Tuesday, April 1, 2003
Use of Extrinsic Evidence to Contradict Settlement Rejected
By KENNETH OFGANG, Staff Writer/Appellate Courts
The Fourth District Court of Appeal has rejected a defendant’s effort to use extrinsic evidence to defeat what the court characterized as the clear and unambiguous language of the defendant’s statutory settlement offer.
Friday’s ruling leaves Bergen Brunswig Corporation, one of the nation’s largest drug companies, liable to its former chief executive for millions of dollars in retirement and other benefits, on top of a $5 million lump-sum settlement of his wrongful termination claim.
Bergen Brunswig ousted Donald R. Roden in November 1999 after the value of the company’s shares tumbled more than 80 percent in less than a year. The Orange-based company later agreed to a merger with rival AmeriSource Health Corporation, forming AmeriSourceBergen Corporation, which may be the nation’s largest drug distribution firm.
Roden, who became the company’s president and chief operating officer in 1995 and CEO in 1997, had a contract requiring the company to give him three years’ notice before terminating him without cause. After he was fired, he sued for breach of contract, defamation, and infliction of emotional distress, among other things.
After lengthy negotiations, Bergen made, and Roden accepted, a Code of Civil Procedure Sec. 998 settlement offer. But the agreement was, as Justice Eileen Moore said Friday, “stunningly brief” and led to more rancor.
After Roden rejected several proposals to resolve issues not specifically resolved by the settlement, Brunswig moved to set aside the judgment. Orange Superior Court Judge Stuart Waldrip denied the motion and entered a post-judgment order clarifying the judgment on terms favorable to Roden.
The settlement offer consisted of three paragraphs. Under paragraph 1, Roden was entitled to $5 million “less legally required deductions.” Paragraph 2 required the company to continue certain benefits specified in the employment contract, including health, life, disability and retirement benefits plus a car allowance, and Paragraph 3 entitled Roden to reasonable attorney fees.
On appeal, the company challenged one aspect of Waldrip’s decision—his conclusion that retirement benefits were covered by Paragraph 2, and thus payable in addition to, rather than as part of, the $5 million.
Moore, writing for the Court of Appeal, said the agreement was clear—retirement benefits are covered by paragraph 2 and are thus payable in addition to the paragraph 1 lump sum. She rejected the company’s argument that extrinsic evidence showed either that the parties intended to include the retirement benefits in the $5 million, or that there had been no meeting of the minds and that the judgment should be set aside.
Bergen pointed to a previous settlement offer, which Roden rejected, in which the company offered to reduce the retirement benefits to a present value of just under $1.7 million and to pay that sum to Roden, in addition to continuing his insurance and automobile benefits and resolving issues involving stock options, lawyer fees, and an outstanding loan, among other things.
The company also noted that while the later Sec. 998 offer was pending, it tendered Roden a check for nearly $2 million, which the company said represented the entire amount owed Roden under his contract—including the present value of his retirement benefits—less offsets.
That tender “’Twas a puzzlement,” Moore wrote, because there was no explanation of how it related to the Sec. 998 offer. It was not until after Roden accepted the Sec. 998 offer, she explained, that Bergen said it intended to present Roden with two alternatives—one in which Roden would take the check and continue the litigation, and the other in which he would accept the Sec. 998 offer and end the lawsuit.
That interpretation, the company said, was supported by correspondence between the attorneys after Roden accepted the offer, indicating that the company never intended to pay Roden retirement benefits in addition to the $5 million.
Bergen, Moore said, was trying to use post-settlement communications “to bootstrap itself into a better position by ‘clarifying’ the contract terms before the court entered judgment.” But courts cannot rely on post-settlement communications to determine what the parties intended at the time of the settlement, the justice insisted.
Nor can the pre-settlement communications result in the judgment being set aside, Moore said, given the lack of ambiguity in the settlement offer.
Waldrip’s order, she wrote, “is consistent with the public policy objectives behind section 998.”
Copyright 2003, Metropolitan News Company