Szomjassy v. Ohm Corp.

• Decision Date: 08 March 2001
• Docket Number: No. CIV.A.1:98CV3705CAP.,CIV.A.1:98CV3705CAP.
• Parties: Michael SZOMJASSY, Plaintiff, v. OHM CORPORATION and International Technology Corporation, Defendants.
• Court: U.S. District Court — Northern District of Georgia

132 F.Supp.2d 1041

Michael SZOMJASSY, Plaintiff, v. OHM CORPORATION and International Technology Corporation, Defendants.

No. CIV.A.1:98CV3705CAP.

United States District Court, N.D. Georgia, Atlanta Division.

March 8, 2001.

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Bruce Harvey Beerman, Burr & Forman, John Allen Howard, Marion Smith, II, Smith Howard & Ajax, Atlanta, GA, for Plaintiff.

William Sneath Myers, Myers & Johnston, Atlanta, GA, for Defendants.

ORDER

PANNELL, District Judge.

The plaintiff filed the instant action, alleging breach of contract. This matter is before the court on the parties' cross-motions for partial summary judgment.

I. BACKGROUND FACTS AND PROCEDURAL HISTORY

In analyzing a summary judgment motion, the court resolves all issues of fact in favor of the non-movant. See Cottrell v. Caldwell, 85 F.3d 1480 (11th Cir.1996). Therefore, the facts, as stated below, may not prove to be the facts that would be established at trial. See Hartsfield v. Lemacks, 50 F.3d 950, 951 (11th Cir.1995) (citing Rodgers v. Horsley, 39 F.3d 308, 309 (11th Cir.1994)).

The plaintiff, a Georgia citizen during the relevant time at issue,¹ was employed by the defendant OHM Corporation ("OHM") in November of 1989. Initially employed as Vice President in charge of the Southeastern Region, he was later promoted to Vice President of the Southern Region, and in 1995, was promoted to Senior Vice President in charge of Eastern Operations. On May 14, 1992, the plaintiff executed his first employment contract with OHM, and on March 10, 1996, executed the Employment Agreement that is the subject of the instant litigation (the "Employment Agreement").

In late 1997, the defendants, OHM and International Technology Corporation ("IT"), began merger discussions through which IT would acquire OHM. As part of those discussions, OHM retained an accounting firm, Ernst & Young ("E & Y"), to analyze the approximate amounts that would be due to OHM executives, if the merger occurred. That analysis was provided to IT as part of the merger negotiations.

After the first stage of the merger was completed in February, 1998, the plaintiff was unwilling to accept any of the employment positions offered to him by IT. On March 3, 1998, the plaintiff was fired, along with other senior OHM executives — Robert Blackwell, Philip Petrocelli, Pamela Beall, and James Kirk. These other executives have also filed suit against the defendants, based upon their employment agreements.

The plaintiff was not paid within five (5) days of his termination, as required by the Employment Agreement, but rather was paid an advance payment of $600,000 in April, 1998. This payment was less than the lowest calculation that E & Y had approximated as the amount due to the plaintiff.

Following this payment, the plaintiff alleges that the defendants continued to acknowledge the plaintiff's entitlement to an additional contract payment, but failed to make that payment. In October, 1998, the plaintiff accepted a position with Aqua Alliance, Inc. ("AAI"). Similar to the defendants AAI and one of its wholly-owned subsidiaries, Metcalf & Eddy ("M & E"), are in the environmental business. The business of those companies, however, differs from OHM's business operations. OHM was a construction contract firm involved in the treatment of hazardous waste. Alternatively, AAI and M & E serve as engineering, consulting and systems operations firms for water and wastewater treatment. The plaintiff contends that other than one designated representative of the defendants who testified pursuant to Fed.R.Civ.P. 30(b)(6), all other witnesses in this case have testified that neither AAI nor M & E were competitors of OHM nor are they or any representative of the defendants aware of any specific conduct or action on the part of the plaintiff in violation of the terms of the restrictive covenant contained in the Employment Agreement.

According to the plaintiff, under the terms of the Employment Agreement, OHM agreed that if it terminated the plaintiff's employment following a "change in control" of OHM, then it would financially compensate him according to the criteria set forth in the Employment Agreement, subject to certain tax considerations. The Employment Agreement provision at issue states that after termination the plaintiff will receive within five (5) business days a lump sum payment in lieu of salary, bonus, and all other incentives and compensation that he would have received during the "Period of the Employment Agreement." The dispute centers around a payment ceiling clause contained in Paragraph 5(a)(i) of the Employment Agreement, which the defendants contend limits the total amount of any termination payment to avoid triggering "parachute payment" taxes and penalties under 26 U.S.C. § 280G(b)(2)(c) & (b)(3-4). That section penalizes both parties if the termination payment due to a "change in control" exceeds 299 percent of the employee's average annual compensation over the preceding five (5) years.

The plaintiff contends that all or at least part of his termination payment compensates him for the restrictive covenant, which he argues is excluded from treatment as a "parachute payment" under Section 280G. Conversely, the defendants argue that the termination payment compensates the plaintiff only for termination of his employment before the expiration of the contract "Period," and is not made in exchange for the covenant not to compete. Alternatively, the defendants counter that even if part of the payment were attributable to the covenant not to compete, it would still constitute a parachute payment under Section 280G, which is impermissible under the Employment Agreement.

The plaintiff has moved for summary judgment on the following issues:

1. The defendants' Third Defense, as contained, in their Answer (the plaintiff's subsequent employment violated the terms of the restrictive covenant in Section 7 of the Employment Agreement);

2. The plaintiff's entitlement to payment of his reasonable attorney's fees and to replenishment of the letter of credit in accordance with Section 8 of the Employment Agreement; and

3. The defendants' counterclaim for forfeiture of the plaintiff's benefits paid under the SERP plan and for attorney's fees.

The defendants have moved for summary judgment on the following issues:

1. Count I of the Complaint in which the plaintiff claims that he is entitled to a payment attributable to a covenant not to compete in his employment agreement and his contention that such payment does not constitute a "parachute payment" within the meaning of Section 280G;

2. Count II of the Complaint in which the plaintiff seeks benefits under a deferred compensation plan; and 3. Count IV of the Complaint in which the plaintiff seeks damages for emotional distress and litigation expenses under O.C.G.A. § 13-6-11.

The parties vigorously dispute numerous factual assertions made by each other. The court addresses each of the above issues in turn.

II. LEGAL DISCUSSION

A. Summary Judgment Standard

Rule 56(c) of the Federal Rules of Civil Procedure authorizes summary judgment when all "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." The party seeking summary judgment bears the burden of demonstrating that no dispute as to any material fact exists. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 156, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); see also Bingham, Ltd. v. United States, 724 F.2d 921, 924 (11th Cir.1984). The moving party's burden is discharged merely by "`showing' — that is, pointing out to the District Court — that there is an absence of evidence to support [an essential element of] the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). In determining whether the moving party has met this burden, the district court must view the evidence and all factual inferences in the light most favorable to the party opposing the motion. See Bradbury v. Wainwright, 718 F.2d 1538, 1543 (11th Cir.1983). Once the moving party has adequately supported its motion, the non-movant then has the burden of showing that summary judgment is improper by coming forward with specific facts showing a genuine dispute. See Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

In deciding a motion for summary judgment, it is not the court's function to decide genuine issues of material fact but to decide only whether there is such an issue to be tried. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). The applicable substantive law will identify those facts that are material. Facts that in good faith are disputed, but which do not resolve or affect the outcome of the case, will not preclude the entry of summary judgment as those facts are not material. See Anderson, 477 U.S. at 247, 106 S.Ct. at 2510.

Genuine disputes are those by which the evidence is such that a reasonable jury could return a verdict for the non-movant. See id. In order for factual issues to be "genuine" they must have a real basis in the record. See Matsushita, 475 U.S. at 586, 106 S.Ct. at 1356. "When the record as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial.'" Id. (citations omitted).

B. Choice of Law

As an initial matter, the court turns to the disputed issue of which state's laws govern the contract. Relying on Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), the plaintiff submits that because he is and was at all times a resident of Georgia, and because the contract was executed and performed in Georgia, ...