03-30-2017 – Conmed has been sued by its former Vice President of Key Accounts for Advanced Surgical, alleging that the contract intended a term of 18 months or more, although the contract appears to be silent on that matter.
The Employment Contract provides that Plaintiff is to be paid a 2016 target bonus of $340,000.00 based on Schedule A thereof (the “Target Bonus”), based on the sales of so-called “Air Seal” products by ConMed, which products were “legacy” products originally sold by Surgiquest prior to the Acquisition. However, in an email dated September 9, 2016, Plaintiff was informed by General Manager Bill Peters that:
“…in your new role, your bonus will be split into 50% for the legacy business and 50% for AirSeal business. I have adjusted your legacy bonus component to be below budget for Q3 and Q4.”
This change resulted in a reduction of compensation for Plaintiff, to which Plaintiff never agreed.
Could be an interesting one to follow.
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UNITED STATES DISTRICT COURT
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9 SOUTHERN DISTRICT OF CALIFORNIA
10 CASE NO.: ___________’17CV0643 JLS KSC
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12 C OMPLAINT FOR DAMAGES
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PARTIES; EMPLOYMENT
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County, California, and at all relevant times, was an employee of defendant.
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supply business throughout California, as well as the rest of the United States.
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3. At all times relevant, Plaintiff was employed by ConMed pursuant to the terms of an Employment Contract dated November 15, 2015 (the “Employment Contract”), a true copy of which is attached as Exhibit A.
4. Plaintiff’s employment by ConMed was terminated, actually and constructively, on or about October 20, 2016.
II
JURISDICTION AND VENUE
5. This Court has diversity of citizenship jurisdiction pursuant to 28 U.S.C. Section 1332 because Plaintiff is a resident of the State of California and ConMed in incorporated in the State of New York and the amount in controversy exceeds $75,000.00.
6. This Court has supplemental jurisdiction over Plaintiff and Plaintiff’s pendent state law claims pursuant to 28 U.S.C. Sections 1367.
7. Venue is proper in this judicial district pursuant to 28 U.S.C. Section 1391(b) because:
a) Plaintiff resides in this judicial district;
b) the Employment Contract upon which this Complaint is based was entered into in
this judicial district;
c) a substantial portion of the pertinent events took place in this judicial district;
d) although paragraph 7.b) of the Employment Contract purports to require actions by Plaintiff to be brought in Oneida County, New York, this provision is unenforceable for at least the following reasons:
(i) paragraph 7.c) of the Employment Contract allows ConMed to bring actions against Plaintiff “in any court of competent jurisdiction,” thereby destroying the “mutuality” of the venue provision and rendering it unconscionably unfair;
(ii) ConMed knew at the time the Employment Contract was entered into that
Plaintiff resided in California, a fact which appears on the face of the Employment Contract;
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(iii) the Employment Contract is a contract of adhesion in that Plaintiff was given no choice but to sign it in order to retain his employment;
(iv) Plaintiff was given an insufficiently short time to consider the Employment Contract and was unable to consult his own legal counsel before signing it; and
(v) ConMed is qualified to do business in California, whereas Plaintiff has no connection to New York.
III
FACTUAL BACKGROUND
8. Prior to January 2016, Plaintiff was employed by Surgiquest, Inc. (“Surgiquest”), a manufacturer and seller of medical supplies throughout the United States, as its Vice President of Sales. In or about January 2016, ConMed acquired all of the stock of Surgiquest (the “Acquisition”).
9. Plaintiff was informed by ConMed that in order for the Acquisition to proceed, he would have to agree to the Employment Contract. He was provided with a proposed form of employment agreement and was given a weekend to sign it.
10. Due to the importance of Plaintiff’s agreement to the Employment Contract, that contact is not terminable “at will” but instead was intended by the parties as having a duration until at least the 18 month anniversary of the closing of the Acquisition, i.e., June 30, 2017. The intention of the parties that the Employment Contract is not terminable by ConMed “at will” is reflected in at least the following particulars:
a) No where in the Employment Contract is it stated that it is terminable “at will;”
b) Paragraph. 1 of the Employment Contract promises that “ Your contributions are critical to our future success . . .” which statement is inconsistent with an employemt contract terminable at will and which, together with other terms of the Employment Contract, and statements surrounding its execution, implies a term of at least 18 months;
Case 3:17-cv-00643-JLS-KSC Document 1 Filed 03/29/17 PageID.4 Page 4 of 15
c) Paragraph. 2 of the Employment Contract promises “annual” base salary of 1
$160,000;
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d) Paragraph. 3 of the Employment Contract provides that for “each fiscal year of your 3 employment” Plaintiff will be eligible to participate in a bonus program. “For 2016”
4 the target bonus was $340,000. In addition, the Employment Contract promises 2017 target bonus will be at least $340,000 “based on similar performance goals.”
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e) Paragraph 6 of the Employment Contract makes multiple references to the “18-month 6 anniversary of the Closing Date” as a trigger point for payment with respect to 7 unvested Surgiquest Options.
8 f) Paragraph. 5a of the Employment Contract purports to impose a 2-year noncompetition restriction on Plaintiff following the Closing Date. There was some
9 discussion regarding this obligation at the time the Acquisition was being negotiated.
10 Significantly, when Bill Peters, General Manager ConMed was questioned in an email by the Surgiquest CEO, who thought Plaintiff’s non-compete had been reduced from 2 11 years to 1 year from closing, Peters responded by email dated November 14, 2015:
12 “We interpreted two year from the closing is in effect one year.”
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This statement supports the proposition that the Employment Contract was not
14 terminable at will, but had an intended duration, according to ConMed, of 1 to 2 years.
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11. The Employment Contract provides that Plaintiff is to be paid a 2016 target bonus
16 of $340,000.00 based on Schedule A thereof (the “Target Bonus”), based on the sales of so-called 17
“Air Seal” products by ConMed, which products were “legacy” products originally sold by 18
Surgiquest prior to the Acquisition. However, in an email dated September 9, 2016, Plaintiff was
19 informed by General Manager Bill Peters that:
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“…in your new role, your bonus will be split into 50% for the legacy business and 50% for 21
AirSeal business. I have adjusted your legacy bonus component to be below budget for 22
Q3 and Q4.”
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This change resulted in a reduction of compensation for Plaintiff, to which Plaintiff never agreed.
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12. Plaintiff was a participant in the “Surgiquest Amended and Restated 2006 Stock Option Plan” under the perms of which he was, within 10 days of the termination of his employment, entitled to payment for ‘unvested’ stock options that would have vested in 2016 and 2017 and in later years. Section 6 of the Employment Contract provides that he is entitled to cash Case 3:17-cv-00643-JLS-KSC Document 1 Filed 03/29/17 PageID.5 Page 5 of 15
1 payment for these options if ConMed terminates his employment “without Cause” or Plaintiff 2 terminates his employment for “Good Reason” “prior to the 18-month anniversary of the Closing 3 Date” (i.e., prior to June 30, 2017). These options have a value to Plaintiff of $252,013.00. 4 13. ConMed has failed to pay Plaintiff’s Target Bonus for the third quarter of 2016, 5 which was due and payable by September 30, 2016.
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FIRST CAUSE OF ACTION
7 (Breach of Contact)
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9 14. Plaintiff refers to Paragraphs 1 through 13, inclusive, and incorporates each and every 10 allegation contained therein as a part of this cause of action, as if the same were set forth herein
11 full.
12 15. Plaintiff duly performed all of his obligations under the Employment Contract.
13 16. The action of ConMed in insisting on a change Plaintiff’s bonus structure, as alleged in paragraph 12 hereof and the failure to timely pay the Target Bonus for the 3rd Quarter of
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2016 constituted a breach of the Employment Contract. When Plaintiff refused to sign the
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Proposed Amended Employment Contract, as demanded by Bill Peters, Peters made a final
16 demand to Plaintiff on or about October 20, 2016, as follows:
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“…if you don’t sign the fucking agreement, I am not paying your third quarter bonus
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and we’re done.”
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The Target Bonus for the 3rd Quarter of 2016 remains unpaid. 20
17. The actions of ConMed, acting by and through its General Manager Bill Peters
21 constituted a termination of Plaintiff’s employment in violation of the Employment Contract,
22 effective October 20, 2016 (the “Termination Date”).
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18. ConMed’s breach of the Employment Contract has damaged Plaintiff at least as
24 follows:
a) failure to pay with respect to Surgiquest Options in the amount of $252,013;
b) failure to pay Third Quarter Bonus of $86,700;
c) failure to pay pro-rated Fourth Quarter Bonus of $19,833;
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1 d) lost base salary October 21, 2016 through June 2017 equal to $109,734;
2 e) lost bonus for the period October 2016 through June 2017 equal to $240,830;
3 f) lost medical benefits for the October 2016 through June 2017 equal to $13,214; 4 g) lost 401k match for the period January to June 2017 equal to $5600;
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SECOND CAUSE OF ACTION
6 (Declaratory Relief)
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19. Plaintiff incorporates paragraphs 1 through 18, inclusive, of this complaint as 8 though set forth in full.
9 20. The Employment Contract contains covenants of “Non-Competition” (at paragraph
10 5.b) and “Non-Solicitation” (at paragraph 5.c) (together, the “Covenants”). Plaintiff contends that
11 these Covenants are unenforceable. Plaintiff is informed and believes, and alleges thereon that
ConMed takes the position that these Covenants are enforceable. 12
21. An actual controversy has arisen concerning the enforceability of the Covenants.
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22. Plaintiff desires a judicial determination of its rights and duties under the
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Employment Contract and a declaration that the Covenants are unenforceable.
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16 THIRD CAUSE OF ACTION
(Waiting Time Penalties)
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18 23. Plaintiff incorporates paragraphs 1 through 22, inclusive, of this complaint as 19 though set forth in full.
20 24. California Labor Code §§ 201 and 202 require employers to pay their employees all 21 wages due immediately upon discharge or 72 hours after the employee quits. Plaintiff is no longer 22 employed by ConMed.
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25. Labor Code § 203 provides that if an employer willfully fails to timely pay all
24 wages due on termination of employment, the employer must, as a penalty, continue to pay the subject employee’s wages until all unpaid wages are paid in full. The penalty cannot exceed 30 days of wages.
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26. Plaintiff was not paid all wages due him on termination, as alleged hereinabove.
27. As a consequence of ConMed’s willful conduct in not paying Plaintiff all amounts due him as compensation, as alleged hereinabove, Plaintiff is entitled to 30 days wages as a penalty under Labor Code § 203, in addition to interest thereon and attorney fees. The amount of such penalty is estimated to exceed $40,000.00 and will be proven at trial.
28. In the alternative to the relief sought pursuant to California Labor Code Sections 201-203, if the Court determines that New York law applies to the obligation to pay all wages due on termination of employment, Plaintiff request two times the amount of wages found to be unpaid, pursuant to New York Labor Code Section 191 et seq.
REQUEST FOR JURY TRIAL
Plaintiff requests a trial by jury.
AS TO ALL CAUSES OF ACTION
1. For damages as alleged hereinabove, subject to proof.
2. For Declaratory Relief, as requested.
3. For the imposition of penalties for non payment of compensation on termination of employment as requested hereinabove, plus attorney fees as allowed by law.
4. For costs of suit herein incurred; and
5. For such other and further relief as the Court may deem proper.
Dated: March 29, 2017 Respectfully submitted,
WINTON STRAUSS LAW GROUP, P.C.
By __/s/ David C. Winton_______________
David C. Winton
Attorney for Plaintiff Chris Klecher
dcw@wintonstrauss.com
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Exhibit A
Public Company Litigation 