The U.S. Court of Appeals for the Eleventh Circuit’s recent decision in Gould v. Interface, Inc. provides important guidance for employers and executives on contract interpretation and the limits of judicial review in “for cause” terminations.
In Gould, the court affirmed that when an employment agreement grants an employer sole discretion to determine whether termination is “for cause,” courts will not second-guess that determination. The decision also underscores a common procedural trap for litigants—raising new theories too late in the litigation process.
Background of the Case
Jay Gould, the former CEO of Interface, Inc., entered into an employment agreement that allowed Interface to terminate his employment “in its sole discretion, whether with or without Cause.” The contract defined “Cause” to include categories such as willful misconduct or breach of policy.
According to Interface, Gould engaged in a series of inappropriate behavior including becoming intoxicated at an annual sales meeting and repeatedly calling one of his employees sexist terms. This was not Gould’s first incident either. A year earlier Gould had been sanctioned and counseled for engaging in alcohol-fueled sexual harassment as well, according to the opinion.
Following an internal investigation into the misconduct, Interface’s board voted to terminate Gould “for cause.” Under Gould’s employment agreement, termination for cause entitled him to potentially $10 million less in compensation than termination without cause.
Litigation Overview
Gould sued Interface alleging that Interface breached his employment agreement because (1) his conduct did not warrant “for cause” termination and (2) that Interface had failed to pay him under the terms of the agreement. Interface moved for summary judgment arguing that it enjoyed absolute discretion to determine whether there was cause for Gould’s firing. Interface argued that even if its discretion was qualified by a duty of good faith, it had discharged its duty by relying on the results of the investigation it had conducted into Gould’s behavior before firing him.
The district court granted summary judgment to Interface, holding that the contract gave the Interface absolute discretion to determine whether cause existed and that, in any event, Interface hadn’t acted in bad faith.
Gould filed a motion for reconsideration, raising for the first time, his argument that Interface had no discretion to determine whether cause existed to fire him. However, the district court ruled that Gould waived the argument by raising it too late.
On appeal, Gould raised the argument again that Interface had no discretion to determine whether cause existed to fire him. The Eleventh Circuit agreed with the district court that Gould had forfeited the argument by not raising the argument earlier than he had.
Having found Gould forfeited his alternate theory, the only claim left to address was whether Interface breached the agreement because Gould’s conduct did not meet the contractual definition of cause. The Eleventh Circuit affirmed the district court’s finding that Interface was entitled to summary judgment on the claim because Gould failed to present anything challenging the district court’s decision other than the argument he forfeited.
In sum, the district court granted Interface summary judgment for two independent reasons:
- Interface’s decision to terminate Gould with cause was “entirely within the discretion of the corporation” and therefore Interface’s determination that Gould’s conduct gave rise to “Cause” was not a breach of contract; and
- Even if Interface had only qualified discretion to terminate Gould for cause, he had failed to create a material issue of fact as to whether Interface terminated him in bad faith.
Key Takeaways for Employers and Executives
- Contract Language Matters
Clear, discretionary language—such as “in its sole discretion”—can meaningfully limit judicial review of termination decisions. Employers should ensure “for cause” provisions are precisely drafted to define both “cause” and to grant the employer broad discretion in determining what fits into the definition of cause.
- Preserve All Theories Early
Litigants must advance all relevant arguments at the trial level. Relying on well settled principles, the Eleventh Circuit’s opinion serves as a reminder that new theories raised for the first time on appeal are typically forfeited.
- Boards Should Follow Process
When terminating high-level executives, boards should adhere to formal procedures, rely on credible investigations, and document their findings to demonstrate a good-faith basis for any “for cause” decision regardless of the discretion they retain.
- Practical Implication
For employers: This case provides a roadmap for drafting and enforcing robust “for cause” provisions that allow employers to retain as much discretion in terminating executives as possible.
For executives: It highlights the importance of negotiating clear definitions of “cause” and including contractual limits on the employer’s ability to terminate the executive’s employment for “cause”
Conclusion: A Well-Drafted Contract Can Make the Difference
The Eleventh Circuit’s ruling in Gould v. Interface underscores the judiciary’s reluctance to second-guess employer discretion when exercised within the bounds of a well-drafted contract. The decision is a reminder that precision in drafting—and diligence in preserving arguments—can make all the difference in executive employment disputes.
If you or your company have questions about employment or other business disputes, please feel free to contact our team.
