State Supreme Court Finds Promissory Estoppel Viable New Jersey Employment Law Claim for Withdrawal of Job Offer, Including Those to Investment Advisors

A frequent problem in New Jersey employment law occurs when a business offers someone a job without a contract, that person then quits their current employment, the business rescinds the offer, and the employee is left without a job.  There is no contract, so the employee cannot sue for breach of contract.  What can she do?  In an important New Jersey employment law decision, the State Supreme Court ruled in the case of Goldfarb v. Solimine that the employee has a viable claim for promissory estoppel and may recover “reliance damages” from the prospective employer based on what she would have made had she not quit in reliance on the promise and stayed at her prior job.  Promissory estoppel is a legal doctrine which provides that a party should be responsible for the consequences when a promisee relied on its promise and suffers damages when the promisor fails to perform.

 

Background

David Solimine offered Jed Goldfarb a job managing his family’s investment portfolio.  Goldfarb would receive an annual salary of $250,000-$275,000, plus ten to twenty percent of profits made because of his efforts or advice.  Neither the offer nor a contract were ever put in writing.  However, Goldfarb left his current job as a financial analyst (where he had made between $308,000 and $466,000 per year) in reliance on Solomine’s promise of employment.  After Goldfarb quit, Solimine withdrew the offer and Goldfarb found himself unemployed.

Goldfarb sued Solimine in New Jersey Superior Court for promissory estoppel.  The procedural history was long and complex, but these are the main legal points.  Solimine argued that Goldfarb could not sue because the New Jersey Securities Act requires that investment advisor contracts must be in writing, and since there was no written contract Goldfarb was barred from suing him at all.  The trial judge rejected this argument and sent the case to a jury.  The jury found in Goldfarb’s favor.  The trail judge instructed the jury, over Goldfarb’s objections, that the measure of his damages was what he would have made for Solomine, in other words future or “expectation” damages.  The jury awarded Goldfarb $237,000 in expectation damages.

Goldfarb appealed the judge’s ruling on the measure of damages, and Solimine appealed claiming that the New Jersey Securities Act barred the suit in the first place.  The Supreme Court affirmed the finding of liability, but ordered a new trial on damages.  Solimine appealed to the New Jersey Supreme Court.

 

The Supreme Court’s Opinion

The New Jersey Supreme Court rejected Solomine’s appeal.

First, it held that the Securities Act did not bar the suit because Goldfarb was not suing for breach of contract.  The Supreme Court explained that Goldfarb’s “promissory estoppel claim is not an action based on ‘the contract’ referenced in the Securities Law. Rather, it is a claim based on defendant’s broken promise to engage in an employment relationship with plaintiff.”  Promissory estoppel exists independently of whether there was a contract or not.  Therefore, because it was not a suit over an unwritten contract, it was not barred by the Securities Act.  The Supreme Court explained that under New Jersey law, “Promissory estoppel is made up of four elements: (1) a clear and definite promise; (2) made with the expectation that the promisee will rely on it; (3) reasonable reliance; and (4) definite and substantial detriment.”  Because the jury found that Goldfarb had satisfied each of these elements, it properly found that Solimine was liable for promissory estoppel under New Jersey employment law.

Second, the Court held that the proper measure of damages was “reliance damages,” in other words what Goldfarb would have made had he stayed at his prior job.  Damages for breach of contract are expectation damages.  The difference is that contract damages look forward, and damages for promissory estoppel look backward.

The Supreme Court explained that the differences between a claim for breach of contract and one for promissory estoppel could best be explained by looking at the respective damages they allow parties to recover.

The distinction can perhaps most readily be understood through the distinct types of recovery at issue. Benefit-of-the-bargain or expectation damages look forward. Here, they would look ahead to what plaintiff would have earned if he had worked for defendant, and they would grant him recovery based on that projected employment. Defendant is correct that plaintiff here could not recover under the unwritten employment agreement between them: that agreement — “the contract” within the meaning of [the New Jersey Securities Act] — violated the Act’s writing requirement, and so plaintiff is statutorily barred from bringing suit based on that agreement. Plaintiff is not entitled to benefit-of-the-bargain damages from the unachieved investment employment position.

But he is entitled to seek reliance damages. Reliance damages look backward. Here, they would look back to determine what losses plaintiff suffered as a result of his relying on defendant’s later-broken promise — what he would have earned had he not quit his job to work for defendant. A promissory estoppel claim provides equitable relief to restore a plaintiff to the position he would have been in, had the relied-upon promise not been made and later broken. The claim allows relief designed to deter individuals who make promises with the intent that others rely on them and thereafter seek to avoid the consequences of that reliance when the promise is broken. Properly viewed, Goldfarb’s promissory estoppel claim for reliance damages does not violate the Act’s plain language, nor does it undermine the consumer protection purposes of the Securities Act. It is a claim separate and apart from a contract-based claim that would be barred under the Act.

The Court therefore affirmed the jury’s finding that Solimine was liable for promissory estoppel, but remanded the case for a new trial to determine Goldfarb’s reliance damages (which, based on what he was making in his prior job, would likely be more than his expectation damages).

 

The Takeaways

• First, even when there is no written contract, parties cannot get away with breaking concrete promises which the other party has reasonably relied upon without consequence.
• Second, a rescinded job offer may allow the jilted employee to recover reliance damages from the prospective employer which broke its promise to her.
• Finally, all this is irrelevant without proof. Document everything.  Get offers in writing. Send follow-up emails.  Make sure that there are documents supporting your claim.  While testimony can establish a promise, if the other side denies it documentation can be the difference between winning and losing.

 

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