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The facts of the case, jury’s decision and next possible step
The case refers to MacAndrews & Forbes LLC v. Drapkin, 09-cv-4513, U.S. District Court, Southern District of New York. The plaintiff was Mr. Drapkin while the defendant was MacAndrews & Forbes LLC. MacAndrews & Forbes LLC is a holding company owned by Ronald O. Perelman. In the 1987, the company hired Mr. Drapkin as its vice president. According to the accounts in the case, the amiable relationship between Mr. Drapkin deteriorated to a point such that, by 2006, his salary and duties were reduced. In 2007, Mr. Drapkin agreed to leave the company, which resulted to the contract in question.
The contract involved a separation accord and a stock purchase accord. The company would pay him a total of $27.5 million in installments, and, in turn, he would hand over to the company all of its documents he possessed which company did not possess copies of. Apart from that, he was supposed to delete all company documents from a laptop computer, the company allowed his personal secretary to retain, and refrain from retrieving such files. After performing for two years, the company ceased making payments to Mr. Drapkin. Mr. Drapkin filed a suit demanding to be paid $ 16 million in arrears. In its defense, the firm claimed that they stopped making the payments because Mr. Drapkin breached the contract they had.
The trial concentrated on whether Mr. Drapkin breached his separation accord with his former employer by urging away an employee and by failing to return and delete company files in his assistant’s computer. On the other hand, Mr. Drapkin’s lawyer argued that the information contained in the files was covered by confidentiality agreements, thereby, posing no risk of disclosure. Finally, at the end of trial, the jury concluded that Mr. Drapkin had performed the obligations of the contract. Consequently, the jury granted him $16 million in recompenses to Mr. Drapkin. However, the verdict may not be the final whistle in the case, since MacAndrews & Forbes’s lawyers may choose to appeal. The lawyers may opine the dismissal of the claims to material breaches unlawful.
Parties in alleged breach of contract and the alleged breaches
MacAndrews & Forbes LLC alleged that Mr. Drapkin dishonored his departure agreement with the company. The company claimed that Mr. Drapkin failed to delete company files in his possession after he left the company. According to the contract, he was supposed to hand over copies of company files in his possession, that is, the files the company did not have. Furthermore, he was supposed to delete all copies of the said files and refrain from retrieving them.
The company alleged that numerous company files were found in the laptop belonging to the assistant to Mr. Drapkin, though such documents were supposed to have been deleted. Additionally, the company alleges that Mr. Drapkin breached the contract by attempting to persuade an employee of the company to leave with him. However, the first claim took precedence over the second one. This may have been due to the tangible nature of the proof of the undeleted documents claim.
The result of a case in which both parties are in breach of an accord
If both parties in a case are in a breach of pact, the state puts the contract to an end. After that, the right to claim ascends in harmony with the damages incurred by the parties. The assessment for damages would be evaluated from the time of breaking of the contract. For example, in this case, the company withheld payment to Drapkin because they believed he was in breach of contract. Consequently, both parties had withheld their obligatory performance of the contract.
This is so since the company could have continued performing and sue Mr. Drapkin for the alleged breach. In such a case, the contract no longer holds, and the parties sue in court for damages. In the court, the damages are evaluated from the time the parties broke their contract. The basic principle is to recompense the casualty of the breach for damage resulting from the breach. In the settlement, the court tries to put the aggrieved party to as adjacent as possible to where he was if the contract had not taken place. However, another variation is to restore the aggrieved to the point he would be if the accord had been fulfilled.
Why breaching in reaction to the breach of the other party was not a wise strategic move
In MacAndrews & Forbes LLC v. Drapkin, according to MacAndrews & Forbes, Drapkin breached the contract; consequently, they withheld the payment. When contractual parties are faced with the challenges of the other party breaching the contract, they can withhold accomplishing their commitments, issue a notice of termination or sue the other party for damages. The standards applied in courts differ across cases dealing with withholding.
In most cases, however, the court considers whether the breach warranted the withholding response. The company could only terminate the agreement if the perceived breach was considerably large. The breach must be of an imperative term, and it must result to a substantial loss to the grieved party. Additionally, termination requires the consideration on the extent of the breaching party’s performance of their obligations. Alternatively, the grieved party may choose to continue performing its obligation and sue the other party for damages resulting from the failure in performance.
When MacAndrews & Forbes perceived that Drapkin was in breach of contract, they had the three options. The decision should have been arrived at after keen considerations of the above issues. First was the breach substantial to warrant cessation of the contract? This would have led the company to evaluate the effect of the alleged breach to the company. Second, the company would have considered to what extent Drapkin had performed his obligations. The proceedings in the case found out that the documents found in the laptop were covered with confidentiality agreements; therefore, they did not pose any key threat to the company.
Additionally, the plaintiff had performed most of his obligations. Consequently, the decision of the company to withhold payments was not a wise strategic move. This is justified by the fact that if the court could verify that the party allegedly in breach substantially performed his obligations, they may not have regarded the claims of the company as warranting withholding of payments. Additionally, if the court could have proved that the alleged breach had not resulted in significant loss to the company, the verdict would not have favored the firm. Consequently, the decision by the firm could result to the company paying more in damages that if it had performed completely.
Why the case went to trial though many cases settle before trial
One of the things I suppose caused the case not to be settled before trial was the relationship between Ronald O. Perelman and Mr. Drapkin. The contract resulted from dissolution of friendship which extended into business matters. The resulting bad blood could have resulted in either party not willing to negotiate with the other and settle before trial. Mr. Drapkin and Mr. Perelman have been described as longtime business partners and close friends. The center of the raw is a separation agreement that Mr. Drapkin signed with the company while he left. Part of the money that summed up the $27.5 million was from a stock acquisition accord. Though not a conclusive indicator, this hints to the nature of the separation. The partners were staying clear of each other’s business. The separation resulted from the deterioration of their friendship.
The lack of the parties not settling their case before trial may have its basis in this. Their partnership was not strictly business; it then extended to friendship; consequently, the case is not only business natured. They are friends turned foes seemingly with scores to settle. This led to each party having a desire to outshine the other in a legal capacity. Agreement before trial by any of the parties would seem like weakness. Therefore, due to their egos, they opted to proceed to trial to fight it out. In such a case, the winner would gain not only the payment in money, but also a satisfaction that would only result from vanquishing a foe.
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