By Vance Knapp
$735,000. That’s what one company paid a former executive in severance. Now the executive has to pay it back because she breached the confidentiality provisions in her separation agreement. Hallmark Cards, Inc. v. Janet Murley, Case No. 11-2855 (8th Cir. Filed Jan. 15, 2013). The employer provided the severance payment in exchange for the former executive’s promise not to compete against the employer for 18 months, not to disclose the employer’s proprietary and confidential information, and not to retain any documents relating to the employer.
After the non-compete expired, the former executive accepted a consulting assignment with a competitor for $125,000. The former executive then disclosed the original employer’s confidential information. (In fact, the former executive seems to have kept a number of the employer’s documents, see the next post.)
When the employer discovered the breach of confidentiality – through a due diligence review by a company purchasing the competitor – the employer sued for breach of contract, misappropriation of trade secrets, conversion of Hallmark’s confidential information and unjust enrichment. The jury returned a verdict for the employer in the amount of $860,000—the $735,000 severance payment plus $125,000 the former executive received for the consulting services. On appeal, the court reduced the jury’s award to the $735,000 severance amount.
Don’t neglect confidentiality provisions when preparing a separation agreement.