The $4.1 Billion Employment Arbitration Award


[update: the judgment confirming the award in Chester v. iFreedom is here; from Settle It Now]

In case you have not heard, a California court has confirmed recently a $4.1 billion award for an employment-related dispute. Following is an AP article from Yahoo Technology News discussing the case. We welcome your commentary!

LA judge OKs $4.1 billion award in pay dispute

Posted on – Fri Jun 5, 2009

LOS ANGELES – A judge approved a $4.1 billion arbitration award against an Internet communications company accused of firing its chief operating officer in a dispute over commissions he said he was owed.

The award confirmed last week in Los Angeles Superior Court includes commissions, along with back wages, interest and other payments for Paul Chester, who was fired four years ago by iFreedom Communications Inc.

Arbitrator William F. McDonald wrote in his decision that the award is “appropriate to punish and make an example of defendants.”

Although Judge Teresa Sanchez-Gordon agreed with the award, Chester’s attorney conceded it may be difficult to collect the entire amount.

“There are very few entities that could pay such an award or such a judgment, but we certainly expect that our client will want us to explore all the possibilities,” Scot Bernstein said Friday.

McDonald, a retired judge, wrote in the award filing that privately held iFreedom and its founder Timothy Ringgenberg were liable for breach of contract, failure to pay wages and other claims.

He found that Chester did not receive the commissions of 5 percent on iFreedom’s gross revenue when he came to work for the company in June 2004. He was fired without cause in September 2005 after he confronted iFreedom about the commissions, the filing said.

A phone number for Ringgenberg in Fountain Valley was disconnected. A call placed to an iFreedom office in Laguna Hills was not picked up.

Micheal LaRoy, a University of Illinois law professor who focuses on arbitration law, said he has never encountered an arbitration award that approached that amount, and he predicted it would likely be reduced or vacated on appeal.

He said courts rarely allow punitive damages to stand in arbitration awards, even when they are less generous.

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