Judge Rules in Slater's Favor Against MeritDirect

Though a Connecticut Superior Court judge has issued a preliminary ruling in favor of former MeritDirect senior vice president Chad Slater against the company, a pending arbitration process will dictate the outcome of the case.

Judge Chase T. Rogers' April 30 ruling came to light last week after Rogers agreed to Slater's motion to have the records unsealed. MeritDirect has appealed the decision.

After an almost three-year business relationship, MeritDirect and Slater parted ways Oct. 7 after Slater said he wanted founding partner Mark Joyce ousted from the firm. On Oct. 24, Slater commenced a civil action contending that MeritDirect breached its contract by wrongfully dismissing him, not paying wages due, defaming his character and other allegations.

“My position has been completely vindicated,” said Slater, founder/president of Integrated Direct Marketing LLC, Stamford, CT.

“First, MeritDirect has not been directed to pay Mr. Slater one penny,” MeritDirect CEO Ralph Drybrough said in a statement. “Second, this judge's decision is not a determination of how much, if anything, Mr. Slater might be ultimately awarded in the underlying arbitration, before a different fact finder, that is scheduled to begin in mid-November.”

In the meantime, Drybrough said, his firm has more than enough money on hand to cover its expenses.

“It's business as usual,” he said in an interview.

Drybrough also noted that MeritDirect's appeal stresses that the dispute was supposed to be resolved solely through arbitration and not the court.

According to Rogers' ruling, MeritDirect was unable to prove there was cause for Slater's termination. It said in part, “although MeritDirect purported to suspend or terminate Slater for cause under the Operating Agreement, no cause existed as of October 7, 2002 or November 8, 2002 for termination. There was no conduct that was 'clearly contrary to the best interests of [MeritDirect].'”

Further, the judge found MeritDirect in breach of its contract with Slater by terminating him without cause and failing to pay him owed wages. The court awarded a prejudgment remedy of $1.34 million. Pending the arbitration process, that amount will be held as a lien against MeritDirect.

Though MeritDirect's operating agreement stipulates that disputes be settled in arbitration, Slater had asked that MeritDirect's bank account be garnished for $2.6 million pending the determination of the arbitration. Under a Connecticut statute, the court can garnish double the amount of the alleged owed wages, which in this case is $1.3 million, according to Slater's claim.

The arbitration demand, filed with the American Arbitration Association, lists $7 million as the amount sought by Slater in that proceeding. However, arbitration is a private process, and further information was unavailable except that it is scheduled to resume later this year.

Meanwhile, a court battle initiated by MeritDirect to prevent Slater from operating his new list company is still pending. MeritDirect began the proceedings Feb. 21 when it filed an application for a temporary injunction against Slater, Integrated Direct Marketing and Direct Media Inc. with the Superior Court in Stamford, CT.

The action was triggered by Slater's announcement the previous day that he had opened IDM and that Direct Media would provide back-office support. Also, Direct Media had announced that IDM was a partner in its new database consortium.

According to MeritDirect's complaint, the three parties violated MeritDirect's operating agreement, including that Slater could not compete against his former employer for two years. The complaint further alleged that Slater knowingly divulged proprietary information while still employed at MeritDirect.

Slater intends to defend himself against these charges.

“He hasn't violated the agreement,” said Marc L. Zaken of the law firm Edwards and Angell, which is handling the case for Slater.

Drybrough said the case has been delayed because of a proposed transfer from one judge to another and that he did not have a date for the resumption.

“It's kind of in limbo,” he said. “I don't think a new judge has even been assigned.”

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