Court Disposes of Former CEO’s Claims Against Purchaser of His Company’s Trash Carts
Normally, in litigation between executives and employees, the executive will bring suit after he or she is fired, alleging wrongdoing by the former employer. This makes sense: the employer, after all, is the one who took the adverse action against the exec. And it’s the one that caused the damage, assuming that the executive can prove his or her claims.
The case of Stephen Stradtman, former CEO of Otto Industries North America, Inc., was not a normal case. For one thing, Stradtman wasn’t fired – he quit. And Stradtman didn’t sue Otto – he sued two other companies (Republic Services, Inc. and Republic Services of Virginia, LLC) and one of their employees.
According to Stradtman’s complaint (attached here), two relationships were important to his case: first, the relationship between Otto and Republic, as seller and purchaser of trash and recycling carts; and second, the relationship between Stradtman and his wife, Jennifer Taylor, who worked for Republic and then sued it for sexual harassment and retaliation. Stradtman claimed that Republic pulled its business from Otto in retaliation for Taylor’s lawsuit, destroying his ability to perform his job as Otto’s CEO. Among other claims (which were dismissed at the outset of his case), Stradtman alleged a claim for tortious interference with contractual relations and business expectancies, a common law tort claim that allows a person to sue when another interferes with their contract with a third party and causes them a pecuniary loss.
However, Stradtman’s claim didn’t survive summary judgment. Stradtman v. Republic Services, Inc., No. 1:14cv1289 (JCC/JFA) (E.D. Va. June 11, 2015). He couldn’t overcome the fact that Otto did not terminate Stradtman’s employment; instead, the court concluded, Stradtman voluntarily resigned. Stradtman tried to save his claim by arguing that he was “constructively discharged” – in other words, conditions at Otto were so bad for him that he had no choice other than to quit. But the court found that Stradtman’s working conditions were not intolerable, because he had just negotiated a $270,000 bonus, and his superiors wanted him to stay. Even more damaging, the court decided that Stradtman had “executed a calculated, years-long scheme in an attempt to cast liability on [Republic] for actions he willingly took”: he was offered and accepted another job without telling Otto, and also told his attorney that he would need to “force [his] termination … in order to try to receive severance.” According to the court, Stradtman’s attorney commented that Stradtman’s claim against Republic was not likely to succeed “no matter the forum.”
At these last points, you may have heard a metaphorical record scratch. Why was the court talking about Stradtman’s communications with his attorney? Aren’t those normally off limits from discovery? Well, it turns out that the case involved a number of thorny privilege issues. In the litigation that his wife filed against Republic, Stradtman mistakenly produced the communication with his attorney in which he said that he would need to “force [his] termination.” Although the court accepted that the two had an attorney-client relationship at the time – another hotly disputed issue – it didn’t allow him to claw back the email. (See the privilege order, attached here.)