Don Marsh has won a partial victory in his four-year federal court battle with the company that he once led.
Judge Sarah Evans Barker issued an order Monday allowing Marsh to keep nearly $2.2 million in severance paid by Marsh Supermarkets Inc., which had attempted to recover the payments from its former CEO.
The order stems from a two-week civil trial in February after which a federal jury ordered Marsh to pay the local grocery chain $2.2 million, finding that he used company money to finance global travels to entertain mistresses and other unnecessary personal expenses.
If Barker's Monday ruling had gone against Don Marsh, he could have ended up owing his former company as much as $4.4 million if he was forced to give back the portion of his severance he’s already received.
Andrew McNeil, an attorney representing Don Marsh, said his client is pleased with the judge's interpretation of his employment contract. But “he’s sad and disappointed that it played out publicly when his passion has always been groceries and the grocery business."
An attorney for the supermarket chain could not be reached Tuesday morning.
Don Marsh’s missteps have become public knowledge, Barker wrote in her order, but she said company directors charged with supervising him undoubtedly fell asleep at the wheel.
“The unavoidable post-trial hurdle for the company is that the company wrote the plan it now asks the court to retroactively administer in a way that alters its terms to its advantage,” she wrote. “This we cannot do.”
After Marsh Supermarkets sued Marsh in federal court in 2009, he countersued, asserting the company improperly withheld his post-retirement payouts in 2008 and still owed him about $2.1 million. The jury denied his counterclaim.
Marsh left the company he had led since the late 1960s following its purchase in September 2006 by Sun Capital Partners, a Florida private equity firm.
Marsh Supermarkets stopped the severance payments after it said an Internal Revenue Service 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.
The nine-member jury in February found that Marsh committed breach of contract and fraud, but stopped short of delivering Marsh Supermarkets a total victory.
Although the grocery chain asked for $1.6 million to cover expenses and penalties related to the IRS audit, the jury awarded the company half that amount on its fraud claim, saying it shared responsibility. The jury also awarded the company $1.4 million on its breach-of-contract claim.
Barker denied a request from the company to collect $1.8 million in life insurance policy premiums paid on Marsh’s behalf.
Many of the arguments presented by both sides involved implications of the Employee Retirement Income Security Act, or ERISA, a federal law governing pension plans.
“Nearly four years ago, in what was apparently a rare moment of harmony,” Barker wrote, “both parties conceded that ERISA governs only part of Mr. Marsh’s employment agreement.”
Barker concluded that ERISA provisions made the $2.2 million in severance paid to Don Marsh "vested and nonforfeitable"—a reality she said the company has to live with even though Don Marsh "behaved in a manner unbecoming of a CEO."
Barker also found that Don Marsh can recover attorneys’ fees relating to his ERISA claims. But she also found that the company can recover fees relating to non-ERISA claims.
Lawyers for Marsh and Marsh Supermarkets are still determining the breakdown of those fees.