Montclair settles CFO lawsuit for $1.25 million; Township on hook for $1M

Hardly 12 hours before residents were to begin selecting a new council, sitting members of Montclair's governing body voted unanimously to approve a tentative settlement agreement worth $1.25 million, ending the long-running litigation between the township and its CFO.

However, just $250,000 of that amount is going to the plaintiff, Finance Officer Padmaja Rao, and will be paid by the municipality's joint insurance fund. That leaves the township on the hook for $1 million in attorney fees, according to Deputy Mayor Bill Hurlock, who presided over Monday night vote.

“It’s in the best interest of the town to settle the matter for business purposes. There is no admission of any wrongdoing by the township,” Township Attorney Paul Burr said. “There is unlikelihood of what would happen long term and uncertainties in what would happen with the litigation.”

The tentative agreement has yet to be signed, according to Rao's attorney, Nancy Smith, who represented the CFO along with Roosevelt Nesmith, while both parties iron out the exact language.

"It's not a big damages case," Smith said of her client's paltry payment compared to her and Nesmith's fees, because Rao was not fired, leaving out the option of requesting back pay and other loss of benefits and income. "But it's an important case."

Montclair's private attorney Stefani Schwartz was not immediately available for comment.

The agreement releases both the Township and its ex-Manager Timothy Stafford from the lawsuit but does not preclude Rao from filing new claims against Montclair, or its employees, should the harassment or retaliatory actions continue, Smith said.

Nor does the agreement include a so-called "non-disparagement clause," which would have precluded Rao from discussing details of her alleged harassment or discrimination, even when such statements would reflect poorly on the township, according to Smith, who said the state Supreme Court ruled against including such provisions in settlements last week.

Rao, who has served as chief financial officer since 2015, filed suit against Stafford and the municipality as an entity in October 2022. In her complaint, Rao alleged a pattern of bullying and abusive behavior against female employees at the hands of Stafford, who served as Montclair's chief executive until his ouster last year.

Furthermore, Rao accused Stafford and Mayor Sean Spiller of shutting her out of multiple duties as CFO in retaliation for her having raised concerns about the former's conduct, potentially falsified certifications signed by multiple council members that permitted them to receive government health benefits, alleged discriminatory practices at the Fire Department, and a supposed culture among the governing body of shielding Stafford from consequence, the complaint said.

Smith was unsure what motivated the township to come to the table so suddenly: "I have no idea why it happened now. They called us up, I didn’t call them." But added the fact that all of the sitting councilors, save for Robert Russo, are leaving their posts as part of July's re-organization meeting.

Russo, who was absent at Monday's meeting, is the only incumbent running in Tuesday's election. Spiller was not at the meeting, either. The remaining five councilors voted unanimously to approve the agreement.

"What motivated my client is, with the town council done, can we not start out as adversaries," Smith said, adding that it's possible the township did not want the new governing body to have access to all the records that have been filed or requested in the case, but acknowledged that was mere conjecture on her part.

The $1 million in fees will be split evenly between her and Nesmith, and would have been far greater had the township continued to trial.

"It was contentious, they have an army of lawyers on their side. Every individual council member had a lawyer, the town had a lawyer, and for a while the town had two law firms," Smith said of the various attorneys the township employed before and after adopting an indemnity ordinance last year, which requires the township to cover the legal defense of employees subject to litigation.

"I’d love to know how much all the attorneys on the town’s side made," Smith said.

This article originally appeared on NorthJersey.com: Montclair settles CFO lawsuit; will cost taxpayers $1M