By  on June 2, 2011

A federal appellate court has given Todd Oldham’s breach of contract suit against Old Navy new life.

The Second Circuit Court of Appeals ruled Wednesday that the Manhattan district court erred in dismissing two counts that were part of Oldham’s complaint and sent them back to the lower court for further consideration. The appeals court affirmed the other components of the lower court’s decision from Jan. 21, 2010.

The five-count complaint arose from a creative services agreement between L-7 Designs Inc., Oldham’s company, and Gap Inc.’s Old Navy unit from September 2007. Oldham was hired as “design creative director” and the parties planned to establish a separate licensing deal for a Todd Oldham signature line by October 2008.

Negotiations deteriorated and Oldham’s L-7 firm filed a lawsuit in February 2009 alleging breach of contract claims by failing to negotiate in good faith. Two days after the lawsuit was filed, Old Navy ended the creative services agreement.

A federal district court in Manhattan ruled in January 2010 that the retailer made good faith efforts to strike a deal, and granted Old Navy’s motion to dismiss, prompting the appeal by Oldham’s firm.

The appellate court said that, in dismissing all five counts of the complaint, 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).”

In the wrongful termination count, Oldham had sought a declaratory judgment that Old Navy wrongfully terminated the parties’ agreement in which Oldham was to provide creative services to Old Navy.


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