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Decision could come soon on Don Marsh severance claim

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Don Marsh shouldn’t have to wait long to find out if he can collect his entire $4 million severance or whether he’ll have to return the portion he’s already received from Marsh Supermarkets Inc.

That issue will be decided by Judge Sarah Evans Barker, who presided over the two-week civil trial that saw a federal jury return a $2.2 million judgment against the company’s former CEO.

The late-Friday verdict followed a nearly three-year court battle brought by locally based Marsh Supermarkets, which claimed Don Marsh, 75, used the company as a personal checkbook to finance his global travels and trysts with several mistresses.

Now that the trial is over and the facts have been presented, Barker shouldn’t take long to rule on the countersuit, Don Marsh’s attorney, Andrew McNeil, said Monday morning.

“The issue in front of Judge Barker is one the parties have addressed a few times in the case, so we anticipate a ruling coming fairly soon,” he said.

Barker’s decision will be critical for Don Marsh, who could end up owing his former company as much as $4.2 million if he is forced to give back the portion of his severance he’s already received.

On top of that, Don Marsh revealed during the trial that he owes the Internal Revenue Service more than $500,000 in back taxes.

The company paid him roughly $2 million in severance before halting payments after it said an IRS audit found “disallowed deductions” for personal expenses he racked up from April 2004 to September 2006. The company ultimately paid the IRS a $616,000 penalty.

Don Marsh's attorneys insisted the trips were business-related and within the bounds of his employment contract, prompting the former CEO to countersue the supermarket chain. He claims the company wrongfully halted severance payments following its sale to Sun Capital Partners in September 2006, shorting him $2 million.

Jeff Mallamad, co-chairman of Bingham Greenebaum Doll LLP’s labor and employment practice, said the decision will depend on the terms of the contract.

“There can be terms in the contract to give the company the right to cease payments,” said Mallamad, who is not involved in the case. “It could be a 'high crimes and misdemeanors' kind of standard.”

On the other hand, Mallamad expects Don Marsh’s lawyers to argue that the contract doesn’t allow the company to cancel payments and that the company’s board had every opportunity to review his expenses.

McNeil indeed insisted several times during the trial that Marsh Supermarkets’ directors reviewed Don Marsh's expenses and approved them for inclusion in the company’s annual reports.

“We certainly believe in our position, but it’s ultimately up to Judge Barker,” McNeil said. “We’ll just have to wait and see.”

The nine-member jury found Friday that Marsh committed breach of contract and fraud, but stopped short of delivering Marsh Supermarkets a total victory.

Although the grocery chain had asked for $1.6 million to cover expenses and penalties related to the IRS audit that focused on Don Marsh's expenses, the jury awarded the company half that amount, saying it shared responsibility.

Besides the $2.1 million in severance Marsh Supermarkets also is hoping to recover, the company believes it’s entitled to $1.8 million in life insurance policy premiums paid on Marsh's behalf.

“Obviously, the jury’s decisions that Mr. Marsh breached his contract and committed fraud are helpful as we go forward in the case to address the ERISA [Employee Retirement Income Security Act] issues,” said David Herzog, one of Marsh Supermarkets’ lawyers.
 

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