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The 2nd Circuit Court of Appeals ruled unanimously in favor of fashion designer Todd Oldham this week in Manhattan. Oldham was embroiled in a battle against Gap Inc. owned clothing store Old Navy over a breach of contract lawsuit. In reaching its decision, the Court of Appeals said that the Manhattan district court erred in dismissing two counts from Oldham’s complaint against the retailer.
The lawsuit was based on Oldham’s dismissal as the creative director for Old Navy and the subsequent breach of a deal whereby the clothing retailer allegedly agreed to develop a clothing line named after Oldham, reports New York Post. The agreement was made between Old Navy and Oldham’s company, L-7 Designs, Inc.
The unanimous opinion of the 2nd Circuit Court of Appeals stated that Old Navy failed to negotiate in good faith when it cited "economic conditions" as reason for the breach of the promise to launch Oldham's clothing line in 2008.
In January 2010, a federal district court in Manhattan ruled that the Gap-owned retailer made good faith efforts to negotiate and strike a deal with Oldham, according to a press release by Woman's Wear Daily. The district court judge stated that Oldham was making "extraordinarily high demands" including "$75 million in compensation for lost royalties and reputational damages."
Oldham subsequently lowered the amount of requested damages to $20 million.
While the district court dismissed two counts on Oldham's complaint, the appeals court disagreed. As cited in the decision of the 2nd Circuit Court of Appeals, the district court erred in "dismissing two of those counts outright because L-7 plausibly alleged three bases for breach of contract for failure to negotiate in good faith (Count III) and wrongful termination (Count I)."
As such, Oldham's claims have been reinstated and he will be allowed to pursue the breach of contract claims against Old Navy.