Grubmarket, Inc. faced a legal setback in its appeal regarding counterclaims made by a former employee, Jian He. The Appellate Division of the Supreme Court of the State of New York ruled on October 14, 2026, modifying a previous decision that denied Grubmarket's motion to dismiss He’s claims. This ruling is significant as it addresses issues of employment contracts and the implied covenant of good faith and fair dealing.
The case, documented under docket number 2025-06090, originated when Grubmarket, a company specializing in online grocery delivery, terminated Jian He in July 2023. Following his termination, He filed counterclaims against the company, alleging that Grubmarket breached its employment agreement and violated the implied covenant of good faith and fair dealing.
Grubmarket responded by filing a motion to dismiss these counterclaims, arguing that the claims lacked merit. The Supreme Court of Queens County initially denied this motion on March 11, 2025, prompting Grubmarket to appeal the decision. The appeal was heard by a panel of judges including Betsy Barros, Cheryl E. Chambers, Janice A. Taylor, and Elena Goldberg Velazquez.
The court ruled on several key points regarding the counterclaims. It determined that Grubmarket's motion to dismiss He’s first counterclaim, which alleged breach of contract, was improperly denied. The judges found that the counterclaim sufficiently stated a cause of action under California law, which governed the employment agreement due to a choice-of-law provision. The court stated, "The counterclaim adequately stated a cause of action to recover damages for breach of contract under California law." This means that He’s claims regarding the breach of his employment contract will proceed.
However, the court modified the previous ruling by allowing Grubmarket’s motion to dismiss He’s second counterclaim, which was based on the implied covenant of good faith and fair dealing. The judges noted that the allegations made by He in support of this claim were either duplicative of the first counterclaim or contradicted by the employment agreement itself, which allowed for at-will termination. The ruling emphasized that "an implied covenant of good faith and fair dealing cannot contradict the express terms of a contract."
This ruling has important implications for both parties. For Grubmarket, the decision to dismiss the second counterclaim reduces the potential liability related to He’s allegations. For Jian He, the court's affirmation of the first counterclaim means he can continue to seek damages for the alleged breach of contract. The ruling may also serve as a precedent for future employment disputes involving claims of breach of contract and the implied covenant of good faith.
The outcome of this case could influence how companies draft employment agreements, particularly regarding termination clauses and the obligations of both parties under such contracts. It highlights the importance of clear contract language and the potential consequences of failing to adhere to the terms of an agreement.
Looking ahead, it is unclear whether Grubmarket plans to appeal the court's decision further. The court's ruling allows for the first counterclaim to proceed, which means the case will continue in the lower court. There are no indications of related cases pending that could affect this ruling.