Facts

Plaintiff Larry Barnes had worked for defendant Johnson, Barnes & Finch (JBF), or its predecessor companies, in various capacities from 1992 until 2008. From January 2004 until Aug. 1, 2008, Barnes was the General Manager and Chief Financial Officer of JBF. In May, 2003, Barnes became a JBF shareholder, owning 25 percent of the corporation.

On Dec. 31, 2003, JBF, James Johnson, Mark Finch, Elizabeth Finch, and Barnes entered into a formal Amended and Restated Shareholders Stock Restriction Agreement. Under this agreement, each shareholder was entitled to equal compensation. Originally, the agreement also stated that JBF would purchase insurance with cash surrender value of $1 million, to be issued to Barnes at retirement. On Feb. 2, 2006, the agreement was amended to provide for a $2 million insurance policy.

The shareholders agreement also stipulated that Barnes' employment could not be terminated unless termination was "for cause," following a "material breach of the employment relationship following written notice and an opportunity to cure, where practicable."

Around July 1, 2008, Barnes, Margaret Barnes, Trustees of the Barnes Family Trust, and JBF entered into a written Retirement Agreement. The purpose of this retirement agreement was to modify certain provisions of the shareholders agreement relating to Barnes' retirement and repurchase of shares. The new retirement agreement stated that the retirement and repurchase of shares provisions in the shareholders agreement were no longer applicable, replaced by the provisions of the retirement agreement. However, in all other respects, the shareholders agreement remained in full effect.

The retirement agreement stipulated that compensation was to remain the same as provided in the shareholders agreement. Additionally, the retirement agreement gave Barnes an employee bonus of $1,814,009, defined as compensation Barnes received in excess of compensation received by the other shareholders. The retirement agreement fixed Barnes' retirement date for Oct. 31, 2011, but provided that if Barnes wished to retire earlier, the parties could agree to an earlier date. The retirement agreement did not change or modify the shareholders agreement provision that Barnes could be terminated only for cause.

Between Dec. 16, 2008 and February 2009, the other shareholders and Barnes tried to negotiate a potential buyout of Barnes' shares. However, these negotiations broke down on January 30, 2009. On Feb. 3, Barnes' employment with JBF was terminated. The reason given for termination was that Barnes had refused to work full-time. Barnes filed suit for declaratory relief, breach of shareholders and retirement agreements, and Labor Code violations.

PLAINTIFF'S CONTENTIONS:
Barnes claimed that he was terminated because JBF wanted to avoid paying him the compensation and benefits he was entitled to receive.

DEFENDANT'S CONTENTIONS:
JBF alleged that Barnes was not entitled to receive equal compensation, the employee bonus, or the $2 million for repurchase of his shares. JBF claimed Barnes was entitled to $350,000 for repurchase of remaining stock.

Result

The parties reached a settlement.