Paychex, Inc., Thomas Golisano, and Others Pay $32.2 Million on Judgment Affirmed by Court of Appeal

LOS ANGELES, March 23 /PRNewswire/ -- On March 18, 2010, Paychex, Inc., Thomas Golisano, and two other defendants paid $32.2 million toward a judgment that was recently affirmed by the California Court of Appeal.  On March 9, 2010, the Court affirmed a verdict of a Los Angeles jury that had, in addition to compensatory damages of $15 million, awarded punitive damages totaling $11,000,000 against Paychex (Nasdaq: PAYX) and Golisano.  

In its decision, the Court wrote that Paychex and the other Defendants acted with "a plan to destroy [the plaintiff] and other competitors' businesses through nefarious means."  The Court wrote further:

    
    
    
             The totality of the evidence showed that Paychex acquired [its 
             Rapid Payroll subsidiary] with the covert goal of terminating … 
             software licenses, leaving licensees unable to perform payroll 
             processing. Appellants took advantage of the chaos created by the
             Cancellation Notice to solicit competitors' disaffected clients. 
             It was not an isolated incident of wrongdoing, but required 
             extended deceitful conduct to keep licensees from converting to 
             new software over the years. Appellants' conduct was sufficiently
             reprehensible to justify the imposition of punitive damages.
    

The Court also wrote that Paychex and the other defendants adopted a "strategy … which included stealing clients from competitors and stifling competition" and "set out to destroy their competitors in an insidious manner."  

A complete copy of the decision is available on the Court's website at:  http://www.courtinfo.ca.gov/opinions/nonpub/B206780.PDF.

Paychex and the other defendants made the $32.2 million payment toward the state court judgment and interest accrued since the jury verdict in 2007.  However, Paychex and its subsidiary are currently also subject to a decision of a California bankruptcy court that exposes them to additional interest of $5.5-7.8 million.  In 2007, the Bankruptcy Court for the Central District of California ordered that Paychex's subsidiary, Rapid Payroll, Inc., pay interest from 2003 forward on the claim that is the subject of the judgment.  

The case arose from the attempt by Paychex and a subsidiary to terminate software licenses held by approximately 75 payroll processing businesses that competed with Paychex.  The plaintiff in the case is Computer Payroll Company, from Palm Desert, California.  In 2006, the day before Computer Payroll Company's trial was to begin, Paychex put its subsidiary into a bankruptcy to delay the trial.

The lawyer for the plaintiff, Stephen Wald of the Boston law firm Craig and Macauley, also represented 20 other licensees against Paychex and the other defendants in state and federal courts in Los Angeles, as well as in the bankruptcy case.  In 2004, in the first case to reach trial, he obtained a jury verdict of $6,200,000 against the Paychex subsidiary.  Following bankruptcy court orders that forced Paychex to guarantee payment of all of its subsidiary's debts, most of the cases against Paychex were favorably settled in February 2007.

With the recent payment, Paychex and its subsidiaries have now spent more than $75 million defending and settling cases related to the Rapid Pay software, according to Paychex's public disclosures during the bankruptcy and other court cases.  

Mr. Wald was assisted on Rapid Pay litigation by Jonathan Gordon, a lawyer with the Los Angeles firm Alston+Bird LLP.

SOURCE Craig and Macauley Professional Corporation