Drapkin v. Mafco Consolidated Group, Inc.
818 F. Supp. 2d 678
S.D.N.Y.2011Background
- Drapkin joined the Company in 1987 as vice chairman and left in 2007; he and the Company negotiated a separation package scheduling about $27.5 million in seven installments and a stock buyback.
- Separation Agreement 3(a) sets that the Company will pay Drapkin $15.5 million in installments; Stock Purchase Agreement 3(a)-(b) provides Drapkin a $12 million buyback through installments.
- Section 3(b) obligates the Company to reimburse Drapkin’s medical expenses first, up to age 65, for expenses not reimbursed by other plans.
- Section 5 (non-disparagement) restricts Drapkin’s statements about the Company and allows 10 days to cure breaches after notice.
- Section 6(a) requires Drapkin to deliver to the Company all Company-related documents upon request; Section 6(h) allows retention of certain equipment but requires copying and deletion of Company files not otherwise available to the Company; Section 6(c) bans inducement of employees to leave; Section 9 permits rescission for material breaches; Section 11 preserves rights notwithstanding waivers.
- Drapkin departed May 1, 2007 to Lazard; his assistant Link helped purge documents and later found 849 emails and 79 Company-related documents on Link’s laptop; Drapkin’s health coverage at Lazard and medical expense reimbursements became disputed issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Drapkin’s medical expense reimbursements breached the Separation Agreement | Drapkin argues §3(b) permits reimbursement if not covered by other plans | Company contends reimbursement was improper where Drapkin had other coverage | Summary judgment for Drapkin on §3(b) |
| Whether Drapkin’s remarks breached the non-disparagement clause | Company says Drapkin disparaged Perelman and the Company | Drapkin contends no valid cure notice and no public-domain breach | Drapkin entitled to summary judgment on §5 |
| Whether Drapkin violated §6(a) by failing to turn over documents | Company asserts Drapkin did not comply with §6(a) demand | Fasman testimony shows only a vague request to turn over items, not a demand | Drapkin entitled to summary judgment on §6(a) |
| Whether Drapkin violated §6(h) by retaining Company electronic files | Drapkin retained files beyond what was allowed, violating §6(h) | Interpretation of §6(h) and materiality of breach are questions for trial | Not entitled to summary judgment on §6(h) (material breach issue for trial) |
| Whether Drapkin breached §6(c) by attempting to influence an employee to leave | Drapkin’s remarks to Dr. Rose were an attempt to influence | Remains a jury question whether remarks constitute an attempt to influence | Genuine jury question; summary judgment denied on §6(c) |
Key Cases Cited
- Bear, Stearns Funding, Inc. v. Interface Group-Nevada, Inc., 361 F.Supp.2d 283 (S.D.N.Y. 2005) (materiality of breach; summary judgment standard)
- Frank Felix Assocs., Ltd. v. Austin Drugs, Inc., 111 F.3d 284 (2d Cir. 1997) (materiality may be decided as a matter of law in some cases)
- Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168 (2d Cir. 2004) (ambiguity and extrinsic evidence in contract interpretation)
- World Trade Ctr. Props., L.L.C. v. Hartford Fire Ins. Co., 345 F.3d 154 (2d Cir. 2003) (ambiguity defined by multiple reasonable meanings)
- RJE Corp. v. Northville Indus. Corp., 329 F.3d 310 (2d Cir. 2003) (contract interpretation—extrinsic evidence when ambiguous)