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Vernon W. Hill, Ii, Shirley Hill v. Commerce Bancorp

June 8, 2011

VERNON W. HILL, II, SHIRLEY HILL,
AND INTERARCH, INC., PLAINTIFFS,
v.
COMMERCE BANCORP, LLC, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Kugler, United States District Judge:

NOT FOR PUBLICATION (Doc. Nos. 148, 150)

OPINION

This case is one of many lawsuits arising out of the messy separation between banking entrepreneur Vernon W. Hill and Commerce Bank. In addition to claims by Mr. Hill stemming from his termination by Commerce Bank in 2007, this case also involves claims by Mrs. Hill and her design firm, InterArch, Inc. ("InterArch") against Defendants Commerce Bancorp, LLC and TD Bank, N.A. (collectively "Commerce") based on a contract between Commerce and InterArch. Currently before the Court are two motions by Commerce for partial summary judgment: (1) denying Mrs. Hill and InterArch's claim that Commerce is contractually obligated to pay their legal fees and expenses in this action, (Doc. No. 150); and (2) denying Mr. and Mrs. Hill's claims for intentional infliction of emotional distress, (Doc. No. 148). Because InterArch's agreement with Commerce does not include an explicit fee-shifting provision, and because neither Mr. nor Mrs. Hill offer any evidence in support of their claim for intentional infliction of emotional distress, the Court grants both motions for partial summary judgment.

I.BACKGROUND

Mr. Hill founded Commerce Bancorp, Inc. ("Commerce Bancorp") in 1973 in Marlton, New Jersey. Over thirty years, he built the company into a large and successful regional bank. As of mid-2007, Commerce Bank, N.A. ("Commerce Bank"), a wholly-owned subsidiary of Commerce Bancorp, operated more than 425 branches throughout the east coast. During Mr. Hill's thirty-four years with Commerce Bank, the bank worked with real estate developers, including development firms in which Mr. Hill had a financial interest. One entity with which the bank did business was InterArch, a full-service architectural and design firm founded by Mrs. Hill. InterArch provided extensive services to the bank, including interior design, exterior design, space planning, move coordination, and landscape design. Mrs. Hill is the president of InterArch.

Mr. Hill served as chairman, president, and CEO of Commerce Bank and Commerce Bancorp. His employment with Commerce Bancorp was pursuant to a written agreement, which provided for a five year term, beginning in 1992, and which renewed automatically on each anniversary date for a new five-year term. On March 14, 2006, Mr. Hill entered into the Amended and Restated Employment Agreement (the "Employment Agreement"), which continued his employment for a five-year period from January 1, 2006 through December 31, 2011. Pursuant to the Employment Agreement, Mr. Hill's base salary was $1 million per year plus bonuses, which totaled $1.5 million in 2006. The Employment Agreement permitted Commerce Bancorp to terminate Mr. Hill's employment with or without cause. A termination without cause entitled Mr. Hill to certain benefits, including a lump sum severance payment equal to the full compensation he would have received for the remaining term of the Employment Agreement, the right to participate in the bank's medical, disability, hospitalization, and life insurance benefits for three years, and the immediate vesting of Mr. Hill's options to purchase Commerce Bancorp stock. If Commerce terminated Mr. Hill's employment without cause, the Employment Agreement required Commerce to make the required severance payments to Mr. Hill within thirty days of the termination.

On June 28, 2007, the Board of Directors of Commerce terminated Mr. Hill without cause, effective July 31, 2007. After the termination, Mr. Hill demanded payment under the Employment Agreement's severance provisions and also exercised his vested stock options. Commerce never paid the demand and never executed the stock options.

Mrs. Hill's company InterArch also had a contractual relationship with Commerce during the same period. In 2002, InterArch entered into an Agency Agreement with Commerce, whereby Commerce agreed to "continue" using InterArch for certain design, management, and administration services. Pursuant to the Agency Agreement, it was the parties' practice for InterArch to submit to Commerce for approval a proposal of services for the upcoming year, which included a list of services that InterArch intended to perform for Commerce and included a rate schedule for that work. Commerce's Board of Directors typically approved the proposal and notified InterArch of its acceptance.

On February 27, 2006, InterArch and Commerce executed a Master Agreement for Architectural/Engineering/Consultant Services (the "Master Agreement"), which ran from January 1, 2006 to December 31, 2006. Throughout 2006, Commerce and InterArch acted consistent with the Master Agreement. In December 2006, InterArch submitted its 2007 proposal of services to Commerce. The Board of Directors accepted and approved the proposal on February 20, 2007. InterArch interpreted that acceptance as renewing the same terms and conditions as the Master Agreement, which expired December 31, 2006, thus extending its term until December 31, 2007. Notwithstanding this arrangement, Commerce terminated its relationship with InterArch effective October 31, 2007.

The Master Agreement incorporates by reference the Agency Agreement's "Indemnification" provisions. Section 5 of the Agency Agreement (the "Indemnification Provision") provides:

Indemnification by Commerce. Commerce shall fully indemnify InterArch against, and defend and hold it, its officers, directors, employees, agents and other representatives harmless from any and all liability and related expenses (including without limitation reasonable fees and expenses of its counsel) incurred by InterArch and its officers, directors, employees, agents and other representatives, which may arise out of acts performed or omitted in connection with Projects and this Agreement (i) by InterArch, its officers, directors, employees, agents and other representatives, except to the extent such liability or expense arises out of its or their own gross negligence or willful misconduct, or (ii) by Commerce or any of its officers, directors, employees, agents or other representatives.

Mr. and Mrs. Hill commenced this action on January 14, 2008 in the United States District Court for the District of Columbia. The action was later transferred to this Court, whereupon Plaintiffs filed the Amended Complaint. The Amended Complaint alleges eleven causes of action: (1) breach of contract (by Mr. Hill against Commerce Bancorp); (2) breach of the implied covenant of good faith and fair dealing (by Mr. Hill against Commerce Bancorp); (3) contractual indemnification (by Mr. Hill against Commerce Bancorp); (4) breach of contract (by InterArch against Commerce Bancorp and Commerce Bank); (5) quantum meruit/unjust enrichment (by InterArch against Commerce Bancorp and Commerce Bank); (6) promissory estoppel (by InterArch against Commerce Bancorp and Commerce Bank); (7) breach of the implied covenant of good faith and fair dealing (by InterArch against Commerce Bancorp and Commerce Bank); (8) tortious interference (by InterArch against Commerce Bancorp); (9) contractual indemnification (by InterArch and Mrs. Hill against Commerce Bancorp and Commerce Bank); (10) copyright infringement (by InterArch against Commerce Bancorp and Commerce Bank); and (11) intentional infliction of emotional distress (by Mr. and Mrs. Hill against Commerce Bancorp and Commerce Bank).

In September 2009, Commerce moved to dismiss Count Ten (copyright infringement by InterArch against Commerce), and, in November 2009, Mr. Hill moved for partial summary judgment on Counts One, Two, and Three. In June 2010, the Court granted Commerce's motion to dismiss Count Ten and denied Mr. Hill's motion for partial summary judgment. (Doc. Nos. 131, 132). Plaintiffs have twice moved to file a Second Amended Complaint, but the Court denied both motions. Commerce now moves for partial summary judgment denying Counts Nine and Eleven. Count Nine alleges that the Indemnification Provision requires Commerce to indemnify InterArch and Mrs. Hill for legal fees and expenses: (1) incurred as a result of bringing this action against Commerce; and (2) incurred as a result of responding to various regulatory investigations. Count Eleven alleges that Commerce intentionally caused Mr. and Mrs. Hill emotional distress during Mr. Hill's separation from the bank and by terminating InterArch's agreement with Commerce.

In response to Commerce's motion, Mrs. Hill and InterArch abandon their claim that the Indemnification provision requires Commerce to pay for expenses incurred as a result of the regulatory investigations. However, InterArch maintains that Indemnification Provision requires Commerce to pay InterArch's legal fees and expenses in this action. Mr. and Mrs. Hill did not ...


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