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finding "no hearsay issue" where employer seeks to introduce prior statements made to managers about plaintiff's earlier misconduct, "because what matters is not what actually occurred," but "what senior management reasonably believed and relied on in making their decision to terminate the plaintiff"
Summary of this case from Ancekewicz v. Long Island UniversityOpinion
00 Civ. 0138(HB).
November 14, 2000.
OPINION ORDER
The plaintiff, Phillip DeLeonardis ("DeLeonardis") commenced this diversity action on January 7, 2000 against his former employer Credit Agricole Indosuez ("the Bank") and Credit Agricole Indosuez, North America, Inc. ("CAI-NA"). DeLeonardis has also named as a defendant in this action Indosuez CM II ("ICM II"), the managing partner of numerous investment partnerships in which plaintiff participated as a partner or member. Plaintiff sued the Bank for breach of an alleged employment contract, conversion, defamation, tortious interference, and violation of New York Labor Law § 198. Plaintiff sued ICM II for breach of partnership agreements and defamation. Plaintiff sued CAI-NA for defamation and tortious interference. Pursuant to Rule 56 of the Federal Rules of Civil Procedure, the Bank, CAI-NA and ICM II (collectively, "the defendants") moved for partial summary judgment and to dismiss portions of plaintiffs First Amended Complaint ("Complaint"). Thereafter, plaintiff cross-moved for partial summary judgment against the Bank and ICM II.
At the outset, the Court notes that DeLeonardis has explicitly consented to the dismissal of his defamation claim (plaintiffs Fourth Cause of Action). (See Pl. Opp. Mem. at 1, n. 1.) The plaintiff also consents to dismiss Credit Agricole Indosuez, North America, Inc. ("CAI-NA"). Id. Accordingly, the plaintiffs claims alleging defamation are DISMISSED with prejudice, and all claims against defendant Credit Agricole Indosuez, North America, Inc. are DISMISSED with prejudice.
For the reasons stated below, the defendants' motion for partial summary judgment is GRANTED in part and DENIED in part. Further, for the reasons set forth below, the plaintiffs cross motion for partial summary judgment is DENIED.
I. BACKGROUND
The following relevant facts are not in dispute.
In 1992, the Bank hired DeLeonardis to work as a word processor in its New York office. The Bank promoted DeLeonardis to the position of financial analyst in 1994. The terms of DeLeonardis's employment agreement specified that DeLeonardis was an "at-will" employee. Thereafter, DeLeonardis joined the Bank's Capital Group. DeLeonardis reported directly to Les Lieberman, Managing Director of the Bank's Capital Group. Les Lieberman ("Liebennan") was a senior vice president of the Bank and executive managing director of the Indosuez Capital Group. (Def. Rule 56.1 Counter-Stint. ¶ 26.) By 1999, DeLeonardis was earning an annualized salary of $170,000 and had risen to the rank of vice president.
On August 4, 1999, Bank employees Lieberman, DeLeonardis, Mitchell Goldstein (a vice president of the Bank) and Michael Arougheti (a vice president of the Bank) attended a meeting with Ken Wormser and Jay Bloom of the Canadian Imperial Bank of Commerce ("CIBC"). (P1. Rule 56.1 Stint. ¶ 24.) Lieberman arranged the meeting and invited DeLeonardis, Goldstein and Arougheti to attend. (Pl. Rule 56.1 Stint. ¶ 24.) Thereafter, on August 6, 1999, the Bank fired DeLeonardis, Lieberman, Mary Middlemiss (Lieberman's personal assistant) and "Mathew Linet, an employee of the Bank and, like plaintiff a close associate of Lieberman." (Pl. Rule 56.1 Stint. ¶ 28.) Goldstein and Arougheti were not terminated by the Bank, and remained employed by the Bank following DeLeonardis's termination. (Def. Rule 56.1 Counter-Stint. ¶ 27.)
On January 7, 2000, plaintiff commenced the instant litigation. Thereafter, on June 20, 2000, more than ten months after he was terminated, the Bank paid DeLeonardis $36,019.23, less standard deductions required by law, for 76.5 accrued unused vacation days. (Def. Rule 56.1 Counter-Stint. ¶ 27.) The Bank has also paid DeLeonardis lesser sums pursuant to the plaintiffs participation in various passive investment vehicles.
The parties dispute whether plaintiff was fired for "cause" within the meaning of the Bank's compensation policies and various partnership agreements for purposes of determining the applicability to him of the forfeiture provisions contained in those documents.
II. DISCUSSION
A. Summary Judgment Standard
Summary judgment is properly granted only when the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits show that there is no genuine issue of material fact and the movant is entitled to summary judgment as a matter of law. Fed.R.Civ.P. 56(c). The substantive law determines what facts are material to the determination, and the burden is on the moving party to establish that there are no genuine issues of material fact in dispute and that it is thus entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 248, 256 (1986). A dispute regarding a material fact is genuine "`if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Aldrich v. Randolph Cent. Sch. Dist. 963 F.2d 520, 523 (2d Cir.) (quoting Anderson, 477 U.S. at 248),cert. denied, 506 U.S. 965 (1992). The court resolves all ambiguities and draws all inferences in favor of the nonmoving party in order to determine how a reasonable jury would decide. Aldrich, 963 F.2d at 523. However, the nonmoving party may not prevail merely by offering conclusory allegations or denials. See Podell v. Citicorp Diners Club, Inc., 112 F.3d 98, 101 (2d Cir. 1997).
B. Breach of Employment Agreement
Defendants argue that the plaintiffs First Cause of Action should be dismissed to the extent that plaintiff claims he had an employment contract with the Bank and to the extent that he claims he was an intended third party beneficiary of the Lieberman employment agreement, the Collateralized Loan Obligation ("CLO") Certificate and agreements, and the Rocky Mountain Internet Incentive Compensation Award.
1. Oral Assurances of Employment Until Year's End
As to the initial allegations in the First Cause of Action, defendants argue that DeLeonardis was an employee-at-will of the Bank, pursuant to the Bank's letter dated July 29, 1993, which offered "at-will" employment to the plaintiff. Further, it is undisputed that there was no written employment contract. Plaintiff claims, however, that he was "promised" continued employment "for a term ending December 31, 1999." (Compl. ¶ 39.) In his affidavit, DeLeonardis asserts that in the period of early 1999 to August of that year, "the atmosphere in the offices of Indosuez Capital Group was very unstable" and several employees were interviewing with other firms, concerned that the Bank did not view favorably the future of the Capital Group. (DeLeonardis Aff. ¶ 14). DeLeonardis further claims that "Lieberman made clear in his conversations with me that I had a secure job at the Bank at least through the January 2000 CLO payment, that he wanted me to stay at the Bank, that he would see to it that I got a good allocation from the January CLO distribution (later he indicated that my allocation would be increased), and that he did not want me to interview with other firms while the instability continued." (Id. ¶ 15.) DeLeonardis also asserts that at a meeting on July 13, 1999, Jean Cheval, an executive Vice President of the Bank met with the senior members of the Capital Group and "led us to believe that we should consider we had secure jobs at the Bank through 1999, and that the Bank and Mr. Lieberman would definitely come to a new arrangement that would benefit all of us." (Id.)
Defendants argue that the alleged representations of Lieberman and Cheval could not give rise to an employment contract. The cases cited by the Bank, while inapposite in that they deal with promises of lifetime employment and other indefinite terms, do state the broad principles governing "at will" employment. See Jaffe v. Aetna Cas. Sur. Co., No. 93 Civ. 0385, 1996 WL 337268, at *3 (S.D.N.Y. 1996) (finding alleged oral assurances of continued employment as long as plaintiff performed his job satisfactorily did not create an employment contract) aff'd, 113 F.3d 1229 (2d Cir. 1997); Wanamaker v. Columbian Rope Co., 907 F. Supp. 522, 538 (N.D.N.Y. 1995) (holding that oral assurances of lifetime employment, without more, are insufficient to support a claim for breach of contract under New York law).
It is well established in New York that "an employer's oral assurances to an employee are not by themselves sufficient evidence of an express agreement to alter the employee's at-will status." Dangler v. New York City Off Track Betting Corp., No. 95 Civ. 8495, 1998 WL 599711, at *6 (S.D.N.Y. Sept. 9, 1998) aff'd in part, vacated in part 190 F.3d 130 (2d Cir. 1999) (citing Cucchi v. New York City Off-Track Betting Corp., 818 F. Supp. 647, 652 (S.D.N.Y. 1993) ("oral assurances alone are not enough to alter an employee's at-will status"); Paolucci v. Adult Retardates Ctr., Inc., 582 N.Y.S.2d 452, 453 (2d Dep't 1992) (oral assurances made to employee did not limit defendant's right to terminate plaintiff at any time); Diskin v. Consolidated Edison Co. of New York, 522 N.Y.S.2d 888, 890 (2d Dep't 1987) (oral assurances that employee could only be discharged for cause did not limit employer's right to fire employee at will).
The Court rejects plaintiffs attempt to portray the oral assurances of continued employment as a binding agreement. DeLeonardis was an at-will employee and the Bank was entitled to terminate his employment with or without cause. Accordingly, the defendants' motion for summary judgment dismissing the First Cause of Action is granted to the extent that it relies on a purported oral agreement to employ the plaintiff through the end of 1999.
2. Third Party Beneficiary Claims
As to the second prong of the First Cause of Action, plaintiff argues that he was an intended third party beneficiary of the Lieberman employment agreement, the ICF Cayman Certificate, the CLO IV Agreement, CLO V Agreements, and the only beneficiary of the Rocky Mountain Internet Incentive Compensation Award. Defendants argue that plaintiffs attempt to recover for breach of contract as a third party beneficiary should be dismissed.
Under New York law, it is well-settled that
To prevail on a claim for breach of contract as a third-party beneficiary, the plaintiff must establish the existence of a valid and binding contract between other parties; that the contract was intended for plaintiffs benefit; and the benefit was immediate, and not incidental, so as to "indicate duty to compensate [the plaintiff] if the benefit is lost."Anerio Concrete Co., v. New York City Construction Authority, Nos. 94 Civ. 9111, 95 Civ. 3506, 1997 WL 3268, *19 (S.D.N.Y. 1997) (quoting Burns Jackson Miller Summit and Spitzer v. Lindner. 464 N.Y.S.2d 712, 722 (1983)).
"Even when the contracting parties specifically intend to confer benefits on a third party, not all consequential damages which flow from a breach of the contract are recoverable by the third party. A contract must evince a discernible intent to allow recovery for the specific damages to the third party from a breach thereof before a cause of action is stated." Strauss v. Belle Realty Co., 469 N.Y.S.2d 948 (2d Dep't 1983), aff'd 492 N.Y.S.2d 555 (1985).
Moreover, a party claiming to be a third party beneficiary has the burden of demonstrating that he is an intended, rather than an incidental, beneficiary to the contract. New York law follows the Restatement (Second) of Contracts on this score. Septembertide Publishing. B.V. v. Stein Day. Inc., 884 F.2d 675, 679 (2d Cir. 1989). Section 302 of the Restatement distinguishes between an "intended" and an "incidental" beneficiary as follows:
(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either (a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or (b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. (2) An incidental beneficiary is a beneficiary who is not an intended beneficiary.a. Lieberman Employment Agreement
The Lieberman Employment Agreement does not mention Philip DeLeonardis. (Def. Rule 56.1 Stmt. ¶ 17). Nonetheless, plaintiff asserts that "[t]he Lieberman Employment Agreement was intended to provide the terms under which the entire [Indosuez Capital] Group managed by Mr. Lieberman was employed and compensated by the Bank. It expressly provided various terms of their employment agreements, including compensation, the right to invest in various deals, and how various payments and carry would be divided." (Pl. Opp. Mem. at 10.) Therefore, I find that the circumstances indicate that the Lieberman Employment Agreement can be read as a mechanism for allocating incentive compensation to the plaintiff; and thus, the plaintiff may be considered an intended beneficiary thereunder. Accordingly, defendants' motion for summaryjudgment dismissing the First Cause of Action for breach of contract is DENIED with respect to plaintiffs claim that he is a third party beneficiary of the Lieberman Employment Agreement.
b. CLO Agreements IV V
As part of his First Cause of Action for breach of contract, DeLeonardis claims that he was an intended third party beneficiary of the ICF Cayman Certificate, CLO IV Agreement and CLO V Agreement. These investment vehicles provided that, upon Lieberman's recommendation and subject to the Bank's approval, DeLeonardis would receive a certain percentage allocation from the distributions of the CLO's. The schedules to the CLO's provide that DeLeonardis was to receive 6% of the CLO IV allocations and 10% of the CLO V allocations. (See Affidavit of Thomas M. Campbell in Opposition to Defendants' Motion for Partial Summary Judgment ("Campbell Opp. Aft"), Ex. 2). The defendants do not dispute that the schedule attached to the ICF Cayman Certificate contains a similar provision. (Pl. Rep. Mem. at 4.) The fact that the Bank and Lieberman could at any time reset plaintiffs allocation to zero does not support defendants' contention that DeLeonardis cannot establish that he was an intended third party beneficiary. Accordingly, the Bank's motion for summary judgment on this score must be DENIED.
c. Rocky Mountain Internet Award
Finally, plaintiff argues that he was the sole beneficiary of the Rocky Mountain Internet Award. However, DeLeonardis does not dispute that he was paid $10,831.61 for his interest in the proceeds of this Award, and does not dispute that "[his] consent was not required to sell the shares held by [ICM II]." (Def. Rule 56.1 Stint. at ¶ 37-38.) Therefore, this Court GRANTS defendants' motion for summary judgment seeking dismissal of plaintiffs action for breach of contract with regard to the Rocky Mountain Internet Award.
C. Breach of Partnership Agreements Claim Against ICM II
DeLeonardis argues that he is entitled to partial summary judgment on his Second Cause of Action with respect to his claim that ICM II breached its fiduciary obligation under the GEEG Partnership Agreement by withholding the GEEG payment due him for more than nine months. (The plaintiff finally received his GEEG payment in June 2000.) (Def. Rule 56.1 Stint. ¶ 66). Plaintiff points out that ICM II is a fiduciary under § 5.2C of the GEEG Partnership Agreement, which provides:
Section 5.2. Duties and Obligations of Partners. The Managing General Partner [ICM II] shall be under a fiduciary duty to conduct the affairs of the Partnership in the best interests of the Partnership and the Partners, including the safekeeping and use of all the Partnership's funds and assets and the use thereof for the exclusive benefit of the Partnership and the Partners and to protect the interests and rights of the Partners.
The plaintiffs argument fails, for having reviewed the GEEG Partnership Agreement, nowhere does it specify a payment time table of any kind and thus the plaintiffs contention that a fiduciary duty was breached cannot prevail. This prong of plaintiffs motion cross-motion for summary judgment is DENIED.
D. Conversion Claim
In addition, DeLeonardis claims that the Bank is liable for conversion of all personal property belonging to him which was found in his office and retained by the defendants following his termination. (Compl. ¶ 44.) The parties agree that a box containing DeLeonardis's personal belongings was sent to the plaintiffs residence three weeks after his termination. However, DeLeonardis maintains that the defendants have wrongfully retained additional personal property, including personal computer files stored on the five computers which he utilized at CAI-NA.
"`The tort of conversion is established when one who owns and has a right to possession of personal property proves that the property is in the unauthorized possession of another who has acted to exclude the rights of the owner.'" Oei v. Citibank, N.A., 957 F. Supp. 492, 521 (S.D.N.Y. 1997) (quoting Key Bank of New York v. Grossi, 642 N.Y.S.2d 403, 405 (3d Dep't 1996)); see Chateaugay Corp. v. LTV Steel Co., 10 F.3d 944, 957 (2d Cir. 1993) ("`a denial or violation of the plaintiffs dominion, rights, or possession, is the basis of an action for conversion'") (quoting Sporn v. MCA Records. Inc., 462 N.Y.S.2d 413, 415 (1983)). The defendants cite Kubin v. Miller, 801 F. Supp. 1101, 1108 (S.D.N.Y. 1992) for the proposition that DeLeonardis cannot maintain a claim for conversion, because he has not established "an immediate superior right to an identifiable thing." Under New York law, "[t]he tort of conversion is established when one who owns and has a right to possession of personal property proves that the property is in the unauthorized possession of another who has acted to exclude the rights of the owner. Where the property is money, it must be specifically identifiable and be subject to an obligation to be returned or to be otherwise treated in a particular manner. The funds of a specific, named bank account are sufficiently identifiable." Republic of Haiti v. Duvalier, 626 N.Y.S.2d 472, 475 (1st Dep't 1995) (citations omitted).
DeLeonardis, even after having been presented with a list of files on his computers by the defendants, has failed to identify specifically which files contain personal information. Moreover, DeLeonardis makes the outrageous assertion that defendants, "[u]nwilling to commit actual perjury on this issue., hedge their bets by, instead of admitting they have the material in their warehouses and desire to continue to hold it hostage, [state] that `to the best of the Bank's knowledge' it returned Plaintiffs property." (Pl. Opp. Mem. at 12.) This claim is unsubstantiated. After a lengthy discovery period, DeLeonardis has still failed to "describe or identif[y] in the same manner as a specific chattel" the personal items and the computer files which are the subject of his conversion action. 9310 Third Avenue Assoc., Inc. v. Schaffer Food Service Co., 620 N.Y.S.2d 255, 256 (2d Dep't 1994) (quoting 23 N.Y. Jur.2d, Conversion, § 12 at 218). Therefore, the defendants' motion for summary judgment dismissing plaintiffs cause of action for conversion is GRANTED.
E. Tortious Interference Claim
DeLeonardis alleges both tortious interference with contract and with fiduciary duties.
1. Tortious Interference With Contract
As to the plaintiffs tortious interference with contract claim, New York law "requires proof of (1) the existence of a valid contract between plaintiff and a third party; (2) the defendant's knowledge of that contract; (3) the defendant's intentional procuring of the breach, and (4) damages." Foster v. Churchill, 642 N.Y.S.2d 583, 586 (N.Y. 1996).
The defendants assert that Walsh, who is the Vice President and Secretary of ICM II, and an officer of CAI-NA, delayed the issuance of the GEEG Partners Partnership distributions to DeLeonardis in order to sort out "various issues" after plaintiffs counsel threatened suit. (Walsh July 13 Tr. at 85-86.) "It is well established that only a stranger to a contract, such as a third party, can be liable for tortious interference with contract." Koret, Inc. v. Christian Dior, 554 N.Y.S.2d 867, 869, (1st Dep't 1990). In this case, CAI-NA and the Bank were not "strangers" to any of the investment agreements at issue. Defendant ICM II is a wholly owned subsidiary of Indosuez North America Holdings, Inc., a wholly owned subsidiary of the Bank. (Pl. Rule 56.1 Stint. ¶ 4.) Thus, Walsh's decision to delay the GEEG distributions or any other payments to DeLeonardis cannot constitute tortious interference, even if Walsh was acting in his capacity as a CAI-NA officer for the benefit of the bank. CAI-NA had a legitimate economic interest in making sure that DeLeonardis received the appropriate distributions, especially once litigation had been threatened. Therefore, DeLeonardis's tortious interference claims with respect to the GEEG distributions must be dismissed. See Koret, 554 N.Y.S.2d at 869 (holding that parent corporation can not be liable for subsidiary's breach of contract where the contract was negotiated by an employee of both firms because the corporate parent had a right to interfere with the contract of its subsidiary); cf. G. Golden Assoc., Inc. v. Arnold Foods Co., 870 F. Supp. 472, 480 (E.D.N.Y. 1994) (granting summary judgment dismissing tortious interference claim against successor-in-interest to contract because the successor "cannot be liable in tort for inducing the breach of its own rights and obligations under the [contract]").
"Tr." refers to the excerpts from the deposition transcripts provided to the Court in connection with the motions for summary judgment.
DeLeonardis also alleges that "[t]he Bank also caused Kencel, Smith and deVergnes to breach their duty to Plaintiff as a partner and member of SEI Associates and SEI Capital, respectively." (Pl. Opp. Mem. at 14.) DeLeonardis asserts that "[p]ursuant to these agreements, partners/members are not permitted to organized an investment fund in competition with SEI, L.P." and that "by starting SEI II, the members of SET Capital have breached their obligations under § 8.2" of the SEI Capital Associates Agreement. (Id.) Section 8.1 of the SEI Capital Associates Agreement provides that "each member agrees that he will not organize any fund that would be competitive with the [SEI] Fund in violation of the provisions of the [SET Fund Agreement]" (SEI Capital Associates Agreement, § 8.1 (Campbell Opp. Aff., Ex. 8). This provision was not breached because the investment period and further investments in the SET Fund were terminated in the fall of 1999. The SEI Fund Agreement expressly permits a new fund when the investment period has been terminated. (SEI Fund Agreement, § 10.3 (iii), Campbell Opp. Aff., Ex. 4.) The Court concludes that plaintiffs claim of tortious interference with contract must be DISMISSED.
2. Tortious Interference With Fiduciary Duties
I turn next to plaintiffs allegation that CAI-NA and the Bank's actions in causing Suez Industrie to wind down Suez L.P. constitute tortious interference with fiduciary duties. (Compl. ¶ 50.) "Under New York law, a tortious interference with fiduciary duty claim consists of three elements: `(1) a breach by a fiduciary of obligations to another, (2) that the defendant knowingly induced or participated in the breach, and (3) that the plaintiff suffered damages as a result of the breach.'"Hannex Corp. v. GMI. Inc., 140 F.3d 194, 203 (2nd Cir. 1998) (quoting SK Sales Co. v. Nike, Inc., 816 F.2d 843, 847-48 (2d Cir. 1987) (citations omitted)).
The defendants point out that the reference to "Suez L.P." is to a July 19, 1995 limited partnership agreement ("SEI Fund Agreement") between SEI Capital, L.L.C. ("SET Capital") and Suez Industrie to form Suez Equity Investors, L.P. ("SEI L.P.") (Def. Mem. at 15, n. 7; Def. Rule 56.1 Stmt. ¶ 48.) SEI Capital was formed in 1995 to act as the general partner with Suez Industrie in SET L.P. (Def. Mem. at 15, n. 7.) SEI L.P. manages funds on behalf of Suez Industrie. (Pl. Opp. Mem. at 13.) Pursuant to the SET Fund Agreement, Suez Industrie committed up to $100 million to SEI L.P. (Id.) Approximately $60 million was invested by September 1999. (Id.)
Lieberman is the managing general partner of SET Associates, and the managing member of SEI Capital. DeLeonardis is a partner in SET Associates and a member in SET Capital. (Pl. Opp. Mem. at 12-13.) SEI Capital is the general partner of SEI L.P. Each of the senior members of the Indosuez Capital Group is also a partner with Plaintiff in SEI Associates and a member with him in SET Capital. (Pl. Counter Rule 56.1 Stint. at ¶ 17.) Suez Industrie, a large French conglomerate, is the only limited partner in SEI, LP. (Id. at ¶ 18.)
The SEI Capital Associates Agreement provides that Les Lieberman was vested with the authority to dissolve SEI Capital and wind up its affairs. (See Campbell Opp. Aff. Ex. 8, § 11.1(b)). Lieberman dissolved SEI Capital and wound up its affairs in the fall of 1999.
Plaintiff alleges for the first time in his Memorandum of Law in Opposition to Defendants' Motion for Partial Summary Judgment the following details: The Bank tortiously interfered with SEI L.P. by seeking to keep the SEI L.P. investment at the Bank where "there was no need to do anything with respect to SET L.P. as a result of Mr. Lieberman's termination." (Pl. Opp. Mem. at 13.) DeLeonardis concedes that there was no breach of the SEI Fund Agreement, but that the Bank took steps, following the termination of Lieberman, to induce the Suez Industrie executive with responsibility for SEI L.P. (Xavier Moreno) to amend the SEI Fund Agreement to terminate the investment period and end further investments. (Lieberman July 24 Tr. 167-173.) DeLeonardis asserts that the $40 million which had not vested in SET L.P. by September 1999, along with the $60 million which had already vested, was transferred to the Bank by the two senior members of the CAI-NA Capital Group who had remained with CAI-NA following the August 1999 purge, namely Smith and Kencel. A new investment vehicle, "SEI II", was set up "so as to secure for the Bank and the remaining Group the added investment dollars and compensation represented by the Suez Industrie $40 million." (Pl. Opp. Mem. at 14.)
According to DeLeonardis, in September 1999, just after he was terminated by CAI-NA, only he, Lieberman, and Matthew Linett were involved in managing SEI L.P. DeLeonardis apparently believes that even though he and Lieberman had been terminated by CAI-NA, they should have been permitted to continue to manage SEI L.P. In a memorandum dated September 17, 1999 from Thierry de Vergnes to Xavier Moreno, the Bank acknowledged that "[i]t is perfectly possible for Suez Industrie to [continue with Lieberman as fund manager without the Indosuez Capital Group team]." (Campbell Opp. Aff., Ex. 6.) DeLeonardis, in effect, argues that the Bank had no right to induce Suez Industrie to shift their investment from the management team of Lieberman and DeLeonardis to the Bank and the remaining members of the Indosuez Capital Group. However, only Les Lieberman, as the Managing Member of SET Capital, was authorized and empowered on behalf of SET Capital "to institute, prosecute, defend, settle, compromise or otherwise adjust all claims. and litigation arising out of the affairs of [SET Capital]" (Campbell Opp. Aff. Ex. 8, § 4.1 (m)). Moreover, DeLeonardis has failed to establish that a fiduciary duty owed to him was breached. Lieberman's decision to dissolve SEI L.P. at the Bank's behest cannot constitute a breach of fiduciary duty to the other members of SET Capital, since Lieberman had the unqualified right to unilaterally dissolve SEI L.P. The SET Capital Associates Agreement cannot be read to impose upon Lieberman a fiduciary duty to continue as fund manager of the SEI Fund in perpetuity in order that each member of the Indosuez Capital Group might remain eligible to reap a share of the profits, if any. Accordingly, defendants' motion for summary judgment dismissing plaintiffs Fifth Cause of Action for tortious interference is GRANTED.
F. New York Labor Law Claim
DeLeonardis claims that "[t]he Bank's decision to withhold payments for accrued and unused vacation time and other elements of compensation earned and owing to Plaintiff except in exchange for an onerous severance agreement violates the New York Labor Law § 198 (McKinney's 1999) and entitles Plaintiff to the benefits of such statutes, including penalties and attorneys' fees." (Compl. ¶ 52.)
Plaintiff argues that "vacation pay" was "due in August 1999" (Pl. Mem. at 6) but sets forth no such assertion in his Rule 56.1 Statement. The Bank finally paid plaintiff his vacation pay in June 2000. Plaintiff claims that his vacation pay for accrued unused vacation day covering vacation days from 1996 to 1999 was withheld for unreasonable period of time and was paid only because he filed suit. Plaintiff relies on Section 191(3) of the Wage Act, which provides that a terminated employee shall be paid "wages not later than the regular pay day for the pay period during which the termination occurred." Plaintiff also cites the definition of "wages" sets forth in Section 190(1):
The term "wages" also includes benefits or wage supplements as defined in section one hundred ninety-eight-c of this article, except for the purposes of sections one hundred ninety-one and one hundred ninety-two of this article.
Plaintiff argues that accrued and unused vacation pay thus constitutes "wages" under the
Labor Law. However, plaintiff cites not a single case addressing vacation pay in support. On the contrary, the New York Court of Appeals has affirmed that
it was the legislative intent that "vacation pay" was not included in "wages" for the purpose of the mandatory provisions of section 191 as to the time of payment of wages upon the termination of employment.Glenville Gage Co., Inc. v. Industrial Bd. of Appeals of New York, 421 N.Y.S.2d 408, 410 (3d Dep't 1979), aff'd 436 N.Y.S.2d 621 (1980). TheGlenville court held that Section 198-c was construed to require only that the employer abide by the terms of its agreement to provide benefits. In this case, there was no agreement controlling the payment of accrued vacation pay upon termination, although plaintiff relies on a Memorandum (the "Compensation Memo") dated January 28, 1997 to all Indosuez Capital Group Members from Bertrand Grabowski and Les Lieberman regarding "Indosuez Compensation Policies." Plaintiff asserts that the "Compensation Memo., provides for vesting and payment of non-incentive compensation upon completion of each pay period." (P1. Reply Mem. at 3 citing Affidavit of Thomas M. Campbell in Support of Plaintiffs Motion for Summary Judgment ("Campbell Supp. Aff."), Ex. 2 at 1.) This assertion is unfounded. The Compensation Memo provides only that "members of the Group will be fully vested in their base salaries upon completion of the period of service for which the salaries are payable" and that "[s]uch base salaries will be paid by the Bank in accordance with the Bank's payroll policies and practices." There is no mention of the Bank's policy with regard to vacation pay, much less payment for accrued and unused vacation time after termination of an employee. Plaintiff has not disputed the Bank's assertion that there is no Bank policy with respect to the payment for accrued vacation at any particular time after the termination of employment, and thus defendant's assertion is deemed admitted for purposes of this motion. (Def. Rule 56.1 Counter-Stmt. ¶ 5.)
It is well established that "[w]hen a contract does not specify time of performance, the law implies a reasonable time." Savasta v. 470 Newport Assoc., 82 N.Y.2d 763, 765 (1993). In this case, it is clear that there was no agreement governing the payment of vacation pay and the provisions of the Labor Law do not require payment of vested vacation pay within a time certain after termination. The defendants are entitled to summary judgment with respect to plaintiffs claim for vacation pay.
In addition to his claim for payment for accrued and unused vacation time, plaintiff claims that the defendants improperly delayed (a) the payment of vested dividends from stock in Casden Properties, Inc. paid to plaintiff pursuant to an Incentive Compensation Award; and (b) payments under the Indosuez GEEG Partners partnership agreement, all in violation of the Labor Law. The plaintiff also claims that the Bank has also improperly withheld vested monies due under the July 22, 1999 "Porticoes" CLO distribution in violation of the Labor Law. The defendants argue that none of these amounts, as a matter of law, constitute wages within the meaning of the Labor Law.
In re Apkon (Odyssey Partners, L.P.), 653 N.Y.S.2d 120 (1st Dep't 1997) stands for the unremarkable proposition that monies due as result of mutually agreed upon equity participations by employee in employer's investments involving risk of loss do not constitute "wages" within the meaning of Labor Law § 190(1). The In re Apkon court also held that an employer's refusal to pay such monies does not constitute a "deduction" from wages within the meaning of the Labor Law section prohibiting unauthorized deductions from wages. 653 N.Y.S.2d 120, 120 (citing Labor Law § 193). Section 190 of the Labor Law defines the term "wages" as "the earnings of an employee for labor or services rendered, regardless of whether the amount of earnings is determined on a time, piece, commission or other basis."
In International Bus. Machs. Corp. v. Martson, 37 F. Supp.2d 613, 620 (S.D.N.Y. 1999), Judge McMahon held that an employee stock award, granted under a "Long Term Incentive Compensation Plan" governed by New York law, did not constitute wages under the Labor Law. Judge McMahon relied on cases including Rosenberg v. Salomon, 992 F. Supp. 513 (D.Conn. 1997) and Tischmann v. ITT/Sheraton Corp., 882 F. Supp. 1358, 1370 (S.D.N Y 1995), aff'd, 145 F.3d 561 (2d Cir.) cert. denied, 525 U.S. 963 (1998) and noted that while those cases involved a fact pattern where the award had not yet vested, this was a distinction without a difference. Rather, the relevant factors to be considered are "the terms of the bonus plan, whether the employee had fixed compensation in addition to the possibility of an award under the plan and whether the additional compensation was conditioned on considerations outside the employee's actual work." Martson at 618 (citing Rosenberg at 518).
In Rosenberg, the court found that the stock awards at issue "were intended to give the participant a long-term interest in Phibro and defendant" and "served as a means to ensure that plaintiff will continue performing in the defendant's best interests." Rosenberg at 518. Here, the GEEG partnership distributions, the Casden dividends, and the Porticoes interest distribution have an identical purpose. Moreover, in 1999, DeLeonardis received a fixed salary of $170,000 annualized. "Receipt of a fixed salary generally negates any inference that a separate incentive payment or purely discretionary bonus constitutes wages." Martson at 618. Finally, there is no dispute that "[t]he GEEG partnership distributions, the Casden dividends, and the Porticoes interest distribution were not guaranteed and depend solely upon whether the investments made money or lost money, which was unrelated to DeLeonardis' actual work performance." (Def. Rule 56.1 Stmt. ¶ 67.) Thus, by their terms, the passive equity investments in which DeLeonardis was fully vested were not compensation for actual work.
The defendants' motion to dismiss plaintiffs Labor Law claim is also supported by the decision of the New York Court of Appeals in Gottlieb v. Kenneth D. Laub Co., 605 N.Y.S.2d 213, 216 (1993), where the Court recognized that § 198 of the Labor Law does not apply to "employees serving in an executive, managerial or administrative capacity." Gottlieb v. Kenneth D. Laub Co., 605 N.Y.S.2d 213, 216 (1993) (citing N.Y. Labor Law § 190(5),(6),(7)); Cohen v. Fox-Knapp, Inc., 640 N.Y.S.2d 554, 555 (1st Dep't 1996) ("the salary claim of an executive is not within the purview of Labor Law § 198 by reason of its exclusion from article 6 of the Labor Law"). DeLeonardis qualifies as a "person employed in a bona fide executive, administrative or professional capacity whose earnings are in excess of six hundred dollars a week." Labor Law § 190(7). As a "professional" employee, DeLeonardis cannot take advantage of Section 198.
In sum, I find that there are no material issues of fact regarding the nature of the GEEG partnership distributions, the Casden dividends, and the Porticoes interest distribution and that such payments do not constitute wages under New York's Labor Law. Accordingly, the plaintiffs Sixth Cause of Action for violation of New York's Labor Law is dismissed with prejudice.
G. Defendants' "Cause" Defense
DeLeonardis seeks summary judgment as to defendants' Sixth Separate Defense, which is that "[p]laintiff was terminated for cause." (Answer to First Amended Complaint, Sixth Separate Defense.) The parties dispute whether plaintiff was fired for "cause" within the meaning of the Bank's compensation policies and various partnership agreements for purposes of determining the applicability to him of the forfeiture provisions contained in those documents. Plaintiff argues that no genuine issues of material fact exist on this score. The Court disagrees.
The partnership agreements and the Indosuez Capital Group Compensation Memo define "cause" as "any act which the Bank reasonably and in good faith determines has materially impaired the reputation of the Bank" and "[a]n act of dishonesty or other misconduct by the member that results, or is intended to result in, material harm to the Bank, its business or reputation" respectively. (Def. Opp. Mem. at 17, citing Campbell Supp. Aff. Ex. 7 at 13; Ex. 2 at 4.) The defendants argue that the deposition testimony of senior bank officials "regarding what the Bank was advised concerning the CIBC meeting — that Lieberman had attempted to market the Group and the CLO's to CIBC, and that DeLeonardis supported this attempt through his presence at that meeting" provide the Bank with a "more than reasonable basis for treating DeLeonardis' termination for `Cause' pursuant to the partnership agreements and the Incentive Compensation Policies." (Def. Opp. Mem. at 17.)
In Cotran v. Rollins Hudig Hall Int'l, Inc., 17 Cal.4th 93, 107 (1998), the California Supreme Court held that in cases such as this,
The proper inquiry for the jury, in other words, is not, "Did the employee in fact commit the act leading to dismissal?" It is, "Was the factual basis on which the employer concluded a dischargeable act had been committed reached honestly, after an appropriate investigation and for reasons that are not arbitrary or pretextual?"
This California case is of course not controlling, but merely instructive. DeLeonardis argues that the Bank did not conduct an appropriate investigation and that no reasonablejury could find that plaintiffs mere presence at a meeting during which the Indosuez Capital Group was marketed to a competing financial institution constitutes "cause" under the applicable agreements. Plaintiff is mistaken. This issue is inherently an issue of fact and not an issue of law.
DeLeonardis also asserts there even if there was cause to fire him, such evidence could not be admitted at trial. (Pl. Mem. at 23.) This contention is absurd. There is no hearsay issue because what matters is not what actually occurred at the CIBC meeting but what senior management reasonably believed and relied on in making their decision to terminate the plaintiff. See Cotran v. Rollins Hudig Hall Int'l. Inc., 17 Cal.4th at 107. The Supreme Court's decision in Waters v. Churchill, 511 U.S. 661 (1994), which DeLeonardis relies on, is instinctive in this regard. TheWaters Court observed that
If [the employer] thinks the alleged offense is so egregious that it is proper to discipline the accused employee even though the evidence is ambiguous, [the employer] must consider that a jury might decide the other way. But employers, public and private, often do rely on hearsay, on past similar conduct, on their personal knowledge of people's credibility, and on other factors that the judicial process ignores. Such reliance may sometimes be the most effective way for the employer to avoid future recurrences of improper and disruptive conduct.
Of course, there will often be situations in which reasonable employers would disagree about who is to be believed, or how much investigation needs to be done, or how much evidence is needed to come to a particular conclusion. In those situations, many different courses of action will necessarily be reasonable. Only procedures outside the range of what a reasonable manager would use may be condemned as unreasonable.Waters, 511 U.S. at 676, 678.
In sum, the "cause" issue is precisely the kind of determination that a jury should make as the trier of fact. Therefore, summary judgment on this score must be DENTED.
H. Summary Judgment as to Defendants' First. Second. Third. Seventh, and Eighth Separate Defenses
DeLeonardis asserts that he is entitled to summary judgment on defendants' first (failure to state a claim), second (waiver and estoppel), third (plaintiff did not incur damages), seventh (failure of consideration) and eighth (Statute of Frauds) separate defenses. Defendants assert that these defenses are legal conclusions and that they have made arguments relating to the legal infirmities in the plaintiffs case on these issues. Defendants have set forth credible arguments advancing these defenses in support of their motion and in defense against the plaintiffs motion. Plaintiffs request for summary judgment on this score must be DENTED.
III. CONCLUSION
For the foregoing reasons, defendants' motion for partial summary judgment is GRANTED in the following respects: (1) plaintiffs First Cause of Action is DISMISSED to the extent that plaintiff claims he had an employment agreement with the Bank for employment through the end of 1999 and to the extent that he claims a breach of contract in connection with his interest in the Rocky Mountain Internet Award; (2) plaintiffs Third Cause of Action for conversion is DISMISSED; (3) plaintiff's Fifth Cause of Action for tortious interference with contract and fiduciary duties is DISMISSED; and (4) plaintiffs Sixth Cause of Action for violation of New York Labor Law is DISMISSED. The Court DENIES defendants' motion for partial summary judgment to dismiss the First Cause of Action with respect to plaintiffs claims that he was a third party beneficiary of the ICF Cayman Agreement, CLO IV Agreement, CLO V Agreement and the Lieberman Employment Agreement
Plaintiffs motion for summary judgment on defendants' first, second, third, sixth, seventh and eighth separate defenses is DENIED. Plaintiffs motion for partial summary judgment on his Second Cause of Action for breach of the Indosuez GEEG Partnership Agreement is DENIED. Plaintiffs motion for summary judgment on his Sixth Cause of Action is DENIED and his motion for partial summary judgment on the Fifth Cause of Action for tortious interference is also DENIED.
Plaintiffs third party beneficiary claims (First Cause of Action) and his claims for breach of various partnership agreements (Second Cause of Action) are all that remain for resolution at trial, which is scheduled to commence on December 1, 2000 in Courtroom 23B.
SO ORDERED.