Houlahan v. Raptor Trading Systems, Inc.

Background

John Houlahan was the former Chief Operations Officer of Omex Systems, LLC. After Omex and Raptor merged in 2015, Houlahan became the Chief Operations Officer of the merged entity. His January 2015 Executive Employment Agreement had a two-year term ending December 31, 2017.

The agreement provided for a base salary, possible bonuses, two percent of the net profit from a sale of the relevant business unit or successor company, and severance if Raptor terminated Houlahan without cause. To receive severance, Houlahan generally had to sign a release in a form substantially similar to the agreement's attached separation agreement within 60 days after termination. The agreement also stated that Raptor had to provide that release within 15 days after termination; if Raptor failed to do so, Houlahan's obligation to provide the release in order to receive severance would cease to apply.

Raptor terminated Houlahan's employment on August 9, 2016. The court found that Raptor provided him with an initial separation agreement containing blanks for essential information, including the amount of severance, and also provided a separate August 9, 2016 separation agreement. The latter agreement differed from the initial agreement in several respects, including its treatment of the termination as voluntary, its choice-of-law and forum provisions, its jury-trial waiver, its signing deadline, conditions involving repayment of advances, repayment and attorney-fee provisions, and treatment of a non-compete provision. The parties agreed that the August 9 agreement was not substantially similar to the initial agreement. Houlahan never signed a separation agreement, and Raptor never paid him severance.

The court had previously granted Raptor's motion to dismiss Houlahan's claims for breach of the implied covenant of good faith and fair dealing and for declaratory relief. The opinion addressed the breach-of-contract claim after a bench trial.

Breach of Contract

The court applied New York law, under which a breach-of-contract claim requires a contract, performance by one party, breach by the other party, and damages.

The court found that Raptor intended and required Houlahan to sign the August 9, 2016 separation agreement rather than merely sign the initial agreement. The court relied on the termination letter's reference to Raptor's standard separation agreement, the later email from Raptor's human-resources director, and the circumstances in which the documents were provided. The court also found that the initial separation agreement could not itself have been an enforceable contract because it omitted the amount of severance, an essential term.

Because the August 9 agreement was not substantially similar to the agreement required by the Employment Agreement, the court held that Raptor breached the Employment Agreement by insisting that Houlahan sign it. The court rejected Raptor's argument that Houlahan had to prove he was ready, willing, and able to sign a release. The court explained that the case did not involve an anticipatory breach, that the Employment Agreement specified the consequence of Raptor's failure to provide a compliant release, and that Houlahan testified he was willing to sign an appropriate separation agreement and release.

The court concluded that Raptor was liable for breach of contract and that Houlahan was entitled to $127,500.12 in severance, plus prejudgment interest.

Attorney Fees

Houlahan sought attorney fees under Federal Rule of Civil Procedure 37(c)(2), which can require fees when a party unreasonably refuses to admit a matter that the other party later proves. The court ruled that Houlahan was not entitled to fees under that rule. Raptor had reason to believe it might prevail on whether Houlahan had been told he could receive severance by signing the initial agreement, and Houlahan did not show that the requested fees could have been avoided by an admission.

Disposition

The court ruled that Raptor was liable for breach of contract and that Houlahan was entitled to $127,500.12 plus prejudgment interest. It ruled that Houlahan was not entitled to attorney fees under Rule 37(c)(2). The Clerk of Court was directed to enter judgment and close the case.