Employment-Eighth Circuit Upholds A $735,000 Award To The Employer In Breach Of Contract Claim

February 19, 2013

In Hallmark Cards, Inc. v. Murley, No. 11-2855 (8th Cir. 2013), the plaintiff, Hallmark Cards, Inc. ("Hallmark"), sued the defendant, former employee Janet Murley ("Murley"), for a breach of the parties' separation agreement. Hallmark won a $860,000 jury verdict on its breach of contract claim. Murley appealed.

In this case, Murley had served as Hallmark's group 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 consumer buying process, and long-term industry analysis gathered from Hallmark's market research. Hallmark did not discover Murley's disclosures until 2009, when RPG was purchased by American Greetings, and a third-party review of RPG's records revealed the disclosed information. This suit for breach of contract ensued.

On the appeal, the Eighth Circuit Court of Appeals (the "Court") dealt with the issue of whether the jury's verdict was excessive. The $860,000 verdict consisted of the $735,000 severance payment that Hallmark had made to Hurley under the separation agreement and the $125,000 Murley later received from RPG in exchange for her consulting services. As to the claim for the return of the $735,000 severance payment, the Court said that, in determining if a damage award arising from a state-law claim-as the one made here- is excessive, state case law guides our inquiry. In Missouri (the applicable state), courts generally defer to the jury's decision concerning the amount of damages, and only overturn a jury's verdict when the defendants demonstrate that: (1) some event occurred at trial that incited the bias and prejudice of the jury and (2) the verdict is so grossly excessive so as to shock the conscience of the court. Here, Murley could not demonstrate (1) or (2). As such, the Court upheld the jury verdict against her, to the extent of the $735,000 amount.

As to the claim for the $125,000 consulting fee, the Court said that, 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. Here, 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. Accordingly, the Court overturned the jury verdict, to the extent it included the $125,000 amount.