Litigation with Former CEO Settled, but Lawyers Sued for Malpractice
On the one hand, the annual convention of Destinations International (formerly Destination Marketing Association International) July 11-14 in Montreal was a smooth success. The rebranded organization underwent a top-to-bottom management change early last year and seems to have found an ideal blend of a trade show cum education and networking event.
On the other hand, the litigation everyone was talking about has ensnared the association in the wake of the forced departure of Michael Gehrisch, who served as DMAI’s president and CEO for 15 years until January 2016. Gehrisch actually left, in a de facto sense, in September 2015, albeit with a nice severance package. Meantime, DMAI was deeply in debt to the tune of $1.8 million, and forensic audit reports showed “significant financial mismanagement” under Gehrisch.
Under the separation terms, DMAI was to pay Gehrisch in the form of “salary” through December 2015 plus an additional year’s worth of “salary” – $397K – over 18 months. The association would also continue to provide health benefits for Gehrisch and his wife until Dec. 31, 2016. Then, last September, Gehrisch sued, charging DMAI with not meeting the terms of the agreement. Why? Because Destinations International notified Gehrisch it would stop payment in August 2016 unless he supplied some documentation it sought. Court documents say when Gehrisch did not provide the requested documentation, the payment of his buyout—as well as health insurance – ceased. More than $165,000 had been paid when Destinations International stopped payments.
A month later, Gehrisch sued, seeking $694,751 for violation of the wage law plus $1,191,000 for alleged slander by a board member. With the association facing the possibility of a triple damages award should it lose the case, and with Gehrisch facing expensive legal costs in the interim, the whole matter suddenly came to close last week when it was announced that the two parties had reached an agreement.
A statement furnished to the trade publication USAE News by Destinations International said, “Destinations International (formerly Destination Marketing Association International) and Michael Gehrisch have agreed to settle and dismiss the lawsuit between them. The parties wish to resolve this dispute, to put it behind them, and to focus on their future endeavors. The terms of the Settlement will be kept confidential. On behalf of Destinations International, no additional comments will be made, and no interviews will be granted.”
Not Completely Over
Still pending is a suit Destinations International filed last February against the large Chicago law firm of McDermott, Will & Emery LLP. It charges legal malpractice, saying the law firm and two of its lawyers gave bad advice about how to fire the CEO and failed to fully disclose its prior relationships with him. In its suit filed in New York Supreme Court, Destinations International accused McDermott Will and two partners, Banks Brown and Kristin E. Michaels, of malpractice because they allegedly advised the group to characterize termination payments to the ex-CEO Gehrisch, as “salary,” thus exposing the group to an ongoing suit by Gehrisch under Washington, D.C.’s Wage Payment and Collection Law.
“The drafting of the separation agreement was so flawed as to constitute legal malpractice,” the association charged, adding “The defendants also advised DMAI to make substantial payments to Gehrisch, even though they knew or should have known that Gehrisch was in breach of his underlying employment agreement with DMAI, and that in fact Gehrisch should have been forced to return money he improperly took from DMAI.”
In addition, Destinations International alleges that the lawyers failed to disclose the full extent of their prior personal and professional relationships with Gehrisch. The suit claims that the McDermott Will defendants’ misconduct and ethical violations support an award of punitive damages based on their professional malpractice and receipt of payment for conflicted legal representation.
Brown and McDermott Will represented the American Hotel & Lodging Association (AH&LA) while Gehrisch was its executive vice president between 1988 and 1999, prior to his serving as CEO of Destinations International, according to the suit. Although McDermott Will disclosed to the group that it had worked with the AH&LA while Gehrisch was there, “it did not disclose the volume of work that Brown did for the AH&LA and how closely he worked with Gehrisch,” the suit said.
While Brown also disclosed to Destination Marketing that he was personally friendly with Gehrisch, he didn’t advise the board of directors to seek other counsel to handle Gehrisch’s termination or tell the board that he had also represented Gehrisch personally, the suit said.