Thompson v. Advanced Armament Corp.
614 F. App'x 523
2d Cir.2015Background
- Thompson and Brittingham sued AAC and related entities after termination of their employment under non-cause provisions.
- District court held Brittingham’s termination for gun-law compliance violations breached the contracts and awarded limited salary damages and certain fees.
- District court found Thompson’s termination partly improper for lacking written notice of demand, but ultimately found a failure of a reasonable board determination for her termination.
- Court assumed New York law; breach may be proven via contract breach or implied covenant of good faith and fair dealing.
- Judgment granted in part to plaintiffs and cross-appellants; appellate court affirmed in part, modified to declare broader invalidity of restrictive covenants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was Brittingham’s termination for cause; breach via contract or implied covenant? | Brittingham breach via implied covenant due to bad-faith conduct. | Terminations were for cause under contract terms; no implied covenant breach. | Affirmed breach via implied covenant; alternative ground supports contract breach. |
| Did Thompson receive proper notice and board determination for termination? | Notice/demand and cure provision required; Thompson argued improper termination. | No notice requirement in contract; challenge focuses on board determination. | Not required by contract; but termination invalid for lack of reasonable board determination. |
| What is the proper salary-damages cap for these terminations? | Damages should exceed one year’s salary to deter breach. | Salary damages limited to one year under contract. | Affirmed the one-year salary damages cap. |
| How should Thompson and Brittingham recover attorneys’ fees? | Indemnification provisions aid fee-shifting. | Fees should be limited by contract and discretion of district court. | Thompson: denial affirmed; Brittingham: fee-shifting provisions supported recovery. |
| Are the restrictive covenants enforceable after bad-faith findings? | All covenants invalid due to bad-faith actions. | Some covenants may remain enforceable; expirations moot forward-looking issues. | Declared all now-expired covenants invalid; extended invalidity to cover raiding, solicitation, and disparagement. |
Key Cases Cited
- State Farm Mut. Auto. Ins. Co. v. Mallela, 4 N.Y.3d 313 (N.Y. 2005) (material noncompliance distinguished from technical violations)
- Capital Ventures Int’l v. Republic of Argentina, 552 F.3d 289 (2d Cir. 2009) (contract interpretation reviewed de novo)
- National R.R. Passenger Corp. v. McDonald, 779 F.3d 97 (2d Cir. 2015) (breach of implied covenant can affirm contract breach)
- Kader v. Paper Software, Inc., 111 F.3d 337 (2d Cir. 1997) (implied covenant violation requires purposeful sabotage)
- Rocanova v. Equitable Life Assurance Soc’y of U.S., 83 N.Y.2d 603 (N.Y. 1994) (contract damages and tort distinctions in breach cases)
- Harris v. Provident Life & Acc. Ins. Co., 310 F.3d 73 (2d Cir. 2002) (breach of implied covenant is a contract breach)
- Mid-Hudson Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp., 418 F.3d 168 (2d Cir. 2005) (indemnification scope and attorney’s fees interpreted)