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Keywords

contractbreach of contractplaintiffdamagesarbitrationliabilitycorporation
contractplaintiffdefendantdamagescorporation

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Musman v. Modern Deb, Inc., 50 A.D.2d 761, 377 N.Y.S.2d 17

Facts

The plaintiff was a shareholder and officer of Modern Deb, Inc. when it was acquired by First Republic Corporation of America. An employment agreement was established, ensuring the plaintiff would receive full compensation and bonuses if discharged without cause. After being fired on April 16, 1971, an arbitration determined the termination was without cause, leading the plaintiff to sue Modern Deb and its parent and subsidiaries for breach of contract.

The relevant circumstances in this action for damages for breach of an employment contract are as follows: plaintiff had been a shareholder and officer of defendant Modern Deb, Inc., when on December 31, 1968, all of the stock of Modern Deb was exchanged for stock of defendant the First Republic Corporation of America.

Issue

Did the employment contract's provisions exempt the plaintiff from the duty to mitigate damages, and were the parent corporation and subsidiaries liable for the employer's obligations under the contract?

Did the employment contract's provisions exempt the plaintiff from the duty to mitigate damages, and were the parent corporation and subsidiaries liable for the employer's obligations under the contract?

Rule

The court ruled that the employment contract's provision fixed the employer's exposure following a discharge without cause and removed the ordinary rule requiring mitigation of damages.

The mere fact that the contract required the general manager-designer, in the apparel business, to perform reasonable responsibilities and duties for his employer's parent and its subsidiaries did not alter his employment relationship and ipso facto make him an employee of those other corporations.

Analysis

The court found that the employment agreement clearly stated that if the plaintiff was discharged without cause, he was entitled to full compensation and bonuses for the remainder of the term, thus eliminating the need for mitigation. The court also determined that the relationship between Modern Deb and its parent corporation did not warrant liability for the parent, as they operated in different lines of business and maintained separate corporate identities.

The court found that the employment agreement clearly stated that if the plaintiff was discharged without cause, he was entitled to full compensation and bonuses for the remainder of the term, thus eliminating the need for mitigation.

Conclusion

The court modified the judgment to increase the damage award against Modern Deb, Inc. to $108,330.50 and dismissed the action against First Republic Corporation of America and its subsidiaries.

Judgment modified on law and facts by increasing award and dismissing action against parent corporation.

Who won?

The plaintiff prevailed against Modern Deb, Inc. due to the clear terms of the employment contract that entitled him to damages after being discharged without cause.

Judgment, Supreme Court, New York County, entered April 3, 1975, awarding plaintiff damages of $59,187.03 against defendants Modern Deb, Inc. and the First Republic Corporation of America, but dismissing the action against defendants Galapago, Ltd. and Murray Lincoln, Inc.

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