Former Executive Wins $4.1 Billion in Employment Contract Dispute

Tuesday, June 9th, 2009 | Breach of Contract, Breach of the Implied Covenant of Good Faith, Executive Compensation

A California Court has recently confirmed an arbitration award of $4.1 Billion for a former executive in a suit against his former employer, iFreedom Communications, Inc. (iFreedom).  The award, which is being touted as the largest damages award issued in an employment arbitration, stems from a dispute over a compensation agreement where iFreedom agreed to pay its former chief marketing officer a commission structure of five percent of gross sales, company stock, and other benefits in exchange for his experience in building marketing organizations.  According to the former executive, the company failed to pay him according to the compensation agreement and terminated him without cause when he confronted the company about the unpaid wages.  The arbitrator found in Chester’s favor, concluding that iFreedom and its founder were liable, among other things, for breach of contract, breach of the implied covenant of good faith and fair dealing, and failure to pay wages.  The arbitrator also determined that Chester demonstrated by clear and convincing evidence that the defendants engaged in “a pattern of despicable conduct,” and thus, an award of punitive damages was appropriate.

The massive award of $4.1 billion in this case is significant because it highlights the fact that employers can face severe penalties for failing to satisfy contractual obligations owed to employees.  The Employment Law Group® law firm has successfully represented and advised senior executives in employment-related contract disputes including breach of stock option agreements and compensation agreements.  For more information about the firm’s Executive Counsel Practice, click here.

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