Miller v. U.S. Foodservice, Inc.

361 F.Supp.2d 470 (2005)

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Nature of the Case

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Facts

P joined D and after 11 years rose to the position of CEO in 1994. P served as D's Chairman of the Board of Directors, President, and CEO since 1997. After Royal Ahold, an international food provider based in the Netherlands acquired D in 2000, P became a member of Royal Ahold's Executive Board (also known as its Managing Board or “RVB”) on or about September 1, 2001. He served in this dual capacity as officer and director for D and director for Royal Ahold until May 13, 2003, the day he resigned from his positions. In 2003, an internal investigation revealed that D “accounting irregularities” had resulted in an overstatement of D's income by nearly $900 million for fiscal years 2000 and 2001, and during fiscal year 2002. Royal Ahold restated its earnings. Certain senior officers and other D employees had violated generally accepted accounting principles by improperly and prematurely recognizing promotional allowances” and that “material weaknesses in D's accounting procedures and internal controls had permitted this improper revenue recognition over the preceding three years.” D blames P. P contends he had nothing to do with the fraud. D claims that P intentionally misrepresented that corrective measures were being implemented several times during Audit Committee meetings in 2000 through 2002. P resigned from his positions for which he was promised he would receive post-termination benefits as specified by his employment agreement with D, a severance payment, and all rights and benefits through his retirement plan vested through December 31, 2003. P got two letters one terminating his employment benefits and the second after he quit terminating all his post-termination benefits. P contends that Royal Ahold and D fraudulently induced him to resign by promising these benefits and that they materially breached their agreement when they unilaterally ceased providing him with post-termination benefits. Ds argue that P materially breached his employment agreement by violating the fiduciary duties of due care, good faith, and loyalty, and therefore they are discharged from their obligations under the employment and severance agreements. P is seeking a declaratory judgment as to whether and to what extent he is entitled to benefits, as well as compensatory damages in the amount of at least $10 million, and a temporary restraining order and preliminary injunction ordering the companies to pay his benefits pending the outcome of this litigation. Ds countersued, claiming, that P violated the fiduciary duties of due care, good faith, and loyalty, and therefore they are not obligated to provide him with the benefits conferred by the contract. The companies also are suing under the theory of corporate waste, and are bringing contract claims for mutual mistake and unjust enrichment. They are seeking forfeiture, disgorgement, and restitution of compensation, incentive-based bonuses, and other benefits, as well as rescission of the employment agreement if its enforcement would result in ill-gotten gains. P has moved for dismissal, or in the alternative, for summary judgment, on the grounds that Ds have failed to state a claim because he is protected by the business judgment rule or the indemnification provisions of D by-laws.