## Facts

- Petrie Stores Corporation recruited Michael J. Boyle, a senior retail executive, to serve as president and chief executive officer as successor to the founder-chairman, Milton Petrie.
- Boyle was reluctant to leave a secure, highly compensated position and sought contractual protection against arbitrary discharge.
- The parties, represented by sophisticated counsel, executed a detailed written employment agreement providing:
  - a five-year term beginning November 1, 1982;
  - Boyle’s “general supervision” over the business subject to board control;
  - specific, enumerated grounds for termination “for cause”; and
  - a large liquidated-damages payment (over $2.1 million, excluding certain benefits) if Boyle was terminated other than for cause or material breach.
- After Boyle started, he and Milton Petrie quickly clashed over authority and day-to-day control, culminating in a heated argument.
- On January 13, 1983, after roughly two months, the board terminated Boyle at Milton Petrie’s insistence.
- Boyle sued for breach of contract, seeking the contract’s liquidated damages and related benefits (including stock options).
- Petrie Stores argued Boyle was terminated “for cause” and, alternatively, that the liquidated-damages clause was an unenforceable penalty or unconscionable.

## Issues

1. Whether Boyle’s conduct fit the contract’s enumerated grounds for termination “for cause,” excusing payment of liquidated damages.
2. If the termination was without cause, whether the liquidated-damages provision was enforceable under New York law or void as a penalty or unconscionable term.

## Decision

- The court held Boyle was not terminated “for cause” because the proven conduct reflected management conflict and disagreement over authority, not contract-defined misconduct such as willful misconduct or dishonesty.
- The court found Petrie Stores breached the fixed-term agreement by terminating Boyle without a contractually recognized cause.
- The court upheld the liquidated-damages clause as valid and enforceable, not a penalty and not unconscionable.
- The court awarded Boyle the contractually specified liquidated damages and associated contractual benefits, including stock-option benefits.

## Legal Principles

- Where an executive employment agreement expressly defines “for cause” grounds, courts apply those definitions as written and do not expand them to cover generalized dissatisfaction, personality conflicts, or “loss of confidence.”
- A liquidated-damages clause is enforceable if, at contracting, actual damages from breach were difficult to measure and the stipulated amount was a reasonable estimate rather than grossly disproportionate to probable loss.
- In evaluating liquidated damages, courts consider factors including sophistication of the parties and counsel, bargaining power, the clause’s relationship to total promised compensation, and whether the term functions to compensate rather than punish.
- A substantial stipulated sum may be upheld when it reflects a negotiated allocation of risk in a fixed-term executive contract and approximates expected compensation for the promised term.

## Conclusion

The court treated the termination as a breach of a negotiated fixed-term executive contract, rejected “for cause” justifications not grounded in the contract’s enumerated standards, and enforced the parties’ liquidated-damages remedy as a reasonable, non-penal estimate of difficult-to-quantify losses from premature discharge.


Boyle v. Petrie Stores Corp., 518 N.Y.S.2d 854 (N.Y. Sup. Ct. 1985)