Opinion
No. 651224/11.
2012-05-17
Richard A. MARIN,, Plaintiff, v. AI HOLDINGS (USA) CORP., AI Properties and Development (USA) Corp., Africa Israel Investments Ltd., Izzy Cohen and Nadav Grinshpon, Defendants.
Zukerman Gore Brandeis & Crossman by John K. Crossman, Esq., Frank C. Welzer, Esq., New York, for Plaintiff. Morrison Cohen LLP by Y. David Scharf, Esq., Kristin T. Roy, Esq., Evan Lupion, Esq., New York, for Defendants.
Zukerman Gore Brandeis & Crossman by John K. Crossman, Esq., Frank C. Welzer, Esq., New York, for Plaintiff. Morrison Cohen LLP by Y. David Scharf, Esq., Kristin T. Roy, Esq., Evan Lupion, Esq., New York, for Defendants.
BERNARD J. FRIED, J.
Plaintiff, Richard A. Marin, alleges that his former employer, AI Holdings (USA) Corp. (AI–USA), breached an agreement to pay him an employment bonus and other executive compensation, and that the individual defendants tortiously interfered with that agreement or with plaintiff's prospective economic advantage with AI–USA. Plaintiff seeks to recover on theories of contract, misrepresentation, promissory estoppel, unjust enrichment and quantum meruit, and to hold defendants AI Properties and Development (USA) Corp. (Properties) and Africa Israel Investments Ltd. (AFI) liable, as alter egos of AI–USA.Defendants seek an order, pursuant to CPLR 3211(a)(1), (7) and (8), dismissing the amended complaint (the complaint) with prejudice, or, in the alternative, an order, pursuant to CPLR 3024(b), striking scandalous and prejudicial allegations therein, and for sanctions pursuant to 22 NYCRR 130–1.1[c].
Unless indicated otherwise, the allegations that follow are taken from the complaint. Plaintiff was the chairman and chief executive officer of defendants AI–USA and Properties USA (together, AI–USA). AI–USA's parent company is AFI, a publicly-traded Israel-based company. Defendant Izzy Cohen (Cohen) is the chief executive officer of AFI and avers that he is a director of AI–USA, but plaintiff states that Cohen, his former supervisor, had no official title at AI–USA. Defendant Nadav Grinshpon is a director of AFI and AI–USA.
Plaintiff was hired by AI–USA in 2008. The parties do not dispute that plaintiff was an at-will employee when he worked for AI–USA and that he was working without a written employment agreement when, in December 2010, he was terminated from his position. Prior to 2010, plaintiff's salary and bonus terms were the subject of a written agreement (2009 Employment Agreement) that expired on December 31, 2009.
It is undisputed that, during 2010, plaintiff was paid a $400,000 salary and that in July 2010, he was paid a $1.25 million bonus. That bonus was paid for plaintiff's 2008–2009 work, pursuant to the 2009 Employment Agreement, which includes a provision for a bonus solely at the discretion of AI–USA. Also, at or around July 2010, a press release was issued by AFI with positive comments about plaintiff's work performance.
Plaintiff claims that, during 2010, he entered into an oral agreement for a $1.25 million dollar bonus, and other compensation, to be paid in addition to his $400,000 annual salary for his 2010 work. Plaintiff contends that he negotiated his compensation terms with Cohen, who was authorized to negotiate the amount of his 2010 bonus, and who had the authority of Lev Leviev, AFI's chairman of the board and principal shareholder, who controlled AFI's board of directors (the Board). Plaintiff alleges that Cohen repeatedly assured Marin that, for 2010, he would again receive an annual bonus of $1.25 million, as well as valuable management incentive payments, retroactive to January 1, 2010. Plaintiff further alleges that after negotiations with Cohen through the earlier part of the year, in May 2010, Cohen agreed that AI–USA would pay Marin a $1.25 million bonus for 2010, as well as other incentives.
Plaintiff also alleges that Cohen indicated that Marin's compensation would be subject to approval by the Board, and assured Marin that his 2010 bonus would be submitted for approval in March 20. 10, but that it was not. Plaintiff contends that he continued to work in reliance on Cohen's repeated promises, in 2010, that approval would be obtained. Plaintiff asserts that with the benefit of hindsight, it is now clear that Cohen never intended to present the bonus for approval, and that, in the alternative, if he had intended to do so, he breached his promise. Marin states that he relied on Cohen's representations, and would have accepted two other job offers, had he known that AI–USA would not pay him as agreed Marin states that in October 2010, he had discussions with Cohen about the AI–USA budget that would be presented to the Board, during which Cohen tried to renegotiate the $1.25 million bonus amount down, but instead included it in the budget. Plaintiff alleges that the AI–USA budget was presented to the Board without objection.
On December 8, 2010, by letter from AI–USA, plaintiff's employment was terminated and plaintiff was informed that he would not be receiving any bonus for 2010 and was obligated to immediately repay a $500,000 loan. Plaintiff claims this happened because, in Fall 2010, he raised, reported and attempted to investigate transactions involving the alleged diversion of AI–USA's corporate business opportunities by Grinshpon and Cohen.
Although defendants submit affidavits explaining what they assert were their legitimate business reasons for the transactions, for purposes of this motion, plaintiff's assertions that the transactions were diversions of AI–USA's business opportunities must be accepted.
AFI moves to dismiss the complaint for lack of personal jurisdiction on the basis that it does not conduct business in New York or maintain contacts sufficient to justify personal jurisdiction under CPLR 301. CPLR 3211(a)(8) permits a party to dismiss claims against a defendant on the ground that “the court has not jurisdiction of the person of the defendant.” Where a defendant moves to dismiss the complaint for lack of personal jurisdiction, the plaintiff bears the burden of proof of demonstrating jurisdiction (Copp v. Ramirez, 62 A.D.3d 23, 28, 874 N.Y.S.2d 52 [1st Dept 2009] ). Evidence presented must be viewed in the light most favorable to the non-moving party and doubts resolved in his favor (Brandt v. Toraby, 273 A.D.2d 429, 430, 710 N.Y.S.2d 115 [2d Dept 2000] ).
Grinshpon argues that AFI is an investment and holding company, formed and existing under the laws of Israel, is based there, and does not conduct business operations in the United States or have contacts with New York. Grinshpon asserts that AFI has indirect ownership of interests in limited liability companies or corporations, which may operate in New York, but itself has no New York offices, warehouses, employees, telephone listing or presence. Grinshpon states that the complaint does not allege that AFI entered into an agreement in its own capacity. With these allegations, AFI has met its burden to demonstrate that it is not subject to jurisdiction pursuant to CPLR 301.
In opposition, plaintiff argues that the pleadings warrant personal jurisdiction pursuant to New York's long-arm jurisdiction statute, CPLR 302(a)(1) or (3), but does not discuss the allegations that he claims demonstrate that such jurisdiction has been conferred. Instead, he discusses the issue of jurisdiction over a parent corporation under agency and the “mere department theory” ( see Pl. Memo. of Law, at 30–31 [ citing Frummer v. Hilton Hotels Intl., 19 N.Y.2d 533, 537, 281 N.Y.S.2d 41, 227 N.E.2d 851,cert denied389 U.S. 923 [1967] ). Therefore, plaintiff has not met his burden to demonstrate jurisdiction under CPLR 302(a)(1) and (3).
Plaintiff, however, argues that AFI is doing business in New York, and that if his showing is not sufficient to prove this, than he should be permitted discovery on the issue (CPLR 3211[d] ). CPLR 301 concerns jurisdiction over those “engaged in such a continuous and systematic course of doing business' in New York as to warrant a finding of its presence' in this jurisdiction” (Delagi v. Volkswagenwerk AG of Wolfsburg, Germany, 29 N.Y.2d 426, 430–431 [1972] ). The test for such presence requires that “[t]he court ... be able to say from the facts that the corporation is present' in the State not occasionally or casually, but with a fair measure of permanence and continuity' “ (Landoil Resources Corp. v. Alexander & Alexander Servs., 77 N.Y.2d 28, 33–34 [1990], quoting Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267 [1917] ). Whether a corporation itself may be deemed to be present in the State with permanence and continuity is evaluated using a number of factors (Landoil, 77 N.Y.2d at 33, 563 N.Y.S.2d 739, 565 N.E.2d 488), including the conducting of business affairs in New York, and/or an office, bank accounts, property or employees in the State (Frummer, 19 N.Y.2d at 537, 281 N.Y.S.2d 41, 227 N.E.2d 851).
Plaintiff argues that AFI is doing business in New York through its subsidiaries. A foreign corporation may be present through the conduct of its New York-based subsidiaries where the subsidiary is “so dominated” by a parent that is deemed a mere instrumentality or department of the parent (Delagi, 29 N.Y.2d at 432, 328 N.Y.S.2d 653, 278 N.E.2d 895). Regarding this issue, the factual question to be answered is whether or not the subsidiary was only nominally independent, so as to essentially not function as a separate entity (Taca Intl. Airlines, S.A. v. Rolls–Royce of England, 15 N.Y.2d 97 [1965] ). Factors that may be considered in making such a determination include the subsidiary's financial dependency on the parent, its observance of corporate formalities and the parent's interference in, and control of, the subsidiary's marketing and operational policies and selection and assignment of executive personnel (Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120–22 [2d Cir1984] ).
Plaintiff provides some of AFI's internet postings, and concludes that they demonstrate subsidiary AI–USA's domination by AFI, but fails to adequately address what in these materials challenges Grinshpon's averment of AFI's indirect ownership of interests in entities that may operate in New York, or how they suggest a non-frivolous basis for jurisdiction. Plaintiff also provides little more than that to demonstrate a likely jurisdictional basis, or a basis for his conclusion of parent company AFI's domination over subsidiary AI–USA.
Plaintiff states that he seeks additional discovery pursuant to CPLR 3211(d). To obtain discovery under CPLR 3211(d), the party asserting that jurisdiction exists over a defendant must demonstrate that facts may exist to exercise jurisdiction, in order to make “a sufficient start to warrant further discovery on the issue” (Ying Jun Chen v. Lei Shi, 19 A.D.3d 407, 408, 796 N.Y.S.2d 126 [2d Dept 2005] [internal citation and quotation marks omitted] ). Plaintiff asserts that AI–USA was only nominally independent, and no more than mere shell, or a sham company, but fails to substantiate these assertions, or conclusions, with supporting facts.
In addition, plaintiff's affidavit is bereft of substantive factual assertions concerning AI–USA's financial dependency on AFI, or the parent company's day-to-day control over the subsidiary's business functioning. Such opposition is inadequate, because a conclusory allegation of financial integration is not sufficient, and as plaintiff was AI–USA's CEO for years, this inchoate showing of that which would be within his own knowledge, is inexplicable. Not that plaintiff would be expected to provide exact specifics from memory about the company, concerning, for example, financial dependency. However, plaintiff represents that he has extensive experience and background in the financial industry and management. In addition, having headed the subsidiary, he had a front-row seat to its finances, day-to-day operations, observance of corporate formalities and any parental interference with it. Consequently, plaintiff undoubtedly would possess at least basic knowledge about such matters, yet provides only conclusory assertions that do not demonstrate a non-frivolous basis for jurisdiction under CPLR 301. Therefore, AFI's motion to dismiss for lack of jurisdiction is granted.
The record demonstrates that AI–USA had New York offices, officers and staff, facts that do not support plaintiff's conclusory assertion that AI–USA was no more than a mere shell, or a sham company.
The Motion to Dismiss for Failure to State a Cause of Action
“[O]n a CPLR 3211 motion to dismiss, the court must afford the pleadings a liberal construction, take the allegations of the complaint as true and provide plaintiff the benefit of every possible inference” (Simkin v. Blank, 80 A.D.3d 401, 401, 915 N.Y.S.2d 47 [1st Dept 2011] [internal citation and quotation marks omitted] ). To prevail on a motion for dismissal pursuant to CPLR 3211(a)(1), the documentary evidence proffered by a movant must “utterly refute plaintiff's factual allegations or conclusively establish a defense as a matter of law” ( id. at 402, 915 N.Y.S.2d 47 [citation omitted] ). “With respect to the branch of defendant's motion based upon CPLR 3211(a)(7), even though [a] defendant submit[s] documents, dismissal should not eventuate' unless [the movant shows] that a material fact alleged by plaintiff is not a fact at all and unless it can be said that no significant dispute exists regarding it' “ ( id. at 403, 915 N.Y.S.2d 47, quoting Guggenheimer v. Ginzburg, 43 N.Y.2d 268, 275 [1977] ).
Defendants argue that plaintiff's contract and implied contract claims should be dismissed because documentary evidence demonstrates that the parties did not agree that a non-discretionary bonus would be a part of Marin's compensation, but that the bonus was discretionary. Defendants further argue that the documents demonstrate that the parties engaged in continuing negotiations about a bonus, as well as additional management incentive compensation, referred to by the parties as “MIP,” that did not culminate in agreement. Defendants also contend that Marin has not pleaded the claim, because no consideration was exchanged for a bonus, and he has not identified targets that would entitle him to the bonus.
As a general rule, an employee has no enforceable right to compensation under a discretionary bonus plan or contract ( see Namad v. Salomon Inc., 147 A.D.2d 385, 537 N.Y.S.2d 807 [1st Dept], affd74 N.Y.2d 751 [1989];Kaplan v. Capital Co. of Am., 298 A.D.2d 110, 111, 747 N.Y.S.2d 504 [1st Dept 2002] [“bonus compensation sought was clearly stated in the company handbook to be purely discretionary”]; Freeman v. DL Rothberg & Assoc., P.C., 10 Misc.3d 132(A), 2005 N.Y. Slip Op 58040(U) [App Term, 1st Dept 2005] [no bonus where employment agreement provided for discretionary bonus]; see also Ryan v. Kellogg Partners Inst. Servs., 79 A.D.3d 447, 448, 914 N.Y.S.2d 81 [1st Dept 2010], affd19 N.Y.3d 1, 2012 N.Y. Slip Op 02248 [2012] [jury question where employee application and handbook not conclusive as to whether or not bonus was discretionary] ). However, New York also has a “long standing policy against the forfeiture of earned wages” which may be implicated in adjudicating employee bonus disputes (Weiner v. Diebold Group, 173 A.D.2d 166, 167, 568 N.Y.S.2d 959 [1st Dept 1991] [regarding claimed earned sales commissions] ). Hence, “[e]mployees in this state may enforce an agreement to pay an annual bonus made at the onset of the employment relationship where such bonus constitutes an integral part of plaintiff's compensation package” (Mirchel v. RMJ Sec. Corp., 205 A.D.2d 388, 389, 613 N.Y.S.2d 876 [1st Dept 1994] [internal citation and quotation marks omitted] ). The issue of whether compensation is earned income that is an inherent part of the employee's compensation, or a discretionary bonus, which may be awarded solely at the employer's discretion, is generally one of fact ( see Ryan, 79 A.D.3d at 448, 914 N.Y.S.2d 81).
Defendants' documentary submissions in support of their motions include what the parties refer to as “term sheets,” with the heading “AFI (USA) Management Incentive Proposal,” (Term Sheets, individually, Term Sheet). These Term Sheets were exchanged between Marin and Cohen until May of 2010 and address compensation for AI–USA's in-house counsel and four AFI–USA executives, including Marin.
In addition to salary, the Term Sheets address “bonus/commission terms and targets, and note that additional terms concerning management incentive compensation payment (“MIP”), separate from bonus and salary, were anticipated ( see e.g. Cohen Aff., Exh. N). The Term Sheets provide a redacted section, presumably that lists the salary of the AFI–USA counsel and executives, as well as a section labeled as “Annual Bonus/Commission,” which lists bonus amounts for the executives and counsel. Marin's bonus is listed as $1.25 million. This section of the Term Sheets states that “[a]ll bonuses are deemed at the sole discretion of AFI's Board ... and will be subject to full compliance with targets set in advance” ( id.). Large portions of the Term Sheets have been redacted, but on the last page is written “Final Agreement—This term sheet will be used as the basis for drafting a final agreement between the parties” ( id.) On the most recent Term Sheet exchanged by the parties, dated May 16, 2010, is written “[t]he effectiveness of this agreement is subject to the approval of AFI's Board” ( id.)
In opposition, plaintiff argues that his bonus was not discretionary because, by May 2010, Cohen orally agreed that plaintiff would be paid a base salary, plus a substantial annual bonus, and certain unspecified MIP, and that the bonus was to be $1.25 million. In fact, plaintiff claims that he and Cohen specifically, and expressly, agreed that plaintiff's 2010 compensation would include the $1.25 million bonus. Plaintiff also states that it is routine for AFI to pay its senior executives compensation consisting of a salary, annual bonus and incentive payments. In support, plaintiff points to an e-mail from Cohen, in which Cohen described the MIP as “an extra payment on top of salary and regular annual bonuses” (Marin Aff., Exh. A [emphasis supplied] ). Plaintiff also avers that Cohen was in communication with AFI's chairman, Leviev, about all financial matters, including the amount of compensation to be paid AI–USA employees. Plaintiff states that Cohen indicated to him that Leviev agreed to the bonus, and that Cohen, who was a member of the Board, knew that once Leviev did so, there were sufficient votes for approval. Plaintiff further claims that Cohen told him that Leviev had delegated his approval to Cohen, so that the Board's approval was a foregone conclusion. Based on Cohen's representations, plaintiff states that he understood that there was a full meeting of the minds about salary, bonus and MIP, and that Cohen was authorized to negotiate his bonus amount on behalf of AFI's chairman, AI–USA and the Board.
Defendants argue, correctly, that the parties could not be actively engaged in negotiations about a matter or issue, and at the same time have come to an agreement about it. Despite that plaintiff states that he had an oral agreement concerning the MIP, the documents submitted demonstrate that the parties did not reach an agreement as to MIP terms ( see Exh. Q).
Plaintiff had no enforceable definite agreement for payment, or reasonable expectation of MIP payments while involved in negotiating the MIP, the plan for which had not been formed.
Apparently, the company sought to develop an MIP compensation structure for its subsidiaries world-wide.
However, plaintiff avers that the parties orally agreed to the bonus, its amount ($1.25 million), that the Board's discretion would be exercised in his favor, and merely desired to later set down their agreement in writing. These averments must be taken as true on this motion to dismiss. Viewed in plaintiff's favor, the words and conduct of the parties may indicate their intent to become bound, and credibility issues may not be resolved on this motion (Venetis v. Stone, 31 Misc.3d 1205(A), 2011 N.Y. Slip Op 50497(U) [Sup Ct, N.Y. County 2011]; see Lagano v. Soule, 86 A.D.3d 665, 666, 926 N.Y.S.2d 729 [3d Dept 2011] ).
While, as demonstrated by the 2009 Agreement, a non-discretionary bonus may not have been part of plaintiff's compensation at the outset of his employment, as was the case in Mirchel (205 A.D.2d 388, 613 N.Y.S.2d 876,supra ), it is both parties' position that they had no contract as to bonus after the 2009 Agreement ended, but began negotiations anew. Therefore, the fact that the bonus may not have been an agreed part of plaintiff's compensation when he was originally hired is not dispositive, as the parties were free to later negotiate different compensation terms, just as they did prior to entering into the 2009 agreement.
The documents that defendants have submitted in moving include affidavits and email messages with attachments, which demonstrate that the parties were still negotiating during mid-to-late May, cannot be said to utterly refute plaintiff's claim that an oral agreement for a non-discretionary bonus was not reached before June. The emails messages from July are not, in themselves, definitive as to this issue ( see e.g. Def. Mov. Aff., Exh, O, Exh. Q [July 26, 2010 email concerning MIP ] ). The meaning of the August 1, 2010 email from an AFI employee is not sufficiently ascertainable, as a matter of law, and its meaning is not irrefutable ( see id., Exh. S), and could have essentially concerned the MIP or and/or bonus plans beyond 2010. The conclusion that the October through December 2010 email messages may have concerned what plaintiff contends were his attempts to obtain an agreement in writing cannot be excluded on this record (Sanders v. Winship, 57 N.Y.2d 391, 394 [1982] [on CPLR 3211 the court “resolve[s] all inferences which reasonably flow therefrom in favor of the pleader”). Whether Marin is referring to the 2009, as opposed to the 2010, bonus in his December 14, 2010 email, when he references the possibility that he might not obtain a bonus cannot be definitively ascertained on this record. Consequently, this communication, without more, cannot be deemed, as a matter of law, as Marin's admission that there was no oral agreement concerning a 2010 bonus.
While plaintiff's statement that defendants' submissions are entirely consistent with his claims may be debatable, there is no single document that conclusively demonstrates as false, as a matter of law, plaintiff's averment that the parties reached an agreement. Defendants' contention, that viewing all of the email messages in context demonstrates the absence of a claim, ignores that doing so would require the impermissible making of inferences in favor of the nonmoving party.
Therefore, defendants also have not conclusively demonstrated that a material fact alleged by plaintiff is not a fact, or that there is no significant dispute regarding whether or not the parties entered into an oral agreement for the bonus. Nor have defendants resolved or sufficiently addressed the issue concerning plaintiff's assertion that there was an oral agreement to exercise Board discretion in his favor concerning the bonus.
In reply, defendants argue that the documentary evidence demonstrates that the parties were engaged in ongoing negotiations regarding the terms of the MIP, and did not intend to form an agreement until the MIP terms were agreed upon and approved by the Board. This argument was not made in the moving papers, and may not be first raised in reply ( see Azzopardi v. American Blower Corp., 192 A.D.2d 453, 454, 596 N.Y.S.2d 404 [1st Dept 1993] [impermissible, in reply papers, to introduce new grounds or arguments in support of movant's motion] ). In any event, while defendants state that they did not intend to form an agreement until MIP terms were established, in support they cite to one of the Term Sheets. The Term Sheets, however, were for all of the AI–USA executives and counsel, yet the record contains documents that suggest that contracts were entered into with some of these employees with guaranteed bonus terms, but without MIP terms ( see Cohen Aff., Exh. U).
The parties do not dispute that Marin's salary was $400,000, which was paid out over 2010 while Marin worked.
Defendants cite to Schutty v. Speiser Krause P.C., 86 A.D.3d 484, 484, 928 N.Y.S.2d 4 [1st Dept 2011], in which the plaintiff claimed compensation from his employer based on an oral contract. In that case, however, the employment relationship was governed by the terms of the plaintiff's original written employment contract, and the plaintiff-employee's resignation letter demonstrated that the parties had not come to full agreement concerning the very term upon which the plaintiff based his claim.
Here, there is no dispute that the 2009 Agreement did not govern the parties' relationship in 2010, and defendants' argument that the emails demonstrate that the parties were still negotiating the bonus, requires the impermissible drawing of inferences in favor of the non-moving party from messages that are not necessarily self-explanatory. In light of plaintiff's assertions, defendants have not, on this record, as a matter of law, demonstrated that the documentary evidence conclusively establishes that the parties did not reach an agreement as to the payment of a bonus, or its amount.
Examination of the Schutty case included review of the materials contained in the file of the New York County Clerk for this case under Index number 602485/08.
Almost none of the documents submitted, such as party affidavits and email correspondence, meets the criteria for documentary evidence under CPLR 3211(a)(1).
Defendants argue that there was no consideration for an agreement, as plaintiff was already obligated to perform the work that he did for his salary. It is true that “[n]either a promise to do that which the promisor is already bound to do, nor the performance of an existing legal obligation constitutes valid consideration” (Tierney v. Capricorn Invs., 189 A.D.2d 629, 631, 592 N.Y.S.2d 700 [1st Dept 1993] ). However, the agreement to continue employment by an at-will employee may constitute consideration ( see Ryan v. Kellogg Partners Inst. Servs., 19 N.Y.3d 1, 2012 N.Y. Slip Op 02248 [2012] [“But even if Ryan [the employee] had been unemployed when Kellogg hired him, his subsequent performance would have constituted consideration”]; Levy v. Lucent Techs. Inc., 2003 WL 118500, [SD NY] 2003] ). To the extent that AFI–USA's counsel's averments conflict with those of plaintiff, credibility issues must be resolved in plaintiff's favor on a motion to dismiss ( see Lagano, 86 A.D.3d at 666, 926 N.Y.S.2d 729).Tierney (189 A.D.2d 629, 592 N.Y.S.2d 700,supra ), upon which defendants rely extensively, concerned a plaintiff with a written contract that bound him to do, for a certain payment, that for which he sought additional compensation. This case is not analogous because, as an at-will employee, plaintiff did not have an obligation to stay on with AI–USA. Whether or not he did so in exchange for the promise of a bonus is a fact issue that cannot be resolved here.
Langer v. Dadabhoy (44 AD3d 425, 426 [1st Dept 2007] ), where the contract claim was dismissed for want of consideration based on plaintiff's allegation that he set aside of funds for the purchase of certain real estate, does not demonstrate that consideration was not exchanged here.
Defendants argument that plaintiff's claim is inherently incredible, because the Board did not approve the 2009 bonuses until July 26, 2010, is not itself dispositive. Documents in the record suggest that the timing may have been influenced by AFI's concerns about public perception of excessive executive compensation during a time when AI–USA was apparently suffering losses, and inferences may not be drawn in defendants' favor from the timing of this event.
Defendants argue that there was no agreement as to an amount for the bonus and that the complaint does not provide details of targets to be met. When there is no written agreement between the parties, the plaintiff must establish that the parties, by their words and/or conduct, mutually assented to the terms of an agreement that is sufficiently definite ( see Charles Hyman, Inc. v. Olsen Indus., 227 A.D.2d 270, 275, 642 N.Y.S.2d 306 [1st Dept 1996] ). If there exists a reasonable basis for calculating a bonus due an employee, a court may enforce the contract term, and bonus history thus may be used to determine an appropriate amount (Giuntoli v. Garvin Guybutler Corp., 726 F.Supp. 494, 508 [SD N.Y.1989] ).
Plaintiff claims that his bonus was for $1.25 million, and was the product of his negotiations with Cohen. Furthermore, the complaint with plaintiff's affidavit, informs defendants that plaintiff claims that he entered into an agreement for a bonus, fulfilled his obligations thereunder, and was injured when defendants did not pay the bonus, thereby sufficiently stating a contract claim ( seeCPLR 3013). In any event, plaintiff avers that he was not required to meet any targets in order to obtain the bonus, but did meet them, and he is not required to produce evidence, on this motion, to demonstrate the validity of his claim.
As to plaintiff's claim for implied contract, defendants move to dismiss for essentially the same reasons discussed above. An implied contractual relationship may be established by the conduct of the parties, as well as by express agreement (Mirchel, 205 A.D.2d at 390, 613 N.Y.S.2d 876;Land–Site Contr. Corp. v. Marine Midland Bank, N.A., 177 A.D.2d 413, 415, 576 N.Y.S.2d 255 [1st Dept 1991] ). A contract implied in fact for bonus payments has been recognized in New York ( see Mirchel, 205 A.D.2d at 390, 613 N.Y.S.2d 876;Squadrito v. Credito Italiano, 193 Misc. 34, 83 N.Y.S.2d 334 [City Ct, N.Y. County 1948] [twenty-year custom of awarding bonuses]; Wineburgh v. Seeman Bros., 21 N.Y.S.2d 180, 186–87 [Sup Ct, N.Y. County 1940] [bonuses paid every year] ). While the 2009 Agreement specifically states that plaintiff was only entitled to a discretionary bonus for his first year of work, and does not establish defendants' implied promise to pay a non-discretionary, or guaranteed, bonus, defendants have not demonstrated that, as a matter of law, the words and conduct plaintiff alleges and avers occurred in 2010 could not be deemed an implied agreement. Consequently, the motion to dismiss the first and second causes of action of the complaint is denied.
As plaintiff's arguments concerning CPLR 3211(d) pertain only to the breach of contract claims, which have not been dismissed, they need not be addressed.
Plaintiff's third cause of action for misrepresentation is dismissed. The elements of this claim are (1) a defendant's material false representation of a present fact, (2) a defendant's intention to defraud the plaintiff thereby, (3) that the plaintiff reasonably relied upon the representation, and (4) that the plaintiff suffered damage resulting from his or her reliance on the misrepresentation (Swersky v. Dreyer & Traub, 219 A.D.2d 321, 326, 643 N.Y.S.2d 33 [1st Dept 1996] ). Plaintiff's allegations concern numerous alleged unfulfilled promises about performance and otherwise, and do not support a misrepresentation claim (Manas v. VMS Assocs., LLC, 53 A.D.3d 451, 454, 863 N.Y.S.2d 4 [1st Dept 2008]; Jacobs v. Lewis, 261 A.D.2d 127, 127, 689 N.Y.S.2d 468 [1st Dept 1999] [“ultimately unfulfilled promises” not actionable as fraud]; Tierney, 189 A.D.2d at 632 [1993];CPLR 3016). However, the claim is not properly dismissed with prejudice where dismissal is based on the failure to allege sufficient facts to support the claim.
The fourth cause of action for promissory estoppel is duplicative of plaintiff's breach of contract claim ( see Hoeffner v. Orrick, Herrington & Sutcliff LLP, 61 A.D.3d 614, 615, 878 N.Y.S.2d 717 [1st Dept 2009]; Celle v. Barclays Bank P.L.C., 48 A.D.3d 301, 303, 851 N.Y.S.2d 500 [1st Dept 2008] ). Moreover, if plaintiff is unable to prove that his bonus was not discretionary, and that he has an enforceable agreement for the amount he claims, under the circumstances alleged here, plaintiff does not state facts that demonstrate that he would be entitled to the bonus he seeks, or other compensation in lieu of that bonus. Furthermore, reliance is not reasonably placed on beliefs and anticipatory statements about possible future events, such as the email message that Cohen believed the Board would formally approve the 2010 bonus in Q4, or the mere presentation of a subsidiary company's budget to a portion of the Board. As the facts as alleged do not demonstrate that plaintiff is entitled to the recovery under the equitable doctrine of promissory estoppel, the claim is dismissed with prejudice.
Plaintiff's quantum meruit and the unjust enrichment claims, the fifth and sixth causes of action of the complaint, are dismissed, with prejudice, as well. “The elements of a claim in quantum meruit are: the performance of services in good faith, acceptance of the services by the person to whom they are rendered, an expectation of compensation therefor, and the reasonable value of the services” (Freedman v. Pearlman, 271 A.D.2d 301, 304, 706 N.Y.S.2d 405 [1st Dept 2000] ). “To state a cause of action for unjust enrichment a plaintiff must allege that it conferred a benefit upon the defendant and that the defendant will obtain such benefit without adequately compensating plaintiff therefor” (Nakamura v. Fujii, 253 A.D.2d 387, 390, 677 N.Y.S.2d 113 [1st Dept 1998] ). Both of these theories of recovery are intended to prevent the unjust enrichment of one party at the expense of another. While plaintiff alleges that he conferred a benefit on AI–USA through his work and also seeks the value of the services rendered, he undisputedly received a salary, but does not assert that the services he performed were “so distinct from the duties of his employment and of such nature that it would be unreasonable for the employer to assume that they were rendered without expectation of further pay” (Freedman, 271 A.D.2d at 304, 706 N.Y.S.2d 405 [internal citation and quotation marks omitted] ).
Plaintiff alleges that Cohen and Grinshpon tortiously interfered with his bonus contract with his employer AI–USA. In the event that it is ultimately determined that plaintiff did not have an enforceable agreement for a bonus, plaintiff alleges that they intentionally interfered with the proposed agreement. Cohen and Grinshpon move to dismiss these claims.
To plead a claim for tortuous interference with a contract a plaintiff must allege (1) his valid contract with a third party; (2) about which defendant had knowledge; (3) the defendant's intentional procurement of a breach of that contract, without justification; (4) breach; and (5) damages (NBT Bancorp Inc. v. Fleet/Norstar Fin. Group, Inc., 87 N.Y.2d 614, 620–21 [1996] ). “A claim for tortious interference with a prospective business relationship (i.e., an economic advantage) must allege: (1) the defendant's knowledge of a business relationship between the plaintiff and a third party; (2) the defendant's intentional interference with the relationship; (3) that the defendant acted by the use of wrongful means or with the sole purpose of malice; and (4) resulting injury to the business relationship” (534 East 11th Street Hous. Dev. Fund Corp. v. Hendrick 90 A.D.3d 541, 542, 935 N.Y.S.2d 23 [1st Dept 2011] ).
Plaintiff alleges that he and another AFI subsidiary senior executive were terminated after questioning directives contrary to the interests of AFI's shareholders. Plaintiff asserts that Cohen and Grinshpon caused AI–USA not to pay his bonus in order to cover up wrongdoing that plaintiff discovered and reported, to punish, silence and make an example out of him, and to send a message to those in AFI subsidiaries who dare to question AFI's senior management. In support of his claim, plaintiff points to his allegations that Grinshpon diverted valuable property management business away from AI–USA to a competitor and that, Grinshpon, as Leviev's, “chief lieutenant for personal business,” personally profited by diverting the business to other Leviev-controlled companies.
Plaintiff alleges and avers that in response to his raising the alleged improprieties, Cohen instructed him to “drop it.” Plaintiff also asserts that Cohen directed him to take a write off for a $200,000 debt owed to AI–USA by an outside company, China Sonangol. Plaintiff argues that Grinshpon and Cohen's actions were contrary to AI–USA's business interests, and without justification. Plaintiff contends that Cohen and Grinshpon acted maliciously, and sought to conceal their wrongdoing by not paying plaintiff his bonus, because plaintiff raised the improprieties. Plaintiff alleges that Grinshpon and Cohen acted with malice, for personal gain at plaintiff's expense, and caused AI–USA to fire plaintiff and breach its agreement to pay his bonus and MIP.
Plaintiff does not assert a claim for wrongful termination.
New York courts recognize the distinction between a corporation and its officers and directors, who carry out corporate business affairs, with public policy limiting liability imposition on those that carry out the corporation's business ( see Petkanas v. Kooyman, 303 A.D.2d 303, 305, 759 N.Y.S.2d 1 [1st Dept 2003] ). Therefore, corporate officers and directors ordinarily are not liable to a third-party for inducing a breach of a contract with the corporation merely for making decisions or taking acts that result in the corporation's breach or broken promise (Joan Hansen & Co. v. Everlast World's Boxing Headquarters Corp., 296 A.D.2d 103, 109, 744 N.Y.S.2d 384 [1st Dept 2002] ). Officers may be rendered personally liable, however, where their acts or conduct were to benefit the officer's personal, rather than the corporation's interests (Hoag v. Chancellor, Inc., 246 A.D.2d 224, 230, 677 N.Y.S.2d 531 [1st Dept 1998] ).
To establish liability, the complaint must allege that the officer acted outside the scope of his or her employment or personally profited from his interference with the contract at issue ( id. at 228–29, 677 N.Y.S.2d 531), such that the benefit obtained from the contract interference was not to the corporation (Petkanas, 303 A.D.2d at 305, 759 N.Y.S.2d 1). Such claims are subject to an enhanced pleading standard, in that a plaintiff must make a particularized pleading, in nonconclusory language, of facts establishing that the acts were either: (1) beyond the officer or director's employment scope; or (2) were performed with malice and motivated by a desire for personal gain (Joan Hansen & Co., 296 A.D.2d at 109–110, 744 N.Y.S.2d 384). The First Department has “construed personal gain in terms that the challenged acts were undertaken with malice and were calculated to impair the plaintiff's business for the personal profit of the [individual] defendant' “ (Petkanas, 303 A.D.2d at 305, 759 N.Y.S.2d 1, quoting Joan Hansen & Co., 296 A.D.2d at 110, 744 N.Y.S.2d 384;see e.g. Hoag, 246 A.D.2d at 229, 677 N.Y.S.2d 531 [alleging that individual tortfeasors gained as they received fees that plaintiffs would have received] ).
Plaintiff makes only conclusory allegations as to actual personal gain by Cohen and Grinshpon from this conduct,
as the only arguably non-conclusory facts that might indicate possible personal gain concern Leviev, whom plaintiff asserts profited in that he was able to engage in additional transaction(s) with China Sonangol.
Plaintiff cannot seriously contend that firing him or asserting that AI–USA would not pay plaintiff bonus was conduct outside the scope of Cohen, his supervisor, or Grinshpon's employment.
Leviev, however, is not a defendant. For the aforementioned reasons, the seventh and eighth causes of action of the complaint are insufficiently pleaded and dismissed.
Crediting plaintiff's allegations about injury to AFI's shareholders through diversions of AI–USA corporate opportunities, such interference or transactions do not constitute interference with plaintiff's alleged contract or opportunity with AI–USA. Furthermore, plaintiff's reliance on Cohen v. Davis (926 F.Supp. 399, 403–404 [SD N.Y.1996] ) is unpersuasive. The plaintiff in that case alleged that the defendants made fraudulent or false statements about her in order to effect her termination, and the court determined that plaintiff sufficiently stated that the defendants used wrongful means to interfere with her employment contract.
Defendants move to strike scandalous allegations in the complaint about them, offering affidavits that purport to explain a business rationale for what plaintiff alleges was improper conduct concerning defendants, non-party China Sonangol, and another former employee or his company. CPLR 3024(b) provides that “[a] party may move to strike any scandalous or prejudicial matter unnecessarily inserted in a pleading” (CPLR 3024[b] [emphasis added] ). “In reviewing a motion pursuant to CPLR 3024(b) the inquiry is whether the purportedly scandalous or prejudicial allegations are relevant to a cause of action” and “[g]enerally speaking, if the item would be admissible at the trial under the evidentiary rules of relevancy, its inclusion in the pleading, whether or not it constitutes ideal pleading, would not justify a motion to strike under CPLR 3024(b)' “ (Soumayah v. Minnelli, 41 A.D.3d 390, 392, 393, 839 N.Y.S.2d 79 [1st Dept 2007] [internal citation omitted] ).
Defendants argue that the allegations are untrue, and unnecessary to plaintiff's contract or quasi-contract claims, but ignore that plaintiff also had other types of claims. Notwithstanding that, defendants' motion is granted to the extent that complaint allegation numbers 12, 14, 15 and 84 are stricken as they are both irrelevant to this action and inflammatory. It is not clear whether portions of complaint allegation numbers 3, 16 and 40 will be necessary or relevant to plaintiff's claim, including his assertion that his bonus was an inherent part of his salary, and I decline to parse through words and sentences in order to strike out portions of these allegations. To the extent that defendants seek dismissal of a few other allegations, as they were a considerable part of defendants' claims, and discussed in this decision, and will remain in the original complaint which has been publicly filed, the striking of them is unwarranted.
Defendants' motion for sanctions and attorneys' fees pursuant to 22 NYCRR 130–1.1[c] is denied. Sanctions are only appropriate when a party or attorney has abused the judicial process, or wasted judicial resources by engaging in wholly frivolous litigation ( see e.g. Creative Bath Prods. v. Connecticut Gen. Life Ins. Co., 173 A.D.2d 400, 401, 570 N.Y.S.2d 31 [1st Dept], lv denied79 N.Y.2d 751 [1991] ). Frivolous conduct has been defined as the assertion of false material factual statements, or conduct that is “without merit in law,” or “undertaken primarily to delay or prolong litigation resolution,” or “to harass or maliciously injure another” (22 NYCRR 130–1.1[c] ). The complaint has not been dismissed, and defendants have not shown that this action is frivolous.
Therefore, it is
ORDERED that the defendants' motion to dismiss the complaint and to strike allegations of the complaint is granted to the extent that the complaint is dismissed in its entirety as to Africa Israel Investments LTD for lack of jurisdiction and as against the remaining defendants the third, fifth and sixth causes of action of the complaint are dismissed with prejudice and the fourth, seventh and eighth are dismissed without prejudice, and the allegations numbered 12, 14, 15 and 84 of the amended complaint are stricken, and is otherwise denied.