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March 29, 1996

DEAN L. WILDE, II, et al., Defendants.

The opinion of the court was delivered by: GREEN

 After defendants Dean L. Wilde, II and Dean R. Silverman established a competing business, Dean & Co. Strategy Consultants, Inc. ("Dean & Co."), and, along with defendant Moray P. Dewhurst, left the employ of plaintiff Mercer Management Consulting, Inc. ("Mercer"), Mercer brought a ten-count complaint alleging, inter alia, breach of fiduciary duty, breach of contract, and tortious interference with contractual relationships. Defendants Wilde and Silverman counterclaimed for breach of contract, stemming from Mercer's alleged failure to honor an agreement to make certain payments to Wilde and Silverman.

 Following denial of defendants' second motion for summary judgment (except as to one claim relating to defendant Dewhurst), this case was tried to the Court. After the trial, counsel submitted extensive proposed findings of fact and conclusions of law. *fn1" Upon consideration of the record and evidence introduced at trial, including the testimony of witnesses whose credibility, demeanor, and behavior the Court has had an opportunity to observe and fully evaluate, for the reasons set forth below judgment shall be entered in favor of plaintiff on its claims relating to breach of the 1982 Agreement by defendants Dean Wilde and Dean Silverman, and in favor of defendants on all of Mercer's other claims. Judgment shall be entered in Mercer's favor on Wilde's and Silverman's counterclaim.


 Mercer is a management consulting and strategic planning company incorporated under the laws of Delaware. Mercer is an indirect subsidiary of Marsh & McLennan Companies, Inc. ("MMC"). In 1987, MMC acquired, through a subsidiary, a management consulting and strategic planning company known as Temple Barker Sloane, Inc. ("TBS"). On February 14, 1990, MMC acquired Strategic Planning Associates, Inc. ("SPA"), by merging it with TBS. The resulting company became known as Mercer Management Consulting, Inc., the plaintiff company in this case.

 Defendants Wilde, Silverman, and Dewhurst were employed by SPA, and subsequently by Mercer, as management consultants. *fn2" Each defendant quickly rose through the ranks. Wilde joined SPA in 1980 after his graduation from the Massachusetts Institute of Technology's ("MIT's") Sloane School of Management. He became a vice president of SPA in 1984 and an executive vice-president and member of SPA's Policy Committee in 1988. Moreover, he served on Mercer's Board of Directors and Mercer's "inside board" from approximately October 1991 until his resignation on April 2, 1993. *fn3"

 Silverman, a graduate of Columbia Law School, joined SPA in 1979 after three years in a law firm and another management consulting business. Like Wilde, Silverman became a vice president in approximately 1984, and became an executive vice president and Policy Committee member in 1988. He too served on Mercer's Board of Directors and the "inside board" from approximately October 1991 until his resignation on April 2, 1993.

 Dewhurst joined SPA in 1980 after his graduation from MIT's Sloane School of Management. He became a vice president of SPA in 1984 and served in that position until his resignation on March 15, 1993.

 In 1982, Wilde, Silverman, and Dewhurst each executed an employment agreement with SPA (the "1982 Agreement"). The 1982 Agreement provides, inter alia, that each defendant will refrain from "rendering competitive services" to any client or active prospect of SPA, or from hiring or assisting in hiring any SPA employee, for a period of one year following the termination of employment with SPA. Such agreements are typical in the management consulting industry. Thomas Waylett, Chairman of Mercer Management, testified that the agreements served as Mercer's "protection that people wouldn't just walk out the door, set up in business, and take clients and employees." Tr. at 51. As part of its "due diligence" investigation prior to the TBS/SPA merger, Mercer sought to ascertain whether SPA's employees had previously signed non-solicitation agreements, and it learned of the 1982 Agreements in the course of that investigation. *fn4"

 A. The 1990 Agreements

 In 1989, as a condition of the merger between TBS and SPA, Mercer required five senior employee-stockholders of SPA, including Wilde and Silverman, to enter into employment agreements ("the 1990 Agreement"). *fn5" Wilde and Silverman each executed the 1990 Agreement in December 1989. The agreements became effective as of the merger date -- February 14, 1990.

 Among its key provisions, the 1990 Agreement assured continued employment at a guaranteed level of compensation for a period of three years from the date of the merger. The agreement obligated Wilde and Silverman to "perform and discharge well and faithfully their duties". Jt. Exh. 1 at P 4. For a three-year period commencing on the date of the merger, the agreement prohibited Wilde and Silverman from offering competitive services within a 50-mile radius, soliciting or accepting business from any Mercer client or active prospect, or soliciting any management consulting professional to terminate employment with Mercer. Id. at P 6.

 Pivotal to the instant dispute is paragraph 14 of the 1990 Agreement, which concerns the relationship between the 1990 Agreement and prior employment agreements. Paragraph 14 states, in pertinent part:

14. Entire Agreement. This instrument contains the entire agreement of the parties with respect to employment following the Merger Date and supersedes all prior oral or written agreements and understandings between and among the Employee [and] the Company ... with respect to employment following the Merger Date, except for any agreements or understandings restricting or prohibiting the competition or solicitation activities of the Employee or the use of confidential information of the Company or its clients which shall remain in full force and effect, provided that in the event of a conflict between the provisions of this Agreement and those of any other agreement which survive hereunder, the provisions of this Agreement shall control.

 Jt. Exh. 1 at P 14.

 The meaning of paragraph 14 and its effect on the survival of the 1982 Agreements is paramount to Mercer's breach of contract claims. The Court previously determined that the language in paragraph 14 was subject to a number of possible interpretations, and consequently, extrinsic evidence concerning paragraph 14's meaning was allowed. Because of the importance of this issue to the underlying claims, the evidence is recounted in some detail below.

 Mercer's Chairman, Thomas Waylett, stated his objectives with respect to the 1990 Agreements as follows:

To make sure that these individuals remained employees of our firm for at least three years. That if in the event they left they did not compete with us during that period. That's different from nonsolicitation. Nonsolicitation is covered by a different agreement. That we would undertake to not fire them during that period, and we would undertake to pay them not less than a certain amount of money during that period.

 Tr. at 83-84. Or, in the vernacular:

I wanted these people's feet nailed to the floor for three years . . . [and] to have the nonsolicitation stuff survive.

 Tr. at 276. Waylett further testified that he wanted the SPA agreements to be substantially the same as the agreements obtained in the TBS acquisition. He communicated these intentions to Mercer's counsel. Moreover, although he did not personally review the agreements at the time, Waylett believed the 1990 Agreements met his goals.

 At the time of the SPA acquisition, Leonard DiNapoli had been Mercer's principal legal officer for approximately five years, and had overseen virtually all of the legal work for Mercer's prior acquisitions. DiNapoli was closely involved in drafting the agreements utilized in the acquisition of TBS, and he was given responsibility for negotiating the 1990 Agreements on Mercer's behalf.

 According to DiNapoli, his goals in the negotiation of the 1990 Agreements were to obtain a non-competition provision for a fixed period subsequent to the merger, and in addition, to leave undisturbed whatever non-solicitation agreements existed prior to the merger. Initially, the draft agreement contained a non-competition clause which was of a two-year duration and commenced at the termination of employment. This version of the agreement was soundly rejected by Richard Morvillo, who represented Wilde and Silverman in the negotiations, and by Ralph DeMartino, who represented Francois deCarbonnel, another Policy Committee member, in the negotiations. Morvillo and DeMartino found both the scope and duration of the restrictions excessive. *fn6"

 Eventually the parties reached an impasse in the negotiations. The impasse was broken by counsel's agreement to incorporate what they describe as a "three-year wasting non-compete" provision into paragraph six. Under that provision, Wilde and Silverman would be prohibited from competing with Mercer for a three-year period from the date of the merger, whether or not they were employed by Mercer. The three-year non-compete provisions were coterminous with an employment and salary guarantee.

 Having reached agreement on paragraph six, the parties then turned their attention to paragraph 14. The discussions on paragraph 14 were brief in comparison to the discussions over paragraph six, which themselves were concentrated in a two- or three-week period of time due to the imminency of the merger.

 As previously described, paragraph 14 provided that the 1990 Agreement represented the complete agreement of the parties, except for other agreements relating to competition, solicitation, or use of confidential information. The purpose of the "exception clause," according to DiNapoli, was to preserve any existing agreements relating to non-competition, non-solicitation, or confidential information. In the course of due diligence, Mercer had learned that all senior professionals had one-year nonsolicitation agreements, and DiNapoli wished to preserve these agreements. According to DiNapoli, under the 1982 and 1990 Agreements, Wilde and Silverman could compete after three years, "but as to solicitation, [for] one more year they had to leave alone the client base that [Mercer] bought and paid for." Tr. at 411. In other words, the 1990 Agreement broadly prohibited competition with Mercer for three years; the 1982 Agreement, which took effect once an employee left Mercer's employ, did not prohibit competition generally, but prohibited former employees from interfering with Mercer clients or employees for a one-year period following their employment.

 According to Morvillo and DeMartino, they repeatedly asked DiNapoli to identify the agreements covered by the "exception clause" of paragraph 14, out of a concern that the exception clause could "swallow the rule" -- meaning, presumably, that it could preserve restrictions greater than those contained in paragraph six. DiNapoli testified that he told Morvillo and DeMartino he wanted to preserve "whatever was out there," but he declined to identify the particular agreements covered by the exception clause. As he put it:

[Morvillo] had an easy way to find out . . . He could ask his client what they signed. . . . And so I resisted identifying what it is these guys had signed, because it seemed to me he had a more direct way to find out than from me.

 Tr. at 398. Morvillo and DeMartino denied that DiNapoli told him he wanted to preserve "whatever was out there." Rather, Morvillo testified that DiNapoli told him "I don't know of any other agreements that your clients have signed." Tr. at 513. DeMartino testified that DiNapoli told him "I can't tell you everything that exists out there, but I don't know of anything that would survive." Tr. at 574. These witnesses testified that DiNapoli told them he needed to preserve the exception clause as a matter of form, so that he could truthfully say the language appeared in all Mercer merger agreements. *fn7" DiNapoli emphatically denied this assertion.

 Significantly, Morvillo was not informed by his clients of the existence of the 1982 Agreements. Indeed, both Wilde and Silverman testified that they had forgotten about the agreements at the time the 1990 Agreements were being negotiated. *fn8" According to these witnesses, they each provided a folder of documents relating to their employment with SPA to Morvillo, but the folders did not contain the 1982 Agreements. The folders did contain, and Wilde and Silverman remembered signing, shareholder agreements which referenced "any of his agreements . . . including, but not limited to, his employment, confidentiality and option agreements." Jt. Exh. 37 at P 1. Neither Wilde or Silverman nor their counsel ever checked with personnel officials at SPA or elsewhere to determine what "other agreements" the shareholder agreements were referencing. *fn9"

 Similarly, the merger documents, which both Wilde and Silverman reviewed, contain a provision warranting that SPA's officers had signed confidentiality agreements. Jt. Exh. 9 at 19. That same document contains a separate provision stating that "simultaneously herewith, SPA has entered into employment agreements" with five individuals, including Wilde and Silverman. Id. at 28. Nonetheless, neither Wilde nor Silverman inquired as to the "confidentiality agreements" referenced in the merger documents. *fn10"

 Subsequently, counsel added the "proviso" to paragraph 14. In DiNapoli's view, the purpose of the proviso was "to address the possibility that the old agreements would for a period exist simultaneously with this 1990 agreement. If the provisions were not reconcilable, we provided which one of them would take precedent [sic]." Tr. at 378. *fn11"

 Morvillo and DeMartino had a different view of the proviso. They believed the proviso "eviscerated" the exceptions clause. Morvillo testified that:

I told [DiNapoli] that we were concerned that there might be some agreement out there that he was unwilling or unable to identify, and I wanted to be sure that three years from now there isn't going to be any question about whether my clients were able to go out and open up their own shop or otherwise compete in any way they wanted to do. And we discussed the language to implement that.

 Tr. at 516. Thus, in Morvillo's view, the proviso "wiped out" the exceptions clause. In the end, according to Morvillo,

 Tr. at 520. In Morvillo's view, the proviso was the language which made Wilde's and Silverman's freedom to compete after three years "darn clear." Tr. at 521. Thus, according to Morvillo, he was advised by DiNapoli that after the three year period in paragraph six expired, Wilde and Silverman could "do whatever the heck they wanted." Tr. at 515. *fn12" According to Morvillo, DiNapoli never contradicted the view that Wilde and Silverman would be free to compete in three years; in fact "I thought, and still think, Mr. DiNapoli agreed at the end of three years my clients were free to do anything, notwithstanding what might be said in some other piece of paper in somebody's files somewhere." Tr. at 537.

 DiNapoli denied that Morvillo or DeMartino conveyed to him their view that the proviso, in effect, "wiped out" the exception clause. He testified that he would not have agreed to language achieving such a result, because "it would be ridiculous to have a research assistant with six months of experience subject to a nonsolicitation [agreement] while the rainmakers were free." Tr. at 379.

 Thus, DiNapoli interpreted the 1990 Agreement as follows:

The noncompetition agreement ran out ... in February of 1993, and the nonsolicitation would run out one year after they terminated employment. And so it's not the longer of either of this or that and combining nonsolicits with noncompetes and messing them all together. They are entirely different agreements, different restrictions, difference in scope, difference in duration, and difference in expiration dates. And they wanted to be able to compete after three years, and they could . . . But as to solicitation, one more year they had to leave alone the client base that we bought and paid for.

 Tr. at 411. *fn13"

 B. Mercer's Policy on Restrictive Covenants

 TBS and SPA had different policies on requiring employees to sign confidentiality or non-solicitation agreements, and these differences carried over to Mercer following the merger. As previously discussed, TBS required entry level employees to sign agreements protecting client confidences, but only required non-solicitation agreements of those employees who held stock. SPA, on the other hand, required all of its consultants to sign agreements containing both confidentiality and non-solicitation (or, more precisely, non-interference) provisions. Mercer's "inside board" recognized this disparity in policies, but did not immediately address it due to other pressing concerns. Thus, TBS employees who had not been required to sign a non-solicitation agreement were not required by Mercer to sign such an agreement. Dep. of Scott Davenport at 84.

 According to Robert Duboff, Mercer's present policy is for new employees to sign confidentiality agreements, and for partners to sign non-solicitation agreements, with the difference attributable to the high level of client contact by partners but not new employees. Interestingly, Dub off's own non-solicitation agreement restricts solicitation of clients, but not solicitation of employees.

 C. The Marzipan

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