Bon-Ton Stores, Inc. alleges in a lawsuit that it recently filed against its former Senior Vice President, Director of Sales Gary Pralle that – after the company fired Mr. Pralle – it discovered “pornographic materials” and “documents containing racial slurs” in his e-mails. According to Bon-Ton, had it known about this “after-acquired evidence”before it fired Mr. Pralle, it would have had “cause” for firing him under its “Executive Severance Pay Plan” such that Mr. Pralle would not be entitled to severance. In other words, Bon-Ton v. Pralle is an example of a company invoking the after-acquired evidence doctrine to overcome a breach of contract claim. (Bon-Ton also alleges that bad behavior by Mr. Pralle that the company knew about before it fired him also gave the company “cause,” but those allegations mess up the example so we’re ignoring them.)
We have described here before on Suits by Suits how executive-level employees are often entitled by contract to severance payments upon termination “without cause” but not upon termination “with cause” – such as in the case of the former Yahoo COO. In the Bon-Ton case, as in many cases, the severance plan defines “cause” to include “willful violation or disregard of the standards of conduct set forth in . . . all Employer employment policies of general applicability.” Bon-Ton contends that having pornographic materials and documents with racial slurs in your e-mail violates its policies.
Not all courts have adopted the after-acquired evidence doctrine and even the courts that have adopted it do not necessarily apply it in the breach-of-(employment and/or severance) contract context. For example, the availability of the doctrine could be limited to cases of employment discrimination where the company contends that information that it learned after terminating an employee was legitimate (non-discriminatory) grounds for firing, thus a court should not order the company to pay backpay after its discovery of the information. Where the doctrine is available to defend against a breach of contract claim, a company can try to show that information that it learned after the executive was fired supports a with cause termination such that the company does not have to pay severance.
Thus, all is not lost for companies that worry they may not have had cause for a termination, and executives in that situation should not feel too relieved. In an after-acquired evidence jurisdiction, there is still time after the termination to make the case for cause.