Judge: Compuware must award Karmanos $16.5M
Peter Karmanos Jr. is a step closer to winning a longstanding legal battle against the company he co-founded.
On Monday, Wayne County Circuit Court Judge Daniel Ryan upheld an arbitrator’s decision for Compuware to award Karmanos $16.5 million for wrongly firing him and taking away his stock options in 2013.
In his three-page opinion, Ryan said Compuware had no basis to second-guess, modify or vacate arbitrator Gene Esshaki’s decision in February to award the millions.
“The first wrong is the breach of contract in wrongfully terminating Karmanos,” he wrote. “The second is the conversion of the stock options by subsequently and intentionally interferring with the execution of the options following the wrongful termination.”
E. Powell Miller, one of Karmanos’ attorneys, said Compuware could appeal to a higher court but said, “I would view any such attempt as frivolous.”
“We are pleased for Mr. Karmanos who has had an amazing career and impact on the city of Detroit,” Miller said. “We hope that Compuware will honor the award and pay it.”
Karmanos was the longtime CEO of the company, but he was fired after telling the firm’s management they needed “to get their head out of their” buttocks.
The 72-year-old business mogul, philanthropist and owner of the NHL’s Carolina Hurricanes sued Compuware in November 2013, alleging the company fired him from a $3.6 million consulting job without cause and withheld stock options.
Karmanos alleges he suffered significant damages, including unpaid salary, severance pay, bonuses and stock options.
“Compuware’s acts and/or omissions were actuated by malice and/or accompanied by a wanton and willful disregard of the foreseeable harm to Mr. Karmanos from its acts and/or omissions,” the businessman’s lawyer, Kevin O’Shea, wrote in the original lawsuit.
The $16.5 million awarded includes $1 million in attorney fees and costs. The judge’s decision is the first time the full details and the amount of money Karmanos is seeking has been made public. In his opinion, Ryan notes arbitration was chosen as an option to avoid making the details of the dispute public.
The rift between Karmanos and the management of the company is deep and began months before he was fired.
Karmanos co-founded Compuware in 1973 and is the company’s former chief executive officer and chairman. He retired as executive chairman March 31, 2013.
After that, Karmanos worked under a six-year consulting deal that paid him a $600,000 annual salary and included bonuses, an office, parking, reimbursements for business expenses and the use of two company cars, according to the lawsuit.
Under the deal, Karmanos was supposed to receive stock option grants for 100,000 shares of Compuware stock each year, according to the lawsuit.
In May 2013, Compuware executives canceled two retirement celebrations for Karmanos.
Last December, Compuware sold the company to Chicago-based private equity investment firm Thoma Bravo LLC. As part of the buyout, the company was split into two entities, with the mainframe operations remaining in Detroit and the software operations moving to Boston.
The Compuware Building, the iconic building at Campus Martius downtown, was sold to Dan Gilbert’s Bedrock Real Estate Services and Meridian Health. Compuware now leases space in the same building.
Since his termination, Karmanos went on to found software company MadDog Technology in Birmingham.
Karmanos has donated money to the Michigan Cancer Foundation, which was renamed the Barbara Ann Karmanos Cancer Institute in 1995 in memory of his first wife, who died of breast cancer in 1989.
He has also donated to scholarship funds for students of Greek heritage and was named Goodfellow of the Year in 2013 for his contributions to the city of Detroit.