Grubb & Ellis Exec Sues Firm in 'Change-of-Control' Dispute

Filed in November, the case is moving toward the discovery phase and could go to trial in May.

A 20-year industry veteran and Grubb & Ellis executive since 1997, Ehrenberg shared the company presidency with John G. Orrico from May 2000 to May 2001, when chief executive officer Barry Barovick took over and the company headquarters shifted to New York City. Orrico, former president of the real estate services operations, has left the company.

Ehrenberg claims that since suggesting there had been a change of control, Grubb & Ellis has begun dismantling her management services subsidiary, kept her out of the loop and has made it known "that she is on the verge of being fired." The result is "a disintegrating relationship with her employer, one characterized by continuing efforts to undermine her status and position and, most recently, by the suggestion to the court in a publicly-filed document that she may be manufacturing facts to support her legal position."

Besides claiming breach of contract, Ehrenberg also is seeking payment of her legal fees while she fights her case. Three attorneys from two separate firms—Luke DeGrand & Associates and Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz--are representing Ehrenberg, who earned a reported $315,000 in salary in the last fiscal year as well as a $120,000 bonus. Although an amount of damages are unspecified, they could amount to $1.5 million if Ehrenberg is guaranteed her salary for two years plus highest bonus in the past three years--$435,000 in 2001.

Grubb & Ellis officials had no comment on the lawsuit. However, the company denies in court papers there has been a change of control that would trigger the executive change of control plan, and seeks to dismiss Ehrenberg's request for a preliminary injunction.

The company does admit, however, that it advised the Security and Exchange Commission of a "change of control" to comply with that agency's regulations. The discrepancy, attorneys argue, is that the change of control plan does not cover investors such as Kojaian Investors, LLC acquiring bigger stakes in Grubb & Ellis.

"The plaintiff is just plain wrong," states Michael Poulos and Paul J. Campbell of Piper Rudnick. In their reply to Judge Suzanne B. Conlon.

Grubb & Ellis' attorneys also note Ehrenberg remains in her position at her current salary, title and office in this north suburb. They also argue Grubb & Ellis should not be on the hook for her legal fees because Ehrenberg has not proven actual damages.

However, Ehrenberg claims her June 2000 employment contract is covered by Grubb & Ellis' 1999 executive change of control plan. That plan, which among other things guarantees the executives' employment, position and pay for two years, triggered when Kojaian Investors, LLC widened its stake in Grubb & Ellis to 58% in September. The change of control plan is triggered when an investor acquires at least 25% of the company, Ehrenberg's lawsuit contends.

Her lawsuit also claims the executive change of control plan provides for the company to pay employees' legal fees in order to "level the playing field" in disputes arising over the deal. One of the law firm's bill for November totaled $6,050, at $250 per hour.

Ehrenberg claims that while other executives were pressured to sign new contracts not covered by the change of control plan, she refused when asked by Barovick. She also argues the company paid legal bills for former president of institutional services Douglas Frye in his dispute with the company upon termination.