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Salomon v. LECG

September 21, 2009


The opinion of the court was delivered by: Rebecca R. Pallmeyer United States District Judge

Judge Rebecca R. Pallmeyer


Defendant LECG, LLC ("LECG") is a global firm in the business of providing independent expert testimony, analysis, and strategic consulting services to businesses, law firms, and government agencies. (Def. Rule 56.1 (b)(3) Statement ¶ 1.) Plaintiff John Salomon was employed by LECGfrom June 2, 2004 until his resignation on August 17, 2007. (Id. ¶ 3.) The terms of Salomon's employment with LECG were governed by a letter agreement dated June 1, 2004 (the "Director Agreement") and a further letter agreement dated April 10, 2006 (the "Amendment"). Under the terms of the Director Agreement, Salomon would forfeit substantial financial benefits if he chose to leave LECG's employ other than for Good Reason, as defined in the agreement. Specifically, the Director Agreement empowered LECG to "claw back" the unamortized portion of Salomon's signing bonus (in the amount of $321,204.34) and to retain the unamortized portion of Salomon's deferred compensation plan ("DCP") (also in the amount of $321,204.34).

In September 2007, Salomon filed this lawsuit, seeking among other things, a declaratory judgment that he had "Good Reason" to terminate his employment with LECG on August 17, 2007. There is no dispute that if Salomon lacked Good Reason for the termination of his employment, LECG is legally entitled to retain the unamortized benefits. The dispute instead centers on whether Good Reason existed and whether Salomon is entitled to relief in the form of recovery of the disputed benefits. Salomon has moved for summary judgment in his favor on this issue, but for the reasons explained here, the motion is denied.*fn1


Contractual Provisions

Analysis of the parties' dispute begins with the contractual provisions. When Salomon joined LECG in June 2004, his compensation was based primarily on what the Director Agreement referred to as the "Expert Model," a formula by which LECG experts were paid for the consulting work they performed; in addition, Salomon received bonuses for recruitment and development. No fixed salary was included in his compensation package. Salomon was also paid a signing bonus and received contributions to his deferred compensation plan. The Director Agreement provided that portions of the signing bonus and DCP were to be repaid should Salomon leave LECG other than for Good Reason. Good Reason, as defined in the Director Agreement, falls into five categories:

For purposes of this agreement, "Good Reason" means the following grounds for termination of your employment with LECG: (A) a willful failure by LECG to pay a monetary obligation or monetary obligations exceeding $50,000 in aggregate to you under your Expert Agreement that is not cured within 30 days after written notice from you, as applicable, describing such failure to pay; provided, however, that a failure by LECG to pay a monetary obligation (i) under this Agreement because of a good faith disagreement over the amount owed or (ii) under this Agreement that is the subject of a pending disagreement resolution procedure shall not constitute Good Reason, (B) a material adverse change in your duties, responsibilities or positions which is not cured by LECG within 30 days written notice indicating your objection to any such material adverse change, (C) a material adverse change in the Expert Model or other terms affecting your compensation, which is not generally applicable to all other LECG employees covered under the Expert Model, (D) the breach of any material obligation of LECG to you under this Agreement or any other written agreement or plan relating to your employment which is not cured with 30 days written notice from you describing such breach, and (E) your Death or Disability (as defined in LECG's long term disability plan).

(Director Agreement, Ex. A to Pl's Mot., at 321.) In January 2006, Salomon was placed on LECG's Executive Management Committee ("EMC"). (Def. Rule 56.1 (b)(3) Stmt. ¶ 15.) The parties dispute whether Salomon's participation on the EMC was intended to be permanent or temporary, but they agree that the Amendment adopted in April 2006 explains how Salomon was to be compensated for his additional responsibilities as a member of the EMC. The "Compensation" portion of the Amendment reads as follows:

In addition to your Director Earnings as stated in your Employment Agreement, commencing January 1, 2006, you will receive as compensation for your additional responsibilities as a member of the Executive Committee a salary of $250,000 per annum. Because you will be receiving a salary for your recruiting and other responsibilities after January 1, 2006 as a member of the Executive Committee, your Bonus for Practice Development after January 1, 2006 will be modified as set forth below. Except as identified on Exhibit A attached hereto, new hires or acquisitions identified or completed during the period commencing January 1, 2006 and continuing for so long as you are eligible to receive this salary will not be included in the computation of your Bonus for Practice Development. The Salary will be paid according to LECG's regular policies, and both your salary and performance will be reviewed by the Compensation Committee of LECG Corporation ("the Compensation Committee") at the end of an initial eight-month period (approximately September 1, 2006). The Compensation Committee reserves the right to propose modifications to your role on the Executive Committee following such review . . . . (Amendment, Ex. B to Pl's Mot., at 019.) The Amendment also states that, unless expressly modified, all terms and conditions of the Director Agreement remain in effect. (Id. at 022.) The parties do not dispute that the Good Reason provision continued to cover the general terms of Salomon's employment.

Salomon's Termination

In February 2007, Michael Jeffery was elevated to the position of Chief Executive Officer of LECG. (Def. Rule 56.1 (b)(3) Stmt. ¶ 21.) On March 5, 2007, Jeffery advised Salomon that Salomon would no longer be a member of the EMC. (Id. ¶ 22.)*fn2 By letter dated March 7, 2007, Salomon advised Jeffery that he considered his removal from the EMC to be a "material, adverse change in [his] duties, responsibilities, or position," giving rise to Good Reason under the terms of the Director Agreement. (Id. ¶ 24.) Salomon's letter gave notice that LECG had 30 days to cure under the contract, but made no reference to Salomon's compensation. (Letter, Ex. F to Pl's Mot., at 026-27.) Jeffrey responded on March 16, 2007, asserting that LECG had not adversely changed Salomon's duties, responsibilities, or position by removing him from the EMC. (Def. Rule 56.1 (b)(3) Stmt. ¶ 25.) Then on May 24, 2007, Jeffrey notified Salomon that LECG would no longer pay Salomon's $250,000 salary. (Id. ¶ 26.) LECG completely discontinued payment of Salomon's $250,000 salary on June 1, 2007. On July 17, 2007, Salomon gave LECG notice of his decision to resign from LECG's employment. (Id. ¶ 27.)

Salomon now moves for partial summary judgment, contending that the Director Agreement and the Amendment are unambiguous and that, by the terms of those agreements, LECG's elimination of Salomon's salary on June 1, 2007 amounted to Good Reason for his resignation. Salomon claims to be entitled to judgment as a matter of law as to the disputed unamortized portions of his signing bonus and DCP account. Although Salomon has identified a number of other circumstances that he believes establish Good Reason for his resignation, as well, he focuses for purposes of this motion solely on LECG's conduct in eliminating his ...

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