826 F.3d 69 (2nd Cir. 2016), 15-0603-cv(L), Gilman v. Marsh & McLennan Companies, Inc.

Docket Nº:15-0603-cv(L)
Citation:826 F.3d 69
Opinion Judge:DENNIS JACOBS, Circuit Judge
Party Name:WILLIAM W. GILMAN, EDWARD J. McNENNEY, JR., Plaintiffs-Appellants, v. MARSH & McLENNAN COMPANIES, INC., MARSH INC., MARSH USA INC., MARSH GLOBAL BROKING INC., MICHAEL CHERKASKY, Defendants-Appellees
Attorney:DAVID I. GREENBERGER (Jeffrey L. Liddle, Blaine H. Bortnick, James W. Halter, on the brief), Liddle & Robinson, LLP, New York, NY, for Plaintiffs-Appellants. JONATHAN D. POLKES (Gregory Silbert, Nicholas J. Pappas, on the brief), Weil, Gotshal & Manges LLP, New York, NY, for Defendants-Appellees ...
Judge Panel:Before: KEARSE, WINTER, and JACOBS, Circuit Judges.
Case Date:June 16, 2016
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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826 F.3d 69 (2nd Cir. 2016)

WILLIAM W. GILMAN, EDWARD J. McNENNEY, JR., Plaintiffs-Appellants,

v.

MARSH & McLENNAN COMPANIES, INC., MARSH INC., MARSH USA INC., MARSH GLOBAL BROKING INC., MICHAEL CHERKASKY, Defendants-Appellees

15-0603-cv(L)

United States Court of Appeals, Second Circuit

June 16, 2016

Argued January 13, 2016

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Faced with the prospect of criminal indictment premised on the actions of two employees, a company demanded that those employees explain themselves under the threat of termination. They refused, and were fired. The ex-employees seek to recover certain employment benefits they lost by reason of termination. We agree with the summary judgment ruling of the United States District Court for the Southern District of New York (Oetken, J.) that the company had cause to fire the two employees for refusal to comply with its reasonable order, and did so.

DAVID I. GREENBERGER (Jeffrey L. Liddle, Blaine H. Bortnick, James W. Halter, on the brief), Liddle & Robinson, LLP, New York, NY, for Plaintiffs-Appellants.

JONATHAN D. POLKES (Gregory Silbert, Nicholas J. Pappas, on the brief), Weil, Gotshal & Manges LLP, New York, NY, for Defendants-Appellees Marsh.

JAMES O. HEYWORTH (Andrew W. Stern, on the brief), Sidley Austin LLP, New York, NY, for Defendant-Appellee Cherkasky.

Before: KEARSE, WINTER, and JACOBS, Circuit Judges.

OPINION

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DENNIS JACOBS, Circuit Judge

Faced with the prospect of criminal indictment premised on the actions of two employees, a company demanded that those employees explain themselves under the threat of termination. They refused, were fired, and in this suit seek to recover employment benefits they lost by termination. They appeal from the judgment of the United States District Court for the Southern District of New York (Oetken, J.), dismissing their complaint on summary judgment. We agree with the district court that the defendant company -- Marsh (i.e., Marsh & McLennan Cos., Marsh Inc., Marsh USA Inc., and Marsh Global Broking Inc.) -- had cause to fire William Gilman and Edward McNenney, Jr., for refusal to comply with its reasonable order. Accordingly, we affirm.1

BACKGROUND

In April 2004, the New York Attorney General (the " AG" ) began investigating " contingent commission" arrangements by which insurance brokers were thought to be steering clients to particular insurance carriers. Marsh, as one of the brokers under investigation, retained outside counsel, Davis Polk & Wardwell LLP, to conduct an internal investigation of the AG's allegations. The internal investigation included interviews with Gilman and McNenney in the spring and summer of 2004.

The focus of the AG investigation shifted, in September 2004, to an alleged bid-rigging scheme involving Marsh and several

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insurance carriers. On October 13, 2004, two individuals at American International Group, Inc. (" AIG" ) pleaded guilty to felony complaints charging them with participation in a bid-rigging scheme with Marsh. In the allocution of one of the AIG employees, Gilman and McNenney were identified as co-conspirators. The next day, the AG filed a civil complaint against Marsh for alleged fraudulent business practices and antitrust violations.

The fallout from the civil complaint was swift and severe. Marsh's stock price plunged, a raft of private civil suits were filed, and Marsh's directors, clients, and shareholders demanded answers to the bid-rigging allegations. Marsh responded by expanding the ongoing internal investigation; on October 19, 2004, Marsh suspended Gilman and McNenney (with pay). More or less at the same time, Marsh's counsel asked Gilman and McNenney to sit for interviews and warned that failure to comply would result in termination. Gilman was asked to interview with a lawyer from Davis Polk as soon as possible. McNenney alleges that he was asked to submit to an interview with a lawyer from the AG and that he was told to do so without presence of counsel. (Marsh vigorously denies that McNenney was asked to interview with the AG, let alone to do so without counsel.)

On October 25, 2004, the CEO of Marsh's parent company resigned and was replaced by Michael Cherkasky. The same day, Cherkasky met with Eliot Spitzer, then-Attorney General of New York, to discuss the investigation. Gilman and McNenney contend that the upshot of the meeting was that the AG would forgo criminal prosecution of Marsh itself in exchange for its cooperation with the AG's investigation, including waivers of attorney-client privilege and work-product immunity for information developed in the (expanding) internal investigation. That day, an AG press release announced that a civil proceeding would suffice to punish and reform Marsh, and that criminal prosecutions arising out of the alleged bid-rigging scheme would be limited to individuals. This press release was widely understood to mean the AG would indict Gilman and McNenney -- as it eventually did.

By the time of the October 25 meeting and agreement between Cherkasky and Spitzer, neither Gilman nor McNenney had complied with Marsh's counsel's requests that they sit for interviews. On October 27, 2004, McNenney's attorney conveyed McNenney's refusal to Davis Polk; Marsh fired him the next day. On October 28, 2004, Gilman's attorney scheduled an interview for his client on November 2. But on November 1, 2004, Gilman submitted paperwork purporting to effectuate an early retirement; later that day, his attorney conveyed Gilman's refusal to be interviewed. Marsh fired Gilman the next day, and did not accept Gilman's purported retirement.

As Marsh employees, Gilman and McNenney were eligible for some valuable employment benefits. Under Marsh's Stock Award Plans, they received grants of stock options, stock bonus units, and/or deferred stock units, some of which they could have been entitled to upon termination if (for example) they had retired or were fired without cause. If, however, they were terminated " for cause," any...

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