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A jury in Pennsylvania’s Delaware County Court of Common Pleas has awarded $5.2 million in damages to a software company, with the bulk of the damages attributed to the company’s president and former vice president in a case involving claims of tortious interference with business relations and breach of fiduciary duty. Last week’s verdict awarded the damages to the corporate plaintiff, Mountain View, Calif.-based Integration Associates, but held another plaintiff, Friedemann Arnold, the president of Integration, 40 percent liable. Integration’s former vice president, Dieter Hotz, was found liable for $2.7 million of the verdict, or about 52 percent. Both men owned 50 percent of Integration Associates. Attorney Neal A. Jacobs of Neal A. Jacobs & Associates in Philadelphia represented both Integration and Arnold. He said Tuesday that Jacobs is retaining individual counsel to pursue any appeals issues or other post-trial relief on his behalf to cure any potential conflict of interest. DISINTEGRATION Integration Associates v. Delta Consulting Inc. is the product of three consolidated suits that resulted from an impasse between Arnold and Hotz. Each was a 50 percent shareholder in the software services company. According to Hotz’s attorney, John W. Nilon Jr. of Kassab Archbold & O’Brien in Media, Pa., Hotz initially filed an action in 1998 asking the court to appoint a liquidating receiver for Integration, when he and Arnold “reached an impasse.” Arnold filed a countersuit against Hotz and Delta Consulting — a company Hotz formed when he left Integration — accusing Hotz of taking most of Integration’s employees with him and destroying a contract that was the lifeblood of Integration when he left the company. A third suit involved various contracted employees who claimed they were never paid, Nilon said. Attorney Ronald L. Williams of Stevens & Lee represents the wage claimants. He said they prevailed “to the penny” on their claims in unpaid bonuses of nearly $173,000. According to Jacobs, Hotz was accused of destroying Integration’s contract with fellow software company SAP by informing SAP that Integration had hired a SAP employee to moonlight for Integration under an assumed name. The employment arrangement was a violation of the Integration-SAP contract and when SAP found out, it terminated the contract, the plaintiffs said. SAP is a large German software company with American headquarters in Delaware County, Jacobs said. After a four-week trial before Delaware County Judge James Proud, a jury of eight found Hotz responsible for $2.7 million of the verdict. It attributed $311,000 of fault to Jack Tomb, Integration’s director of human relations and contract manager, and found Integration’s controller, Jennifer Coffey, responsible for $500. The jury determined after two days of deliberation that the three defendants were 60 percent at fault. But the jury also found Arnold 40 percent at fault — what Williams said amounts to $2.1 million of the verdict. Jacobs said that having spoken to the jury after the trial, his impression is that the jurors determined Arnold was responsible for “sinning unintentionally.” “They believed that Arnold failed to act affirmatively to protect the company,” Jacobs said. Jacobs said he believes the jury’s verdict “validates the obligation of a director to act in the best interests of the company and the obligation of employees, especially senior employees, to be loyal to their employer.” But both Nilon and Williams said the verdict represented nothing more than that the jury found both Hotz and Arnold were “nearly equally responsible for the demise of [Integration].” Attorney Jeffrey B. First assisted Jacobs in representing the plaintiffs. Delta and Hotz were represented by Nilon and Mary J. Walk of Kassab, Archbold & O’Brien, based in Media. John J. Miravich of Stevens & Lee in Reading, Pa., represented the wage claimants along with Williams. AFTERMATH The total amount of damages in the case remains to be seen. Both parties said they intend to file post-trial motions. Jacobs has moved for another damages hearing on the issue of lost profits due to the loss of a corporate opportunity. Leading up to the trial, Jacobs said there were “serious settlement discussions” but that the parties were never able to reach an agreement. Nilon said he is working to resolve the matter between the parties and is currently trying to schedule a shareholders’ meeting for Integration, “hopefully before March 1.” He said he has asked Proud to hold off on appointing a receiver in the meantime.

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