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Business Law 13th Edition by Frank Cross, Kenneth Clarkson, Roger LeRoy Miller
Edition 13ISBN: 978-1133046783Business Law 13th Edition by Frank Cross, Kenneth Clarkson, Roger LeRoy Miller
Edition 13ISBN: 978-1133046783 Exercise 6
IN THE LANGUAGE OF THE COURT
bye, Circuit Judge.
* * * *
[Janet] Murley served as [Hallmark Cards, Inc.'s] vice-president of marketing from 1999 to 2002. In this capacity, she was responsible for product and business development, advertising, and research, and had access to confidential information including Hallmark's business plans, market research, and financial information. In 2002, Hallmark eliminated Murley's position as part of a corporate restructuring. Murley and Hallmark entered into a negotiated separation agreement which laid out the terms of Murley's departure. Pursuant to the agreement, Murley agreed not to work in the greeting card or gift industry for a period of eighteen months, solicit Hallmark employees, disclose or use any proprietary or confidential information, or retain any business records or documents relating to Hallmark. She also agreed to release Hallmark from any claims arising from her termination. In exchange, Hallmark offered Murley a $735,000 severance payment, eighteen months of paid COBRA benefits, executive outplacement services, and paid tax preparation for two years.
In 2006, after the expiration of her non-compete agreement, Murley accepted a consulting assignment with Recycled Paper Greetings ("RPG") for $125,000. Murley admits that in the course of that assignment, she disclosed to RPG confidential Hallmark information including slides from Hallmark's business model redesign, information regarding Hallmark's consumer buying process, and long-term industry analysis gathered from Hallmark's market research. Hallmark was unaware of Murley's disclosures until 2009, when RPG was purchased by American Greetings. Prior to the closing of that sale, American Greetings contacted Hallmark to arrange a third-party review of RPG's records to ensure none of Hallmark's confidential information was contained therein. The thirdparty reviewer uncovered a number of Hallmark's documents in the records and alerted Hallmark to its findings.
On May 14, 2009, Hallmark filed suit [in a federal district court] against Murley, alleging breach of contract. Hallmark sought damages of $860,000, consisting of the $735,000 severance payment it made to Hurley under the parties' 2002 agreement and the $125,000 Murley received from RPG in exchange for her consulting services. * * * The jury returned a verdict in Hallmark's favor and awarded it exactly $860,000 in damages. * * * This appeal followed.
* * * * With respect to the $735,000, Murley contends Hallmark was not entitled to a return of its full payment under the parties' separation agreement because Murley fulfilled several material terms of that agreement (e.g., the release of liability and non-compete provisions). Under the circumstances, we cannot characterize the jury's reimbursement of Hallmark's original payment under the separation agreement as grossly excessive or glaringly unwarranted by the evidence. Hallmark's terms under the separation agreement clearly indicated its priority in preserving confidentiality. At trial, Hallmark presented ample evidence that Murley not only retained but disclosed Hallmark's confidential materials to a competitor in violation of the terms and primary purpose of that agreement. Thus, the jury's determination that Hallmark was entitled to a full refund of its $735,000 is not against the weight of the evidence.
With respect to the remaining $125,000 of the jury award, Murley argues Hallmark can claim no entitlement to her compensation by RPG for consulting services unrelated to Hallmark. We agree. In an action for breach of contract, a plaintiff may recover the benefit of his or her bargain as well as damages naturally and proximately caused by the breach and damages that could have been reasonably contemplated by the defendant at the time of the agreement. Moreover, the law cannot elevate the non-breaching party to a better position than she would have enjoyed had the contract been completed on both sides. By awarding Hallmark more than its $735,000 severance payment, the jury award placed Hallmark in a better position than it would find itself had Murley not breached the agreement. The jury's award of the $125,000 payment by RPG was, therefore, improper. We vacate the award and remand for the district court to reduce the fee award appropriately. [Emphasis added.] * * * * * * * So modified, the judgment will stand affirmed.
Legal Reasoning Questions
1. What are compensatory damages? What is the standard measure of compensatory damages?
2. In this case, what was the basis for Hallmark's suit against Murley? How much did Hallmark seek to recover in the form of damages?
3. What were Murley's arguments against the amount of damages that Hallmark requested?
4. Did the court award Hallmark the amount that it sought in damages? Why or why not?
bye, Circuit Judge.
* * * *
[Janet] Murley served as [Hallmark Cards, Inc.'s] vice-president of marketing from 1999 to 2002. In this capacity, she was responsible for product and business development, advertising, and research, and had access to confidential information including Hallmark's business plans, market research, and financial information. In 2002, Hallmark eliminated Murley's position as part of a corporate restructuring. Murley and Hallmark entered into a negotiated separation agreement which laid out the terms of Murley's departure. Pursuant to the agreement, Murley agreed not to work in the greeting card or gift industry for a period of eighteen months, solicit Hallmark employees, disclose or use any proprietary or confidential information, or retain any business records or documents relating to Hallmark. She also agreed to release Hallmark from any claims arising from her termination. In exchange, Hallmark offered Murley a $735,000 severance payment, eighteen months of paid COBRA benefits, executive outplacement services, and paid tax preparation for two years.
In 2006, after the expiration of her non-compete agreement, Murley accepted a consulting assignment with Recycled Paper Greetings ("RPG") for $125,000. Murley admits that in the course of that assignment, she disclosed to RPG confidential Hallmark information including slides from Hallmark's business model redesign, information regarding Hallmark's consumer buying process, and long-term industry analysis gathered from Hallmark's market research. Hallmark was unaware of Murley's disclosures until 2009, when RPG was purchased by American Greetings. Prior to the closing of that sale, American Greetings contacted Hallmark to arrange a third-party review of RPG's records to ensure none of Hallmark's confidential information was contained therein. The thirdparty reviewer uncovered a number of Hallmark's documents in the records and alerted Hallmark to its findings.
On May 14, 2009, Hallmark filed suit [in a federal district court] against Murley, alleging breach of contract. Hallmark sought damages of $860,000, consisting of the $735,000 severance payment it made to Hurley under the parties' 2002 agreement and the $125,000 Murley received from RPG in exchange for her consulting services. * * * The jury returned a verdict in Hallmark's favor and awarded it exactly $860,000 in damages. * * * This appeal followed.
* * * * With respect to the $735,000, Murley contends Hallmark was not entitled to a return of its full payment under the parties' separation agreement because Murley fulfilled several material terms of that agreement (e.g., the release of liability and non-compete provisions). Under the circumstances, we cannot characterize the jury's reimbursement of Hallmark's original payment under the separation agreement as grossly excessive or glaringly unwarranted by the evidence. Hallmark's terms under the separation agreement clearly indicated its priority in preserving confidentiality. At trial, Hallmark presented ample evidence that Murley not only retained but disclosed Hallmark's confidential materials to a competitor in violation of the terms and primary purpose of that agreement. Thus, the jury's determination that Hallmark was entitled to a full refund of its $735,000 is not against the weight of the evidence.
With respect to the remaining $125,000 of the jury award, Murley argues Hallmark can claim no entitlement to her compensation by RPG for consulting services unrelated to Hallmark. We agree. In an action for breach of contract, a plaintiff may recover the benefit of his or her bargain as well as damages naturally and proximately caused by the breach and damages that could have been reasonably contemplated by the defendant at the time of the agreement. Moreover, the law cannot elevate the non-breaching party to a better position than she would have enjoyed had the contract been completed on both sides. By awarding Hallmark more than its $735,000 severance payment, the jury award placed Hallmark in a better position than it would find itself had Murley not breached the agreement. The jury's award of the $125,000 payment by RPG was, therefore, improper. We vacate the award and remand for the district court to reduce the fee award appropriately. [Emphasis added.] * * * * * * * So modified, the judgment will stand affirmed.
Legal Reasoning Questions
1. What are compensatory damages? What is the standard measure of compensatory damages?
2. In this case, what was the basis for Hallmark's suit against Murley? How much did Hallmark seek to recover in the form of damages?
3. What were Murley's arguments against the amount of damages that Hallmark requested?
4. Did the court award Hallmark the amount that it sought in damages? Why or why not?
Explanation
Verified
Verified
Compensatory Damages.
1. Compensations ...
Business Law 13th Edition by Frank Cross, Kenneth Clarkson, Roger LeRoy Miller
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