| Stevens v Publicis S.A. |
| 2008 NY Slip Op 02880 [50 AD3d 253] |
| April 1, 2008 |
| Appellate Division, First Department |
| Arthur H. Stevens, Appellant, v Publicis S.A., et al.,Respondents. |
—[*1] Reed Smith LLP, New York (Peter D. Raymond and John B. Webb of counsel), forrespondents.
Judgment, Supreme Court, New York County (Richard B. Lowe, III, J.), entered February 26,2007, dismissing the complaint in its entirety after a jury trial, unanimously affirmed, with costs.Order, same court and Justice, entered January 12, 2007, which granted defendants' motion forpartial summary judgment on their claim for reasonable attorneys' fees and expenses,unanimously affirmed, with costs.
In October 1999, plaintiff sold his New York-based public relations firm, Lobsenz-Stevens(L-S), to defendant Publicis S.A., a French global communications company, and its codefendantAmerican subsidiary. The sale involved two contracts: a stock purchase agreement, pursuant towhich plaintiff sold all the stock of L-S to defendants, and an employment agreement, pursuantto which plaintiff was to continue as chairman and CEO of the new company, namedPublicis-Dialog, Public Relations, New York (PDNY), for three years. Plaintiff's duties were tobe the "customary duties of a Chief Executive Officer."
Under the stock purchase agreement (SPA), plaintiff received an initial payment of$3,044,000, and stood to earn "earn-out" payments of up to $4 million contingent upon PDNYachieving certain levels of earnings before interest and taxes during the three calendar years afterclosing.
Within six months of the acquisition, signs of financial problems appeared. Plaintiff admitsthat revenue and profit targets were not met. Further, PDNY lost L-S's largest preacquisitionclient, Pitney Bowes. On March 5, 2001, plaintiff had a meeting with Jon Johnson, former CEOof Publicis Dialog, a related entity, at which he was shown financial statements and told that thebusiness had lost approximately $900,000 in the year 2000. Plaintiff was removed as CEO of thebusiness, and was given several options, including leaving the firm, staying and working on newbusiness, and a third option to come up with another alternative. Thereafter, Bob Bloom, formerchairman and CEO of Publicis USA, became involved in the matter. Bloom and plaintiffexchanged a series of e-mails, culminating in a March 28 message from Bloom setting forth hisunderstanding of the parties' terms regarding plaintiff's new role at PDNY: "Thus I suggested anallocation of your time that would permit the majority of your effort to go against new businessdevelopment (70%). I also suggested that the remaining time be allocated to maintaining/growingthe former Lobsenz Stevens clients (20%) and involvement in management/operations of the unit(10%). This option, it would seem, is in your best interest because it offers the bestopportunity for you to achieve your stated goal of a full earn-out. When I suggested thisoption, you seemed to have considerable enthusiasm for it and expressed your satisfaction with itso I, of course, assumed that it was an option you preferred." (Emphasis added.) By e-mail thenext day, plaintiff wrote:
"Bob, to begin with, I want to thank you again for helping me restore the dignity and respectthat I'm entitled to as a senior professional. Things were really getting out of hand until youintervened.
"What's happened since the lunch you and I had has been almost cathartic . . .
"That being said, I accept your proposal with total enthusiasm and excitement. . .
"I'm psyched again and will do everything in my power to generate business, maintainprofits, work well with others and move forward." (Emphasis added.)
Bloom replied the same day: "I am thrilled with your decision. You have my personalassurance that all of us will continue to work in the spirit of partnership to achieve our mutualgoal and function together as close senior collaborators in a climate of respect and dignity forall." Each of the e-mail transmissions bore the typed name of the sender at the foot of themessage.
In denying plaintiff's motion for partial summary judgment prior to trial, the court found thatthe parties had agreed in writing to modify plaintiff's duties under the employment agreement. Inso ruling, the court properly relied on the e-mail exchange between the parties in which bothsides expressed their unqualified acceptance of the modification to the agreement.
The series of e-mails beginning with Bloom's March 26, 2001 message setting forth theterms of the proposed modification, together with plaintiff's March 29 acceptance of the terms ofthe agreement and Bloom's immediate reply, memorialized the terms of the parties' agreement tochange plaintiff's responsibilities under the employment agreement. The agreement is furtherconfirmed in another e-mail sent to Andrew Hopson, chief operating officer of PDNY, in whichplaintiff reaffirmed his unconditional acceptance of the modified agreement.[*2]
The e-mails from plaintiff constitute "signed writings"within the meaning of the statute of frauds, since plaintiff's name at the end of his e-mailsignified his intent to authenticate the contents (see Rosenfeld v Zerneck, 4 Misc 3d 193 [2004]). Similarly,Bloom's name at the end of his e-mail constituted a "signed writing" and satisfied therequirement of section 13 (d) of the employment agreement that any modification be signed byall parties.
The trial court's instruction regarding the covenant of good faith and fair dealing was proper.In Pernet v Peabody Eng'g Corp. (20 AD2d 781, 782 [1964]), we stated that a breach ofthe covenant depends upon a finding that the defendant acted with intent to deprive the plaintiffof his rights under the agreement to which the defendant was a party, "or, if the same wasbrought about by conduct of the defendant in such reckless or neglectful disregard of plaintiff'scontract rights as to justify an inference of bad faith." The Restatement, which sets forth the sameformulation of the implied covenant, indicates that "bad faith" may include "evasion of the spiritof the bargain, lack of diligence and slacking off, willful rendering of imperfect performance,abuse of a power to specify terms, and interference with or failure to cooperate in the otherparty's performance" (Restatement [Second] of Contracts § 205, Comment d). Thisis the very conduct alleged in the complaint. Therefore, the use of the term "bad faith" indescribing the conduct necessary to find a breach of the covenant was not improper.
The court properly declined plaintiff's request to offer rebuttal testimony, since plaintiff hadtestified on these topics at length during his direct case. There was no error in instructing thejury, during a read-back of Johnson's testimony, that the "breach" to which Johnson referred wasa breach of the employment agreement and not the stock purchase agreement. The instructionwas proper. In March 2001, when the conversation occurred, breach of the SPA was not yet anissue since plaintiff at that point did not know whether he would be entitled to any earn-outpayments. As of that point in time, no earn-out calculations had been performed for 2000 and2001, and it was not yet 2002. Furthermore, as the court noted, the employment agreement, notthe SPA, contains the relevant provisions concerning plaintiff's position and job duties.
The jury's verdict was based on a fair interpretation of the evidence, and was not against theweight of the evidence. Attorneys' fees were properly awarded pursuant to section 13 (h) of theemployment agreement since breach of that agreement was at issue during the trial, and the claimwas only removed from the case prior to its submission to the jury. However, since the claim wasadmittedly removed from the case as of that point in time, any award of attorneys' fees shouldexclude fees in connection with preparation of post-trial memoranda. Concur—Lippman,P.J., Tom, Williams and Acosta, JJ.