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April 7, 2004.


The opinion of the court was delivered by: CONSTANCE MOTLEY, Senior District Judge


This is a breach of contract action in which the plaintiff, Deutsche Asset Management, avers that defendant John Callaghan owes plaintiff monies mistakenly paid to him in excess of his salary during his tenure as plaintiffs employee. Defendant counterclaims on the grounds that plaintiff actually underpaid him and breached his employment contract. At issue before the court are plaintiffs motion for summary judgment on defendant's counterclaims for severance compensation, liquidated damages, fraud, unjust enrichment and defamation, and defendant's motion for summary judgment on breach of contract, severance compensation, and liquidated pages: For the reasons stated below, plaintiffs motion for summary judgment is hereby GUARANTED and defendant's motion for summary judgment is


 I. Factual Background

  A. Plaintiff and defendant's 1997 and March 1999 employment contracts

  Morgan Grenfell Capital Management (hereinafter "MGCM"), a subsidiary of plaintiff Deutsche Asset Management, Inc. (hereinafter "plaintiff or "DAM"), hired John P. Callaghan (hereinafter "defendant" or "Callaghan") in 1997 to co-manage small cap investment portfolios.*fn1 Callaghan became a member of the Small Cap Team, consisting of Callaghan, Audrey Jones and Dave Baratta. Pursuant to his employment agreement, the Team would receive 50% of the gross revenues "received by MGCM from the management of portfolios for which the Small Cap Team was primarily responsible." In any event, the contract guaranteed that Callaghan's total compensation would not be less than $470,000 for 1997 or less than $800,000 for 1998.

  In March of 1999, Callaghan signed a new contract with MGCM that adopted by incorporation the 50% compensation scheme from the 1997 agreement.*fn2

  B. Discussions as to whether Callaghan and the Team would manage Bankers Trust portfolios

  In June of 1999, plaintiff merged with Bankers Trust, raising the question of who would manage the Bankers Trust portfolios. Prior to the merger, the Small Cap Team had a meeting with Rich Marin, the head of the merger, and Paul Higgins, Marin's "right-hand man." Callaghan Dep. at 104. At the meeting, the Team expressed interest in managing the Bankers Trust portfolios. Id. at 104-105. Callaghan recalls Baratta telling Marin that the Team's interest in taking over the portfolios was "based on the understanding that we have a contract that calls for us to share in the revenues," and, while Callaghan does not remember the precise nature of his words, that Marin responded by stating something to the effect that the Team would be paid based on the contract or the agreement. Id. Callaghan also testified on his deposition that Marin never stated that the Team would earn 50% of the gross revenues received from the Bankers Trust assets during the meeting. Thereafter, Higgins told the Team members that they should renegotiate their contract if they were to manage the Bankers Trust portfolios. Id at 105-06. Callaghan understood Higgins to mean that "he would like to renegotiate the contract at a lower percentage than the 50 percent we had in our agreement." Id. at 106-108.

  DAM representatives aver that it was their understanding as well as the Team's that if the Small Cap Team were to take over the Banker's Trust portfolios, the 50% compensation scheme spelled out in the 1999 contract would not apply to revenues generated by the Banker's Trust assets. Weinreich Dep. at 80-81; Grohowski Dep. at 88; Kausch Dep. at 145-46; Weinrich Decl. ¶ 7. Josh Weinreich was the Co-Head of the Private Bank of Bankers Trust immediately before the merger. After the merger, he became Co-Head of the Americas for Deutsche Asset. Weinrich swears that while he and the Small Cap Team discussed the possibility of the Team managing the Bankers Trust's small cap assets, he told them that "under no circumstances" would the Team be compensated pursuant to the 50% compensation scheme that applied to the MGCM small cap portfolios and that he would not transfer the Bankers' assets to the Team's management if the 50% scheme applied. See Weinreich Decl. at 3.

  C. Discussions regarding Team compensation in the face of Baratta's departure and the Team's management of the Bankers Trust portfolios

  When the merger occurred thereafter in early June, the Team took over management of Bankers Trust small cap assets. Callaghan Dep. at 118. According to Callaghan, the parties had not reached an agreement as to what compensation the Team would receive for doing so. Id. According to Jeanne Kausch, DAM's head of Human Resources, Leo Grohowski, Callaghan's direct supervisor and Regional Chief Investment Officer, and Weinreich, DAM did not understand the 50% scheme to apply to the Bankers Trust Assets. Callaghan Dep. at 86, Grohowski Dep. at 12, 88; Barr Dep. at 13, Kausch Dep. at 145-46, 172-73, 196-99; Weinreich Dep. at 81-82; Weinreich Decl. 5-7.

  At approximately the same time as the merger in early June 1999, Baratta resigned his position with DAM, thereby raising the question of Jones' and Callaghan's compensation as the two remaining members of the Small Cap Team. Pursuant to the terms of Callaghan's 1999 employment contract (incorporating, by reference, the relevant provisions of the 1997 contract), with the departure of any Team member from the Team, "in the event the Co-Managers of the team and MGCM cannot reach agreement on the allocation of the aggregate compensation, the allocation shall be determined by the Chairman of the Board of MGCM, whose determination will be final." Callaghan Dep., Exhibit 7. Kausch testified that there was "a debate about what to do when Baratta left" and there were "differences of opinion as to what was called for." Kausch Dep. at 102. Specifically, "[a]t the time David Baratta resigned in approximately June of 1999, there was an issue as to whether the 1999 agreement between MGCM and the Small Cap Team (defined as Baratta, Callaghan and Audrey Jones) required that the remaining members of the Small Cap Team would split the share left on the table by the departing number, or rather contemplated that the remaining share could be held in reserve in the event a new member of the team had to be hired." Kausch Decl. ¶ 6 (February 25, 2003). On June 15, 1999 Jeanne Kausch sent Jones and Callaghan a letter via email. The email reads: "Attached is a draft for your review . . . After verbal agreement from you both that this is agreed, I will produce a hard copy memo to each of you for your files." Callaghan Dep., Exhibit 9. The letter, which is marked "draft", begins: `This letter outlines the compensation agreement between you and Deutsche Asset Management and replaces all prior compensation agreements between you and Morgan Grenfell except noted herein." Id The letter provides that with the departure of Baratta from the Team, Jones and Callaghan would each receive 16.5% of total revenues from current Morgan Grenfell assets [i.e., a larger share than they received before Baratta resigned his position] but that "assets from the Bankers Trust Small Cap portfolio will not be combined with those currently under your management for purposes of evaluating the investment performance under the terms of the March 9 letter." Id. The letter also increased Jones and Callaghan's minimum compensation for 1999 to $750,000. In contrast to 1999, for the years 2000 and beyond, "revenues from Bankers Trust's Small cap portfolio will be included in the calculation."

  A second letter dated June 30, 1999, with a pen-line edit date of July 6, 1999, is substantially the same as the June 15th letter except it is not marked "draft", is signed by Weinreich and Kausch, and is increasingly specific as to compensation for 2000 and beyond and other terms of employment. Like the earlier June 15th letter, it provides that the 50% compensation scheme will not apply to revenues generated from Banker's Trust portfolios in 1999.

  On September 30, 1999, Jones and Callaghan sent an email entitled "employment agreement" seemingly in reply to the June 30th letter. Callaghan Dep., Exhibit. 10. Callaghan's email reads: "I have attached a list of Audrey's and my comments about the employment agreement. We are sorry about the delay . . . Please let us know when we can set up a meeting to discuss this." Id The first paragraph of the attached letter states: "This is a summary of the last remaining issues we have with our employment agreement. The first part of the summary attempts to state more precisely what we believe to be our mutual understanding of the agreement reached." Id. The attached notes are relatively exhaustive, covering a range of subjects including offering additional terms. However, Callaghan and Jones do not address the exclusion of Bankers Trust profits from their 1999 compensation package anywhere in their letter. See Id. It is the last document in which compensation for 1999 is mentioned.

  D. Payment of 1999 bonus compensation

  In October of 1999, DAM paid Callaghan his third quarter bonus, pursuant to which Callaghan received his share of 50% of the revenues generated for managing the MGCM assets, but not for managing the Banker's Trust assets. Callaghan Dep. at 298-99. The payment would have been several hundred thousand dollars higher had 50% of Bankers Trust revenues been included. Kausch Decl., ¶ 7.

  In early 2000, DAM paid Callaghan his fourth quarter 1999 bonus in the amount of $780,000. DAM claims that by mistake, it overpaid Callaghan by $482,739 because it did not calculate the amounts he had already received throughout 1999. Callaghan did not address the overpayment with DAM at that time. Id. at 299-300.

  E. The 2000 employment contract

  On February 23, 2000, Callaghan received a letter signed by Kausch and Barr stating "this letter describes the compensation agreement between you and DAM for your services in 2000 and 200L" Callaghan Dep., Ex. 4. Under the agreement, for the years 2000 and 2001, Callaghan would earn 8.3% of the gross revenues received from portfolios managed by the Team, with an annual base salary of $355,000 and a guaranteed minimum salary of $950,000. The contract guaranteed his compensation as long as Callaghan did not resign for other than "Good Reason." "Good reason" is defined as "(i) any default by Deutsche Asset Management in its obligation to you with respect to payment of compensation and provision of benefits when, as and if due, occurring 10 business days after notice to Deutsche Asset Management by you that such payment or benefit was not made when due, (ii) the failure or refusal to appoint you to a job having the same or equivalent official title as Managing Director or having the level of responsibility or authority you currently exercise." Id. If Callaghan resigned for "Good Reason", DAM agreed to pay him a pro-rata share of his guaranteed compensation plus a severance payment equal to salary and bonus. Pursuant to the letter, Callaghan's title was "Principal Portfolio Manager of Small Cap Equity Investments." Callaghan Dep., Exhibit 4.

  F. Plaintiffs request for reimbursement of the alleged overpayment and Callaghan's resignation

  In August of 2000, DAM realized it had overpaid Callaghan for his fourth-quarter 1999 bonus. Kausch Decl, ¶ 10. After a meeting on August 4th in which DAM representatives communicated the error and asked Callaghan to repay the $480,000 it had mistakenly transferred to him, Callaghan charged that not only did he not owe DAM for this payment, but that DAM owed him for his share of 50% of the revenues generates from the Bankers Trust assets in 1999, totaling $550,000.

  In February of 2001, without having resolved whether Callaghan owed DAM or whether DAM owed Callaghan for 1999 compensation, Callaghan resigned his employment with plaintiff.

  Callaghan justified his resignation on two grounds. First, he maintains that DAM breached his employment agreement by refusing to pay him his share of 50% of the revenues generated from the Bankers Trust assets in 1999. Callaghan believed that the 50% bonus compensation formula spelled out in his 1999 contract applied to revenues from those assets because a) around the time that the parties were discussing how the Team should be compensated for managing the Bankers Trust assets, Dean Barr, DAM's Chief Investment Officer, said he was dropping renegotiation of the 1999 contract and b) although written correspondence previously circulated in 1999 provided that the Bankers Trust assets were excluded from the 50% compensation scheme, the subsequent employment agreement dated February of 2000 did not address 1999 compensation, leading him to conclude that the renegotiation had in fact been dropped. Callaghan Dep. at 230. Callaghan alleges that he did not complain about the $550,000 underpayment in his third and fourth quarter 1999 bonuses because the amount received was a "plausible number" for the amounts owed to him and he did not have an accounting of revenues generated from the Bankers Trust portfolios. Callaghan Dep., at 42.*fn3 Alternatively, Callaghan suggests that he did not complain about alleged underpayment because, at the time, the parties were in the middle of contract negotiations. Callaghan Dep. at 299-300. "One of the demands that was being made at the time was to exclude those assets [the Banker's Trust assets] from the calculation; to have protested at that point, I was afraid to raise the issue and "squash the negotiations" Id.

  Second, Callaghan justifies his resignation on the grounds that although his 2000 contract provides that "bonuses for other members of the Small Cap Team will be determined by the Team principals," in late 2000/early 2001, when they were deciding employee compensation, DAM excluded him from the second and third round of negotiations, communicated with Jones to the exclusion of Callaghan, and did not follow his recommendations for at least one employee. Audrey Jones, however, testified that DAM did not bypass Callaghan during the 2000/2001 compensation decision process. Jones Dep. at 118. Human Resources Director Jeanne Kausch testified that the decision-making process did not differ from the way it had functioned in ...

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