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Fairman v. District of Columbia

October 25, 2007

JOHN A. FAIRMAN, APPELLANT,
v.
DISTRICT OF COLUMBIA, APPELLEE.



Appeal from the Superior Court of the District of Columbia (CA-7457-01) (Hon. Linda Davis, Trial Judge).

The opinion of the court was delivered by: Wagner, Senior Judge

Argued April 14, 2004

Before WAGNER, NEBEKER and STEADMAN, Senior Judges.*fn2

Concurring opinion by Senior Judge STEADMAN at p. 17.

Appellant, John A. Fairman, appeals from an order of the trial court granting the application of appellee, District of Columbia (District), to vacate an arbitration award and denying Fairman's motion to dismiss the District's application. The arbitrator had determined that Fairman was entitled to severance pay in accordance with the terms of amendments to his employment agreement with the District of Columbia Health and Hospitals Public Benefit Corporation (PBC).*fn3 Consistent with the District's argument, the trial court concluded that enforcement of the amended agreement would violate a well-defined and dominant public policy in that the amended agreement had not been approved by the Financial Responsibility and Management Assistance Authority (Control Board). On appeal, Fairman challenges that determination. The District now concedes that the contract amendment was not subject to Control Board review and that the public policy upon which the trial court relied in vacating the award "is not of the clearest nature." Therefore, the District urges this court to affirm on other grounds discussed hereinafter. We conclude on alternate grounds that Fairman is not entitled to severance pay under the amendments to his employment contract, but that he is entitled to severance pay under his original contract. Therefore, we remand the case to the trial court for further proceedings consistent with this opinion.

I. Factual Background

Fairman and the PBC entered into a contract on October 1, 1997 under the terms of which Fairman was appointed the General Manager and Chief Executive Officer (CEO) of the PBC. His original term of service was to be from October 1, 1997 to September 31, 1999. The contract, as finally approved by the Control Board, had a severance provision which entitled Fairman upon termination to "six months salary and all benefits at the level in effect at the time of severance." The contract also provided "[t]hat the PBC and Fairman agree that any dispute arising under this agreement which cannot be resolved amicably shall be resolved through arbitration under rules of the American Arbitration Association."

In April 1999, Fairman and the PBC executed amendments to the original agreement, which set Fairman's term of employment at five (5) years commencing from October 1, 1998 and increased his base salary to $175,000 per year. The severance provision was amended to entitle Fairman upon termination to "all salary and benefits due and owing under the remaining terms of [the] agreement . . . . and [i]n no case . . . to less than one year's salary and all benefits . . . . at the level in effect at the time of severance."

In June 2000, the PBC terminated Fairman's employment, and Fairman sought termination pay under the terms of the modified agreement. The PBC rejected Fairman's demand, and Fairman requested arbitration to which the District submitted without objection. During the arbitration proceedings, the District raised as an issue whether the 1999 amendments had ever been presented for review to the Control Board. After extensive hearings, on July 27, 2001, the arbitrator entered an award to Fairman in the amount of $662,925 based on the contract as amended.*fn4

The District filed a petition to vacate the arbitration award in the Superior Court, contending that the award violated public policy "by purporting to enforce illegal and void modifications to the [1997] Agreement," in that the "proposed [1999] modifications [had] not [been] submitted to the Control Board." The District contended that "the only authorized expenditure for a severance payment to [Fairman] is the six-month severance provision contained in his unmodified [1997] employment agreement," and it represented in one of its filings with the court that it was prepared "to make a payment of any amount owed under this [1997] agreement."

Fairman filed a motion to dismiss the District's petition, contending that the District had not alleged a statutory basis for vacating the arbitration award. The trial court denied Fairman's motion and stated as its reason that if the arbitrator exceeded her powers as alleged, there would be a valid statutory reason for vacating the award. On the merits of the District's petition, the trial court noted that an arbitration award that violates public policy cannot stand. The court concluded that this public policy exception is applicable in this case because:

It is clear that the Control Board was required to approve the respondent's amended employment contract in order for it to be enforceable, pursuant to D.C. Code § 47-392.03 (b) (2001). The 1999 amended employment agreement was never submitted to the Control Board. Any award requiring the government to pay on the unapproved amended employment agreement contravenes a District of Columbia statutory provision. Indeed, any person attempting to enforce the award would be committing an illegal act . . . Therefore, there is a well defined and dominant public policy that is violated if the agreement is enforced.

The trial court further concluded that, given this strong public policy, it was not necessary to consider whether the arbitrator had based her award on equitable estoppel grounds.*fn5 For these reasons, the trial court ...


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