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Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts
Posted: August 7, 2016

“Sole Discretion” Provision Must Be Exercised in Good Faith

On July 29, 2016, Justice Scarpulla of the New York County Commercial Division issued a decision in Merola v. Kahn Lucas Lancaster, Inc., 2016 NY Slip Op. 31475(U), denying summary judgment because of questions of fact regarding whether a party with “sole discretion” under an employment contract to decide whether the critera for discharging an employee were met did so in good faith, explaining:

Although the Employment Agreement conferred the discretion to determine cause on KLL, KLL did not have the right to exercise such discretion in bad faith, to manufacture cause where none existed. Therefore, the Employment Agreement does not prevent Merola from challenging KLL’s determination that she was terminated for cause for failing to perform her duties.

(Internal quotations and citations omitted) (emphasis added).

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