Bradford v. New York Times Co.

Decision Date21 June 1974
Docket NumberD,No. 784,784
Citation501 F.2d 51
Parties1974-2 Trade Cases 75,149 Amory H. BRADFORD, Plaintiff-Appellant, v. The NEW YORK TIMES COMPANY, Defendant-Appellee. ocket 73-2264.
CourtU.S. Court of Appeals — Second Circuit

J. Asa Rountree, New York City (Debevoise, Plimpton, Lyons & Gates, Joseph Leibowitz, New York City, of counsel), for plaintiff-appellant.

John W. Castles 3d, New York City (Lord, Day & Lord, Muriel Bell, Stephen M. Hudspeth, New York City, of counsel), for defendant-appellee.

Before WATERMAN, FRIENDLY and MULLIGAN, Circuit Judges.

MULLIGAN, Circuit Judge:

This is an appeal from a judgment dismissing the plaintiff's complaint after a non-jury trial before Hon. Morris E. Lasker, United States District Judge, Southern District of New York, which was conducted in October, 1972. Judge Lasker's opinion, not yet reported, was filed on July 17 and the judgment appealed from was entered on July 18, 1973. Affirmed.

The plaintiff, Amory H. Bradford (Bradford), was the General Manager, Vice President and a Director of the New York Times Company (Times) at the time of his voluntary resignation on June 6, 1963. He had been employed by the Times since 1947 in various executive capacities. At the time of his departure and for several years before, Bradford had broad and vital corporate responsibilities. He was in charge of all business operations, reporting directly to the publisher. He headed the Times' advertising, circulation, production and promotion departments. He was responsible for acquiring newsprint. He set policy for the advertising department, including the fixing of rates. He was unquestionably the major figure on the business side of the newspaper.

In 1959, the Times adopted an Incentive Compensation Plan (Plan), and Bradford participated in its drafting and, as a director, voted for its approval. The purpose of the Plan was 'to retain and attract executives and employees who engance (the Times') tradition and contribute to its success.' The Plan provided for 'retirement units' for selected executives and other personnel. The units were based upon the value of the participant's service to the Times. The units were credited to the account of each participant and, upon his death, retirement or severance, he would receive in 10 equal annual installments shares of stock in the Times equal in sum to the number of his units.

Paragraph 14 of the Plan provided:

a. Each Participant shall enter into an agreement with The Times which shall provide that during the period payments will be made to him hereunder and in consideration of such payments, the Participant will not engage in any business or practice or become employed in any position in competition with The Times or which is otherwise prejudicial to the interests of The Times, and that he will hold himself available to The Times for reasonable consultation and other services.

b. In the event of any breach of such agreement by the Participant, The Times, in its sole discretion, may discontinue the installments still unpaid.

Paragraph 27 of the Plan provided:

c. Any decision or action taken by The Times, the Board or the Committee appointed by the Board to administer the Plan, arising out of or in connection with the construction, administration, interpretation and effect of the Plan shall be conclusive and binding upon all Participants and any person claiming under or through any Participant.

After the Plan had been adopted, Bradford was designated as a participant and was awarded 50 units for each of the years 1959, 1960, 1961 and 1962. On December 22, 1959, he entered into an agreement pursuant to Paragraph 14 of the Plan. It provided:

In accordance with Part I of The New York Times Incentive Compensation Plan, in which I am a participant, I agree that during the period that payments are made to me under the Plan and in consideration of such payments I will not engage in any business or practice or become employed in any position in competition with The Times or which is otherwise prejudicial to the interests of The Times and that I will hold myself available to The Times for reasonable consultation and other services.

At the time of his resignation in June, 1963, Bradford had accumulated 205 units (including a dividend credit). In July, 1963, Bradford received his first annual installment under the Plan, consisting of 21 shares of stock (then worth about $7000), leaving a balance due of 184 units (then worth about $60,000). The Times further voluntarily paid him six months salary amounting to $40,000.

On October 21, 1963, Bradford advised Harding Bancroft, a senior executive of the Times, that he was taking a position as an assistant to Mark Ferree, General Manager of Scripps-Howard Newspapers. That organization released an announcement of this fact to the press on October 23, 1963. Bradford became Assistant General Manager of Scripps-Howard Newspapers on January 1, 1964. This organization was a division of E. W. Scripps Company, which owned or controlled a chain of 16 newspapers in the United States, one of which was the New York World-Telegram & Sun. The division provided management services for all of the papers in the chain, including the World-Telegram. Bradford's salary was fixed at $65,000 for one year. After consultation among executives and with outside counsel, the Times, on November 15, 1963, notified Bradford, by a letter which cited Paragraph 14 of the Plan, that by assuming his new position he had relinquished any further rights he might have had under the Plan. In response, by letter dated November 19, 1963, Bradford indicated that, while he did not contest that the Times had the right to discontinue the payments if it considered that a breach had occurred, he did not consider his new position to be 'in any material way in competition with The Times or . . . otherwise prejudicial' to its interests. Before that letter was received (Bradford had written it while on vacation in Greece), the Times' Board had approved the discontinuance of his payments, and it reaffirmed its determination on reconsideration of the matter on December 19, 1963.

Bradford's employment at Scripps-Howard terminated on December 31, 1964. In April, 1966, he wrote to the Times requesting a resumption of payments. Due to stock splits and market changes, Bradford's 184 units had risen in value from $60,000 to about $230,000. On May 2, 1966, the Times advised Bradford that since he had breached his agreement, his rights had terminated and were not resurrected by his subsequent separation from Scripps-Howard. On October 2, 1967, this diversity suit was commenced for breach of contract, seeking delivery of 12,300 shares of Class A common stock of the Times plus cash for dividend credits. The complaint was later amended to include a count alleging a violation of section 1 of the Sherman Antitrust Act, 15 U.S.C. 1, for which Bradford sought treble damages and costs, including reasonable attorneys' fees, pursuant to section 4 of the Clayton Act, 15 U.S.C. 15.

I

On appeal, Bradford principally urges that the noncompetition agreement which he executed pursuant to the Plan constituted a restraint of trade which is void and unenforceable under New York law. The court below found that there was no restrictive covenant in restraint of trade because the agreement did not absolutely prohibit Bradford from working for a competitor, but rather offered him an 'attractive option,' the retention of substantial retirement benefits. The court concluded that this was an 'employee choice' case under New York law and therefore not to be tested by common law restraint doctrines.

Since the Plan and the agreement executed pursuant to its terms did limit Bradford's employment opportunities after he severed his relationship with the Times, we are dealing with a restraint which is valid only if it is found to be reasonable. The New York Court of Appeals has announced that there are powerful considerations of public policy which militate against the sanctioning of the loss of a man's livelihood. The covenant not to compete with a former employer is subject to an 'overriding limitation of reasonableness.' Karpinski v. Ingrasci, 28 N.Y.2d 45, 49, 320 N.Y.S.2d 1, 4, 268 N.E.2d 751, 753 (1971); Purchasing Associates, Inc. v. Weitz, 13 N.Y.2d 267, 272, 246 N.Y.S.2d 600, 603-604, 196 N.E.2d 245, 247-248 (1963). In view of the strong public policy of the state, we cannot accept the theory that New York has adopted the so-called 'employee choice' doctrine, which is alleged to make judicial determination of reasonableness unnecessary. Kristt v. Whelan, 4 A.D.2d 195, 164 N.Y.S.2d 239 (1st Dep't 1957), aff'd without opinion, 5 N.Y.2d 807, 181 N.Y.S.2d 205, 155 N.E.2d 116 (1958), which is urged as the basis for the rule, has not been discussed in any subsequent court of appeals decision. 1 The cases in New York have consistently been concerned with occupational limitations upon former employees, and we do not believe that Kristt is of significance in light of Chief Judge Fuld's searching opinions for the court of appeals in Karpinski and Purchasing Associates.

In any event, we cannot characterize the contract before us as one which afforded Bradford a choice of alternative performances. Bradford's agreement executed pursuant to Paragraph 14 of the Plan provided: 'I agree that . . . I will not engage in any business or practice . . . .' The Plan itself (Paragraph 14) does not provide simply for the conditional forfeiture of benefits, but refers to an 'agreement' business or practice . . ..' The of unpaid installments in the event of a 'breach.' New York recognizes that on occasion a contract may truly provide one of the parties the alternative of one performance or another. Hasbrouck v. Van Winkle, 261 App.Div. 679, 27 N.Y.S.2d 72 (3d Dep't 1941), aff'd without opinion, 289 N.Y. 595, 43 N.E.2d 723 (1942). We do not construe this contract to be...

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