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Manganella v. Jasmine
Co., Inc., 2007 WL 324436 (Mass. Super.)
(Oct. 16, 2007) (Fabricant, J.). |
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On cross-motions for summary judgment,
the Court considered the preclusive effect of an
arbitration decision in subsequent litigation for breach
of contract. Plaintiff was the founder of the Defendant
company and sold his shares in the company to Lerner New
York, Inc. in exchange for some $30 million. The stock
purchase agreement provided that $7 million of the
purchase price would be returned to Lerner if Plaintiff
committed a “major employment breach,” a term defined to
include only conduct that had not been remedied within
thirty days of notice from the company. The agreement
provided for arbitration of any dispute as to whether a
major employment breach had occurred. A related
agreement set forth the terms of Plaintiff’s role with
the company, and provided for termination with or
without cause subject to a separate set of definitions
and conditions. Shortly after the stock sale, the
company terminated Plaintiff as a result of allegations
of sexual harassment raised against him. The company
stated that termination was for a “major employment
breach,” and commenced arbitration to enforce the refund
provision of the stock |
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purchase agreement. Although the
arbitrators found that Plaintiff had sexually harassed
several employees in violation of company policy, they
also found that the company had failed to give Plaintiff
notice and an opportunity to remedy his violations.
Absent such notice, there was no “major employment
breach.”
Plaintiff asserted the arbitration
decision established that he had been terminated in
violation of his employment agreement. The Court agreed
that the arbitrators’ decision was a final judgment for
purposes of issue preclusion, but concluded the decision
established that Plaintiff. “knew that he was terminated
for cause, and knew what conduct was alleged to
constitute cause.” Id. at *8.
The Court concluded that the findings of
the arbitration panel established that Plaintiff
intentionally caused the company to violate a material
law and had willfully harmed the company’s reputation.
Id. at *10-11. The panel’s findings thus
established cause for termination under the provisions
of the employment agreement, and Defendant was entitled
to judgment as a matter of law.
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