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Current Developments in the Commercial Divisions of the
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Posted: June 21, 2017

Failure to Set Standards For Award of Stock Options Breach of Implied Covenant of Good Faith

On June 15, 2017, the First Department issued a decision in Zakrzewski v. Luxoft USA, Inc., 2017 NY Slip Op. 04906, holding that allegations that the defendant failed to set standards by which the plaintiff could earn stock options stated a claim for breach of the implied covenant of good faith and fair dealing, explaining:

The complaint states a cause of action for breach of the implied covenant of good faith and fair dealing. It alleges that defendant’s representative, acting with authority, sent plaintiff a letter offering him employment, with an email saying that plaintiff would have the ability to earn up to $250,000 worth of defendant’s restricted stock, pending defendant’s acquisition of plaintiff’s former employer and provided that plaintiff met certain goals; it further alleges that defendant failed to set goals. Based upon the language of the email, a reasonable person in plaintiff’s position would be justified in understanding that defendant was obligated to set goals for plaintiff to enable him to receive the fruits of the offer. Defendant’s alleged failure to set goals had the effect of destroying or injuring plaintiff’s right to earn the stock.

(Internal quotations and citations omitted).

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