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BIGDA v. FISCHBACH CORP.

April 19, 1994

JOHN F. BIGDA, Plaintiff,
v.
FISCHBACH CORPORATION, Defendant.


Carter


The opinion of the court was delivered by: ROBERT L. CARTER

ROBERT L. CARTER, District Judge

 Plaintiff, John H. Bigda, brings this diversity action against the Fischbach Corporation ("Fischbach"), for damages resulting from claimed breaches of his employment agreement. Plaintiff's first cause of action seeks a minimum of $ 601,377 in liquidated damages. His second cause of action seeks an undetermined amount of money for defendant's failure to provide certain supplemental pension benefits, his third, an undetermined amount of money in severance pay, and his fifth, $ 400,918 for defendant's repudiation of its obligations under the Senior Executive Benefit Plan. *fn1" In his sixth cause of action, Bigda seeks liquidated damages for Fischbach's willful failure to pay his wages in violation of New York Labor Law § 198. See N.Y. Labor Law § 198 (McKinney 1986).

 Plaintiff has moved for summary judgment on his first and fifth causes of action, partial summary judgment on his second, third and sixth causes of action, and to compel the production of documents relating to his third cause of action. Defendant has cross-moved for summary judgment on all five causes of action, and also seeks to amend its Answer, filed June 22, 1992, to add a counterclaim for breach of the fiduciary duty Bigda owed to Fischbach while serving as the company's general counsel and secretary.

  I.

 A.

 The undisputed facts are as follows. Bigda became the general counsel and secretary of Fischbach in 1980. Beginning that same year, Victor Posner, a well-known corporate raider, began to purchase Fischbach's outstanding common stock through a company called Pennsylvania Engineering Corporation ("PEC"). In an effort to ward off a takeover by PEC, Fischbach entered into a standstill agreement with PEC which limited the percentage of outstanding common stock that PEC or its affiliates could own (the "Standstill Agreement").

 In April, 1984, Posner, in conjunction with Ivan Boesky, Michael Milken and others, brought an action against Fischbach in Florida state court, seeking to set aside the restrictions contained in the Standstill Agreement. That action was settled in January, 1985 when the parties entered into a ten-year stipulation of settlement (the "Stipulation") which gave ultimate control of defendant to Posner, while preserving operational control and certain prerogatives for then-current management.

 Among other things, the Stipulation required that certain key Fischbach employees be offered five-year employment agreements, and plaintiff entered into one on October 25, 1985 (the "Employment Agreement"). The Employment Agreement established and ensured the level of plaintiff's salary, job responsibilities and other entitlements, and gave Bigda the right to terminate and collect liquidated damages if Fischbach breached 1) any term of the Stipulation, 2) certain enumerated provisions of the Employment Agreement, or 3) any unenumerated provision of the Employment Agreement, which breach Fischbach then failed to cure within 10 days.

 Plaintiff's liquidated damages (the "Damages Provision") included, among other things, payment of triple his most recent base salary as of the date of the termination, a lump sum cash payment at his normal retirement age equal to the pension benefits that he would have been entitled to under the retirement plan if he had continued to be employed by defendant for three additional years, and the continued participation for three years in all benefit programs in which he was entitled to participate immediately prior to the date of termination. The full amount of liquidated damages was payable regardless of the Employment Agreement's remaining term, and Bigda was relieved of any obligation to mitigate damages.

 Posner controlled Fischbach from 1985 until August, 1990 (the "Posner era"), during which time Bigda believed that defendant breached both the Stipulation and the Employment Agreement repeatedly (together, the "Posner era breaches"). More specifically, Bigda believed that Posner breached the Employment Agreement by diminishing plaintiff's responsibilities and authority as general counsel and secretary. Also, in 1988, Fischbach terminated its pension plan and its policy of offering severance packages based upon the length of an employee's tenure at Fischbach. According to Bigda, these breaches entitled him to terminate the Employment Agreement and collect his liquidated damages.

 Bigda, however, did not terminate the Employment Agreement during this time, and was still in Fischbach's employ when it was acquired in August, 1990 by the American Insurance Group ("AIG"), through AIG Acquisition Corporation. AIG has controlled Fischbach since that time (the "AIG era").

 On September 26, 1990, just four weeks before the Employment Agreement was due to expire, Bigda mentioned, at a meeting with AIG attorney Richard D'Alessandri and other AIG representatives, that he was contemplating suing for breach of the Employment Agreement. Without any further discussion, Bigda terminated the Employment Agreement on October 3, 1990. In compliance with the termination clause, he sent his notice, by registered mail, to "Fischbach Corporation, Attention: Chairman," and later received a signed receipt. Bigda sent no copies to any specific officers of defendant, nor did he contact anyone personally.

 B.

 The parties disagree about their respective performances under the Employment Agreement from the time of AIG's takeover through October 3, 1990. Thus, they vigorously dispute whether Fischbach breached the Agreement.

 According to Bigda, from the time it took control of defendant, AIG interfered with his authority and responsibilities as general counsel and secretary. For example, D'Alessandri communicated directly with outside counsel representing Fischbach, and became actively involved in various legal matters, including the claim of Stanley Shaughnessy that Fischbach breached his employment agreement and the preparation of defendant's proof of claim in the bankruptcy proceeding of Drexel Burnham & Lambert. D'Alessandri also prepared the articles of incorporation and by-laws of AIG Acquisition Corp., and took responsibility for the preparation of the minutes of all shareholder and board of directors meetings. Bigda further claims that AIG brought in two more attorneys, Paul Schorr and Thomas Shea, to assume day-to-day responsibility for legal matters previously within plaintiff's authority, including work on mergers and acquisitions, and the hiring of outside counsel to review the legal problems of one of Fischbach's subsidiaries. Finally, specific policies of AIG deviated both from the terms of the Stipulation and from past practices during the Posner era, including the continuation of certain bonus programs and the incorporation of salary increases into the Senior Executive Benefit Plan.

 Of particular concern to plaintiff was a memo -- circulated on September 13, 1990 -- depicting a new internal structure for the company and designating Shea as the head of Fischbach's legal affairs department. This new organizational chart grew out of a proposed joint venture that Fischbach sought to enter into with Peter Kiewit & Sons, Inc.

 For its part, defendant denies that D'Alessandri, or any other AIG employee, interfered with Bigda's responsibilities. When D'Alessandri first met with plaintiff in 1990 to discuss various lawsuits pending against Fischbach, Bigda allegedly told D'Alessandri to speak with the company's chief outside antitrust counsel because he was unfamiliar with the details of the actions. Defendant maintains that on all matters relating to its business, D'Alessandri made a practice of consulting with Bigda, and seeking his comments as necessary. With respect to specific matters such as the proof of claim in the bankruptcy proceeding, defendant claims that D'Alessandri either did not become involved with these matters until after the expiration of the Employment Agreement or, as happened with the dispute involving Stanley Shaughnessy's employment agreement, ...


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