Ehrlichman

FACTS AND PROCEDURAL HISTORY

In June 2008 Lee B. Ehrlichman was hired as chief operating officer of Heart Tronics, Inc., a start-up business that had developed improved electrocardiogram technology.1 The parties’ written employment agreement provided Ehrlichman an annual salary of $500,000, along with relocation expenses and other benefits. Ehrlichman took the job after working for several weeks as a consultant for the company, in part so he could determine whether the company was viable. Under the agreement Ehrlichman was entitled to two-year’ severance pay if he were fired without good cause. The agreement defined good cause as follows: conduct that led to Heart Tronics being convicted of a crime or incurring criminal penalties; directives by appropriate government entities that Ehrlichman be terminated; Ehrlichman’s conviction of a felony offense or a misdemeanor involving a crime of dishonesty or moral turpitude; and the falsity of any of Ehrlichman’s representations and warranties contained in the agreement. The agreement contained three representations and warranties applicable to Ehrlichman – concerning advice of counsel and the absence of duress and coercion in the…