Retail giant Barnes & Noble has been ordered to front 50% of the legal fees that are expected to arise out of the lawsuit the company’s former CEO filed after he was ousted in July 2018.
The company’s ex-CEO, Demos Parneros, sued Barnes & Noble after he was terminated over allegations that he had s-xually harassed a female employee, bullied and belittled subordinates and undermined a potential change in control.
The company had filed crossclaims against Parneros last fall, and it is because of these counterclaims that Parneros sought an advancement on the attorney fees he expects to spend defending himself.
In an order docketed by the court Tuesday, U.S. District Judge John G. Koeltl of the Southern District of New York granted Parneros’ motion for advanced fees, which had sought 50% of anticipated attorney fees and expenses in the case. The one-page order also said that fees for time spent before the crossclaims were filed should not be advanced.
The total number of dollars expected to be spent on Parneros’ behalf in the case was undetermined.
In arguing for the advanced fees, the ex-CEO pointed to New York state law and his employment contract, which he argued indemnified him. Barnes & Noble, however, balked, arguing the contract only allowed for indemnification against claims brought against him in his official capacity, and that many of the counterclaims overlap with the claims Parneros is raising.
“Plaintiff is asking Barnes & Noble to subsidize his defense of direct claims asserted by the company for his own misconduct—a result that was not contemplated by the indemnification statutes, which were enacted to protect directors and officers from the costs of defending third party and derivative claims, not to immunize them from the consequences of their misdeeds towards the company itself,” the company said in a February filing.
Koeltl ultimately disagreed.
In August, Parneros sued the New York-based retail giant, claiming the company issued a press release that falsely stated he had violated company policy. He also claimed Barnes & Noble did so in language and in a manner that it “knew full well was false but would be read as reporting that Parneros had engaged in serious s-xual misconduct.” His lawsuit cited the various media reports speculating on a potential s-xual harassment scandal.
The company responded several weeks later, making clear that the alleged s-xual misconduct allegations were a reason for the termination. The company cited two separate occasions, one in which Parneros allegedly inappropriately touched a female subordinate and another when he allegedly made an advance and used s-xual language.
In his lawsuit, Parneros described the alleged incident of s-xual harassment involving an executive assistant as “simply an innocuous, less than five-minute conversation about vacationing in Quebec.” His lawsuit said that “any issue with that executive assistant had been positively resolved.” His initial complaint also said the accusations of improper conduct were made against a backdrop of a company where top leadership “frequently engaged in inappropriate and unprofessional conduct.”
Barnes & Noble’s response also claimed the former CEO “mistreated and bullied members of the executive team, including one of his direct reports, an officer of the company.” The final reason for termination, the company claims, was that Parneros attempted to sabotage the acquisition of a book retailer “in an effort to preserve his position as CEO and contrary to the board’s clear directive, an inexcusable breach of the fiduciary duties that any CEO owes the company that employs him.”
Paul, Weiss, Rifkind, Wharton & Garrison attorney Jay Cohen, who is representing Barnes & Noble, and Debra Raskin, of Vladeck, Raskin & Clark, who is representing Parneros, each did not return a call for comment left late Tuesday afternoon.