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Romagnola v. Gillespie

July 6, 2007

RICHARD A. ROMAGNOLA, PLAINTIFF-RESPONDENT/ CROSS-APPELLANT,
v.
GILLESPIE, INC., RICHARD GILLESPIE, AND THE INTERPUBLIC GROUP OF COMPANIES, INC., DEFENDANTS-APPELLANTS/CROSS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Law Division, Civil Part, Somerset County, L-1182-01.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: October 24, 2006

Before Judges Kestin, Weissbard and Graves.

This appeal and cross-appeal are rooted in a February 10, 1998 transaction involving a contract for the purchase and sale of a business and an employment agreement.

Plaintiff, Richard A. Romagnola, owned an advertising agency, R.A.R. & Associates, Inc. (RAR), with clients in the pharmaceutical industry. Defendant Richard Gillespie owned a larger advertising agency, defendant Gillespie, Inc. (Agency), and was seeking a foothold in the pharmaceutical advertising market. The Agency purchased RAR in an asset purchase agreement that absorbed RAR into the Agency, designating it as part of the Gillespie/RAP Healthcare Group (Group).

The contract provided that the Agency would employ Romagnola in a salaried managerial position pursuant to an employment agreement. The purchase price was to be paid partially by a lump sum and partially through "earn out" and bonus payments to be made over a three-year period beginning in February 1998. The employment agreement included a provision that prohibited Romagnola, for two years following termination of his employment with the Agency, from soliciting his fellow Agency employees for employment with other advertising employers.

Shortly after purchasing RAR, Gillespie sold the Agency, including the interests acquired from RAR, to defendant Interpublic Group of Companies (IPG). Gillespie became an employee of the Agency/IPG venture.

The calculation of Gillespie's earn-out remuneration from the Agency/IPG venture conflicted with the calculation of Romagnola's earn-out remuneration under his employment agreement with the Agency. The more money Romagnola received from the Agency, the less Gillespie received from the Agency/IPG venture. Also, it is clear that Gillespie sold the Agency to IPG without first obtaining Romagnola's consent, as required under the asset purchase agreement between RAR and the Agency.

The relationship between Romagnola and Gillespie deteriorated over time as Romagnola sought to address the inherent conflict between his earn-out compensation and Gillespie's. Romagnola's attempt to renegotiate the terms of his earn-out package with IPG failed and, shortly thereafter, in May 2000, Gillespie discharged him.

In accordance with the employment agreement, the Agency paid Romagnola his salary for the remaining months of the three-year period established in the employment agreement. At the time of his dismissal, however, Romagnola was still owed earn-out and bonus remuneration for the years 1999 and 2000. Also, at that time, in contravention of the employment agreement, Romagnola had solicited Agency employees to join him as employees of another advertising company.

Romagnola filed suit against defendants, including claims for breach of contract and for breach of the implied covenant of good faith and fair dealing, seeking to recover the unpaid earn-out and bonus remuneration for the years 1999 and 2000, as well as damages for lost prospective compensation. Defendants filed a counterclaim asserting, inter alia, that Romagnola had breached the employment agreement's anti-solicitation provision.

A period of discovery and motion practice ensued, during which the trial court, on untimeliness grounds, barred plaintiff from using both the testimony and the expert report of an economist, Dr. Frank Tinari, at trial. Also during the pre-trial phase, plaintiff served defendants with an offer of judgment in the amount of $1,165,000 pursuant to R. 4:58-1. Defendants did not act on that offer.

Following a nine-day bench trial, the trial court, based upon the findings and conclusions set out in an extensive written decision, awarded $1,315,909.63 in damages to plaintiff for the years 1999 and 2000. The findings included determinations that defendants had breached the asset purchase agreement, the employment agreement, and the implied covenant of good faith and fair dealing. The court dismissed defendants' counterclaim, determining that ...


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