Former Philadelphia Union manager Peter Nowak sues team for wrongful termination and unpaid severance money
Peter Nowak, who was dismissed as manager of the Philadelphia Union on June 13, has sued the team claiming that it did not act in good faith when claiming to fire Nowak for cause.
Updated at 6:10 p.m. Tuesday after talking to both sides' attorneys. Previously updated at 11:53 a.m. Tuesday with statements from the Union and Major League Soccer.
This is very long and has a lot of legalese. You have been warned. Also, to be clear, all words that appear in italics below are direct quotes from documents filed in court as part of the suit. You can read the full text of the formal complaint and all of the accompanying exhibit documents by clicking on the links at the bottom of this post.
In the wake of his dismissal from the Philadelphia Union last month, Peter Nowak has sued the team in federal court here in Philadelphia. Nowak asserts that the Union did not act in good faith when claiming to fire him for cause. He also seeks payment of severance money he says he has not received, despite what the complaint claims is a contractual obligation to pay him.
"Clearly the Union has a right to say we don't want you on the sideline [and] you're no longer welcome here," said Clifford Haines, one of Nowak's two attorneys in the case. "What they don't have a right to say is we're not going to pay you under the agreement that we made."
Haines and colleague Hollie Knox work for the Philadelphia-based firm Haines & Associates.
"We don't challenge the Union's right to pick anybody they want as a coach, but once they pick them and put them under contract, they've got to keep them under contract," Haines told me. "They're going to take the position that they have a for-cause reason to terminate Peter, and they're not obligated when there's a for-cause reason to honor their commitment to pay. We don't agree with that."
Union CEO Nick Sakiewicz told me in an e-mail: "The team disputes the allegations in the complaint and will vigorously defend against the lawsuit."
Julie Gottshal, the attorney representing the Union in the case, told me that she is not authorized to speak publicly about the matter, and referred me to the team. Gottshal works for the Chicago-based firm Katten Muchin Rosenman LLP.
A spokesperson for Major League Soccer told me that it is the league's policy to not comment on pending litigation.
As I said above, the complaint - which was filed in the U.S. District Court, Eastern District of Pennsylvania - refers to unpaid severance money that Nowak claims the club was contractually obligated to provide. The case will go to trial, and will be heard by a judge at the federal courthouse at 6th and Market Streets.
Nowak was dismissed as the Union's manager on June 13. The complaint notes that at that point, Nowak was under contract with the team until December 31, 2015. Since then, according to the complaint, the Union has ceased paying Nowak any money - despite "its obligation to do so under the contract."
"The practical reality is the Union was unwilling to honor his contract through the end of 2015, and we did not believe that they have a good-faith basis for doing that," Haines told me. "So we are trying to enforce the contract."
According to the complaint, this was the sequence of events which led to the suit being filed:
Defendants provided Mr. Nowak with written "options" as follows: (1) sign a Separation Agreement and General Release which would deem him terminated as of June 13, 2012, but continue his salary through December 31, 2012 (while depriving him of his entitlement to salary and benefits through December 31, 2015) or (2) if he refused to sign, a letter would be issued indicating that he was being terminated "for cause pursuant to Paragraph III (A)" of the Original Agreement, in which case, Mr. Nowak would receive no severance.
Here is one key clause from the Separation Agreement proposal:
In consideration for the releases and covenants by Employee in this Agreement and provided that Employee complies with all obligations herein, the Company will, subject to paragraph 5(a), provide Employee with severance pay (the "Severance Payments") equal to: (i) Employee's regular base monthly salary ($31,087.50/month), less applicable withholdings, from the Separation Date through December 31, 2012, to be paid at regular payroll intervals[.]
The Union told Nowak that if he did not sign the Separation Agreement and General Release by July 20, the letter dismissing him for cause would be issued. Nowak refused to sign that document. The Union's lawyers notified Nowak's lawyers on July 20 that it had issued the "for cause" letter, and thus the two parties headed to court.
As Haines described it to me, the Union gave Nowak "the option of accepting that as essentially a buyout, or terminating him for cause."
"[Nowak] rejected the buyout proposal that they made," Haines said. "They then said fine, we're terminating you for cause. Our position is they haven't satisfied the terms of the contract with respect to cause."
Nowak's complaint states:
Defendants have no good faith basis for their assertion of a "for cause" termination… In addition, even if Defendants have grounds for a claim of contractual breach under Paragraph III (A), Defendants have failed to satisfy the condition precedent to termination of the contract and/or breached the contract by: (1) failing to provide Mr. Nowak with notice of the termination before it actually occurred and/or (2) failing to provide Mr. Nowak with an opportunity to cure the concerns as stated in the "for cause" letter.
The complaint also states that Pennsylvania Professional Soccer LLC – a subsidiary of Keystone Sports and Entertainment, which operates the Union – "demanded immediate repayment of a loan made by the Club to Mr. Nowak, causing Mr. Nowak immediate and material harm."
In addition, the complaint states:
the Defendants have notified Plaintiff that they will not honor his contract and that unless he agrees to a substantially reduced severance package, Defendants will claim that he is being terminated for cause.
As such, Nowak requested the that the court order the following things:
1. Declaring that Defendants failed to act in good faith in determining that Mr. Nowak should be terminated "for cause;"
2. Declaring that Defendants have failed to satisfy a condition precedent to termination of the contract and/or breached the contract by failing to provide Mr. Nowak notice prior to termination for cause;
3. Declaring that Defendants have failed to satisfy a condition precedent to termination of the contract and/or breached the contract by failing to provide Mr. Nowak with an opportunity to cure any occurrences prior to termination for cause;
4. Declaring that as a result of the above, Defendant lacked the contractual right to terminate Mr. Nowak pursuant to Paragraph III(A);
5. Enjoining Defendant from taking any further action to harm Mr. Nowak that breaches the Original Agreement and the Extension Agreement; and
6. Declaring that all other terms and conditions of the contract remain in force.
A letter from Pennsylvania Professional Soccer LLC to Nowak dated June 13, 2012 cites the following reasons for Nowak's termination. Some of them may sound familiar to you:
1. various material breaches of League Rules (including the League's Collective Bargaining Agreement), including physical confrontations with players and officials during a Team game resulting in a fine and multi-game suspension, interfering with the rights of Team players to contact the players' union with concerns, subjecting Team players to inappropriate hazing activities and engaging in behavior that put the health and safety of Team players at risk.
2. material breaches of the Employment Agreement, including engaging in discussions regarding, and otherwise actively seeking, employment by other professional soccer teams in Europe and making disparaging remarks to third parties regarding Club, its management and its ownership.
3. demonstrating gross negligence, including putting the health and safety of Team players at risk by requiring injured players to participate in strenuous training activities, not allowing players to have water during such activities despite temperatures in excess of 80 degrees, ignoring the advice of the head athletic trainer regarding which players are healthy enough to play in games and participate in training sessions and creating an atmosphere where medical issues should be hid from medical staff and not treated.
4. committing actions that have reflected in a materially adverse manner on the integrity, reputation and goodwill of Club and the Team (in the eyes of the League, U.S. Soccer, current and potential Team players, sponsors and fans), including the unusually harsh treatment of players described above, actions during Team games that have resulted in fines and suspensions, the multiple breaches of League Rules and a discussion (by you or your agent on your behalf) with the head of U.S. Soccer that was in very poor taste and left a very bad impression with U.S. Soccer.
5. multiple incidents of insubordination with respect to the Club's Chief Executive Officer, including claiming at one point (in direct contradiction to the terms of the Employment Agreement) that he does not report to the Club's Chief Executive Officer.
6. various material breaches of Team Rules, including creating a hostile work environment and culture of fear for Team players and other front office employees by orally berating and physically intimidating fellow employees.
The letter concludes by stating that the "Club has determined that the above infractions are not capable of being cured and believes your continued employment by Club would continue to cause material harm to Club."
The word "cured" means a change in Nowak's behavior that would fix the problem.
I asked Haines if he was willing to respond to any of the claims above. I was especially interested in the part about conversations with other soccer teams in Europe. It was publicly reported last month that Nowak applied for a vacant manager position with Scottish Premier League club Hearts while in charge of the Union.
"We are not going to dispute the allegations or respond to the allegations in media - we'll do that in a court setting," Haines saidd. "So I think it's best left to the modality, rather than a he-said, she-said about what might have happened – was it 79 degrees [instead of 80], did they give water or not. We'll let that play out."
Nowak's original contract was signed on June 1, 2009, with an expiration date of December 31, 2012. Nowak agreed to a contract extension on December 20, 2011, which changed the expiration date to December 31, 2015.
This was also the time at which Nowak's title was amended from "sole manager of the Team and the Club's soccer operations" to also include "Executive Vice President of Soccer Operations."
The terms by which Nowak could be terminated did not change from the original contract to the extension. The original contract includes potential reasons for termination, including "gross negligence or willful misconduct in performing his duties."
In addition, the contract says that the "Club may also terminate this agreement upon written notice to manager for any reason other than as set forth in [the aforementioned potential reasons] or for no reason."
This clause is also of consequence:
Whether Club has terminated this Agreement pursuant to Paragraph III(A) or (B) [in which potential reasons for termination are spelled out] shall be determined in good faith by Club at its reasonable discretion; provided that (i) prior to terminating Manager pursuant to Paragraph III(A), Club shall specify in reasonable detail the reason Manager is being so terminated and give Manager an opportunity to respond thereto ...
Club shall allow Manager fifteen (15) days to cure the occurrence, except that Club shall have no obligation to provide Manager such opportunity to cure if Club determine, in its good faith judgment, that the occurrence is of a nature that is not curable or that Manager's continued employment during a cure period could be reasonably expected to result in material harm to Club.
As a result of the filing, we now know Nowak's base annual salary during his time with the Union. From June 1-December 31, 2009, Nowak had a prorated salary of $350,000 (the resulting figure was $204,167). In 2010 and 2011, he made $373,050 per year.
In addition, Nowak received a one-time signing bonus of $69,500 that was obliged to be paid before January 15, 2010.
When Nowak's contract was extended, it was agreed that he would receive base salaries of $385,000 in 2013; $396,550 in 204; and $408,446 in 2015.
The contract extension also included an agreement for the Union to:
provide to Manager [Nowak] an unsecured recourse loan in the aggregate principal amount of $60,000, which Loan shall accrue interest at a fixed rate of 5.00% per annum and be immediately due and payable upon the earlier of (i) December 31, 2015 and (ii) the date that Manager is no longer employed by Club for any reason.
This loan was agreed to be repaid by withholding a regularly scheduled sum from Nowak's paycheck - $690 every two weeks - unless Nowak was able at some point to repay the entirety of the remainder of the balance due.
The contract stated that if Nowak was unable to repay the loan by the maturity date, the interest rate would rise to 7.00% and the club would have the right to offset the outstanding balance against severance payments owed to the manager.
As far as I can tell, this is the loan referred to in the complaint issued in court.
I found a few other things worth noting from the exhibit documents in the case.
The first is the list of benefits to which Nowak was contractually entitled. Here are some highlights:
(B) During the Term while Manager is actually providing his services hereunder as manager of the Team and the Club's soccer operations, Club shall provide Manager use of an automobile, the make and model of which shall be mutually agreed upon by Manager and Club. Manager shall be responsible for all costs associated with use of the applicable automobile, including, without limitation, obtaining and maintaining insurance for such automobile and costs related to maintenance, parking and fuel.
(C) Each year during the Term while Manager is actually providing his services hereunder as Manager of the Team and the Club's soccer operations, Club shall provide Manager, at Club's expense, an aggregate of sixteen (16) (prorated for 2009) roundtrip, coach class airline tickets for use by Manager and his immediate family between Naples, Florida and Philadelphia, Pennsylvania; provided, however that Manager shall personally use such tickets for a reasonable number of trips each calendar year and only to the extent such travel by Manager does not interfere with Manager fulfilling his duties hereunder. Club will book all such airline tickets for Manager and his immediate family and shall be given reasonable prior notice by Manager.
(H) All travel by Manager for games, training camps and scouting. as well as any other travel requested by the Club in connection with Manager providing his services hereunder, will be in Business Class on three cabin aircraft and First Class in two cabin aircraft on domestic flights in excess of three hours and all international flights and hotel accommodations will be at least a Junior Suite.
There was also a schedule of potential bonuses that Nowak would receive if the team was to achieve certain things on the field. Here's the list. The last item is especially noteworthy:
Team wins the MLS Cup Championship: $50,000
Team wins MLS Conference Championship: $25,000
Team wins the League's Supporters' Shield: $50,000
Team wins the US Open Cup: $50,000
Group Phase Advance by Team in the CONCACAF Champions' League: $75,000
Team wins the CONCACAF Champions' League: $75,000
Team wins the semi-finals of the SuperLlga Tournament: $50,000 *
Team wins the Championship of the SuperLiga Tournament: $50,000 *
Advance by Team to semi-finals of FIFA World Club Championship: $100,000
Team wins FIFA World Club Championship: $200,000
Manager is selected as Head Coach for the League's All-Star Game: $15,000
* - Remember that the SuperLiga still existed when Nowak was originally hired.
You can read more in the source materials linked to below.
1. The complaint document: PIOTR NOWAK, Plaintiff vs. PENNSYLVANIA PROFESSIONAL SOCCER, LLC, and KEYSTONE SPORTS: AND ENTERTAINMENT, LLC, Defendants
2. Exhibit A: "MANAGER EMPLOYMENT AGREEMENT," Nowak's original contract with the Union.
3. Exhibit B: Nowak's 2011 contract extension.
4. Exhibit C: "SEPARATION AGREEMENT AND GENERAL RELEASE" that was sent to Nowak and not signed.
5. Exhibit D: A letter to Nowak outlining the causes for his termination.
6. Exhibit E: A letter from the Union's attorneys to Nowak's attorneys stating that the letter of termination has been executed.