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Connaughton v Chipotle Mexican Grill, Inc. Case Study


Introduction

In 2010, Mr. Connaughton (plaintiff) sold his business concept of ramen cuisine to Chipotle Mexican Grill, Inc (defendant). The majority shareholder, CEO, and founder of Chipotle employed the plaintiff as an employee who could be trusted with the implementation of the ramen cuisine concept. The employment contract stated that the plaintiff would be compensated as an employee whereby the base salary would be provided. After three years of work, the petitioner would be entitled to certain equity in the company. Since the plaintiff was an employee of the defendant, he could not engage in any other outside projects concerning the development of ramen cuisine. The plaintiff worked for one and a half years of employment, and the plaintiff realized that the defendant had engaged in a confidential agreement with David Chang to develop a ramen restaurant concept.

The legal issues in the case are that the defendant allowed the plaintiff to develop the ramen concept without being informed of the prior non-confidential agreement signed by the defendant and Chang. The defendant argues that his contract with the complainant got terminated due to loss of confidence in the ramen concept, as well as the claim that the complainant engaged in external work. The plaintiff argues that the defendant should be charged with fraudulent inducement and unjust enrichment. In particular, the defendant introduced the plaintiff through fraudulent means to work without informing of the non-disclosure agreement signed by Chang. Any information revealed would have enabled the plaintiff to avoid becoming an employee of Chipotle.

In the paper, I argue that there was no intention of the defendant to defraud or mislead the plaintiff into signing the employment agreement. Besides, the plaintiff cannot present any evidence that they have suffered damages in the process of implementing the ramen concept at Chipotle.

Majority vs. Dissenting opinions

The dissenting opinion is based on the notion that the court did not properly dismiss the claim. The dissenting opinion builds on the assumption that the defendant failed to disclose information regarding the contract with Mr. Chang. The information withheld would have assisted the plaintiff in making the right decision on whether to continue with the ramen project. In particular, the implementation of the ramen concept was affected by the non-disclosure agreement between the defendant and Mr. Chang. Despite the failure to disclose full information, the court is right to dismiss the claim that the defendant engaged in the fraudulent inducement.

Since the plaintiff is an employee of Chipotle, they are not liable to any litigation initiated by Mr. Chang. Furthermore, there was no allegation that the plaintiff has stolen the Momofuku Ramen, as well as any damage to professional reputation. Under the terms of employment, the plaintiff does not present any claim that the contract agreement was not met.

An employment contract is signed at will. Under the employment contracts, there are no valid accounts for damages arising from the defendant’s actions. Any profits to Chipotle would not be a benefit to the plaintiff since the agreement is based on the contract as an employee but not on the profits generated from the ramen concept. The court argued that the plaintiff does not qualify for the stock since the employment agreement stated that the plaintiff must work for three years.

Even when there would be no fraud, the plaintiff has no legal jurisdiction to seek a share of alleged profits. In the case of Caruso v. Hirsch, 2007 (par 4), the wife’s proposed amended counterclaim demonstrated that she suffered damages and losses attributed to malpractice of the Caruso law firm. Caruso failed to protect the interest of the wife before the husband filed a bankruptcy case by the husband in the matrimonial property case. However, in the case of (Mr. Connaughton), there is no indication that damages exist. Mr. Connaughton presents allegations that future profits could have been lost. The judge cannot calculate the alleged profits.

In the case of Lama v. Smith Barney (par 11), in most fraud cases, the measure of the damage is based on the loss sustained directly from the wrong. The plaintiff in the case was required to present the evidence that he had lost something of value. CBS had duped the petitioner to accept something of a much lower value. The court, when calculating damages arising from fraud cases, looks at what the plaintiff has lost, and not on what might be gained in the future. The plaintiff (Mr. Connaughton) cannot rely on alleged profits without presenting evidence on losses incurred.

The dissenting opinion argues that the defendant engaged in fraud. Fraud, according to dissenting opinion relates to the loss sustained as a result of wrongful dismissal. Damages arising from fraud should be calculated based on what the plaintiff lost but not on alleged profits. Damages to the plaintiff should be viewed in terms of the gains on the ramen concept, had the plaintiff avoided the Chipotle offer. The judge does rely on the argument on what might have been gained. The plaintiffs should present evidence on when they lost but not what might have been gained inside or outside Chipotle.

Societal and business implications

The majority opinion that the plaintiff shows the evidence of loss or damages as a result of wrong implies society and business. Employers can use such arguments to terminate employment contracts signed with employees. In particular, the employee has no damage or loss when the contract is terminated wrongfully. Employers have the right to dismiss the employee unfairly without any reason. A society that does not consider the wishes of the employee is bound to fail. Compensation for damages incurred by employees should not be viewed in terms of money. Within society, employees take care of children and other family members.

Damage should be considered concerning society members affected as a result of wrongful termination of the contract. Termination of an employment contract is celebrated in the society when the plaintiff is denied the right to damages incurred.

The dissenting opinion that damages can be reasonably inferred implies that businesses have no authority to dismiss employees at any time. The notion that employees are at the will of the employer is eliminated since employees have other responsibilities in the society. Businesses should be ethical in how they dismiss the employee despite the employee being ‘at will’ to the employer. When reasonable damages are inferred, businesses will have to consider any decision regarding the termination of the employment contract.

Evaluation of dissent opinion conclusion

According to Black v. Chittenden, 1986 (par 1), when the defendant knowingly withholds important information that can assist the plaintiff to make decisions, it is clear that the plaintiff is deceived and damaged. The claim that the plaintiff was not informed about the existence of another agreement is sufficient to plead for the defendant’s knowledge of false information when employing the plaintiff. The judge argues that the plaintiff failed to present any evidence on financial injury arising from the fraud. The judge cannot substantiate that the plaintiff will not suffer any losses from wrongful dismissal. Any wrongful dismissal has consequences, whether financial, social, or emotional to the plaintiffs

The judge is right that alleged profits cannot be substantiated. However, any dismissed employee needs to be compensated because they have devoted time, emotions, and other resources to meet the employment contract specifications. The judge must consider loss or damages incurred by the plaintiff based on the employment position at Chipotle and damage to a professional reputation built for several years.

Conclusion

The plaintiff could have received equity (at the end of three years) even when the ramen concept failed to generate profits at Chipotle. The defendant had the obligation to respect the contract even when the ramen concept could not lead to profitability. The judge is right to dismiss the claim for damages based on alleged profits in the future. However, the judge must consider damages concerning information withheld when signing the contract (the defendant and Mr. Chang).

The information would have assisted the plaintiff to avoid signing the contract. The plaintiff suffered damages concerning the loss of employment as well as time devoted to the completion and implementation of the ramen cuisine concept. In the future, employers will have the authority (impunity) to dismiss employees without considering damages caused to the employee. Damages should not be viewed in terms of profits alone.

Works Cited

Caruso, Caruso & Branda, P.C. v. Hirsch. 04769 [41 AD3d 407]. The Supreme Court Kings County. 2007.

Claire S. Black et al v. Ralph Chittenden. 69 N.Y.2d 665. Court of Appeals of the State of New York. 1986.

Kyle Connaughton v. Chipotle Mexican Grill, Inc. NY Slip OP 00273. Appellate Division of the Supreme Court of New York, First Department. 2016. (Dissenting opinion).

Kyle Connaughton v. Chipotle Mexican Grill, Inc. NY Slip OP 00273. Appellate Division of the Supreme Court of New York, First Department. 2016. (Majority opinion).

Lama Holding Co v. Smith Barney. 88 N.Y.2d 413. The Supreme Court of New York. 1996.

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IvyPanda. (2020, July 17). Connaughton v Chipotle Mexican Grill, Inc. Retrieved from https://ivypanda.com/essays/connaughton-v-chipotle-mexican-grill-inc/

Work Cited

"Connaughton v Chipotle Mexican Grill, Inc." IvyPanda, 17 July 2020, ivypanda.com/essays/connaughton-v-chipotle-mexican-grill-inc/.

1. IvyPanda. "Connaughton v Chipotle Mexican Grill, Inc." July 17, 2020. https://ivypanda.com/essays/connaughton-v-chipotle-mexican-grill-inc/.


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IvyPanda. "Connaughton v Chipotle Mexican Grill, Inc." July 17, 2020. https://ivypanda.com/essays/connaughton-v-chipotle-mexican-grill-inc/.

References

IvyPanda. 2020. "Connaughton v Chipotle Mexican Grill, Inc." July 17, 2020. https://ivypanda.com/essays/connaughton-v-chipotle-mexican-grill-inc/.

References

IvyPanda. (2020) 'Connaughton v Chipotle Mexican Grill, Inc'. 17 July.

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