ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, April 19, 2012

If you liked it then you should have put a pen to it...

Quill-penSamuel Goldwyn remarked that “an oral contract isn’t worth the paper its written on.”  But Daniel Ryan fared ok -- that is, after a trial and two appeals. 

In 2003 Ryan was approached about leaving a brokerage firm to join Kellogg Partners, a broker-dealer being formed to trade stocks for institutional investors.  Ryan told Kellogg he wanted a package of $350,000 to leave his current position, and Ryan testified at trial that Kellogg promised to compensate him with $175,000 salary and a non-discretionary $175,000 bonus to be paid out in late 2003 or early 2004.  Ryan took the job with Kellogg.  Ryan testified that Kellogg kept delaying payment of the bonus and, ultimately offered Ryan $20,000 and terminated him.  Ryan sued for breach of contract and violations of NY Labor Law.

At trial, Kellogg’s managing partner “in every conceivable way contradicted Ryan’s testimony on the topic of bonuses; in particular, he told the jury that the subject ‘simply did not come up’ during the course of bringing Ryan on board at Kellogg, and that bonuses were discretionary only.”  The jury discredited Kellogg’s testimony and found in favor of Ryan.

Addressing Kellogg’s motion to set aside the jury verdict, the trial court held that the bonus agreement was supported by consideration because it was forward looking, not compensation for a benefit previously conferred.  The trial court also held that the bonus agreement did not come within the statute of frauds because it was capable of being performed within one year.

By the time the case worked its way to the New York Court of Appeals, Kellogg had a few theories for reversal; in particular, Kellogg argued that the evidence was insufficient to support the jury’s verdict because statements in Ryan’s employment application and Kellogg’s employee handbook negated Ryan’s testimony of an agreement to pay him a non-discretionary bonus.  New York’s highest court unanimously held that the job application and employee handbook, while stating that Ryan was an at-will employee, said nothing about bonus policy and, therefore, did not negate his testimony.

The New York Court of Appeals opinion is highly recommended for contracts profs – it seems that Kellogg’s lawyers raised every NY GOL defense they could think of (statute of frauds, benefit previously conferred and even an oral modification unsupported by consideration).

The lesson, kids: get it in writing.

Ryan v. Kellogg Partners Institutional Services (March 27, 2012 New York).

[Meredith R. Miller]

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