Monday, July 14, 2014
In Random Ventures, Inc. v. Advanced Armament Corp., the District Court for the Southern District of New York found that a party that wrote the word "flounder" on a signature line was not bound by the document on which he scribbled that word.
For the full context, you would have to read the 117-page District Court opinion. Our highly-consdensed summary is as follows:
Kevin Brittingham formed a company, Advanced Armament Corp. (AAC) that designed and manufactured silencers for firearms. AAC thrived and in 2009, a large firearms manufacturer, Remington Arms Company (Remington) acquired it. Remington paid $10 million up front, and Brittingham was to get another $8 million if he was still around as an AAC employee (now Remington's subsidiary) in 2015. He was terminated at the end of 2011 and his partner from the original business, Lynsey Thompson, was terminated one month later. Both Brittingham and Thompson sued for breach of contract and breach of the covenant of good faith.
The Court noted that Brittingham socialized with his clients by riding dirt bikes, engaging in aerial pig hunts and attending strip clubs. He ran a successful business but, as the Court observed, he is nobody's idea of a perfect fit for a corporate culture. Tensions arose in the relationship over AAC's compliance with federal regulations relating to the handling of firearms. The Court concluded unequivocally that Remington (not Brittingham) bore responsibility for the compliance failures. Nontheless, Remington suspended Brittingham and Thompson over compliance issues.
Remington offered Brittingham a new employment agreement. The agreement was really an ultimatum: either sign this acknowledgment that we have grounds to terminate you for cause and then you can return to work on a probationary basis or consider yourself terminated for cause right now. Of course, termination for cause would cost Brittingham $8 million. The court characterized this document as an $8 million hold-up (with or without a silencer?), which Brittingham "consistently refused to execute." Eventually Brittingham (or someone) scribbled "Flounder" on the signature line and faxed the agreement to Remington. The Court seems to have found that the scribble did not bind Brittingham, since a sophisticated party like "Remington could not reasonably have been duped into believing Brittingham had adequately executed the proposed amended EA based on the scribbling on the last page." But it is not clear that such a finding is necessary to the Court conclusion, since Remington never executed the new agreement.
It seems that the Court's finding that the agreement was not enforceable did not actually turn on the issue of signature. The Court refused to enforce an agreement that Brittingham could be terminated for cause when, in fact, no grounds for termination for cause existed.
To the extent that Brittingham and Thompson did agree to amended employment terms, however, the Court finds as a factual matter that they did so under false pretenses – as determined above, defendants did not have Cause to terminate either plaintiff at the time of their suspensions.
The Court rejected Remington's argument that by writing "Flounder" and by returning to work, Brittingham had waived any objection to the amended employment agreement. The Court construed Brittingham's act as one of defiance rather than as one of waiver.
Interesting aside related to Nancy Kim's post from February about Rocket from the Crypt and acceptance by tattoo. Before it was acquired, Brittingham's company ran a promotion promsing a free silencer to anyone bearing a tattoo with his company's logo. The promo cost the company $250,000.