Barnes & Noble Is Sued by Former CEO for Breach of Contract

(Bloomberg) -- Barnes & Noble Inc.’s former chief executive officer sued the company for breach of conduct and defamation, claiming it falsely suggested he’d engaged in sexual misconduct when it fired him after just 14 months on the job.

Demos Parneros accused Leonard Riggio, Barnes & Noble’s founder and chairman, of "falsely and irrevocably" damaging a reputation he had worked for 35 years to build. Riggio made up reasons to fire Parneros after a deal to sell Barnes & Noble fell through and then refused to pay him at least $4 million in severance, Parneros claimed in a lawsuit filed Tuesday.

Barnes & Noble said in a statement that the lawsuit is an attempt to extort money by a CEO who was terminated for sexual harassment, bullying behavior and other violations of company policies. Debra Raskin, Parneros’s lawyer, declined to respond to the company’s statement, but the former CEO denied the allegations in his complaint.

"Parneros had not violated company policies and always conducted himself in a professional manner,” according to the complaint. “Given Riggio’s erratic and unprofessional behavior, the false allegations of cause to fire Parneros rang especially hollow."

Barnes & Noble is searching for its fifth CEO since 2010 as it fights online retailers and tries to lure customers to brick-and-mortar stores plagued by sluggish sales. The bookseller said in a July 3 statement that it fired Parneros for violating company policies, without any reference to sexual harassment allegations. The company said Parneros wasn’t fired “due to any disagreement with the company regarding its financial reporting, policies or practices or any potential fraud.”

Parneros cited that statement in his lawsuit, claiming it was written in a way to falsely suggest that he “had engaged in serious sexual misconduct.”

Parneros offered another reason for his firing, saying an unnamed book retailer made an offer to buy the company in spring 2018 that was accepted by Barnes & Noble. The offer was withdrawn after the potential acquirer conducted due diligence, according to the complaint. That occurred a few months after the company had rejected a buyout offer from Sandell Asset Management.

The deal’s termination upset Riggio, who then became hostile to Parneros and stopped returning his calls or text messages until a July 2 meeting, according to the complaint. The chairman cited Parneros’s interactions with an executive assistant, saying they violated the sexual harassment policy, and fired him, according to the complaint. Riggio also accused Parneros of mistreating the chief financial officer, according to the lawsuit.

The bookseller confirmed the sexual harassment claim in its response to the lawsuit, adding it harmed the whole company.

“Mr. Parneros not only violated his employment agreement, but also compromised the trust and respect that we strive to foster throughout our organization," Barnes & Noble said.

And the retailer defended its chairman.

Riggio is known by “his business associates, colleagues and employees for his impeccable reputation and as an individual and leader that upholds the highest standards of integrity and decency," the company said.

The case is Demos Parneros v Barnes & Noble Inc., 18-cv-7834, U.S. District Court, Southern District of New York (Manhattan).

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