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JANOVER v. BERNAN FOODS

October 16, 1995

PETER G. JANOVER, Plaintiff,
v.
BERNAN FOODS, INC., THE AXMAR INVESTMENT COMPANY, ROBERT MARCUS, BETTY MARCUS, THE BIRCHALL INVESTMENT COMPANY, and THE ZIUTA G. AKSTON TRUST, THE BETTY G. MARCUS TRUST #1, THE BETTY G. MARCUS TRUST #2, THE BETTY G. MARCUS TRUST #3, in their capacities as partners of The Axmar Investment Company, and THE BETTY G. MARCUS TRUST #4, THE BETTY G. MARCUS TRUST #5, THE ROBERT P. MARCUS TRUST #1, and THE ROBERT P. MARCUS TRUST #2, in capacities as partners of The Birchall Investment Company, Defendants.



The opinion of the court was delivered by: BATTS

 DEBORAH A. BATTS, United States District Judge.

 Peter G. Janover ("Plaintiff") moves for partial summary judgment to collect severance benefits pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq., or, alternatively, under New York State contract law, and for a declaration that a separate future services agreement is unenforceable. Defendants cross-move for partial summary judgment concerning the severance benefits, and also move for partial summary judgment for monies received by Plaintiff under a separate consulting agreement.

 I. BACKGROUND

 On June 24, 1987, Plaintiff and Defendants Bernan Foods, Inc. ("Bernan") and Axmar Investment Company ("Axmar") signed an employment agreement (the "Employment Agreement") (Peter G. Janover Decl. in Support of Plaintiff's Motion for partial Summary Judgment, [hereinafter "Janover"], Ex. A) whereby Plaintiff would serve as Bernan's President and Chief Operating Officer for a term of five years. At this time, Axmar owned Bernan, and signed the Employment Agreement as guarantor of Bernan.

 Defendants Robert and Betty Marcus ("the Marcuses") were the primary shareholders in Bernan, Axmar, and the Birchall Investment Company ("Birchall"). Upon signing the Employment Agreement, the Marcuses informed Plaintiff that his primary goal would be to sell Bernan within the next five years. As this goal conflicted with Plaintiff's interest in continued employment with Bernan, the Employment Agreement included severance benefits, or a "golden parachute" provision. Under the golden parachute provision, Plaintiff would be entitled to substantial monetary compensation if his termination was triggered by the sale of Bernan, as long as he did not continue to work for either Bernan or the purchaser of Bernan. Furthermore, the golden parachute created an incentive to sell Bernan quickly, by including a clause which decreased the amount of severance benefits Plaintiff would receive, the longer it took him to sell the company.

 Defendant Robert Marcus, acting on behalf of Axmar, and Plaintiff signed a severance agreement, dated December 28, 1995, yet signed December 29, 1995 (the "Severance Agreement") (Janover Decl., Ex. D) . In the Severance Agreement, Axmar agreed to increase the amount of Plaintiff's severance benefits under the Employment Agreement from 18 months of his regular, monthly salary to 27 months. The parties further agreed that Plaintiff would receive up to $ 6,200 for out-placement expenses for the first 12 months following his termination.

 On December 29, 1989, Axmar sold Bernan to the Marcuses' son-in-law, Raymond Hughes ("Hughes"). On January 4, 1990, Plaintiff sent a letter of resignation, effective April 4, 1990, to Hughes, with a copy to the Marcuses, also requesting severance benefits as provided for in the Employment Agreement.

 Hughes and the Marcuses then requested that Plaintiff continue to work for them until Bernan was sold to a buyer outside of the Marcus family. On March 18, 1990, Plaintiff sent the Marcuses a memorandum stating that he would draft a letter to the Marcuses and Hughes in order to protect his severance benefits should he remain under their employ beyond April 4, 1990. On March 26, 1990, Plaintiff delivered to Robert Marcus a written letter agreement ("Extension Agreement") (Janover Decl., Ex. G). The Extension Agreement, signed by Plaintiff, Hughes on behalf of Bernan, and Robert Marcus on behalf of Axmar, stated that Plaintiff would continue to work for Bernan beyond April 4, 1990, but that

 
the continuation of [Plaintiff's] employment, beyond April 4, 1990, does not, in any way, revoke [Plaintiff's] resignation . . . under the Employment Agreement . . . or the severance benefits accrued thereunder and the additional benefits granted by AXMAR in our letter agreement dated December 29th, 1989 [i.e., the Severance Agreement].

 Janover Decl., Ex. G at 1.

 Plaintiff continued to work for Bernan after April 4, 1990. In November 1991, Plaintiff began negotiating with Wilton Foods, Inc. ("Wilton") to sell Bernan. On February 1, 1992, Plaintiff entered into a consulting agreement (the "Consulting Agreement") (Janover Decl., Ex. J) with Wilton, whereby Plaintiff would receive $ 180,000 in exchange for providing consulting services to Wilton after the sale of Bernan's assets to Wilton. On February 6, 1992, Plaintiff, Axmar and Birchall executed a future services agreement *fn1" (the "Future Services Agreement") (Janover Decl., Ex. I) in which the $ 180,000 Plaintiff was to receive under the Consultation Agreement, was deemed part of the sale price of Bernan. The money, however, would be treated as compensation to Plaintiff for his future employment with Axmar, Birchall, and their affiliates over the next 18 month period. Plaintiff did receive $ 180,000; however, Plaintiff never worked for Axmar, Birchall or any of their affiliates after the sale to Wilton.

 Following the sale of Bernan's assets to Wilton, Plaintiff continued working for Bernan for a few months. On May 23, 1992, Plaintiff submitted a formal, written resignation from Bernan and requested the severance benefits allegedly owed to him under the Employment, Severance, and Extension Agreements. The Defendants refused to pay the severance benefits.

 Plaintiff brought suit against Defendants alleging that the severance benefits provided for in the three Agreements constitute a plan under ERISA, 29 U.S.C. §§ 1001 et seq. He argues that Defendants' refusal to pay the severance is a violation of that statute. In the alternative, Plaintiff alleges that New York State contract law also requires that the Defendants pay him pursuant to the Agreements. Plaintiff also argues he is entitled ...


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