Bobby N. Harmon, CPCU, ARM
104 E. Grundy Avenue Tel No. (859) 336-3652
Springfield, KY 40069
May 22, 2001
Mr. Steve Guttman, Esq.
Attorney at Law
1132 Bishop St., Ste 1404
Honolulu, HI 96813
RE: Harmon Ch. 7 Bankruptcy Case No. 99-04339 - Settlement as Wage Income
Dear Mr. Guttman:
This is in reply to your letter dated May 14, 2001.
In your second paragraph, you state, “. . . if I read correctly the entire paragraph, I think you are stating that the two provisions do not exclude a wage income claim and based upon two other provisions of the Settlement Agreement, you think your position as to wages has support within the context of the document. One obvious response is that in drafting a settlement agreement document, a person does list all the type of claims that were NOT (emphasis added) the basis for the settlement.”
Section E, paragraph 1 (b) states, “RELEASORS understand and agree that the settlement amounts and other consideration described above constitute a complete compromise, accord and satisfaction, waiver and release of all claims for general and special damages, physical pain and emotional distress, and pain and suffering related to injury to reputation.” I know that I am not a lawyer, and I have been known to use a double negative on occasion, but I fail to see listed in the agreement “all the type of claims that were NOT the basis for the settlement.”
And, yes, it was my intent to state that the two provisions do not exclude a wage income claim.
You go on to state, “In reviewing a settlement agreement document, it is appropriate to look at what was pending before a court at the time the parties agreed to resolve pending litigation. In your case, the federal lawsuit did not include a wage income claim. Your lawsuit before the federal court was alleging various tort claims and claims arising under the Racketeer Influence and Corrupt Organization Act. There was no pending wage claim. Your state court actions had already been dismissed, but I do not believe you made a wage claim in the state court actions.”
This statement is incorrect, and I reference Arnold T. Phillips’ letter dated November 17, 1999, addressed to you. In his letter, Mr. Phillips states:
“With regards to the above referenced matter I am responding to your request for a statement of what the plaintiff’s damages are in the various litigations in which he is involved at this time. You requested this information to assist Trustee Woo in administering the Chapter 7 estate.
“Presently, Mr. Harmon has an appeal of the unemployment benefits pending before the Hawaii Supreme Court in which he is defending the reversal by the First Circuit Court of the denial of benefits. Bobby N. Harmon vs Bernice P. Bishop Estate, Attn: Personnel Division and State of Hawai`i, Dept. of Labor and Industrial Relations S.C. No. 22624.
“He has a cause of action as a whistle blower raised in a counterclaim to the KSBE action to recover documents in the First Circuit Court. P&C Insurance Company, Inc. et al vs. Bobby N. Harmon Civil No. 97-0512-02. The counterclaim states cases of action under the Whistleblower’s Protection Act and for breach of contract, tortious breach of contract, negligent and/or intentional infliction of emotional harm. The counterclaim was dismissed and can be appealed when there is a final judgment on the original complaint.
“There is a RICO action in United States District Court. Bobby N. Harmon vs. Federal Insurance Co., Inc. et al. CV 99-00304 DAE. In this case an amended complaint is due on December 7th.
“Because full unemployment compensation was paid to Mr. Harmon when the denial from the administrative hearing was reversed by the First Circuit Court there would be no damages resulting from the state court appeal. Mr. Harmon seeks to protect the First Circuit Court decision in the appeal. Attorney’s fees and costs are due our office for the work on this appeal.
“On the other litigation the major element of damages which Mr. Harmon has is his loss of income and benefits from his employment at KSBE (emphasis added). Whether the damages are found to be due as a result of the RICO violation, the whistle blower action, wrongful termination or breach of contract they would cover the same elements of damage for the same time - November 1996 to date of trial.
“For these damages we consider Mr. Harmon to have a base salary of approximately $70,000 and a complete benefit package covering medical and disability plus retirement contributions (emphasis added). For purposes of our calculation we have figured this dollar amount as a percentage of salary. The percentage we selected was 28%.
“For the four year period of time the claim for salary and benefits would be for $364,000 exclusive of interest. The RICO claim and the unfair and deceptive practice claim in the state court action provide for treble damages or $1,092,000. Attorney’s fees and costs can be estimated at $375,000 (approximately 1800 hours) and $200,000 respectively.
“These damage estimates do not include the compensation for the tortious breach of contract, negligent and/or intentional infliction of emotional harm claims in the state court action. The damages for the negligent and/or intentional infliction of emotional harm could be substantial especially given the recent hospitalization of ...
“Neither do these estimates consider the costs and expenses of any appellate work which may be necessary other than the work already performed in the state appeal.
“Finally, the estate should be aware of the possibility of a breach of contract claim against Federal Insurance on its failure to tender defense. If the estate decided to pursue this claim it should consider that these damages will be mitigated by the defense costs paid under Mr. Harmon’s homeowners policy coverage. Although this may produce an entitlement to homeowner’s carrier it may not produce any asset for the estate. . . .”
I believe you have also missed another key point in my previous correspondence. At the settlement conference, I was not the one who stated that the entire settlement could be categorized as “wage income” – it was my then-attorney, Bradley R. Tamm, who made this determination. All of the attorneys present at the conference expressed their agreement to this categorization. I was told that I had no choice in the matter.
You state that I have raised certain questions independent of the wage income allegation in my most recent correspondence, and request that I reread what had been set forth in prior letters because you are of the opinion that those matters were fully addressed. I have reread these letters (several times) and I regret to say that I fail to see where I have been provided with answers to the majority of my questions. To try to keep this letter focused and reasonably brief, however, I am addressing only the “wage loss” issue herein. I intend to address the remaining issues soon in separate letters.
The Kentucky address is my mother’s home and is not my permanent address. This address does not apply to my wife. As you know, we lost our home of 30 years in the bankruptcy, so we are currently uncertain where we will be living. I will advise you and the Clerk of the Bankruptcy Court when we get a new permanent address.
Thank you for your prompt reply.
Very truly yours,
Bobby N. Harmon
cc: Gayle Lau, Esq.
Curtis Ching, Esq.
Office of the U.S. Trustee
1132 Bishop St., Ste 602
Honolulu, HI 96813
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