An Ontario appeal court has partly allowed an appeal by Toronto brokerage firm Research Capital Corp. in a wrongful dismissal suit.

Former Research Capital corporate finance chief John Palumbo won a suit against the firm for wrongful dismissal in 2002. The firm took the position that Palumbo had “constructively resigned” and counterclaimed to hold him and his firm, Palumbo Resources Inc., responsible for specified “principal trading losses”.

The appeal court upheld the trial judge’s conclusion that Palumbo was dismissed without cause and that neither Palumbo nor PRI are responsible for the principal trading losses claimed by RCC. However, it did reverse the judge’s decision on the amount of compensation that he was entitled to as a result. It set aside the trial judge’s award for $500,000 in broker warrants that were exercised by RCC after he left the company, and her award of about three months’ interest on Palumbo’s capital.

The appeal court found no reviewable error in the trial judge’s finding that when RCC insisted that Palumbo share the role of head of corporate finance (with Gord Pridham who was hired in 1996) it constructively dismissed him; or in her ultimate conclusion that in early February 1999 when RCC ended Palumbo’s employment for failing to accept his new responsibilities, it dismissed him without cause.

However, it concluded, “as none of the broker warrants allocated to Palumbo had value on the Termination Date, I would set aside the trial judge’s award for broker warrants in its entirety.”

It also found that his employment contract precluded any award of interest on Palumbo’s capital. “Until Palumbo gave RCC a general release RCC had no obligation to pay him his capital; when RCC did receive a general release it had no obligation to pay Palumbo interest on the capital it had withheld,” it ruled.