NEW YORK (FORTUNE) - Four union pension funds have sued the directors of Hewlett-Packard alleging that the severance package the company paid to ousted CEO Carly Fiorina last year -- which the suit values at between $21.4 million and $42 million -- greatly exceeded the maximum allowed under a board policy adopted in 2003.

The Indiana Electrical Workers Benefit Trust and three funds run by the Service Employees International Union claim that the policy forbade awarding Fiorina more than 2.99 times her annual salary and target cash bonus without first seeking shareholder approval. The formula should have capped Fiorina's severance at $16.49 million, according to the suit, filed Monday evening in federal court in San Jose. The plaintiffs seek to have Fiorina and the directors return to Hewlett-Packard (Research) all excessive payments.

Former Hewlett-Packard CEO Carly Fiorina

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"HP believes the suit is without merit," the company said in a one-sentence statement. A spokesperson for Fiorina, who is also named as a defendant, had no immediate comment.

Fiorina, who was terminated on February 8, 2005, was paid $21.4 million in cash, including a $14 million payment the company described as severance, and $7.4 million as her pro rata share of a three-year incentive program whose conditions she had not yet completed. In addition, she left the company with about $19 million worth of restricted stock and options, according to the suit.

The unions allege that upon termination Fiorina forfeited the right to any payment under the incentive program. They also claim that any payment made under the incentive program should have been deducted from the $14 million in severance, and that, in any event, the cumulative impact of all the various payments violated the 2003 policy capping severance at 2.99 times salary plus target bonus.

At HP's shareholders meeting in March 2003, HP chairman Patricia Dunn publicly described the entire $21.4 million cash payout to Fiorina as "severance," according to the complaint. "The fact that Dunn conceded it was a severance payment confirms our belief [that it was excessive]," says plaintiffs attorney Michael Barry, of Wilmington, Delaware's Grant & Eisenhofer.

In November 2002 former Compaq Computer CEO and then-HP president Michael Capellas left HP with a $16 million severance package, causing an uproar. The SEIU, a large HP shareholder, then sponsored a proxy proposal that advised capping future severance payments at 2.99 times an executive's salary and bonus. Over board opposition the proposal passed. The HP board then adopted a version of it in July 2003. Due to the complexity of its definitions, however, it is difficult to tell how it would apply to all the various forms of compensation Fiorina received.