient relevant information regarding the Restatement’s scope and root causes in hand, the Company agreed that http://ir.hertz.com/download/Standards+of+Business+Conduct+08.22.2017.pdf (filed contemporaneously herewith). 8 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 15 of 37 PageID: 608 Frissora’s departure was “without cause” and provided him with severance payments and other benefits. See id. The information available at the time undeniably included the following: • Hertz had already revised its earnings guidance in 2013 and was intimately aware of the accounting issues and internal controls weaknesses later detailed in its Restatement. See Compl. Ex. 2 at ¶¶ 27-29, 32. • On May 13, 2014, Hertz announced that it was unable to file its Form 10-Q for the first quarter of 2014, explaining that it had identified certain errors relating to prior periods which might require it to restate its previously issued financial statements for 2011. Id. ¶ 33. • On June 6, 2014, Hertz announced that its continuing review had identified additional accounting errors, that its Audit Committee had determined that the company’s 2011 financial statements must be restated, and that it was reviewing its 2012 and 2013 financial statements to determine if a restatement for those periods was required. Id. ¶ 34. It also announced that it had identified at least one material weakness in its internal control over financial reporting and that its disclosure controls and procedures were ineffective as of December 31, 2013. Id.5 5 Additionally, on November 20, 2013, a class-action lawsuit styled Ramirez v. Hertz Global Holdings, Inc. et al. was commenced in this Court against Hertz, Frissora, and Douglas. Compl. ¶ 55. The shareholder plaintiffs in Ramirez made various allegations regarding Hertz’s and the individual defendants’ conduct related to the Company’s financial performance and statements. Id. Over the course of Hertz’s and Frissora’s successful joint legal defense, five separate complaints in Ramirez were withdrawn or dismissed. Id. ¶ 56. On April 27, 2017, Hertz and Frissora secured a final dismissal with prejudice of the plaintiffs’ claims, which was affirmed by the U.S. Court of Appeals for the Third Circuit on September 20, 2018. Id. Throughout this effort, Hertz defended the propriety of Frissora’s and Douglas’s conduct, notably arguing (and thereby admitting) that, among other things, (1) the Restatement did not state that the accounting errors were the result of Frissora’s management style; (2) Hertz’s investigation found that numerous factors ultimately led to the accounting errors necessitating the Restatement; (3) findings that Frissora 9 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 16 of 37 PageID: 609 • At this time in June 2014, the Audit Committee had also commenced an investigation of identified accounting errors and the conduct of its employees, including Hertz management. Id; Compl. ¶ 48. Events Following Frissora’s Separation From Hertz In or about November 2014 – roughly a month after Hertz negotiated for and agreed to Frissora’s Separation Agreement – Hertz, presumably with the advice of outside counsel and its outside auditors and specialists who had been reviewing Hertz’s accounting throughout the relevant time period, determined that it would restate its earnings. Compl. ¶ 42. The Restatement, filed on July 16, 2015, disclosed a substantial list of intervening acts and decisions by a wide range of actors that contributed to the Restatement, encompassing numerous separately identified accounting errors occurring in different parts of the Company’s operations. Compl. Ex. 1 at 7-8. The Restatement filing did not assert that the associated accounting errors were the result of Frissora’s tone or management style, but rather noted that may have created a pressurized environment does not lead to the conclusion that Frissora knew, or should have known, that improper accounting was occurring or internal control deficiencies existed; and (4) that it does not follow from the existence of an inappropriate “tone at the top” that the CEO knew or recklessly disregarded the fact that any pressure to meet expectations would result in employees not adhering to accounting standards. See, e.g., Defendant Hertz Global Holdings, Inc.’s Memorandum of Law in Support of its Motion to Dismiss Plaintiff’s Fourth Consolidated Amended Class Action Complaint, at 15-18, In re Hertz Global Holdings, Inc., No. 2:13-cv-07050MCA/LDW (D.N.J. Mar. 24, 2016) (hereinafter “Ramirez Motion to Dismiss”). 10 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 17 of 37 PageID: 610 his tone, which existed within a “complex mix of structural and environmental factors,” “resulted in an environment which in some instances may have led to inappropriate accounting decisions.” Id. at 8. As expected, shareholder litigations and government investigations ensued. On May 30, 2018, a shareholder derivative suit was filed in the Delaware Chancery court stemming from a derivative demand that Hertz had investigated and rejected. Compl. ¶¶ 58-60. Further, certain federal and state government investigations were conducted. Compl. ¶¶ 61-64. On December 31, 2018, Hertz reached an agreement with the SEC in which Hertz agreed to pay a $16 million penalty to the SEC, as described in the SEC’s accompanying order (the “SEC Order”). Compl. Ex. 2. Notably, the SEC Order did not attribute any accounting error, or the cause of the Restatement, to a specific individual. Rather, the SEC Order discussed numerous errors, diverse conduct, and manifold decisions made by a litany of employees from all levels of the Company as causal factors contributing to the Restatement. See id. Significantly, the SEC made no finding of intentional wrongdoing – nor any finding of gross negligence – by Frissora or any other Hertz employee. On February 11, 2019, the Compensation Committee of each of the Plaintiffs’ Boards of Directors resolved to seek repayment from Frissora and others of “Covered Incentive Compensation” on the basis that the Clawback Policies had been triggered. Compl. ¶¶ 1, 3. A demand letter was subsequently sent to Frissora by 11 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 18 of 37 PageID: 611 Hertz and, on March 25, 2019, Hertz brought this action. Hertz’s commencement of this litigation occurred roughly four years after the Restatement issued, slightly less than five years after Frissora and Hertz entered into the Separation Agreement, and more than five years after the Company’s internal investigations regarding the accounting errors were well underway. STANDARD OF REVIEW To survive a motion to dismiss pursuant to Rule 12(b)(6), Hertz must have pled “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). The Company must “provide more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Connelly v. Steel Valley Sch. Dist., 706 F.3d 209, 212 (3d Cir. 2013) (citing Twombly, 550 U.S. at 555 and Ashcroft v. Iqbal, 556 U.S. 662, 678, (2009) (quotations omitted). Further, Hertz must plead facts that “show ‘more than a sheer possibility that a defendant has acted unlawfully.’” Id. In this context, a district court need not credit “bald assertions” or “legal conclusions” in a complaint when deciding a motion. See Nami v. Fauver, 82 F.3d 63, 65 (3d Cir. 1996).6 6 The Court may consider the facts alleged in the Complaint, documents attached to the Complaint as exhibits, matters of public record, and undisputedly authentic documents if the Plaintiffs’ claims are based upon those documents. Pension Benefit Gaur. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993); see also In re Burlington Coat Factory Sec. Lit., 114 F.3d 1410, 1426 (3d Cir. 1997) (“document[s] integral to or explicitly relied upon in the complaint may be considered without converting the motion to dismiss into one for summary 12 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 19 of 37 PageID: 612 ARGUMENT I. HERTZ’S CLAWBACK CLAIMS FAIL AS A MATTER OF LAW Counts I and III7 should be dismissed because Plaintiffs have not alleged, and cannot allege (1) the basis upon which the Clawback Policies are contracts enforceable against Frissora, (2) that Frissora’s conduct amounted to “gross negligence” sufficient to trigger the Clawback Policies, and (3) that Frissora’s conduct – as opposed to the conduct of literally hundreds of other actors – “caused or contributed to the need for the restatement,” the standard set forth in the Clawback Policies. A. Hertz Failed To Implement The Clawback Policies And They Are Therefore Unenforceable Against Frissora The Clawback Policies are not themselves binding contracts. The plain reading of both Clawback Policies requires that they be implemented elsewhere, whether by incorporation into Hertz’s Standards of Business Conduct or by incorporation into the various agreements providing for executive compensation awards to Frissora. With the limited exception of Frissora’s Separation Agreement, discussed herein, Hertz has done neither. judgment.” (internal quotations omitted)). Because Hertz relied upon the Clawback Policies, Frissora’s Separation Agreement, and the Restatement in the Complaint, the Court may consider them on this motion to dismiss. 7 Count II of the Complaint is alleged only against Douglas. 13 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 20 of 37 PageID: 613 Since passing the resolution regarding the 2010 Clawback Policy, Hertz has amended its Standards of Business Conduct but has not included therein an amendment incorporating or referencing the 2010 Clawback Policy or the 2014 Clawback Policy. As a result, the current version of Hertz’s Standards of Business Conduct does not include any reference to any Clawback Policy. See Ex. E; see also supra, note 3, 4. Nor has Hertz incorporated the terms of the Clawback Policies into specific award agreements other than the Separation Agreement. Hertz vaguely asserts throughout its Complaint that various agreements incorporate the Clawback Policies, see Compl. ¶¶ 65, 79, 122, but fails adequately and clearly to allege that any of Frissora’s incentive compensation was subject to the referenced agreements. Specifically, in its Complaint, Hertz repeatedly references a “Performance Stock Unit Agreement,” an “Employee Stock Option Agreement,” and a “Price Vested Stock Unit Agreement” as requiring that payments made thereunder be subject to the Clawback Policies. See id. Hertz fails, however, to allege (1) that Frissora specifically was a party to any of these agreements; (2) that those agreements reference the Clawback Policies, as opposed to some other policy; (3) what incentive compensation, if any, was paid to Frissora under these agreements and when; and (4) what the operative language is in each of these agreements that implements and incorporates the Clawback Policies. Furthermore, Hertz has not attached the 14 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 21 of 37 PageID: 614 relevant agreements as exhibits to the Complaint and therefore the accuracy of Hertz’s allegations cannot be independently discerned. For these reasons alone, Plaintiffs’ Counts I and III should be dismissed as against Frissora for failure to state a claim upon which relief can be granted. See General Motors Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296, 333 (3d Cir. 2001) (“Liberal construction has its limits, for the pleading must at least set forth sufficient information for the court to determine whether some recognized legal theory exists on which relief could be accorded the pleader.”) (quoting 2 James Wm. Moore, Moore’s Federal Practice § 12.34[1][b], at 12-61 to 12-63 (3d ed. 2001)). B. Plaintiffs Fail Adequately To Allege That The Conduct Standards In the Clawback Policies Have Been Triggered Even assuming that the Clawback Policies are enforceable contracts, which they are not, Plaintiffs have failed adequately to allege that the Clawback Policies’ various standards of conduct have been violated and that the “contracts” have therefore been breached. The 2010 Clawback Policy requires a showing of “gross negligence,” “fraud,” or “misconduct” that has “caused or contributed to” a financial restatement. Ex. B at 3. The 2014 Clawback Policy refers to “willful misconduct” but otherwise mimics the 2010 Clawback Policy. Ex. D, at 1. Plaintiffs, lacking any evidence of intentional wrongdoing, avoid allegations of fraud or misconduct and allege only that Frissora acted with “gross negligence,” seeking to allege and prove the most lenient standard available that would trigger the Clawback Policies. 15 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 22 of 37 PageID: 615 Nevertheless, Delaware law imposes a high burden for establishing gross negligence, and Hertz’s allegations fail to clear it.8 See In re Lear Corp. S’holder Litig., 967 A.2d 640, 652 (Del. Ch. 2008) (“The definition of gross negligence used in our corporate law jurisprudence is extremely stringent.”). Delaware courts have defined gross negligence as “conduct that constitutes reckless indifference or actions that are without the bounds of reason.” McPadden v. Sidhu, 964 A.2d 1262, 1274 (Del. Ch. 2008). In order to be grossly negligent, conduct “has to be so grossly offthe-mark as to amount to ‘reckless indifference’ or a ‘gross abuse of discretion.’” Solash v. Telex Corp., 13 Del. J. Corp. L. 1250, 1264 (Del. Ch. 1988). “In the context of a motion to dismiss . . . gross negligence requires the articulation of facts that suggest a wide disparity between the process [the defendants] used and the process which would have been rational.” In re TIBCO Software Inc. Stockholders Litig., No. 10319-CB, 2015 WL 6155894, at *23 (Del. Ch. Oct. 20, 2015). 8 The Clawback Policies do not contain governing law provisions. We believe that under New Jersey choice of law principles Delaware should be applied, but note that the burden of alleging and ultimately proving gross negligence would be similarly high under either New Jersey or Florida law. See, e.g., Fialkowski v. Greenwich Home for Children, Inc., 921 F.2d 459, 462 (3rd. Cir. 1990) (“Gross negligence has also been described as . . . the failure to exercise even that care which a careless person would use.” (internal citation and quotation omitted)); see also Hager v. Live Nation Motor Sports, Inc., 665 F.Supp.2d 1290, 1294 (S.D. Fla. 2009) (explaining gross negligence requires “the defendant had knowledge of the existence of circumstances which constitutes a clear and present danger and yet still undertakes a conscious, voluntary act or omission . . . which is likely to result in injury.” (internal quotations and citation omitted)). 16 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 23 of 37 PageID: 616 Hertz’s allegations come nowhere close to meeting Delaware’s stringent standard. The Company’s claims focus on allegations that Frissora was an aggressive manager who created an improper “tone at the top,” in essence suggesting that Frissora’s active leadership style and demands on employee performance contributed to the accounting errors and the Restatement. See, e.g., Compl. ¶ 48. But the specific conduct cited to support the allegations of gross negligence reads as routine – and even desirable – behavior of a CEO, and not the irrational, “grossly off-the-mark” reckless indifference that is required. 9 See id. ¶ 5 (alleging Frissora 9 Notably, in the federal securities fraud context, courts, including the Third Circuit, have found that allegations of an executive’s improper “tone at the top” amount only to an allegation of mismanagement, and cannot alone establish various standards of misconduct. See In re Hertz Global Holdings Inc., 905 F.3d 106, 117 (3d Cir. 2018) (holding Hertz’s admission of Frissora’s “inappropriate tone at the top” was not an admission of his misconduct, and absent an allegation of fraud, “tone at the top” would not support a securities fraud claim); Matrix Capital Mgmt. Fund, LP v. BearingPoint, Inc., 576 F.3d 172, 183 (4th Cir. 2009) (finding executives’ failure to maintain an appropriate tone at the top did not amount to severe recklessness). Similarly, in its defense of the Ramirez action, Hertz repeatedly argued that the conduct it now alleges constitutes gross negligence by Frissora did not in that case rise to the level of “either reckless of conscious behavior” under applicable legal standards, which in requiring some form of recklessness are comparable to the standards required by Delaware for finding gross negligence. See, e.g., Ramirez Motion to Dismiss, at 13-14; compare McPadden, 964 A.2d at 1274 (Delaware courts have defined gross negligence as “conduct that constitutes reckless indifference or actions that are without the bounds of reason”) and Solash, 13 Del. J. Corp. L. at 1264 (In order to be grossly negligent, conduct “has to be so grossly off-the-mark as to amount to ‘reckless indifference’ or a ‘gross abuse of discretion’”) with Institutional Inv’rs. Grp. v. Avaya, Inc., 564 F.3d 242, 267 (3d Cir. 2009) (to plead scienter, Plaintiffs must allege facts constituting strong circumstantial evidence of “either reckless or conscious behavior.”). 17 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 24 of 37 PageID: 617 put an “emphasis on meeting internal budgets, business plans” and other companywide goals); id. ¶ 6 (alleging Frissora requested “team-wide calls [and] weekend meetings,” and sought “paradigm-busting” strategies to address corporate challenges); id. ¶ 41(a), (g) (alleging Frissora “aggressively” sought opportunities and gave “active consent and encouragement” to personnel).10 In essence, throughout much of the Complaint, Plaintiffs have alleged that Frissora simply shared the goals and practices of virtually all corporate executives and shareholders, including other executives and shareholders of Hertz. What remains are bald, unsupported assertions that are self-contradictory. For example, without explaining how or why, Hertz alleges that Frissora should have known about, and failed to identify, weaknesses in Hertz’s internal controls. 10 Although Hertz’s Complaint does in some instances plead certain conduct specific to Frissora, throughout the Complaint, including in paragraphs cited herewith, Hertz routinely relies on group pleading against the “Defendants” without identifying which specific defendant or defendants engaged in the conduct. See, e.g., Compl. ¶ 27 (“Defendants were aware of yet failed to correct” internal control deficiencies); ¶ 31 (“This deficiency was the result of Defendants’ effort to aggressively cut costs . . . .”); ¶ 34 (“Defendants chose to push for major changes in its accounting processes . . . .”); ¶ 37 (“As a result of Defendants’ poor management . . . .”); ¶ 38 (“Defendants . . . were responsible for streamlining its hierarchy and ensuring the appropriate review of accounting changes.”). This type of group pleading is insufficient to state a claim against Frissora. See Sheeran v. Blyth Shipholding S.A., No. 14-5482 (JBS/AMD), 2015 WL 9048979, at *3 (D.N.J. Dec. 16, 2015); Japhet v. Francis E. Parker Mem’l Home, Inc., No. 14-01206 (SRC), 2014 WL 3809173, at *2 (D.N.J. July 31, 2014); Ingris v. Borough of Caldwell, No. 14-855 (ES), 2015 WL 3613499, at *5 (D.N.J. June 9, 2015); Falat v. County of Hunterdon, No. 126804 (SRC), 2013 WL 1163751, at *3 (D.N.J. Mar. 19, 2013). 18 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 25 of 37 PageID: 618 However, the Complaint and its attachments make clear that it took a broad range of experts devoted to the task – outside counsel, independent counsel for the Audit Committee, the Audit Committee, and management – six months to identify those control weaknesses. See Compl. Ex. 1 at 3.11 Neither any of the allegations alone, nor all of them taken together, satisfies Delaware’s stringent definition of gross negligence, and Hertz’s conclusory assertion that they do is manifestly insufficient. As a consequence, even if Plaintiffs could demonstrate that the Clawback Policies are contracts enforceable against Frissora – and as a matter of law they cannot – Plaintiffs have failed adequately to allege that Frissora acted with the requisite gross negligence, and therefore cannot establish that a breach of contract has occurred. For this additional reason, Plaintiffs’ Counts I and III should be dismissed for failure to state a claim. 11 In perhaps an even more egregious example of self-contradiction, in prior court filings related to the litigations for which it now seeks damages, Hertz has admitted that the same pressure or tone from Frissora complained of in this Complaint could not establish that Frissora knew or should have known about Hertz’s accounting and control deficiencies that led to the Restatement. See, e.g., Ramirez Motion to Dismiss, at 16 (“[f]urther, pressure from the CEO does not lead to the conclusion that Defendants, including the CEO himself, knew or should have known that improper accounting was occurring or internal control deficiencies existed in the Company’s accounting and financial reporting. That an inappropriate tone may have existed at certain times does not mean the Company or that any of the Defendants knew that the pressure to meet expectations would result in employees not adhering to GAAP or Company accounting standards.”). 19 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 26 of 37 PageID: 619 C. Plaintiffs Have Not Adequately Alleged That Frissora’s Conduct Caused Or Contributed To The Restatement Even if Hertz could demonstrate that the Clawback Policies are binding contracts, which it cannot, and even if Hertz had adequately alleged gross negligence, which it has not, under the Clawback Policies Hertz is required to demonstrate that Frissora’s gross negligence “caused or contributed to the need for the Restatement.” See Ex. B at 3; Ex. D at 1. Hertz’s allegations in this regard are all impermissibly conclusory. Nowhere in the Complaint does Hertz allege how Frissora’s conduct caused or contributed to the Restatement. Hertz’s allegations of causation deserve particular scrutiny, as they are not only vague but also facially implausible. The Complaint and exhibits are laden with reference to intervening actors – most notably the Company’s Board of Directors – and causes which go ignored in Hertz’s allegations that Frissora’s conduct caused it harm. The obvious fiction of isolating Frissora’s conduct as the cause of the Restatement and the cause of these expenditures when the actions of so many others in a company of thousands had much more direct impact on those expenditures truly strains credulity. Hertz’s pleading in this regard is vague, conclusory, and utterly inadequate. 20 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 27 of 37 PageID: 620 II. PLAINTIFFS’ COUNT IV IS LEGALLY FLAWED AND MUST BE DISMISSED A. Hertz Fails To State A Claim For Breach Of The Separation Agreement Count IV alleges a breach of the Separation Agreement and ultimately an entitlement to both general and consequential damages for the breach. The Separation Agreement is materially different from the Clawback Policies in numerous respects: • It is signed and acknowledged by Frissora; • It contains an explicit provision incorporating the 2014 Clawback Policy, subjecting payments made pursuant to Section 4 of the Separation Agreement to recovery upon a showing of willful gross neglect or willful gross misconduct; see Ex. F at § 8(b) • It expressly states that decisions unrelated to financial restatements cannot be used as a basis to claw back Frissora’s incentive compensation; see id. • It expressly preserved Frissora’s right “to challenge any future claw back.” Id. at § 8(e) (“Nothing in this Agreement waives any rights Frissora may have to challenge any future claw back pursuant to this Section 8 and/or the [Clawback Policies].”); and • It is expressly governed by Florida law. See id. at § 14(f).12 12 Although not entirely dispositive under New Jersey choice of law principles, the parties’ contractual choice of governing law is routinely upheld absent public policy concerns not present here. See Instructional Sys., Inc. v. Comput. Curriculum Corp., 614 A.2d 124, 133 (1992) (citing Restatement (Second) of Conflicts of Laws § 187 (Am. Law Inst. 1969) (“Restatement”)). Accordingly, in this Motion we analyze Hertz’s Separation Agreement claim under Florida law. 21 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 28 of 37 PageID: 621 Most directly relevant to Hertz’s claims in Count IV, in a separate section of the Separation Agreement, Section 9(b), Frissora made representations that he (1) had not “engaged in any conduct that constitutes willful gross neglect or willful gross misconduct with respect to his employment duties . . . which has resulted or will result in material economic harm” to Hertz, and (2) had not “facilitated or engaged in, and [at the time of execution] has no knowledge of, any financial or accounting improprieties or irregularities” at Hertz. Id. at § 9(b)(i) and (iii). This standard of “willful gross neglect or willful gross misconduct” imposes a patently higher standard than the standards contained in the Clawback Policies. To adequately allege, therefore, that Frissora breached the Separation Agreement by falsely certifying therein that he did not engage in willful gross neglect or willful gross misconduct, Hertz would have to allege that Frissora’s conduct amounted to something worse than gross negligence. Because Hertz has failed, for the reasons stated herein, adequately to allege that Frissora’s conduct met that standard or that Frissora facilitated, engaged in, or had knowledge of the accounting or financial improprieties relevant to the Restatement, as a matter of pure logic it has also failed to allege a breach of the Separation Agreement. Hertz’s claim must therefore be dismissed on that basis. 22 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 29 of 37 PageID: 622 B. Hertz Has Failed Adequately To Plead Consequential Damages Further, even if Hertz could allege a breach of the Separation Agreement, which it cannot, Hertz’s claim for more than $200 million in consequential damages fails as a matter of law. Consequential damages require pleading and proving the elements of causation and foreseeability, and Hertz has offered only conclusory allegations which are insufficient as a matter of law. Hertz’s bald assertions of a causal link between Frissora’s alleged misrepresentations in the Separation Agreement and the Company’s subsequent costs are flatly insufficient and its allegations that such damages were reasonably foreseeable to the parties are so spare as to be practically non-existent. As such, Hertz’s consequential damages claim should be dismissed. It is axiomatic that the purpose of contract damages is “to restore an injured party to the same position that he would have been in had the other party not breached the contract.” Feldkamp v. Long Bay Partners, LLC, 773 F. Supp. 2d 1273, 1284 (M.D. Fla. 2011), aff’d, 453 F. App’x 929 (11th Cir. 2012) (applying Florida law); Lindon v. Dalton Hotel Corp., 49 So.3d 299, 305 (Fla. 5th DCA 2010). The injured party is entitled to recover all damages that are causally related to the breach so long as the damages were reasonably foreseeable at the time the parties entered into the contract. Feldkamp, 773 F. Supp. 2d at 1285 (quoting Capitol Envtl. Servs., Inc. v. Earth Tech, Inc., 25 So.3d 593, 596 (Fla. 1st DCA 2009)) (internal quotations 23 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 30 of 37 PageID: 623 and citations omitted). Damages are foreseeable if they are the proximate and usual consequence of the breaching party’s act and are not “what might possibly occur.” Land Title of Cent. Fla., LLC v. Jimenez, 946 So. 2d 90, 93 (Fla. 5th DCA 2006); see also Dolan Title & Guar. Corp. v. Hartford Accident & Indem. Co., 395 So.2d 296, 299 (Fla. 5th DCA 1981). Finally, in restoring the injured party to the same position, a plaintiff is not entitled to be placed, because of the breach, in a position better than that which he would have occupied had the contract been performed. Feldkamp, 773 F. Supp. 2d at 1285; Lindon, 49 So.3d at 305; see also Deauville Hotel Mgmt., LLC v. Ward, 219 So. 3d 949, 954 (Fla. 3d DCA 2017). Here Hertz claims that because of his Separation Agreement representations, Frissora is responsible for damages resulting from (1) a class-action securities lawsuit, (2) shareholder derivative demands, (3) an SEC investigation, (4) a Department of Justice investigation, (5) an investigation by the New Jersey Bureau of Securities, (6) Hertz’s associated legal fees and related expenses (as well as expert and consultant fees), (7) audit fees (including heightened audit costs), (8) costs associated with financing waivers, (9) higher-than-necessary tax liabilities, and (10) other unspecified damages that Hertz admits are unquantifiable, altogether totaling more than $200 million and all occurring after, and in some cases long after, Frissora left the Company. Compl. ¶¶ 54-75. 24 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 31 of 37 PageID: 624 Hertz simply cannot allege – much less establish – that the damages claimed in Count IV are caused by Frissora’s alleged misrepresentations in the Separation Agreement. As described above in Section I.C, Hertz has not only failed adequately to allege that Frissora’s conduct caused or contributed to the need for the Restatement, it has expressly argued elsewhere that it did not. It clearly follows that Hertz has also failed to allege that a representation about that conduct made at a time when the Company was in possession of the relevant information about that conduct caused the need for the Restatement, let alone any of the ensuing complained-of damages. Despite needing to allege more in this Count, Hertz offers less, failing even to attempt meaningfully to plead causation, instead simply asserting in conclusory fashion that the claimed damages were the “proximate result” of Frissora’s misrepresentations. Compl. ¶ 119.13 Finally, Hertz’s Complaint does nothing to allege that Frissora could have foreseen the manifold and, in some cases, esoteric claimed damages stemming from his alleged misrepresentations. The Complaint does not plead any allegations, let alone sufficient allegations, to establish foreseeability of damages in excess of $200 million. It certainly does not appropriately plead that any particular component of those claimed damages was foreseeable, and the mere suggestion that some of 13 Count IV makes similar allegations against Zimmerman in demanding more than $200 million in damages. 25 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 32 of 37 PageID: 625 Hertz’s claimed damages, such as costs associated with financing waivers and higher-than-necessary tax liabilities, were foreseeable as the result of a representation made in a severance agreement are patently ridiculous. Cf. Morse v. Lower Merion School Dist., 132 F.3d 902, 908 (3d Cir. 1997) (upholding the district court’s order of dismissal and holding as a matter of law plaintiff’s bald assertions of foreseeable harm were insufficient). Accordingly, even if Hertz could prove that Frissora breached the Separation Agreement – which it cannot – Hertz may only recover as damages at most the monies paid to Frissora pursuant to that agreement, as the payment of severance amounts under false pretenses was the only reasonably foreseeable harm proximately caused by Frissora’s alleged misrepresentations. Because it has not pled adequately the requisite causation and foreseeability of its claimed damages in Count IV, Hertz’s claim for more than $200 million in damages is flawed as a matter of law and must be struck from the Complaint. C. Hertz Improperly Seeks Tort Damages For A Breach Of Contract Claim Count IV is additionally flawed because it reflects an improper attempt to seek tort damages in a contract claim. Hertz has at least implicitly acknowledged that it is pursuing contract claims instead of tort claims in this action in an attempt to evade its obligations to advance Defendants’ legal fees in this dispute. Compl. ¶¶ 127, 128 (“[Defendants] are not entitled to advancement of expenses in a contract-based 26 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 33 of 37 PageID: 626 action . . . [and] even if the By-Laws’ provision for advancement of expenses did apply in a contract-based action . . . advancement is inconsistent” with the Clawback Policies”). Several legal doctrines recognized in the Third Circuit and Florida courts, however, have been developed to maintain the conceptual distinction between breach of contract claims and tort claims. See, e.g., KBZ Commc’ns Inc. v. CBE Technologies LLC, 634 F. App’x 908, 909 (3d. Cir. 2015) (explaining that the “gist of the action” doctrine precludes tort claims where the alleged dispute is based in contract); Dittman v. Univ. of Pittsburg Med. Ctr., 196 A.3d 1036, 1049 (Pa. 2018) (merging the economic loss doctrine – which precludes recovery of tort damages where the only injury is economic (i.e. contractual harm) – with the gist of the action); see also HTP, Ltd. v. Lineas Aereas Costarricenses, S.A., 685 So.2d 1238, 1239 (Fla. 1996) (finding, under Florida law, “the economic loss [doctrine] should [bar] an award of tort damages” where the parties were involved in a pre-existing contractual relationship). It follows from these doctrines that the Court should reject Hertz’s recasting of tort claims as breach of contract claims in order to seek increased damages while attempting to avoid its advancement obligations. See Compl. ¶¶ 109-119, 127-128.14 14 In casting its Complaint in this manner, Hertz is also attempting to avoid obligations to plead standard elements of a misrepresentation claim, such as scienter and justifiable reliance. These factors are particularly resonant in a context where at the time of Frissora’s Separation Agreement, Hertz had substantial information in its possession about the scope of the accounting errors and their root cause but 27 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 34 of 37 PageID: 627 Hertz cannot and should not have it both ways – if it elects to pursue contract theories, it should be limited to contract remedies; that is, limited to recover at most what it paid Frissora pursuant to the Separation Agreement. D. Hertz Has Failed Adequately To Plead Its Claimed Special Damages Under Rule 9(g) Finally, even if the damages claimed by Hertz in Count IV were not precluded as a matter of law because of Hertz’s failures to plead foreseeability and causation, Hertz has also failed to satisfy the heightened pleading standards of Rule 9(g). Consistent with other jurisdictions, this Court has established that “[s]pecial, as contradistinguished from general damage, is that which is the natural, but not the necessary, consequence of the act complained of.” Delzotti v. Morris, Civ. No. 147223 JBS/AMD, 2015 WL 5306215, at *8 (D.N.J. Sept. 10, 2015) (quoting Roberts v. Graham, 73 U.S. 578, 580 (1867)); see also 5A Wright & Miller, Federal Practice & Procedure § 1310 (4th ed. 2019) (special damages are considered “those elements of damages that are the natural, but not the necessary or usual, consequence of the defendant’s conduct . . . .”); Neal v. Honeywell, Inc., 191 F.3d 827, 832 (7th Cir. 1999) (“The usual consequences of a wrong are ‘general’ damages, and unusual consequences are ‘special.’”); Huyler’s v. Ritz–Carlton Rest. & Hotel Co., 6 F.2d nonetheless accepted Frissora’s representations as true, granted him a separation “without cause,” and paid him severance benefits. 28 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 35 of 37 PageID: 628 404, 406 (D. Del. 1925) (“Both [special and general] damages must be the natural and proximate consequence of the breach complained of, but general damages are such as inevitably follow, while special damages are such as may or may not follow the breach.”). Unlike general damages, which are implied or presumed by the law, special damages “must be specifically stated.” Rule 9(g); Delzotti, 2015 WL 5306215 at *8; see also FLA. STAT. ANN. § 1.120.15 As described previously, the damages sought in connection with the alleged breaches of the Separation Agreement include, without any specifically attributed costs pled in the Complaint, “legal fees and related expenses” incurred by Hertz in connection with its internal investigation and costs of responding to lawsuits and investigations initiated by various private and government entities, “auditor review costs” related to auditor’s reviews of Hertz’s internal finances, “heightened costs of subsequent audits,” “costs of financing waivers,” “higher-than-necessary taxes,” and “significant other costs,” including an undefined negative impact on Hertz’s market 15 Although state law controls the substantive elements of a claim in diversity of citizenship actions, and the pleadings may be required to indicate or imply the existence of these elements – including special damages – with more than the usual particularity, the form in which they are stated is governed by federal, not state, standards of pleading. Consequently, whether special damages have been sufficiently pled is to be determined under Rule 9(g), not the relevant state’s practice. 5A Wright & Miller, Federal Practice & Procedure § 1311 (4th ed. 2019). 29 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 36 of 37 PageID: 629 capitalization and the “distraction of management’s attention from running the core business.” Compl. ¶¶ 73-75. It is clear that these damages do not necessarily flow from a breach of contract, let alone the particular breaches alleged here – misrepresentations about historical conduct by a departing Company executive in a severance agreement – and thus are special damages that must be pled with greater specificity under Rule 9(g). See, e.g., United Indus., Inc. v. Simon-Hartley, Ltd., 91 F.3d 762, 764 (5th Cir. 1996) (recognizing that federal courts routinely classify attorney’s fees as special damages that must be specifically pleaded under Rule 9(g)); Maidmore Realty Co. v. Maidmore Realty Co., 474 F.2d 840, 843 (3d Cir. 1973) (“Claims for attorney fees are items of special damage which must be specifically pleaded under Federal Rule of Civil Procedure 9(g).”). However, although Hertz has enumerated the types of damages it believes it has suffered, as discussed throughout, it has not sufficiently and specifically pled any of the particulars of its damages, including the quantum of any particular category of claimed damages, and in some instances acknowledges that certain claimed damages cannot be quantified. These types of conclusory allegations are demonstrably inadequate in a heightened pleading context, and Count IV should be dismissed on that basis. See Street-Works Dev. LLC v. Richman, No. 13CV774 (VB), 2015 WL 872457, at *7 (S.D.N.Y. Feb. 3, 2015) (holding an assertion that 30 Case 2:19-cv-08927-ES-CLW Document 50-1 Filed 06/20/19 Page 37 of 37 PageID: 630 fraudulent statements caused the claimant to suffer “compensatory, expectancy, special and punitive damages” in excess of $20 million to be insufficient because “[a] general monetary allegation stated in round numbers is generally not considered to reflect the specific damages required of special damages.”). CONCLUSION For the foregoing reasons, Counts I, III, IV and V against Frissora should be dismissed with prejudice. Dated: June 20, 2019 Respectfully submitted, LOWENSTEIN SANDLER LLP /s/ Gavin J. Rooney Gavin J. Rooney One Lowenstein Drive Roseland, NJ 07068 973.597.2500 Attorneys for Defendant Mark Frissora Andrew J. Levander (admitted pro hac vice) Jeffrey A. Brown (admitted pro hac vice) DECHERT LLP 1095 Avenue of the Americas New York, NY 10036 212.698.3500 Attorneys for Defendant Mark Frissora 31 Case 2:19-cv-08927-ES-CLW Document 50-2 Filed 06/20/19 Page 1 of 2 PageID: 631 UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY THE HERTZ CORPORATION and HERTZ GLOBAL HOLDINGS, INC., Civil Action No. 2: 19-cv-08927 Plaintiffs, V. MARK FRISSORA, ELYSE DOUGLAS, and JOHN JEFFREY ZIMMERMAN, CERTIFICATION OF JEFFREY A. BROWN IN SUPPORT OF DEFENDANT MARK FRISSORA'S MOTION TO DISMISS Defendants. I, JEFFREY A. BROWN, certify, under penalty of perjury, as follows: 1. I am a partner at Dechert LLP, attorney for Defendant Mark Frissora. I am admitted to practice pro hac vice before the United States District Court of New Jersey in this matter. I submit this Certification in support of Defendant Mark Frissora' s Motion to Dismiss. 2. Attached hereto as Exhibit A is a true and correct copy of the Delaware Court of Chancery's Order Granting Plaintiffs' Motion for Partial Summary Judgment, Frissora v. Hertz Global Holdings, Inc., C.A. No. 2019-0246-KSJM (May 23, 2019). 3. Attached hereto as Exhibit Bis a true and correct copy of Hertz Global Holding, Inc. and The Hertz Corporation Joint Board of Directors, Meeting Minutes, November 12, 2009 (the "2010 Clawback Policy"). 4. Attached hereto as Exhibit C is a true and correct copy of Hertz Global Holdings, Inc.'s November 22, 2011 Form 8-K publicly filed with the United States Securities and Exchange Commission. 5. Attached hereto as Exhibit D is a true and correct copy of the Amended and Restated Compensation Recovery Policy, February 19, 2014 (the "2014 Clawback Policy"). Case 2:19-cv-08927-ES-CLW Document 50-2 Filed 06/20/19 Page 2 of 2 PageID: 632 6. Attached hereto as Exhibit E is a true and correct copy of Hertz Standards of Business Conduct publicly available on Hertz's website at http://ir.hertz.com/download/Standards+of+Business+Conduct+08.22.2017. pdf. 7. Attached hereto as Exhibit F is a true and correct copy of Defendant Mark Frissora's Separation Agreement, September 15, 2014. I certify that the foregoing statements made by me are true. I understand that if the foregoing statements made by me are willfully false, I am subject to punishment. Dated: June 20, 2019 Respectful · submitted, Jeffrey A. rown (admitted pro hac vice) Andrew J. Levander (admitted pro hac vice) DECHERTLLP 1095 Avenue of the Americas New York, NY 10036 212.698.3500 Gavin J. Rooney One Lowenstein Drive Roseland, NJ 07068 973.597.2500 Attorneys for Defendant Mark Frissora 2 Case Document 50-3 Filed 06/20/19 Page 1 of 10 PageID: 633 Exhibit A Case 2:19-cv-08927-ES-CLW Document 50-3 Filed 06/20/19 Page 2 of 10 PageID: 634 EFiled: May 23 2019 01:45PM EDT Transaction ID 63291770 Case No. Multi-Case GRANTED IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE SCOTT SIDER, Plaintiff, v. HERTZ GLOBAL HOLDINGS, INC., Defendant. J. JEFFREY ZIMMERMAN, Plaintiff, v. HERTZ GLOBAL HOLDINGS, INC., Defendant. ELYSE DOUGLAS, Plaintiff, v. HERTZ GLOBAL HOLDINGS, INC., Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) C.A. No. 2019-0237-KSJM C.A. No. 2019-0240-KSJM C.A. No. 2019-0243-KSJM Case 2:19-cv-08927-ES-CLW Document 50-3 Filed 06/20/19 Page 3 of 10 PageID: 635 MARK P. FRISSORA, Plaintiff, v. HERTZ GLOBAL HOLDINGS, INC., Defendant. ) ) ) ) ) ) ) ) ) ) ) C.A. No. 2019-0246-KSJM [PROPOSED] ORDER GRANTING PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT WHEREAS, on March 28 and 29, 2019, plaintiffs Elyse Douglas, Mark P. Frissora, Scott Sider, and J. Jeffrey Zimmerman (collectively the “Plaintiffs”) each filed verified complaints against Hertz Global Holdings, Inc. (“Hertz”) (the “Verified Complaints”) seeking advancement of attorneys’ fees and expenses incurred (1) in response to separate letters to each Plaintiff from Hertz on February 13, 2019, seeking to claw back certain compensation paid to them while officers of Hertz (the “Clawback Proceeding”), (2) in response to Hertz’s commencement of two lawsuits captioned The Hertz Corporation and Hertz Global Holdings, Inc. v. Mark Frissora, Elyse Douglas, and John Jeffrey Zimmerman, in the U.S. District Court for the District of New Jersey, Case Number 2:19-cv-08927 (the “District Court Action”) and The Hertz Corporation and Hertz Global Holdings, Inc. v. Scott Sider, in Lee County Circuit Court, -2- Case 2:19-cv-08927-ES-CLW Document 50-3 Filed 06/20/19 Page 4 of 10 PageID: 636 Florida, Case Number 19-CA-001808 (the “Florida Action”); and (3) in prosecuting this action; WHEREAS, on April 18, 2019, Plaintiffs filed a Motion for Partial Summary Judgment (the “Motion”); and WHEREAS, on May 14, 2019, following the completion of briefing, the Court held oral argument on Plaintiffs’ Motion. NOW, THEREFORE it is HEREBY ORDERED, this __ day of _________________, 2019, as follows: 1. For the reasons stated on the record during the hearing held on May 14, 2019, Plaintiffs’ Motion is GRANTED. 2. Plaintiffs are entitled to advancement of the attorneys’ fees and other expenses reasonably incurred in connection with defending against (a) the Clawback Proceeding, (b) all claims in the District Court Action, and (c) all claims in the Florida Court Action (collectively, the “Covered Claims”). 3. Plaintiffs are further entitled to the attorneys’ fees and expenses reasonably incurred in preparing and prosecuting this action (the “Fees for Fees Claim”). 4. For all amounts for which advancement of the Covered Claims is sought in accordance with Paragraph 2 or for which payment of the Fees for Fees Claim is sought in accordance with Paragraph 3, Plaintiffs shall submit: -3- Case 2:19-cv-08927-ES-CLW Document 50-3 Filed 06/20/19 Page 5 of 10 PageID: 637 a. A true and accurate copy of the invoice addressed and sent to the applicable Plaintiff, identifying the fees and expenses for which advancement or payment is requested. Each invoice shall provide for each time entry the date, timekeeper, billing rate, task description, time incurred, and amount charged. Each invoice shall identify for each expense the date of the charge, its nature, and the amount incurred; b. A certification signed by a senior Delaware attorney representing Plaintiffs that (i) he/she personally reviewed the invoice, (ii) each time entry and expense falls within the scope of Plaintiffs’ advancement rights for the Covered Claims or payment rights for the Fees for Fees Claim, as the case may be, (iii) in his/her professional judgment, the fees and expenses charged are reasonable in light of the factors listed in Rule 1.5(a) of the Delaware Lawyers’ Rules of Professional Conduct, (iv) the services rendered were thought to be prudent and appropriate in his/her professional judgment, and (v) the amounts billed are in accordance with the terms of representation agreed to by the applicable Plaintiff; and -4- Case 2:19-cv-08927-ES-CLW Document 50-3 Filed 06/20/19 Page 6 of 10 PageID: 638 c. Each invoice shall be paid to the applicable Plaintiff or his or her law firm within 30 calendar days of submission unless objected to pursuant to the procedures set forth in this Order. Each Plaintiff shall indicate to Defendant whether Defendant should remit payment to each Plaintiff, or to each Plaintiff’s counsel directly. 5. Any objection to a demand for advancement made pursuant to this Order must be raised no later than 10 calendar days after Defendant receives the demand. Any portion of a demand not objected to must be paid in full no later than 30 calendar days after the demand was submitted pursuant to this Order. Any disputed amounts not paid within 30 days after the demand was submitted will accrue interest at the Delaware legal rate of interest compounded monthly, from 30 days after receipt of the applicable demand. 6. For all amounts Plaintiffs previously submitted to Defendant for advancement, such invoices shall be resubmitted in the form and manner required by this Order no later than 5 business days after the date of this Order. Defendant shall respond with any objection to the payment of such amount within 5 business days. Hertz shall pay all amounts it does not object to within 5 business days consistent with paragraph 8 of this Order. All previously submitted amounts will begin to accrue interest at the Delaware legal rate of interest from 30 days -5- Case 2:19-cv-08927-ES-CLW Document 50-3 Filed 06/20/19 Page 7 of 10 PageID: 639 after such amount was initially submitted until payment by Hertz, and Plaintiffs shall provide Hertz with the calculation of the interest owed as of the due date for payment set forth in this paragraph. For the avoidance of doubt, nothing in this paragraph relieves Hertz of its obligation to pay all interest due as of the date of payment. 7. To the extent there are any objections to a demand for advancement pursuant to this Order, a senior Delaware lawyer for Defendant shall set forth the basis for such objection to the demand in a written response. The written response shall identify each specific time entry or expense to which Defendant objects and explain the nature of the objection. A senior Delaware lawyer for Defendant shall certify that (i) he/she personally reviewed the demand and (ii) in his/her professional judgment, the disputed fees and expenses are not reasonable or otherwise fall outside the scope of the advancement right. The response shall cite any legal authority on which Defendant relies. Any objection not included in the response is deemed waived. 8. If Defendant disputes more than 50% of the amount sought in any demand, Defendant shall pay 50% of the amount sought and Plaintiff shall hold the amount exceeding the undisputed amount (not to exceed 50% of the amount sought) in an escrow account pending resolution of the dispute regarding such portion. -6- Case 2:19-cv-08927-ES-CLW Document 50-3 Filed 06/20/19 Page 8 of 10 PageID: 640 9. Within 10 calendar days of receiving objections submitted in compliance with Paragraph 7 of this Order, a senior Delaware lawyer for Plaintiffs will reply to the response in writing and provide supporting information and legal authority. 10. Within 5 calendar days of Defendant’s receipt of Plaintiffs’ reply, senior Delaware lawyers representing each party will meet in person or by phone and confer regarding any disputed amounts. Any additional agreed-upon amount that results from the meet-and-confer session will be paid with the next month’s payment of undisputed amounts. 11. Not more frequently than quarterly, Plaintiffs may file an application pursuant to Court of Chancery Rule 88 seeking a ruling on the disputed amounts. Briefing shall consist of a motion, an opposition filed within fifteen days of the motion, and a reply filed within ten days of the opposition. The Parties shall not raise any new arguments not previously raised with the other side in the applicable demand, response, reply, or meet-and-confer. The Parties shall only cite authorities identified in writing in the applicable demand, response, or reply. The Court will determine if a hearing is warranted. 12. If the Court grants an application in whole or in part, then pre- judgment interest will be due at the Delaware legal rate of interest, compounded monthly, from 30 days after the receipt of the applicable demand. In addition, in -7- Case 2:19-cv-08927-ES-CLW Document 50-3 Filed 06/20/19 Page 9 of 10 PageID: 641 parallel with the next demand, Plaintiffs may demand reimbursement for the fees and expenses incurred in connection with the granted application, proportionate to the success achieved. The Parties shall address any such reimbursement demand in the same manner as a demand made under Paragraph 4 of this Order. In connection with a successful application, Plaintiffs shall be entitled to reimbursement of fees and expenses incurred for time spent preparing invoices and demands, addressing responses, or conferring regarding demands made. Vice Chancellor McCormick -8- Case 2:19-cv-08927-ES-CLW Document 50-3 Filed 06/20/19 Page 10 of 10 PageID: 642 Court: DE Court of Chancery Civil Action Judge: Multi-Case File & Serve Transaction ID: 63286576 Current Date: May 23, 2019 Case Number: Multi-Case Case Name: Multi-Case Court Authorizer: McCormick, Kathaleen St Jude /s/ Judge McCormick, Kathaleen St Jude Case Document 50-4 Filed 06/20/19 Page 1 of 5 PageID: 643 Exhibit Case 2:19-cv-08927-ES-CLW Document 50-4 Filed 06/20/19 Page 2 of 5 PageID: 644 Hertz Global Holdings, Inc. and The Hertz Corporation Joint Board of Directors Meeting November 12, 2009 Agenda Item: Adoption of a “Claw Back” Policy for Executive Compensation Action Sought: Approval of an Amendment to Hertz Global Holdings, Inc.’s (“Hertz Holdings”) Standards of Business Conduct to include a “claw back” policy Background: The Sarbanes-Oxley Act of 2002 requires the CEO and CFO of public companies to return bonus compensation and other compensation from long-term awards received during a period covered by restatement due to fraud or wrongdoing. To date, the Boards of Directors (the “Boards”) of Hertz Holdings and The Hertz Corporation (individually, the “Company”) have only elected to enlarge upon that statutory scheme with respect to certain equity compensation (restricted stock units and performance stock units) paid to our executives. However, there is now a growing trend among Fortune 500 companies to adopt a comprehensive “claw back” policy. Current market data indicates that 65% of Fortune 100 companies have a “claw back” policy compared with only 18% in 2006. 33% of the company's peers have a claw back policy. Management recommends that the Boards adopt a “claw back” policy for all annual incentive, long-term incentive, equity-based awards and other performance-based compensation arrangements, effective January 1, 2010, that reflects the following key design aspects: Attachments: -- Repayment obligation is triggered by an award of compensation based on achievement of financial results that were the subject of a restatement; -- The Compensation Committee of the Company (the “Compensation Committee”) must determine that the executive officer's gross negligence, fraud or misconduct caused or contributed to the need for the restatement; -- Applies, on a prospective basis, to the CEO, all elected Vice Presidents and the Treasurer; -- Compensation Committee will retain discretion as to whether or not to enforce the “claw back”; and -- 3-year time limit on payment recovery. Proposed Joint Board Resolutions Proposed Amendment to the Standards of Business Conduct –Hertz Procedure W 1-22 Case 2:19-cv-08927-ES-CLW Document 50-4 Filed 06/20/19 Page 3 of 5 PageID: 645 Hertz Global Holdings, Inc. and The Hertz Corporation Proposed Joint Board Resolutions WHEREAS, Hertz Global Holdings, Inc. (“Hertz Holdings”) or The Hertz Corporation (individually, the “Company”) sponsors and maintains certain annual incentive, equity-based awards and other performance-based compensation arrangements for the benefit of its executives; WHEREAS, the Board of Directors of each Company (the “Board”) has determined that it is in the best interests of each Company and its stockholders to adopt a policy that requires certain executive officers to repay or forfeit compensation where the payment, granting or vesting of such compensation is based on certain restated financial statements; and WHEREAS, the Board has determined that it is in the best interests of each Company and its stockholders to have the policy incorporated into the Hertz Holdings’ Standards of Business Conduct and that beginning on January 1, 2010, all future award agreements or other documents setting forth the terms and conditions of any annual incentive, long-term incentive, equitybased award or other performance-based award granted to executive officers, adhere to and comply with such policy; NOW, THEREFORE, BE IT: RESOLVED, that effective as of January 1, 2010, the Hertz Holdings’ Standards of Business Conduct (the “Standards of Business Conduct”) be amended and restated to include the compensation recovery policy attached hereto as Exhibit A (the “Compensation Recovery Policy”); and, it is further RESOLVED, that the Senior Vice President, Chief Human Resource Officer and Senior Vice President, General Counsel and Secretary of Hertz Holdings may make other non-material amendments to the Standards of Business Conduct in order for the Compensation Recovery Policy to be properly incorporated into the Standards of Business Conduct; and, it is further RESOLVED, that the Senior Vice President, Chief Human Resource Officer, be, and she hereby is, authorized and instructed, in the name of and on behalf of each Company, to take or cause to be taken any and all actions that she deems necessary, appropriate and advisable to effectuate and carry out the purposes of the foregoing resolutions, including, but not limited to, securing the written agreement of each executive officer to such policy. Case 2:19-cv-08927-ES-CLW Document 50-4 Filed 06/20/19 Page 4 of 5 PageID: 646 Exhibit A Compensation Recovery Policy The Boards of Directors of Hertz Global Holdings, Inc. and The Hertz Corporation (individually, the “Company”) have adopted a policy requiring its “executive officers” to return bonus compensation and other compensation from long-term awards received during a period covered by financial restatement due to fraud or wrongdoing (the “Compensation Recovery Policy”). Accordingly, effective with respect to any annual incentive, long-term incentive, equity-based award or other performance-based award granted by either Company on or after January 1, 2010: Any individual who is an “executive officer” of either Company at the time of grant or payment of any annual incentive, long-term incentive, equity-based award or other performance-based award (collectively, “Covered Incentive Compensation”) shall repay or forfeit, as directed by the Compensation Committee of the Company (the “Compensation Committee”), to the extent permitted by law, any Covered Incentive Compensation received by him or her if: -- the payment, grant or vesting of such Covered Incentive Compensation was based on the achievement of financial results that were the subject of a restatement of the Company's financial statements, as filed with the Securities and Exchange Commission; -- the need for the restatement was identified within 3 years after the date of the first public issuance or filing of the financial results that were subsequently restated; -- the Compensation Committee determines in its sole discretion, exercised in good faith, that the executive officer's gross negligence, fraud or misconduct caused or contributed to the need for the restatement; and -- the Compensation Committee determines in its sole discretion that it is in the best interests of the Company and its stockholders for the executive officer to repay or forfeit all or any portion of the Covered Incentive Compensation. In addition, if the Compensation Committee determines that the Compensation Recovery Policy applies to an individual who was an “executive officer” of the Company at the time of grant or payment of such Covered Incentive Compensation, then in addition to the above provisions, the “executive officer” shall, as directed by the Compensation Committee, to the extent permitted by law: (i) forfeit any outstanding equity-based awards granted during the period following the publication of the financials that were subsequently restated; and (ii) repay the amount received upon the settlement, or any gains realized upon the exercise, of any equity-based awards or other awards. Case 2:19-cv-08927-ES-CLW Document 50-4 Filed 06/20/19 Page 5 of 5 PageID: 647 The Company may, to the extent permitted by law, enforce an executive officer’s repayment obligation under this policy by reducing any amounts that may be owing from time-to-time by the Company or an affiliate to the executive officer, whether as wages, severance, vacation pay or in the form of any other benefit or for any other reason. The Compensation Committee shall have full and final authority to make all determinations under this Compensation Recovery Policy, including without limitation whether this Compensation Recovery Policy applies and if so, the amount and type of compensation to be repaid or forfeited by the executive officer. All determinations and decisions made by the Compensation Committee pursuant to the provisions of this Compensation Recovery Policy shall be final, conclusive and binding on all persons, including the Company, its affiliates, its stockholders and employees. From and after January 1, 2010, each award agreement or other document setting forth the terms and conditions of any Covered Incentive Compensation granted to an executive officer shall include a provision incorporating the requirements of this Compensation Recovery Policy with respect to such award. The remedy specified in this policy shall not be exclusive and shall be in addition to every other right or remedy at law or in equity that may be available to the Company. 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W•'flllll•l•.t'fl b•• 1Jcod c:ar-lPGf"Aill ar, curC.cmp,11n(l b11h,dl, c•h11n 111 ~ 11r-. 'llhMt w•op«11t•. "1 •Pllblk!t, tr.d.dl comp.-.y, w,are 1ubjKt 11.tHIM Hc:hol yOQ lnedvence 1«4-11.FIQ ttte llm•to 10 IM~ Jew.& Iii'! • I Ciflht C;0\11'111ti•t•l'IN• ... t'Hd lhH:+m•t~lel* dotiui:nt11. tq...-.lly ~IM'lt ii """ peraon.l C:-DINl'llll!Mnt to .ru.url<"lq Uwt ..... e:ondutl Otlf .ne1. m0r+ i-npc,r14"1ll)', LO li.'itt tir ltl..-n Ht:hlli1r I •IIO•ent to ui;ur•wu lh.-wr B~rd o4 Olrffle.--J WldS.nkM' iWMIIJMlllf'.lt TIIAll'I IIW.Pttu WIil! .tl'liU al'ld 1'114"11 rlly HCl'I Ind .wt)' MIi firmly comfflllllld lo "'Wllklr-; 111111 l•lk n Wtl*"' II dey. lnu.,potellv• o'I wtl.lfl:Mf" • pa-linilar II'# req,u a' or.1 come la lnue ~ MFH1u1 inlt,Qr[ty end 111:hia. u1 ta-ft Ml. TMt Is U!ehlllmaf'- o~ a g.aod cOfporat• P.INse jo.,m•, our Board ofDlrK'loni end U''le sanior eiliun,.•hlch 1-1 ... 12: •t-ys IM'I tii•,m.nd w it! •l••YI ,t,t1t1•~tmtnl: '""" ii'lo...,,.wrlr,qi ll'lel Mf'lh. ls•'-•'¥' PDl"llnu, lob,. con:sld...-.cl • ~;ood cer:por.it tMliun, 1 ,;ood buai,....,, p11rt11« .-nd • 9rNI: ph,1:111 lo wot'- b Keu,H ol lM W• .,...1nt1lne .u l cl .st1rid11rd:11, whkh ... ull lh• M«l:z -stmnd.a!d1 of Su:sfte:11 Gondiuct DI' Code, 1111: rarl.h, in lh• 1»9e:s I.Mt folloW Thb b • nt...-«Ke 1-~rc1-, •tj(l'I i;t. itlt~.ct to l'l•IO 'f'OII ll"ldiwil•l'ld ,om, eil fl'I• '"IH IM1t iO"tn'l lM Pl'..,. •-ov lo oo bWl'IH.1..1 •PK.I •II M-Wl'l llft'lplOVHS le 1>11 t1mltlllr • ·tl'l lhl5. c.oc11-. our -e:om,..Hl"fllf'll 1-0 P-Wiodic: ln1iilnQ • Wt Table of Contents I ntroduct lo n: U nderst• nd In9 Our Code WIiy Do We Maw a Coch>? WIK:! t! Expt,,elMla fo llowlM COdl"l Wt.al RKponslbll .lii, Do Wi 1--1.W Undtr ttwCOW? 9 Wit EIHiUrt t-!Hlttl .end Sahttv In Our Workplacr Wt: P'l'olf:ct Each- Ctn.e n PfMt.e- 1n1or11U1don Wt! 4cl In, Our Com1Mn(:1, Btnit lnt.J11:i;t:1, n 1: u Asking Questions and MaklnQ Repor ts WI' ~idl' E;rc:eption.- Ciu:&tom•r Sl'r\l'it• w~ Com~t. l:ithlcally et1d Lawfull'Y We- s,re'ilu'-r~ Thil1;1•P1rty lnJorm,,tion Wt: Follaw Ftroc:l!'durM ror Working wiith Gow-,n.rnell'lt CU1.tGtrl.ef'!. we comoty wlitn G1o1>11 17 . we follow lntfrnalionll Ttad~ Ua'WS. ..,. we Do Not Partl~lpat! 111 Unapprcwd Bo.,wtb 1nd S.r,tfion; we So.POrt Feit Em'110ymet1t Pracliees ,. An,tl-(onup~OB 1.-1~ We Prot«tOurEnvtron1nent We E~.alile- in f:lhiell Politieo1 ond Chari table-Activity 21 ,orourwtvl!l'i W!- do not .atlOW' lina.ncial inw,stmHb to Zl Acknowledgment lrnprol)1;1t:mt:nt w., UH OurCom~n\""i Aueti 1ndl l nfOl' IT'lltiOn, AP,iwo,li'illf Py Oon Ml!lrti l.ook Into Reporb? our s.e1u al'ld Matkittino EUotts Art: Hon,est al'ld Aec:u rate- 17 u WI!' Maki!' Pr~r the~ Company Computtr Sn-Wm; s We Trell Our Customers •nd Bu.s inus Ptrtnors Right 6 Wedo notatlow QiUs anden:ti-tt.ainmt:nt to improp,e-rfy lntluen~ 10\lr j1Jd9mi!'l"lt Wuro noU11ow pc-,son•I r_.1tion;.hip,:i; to iMiprop,e,rty lnflul!l'lt:'f' our j1Jd-Qi!'me-f'lt Business PrilCtlc:es •nd Protect the ~nvlronment 13 W'tllC"rlC" Do We Go to M11ke- ~port$ or Sec-k Atf:vi~? Att Wf: sare fro,n Rf:taUIU0-11 WMn Mlllll'IQ a Repa,t? • 17 we E119ag1 In Proper W1td'o not a low 01,1tshse em.PIOYm•nt to imp~ptrrfy inftueni;t our j1Jr;t',qeme-11t Wt:do l'\Oltar.t cotpor.atr o~po;rtunltln Wlll:t A.nr the Con;c-,quc-n~n, of Codt Violtl.ion$.? 3 rr..t heh ot htrs and Mertz Rlqhl Wf: Tl'Hl Eaeti ottif:t With, Rit:Stll'Ct CbSl:ll'IQllh• RIIQ N Shadow: Do M6nll9tl'1 M.!IYtAdMd Rtspc,nslblll:IH? WIMII LBw!i Must W.11 Koowarul folloW? yo-u Is te olrK lhal ')'DU btU .... VrdKS.18~ lfl A Message F"rom Mark P. F"rissora 1 J(l 1s Wt Comply wRh tho L•ws Governl119 Public Companies 15 WI!' iMalnitaln 1-16M1.t 111WI Accurate Books 1:11 1ndl ~«N'd$ ~ Nrn-r Trade or, l n.sidf! lnrormatior, 1, Wt: Comrnu-nkat. wltll On,e VOlct: l ncltx of Motllne Numbers ana certification Case 2:19-cv-08927-ES-CLW Document 50-5 Filed 06/20/19 Page 7 of 15 PageID: 654 • Tuii n o.!Mr ..rl'f11t1.,...,. o.n thl :11 Ctidt 111111 r•l1v1nt Introduction: Understanding Our Code What Responslbllllles Do We I-lave Under the Code? Ow C.Od• k •nly as. 1ffec,Jv1 H th.M• who follow ll . TP'lt11fo,n, ii i l-«vGIII for tKh Of'i,11,lo'.now IMI" 11nJ"11'1-,..1Pon.;ib'ililyto: M1tl2 polldu 11ncl 11roc.Nlur1 1.; • Ats.jlOftd lol:titCOIIC4"rll5 UIN'4"Hlclby ,m~l111ren, "'""•'llfflil IH'-IH whl-11 n4c.1wrr,1.-.41 • l';tti:,, fl"I 1y, orul f,or mi;c:ond ud , ri.vtr .-.eu:;in,;i Ot' IIVCU'ltdl it'I Q Yi01liltl OM 61 ll'it Codi fW 11'11 1.-W. • .rou~., &ur Cod•. COl"l'I.P•"'t ~u,e1., .,,ut ,r69ilfwH.,. an,,d lM I - llt Al l llr.,t~tVlfl II someo111111!1.\.1. vs. lo dQ lill"illlllyor ul'ltll'llc•lly; end • S pe& ,up H 1111 kM• •r WS.IHld tMI • w4 ol« lon ,;,1 wr Coclt hescii.wrrtd, What Laws Must We Know and Follow? tn tddi ti on-to'llil,.... Co-d• ..,d N.-l':',i; oolii;:in •"d ,.,oe. ..... s,. . ,. •II illlW.- Iii ~ylo 11ph.old lh.• I I W. F!t,..,... bff, l'loO t.ift,,Qtt, dOtuMll'\1 eM'I toYlf ,Ill OI LIWS Uft ti• (Ol'l'lplU, Md ......-y •rolWI OI\JICOUl'll,V I.O ll'III sltHtlo,,i1, IPIIL - IM ,ne:,it, Th i, mti:11 It 411 u,. l'llo(> r• hll.POrl•l'II IMI 111'1 lh1 couw- ol Why Do We I-lave a Code? 5,;mplr :.tat•4 aclinq •lhlcallv Is ,;ood r« bulln.:.s.. ll!ld••d. lt It II c-,petllit1• a,h-witao• H 11 ~Clttf ws.? Our ,b Yl14I m,lk• f'O'llr 1'1'11'1 IM.flllnter lhfO UQl'IO!.lt w eft... 1t ls. lM r1lert crltkllll ..-,o,.,, N...-li , This. m....,1- 01,111" C:ff, •pllfl to ow br«MI lllld rt~M I.,., ln.lM mal:,.;lf)laet'. ~Md.,cb of B1i11~MnCo,r ul~--ow('.oclri 1- ow OtJI" thlll: 111!'1 ,uu comm111n 1-1-nw- 11nd 4j1Gocl j~9nMl'lt,. What Are the Consequences of Code Vlolatlons? Ml'rla: ,.,..,. CM• vi •11 ti ons urioua.1.,-. Cock ¥i o111 ion1 "" hav• HYlrl CO>nHWff'IC:11 k,r l;i,;,,1~ MHI; tncl thCl'4' in ..- ol v-..,. i n -~ -GH,tnw, In, 14';1.-iQ.n t,;, 1rC1111..-it.. fvr 4 oin'il H , ff:.,.tt lhot ..,..,,. 1&-oJIK t111 U1lil'JI of 111" wh,.c, pertlC:IP•hl11u,.1-1.i4,a.11on,d1t1JM1tl. l;ufOP•t,.itl'iil1d • TIie MR !!ll.dl11i.u Pitr t1W11 11ir athwl!i•)' i.o, .,..ur If r o111 tut lholl voo or •Mltltt Nt1tz em,tov-ff Ms CO t Hllt''I' H~trl•MNI rff1ll11l"", s p,Nl. W , M1 r12 • Thi (om11llanc1 Not1 th • Wla l•l1Dhorw (l'llum lHt111 ffll'I' t11k• tiKJfil'll n#l' action, UJ1 to 1M l ncl11odlnQ1 ~•rniiMl ion, l'w yolllr re qk,n.c.aJ"I l!jloli n'Jl l""f0-11• w>,111-..,,,;..;iH in •~•11•·11111.-y •t.b b1 f111-d el lhl' """"' tNa:C.od~•nd Gl'l lh• --01in,t.t ill'Wtll'l•r for rt11~ifl,O • 40od-laiill'I t•p.ott 01 • Mut!lir, l, . . • U 1Llcll,-HIN .-1&11111r.en et u, Lt. Co.ot o.- n-1, lfil~ • Onlit'I• ,t II.U,t1:11://ulm 11r1M1c1--.h11p5n..com / 1-11,t:1.~s,, ( U-5 .• Pillrh A ce 1M $t _ T'Mtnu tm plO'flH (H'iy) Does Hertz Look Into Reports? Y,..-, I! y-o,v m...., • flpf',Jr l, !he ni1Ue.- ajll b1 &-r'1fflplfr Tht C,ami;,li11~ MoHh11t is. • v.ai1Ht. ft:.t IIH l41 ho loll'I- dfv.; ...... -m·11 h '.n t,i1l;o1'1, , Ytil~. I ~- ~ ln.-.dh;,,•11-d, ,It U»t m•l:l•r ln,'Vd--.it u •••Q,ioUw·• 6UlUr 6f . d lt1dor. o, ,eould 11'~..-ilJIII I'( i.t. ~IYS o.....,- ln .all la'M)ll1.QN lh•t M•rlz l1ll;lh11y.-H !$1H~- $1 ml111on, thto Audit Corwnl ll.11 win h1 n.eti rl-NI . lt110nym:ou~ r1port lno J, , ,..11U11bll, Wftere i,ttml lt1d They will lM1 111111 u bl ons Hwy c.o nld'..- 1pp.-oorf4l• by,-. l'iup In fllM'! d , tiow,..,tr, ltl•l 1Mnymeu1. l o i""'"''IOJII• •nv vi,;,J a ti on~ r1pwt,d l e l..,..m_ H ,.._.n, r1p«ts. m1y li t mot1 dl tflc:uU ti>r ff l'rtt llll l1WH1k11.l r n.ws-..ry. ~orr..,;;Clv, .c:~l orJ w ill b• l.horci119Nlr. l'ltfftr,;,r•, '1'9\1 11r, fllQClllf~tdl111 lhor ttpcsl_,11, m41d, •rv:inymoUJ.I Y, ..-,:11,1 •Ill 110,,Jy, prone!, •-i m~h ir1'9u rJ.,. lllln •;. 111oci"'1bl• •i"l•n Vnt,H f11db•.ek Oft Ital O>titfli lM:1 lr!lo rnualn tr11•. T"D llv..- 1..1p to th..- ftUtr an,:t: 1pk•I of tl'IHt , _1,,, ..... m i.at IMVH d' ISliUH a-rta ln to pics- 'Jll'ill'I 011,,omp,lil c,n ,.. c.ll,h • s-: • ,~. divi1ioi, l!ot OI" .-Onlion,~rm,rl..• tc., t,rriill ori.,1 t:u~ICM• tt.! • :Pl'iOH er priee·o,ltt...:I ~lrelt,olH (in cl!Ml.no m arkl'Un~ ln tcina ai11 le.n}~ • • 'hit ll'w ~uieM,-o f-au r t.elvite, ,.-o u ~l'I MCI briflO ll'r•M t111 We Provide Exceptional Customer Service ...,our r1t11 n11-Qer'-t. llltfflllorr ll'l'IIMedi..-ll'fJ'. IP you rem~ w• At ~ttll~ s-lrln to bl' 111,e most c:ustomer•fo ..:ru, Ml f'MJ l~I~,., R'.e.•ll:1: W9· 05 c.urS1ilP-Pllff't.,b1;t1ll"l• u,..., tnffs •ftd c u:stc.rn• n c; MIEll'C. R'ettJ• I • ,twolct m ls1-1••fM'nt tQt1bi,, 11tH P*.,. Uei:11,. O.l'i'w nl e :11,. lhh;r,u & bch11n91"s; ?·~8. fi'aocm'n,u eufomer CQfflSJIMts; :1,, IO'il'... " . • N,Y., rni;;r ,11r154 nJ1 f11c h-in 0.. AU1 ·'98 •nd E.2·12, C"~'r ltlfl't--h'C1t11; o·r.1·9B., CW~O!TH,1' o• ,acts, -Wlf ml1lud in Q m..-11.e ti~. 114V1'rtiM-mmts •nc:I 11n•m~ iQ.ns-: IIAG COfl'lf!l'lili .... .-c!OI' iil'I . ...... M_. Ji.ft . ~vicn:: W1,11·68, (:u-.Jtw,,., Co,,t«~.r .tr.i..-...it11 OK(: ,S F~t'I U4'1t: QW«.t. C'i'fJYua;etivn .,,~ iimnw6i,t•l 'fll"9 1J1;11rl tM iociOl-ol '1'lltll'fi,.1'1; •nd tr1dffl'!..-k.• • W, h..,... • •H PO" li~ility l o \l;e thot IP trelc,ruil ino to othif,r;, fl4'u, ,~ r~ tr .,wt lo tti, Le• D":nrtm•nt, P,rk R ifiil•so• It.. L•9•I Al'4iit1. D•fl,MI M•l'lt, w,,t.t EutOP• LIMl'l H .,. ttlffr+d to (OIIIU>liwl~ ln.tlld.Code ,M , wh i,th et"lty in Ktaf"dlil'ICe wilh ~ ltr iri:t- pM'ty •OfUtr'l el'lt t . TN1 ffi taru.ln .,.,,_ lhat w+ 6o n ot ln.1t•Jt utille• Ml'd IM LMN 0tit«l:ment . 1oflw.ro1- on CotnSJarll' com11-utws.. Add ltfoMll y, """i,r-.iJ-1 ..-d ~QmJ:l•tm on 1¥""1 .... ~~1111'11 ..,~ Cl f lt'IOH Qof us Whrmaliwt th r - 11 h 1tw,1. prhrlll:1. S:f.tCl'lr GIit• hul udH miun,r,M-nl.9'i.o n ;,r dttfto lion.. W• .i"° n,.-... MIi' c1at<11M1"1' n lffltl,, -1dao-o1-Hn, ..-rNlil <.wd ln1ffmat lon,, Qllllo"Hnm,nt· pru:;ur, ou t co11,a9un lo, dii.,u r~ e ttre c,,i,lli d,nJ:i .. i nv~ d idl- ntil i.ati or, 114,1m1N-r1-., S.ix:i1t S ,c ~ I., infor.-n.iie"' el IMir ttllnae r efflpl,,,...,1- It you dr!lo i,1,1mb1r:i:,driv,r"l:licenM"ftl,ln>1',r:i:,1m,eil.,i:!dr1nn happ,11 l a o1-nccn.,11•ilw cendld'ff.11~11 ln.tarm11tlo11 abaUi an a th u cala!P lfflY tl'r al Y<'U . .. ml .,,,nu ...d tc, kn-. •ndl iin!.ut•n- lflfMM•liCll'I . lnter ni.tty. - anl .,- stw.re :h 1dl lnlorm11t lllfl l.o lh 111 •:dent n4l;l • 11f1 91\41 hNillhr •or p1.,., lor u• 111 To,,,.~ th411 'iii"-'· -. .,, ,.,.k 1.h,ir 1ua i'di•nl ial, W• Itta\ ueti oll\H -Mh t•U•d. t •~Plilll\tlbl•fot-..ipho.'ldir\0 1"1•"- t"1•l'.ICl:L•f44Y by l'ioMli"O ,ould.il11,u, tllal i1,p,iy10 e h1dff. ••cti oll'iH'ls w.wl ol.R tl•el.oroul'ld:!I Md w, Mll•ve 1/1111 01.1' tlUtrttUtl,~U f,111,11, aim ta- IMttr ltlil.1 comptlilli.fl. ad v.,.,laq1-. •111 - OiJf WHI. , W• "*. . o1 duty le npNt any loM'IYft coniUllo.111, s.o Ult.I. ""8 Ce~n'I' C41'1 lal,.1 Rep• le cc,rrut th4 sltu•tiM H 1001!1 11 pu111bl• 11innll'1', 0,,.,., C.etnp,an)' IIIH"J. thi;.. i" pttl. lb'f p t e rt'l'l11t! l1"19 • fl"llu,rlno • uf• •t'ld hutU•o•; -.orli,pl•c• •• ~.t ... ,, ~,,.,.. or v11o;1..- lhe m1m...-, i:. t.tu:s, q11W-He in'6il'llalloti, ,e,r an·" 01.n.; ,e.w l•III ;,;-.i.ui~i on clruq,J. whiil • el!llr.dudi no ClllHilllr rupec1•u11 y,a1s.. m.,•n I t,llt •• l •~ft in.c;•i.h ff We Act In Our Company's Best I nterests ,;-.;h.t"Ql,liv.. ~l;l,,in,;l,;.,dill'iJl-9lflWtilic.,ln w• INY• 0ftto W.,'IH u i - rHlkH.l to our caU1"aQ1U1 h by As Meth: 4'mployH·s., oHlc•n and dlr•dors, 11ns ...inq uch o,tlw('1, o.r1onal lntor111al k n Amllln:s .t penOl\111 il.tk ..,i..,11. h•~rtljl KO:.H- lo thi1- ly" ot ,u,n.,::iti"• M•1-•el io, ,Orm..i:io,wi, ,ol i ntu,M PlliNlli on1-• ,~""'"'' 1"-'"'· •PP••ra~ oP Alw.,-1, 1;.11,.t' 1,e1urd b1,,11,ir,,•1-1-j...d'ilm,nt ""ftllrtt1ln,o 'l'tturdutlH lot lhr l z. WJ'a•11iin deu!M, u:H It to th.- • tl •ril 11•c.1.wq t1111 ,.-,to.rm tlw dut ies 1-k •d'l'f.<-• fflDm th.• L - D•ii,;wl,m•n.l:. Comp111-, OI' inc11Mdl.Nl,•it11il'II o~ c-.pe(lo)' to ul'ld!u, r"1Mll.tl~ , lri1,' ptibli,c: (Ir if'"'°" tu phyiit;.11 l'l••fl\! ~d n-d t.P knQW it, -.ti.CW .n,c,:ll"lff c,;iiksqw vr s;QfflC'Qflll"l~,;,.illitth:, 81,1;:inni. 'iJltlt, •"" ~t.-rltiinmitnt .,.,,;,o,1,ll'tnin lf-H1umt1r ui•d lbhild e6tP4-l'•t• ,tlKldwill b,t.,.. n .«icqrr,,JrJtlM Md ClfSNOw~ of Comp11ny Mfoun.Hfon; Qtlhff IPnoo.t- PP the •on•tl"11NI • Cifh; of ce~ end CHh ~11h•el•nl'l ... .,,••va:Pt",;.t.ibit•d , Fot .,uilion.ail'ltotl'llali~.n. , .• r..,.ne,: 'Wl·1e, Rit,_..,...tlo..-th•t9ifh4,01n41"11tt"rt•in,untot 'iJQVllf'l'flm..-.1 ,offi ~illlt, .-"• h•ld to• m1,1,;h J.trii;titr dlll'll dtld' 1i.,-,. llles• :1et 01;il iti tllit uetiot1 . Fot Mor• lntorMlll-0" t+Qilllfdll'IIO o,,lts to Md ,11t.,llliM1•nl of q,,>'Vffn,.Mt oUic: Is or HnpC•'Y,..H., nftr to IM ,~1-in,iai 1-1<1:ion1, ol U1iii; Cl>d•: • -w. Cbl'l'lpt; Mith Cloti..i AN i-<.em.1,r,lkin t.._. ~ c.onttic:I 11:1l int•rnl•"-•nrKeivin'll~ift;; bwll n.H pr11o1.tiw1; ~1, •lw. n.e l .. o_d II ,udl 4'fflpl(lymllf'II -i.J d: •m.pl(llf•·~ OI' • T-11..., ..,.,.. ot wUidl'ntl'f li'miLNI C.ov..-nmantOu;.1..,,,r*"": Kn.1> th• '9aowin9 Jlrin,;ipfn in mi nd to ~ c l • ul•nt uiual:ly au;c,cl11t•d willl acc•pf•tl tt-. 11>p,nr,1rt,;e ol l•vorili'""' .... ,noiiierll'oliti-on; N9fM'l,lll•.cttnditvrn~9ilhitnd~ert..-.ffl1'ntmtir • "'¥1'• f,otl,w P'r,owr.kl~4'5 f11:1 r Workin'II wl1h lbusl,wu. m1alc.11l aM U1utrll',~t orr,;,l'm,,..-n Pr.ciy,n""d e.1"" ot Comp.,iy t,~tmol~y tci ,ni1,1r, tti,t It i• und dir•dtiu-onl)' P-4-r bu sil"IH:I 0,1,1fp,Ou-t . !l; . . p, itl Mil"ld, ii n ttil'ln•ietlM with I H,litlM,.* bu~ n,u: p1n~~H. yo11 otir~o•bion. lo 1rt1t•et u,b lnlMPl!llll i Qfl centifluH A&Mle-nolll)', ... . , . expitWl;id, itm,Dl~m,nt F'cir fu'1htr lnform1tivn. ritltr,mw ; 'W1· 1l.3, lo d-nlo+d 11ny H-Jr,.,...ly 1"1oljllijlHllv•-or A,;,;,;,.irlMon .,,d C,iK.loMI•• o/CQfflH"7lrJfor.m.,/io.rl! 4'(1'1ic;itratillfritrl. l.h.t MMr UiuS.• • tet'lflid, tit~- et1Mid'ffll'l4' dOil'IO W'1·41 • .Bfeedlu o/Siteurfl,: 'W 1·7S, ~.et(ot"J ol 1e. dlsdou- llu S.N•Uo~ lo ,li:u:11ts ~ CMf,'def.ll i •IMitt« r11tJ. Mut'l'I•" Re.soue.s. Alsc,, l 11b UI'• 'ahH'I d'.-.attll'IIO 11,a-81.., kupW, ,; 11"1 mlM lt.llt eledranHl 1Mssaoe1 can b1 -111,wa-d 111"111 lmffl•dl&ld)'. We Make Proper Use of Company Computer Systems fcir •iklitio11IIII in,ormat-io11, rtffftn,;r. W 1·:Hl, C~J~ir.a.;,, ~"'iU ~ 2·24, .E,,,i:,fO)'tH $,,•,,.in9 H Adlllton M COl'loJlrAIMtU Ow C.c,mpany ~idn thelfl', )IQ"1 f 11,r;on .. 1C11nh: m,y t;,, lhN •Mill !o rffll •111,1ir;:,menl cir veM~H U11fl Hffl:; orff'ts... •• ~not: 4'1ietr,ti'1P'I I c:o~N i n9 ,;o~..,,r l;c, e.upp,lr tti• eoq1.1ip;tt1•1\1 o,r "•hid.-:t or d-e ui .:i...-ul.-•L. ll'IIM 111., -~Ltll'f'itH ..,. Pf'~blh,d t,o.rn etillllf)•Uno IMll'I M11rt:r:. We Use Our Company's Assets and lnformatlon Approprlately W'• ..,,.,,.. 111 worl.ld ,,..,., Mrd ta MCl'i,l ln wr fadliths.. nhktes., lnformltlfon, npwt.it,tlN1 1M we do not auow ttnanctaf Tnve-stmont.s tc 9,;,odw ill wil.t, QUl'WMlitl'Tllrl , 'Wf' ,_ii tClc o,....uh-n•s.wtlt •s.wr ,toi,,...h.Ql',,i,rr. lo nf,'iil,,,,..,-4 Improperly U>fWonce our jud9menr lhit:1:• Yll'oitn t,mit,' MitmbarJ ot •"•" ""'r tlo,11 pers.i:.nfl 1'1'1 1:SUH . W• oll:IIO ,n~t • Mur• lh*I 6UI us,th . , . ,,1.rw1, h1'ri at1onllieM1tfin.et1el t1 ll"lt•r-HI 11'411'1Y 0,011111:r:ittlol"I lt.lfl dus. (.C,< ll'llffl ds t-e ff>o) budnass i,;=..1-..,9.,;":d lhittl.,dM'l,dl prHtnt • clil.ll,;,sl4<1 gii;tu•• oP ~r CoMp_,., o.ru-ll.ast11cklskl\0WP.1as "ll'ls.l d11rlr11.dlnq"" oll'ldls spokup.,:1aru. .,.,. 1111.tllwlrlud lo s pHk 11 ltQIIIII . II Is lllllso illt~J I• provlcl1 lmldt i nilor-raatl:on lhrl2. lriclu411no throuQII sed• r.n.d la. II y•u r•cel .... to, ( or- "tig") M11m.... tffliml' .Pro,ur,m, whkti •d"Grt'H,H tlw 1,n,~U11 GI Fc,st...,.1h,.rint1,1rm•lii1,1n.,r,-.,,.r>e;r. Yl'1· 11 2. 0 s.i~r T1"4ittt P11,r sto c:IQ. l'l form11Uo11 is. c-onsid'4r•d pw,Uc: enly •bs.&rbH b y tu Fet t -ddiliOl'llilllin!ol'tMl. Ol\. f•••ttt1c -: WIU - ~1. OCU~IOMll'I' b• ••• ,. or Mllll:•rl61,. IIOftfl,IJ'Mlc d•:i,ltudiOftpl'tic:•dur•';,, er it, •~•r ii J"t1, bt«n ciuloti,r;ly ,cfis-c; rolff •l'?ol;I • r1.ion11bl• .,n,,;i...,l0Pei..,,hoa;.11.,;:wd•orth•i"for..,,,1iontob• 11!'14low C«rio. . y, W, din 11111 by lollcrwir.1q our fh.nwd R11t.ntJon .nrl 91, . . . . iQ.n i; " in;,ld• intor,,..llor-." 01 il'\r-HMetlol'I l.tiat i $ ti b l • veiii•bl• lo IM flubllc Md to IP'lfCMs• « st>II. COffl!M,IIY 1S. fful ,;,/ ,'icJVvti lin ,i MJ d t,rrni".,tio" o••n11110.,..,•"t , P'W'191r'Q,,:itt 11~,v~;,.,,, Case 2:19-cv-08927-ES-CLW Document 50-5 Filed 06/20/19 Page 13 of 15 PageID: 660 We Engage In Proper Business Practices and Protect the Environment l e~. fff hltt!Mi t '9uidtft.o!!•, o!!Ofttlllt Yl'iill'I It.. Ln We Comp ly wlth Global Antl·Corruptlon Laws OtPMltnelV. ltl 1,6dlUo"' 16.tc.UOMI m1t1,l.i1. An,tl•c.orn,Dt.lgn l•wa, inch11M1g. Uu U.S. f0ttililn Cor,....,..t Pucliw1-Ai;t an4U·.. UlUl rihry Act ol ;:o:i.o. prchibil Uw payia•nl 111 bi iib,:;, .,.cund 1hr li'lrtlll'llnqi to- -.tl•<«ruptlM l,1'#1. w• IIVIIU••• '"' '"'' \.«ff O"Ji'artm•~'s inlrMM sih·. arr.,, autllfflre·, Qlw or p,,eml.H 6.l'IY kir,a ol brl~• ar We Fol low International Trade Laws ~lc:kb«ll., o•llcY'lartv lo •r qe'N'rMMnt aUir::lals . Out- Ol!latlllloi'l::i t,ll•l'lillw 01111-b,. whidl.tti•.,..,w, -,,11. r« ttil1 fl*IOt\. II ls erut:111 l11,II! w• do,111ot "G-o"'•rrrn,ntollicl .. -1"1Ml\fden•tltw1lllo rlo,ce,I IJ9"t'"ffl""I ,ntsilloyHI, p9fith:;al 11;en,did.CH Qr '1'1'" abide- b't th• IIIJl'S ol il'IIUtlatlOl'lal I.lad•. TIW:H ..._ 1tric.U"tH·ourate ,,:ports lro,.ll'le Uril NI St1tt1 •mp:1ti.,..,1: a.t QCIY,rnrn,nf-.ciwn.,d' bu li nu:~ . en., In, S4ffle casK. ct"V«lffls. . .,bpDrt,... ocwr Te 1:1..- t:l tar. • "bf'lti,,• I• anythlt\o o! vlllue-•:n,ch H ciPt""*'ni~ rr,~m,.tiOft .,. Jhq,, ptd tc • pf'I''°" u~. 1.von-« enltrt1l,i mo1n.l- uied" to- irillwtrK• i n ,writitl'l•r e:o-un.trv. Eip0tl:11 wti,m prffH~c:. t,1.~lllil~H, 1 ~ f Hn'1 111;:t iw~m,nc or GOOill.ldL l'M U11. II rlbffl' •ho ctn•lfiH .. • l;,riD4' a,,y .. ,,"11t.Hn9M~ s.or.iw.,, o, li'i,cu ""*'I .i:10«:cu1 .,....l"I IKl'ino4o,oy, ltdll'fl[A1 ~fl4M,aallon 11,r u.nwM11 l:1 r,r.widtd iri 11nyw1y~ILMNrlo Yff'bllllrta • MIi" M"il"""''" POmtnC m.,d, t-1;1 • ,;;iov,riun,r.t olfi~tl (H IJ.S. <.-Inn loclll:ed elltwr In 11'1• U~NI ~1tn ar O"'O~•d lo• pliy n.r.flt lb• 0,0>',t,il'IIIIN1l •09"Mi)i,fi anoCh.fl ~01i1nl.-y. h»ort r•9Wiallon,1, dtb,,rml~ ,n:eti,11n,ot tor •1eutlu,va.,,1rwn111riti11 1,rvlN. IIJI• wh40,,r a "~,t~ct ,;,r tKhn.c,toqy .,,..,. 1>t H!llott,ot. li.:nlln,v II Dffmll . MNtl: hM • slrapll itollq : ... Go TN11.d•11•nd:. on.ll"i• IW~-..,•al lkl• ll• r.l'!. lh• ccuntry 110C lmbe. -or dnti111tlot1 •rwJll'i, ~ u.u e, 1111.d uu,. 11110,u ,c..-se-1.IP\eU.S. -oo',IUNne1'111•1ns.i1,,N,. ll'lolllff Y,, CO,r,11<1:1t -1,.:mpt h1 b'lp•:.-. -,l l·~rrv;illon I-a. by 1-tirln,o lt'lird iawti .:i: lo d.e !:.eltn•thiitll) w• 111, 1111-•d'lode o\.lr1'• •n'I ,ciu•:tUon=, ab-Out 1.l;>!Tlli'liH ai01 tit i""'il.t K""'1llil~ s.or;:ti,o n,; 1r,d Qll'l'r•l• OMr IK1tton1 11nl.. 90-d 1-11fet.,- 1.-.. ari4 n91i .tio111,, Dt.--llMnt ln htl: A:ld4,. ,;: ...... ,;: C:~l>tnY p-o,l i1,in •ncl pr,;,«d1,1rn:. W• st.tu. It you r•c•lve I We Engage In Elhlclal Po litical and Charitable Activity Whitt"•• a.-.. •~••1i14 l9 be-w.m• •di-.r.ty in"lllllvot4 i n thll «ll'l'ltn.<.1nitlH wti.r• .,,,., Ii..,. al'ld worl.. do :11111 •INe.tll ly. Thi, m-n~ 11'1111 - or dirKI« IIHYl>I (ffls.lf\led to,~. Nyc:-oll «td rdu,!!t,:; le M lbu1.ln.t111. w'.i ll'I c*'t•ln S!-*'YIM, ,arau,is or counlrl H. Al Hera. - Yiol•I• .. " ' or h.1,1....., riqN ~ r.-a: , tv-M.,ifllljl in, bid er It.• bo~I. FM e:o:am.,i,, reQu.S'l1to-klentll¥ the ,PPl'OY•ilbf It., U~ , 'il~-.,"'..-.1 , A 'i!>ay,::oU'" OCCUf:11 Wl'letl OM ,itr:!l:111"' li,l lk! P '"'i'~• with-1111wller·11w othl'llt , At UMH, ... ,.." M i lWillUd in hs,ti11¥il'IIJ . * Lo-.ylno""" c:ev•n m11r1v IVJl'f'S.OI dlrul • lndorut c,ommunlc11:lori1 with 40YHN'l'llnil: oifldlltls. ~·1479 United Kingdom o,oo~i.'5- 1sn I ut14tn1Mld tl\al: I 1Mdd <-'Kt - , ol llw t;ifflH. i lWff'li- ot M1rtt1 !Mlidu. II don in 1N1R ilt-"!)'S*li""91.,ti'ntlo , IArtifyt~ l•i• Af"l\ply ~,wl•• fHOI.EfH 1'5.t11d I" thh, ciwt, 1, I ha w - , ~U111kim, M wltn,u,11 any bitMvlar or alu.tl«I uncffnil')QI MKl:z. I lllso unditn.t:andl lllal I hlon • rt:Sp,Mslblllty to- ritport _,y Yioltliem 1d our~lo an epg~rnowrR lm!n4'diatotly. Japan 010 IOO 7233 2:2SS. ~ p,r.ad;j~ ..ith 1"-C:odt. wrill,..,P'OtirO.s'• *· pol i(:ift. pt.-di:cn.. r uln ~ttion; ot~i.-n i1,;.u,.dby lllort:t, All other employees: 00800 72J3 2.255 ·~~------ . Case Document 50-5 Filed 06/20/19 Page 15 of 15 PageID: 662 Case Document 50-6 Filed 06/20/19 Page 1 of 3 PageID: 663 Exhibit Case 2:19-cv-08927-ES-CLW Document 50-6 Filed 06/20/19 Page 2 of 3 PageID: 664 Amended and Restated Compensation Recovery Policy Adopted February 19, 2014 Replacement of Original Policy On November 12, 2009, the Boards of Directors of Hertz Global Holdings, Inc. (“Hertz Holdings”) and The Hertz Corporation (“Hertz”) adopted a compensation recovery policy (the “Original Policy”) that became effective as of January 1, 2010. The Boards of Directors of Hertz Global Holdings, Inc. and The Hertz Corporation have adopted this Amended and Restated Compensation Recovery Policy (this “Policy”) to amend and restate in its entirety and replace the Original Policy effective on and as of February 20, 2014. This Policy governs and is effective with respect to any annual incentive, long-term incentive, equity-based award or other performance-based award granted or paid by the Company on or after February 20, 2014. Notwithstanding the amendment, restatement and replacement of the Original Policy, the Original Policy governs the repayment or forfeiture of Covered Incentive Compensation (as defined in the Original Policy) granted and paid to any “executive officer” (as defined in the Original Policy) prior to February 20, 2014. Amended and Restated Policy Each employee of Hertz Holdings, Hertz and their respective subsidiaries (collectively, the “Company”) that has the title of Director or any current or future title of substantially similar status and each employee with a title senior to such title (each, an “Covered Employee”) at the time of grant or payment to such employee of any annual incentive, long-term incentive, equity-based award or other performance-based award (collectively, “Covered Incentive Compensation”) shall repay to the Company or forfeit, as directed by the Compensation Committees of the Boards of Directors of Hertz Holdings and Hertz (together, the “Compensation Committee”), to the extent permitted by law, any Covered Incentive Compensation received by him or her if:  The payment, grant or vesting of such Covered Incentive Compensation was based on the achievement of financial results that were the subject of a restatement of the Company's financial statements, as filed with the Securities and Exchange Commission;  The need for the restatement was identified within three (3) years after the date of the first public issuance or filing of the financial results that were subsequently restated;  The Compensation Committee determines in its sole discretion, exercised in good faith, that the Covered Employee’s gross negligence, fraud or willful misconduct caused or contributed to the need for the restatement; and 1 Case 2:19-cv-08927-ES-CLW Document 50-6 Filed 06/20/19 Page 3 of 3 PageID: 665  The Compensation Committee determines in its sole discretion that it is in the best interests of the Company and the stockholders of Hertz Global Holdings, Inc. for the Covered Employee to repay or forfeit all or any portion of the Covered Incentive Compensation. In addition, if the Compensation Committee determines that this Policy applies to an individual who was an Covered Employee of the Company at the time of grant or payment of such Covered Incentive Compensation, then in addition to the above provisions, the Covered Employee shall, as directed by the Compensation Committee, to the extent permitted by law: (i) forfeit any outstanding equity-based awards granted during the period following the publication of the financials that were subsequently restated; and (ii) repay the amount received upon the settlement, or any gains realized upon the exercise, of any equity-based awards or other awards. The Company may, to the extent permitted by law, enforce an Covered Employee’s repayment obligation under this Policy by reducing any amounts that may be owing from time-to-time by the Company or an affiliate to the Covered Employee, whether as wages, severance, vacation pay or in the form of any other benefit or for any other reason. The Compensation Committee shall have full and final authority to make all determinations under this Policy, including, without limitation, whether an employee is deemed an Covered Employee, whether this Policy applies to an Covered Employee with respect to a restatement and if so, the amount and type of compensation to be repaid or forfeited by the Covered Employee. All determinations and decisions made by the Compensation Committee pursuant to the provisions of this Policy shall be final, conclusive and binding on all persons, including the Company, its affiliates, its stockholders and employees. From and after February 20, 2014, each award agreement or other document setting forth the terms and conditions of any Covered Incentive Compensation granted to an Covered Employee shall include a provision incorporating the requirements of this Policy with respect to such award. The remedy specified in this policy shall not be exclusive and shall be in addition to every other right or remedy at law or in equity that may be available to the Company. 2 Case Document 50-7 Filed 06/20/19 Page 1 of 39 PageID: 666 Exhibit Case 2:19-cv-08927-ES-CLW Document 50-7 Filed 06/20/19 Page 2 of 39 PageID: 667 HERTZ STANDARDS OF BUSINESS CONDUCT Case 2:19-cv-08927-ES-CLW Document 50-7 Filed 06/20/19 Page 3 of 39 PageID: 668 A MESSAGE FROM OUR CEO Dear colleagues, At Hertz, we’re committed to offering the best products and services to our customers. It’s a goal we all share, and we take it very seriously. But that isn’t the only commitment we share. We also have a shared responsibility to act with integrity and make ethical decisions at all times. We do business the right way, every day, in all our locations. This isn’t just about following the law—it’s about doing the right thing. It’s not always easy to know how to handle every tricky situation we might run into. Fortunately, we can refer to our Standards of Business Conduct (or “Code”) when we need help. 2ur Code applies to Hertz’s employees, of¿cers and directors. It lays out the principles that should guide all of our actions—integrity, respect and responsibility—as well as information about the laws we need to follow. Our Code can’t anticipate every problem you might encounter. Fortunately, there are many other resources you can turn to with Tuestions and concerns.