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Acteon, Inc. v. Halverson

United States District Court, D. New Jersey

September 25, 2019

ACTEON, INC. D/B/A COMEG MEDICAL, Plaintiff,
v.
ERIC HALVORSON, Defendant.

          OPINION

          HON. JOSEPH H. RODRIGUEZ, UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on Motions of Defendant Eric Halvorson [Dkt. No. 24] and Plaintiff, Acteon, Inc. d/b/a Comeg Medical [Dkt. No. 25] seeking summary judgment, pursuant to Fed.R.Civ.P. 56. The Court has considered the written submissions of the parties, as well as the arguments advanced at the hearing on April 17, 2019. For the reasons stated on the record that day, as well as those that follow, the Plaintiff’s motion is denied, and Defendant’s motion is denied in part and granted in part.

         I. Background

         A. Plaintiff’s Business

         Plaintiff, Acteon, Inc. d/b/a Comeg Medical (“Plaintiff, ” “Comeg, ” or “Acteon”) “designs, manufactures, markets and/or distributes proprietary dental equipment, including but not limited to imaging systems, dental implant systems, hygiene systems, and dental tips.” [Dkt. No. 1 (Compl.) at ¶8]. Acteon is the wholly owned subsidiary of Acteon Group, a European Company. Plaintiff Acteon is “the only company that does any business in North America.” Harbuck Dep. 15:7-15. Acteon uses “Comeg” as a brand name for commercial purposes. Pochon Dep. 72:8-1. Initially, Acteon was doing business under the Comeg name in France. Now, Comeg is used to primarily to sell “endoscopes and products for endoscopic surgery” throughout the United States, Canada, Puerto Rico, and Latin America. Id. at 18:12-16. The parties agree that Comeg was entering a U.S. market with well-established competitors. Building the business was going to be a challenging and difficult task. Harbuck Dep. 24; Nelson Dep. 30:7-31:10.

         In efforts to expand Comeg, Plaintiff hired Eric Halvorson, the Defendant (“Defendant” or “Mr. Halvorson”), and the parties entered into a formal Employment Agreement on November 23, 2015. (Eric Halvorson’s Employment Agreement, Def. Ex. A); Def. SOMF ¶ 1. Mr. Halvorson was “recruited to make a business out of a nothing business” and build Comeg’s sales in the U.S. as the General Manager of Medical Americas Division. Pochon Dep. 145:1-5, 56:4-7. From February 23, 2016 until his termination, the Defendant also served under the title of President, Medical Americas Division, which Plaintiff insists came without any additional responsibilities. Id. at 15:15-25; 16:1-6.

         B. Defendant’s Employment Agreement

         According to Section 2.1 of Defendant’s Employment Contract his duties as General Manager and “President” were as follows:

Executive shall diligently and competently perform such reasonable duties in connection with the business and affairs of Company as may be assigned to him by Company’s Chief Executive Officer or Company’s Board of Directors (the “Board of Directors”) from time to time, including but not limited to market development in the United States, Canada, Central America and Latin America, determining budget requirements, development of direct and distributor sales organizations, building and implementing training and education programs for surgeon customers in the sales force, building a scalable commercial operations support team, implementing appropriate dashboards to measure and manage performance and results and determining the clinical and economic evidence required to support product value propositions and key selling tools. Executive shall report to Company’s Chief Executive Officer.

         Def. Ex. A

         Plaintiff further describes Defendant’s duties as “commercial marketing and sales;” he was to generate sales forecasts and “develop the sales which were absolutely nonexistent before him.” Pochon Dep. 49:16-20; 35:1-5. Defendant was regarded as a highly paid executive; whose annual base salary was $360, 000. Def. Ex. A, Section 4.1. The Employment Agreement between the parties also provides how Plaintiff may terminate Defendant’s employment with the company. Pursuant to Section 7.1.1, Plaintiff had the option to terminate Defendant’s employment “for cause.” Section 7.1.1 states as follows:

Company may terminate Executive’s employment immediately at any time for Cause. For purposes of this Agreement, “Cause” is defined as: (A) EXECUTIVE’S REPEATED FAILURE TO FOLLOW THE REASONABLE AND LAWFUL DIRECTIVES OF THE COMPANY’S CHIEF EXECUTIVE OFFICER OR BOARD OF DIRECTORS; (B) THE MATERIAL BREACH BY EXECUTIVE OF ANY OF EXECUTIVE’S COMMITMENTS, DUTIES, OR OBLIGATIONS UNDER THIS AGREEMENT; or (c) Executive’s conviction or indictment for a felony, or if Executive enters a guilty plea or plea of no contest with respect to a felony; provided, however that in the case of (a) or (b) above, if in Company’s reasonable discretion, the failure or breach is curable, Executive shall be notified in writing of the failure or breach and shall be given thirty (30) days from receipt of such written notice to cure the failure or breach to the Company’s satisfaction. In the event Executive’s employment is terminated in accordance with this Section 7.1.1, Executive shall be entitled to receive only (a) the portion of Executive’s Base Salary earned through the date of termination; (b) reimbursement of Executive’s reasonable and necessary out-of-pocket business expenses as provided in Section 6.1 through the date of termination of employment in accordance with Company’s policies; and (c) any accrued and vested benefits under Company’s benefit plans, which shall be paid or provided in accordance with, and remain subject to, the provisions of the applicable plans or arrangements (collectively, the “Accrued Amounts”). All other Company obligations to Executive pursuant to this Agreement will become automatically terminated and completely extinguished.

         Def. Ex. A (emphasis added).

         In addition, the Employment Agreement provides that Halvorson’s employment may be terminated “without cause, ” in which case Plaintiff agreed to pay “(a) the Accrued Amounts and (b) any Prior Year Bonus . . . . In addition [Mr. Halvorson] will receive a case severance payment in an amount equivalent to nine (9) months of [Mr. Halvorson]’s Base Salary (the ‘Severance Payment’).” Id.

         C. Defendant’s Employment

         During his employment, Defendant was to report to Plaintiff’s CEO, Ms. Marie Laure Pochon (“Ms. Pochon”). Def. Dep. 72:22. In January 2016, Defendant provided Ms. Pochon with an initial sales forecast for Comeg projecting approximately $4 million in revenue for that year alone (2016). Pochon Dep. 58:10-14; Def. Dep. 45:11-13. According to the Defendant, he continued to send Ms. Pochon multiple regular business updates, which included additional sales forecasts. Def. SMOF ¶ 19. Defendant claims that the forecasts were updated as the targets changed during his tenure, however Plaintiff asserts that Defendant’s overall projections were never changed or updated. Andrea Nelson, Defendant’s employee, testified that the sales forecasts were subject to change. Nelson Dep. 100:1-4. She would give projections to Mr. Halvorson that were not “concrete, ” rather plans that could change drastically. Id. at 103. Overall, Defendant testified that he provided reviews, forecasts, and presentations to Ms. Pochon during his employment, but admits that “revenue was lower than what the forecast and projections were.” Def. Dep. 44:4-7; 44:8-15.

         In his role at Comeg, Defendant “was in charge of hiring his own sales team.” Pl. SOMF 6. He assembled a team that consisted of a Marketing Director, Sales Representatives, an Administrative Assistant, and a Sales Director. Id. at 45. Ms. Pochon knew that Defendant was hiring people for certain roles but was unaware that Andrea Nelson (“Ms. Nelson”) was hired as Director of Sales, in which she maintained a dual role. Specifically, Ms. Pochon stated that Defendant made known that he wanted an “important person next to him . . . who was Marketing Director” but gave no intention of having a Sales Director. Pochon Dep. 26:7-25. She claims it was clear in their conversations together that “nobody would be hired as a Sales Director.” Id. at 28:4-9.

         Defendant hired Ms. Nelson in April 2016. She testified that the Defendant was not “transparent” about her role at Comeg and that he had not communicated why she was hired to other employees. Nelson Dep. 91. Ms. Nelson, however, confronted Defendant about the situation, did not hide her position, and represented herself as the director of sales, which included having her position in her E-mail signature. When asked about hiring staff, Defendant testified that as President of Comeg’s U.S. division, he had “full responsibility to make those decisions.” Def. Dep. 53:15-20. According to him, he was not required to inform the board or Ms. Pochon of Ms. Nelson’s specific responsibilities. Def. Dep. 53:21-25.

         Plaintiff claims that Ms. Nelson’s, large salary was not approved, and further contends that Defendant had Ms. Nelson performing his own responsibilities without permission. [Dkt. No. 25 (Pl. Brf.) at 4]. In Defendant’s deposition he explained: “[Ms. Nelson] helped in many ways. She helped in training the sales group, she helped in closing sales, she had direct interaction with sales people every day to get them up to speed. She was much stronger than the other sales people, so I wanted to use her best practices.” Def. Dep. 70:8-13. Defendant further acknowledges that he had Nelson helping create business plans; he also states that he would get input from “many people, ” including others on the sales team. Def. Dep. 59:20-25.

         Ms. Pochon met Ms. Nelson during a visit in May 2016, at which Ms. Nelson was presented to her as a sales representative who would be a promising sales director if sales developed well. Pochon Dep. 27. In time, board member, Thomas (Rick) Harbuck (“Mr. Harbuck”), was aware of Ms. Nelson’s exact position at Comeg. Harbuck Dep. 47:19-25. He was impressed that the Defendant had brought Ms. Nelson on board and thought it was a “good move;” she contributed good contacts with customers and clients. Id. at 48:3-10.

         According to Ms. Pochon, in August 2016, she had a “long and difficult” conversation with the Defendant regarding sales development. Pochon Dep. 69-71. During this conversation, she did “everything to wake him up, to make him understand, ” but there was no mention of any possible termination of his employment. Id. at 69:1-9. Ms. Pochon told the Defendant that she wanted him to “spend more time with dealers, with current customers.” Id. at 80:21-25. Defendant urges that he did so. He names “Medtronic, ” “Endodcopy Services, ” “Optum, ” and “D-Scope” as clients he met with. Def. Dep. 85-86. “[Defendant] spent some time in the field with people.” Nelson Dep. 108. He characterized his time at Comeg as “20% to 40% of [his] time out of the office” and the rest of the time in the office. Id. at 77:4-6.

         In September 2016, Defendant recalls that Ms. Pochon expressed her disappointment that the sales take off was “far from plan.” Id. at 78:4-16. Then, in October, Mr. Harbuck visited Comeg U.S. to observe the Defendant at work. See Def. Ex. G. Mr. Harbuck’s main job is to observe Comeg and aid the division’s leader. Harbuck Dep. 16:21-25. During his visit, Mr. Harbuck went out in the field with Ms. Nelson. When asked if she expressed any concerns at that time, Mr. Harbuck stated that she did “not really” indicate dissatisfaction with Mr. Halvorson but he recalls that “[c]onfidence in his leadership ability . . . was questioned.” Id. at 53:18-22.

         Ms. Nelson had a lack of confidence in Defendant. She claims she had several conversations with Defendant about her concerns, she tried to let him know “what was lying ahead of [them], ” that things were going to take time at Comeg, and give him relevant advice; however, she kept having to have those conversations multiple times. Nelson Dep. 109-110. According to Ms. Nelson there were similar concerns with the other sales representatives, namely that the Defendant was “out of touch” with the current market that Comeg was trying to sell in. Id. at 141:2-6. She was frustrated in Mr. Halvorson’s lack of understanding and felt there was a disconnect in communication “going back and forth with France.” Id. at 147:22-25. Ms. Nelson “could tell [Defendant] was under pressure. Id. at 148:1-2.

         After Mr. Harbuck’s visit with Defendant and his sales team, he sent an email to the Defendant with an attached memo from his “October 10, 11, 2016 Visit” [Ex. G to Def. Op. (“Harbuck’s Memo”)]. The email and Memo present an overview of his observations, concerns and recommendations that he had at the time. Together they state that he was “impressed” and “confident with where Comeg U.S. is at present.” Id. Harbuck’s Memo also indicates that there was some “confusion and lack of confidence.” Mr. Harbuck expressed that his email and certain positive notes from his visit were “an effort to boost Halvorson’s confidence, and provide him with some type of optimism that he could get the job done.” Harbuck Dep. 35:12-24. At some point, Harbuck’s Memo was forwarded to Ms. Pochon. Id. at 4:11-17. Defendant followed up with Mr. Harbuck to address some of his concerns.” Id. at 30-31.

         In November 2016, Ms. Pochon requested a business update, which showed U.S. sales to “dealers” decreased another 20%. Pochon Dep. 39:3-12, 13-17. Defendant has pointed to certain difficulties with the nature of the business itself and internal issues at Comeg. Some of these “huddles” were expressed to Mr. Harbuck, such as pricing, cost of goods sold, and instructions for products not meeting U.S. standards. Harbuck Dep. 55:16-25. In addition, there was “significant backorder” on the product line. Def. Dep. 74:11-13.

         According to Ms. Pochon, Defendant was given multiple repeated notices, both written and oral, of the deficiencies in his work product and his failures to follow directives. See Pochon Dep 22; Pl. SOUMF ¶ 11. Still, Defendant claims that he “wrote emails along the way giving Marie Laure updates on if interesting things were occurring. It was not uncommon to send her notes.” Def. Dep. 63:10-12. He testified: “I sent her updates on, basically, a monthly basis for the projections, ” and “I don’t think that they ever said that I wasn’t performing well. We talked about the business not performing well.” Id. 64:4-5; 77:23-25. The parties agree that, ultimately, Comeg did not reach Defendant’s projection in his initial sales forecast.

         D. Defendant’s Termination

         Ms. Pochon was unhappy with Defendant’s sales and made the decision to let him go. Pochon Dep. 63:14-16. She reached out to Mr. Harbuck to discuss how Comeg would operate moving forward if Defendant’s position was no longer there. During that conversation, she informed him that Defendant’s role was, in fact, being eliminated. Ms. Pochon also had a conversation with Ms. Nelson, during which she informed Nelson that Defendant would be let go and wanted to confirm that she could assume some of his duties moving forward. Nelson Dep. 151:3-13.

         Plaintiff provided Halvorson with a formal notice of termination by letter, dated November 21, 2016. [Dkt. No. 27, Ex. B (Eric Halvorson’s Termination Letter)]. The letter stated that his termination was “for cause” pursuant to Section 7.1.1 of his Employment Contract but did not include notice of the alleged reasoning. Ms. Pochon testified to firing Defendant, explaining that “Mr. Halvorson gave me many, many times the feeling that, okay, I sent you a forecast in January. We will not meet the forecast, but it’s not really important. I will send you a new forecast. Probably, in some big companies, it’s acceptable, but in a company like Acteon, it’s absolutely not acceptable to think that it is normal to reforecast and to change by half each of your commitments.” Pochon Dep. 44:19-51:25; 86:21-87:13

         At the termination meeting, Pochon claims that she explained to Defendant “that the results were not there and [she] was not satisfied of the way he was driving the commercial part of the - - of Comeg in the U.S.” The General Manger in the company was expected to be in the field, “not sitting in his office” a “major lack” was that Defendant was not with customers. Id. at 62:4-9. Specifically, the CEO stated, “we dismissed Mr. Halvorson because he was absolutely not doing his job properly in terms of behavior and in terms of results. And . . . he was acting absolutely outside of all of the rules of the company.” Id. at 80:24-81:4.

         Defendant declares he did not fail to follow directives from either Ms. Pochon or the Plaintiff’s board of directors. Declaration 2, Def. Ex. 2. Plaintiff further claims that “Defendant’s administrative assistant was also tasked with overseeing employee expense reports, a responsibility that should have been handled solely by Defendant. Said assistant, with Defendant’s approval, approved expenses that included a tv, subwoofers, trips taken outside of the scope of work, and rental cars outside of a sales reps territory, all of which are violations of Acteon Policy.” Pl. SOUMF ¶ 12. Plaintiff’s admit they learned the specific issues with these expense reports after this litigation was commenced. [Dkt. No. 35 (Oral Arg. Tr.) at 8].

         The Plaintiff did not provide Mr. Halvorson with a cure period, to cure any performance issues that the company found. According to Acteon, it determined in its discretion “that Defendant’s many bad faith breaches and deceptions were in no way curable, voiding the 30 day cure period as was reasonably determined by Plaintiff.”[Dkt. No. 24-4 (Pl. SOMF in op.) ¶ 12.]

         E. Procedural background

         Post-termination, Defendant demanded payment of severance pursuant to his employment agreement. Pl. Ex. G. Following the demand, Plaintiff commenced this action and filed a complaint with this Court on January 11, 2017. [Dkt. No. 1]. Plaintiff’s complaint alleges breach of contract (Count I), breach of duty of good faith and fair dealing (Count II), and requests injunctive relief and declaratory judgment (Count III). Defendant filed an Answer and Counterclaim on February 3, 2017, “seeking payment of the severance pay under the Employment Agreement.” [Dkt. No. 4]. Defendant’s counterclaim similarly alleges breach of contract (Count ...


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