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of NCMI. Petitioners’ claims were bifurcated, and Mr. Biehl’s
wrongful termination claim was tried in March 1996. The jury
returned a $2.1 million verdict in favor of Mr. Biehl.
Following the verdict on the wrongful termination claim, and
without resolution by suit of petitioners’ claims for dissolution
of NCMI, petitioners and NCMI entered into negotiations looking
toward a global settlement. On December 31, 1996, NCMI made two
payments: $799,000 directly to Mr. Biehl and $401,000 directly
to Olimpia, Whelan, & Lively. During January 1997, petitioners,
NCMI, and the other defendants signed and delivered a
“Confidential Settlement Agreement and Release of Claims”
(settlement agreement), which set forth the terms of the
settlement. The settlement agreement stated that the foregoing
payments were made in settlement of Mr. Biehl’s employment-
related claims and in payment of attorney’s fees related to the
employment claims, respectively. The settlement agreement does
not refer to NCMI’s payment of the attorney’s fee as a
reimbursement to Mr. Biehl.
The settlement agreement resolved petitioners’ dissolution
claim by incorporating a stipulation for entry of judgment. The
stipulation provided that the defendants would purchase
petitioners’ stock in NCMI for $1.2 million in an installment
sale in final settlement of the corporate dissolution claim.
Monthly payments on the installment sale were to begin on January
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