Gallagher v. Lambert

74 N.Y.2d 562, 549 N.Y.S.2d 945, 549 N.Y.2d 136 (1989)

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Nature of the Case

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Facts

Gallagher (P) purchased stock in the Eastidil Realty (D) close corporation with which he was employed. The purchase of his 8.5% interest was subject to a mandatory buy-back provision: if his employment ended for any reasons before January 31, 1985, the stock would return to the corporation for book value. P was employed by as a mortgage broker. Later, he returned to the company as a broker, officer, and director, serving additionally as president and chief executive officer of D's wholly owned subsidiary, Eastidil Advisors, Inc. At all times, P was an employee at will. In 1981, D offered all its executive employees an opportunity to purchase stock subject to a mandatory buy-back provision. On January 10, 1985, P was fired by D. P demanded payment for his shares calculated on the post-January 31, 1985 buy-back formula. P asserted eight causes of action. Only three, those based on alleged breach of fiduciary duty of good faith and fair dealing, are before us. The trial court denied Ds' motion for summary judgment on these claims, stating that factual issues were raised relating to Ds' motive in firing P. The Appellate Division, by divided vote, reversed, dismissed those claims and ordered payment for the shares at book value.