Gallagher v. Lambert
New York Court of Appeals
549 N.E..2d 136 (1989)
Gallagher (plaintiff) was an at-will employee, officer, and director of Eastdil Realty (defendant), a close corporation. In the summer of 1984, Gallagher purchased an 8.5 percent interest in Eastdil in response to an offer Eastdil made to all its executive employees. The purchase was subject to a buy-back provision, which stated that upon “voluntary resignation or other termination” of employment prior to January 31, 1985, Gallagher would be required to sell the stock back to the corporation at book value. After January 31, 1985, the buy-back price would be keyed to Eastdil’s earnings. On January 10, 1985, Eastdil terminated Gallagher. Gallagher demanded that his shares be repurchased according to the post-January 31 terms. Eastdil refused. The book value of Gallagher’s holdings was $89,000, while the new valuation would have been around $3,000,000. Gallagher sued Eastdil, alleging breach of the fiduciary duty of good faith and fair dealing. Eastdil moved for summary judgment. The trial court denied the motion, holding that issues of fact relating to Gallagher’s termination remained. The appellate court reversed.
Rule of Law
Holding and Reasoning (Bellacosa, J.)
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Dissent (Kaye, J.)