Fox Broadcasting Counterclaims Survive in Part Against Executive Terminated Due to Sexual Harassment Allegations

In Pozner v. Fox Broadcasting Co., 2018 NY Slip Op 30581(U), 2018 WL 1609513 (N.Y.Sup. Ct. Index 652096/2017 April 2, 2018), the court held that Fox Broadcasting stated a counterclaim for breach of contract, but not for breach of fiduciary duty, against a former executive vice president who was terminated from his employment based on sexual harassment complaints from several current and former Fox employees.

In sum, after being terminated due to the sexual harassment allegations, the executive (Pozner) sued for breach of contract. Defendant Fox answered and interposed two counterclaims (the first for breach of contract and the other for breach of fiduciary duty). Pozner moved to dismiss those counterclaims under CPLR 3211(a)(7).

As to the breach of contract counterclaim, the court explained:

Fox’s first counterclaim for breach of contract is sufficient to withstand dismissal. Pozner expressly agreed to comply with the Standards and Fox Facts, both of which were incorporated into his employment contract. Specifically, in paragraph 6 (b) of the contract, Pozner “agree[d] to abide by [the Standards] at all times during [his] employment by [Fox]” (exhibit A to declaration of Michael J. Goettig, Employment Contract at 2). In addition, his employment also was expressly “subject to [Fox’s] policies contained in ‘Fox Facts’ ” (id.). Because these policies and handbooks were plainly incorporated into the contract, Fox may bring a claim for breach of those policies and provisions.

Contrary to Pozner’s contention, the fact that he had no input in the drafting of the Standards and Fox Facts does not allow him to avoid their application. According to the allegations in the counterclaim, as an executive employee, he was familiar with Fox’s workplace expectations, and he was provided with copies of the Standards beginning as early as 1998, and the Fox Facts as early as 2006. Finally, Fox has pleaded damages, and, in any event, nominal damages are available for a breach of contract.

However, the court held that Fox’s breach of fiduciary duty counterclaim was not tenable. It was true that “[a]s a Fox executive and employee, [Pozner] owed a duty of loyalty to Fox … which bound him to exercise the utmost good faith and loyalty in the performance of his duties” and that he was prohibited from acting in any manner that was inconsistent with his agency[.]”

The court continued:

This duty of loyalty, however, has only been extended to cases where the employee act[s] directly against the employer’s interests – as in embezzlement, improperly competing with the current employer, or usurping business opportunities… . There are no such allegations against Pozner in the breach of fiduciary counterclaim.

Fox has failed to present, and I haven’t found any New York case, in which sexual harassment by an executive, without more, forms the basis for a breach of the duty of loyalty claim, resulting in the employer’s recovery of the employee’s salary for the entire term of such conduct. Rather, Fox relies only on cases in other non-controlling jurisdictions, that are clearly distinguishable on their facts.

The court therefore dismissed Fox’s breach of fiduciary duty counterclaim, but permitted the breach of contract counterclaim to stand.