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Baumiller v. SKM Applied Technology Partners

August 8, 2007


On appeal from Superior Court of New Jersey, Law Division, Sussex County, Docket No. L-523-99.

Per curiam.


Argued March 20, 2007

Before Judges Skillman, Lisa and Grall.

Following a bench trial in the Law Division, plaintiff Benjamin E. Baumiller appeals from the dismissal of his complaint alleging defendants' failure to pay severance benefits due under his contract of employment upon his resignation for "good reason." Defendants SKM Applied Technology Partners (SKM) and Sussex Technology, Inc. (STI) cross-appeal from the dismissal of their counterclaims alleging breach of contract, negligent job performance and breach of fiduciary duty. We conclude that plaintiff is entitled to a salary severance payment and insurance benefits but otherwise affirm the judgment.

The litigation arises from the sale of STI to SKM. STI is in the business of plastic injection molding. When STI was established in 1986, plaintiff, who had successfully managed a plant for a company that did similar work, was offered a position as Vice President of Operations and a one-third ownership interest in the company. His equal partners were McKinnon and Boheim. In 1992 STI hired Mackey to prepare financial statements, track production and secure financing. In 1995 STI sold a ten-percent interest in their business to MacIntosh, STI's Vice President of Sales, and hired Cuddihy to manage the plant. By 1996 STI had between seventy and eighty employees and projected sales of $6,000,000. By 1997 STI had 100 employees. In 1997 Mackey, with input from plaintiff and MacIntosh, prepared a five-year growth plan, which included plans for marketing and business development and projected sales of $20.13 million, pre-tax income of $5.208 million and net income of $2.969 million by the end of the five years.

In October 1997 plaintiff and his partners agreed to sell STI to SKM. Langton is SKM's CEO. SKM paid $9,000,000, assumed responsibility for debt of $3,000,000 and agreed to retain the STI partners in their former positions and pay bonuses up to a total of $3,000,000 if STI met income projections. STI personnel were to be retained in the following positions: plaintiff, as Vice President of Operations; McKinnon, as President; Boheim, as Vice President of Engineering; Mackey as CFO; and MacIntosh as Vice President of Sales and Marketing. During negotiations, the men discussed SKM's interest in STI's role in acquisition of additional companies and plaintiff's willingness to oversee operations in newly acquired companies.

The employment contract at issue here is between STI and plaintiff. That contract references SKM's purchase agreement with the sellers of STI. It also recognizes SKM's desire to "encourage" plaintiff's continued employment as "a highly experienced and knowledgeable executive of the Company whose creativity, expertise and efforts have been instrumental in the development of the Company's business."

The employment contract, dated October 24, 1997, is for a term of four years unless terminated earlier pursuant to Section 1.8 of the contract. Section 1.8(a) authorizes STI to terminate plaintiff "without Cause at any time, upon [thirty] calendar days' written notice to the Employee," and permits plaintiff to terminate his employment with "Good Reason at any time, upon [thirty] calendar days' written notice to [STI]." Section 1.8(b) permits STI to terminate plaintiff for "cause" and plaintiff to resign for any reason.

The severance package available on termination of the contract varies depending on the reason for separation. Upon termination in accordance with Section 1.8(b), there is no severance benefit beyond salary previously earned and expenses not yet paid. Upon termination pursuant to Section 1.8(a), plaintiff is entitled to participate in the term-life, medical, disability and dental insurance benefits and severance pay in a lump sum that, when discounted to present value, is equivalent to the greater of one-year's salary or salary from the date of termination to the end of the contract term. Section 1.8(a) provides that these severance benefits "constitute liquidated damages payable as a result of the termination . . . without Cause or . . . for Good Reason."

Eligibility for incentive compensation, the bonuses to which SKM and STI agreed at the time of the sale, is also dependent upon the reason for termination. Pursuant to Section 2.6, incentive compensation owed must be paid if plaintiff resigns for "good reason" or is terminated for any reason other than "cause."

Section 1.9(c) defines the term as follows:

(c) "Good Reason" means (i) any removal of Employee from or failure to re-elect Employee to Employee's position with the Company at the time of this Agreement or a different position with substantially the same or greater powers and authority or (ii) any material increase, decrease or other change in the duties and responsibilities of Employee over, below or from his duties and responsibilities immediately prior to the consummation of the [stock-purchase agreement]. [Emphasis added.]

Plaintiff's employment contract described his duties during the employment period as follows:

Employee shall serve as the Vice President of Operations of the Company and shall report directly to the Company's Board of Directors . . . or to such other person as may be designated from time to time by the Board. In such capacity, Employee shall perform such duties and exercise such powers commensurate with his position as the Vice President of Operations, subject to the direction of the Board or its ...

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