John A. Russell Corporation v. James Bohlig

Breach of Employment Contract - Breach of Fiduciary Duty - Self-Dealing - In May 1989, Mr. Bohlig was hired as executive vice president and
chief operating officer by the John A. Russell Corporation, a general
contracting company in Rutland, Vermont. The parties entered into an
employment contract for a term of three years on May 16, 1989. Shortly
after starting his job, Mr. Bohlig began renovating his house in Shrewsbury
using employees and equipment of the Corporation with the permission of
the Corporation. The cost of the renovations eventually exceeded
$600,000. At trial, the Corporation claimed it gave Mr. Bohlig notice in
November 1991 that he was terminated effective December 31, 1991. Mr.
Bohlig claimed he did not know of the termination until he returned to work
in January 1992 and found his belongings had been removed from his office.
The parties also disputed the reason for the termination.

Subsequently, the Corporation brought suit against Mr. Bohlig for
breach of the employment contract, alleging inappropriate self-dealing,
breach of fiduciary responsibility, and breach of employment obligations
arising from the contract. At trial, the Corporation maintained that Mr.
Bohlig was dishonest to the Corporation in representing the scope of his
home renovations and his ability to pay for the renovations. It claimed
that he still owed a balance of $218,413.20 for the construction work.
Mr. Bohlig counterclaimed for breach of the employment contract,
maintaining that the amount he owed for construction work was offset by
the amount the Corporation owed him in unpaid benefits under the employment
contract. Specifically, he contended that the Corporation failed to pay
him (1) a guaranteed bonus of $20,000 per year, (2) relocation expenses of
$129,938.62, and (3) twelve months of severance pay and employment
benefits in lieu of twelve months notice, amounting to over $110,000.

Mr. Bohlig's three claims for breach of contract were based on three
provisions in the parties' employment contract. At trial, the parties did
not dispute that, under paragraph 2 of the contract, Mr. Bohlig was
entitled to a minimum annual bonus of $20,000.00. Mr. Bohlig claimed that
he was entitled to $10,000 for the half year he worked in 1989, $20,000 for
1990, $20,000 for 1991, and $20,000 for 1992 as part of his severance pay.
The Corporation maintained, however, that Mr. Bohlig had waived
his right to the bonus at meetings during 1989 and 1990 at
which employees agreed there would be no bonuses because the
company was not doing well.

The claim for relocation-expense reimbursement also arose under
paragraph 2 of the contract, which details the relocation expenses that
the employer will reimburse and provides further that it was the intent of
the parties that the relocation would "be revenue-neutral to Employee
after payment of all income taxes on these reimbursements, except as to the
relative differences in the price of Employee's current and new
residences." At trial, the Corporation maintained that it had paid Mr.
Bohlig the moving expenses owed under paragraph 2 totaling $7,136.00.

The claim for severance pay and benefits was based upon paragraph 4 of
the contract, which states:

Termination: Employer may terminate this contract after twenty
four (24) months or any renewal period hereof, upon twelve (12)
months written notice, (or pay and other benefits for a twelve
month period in lieu of said notice). Employer may terminate this
Contract without said twelve month notice and with no further
obligation (other than wages and benefits earned but not paid) only
in the following instances:

1) for Employee's dishonesty in the performance of his duties or
wanton disregard of his duties;

2) at Employee's death; or

3) after any disability has prevented Employee from performing his
duties for a period of six (6) consecutive months.

Whether Mr. Bohlig was terminated in November 1991 or January 1992, he was
terminated after twenty-four months but before the three-year term of the
contract expired. At trial, Mr. Bohlig maintained that, under paragraph
4, he was entitled to twelve months' severance pay and benefits because he
did not get twelve months' notice. The Corporation contended that, under
paragraph 4, it could terminate Mr. Bohlig after twenty-four months with
no notice or severance pay. In the alternative, the Corporation claimed
that it was not obligated to give Mr. Bohlig notice or severance pay
because he was terminated for "dishonesty in the performance of his
duties."

The jury rendered a verdict in favor of the Corporation for
$218,413.20. It rendered a verdict for Mr. Bohlig for $2,828.25.
Pursuant to the parties' stipulation, the court calculated interest on
each award from January 1, 1992, and awarded the Corporation $365,012.89,
the difference between the two awards with interest.

Unknown

Unknown

Reversed in part and remanded by the Supreme Court of Vermont. See: ___ Vt. ___ (8-27-1999) ___ A.2d ___. Note: The above date reflects the appellate court decision date, not the original trial date. Reported by kkm.