In a major development in the legal battle between Barnes & Noble and fired CEO Demos Parneros, a federal judge in New York this week dismissed a defamation claim filed by Parneros, but ruled that a trial can proceed on a claim of breach of the covenant of good faith.

The mixed decision comes after B&N last year moved for partial summary judgment on two of the three claims filed by Parneros after his unexpected firing by the company in July of 2018. In granting B&N’s summary judgment motion on the defamation claim, Judge Mary Kay Vyskocil ruled that a vague July 3 press release announcing the CEO’s firing for violations of company policy did not contain a false statement, or innuendo.

“Barnes & Noble is entitled to judgment as matter of law on Parneros’s defamation claim because there is no genuine dispute that the press release is substantially true,” the court held, adding that Parneros’s “quarrel is with his firing, not the substantially truthful statement about the board’s action.”

In his suit, Parneros had argued that the vaguely-worded B&N press release announcing the firing implied sexual misconduct, “lumping Parneros with the Harvey Weinsteins of the world,” and making the longtime executive "virtually unemployable.”

“Perhaps the board’s decision was unfair, and perhaps Parneros did not engage in the conduct of which he was accused, or perhaps that conduct did not violate any company policies. If so, the appropriate legal challenges are Parneros’s claims for breach of contract and breach of the covenant of good faith and fair dealing,” the court held. “If the Court were to accept Parneros’s theory of defamation, every public company that fired a director for cause would be exposed to a libel lawsuit if the director disagreed with its decision to fire him.”

Knocking out the defamation claim is a potentially substantial victory for B&N. Previous filings in the case suggest that Parneros was seeking approximately $70 million in damages for the defamation claim alone.

Barring a settlement, the case remains far from over, however. A breach of contract claim was not addressed in the summary judgment motions, and remains alive. And while the court dismissed the defamation claim, it denied B&N's bid to knock out the former CEO's claim for breach of the covenant of good faith and fair dealing, holding that there is a "triable question" as to whether the timing of Parneros's firing—just days before an equity award was set to vest—was arbitrary.

In her ruling, Vyskocil said it was an open question as to whether B&N leadership "decided to push [Parneros] out instead of paying him," and suggested resolving that question would require "weighing Parneros’s testimony against that of Riggio and other members of the board."

In court filings, Parneros has argued that his 2018 dismissal was engineered on false pretenses by an angry Len Riggio, and that the reasons for his firing were basically misrepresented to the B&N board by Riggio after the collapse of a proposed deal to sell the company in June of 2018.

Attorneys for B&N denied Parneros's claims, and the company is countersuing, seeking to potentially claw back some of the CEO’s compensation.

The court has set a pretrial conference for October 8.