Legal Intelligencer article by: Aleeza Furman, Litigation Reporter

July 11, 2022

A Philadelphia judge awarded two former employees of a high-end retailer a combined $2.16 million, finding that verbal agreements they had made with the business’ owner entitled them to payouts after they left their jobs.

The defendants argued that the circumstances under which plaintiffs Jonathan Thorson and Grace Song departed BDDW barred them from receiving percentages of the business’ fair-market valuations that owner Tyler Hays had promised them. The plaintiffs, however, said the prohibitive terms that the defendants cited were not part of the agreement they had reached with Hays.

The issue was complicated by the fact that the contract was never recorded in writing, leaving the outcome of the case dependent on a credibility determination from Judge Vincent L. Johnson of the Philadelphia Court of Common Pleas.

George Zumbano of Lamb McErlane, who represented the plaintiffs, said that in disputes over oral contracts, parties must demonstrate to the court that they are telling the truth. Such cases hinge on presenting witnesses who come across as honest and believable, Zumbano said.

Zumbano’s challenge was made easier for the plaintiffs, their attorneys said, by the absence of testimony from a key witness at the nonjury trial—Hays, the owner with whom the plaintiffs had entered the contract.

“Essentially the court didn’t hear his side of the story,” Zumbano said.

According to Johnson’s conclusion of law, defense counsel claimed that Hays was hospitalized and could not come to trial, but the defense never indicated to the court during the trial that a medical change prevented Hays from appearing. The court also learned from other witness testimony that Hays may have previously been deposed but that the defense counsel never presented that deposition.

Because the defense did not produce potentially helpful evidence and did not convincingly explain why, Johnson took an adverse inference and deemed that the evidence would have been unfavorable to the defendant, according to his finding of facts.

Zumbano said that it is very rare for a party in a civil case not to testify in matters that turn on credibility. He said this case marked the first time he ever secured an adverse inference finding against a defendant.

In an emailed statement, Hays called the decision an “egregious mistake by the court, which will be immediately appealed.” He said the trial happened within three days’ notice, ”during the time in which I … was undergoing serious cancer surgery and clearly unable to testify.”

“Suffice to say, this case is far from over,” Hays said.

BDDW CEO and general counsel Jeffrey Ciarlanto and assistant general counsel Katelyn Feldstein represented the defendants, which in addition to Hays and BDDW included several other companies under Hays’ ownership.

In the absence of evidence from Hays, Johnson weighed Thorson and Song’s testimony with that of a number of other BDDW employees.

The defendants claimed that, under the contract, Johnson could not collect his 2% valuation because he did not provide a full year’s notice when he decided to leave the company, and that Song could not collect her 3% valuation because she had been terminated from her position.

The plaintiffs said those respective terms were never a part of their agreements with Hays, and that they were still entitled to the full payment.

Johnson awarded the plaintiffs their respective percentages of the business’ value in addition to 25% of the total wages due as liquidated damages, amounting to $864,000 for Thorson and $1.3 million for Song. He also found that plaintiffs counsel was entitled to attorney fees and costs.

The case is captioned Thorson v. BDDW.

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