|
An arbitrator’s finding that an employee was terminated without cause precludes a contrary finding by a court in later proceedings, but only on the narrow grounds actually submitted to arbitration, according to a Massachusetts state court.
In Manganella v. Jasmine Co., Inc., Civ. A. No. 06-2790-BLS2, 2007 WL 3244436 (Mass. Super. Ct. Oct. 16, 2007), Manganella was hired as a Jasmine executive, and entered into an employment agreement and a stock purchase agreement with the company. Upon a complaint that Manganella engaged in sexual harassment, Jasmine sent a letter terminating his employment and a letter demanding the return of certain proceeds from stock purchases, both stating that Manganella was being fired for cause. Manganella refused to return the proceeds, claiming that he was fired without cause and was under no obligation under the purchase agreement to return the proceeds.
Jasmine then filed a claim for arbitration, seeking a declaratory judgment as to whether it was entitled to the stock proceeds after Manganella’s termination. The arbitrators found that Manganella knowingly and willfully engaged in harassment. But because Jasmine had failed to notify him and give him an opportunity to remedy his performance, or show that an opportunity to remedy would be futile, the arbitrator held that Manganella was terminated without cause under the stock agreement and could keep the proceeds.
Manganella later brought suit against Jasmine for wrongful termination under the employment agreement, and Manganella moved that the Court find the arbitrator’s determination of termination without cause under the stock agreement precluded Jasmine from claiming termination with cause under the employment agreement. Jasmine argued that the grounds for termination with cause under the employment agreement were more expansive than those in the stock agreement, and that the arbitrator’s decision only precluded a finding of cause on the narrow grounds addressed by the arbitrator.
The Court held that the arbitrator’s determination precluded a finding of cause under the employment agreement on the narrow grounds actually addressed by the arbitrator, but did not estop the company from asserting other grounds for termination.
Initially, the Court noted that Jasmine’s assertion of cause for “willful refusal to comply with any significant, lawful and proper policy” in the employment agreement was “virtually identical” to the definition of a major breach in the stock agreement. Since the arbitrator found that Manganella did not commit such a breach under this language in the stock agreement, the Court held that Jasmine was precluded from arguing for termination with cause on those same grounds under the employment agreement.
However, the Court found that the arbitrator’s findings on cause under the stock agreement supported Manganella’s termination with cause under one definition of cause in the employment agreement as “intentionally causing [Jasmine] to violate a material state or federal law in any material respect.”
The Court observed that the arbitrator determined that Manganella had intentionally committed a material crime that could be attributed to the employer under rules of agency, and therefore, if true, satisfied the more expansive grounds for termination under the employment agreement.
Furthermore, the Court noted that Manganella could also be terminated with cause under the employment agreement for “any willful or intentional act… that has the effect of injuring [Jasmine’s] reputation or business.” Since the arbitrator found Manganella’s conduct to be intentional, Jasmine was not precluded by the arbitrator’s findings from arguing in court that Manganella was terminated with cause under that provision.
Subscribe to a free weekly update on ADR case law and
legislation
|