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Thompson v. Advanced Armament Corp., LLC

United States Court of Appeals for the Second Circuit

June 11, 2015, Decided

No. 14-1764-cv(L), No. 14-1983-cv(XAP), No. 14-1990-cv(XAP)

Opinion

 [*524]  SUMMARY ORDER

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment entered on May 12, 2014, is AFFIRMED in part and MODIFIED in part.

The parties in this action, Lynsey Thompson, Kevin Brittingham, Random Ventures, Inc., Advanced Armament Corp., LLC, and Remington Arms Company, LLC [**2]  (the latter two, collectively, "AAC"), appeal or cross-appeal from a judgment entered after a bench trial. ] In such circumstances, we review the district court's findings of fact for clear error and its conclusions of law de novo. See Citigroup Global Mkts. Inc. v. Abbar, 761 F.3d 268, 273 (2d Cir. 2014). We assume the parties' familiarity with the facts and record of prior proceedings, which we reference only as necessary to explain our decision to affirm in part and modify in part.

On appeal, AAC primarily challenges the district court's determination that it breached the operative contracts by terminating both Brittingham and Thompson, purportedly "for cause." We affirm that ruling, albeit for reasons somewhat different from those stated by the district court. We also affirm the holding that Brittingham's and Thompson's salary damages are capped at one year's salary and the rulings (a) awarding Brittingham attorneys' fees and (b) denying Thompson attorneys' fees. We modify, however, the judgment to void all restrictive covenants.

1. Termination of Brittingham

The district court determined that Brittingham's termination for firearms compliance violations was a breach of contract because none of the alleged violations were unusual or outside the normal [**3]  course of AAC's business practices and, therefore, were not "material." See Random Ventures, Inc. v. Advanced Armament Corp., No. 12 Civ. 6792 (KBF), 2014 U.S. Dist. LEXIS 3984, 2014 WL 113745, at *44 (S.D.N.Y. Jan. 13, 2014) (holding that "to constitute a material violation, the conduct would need to have reached beyond AAC's customary (and accepted) business practices"). That interpretation of material, an issue of law we review de novo, is erroneous. See Capital Ventures Int'l v. Republic of Argentina, 552 F.3d 289, 293 (2d Cir. 2009) (holding contract interpretation reviewed de novo).

] "Material," especially when used with regard to violations of the law or noncompliance with a rule, means non-technical. See State Farm Mut. Auto. Ins. Co. v. Mallela, 4 N.Y.3d 313, 321-22, 827 N.E.2d 758, 794 N.Y.S.2d 700, 703 (2005) (contrasting "material failure[s] to abide by state and local law" with "[t]echnical violations"); Madison Ave. Leasehold, LLC v. Madison Bentley Assoc., 30 A.D.3d 1, 8, 811 N.Y.S.2d 47, 53 (1st Dep't) (contrasting "material default" with "technical violation"), aff'd, 8 N.Y.3d 59, 861 N.E.2d 69, 828 N.Y.S.2d 254 (2006); Hungerford & Terry, Inc. v. Suffolk Cnty. Water Auth., 12 A.D.3d 675, 676, 785 N.Y.S.2d 506, 508 (2d Dep't 2004) (contrasting "material" noncompliance with "technical noncompliance"). Thus, while an inadvertent failure to satisfy record-keeping requirements might not be material, willful failures, denominated as federal felonies, cannot be deemed immaterial. Here, AAC asserted that Brittingham committed and allowed to be committed numerous federal felonies—including willful record keeping  [*525]  violations and improper transfers of machine guns. Even if there was a culture of non-compliance at AAC, such conduct necessarily would constitute a "material failure . . . to comply [**4]  with applicable laws or governmental regulations with respect to the Company's [AAC's] operations" under Brittingham's employment agreement. J.A. 795.

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614 Fed. Appx. 523 *; 2015 U.S. App. LEXIS 9717 **; 2015 WL 3619581

LYNSEY THOMPSON, Plaintiff-Appellee-Cross-Appellant, RANDOM VENTURES, INC., KEVIN BRITTINGHAM, Plaintiffs-Counter-Defendants-Appellees-Cross-Appellants, v. ADVANCED ARMAMENT CORP., LLC, REMINGTON ARMS COMPANY, LLC, Defendants-Counter-Claimants-Appellants-Cross-Appellees.

Notice: PLEASE REFER TO FEDERAL RULES OF APPELLATE PROCEDURE RULE 32.1 GOVERNING THE CITATION TO UNPUBLISHED OPINIONS.

Prior History:  [**1] Appeal from a judgment of the United States District Court for the Southern District of New York (Katherine B. Forrest, Judge).

Random Ventures, Inc. v. Advanced Armament Corp., LLC, 2014 U.S. Dist. LEXIS 3984 (S.D.N.Y., Jan. 13, 2014)Random Ventures, Inc. v. Advanced Armament Corp., LLC, 2014 U.S. Dist. LEXIS 66453 (S.D.N.Y., May 2, 2014)Random Ventures, Inc. v. Advanced Armament Corp., LLC, 2014 U.S. Dist. LEXIS 68305 (S.D.N.Y., Feb. 6, 2014)

CORE TERMS

termination, implied covenant, district court, attorney's fees, violations, restrictive covenant, salary

Civil Procedure, Trials, Bench Trials, Appeals, Standards of Review, Clearly Erroneous Review, De Novo Review, Business & Corporate Compliance, Contracts Law, Breach, Material Breach, Contracts Law, Breach of Contract Actions, General Overview, Labor & Employment Law, Wrongful Termination, Breach of Contract, Covenants, Contract Interpretation, Good Faith & Fair Dealing, Remedies, Damages, Compensatory Damages, Abuse of Discretion, Sanctions, Costs & Attorney Fees, Attorney Fees & Expenses