Andrew Kolchins, Respondent,v.Evolution Markets, Inc., Appellant.

Brief

N.Y.February 13, 2018

To be Argued by: DAVID B. WECHSLER (Time Requested: 20 Minutes) APL 2016-00234 New York County Clerk’s Index No. 653536/12 Court of Appeals of the State of New York   ANDREW KOLCHINS, Plaintiff-Respondent, - against - EVOLUTION MARKETS INC., Defendant-Appellant. BRIEF FOR DEFENDANT-APPELLANT On the Brief: DAVID B. WECHSLER TODD GUTFLEISCH KIM MICHAEL WECHSLER & COHEN, LLP Attorneys for Defendant-Appellant 17 State Street, 7th Floor New York, New York 10004 Tel.: (212) 847-7900 Fax: (212) 847-7955 dwechsler@wechco.com tgutfleisch@wechco.com kmichael@wechco.com Printed on Recycled Paper DISCLOSURE STATEMENT PURSUANT TO RULE 500.1(f) Defendant-Appellant Evolution Markets Inc. (“EvoMarkets”) states that: (i) it is a privately held company; (ii) EvoMarkets has no parent; and (iii) no publicly owned corporation holds an interest in EvoMarkets. Here is the list of subsidiaries: Evolution Markets Financial Services LLC Evolution Markets Nuclear Fuel LLC Evolution Markets (Mauritius) Limited Evolution Markets India Private Limited Evolution Markets Africa Proprietary Limited Evolution Markets Asia Private Limited Evolution Markets Greenhouse Gas LLC Evolution Markets Limited Evolution Markets Futures LLC i TABLE OF CONTENTS TABLE OF AUTHORTIES ii-vi PRELIMINARY STATEMENT 1 QUESTION PRESENTED 7 STATEMENT OF FACTS 7 PROCEDURAL HISTORY 14 STATEMENT OF JURISDICTION 15 ARGUMENT I. KOLCHINS’ CLAIM FOR BREACH OF AN ALLEGED 2012 AGREEMENT SHOULD HAVE BEEN DISMISSED A. In Contravention Of Controlling Precedent, The First Department Failed To Consider The “Totality” Of Circumstances, Instead Placing “Disproportionate Emphasis” On Select Communications While Ignoring Others That Establish That No Agreement Was Reached B. The Decision Will Harm Those Doing Business In New York C. Neither Party Intended To Be Bound Without An Executed Writing II. THE FIRST DEPARTMENT ERRONEOUSLY FAILED TO DISMISS KOLCHINS’ CLAIM FOR BREACH OF THE 2009 EMPLOYMENT AGREEMENT CONCERNING THE “PRODUCTION BONUS” 16 16 16 21 27 30 CONCLUSION 35 ii TABLE OF AUTHORITIES New York State Cases Matter of 166 Mamaroneck Ave. Corp. v. 151 E. Post Rd. Corp., 78 N.Y.2d 88 (1991) ..................................................................................................... 27 and n.7 2004 McDonald Ave. Realty LLC v. 2004 McDonald Ave. Corp., 25 Misc. 3d 1204(A) (Sup. Ct. Kings Cty. 2007) ...................................................... 26 and n.7 Adams v. Banc of Am. Sec. LLC, 7 Misc. 3d 1023(A), 2005 NY Slip Op 507149(U) (Sup. Ct. N.Y. Cty. 2005) ......................................................... 26 and n.7 Agosta v. Fast Sys. Corp., 46 Misc. 3d 1217(A), 2015 NY Slip Op 50107(U) (Sup. Ct. Suffolk Cty. 2015) ....................................................................... 27 and n.7 Aiello v. Burns Intl. Sec. Servs. Corp., 110 A.D.3d 234 (1st Dep’t 2013) .......................................................................................... 27 and n.7 Art & Fashion Grp. Corp. v. Cyclops Prod., Inc., 120 A.D.3d 436 (1st Dep’t 2014) ........................................................................................................... 27 and n.7 Beach v. Touradji Capital Mgt., LP, 2014 N.Y. Misc. LEXIS 859 (Sup. Ct. N.Y. Cty. Feb. 26, 2014) .................................................................................... 34, 35 Benedict Realty Co. v. City of N.Y., 11 Misc. 3d 1086(A), 2006 NY Slip Op 50720(U) (Sup. Ct. Richmond Cty. 2006) .................................................. 26 and n.7 Blinds & Carpet Gallery, Inc. v. EEM Realty, Inc., No. 2215/10, 34 Misc.3d 1228(A), 2012 NY Slip Op 50278(U) (Sup. Ct. Kings Cty. 2012) ........... 26 and n.7 Brause v. Goldman, 10 A.D.2d 328 (1st Dep’t 1960) ................................ 26 and n.7 Brown Bros. Elec. Contrs. v. Beam Constr. Corp., 41 N.Y.2d 397 (1977) .......................................................................................................... 27 and n.7 Chapman, Spira & Carson, L.L.C. v. Helix BioPharma Corp., 115 A.D.3d 526 (1st Dep’t 2014) ................................................................................... 26 and n.7 Cobble Hill Nursing Home v. Henry & Warren Corp., 74 N.Y.2d 475 (1989) .......................................................................................................... 27 and n.7 Credit Suisse First Boston Corp. v. Cooke, 284 A.D.2d 365 (2d Dep’t 2001) ........................................................................................... 26 and n.7 iii Dahan v. Weiss, 120 A.D.3d 540 (2d Dep’t 2014) ..................................... 26 and n.7 Dratfield v. Gibson Greetings, Inc., 269 A.D.2d 294 (1st Dep’t 2000) ..................................................................................... 17, 26 and n.7 Eastern European Trading, Corp. v. Knaust, 128 A.D.3d 589 (1st Dep’t 2015) .......................................................................................... 27 and n.7 Edelman v. Poster, 72 A.D.3d 182 (1st Dep’t 2010) .................................. 27 and n.7 In re Estate of Argersinger, 168 A.D.2d 757 (3d Dep’t 1990) ................... 26 and n.7 Estate of Wyman, 128 A.D.3d 1157 (3d Dep’t 2015) ................................. 26 and n.7 Matter of Express Indus. & Term. Corp. v. N.Y.S. Dep’t. of Transp., 93 N.Y.2d 584 (1999) ................................................................................. 26 and n.7 Flores v. Lower E. Side Serv. Ctr., Inc., 4 N.Y.3d 363 (2005) .................. 27 and n.7 Four Seasons Hotels v. Vinnik, 127 A.D.2d 310 (1st Dep’t 1987) ............ 27 and n.7 Galesi v. Galesi, 37 A.D.3d 249 (1st Dep’t 2007) ..................................... 26 and n.7 Geller v. Reuben Gittelman Hebrew Day Sch., 34 A.D.3d 730 (2d Dep’t 2006) ........................................................................................... 26 and n.7 Guggenheim Corporate Funding, LLC v. Access.1 Communications Corp.- NY, 26 Misc. 3d 1210(A), 2009 NY Slip Op 52702(U) (Sup. Ct. N.Y. Cty. 2009) ........................................................................................................... 26 and n.7 Hall v. United Parcel Serv., Inc., 76 N.Y.2d 27 (1990) .......................................... 32 Jordan Panel Sys. Corp. v. Turner Constr. Co., 45 A.D.3d 165 (1st Dep’t 2007) ........................................................................................................... 26 and n.7 Joseph Martin, Jr., Delicatessen v. Schumacher, 52 N.Y.2d 105 (1981) .......................................................................................................... 26 and n.7 King v. King, 208 A.D.2d 1143 (3d Dep’t 1994)........................................ 26 and n.7 Kowalchuk v. Stroup, 61 A.D.3d 118 (1st Dep’t 2009) .................. 27 and n.7, 27, 28 May v. Wilcox, 182 A.D.2d 939 (3d Dep’t 1992) ....................................... 26 and n.7 Metro-Goldwyn-Mayer v. Scheider, 40 N.Y.2d 1069 (1976) ..................... 27 and n.7 iv Newmark & Co. Realty Estate Inc. v. 2615 East 17th St. Realty LLC, 80 A.D.3d 476 (1st Dep’t 2011) ...................................................................... 27 and n.7 Northern Stamping, Inc. v. Monomoy Capital Partners, L.P., 129 A.D.3d 448 (1st Dep’t 2015) ................................................................................... 26 and n.7 Pachter v. Bernard Hodes Group, Inc., 10 N.Y.3d 609 (2008) ........................ 31, 32 Piller v. Marsam Realty 13th Ave., LLC, 41 Misc. 3d 1217(A), 2013 NY Slip Op 51722(U) (Sup. Ct. Kings Cty. 2013) ........................................... 26 and n.7 Ryan v. Kellogg Partners Inst. Servs., 19 N.Y.3d 1 (2012)..................................... 34 Scheck v. Francis, 26 N.Y.2d 466 (1970) ................................................... 26 and n.7 Spier v. Southgate Owners Corp., 39 A.D.3d 277 (1st Dep’t 2007) .......... 26 and n.7 Stonehill Capital Mgt., LLC v. Bank of the West, 28 N.Y.3d 439 (2016) .. 21 and n.6 Truelove v. Northeast Capital & Advisory, Inc., 95 N.Y.2d 220 (2000) ........... 31, 34 Venture Mfg. (Singapore) Ltd. v. Matco Grp., Inc., 6 A.D.3d 850 (3d Dep’t 2004) ........................................................................................... 26 and n.7 Wald v. Graev, 2014 N.Y. Misc. LEXIS 4158, 2014 NY Slip Op 32433(U) (Sup. Ct. N.Y. Cty. Sept. 15, 2014) ............................................................ 26 and n.7 Weiner v. Diebold Group, Inc., 173 A.D.2d 166 (1st Dep’t 1991) .................... 33-34 Yenom Corp. v. 155 Wooster St. Inc., 23 A.D.3d 259 (1st Dep’t 2005) ..... 26 and n.7 Zheng v. City of New York, 19 N.Y.3d 556 (2012) ............. 16, 21, 22, 23, 26 and n.7 Federal Cases Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69 (2d Cir. 1989) ............ 20 Bader v. Wells Fargo Home Mortgage, Inc., 773 F. Supp. 2d 397 (S.D.N.Y. 2011) ........................................................................................................................ 33 Beastie Boys v. Monster Energy Co., 983 F. Supp. 2d 338 (S.D.N.Y. 2013) ................................................................................................. 24, 25 CAC Group Inc. v. Maxim Group LLC, 523 Fed. Appx. 802 (2d Cir. 2013) ...................................................................... 17, 20, 28-29, 27 and n.7 v Ciaramella v. Reader’s Digest Ass’n, 131 F.3d 320 (2d Cir. 1997) ...................................................................... 20, 25, 28, 29, 27 and n.8 Durable Inc., v. Twin County Grocers Corp., 839 F. Supp. 257 (S.D.N.Y. 1993) ....................................................................................................... 22 Empro Mfg. Co. v. Ball-Co Mfg., Inc., 870 F.2d 423 (7th Cir. 1989) ..................... 22 Hostcentric Techs., Inc. v. Republic Thunderbolt, LLC, 2005 U.S. Dist. LEXIS 11130 (S.D.N.Y. June 9, 2005) ...................................................... 27 and n.7 Ireton-Hewitt v. Champion Home Builders Co., 501 F. Supp. 2d 341 (N.D.N.Y. 2007) ...................................................................................................... 33 Kargo, Inc. v. Pegaso PCS, S.A., No. 05 Civ. 10528, 2008 U.S. Dist. LEXIS 81888 (S.D.N.Y. Oct. 14, 2008) ........................................................................ 29, 30 Karmilowicz v. Hartford Fin’l Servs. Grp., Inc., 494 Fed. Appx. 153 (2d Cir. 2012) .................................................................................................................. 32, 33 O’Dell v. Trans World Entertainment Corp., 153 F. Supp. 2d 378 (S.D.N.Y. 2001) ........................................................................................................................ 33 Ogden Martin Sys. of Tulsa v. Tri-Continental Leasing Corp., 734 F. Supp. 1057 (S.D.N.Y. 1990) ................................................................................. 27 and n.7 Olivo v. City of N.Y., 09 Civ. 5894 (AKH), 2010 U.S. Dist. LEXIS 81951 (S.D.N.Y. Aug. 12, 2010) ........................................................................................ 21 R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69 (2d Cir. 1984) ............. 23, 29 Reprosystem, B.V. v. SCM Corp., 727 F.2d 257 (2d Cir. 1984) ................. 27 and n.7 Rubinstein v. Clark & Green, Inc., 395 Fed. Appx. 786 (2d Cir. 2010) ................. 20 Skycom Corp. v. Telstar Corp., 813 F.2d 810 (7th Cir. 1987) ................................. 22 Teachers Ins. & Annuity Asso. v. Tribune Co., 670 F. Supp. 491 (S.D.N.Y. 1987) .................................................................................................................. 25, 26 Turner v. Temptu Inc., 2013 U.S. Dist. LEXIS 114298 (S.D.N.Y. Aug. 13, 2013) ........................................................................................................... 27 and n.7 Welland v. Citicorp, Inc., No. 00-CV-738, 2003 U.S. Dist. LEXIS 22721 (S.D.N.Y. Dec. 17, 2003), aff’d, 116 Fed. Appx. 321 (2d Cir. 2004) ..................... 33 vi Winston v. Mediafare Entm’t Corp., 777 F.2d 78 (2d Cir. 1985) ............................ 25 Statutes N.Y. CPLR § 5602 ................................................................................................... 15 Other Authorities Stewart D. Aaron, “No Formal Contract? No Problem,” N.Y.L.J., April 10, 2015 at p. 4, col. 1 ...................................................................................................... 3 Ben Bedell, “Initial Emails Back Binding Agreement Claim, Panel Finds,” N.Y.L.J., April 6, 2015 at p. 1, col. 4 ........................................................................ 3 Restatement Second of Contracts § 27 (1981) ........................................... 28 and n.9 George Bundy Smith and Thomas J. Hall, “Binding Contracts Despite Continuing Negotiations,” N.Y.L.J., April 17, 2015, at p. 3, col. 1 .......................... 3 1 Defendant-Appellant Evolution Markets Inc. (“EvoMarkets”) appeals from the Decision and Order of the Supreme Court, Appellate Division, First Department, entered on April 2, 2015 in the Office of the Clerk of the Court (the “Decision”) that affirmed, in part, a Decision and Order of the Supreme Court of the State of New York, New York County (Hon. Eileen Bransten, J.S.C.) (the “Motion Court”) dated August 19, 2013 and entered on August 22, 2013. PRELIMINARY STATEMENT By affirming the partial denial of EvoMarkets’ Motion to Dismiss, the First Department: (a) issued a jarring ruling, inconsistent with precedent of this Court, that will be cited by those seeking to trap the unwary into contracts even where the parties’ contemporaneous and objective manifestations demonstrate that neither party yet intended to be bound; and (b) on a separate claim, violated other, well settled precedent of this Court by -- without explanation -- ignoring the express terms of, and effectively rewriting, the parties’ contract, and failing to dismiss the discretionary bonus claim of Plaintiff-Respondent Andrew Kolchins (“Kolchins”) despite a contractual precondition to payment that indisputably was not satisfied. In overlooking and/or misapprehending the totality of the parties’ communications and conduct (this Court’s test to determine if a binding contract 2 has been made), the First Department, in a divided opinion, wrongfully isolated a single five-word e-mail by Kolchins and EvoMarkets’ brief response. Kolchins’ e- mail, stating “I accept, pls send contract,” and EvoMarkets’ “Mazel” response, however, only establishes that the parties did not intend to be bound until they agreed to and signed a formal contract, as they had done on three occasions in the past. Nevertheless, the First Department held that such emails somehow created a three-year, multi-million dollar employment contract (the “Alleged 2012 Agreement”) or a fact issue about a contract’s existence.1 This finding is contrary to: (a) numerous contemporaneous emails of ongoing negotiations between the parties; (b) the parties’ near decade of prior practice of requiring formal, executed agreements; and (c) decisions of this Court. Unless reversed, the Decision will create confusion and be often invoked to argue that a trial is required to determine whether a contract was made. In today’s technology-driven business society, clear and direct law is needed concerning contract formation. While emails, text messages, or other electronic technology may suffice to create a contract when so intended, where the parties’ course of conduct and ongoing communications expressly contemplate written and signed agreements, as here, the law should not be that one party can ensnare the other even before contemplated formal drafts are exchanged. 1 Kolchins never performed under the alleged new agreement, yet claims millions of dollars. 3 Otherwise, uncertainty, indeed chaos, will result along with a flood of litigation. It is contrary to sound public policy and detrimental to commercial activities in the state if business people are forced to measure each word they may utter or email or risk an expensive trial about whether there is an enforceable agreement. The Decision allows for unintended “Gotcha” deals, spawning litigation, stifling business, and causing parties to eschew New York law. The Decision’s implications are so significant that the New York Law Journal (“NYLJ”) reported upon it, and the dissent, three times within eleven days, including a front page article (Ben Bedell, “Initial Emails Back Binding Agreement Claim, Panel Finds,” N.Y.L.J., April 6, 2015 at p. 1, col. 4) and subsequent commentary by leading members of the commercial bar and a retired Court of Appeals Judge. (George Bundy Smith and Thomas J. Hall, “Binding Contracts Despite Continuing Negotiations,” N.Y.L.J., April 17, 2015, at p. 3, col. 1.) In between, the NYLJ even warned that “[p]arties to a contract negotiation therefore should be careful about the record that they may unwittingly be creating for a future litigation.” Stewart D. Aaron, “No Formal Contract? No Problem,” N.Y.L.J., April 10, 2015 at p. 4, col. 1. As the NYLJ and commentators have deduced, the Decision will have a profound impact upon contract negotiations. It chills negotiating by e-mail, the most prevalent means of modern communication. With respect to employment 4 negotiations, employers will be reluctant to have managers engage in standard recruitment conversations without attorney oversight to control the moment when the employer may be considered bound. The Decision will change how employment agreements are now negotiated daily in finance and other industries important to New York. Without involving counsel, parties work out commercial terms and then invest the time and money, with counsel, to put such business terms into a comprehensive and enforceable agreement. The Decision places employers, which bear the risk of hiring decisions, in an untenable position. There are several safeguards that an employer typically undertakes before binding itself to a contract with an employee. These include, without limitation, licensing checks, drug testing, confirming that the potential employee is not subject to existing restrictive employment covenants, and immigration, background, and reference checks. If an employer is deemed bound by its negotiations and subsequently discovers (before signing a formal employment agreement) that, for example, the employee does not hold necessary licenses, has a checkered regulatory past, or is subject to a former employer’s restrictive covenant, the employer is, according to the Decision, already bound (and, in the latter example, potentially subject to tortious interference liability). This will lead to an explosion of retracted “contracts” and ensuing litigations. The Decision will also harm employees, who often, and understandably, 5 defer the expense of retaining counsel until presented with a formal, written agreement to read. The Decision, however, potentially binds employees before having counsel involved. Additionally, if parties can inadvertently bind themselves in negotiations, then arguably one party can argue that the other cannot insert any provisions into the final agreement not included in the original dialogue - such as severance; indemnification provisions; non-disparagement clauses; fringe benefits; arbitration; venue; attorneys’ fees sections; cooperation and confidentiality obligations; and merger/integration clauses. This will hold true for both employers and employees who, as noted, may not have yet retained lawyers to advise them. Making matters worse, the First Department’s holding can be extended even beyond e-mails, to other modern means of communications such as texts, Bloomberg messages, and tweets. The Decision dangerously strays from this Court’s established body of case law holding negotiation communications are not binding and, if left unchecked, imperils New York law’s clear guidance concerning what constitutes negotiations and what constitutes an agreement to be bound. Further, the Court overlooked and/or misapprehended the record evidence when deciding that a June 15, 2012 e-mail “specified the material terms of the employment contract.” (R. 112-113, 175.) Nothing in that e-mail addressed the material issue of, among others, restrictive covenants, which the dissent 6 appropriately stressed was one of the material issues which always divided the parties and on which they never reached agreement. The parties also never reached agreement on a minimum compensation guarantee. Separately, perhaps because it was overshadowed by the contract formation issue, the First Department erroneously - and again inconsistent with controlling decisions of this Court - failed to dismiss Kolchins’ claim for a discretionary bonus (“Production Bonus”). It is undisputed that the express contractual condition for payment was not fulfilled. The First Department ignored established law applicable to the specific terms of the parties’ signed employment contract (the “2009 Employment Agreement”). This error led to the First Department’s mistaken conclusion that Kolchins remained bonus eligible despite not meeting the explicit requirement that he had to be “actively employed by [EvoMarkets] at the time of [its] firm-wide bonus payment dates.” Thus, the First Department diverged from, and has now created confusion in, the well-settled law regarding conditions to bonus compensation. Kolchins is not entitled to a Production Bonus pursuant to the express terms of the 2009 Employment Agreement. Indeed, the First Department’s holding also inexplicably relied on its misstatement of the contract’s language (language that does not exist). While the First Department stated Kolchins may be entitled to a Production Bonus under the 2009 Employment Agreement because such bonus was to be “calculated as ‘no 7 less than 55% of the Net Earnings of the Desk,’” the contract instead states that the 55% represented the “total bonus pool available” to the entire desk on which Kolchins worked, not just to Kolchins. (R. 179, 105.) No specific amount was payable or owed to, or earned by, Kolchins. QUESTION PRESENTED The First Department certified the following question of law to be reviewed by this Court: “Was the order of the Supreme Court, as modified in part and otherwise affirmed by [the First Department], properly made?”2 STATEMENT OF FACTS Kolchins joined EvoMarkets in August 2005, when he signed a formal employment agreement with EvoMarkets (the “2005 Employment Agreement”). (R. 73-82.) After one year, Kolchins and EvoMarkets entered into another formal contract (the “2006 Employment Agreement”), which had a three-year term starting September 1, 2006. (R. 83-94.) In 2009, Kolchins and EvoMarkets entered into another formal agreement, the 2009 Employment Agreement with a three-year term from September 1, 2009 2 To answer that question, EvoMarkets respectfully asks this Court to consider, for example: (1) Should ongoing and/or immediately subsequent negotiations be included in the “totality of the circumstances” a court must analyze to determine whether parties intended to enter and/or entered into a binding contract under Zheng v. City of New York, 19 N.Y.3d 556, 572 (2012)? (2) Can there be a meeting of the minds sufficient to form an employment contract when the parties disagree about restrictive covenants and a minimum compensation guarantee, and are restrictive covenants and compensation guarantees not material employment terms? 8 to August 31, 2012 (the “Term”).3 (R. 95-111.) The 2009 Employment Agreement defined August 31, 2012 as the “Ending Date” (R. 95, §2.1) and “automatically renew[ed] for successive one (1) year terms…unless either [Kolchins] or [EvoMarkets] notify the other in writing” at least sixty days before the end of the Term that he or it did not wish to renew. (R. 96, § 2.4.) Pursuant to the 2009 Employment Agreement, “in order to be eligible to receive any Production Bonus . . . [Kolchins] must be actively employed by [EvoMarkets] at the time of [its] firm-wide bonus payment dates.” (R. 105-106.) Any Production Bonus was to “be paid in accordance with the firm wide bonus practices, which currently provide that bonuses are paid within two months of the close of a given trimester.” (R. 105.) On June 15, 2012, near the end of the three-year term of the 2009 Employment Agreement, Andrew Ertel (“Ertel”), EvoMarkets’ Chief Executive Officer, emailed Kolchins from his iPhone about the possibility of reaching a new agreement: “The terms of our offer are the same terms of your existing contract (other than a clarification around the issue of departed members of the team)…” (R. 112-13.) On June 22, 2012, Kolchins rejected this offer, notifying EvoMarkets 3 Under the 2009 Employment Agreement, Kolchins was promised a minimum total compensation of $3 million including a $750,000 Sign-On Bonus and at least $750,000 in annual compensation. (R. 104.) 9 that, per §2.4 of the 2009 Employment Agreement, he did “not wish to extend [his] employment agreement under its existing terms.” (R. 114.) On July 16th, however, Kolchins (a non-lawyer) emailed Ertel (a non- lawyer): “I accept, pls send contract” (emphasis added), to which Ertel replied, “Mazel. Looking forward to another great run…” (R. 112.) Thereafter, Kolchins and EvoMarkets engaged in negotiations for a new agreement. (R. 115-160.) While early on such discussions appeared promising, the record establishes Kolchins ultimately rejected the terms offered by EvoMarkets. On July 20th, Benjamin Zeliger (“Zeliger”), EvoMarkets’ General Counsel, emailed Kolchins a “draft of [a] new employment agreement,” noting that the proposed new agreement included a clawback clause should Kolchins “leave without Good Reason or [be] terminated for Cause” and “language regarding the retention of desk employee bonuses if the employees are no longer with Evolution” (the latter being the “clarification” that Ertel referred in his June 15, 2012 e-mail). (R. 115-16, 112-13.) Not surprised that the proposed new contract would be different than the 2009 Employment Agreement and well aware that the parties had not yet reached agreement on material terms, Kolchins responded to Zeliger: “I will review and provide my initial feedback before sending to counsel. I will just want reciprocal language pertaining to clawback prob. If you fire me w/o cause I 10 get the full sign-on bonus.” (R. 115.) Zeliger replied, “Thank you, Andrew. And that protection is already in there for you.” (R. 115.) Following further negotiations concerning a possible new deal, Zeliger sent Kolchins a revised draft agreement on July 24, 2012 explaining: Following our discussion yesterday, I’ve revised your agreement and attach a marked draft compared against the last draft sent. We’ve agreed to make several changes that you requested. These include: - Specifying that you shall be a member of the management committee. - Removing the references to Nesis in Section 7. - Making Andy, rather than Pete, the person to approve any management override. - Specifying that the provision around employee bonuses for employees who leave will not apply to the T2 bonuses for 2012 and will not limit your eligibility for a management override. The changes we did not make [that Kolchins requested] include: - We did not change the clawback to reflect a pro rata repayment. The repayment amount remains the amount of the last sign on bonus paid. - We did not reinsert the “For the avoidance of doubt…” sentence in the guarantee paragraph. That provision was unique to 2009 when your current contract was signed, and was meant to not include the T2 bonus from 2009 as part of your guarantee for the first year of your current contract because your bonus structure had changed. Your new contract, however, roles [sic] the guarantee from your current contract, and the guarantee for the next three years should continue to be calculated in the same way as the guarantee from the previous 2 years - i.e., calculated by measuring total cash compensation received during each one year period beginning on Sept 1st. - We did not change the terms of the Special Non-Compete Payment, which remain the same as your current contract. 11 I am happy to discuss further, and I understand that you are going to show the agreement to your attorney for review. (R. 117-118, emphasis added.) Kolchins answered minutes later with disfavor that one of his requested changes was rejected: “We can discuss tomorrow. But not including the avoidance of doubt sentence makes no sense… It defied [sic] logic and common sense…” (R. 117, emphasis added.) Zeliger replied, “Let’s discuss tomorrow. As I understand it, the calculation is meant to be total cash paid to you between Sept 1st through August 31st.” (R. 117.) Kolchins responded a short time later, with added venom, telling Zeliger, “The statement that that was meant for 2009 only is BS [bullshit] and is not what the intended landguage [sic] was created for. It was created for just this. No way should this revenue go against my minimum in a new contract year. It is a bad faith statement and I don’t understand Evo’s logic.” (R. 117, emphasis added.) Moments later, Kolchins emailed Zeliger again, ignoring that he had rejected Ertel’s June 22, 2012 offer and arguing, “[t]his contract was presented to me as a mirror image of my last one. This doesn’t reflect that.” (R. 135.) Kolchins and EvoMarkets continued to negotiate, with Kolchins seeking bonus money for commissions received by EvoMarkets in the second trimester of 2012 not counted against the proposed new compensation guarantee. (R. 137- 160.) On August 3, 2012, Zeliger emailed Kolchins: We have discussed your request regarding the calculation of your 12 guarantee and, in an effort to finalize your contract, we’ve agreed to make that change. Please note that we’re agreeing to this change subject to you not having any additional substantive changes to your contract, as we hope the agreement is now substantially final. Attached is a marked draft of your contract compared against the last draft I sent. You’ll see that we extended your term by two months and now have the guarantee calculated from each Nov 1 - Oct 31 period during the term. [R. 137, emphasis added.] But Kolchins had yet additional substantive changes to the proposed contract and did not accept this offer. On August 13, 2012, Kolchins replied, sending a revised version of the draft agreement and telling EvoMarkets that he had engaged counsel: Attached are my limited comments to my employment agreement. My attorney was not able to mark his changes in a different color. here is an email from him Andrew -- I have marked the changes we discussed this morning on the attached copy of the proposed agreement… (R. 156.) After reviewing Kolchins’ most recent changes, Zeliger wrote Kolchins on August 15, 2012, attaching a new redlined document and stating: “You will see that we’ve accepted some of your lawyer’s changes and tweaked some others. Please let me know if you have any questions. We hope to be able to sign this soon.” (R. 155.) Yet, Kolchins continued to negotiate, telling Zeliger in an August 15th email: Maybe we should discuss in person. It seems to me to be over reaching to not allow me to communicate with clients or solicit Evo employees for a period of time after my non compete. Understanding we are negotiating a worst case scenario, how can you expect to 13 prevent me from working or doing a job WITHOUT paying me, If you want to prevent me from doing these things than pay me. In regards to the special non compete, why would any monies paid to me after the contract period go against a previous years guaranteed comp? Doesnt [sic] that go against common sense? If you want that term, than protect me with the special non compete payment if and when my contract expires and you hold me out. These are all reasonable requests. You have to understand that my base salary is a mere portion of my compensation and if you hold me out of the market (in a worst case scenario) than you are really not paying me to sit out as my comp is mainly determined thru my bonus. In otherwords, you already have a VERY RESTRICTIVE non compete, which i am fine with...but you have to pay me to enforce it. (R. 154-155, emphasis in original.) Zeliger responded on August 17th, stating: I think it makes sense for you, me and Andy to talk next Tuesday (Aug 21st) about your contract. I can send around dial-in information for a call. At this time, we are not willing to make the additional requested changes to your agreement other than the changes that we accepted in the last draft. Also, we have two changes that we want to make: (1) extending the employee non-solicit from 9 months to 18 months following the non-compete period; and (2) revising the production bonus language to clarify that while your payout from the bonus pool is 55% of your net income, the payout for others on the desk is less depending on seniority. [R. 154.] Kolchins promptly rejected EvoMarkets’ offer, stating: “We are headed the wrong way. I cannot accept noncompete language that prevents me from doing my or a job without getting paid.” (R. 154.) (Emphasis added.) On August 23rd, Kolchins reiterated his rejection of EvoMarkets’ proposal, telling Zeliger: “I am not willing to consider your proposed two changes.” (R. 157.) (Emphasis added.) Later, Zeliger emailed Kolchins asking: “Without 14 commenting on the two proposed changes, and just so I understand, do you otherwise accept the last draft of your agreement that we sent you?” (R. 157.) Kolchins replied: [F]or the most part my comments are not meant to be commercial but to tinker with language that was written 3 yrs ago to reflect todays scenario. Evo’s approach was to counter my comments with terms that did not do anything to improve the contract language rather it was to be confrontational. I just don’t understand why common sense refuses to be used on some of this language. I haven’t had a chance to review this language for over a week and don’t think your 2 unreasonable terms were going to have me change my opinion on some of the language. Is that how you were negotiating. Actually I don’t want to negotiate. I think we agreed to terms. It is clarifying some old language. [R. 157.] On September 1st, with no new deal reached and the 2009 Employment Agreement having expired by its terms on August 31, 2012, EvoMarkets informed Kolchins by telephone and letter that his employment had ceased. (R. 161.)4 PROCEDURAL HISTORY On October 9, 2012, Kolchins filed suit against EvoMarkets alleging breach of contract of the Alleged 2012 Agreement and unjust enrichment. (R. 52-72.) On November 30, 2012, EvoMarkets moved to dismiss. (R. 47-161.) On August 19, 2013, the Motion Court dismissed Kolchins’ unjust enrichment claim but denied the motion to dismiss the claim for breach of contract (the “Bransten Order”). (R. 4 Kolchins characterizes his departure as a termination without Cause. While EvoMarkets disagrees, for purposes of this appeal it is immaterial. It is a distinction without a difference. 15 5-15.) On November 4, 2013, EvoMarkets perfected its appeal of the portion of the Bransten Order denying its motion. On April 2, 2015, the First Department: (i) affirmed the Bransten Order as to the breach of contract claim, and (ii) modified the Bransten Order to dismiss Kolchins’ claim for the Special Non-Compete Bonus. (R. 165-193.) On April 30, 2015, EvoMarkets moved for: (i) reargument of the portion of the Decision that denied its motion; and/or (ii) leave to appeal same. (R. 164.) On October 15, 2015, the First Department granted EvoMarkets’ motion for leave to appeal (R. 164)5 and on December 12, 2016, EvoMarkets timely served its Preliminary Appeal Statement. On December 19, 2016, Kolchins moved to dismiss the appeal, which this Court denied on February 14, 2017. STATEMENT OF JURISDICTION The Court of Appeals has jurisdiction under C.P.L.R. § 5602(b), which states “[a]n appeal may be taken to the court of appeals by permission of the appellate division: (1) from an order of the appellate division which does not finally determine an action…” The First Department granted permission for this appeal on October 15, 2015. (R. 164.) 5 Initially, the First Department clerk mistakenly issued an Order denying EvoMarkets’ request for leave to appeal. On December 8, 2016, the clerk told the parties of the error. 16 ARGUMENT I. KOLCHINS’ CLAIM FOR BREACH OF AN ALLEGED 2012 AGREEMENT SHOULD HAVE BEEN DISMISSED A. In Contravention Of Controlling Precedent, The First Department Failed To Consider The “Totality” Of Circumstances, Instead Placing “Disproportionate Emphasis” On Select Communications While Ignoring Others That Establish That No Agreement Was Reached Kolchins’ First Cause of Action alleges the parties agreed to a new employment contract for the period September 1, 2012 to August 31, 2015 and seeks monies allegedly due under that supposed new contract based on early termination (although Kolchins did not work a single day under this alleged contract). In other words, Kolchins claims EvoMarkets should pay him millions of dollars for never providing services under an agreement into which neither EvoMarkets nor Kolchins believed they entered. The Decision cannot be reconciled with well-settled principles of New York law and, specifically, the law stated by this Court. In its Decision, the First Department did exactly what this Court prohibited in Zheng v. City of New York, 19 N.Y.3d 556, 572 (2012): it placed “disproportionate emphasis…on a[] single act, phrase, or other expression” rather than “on the totality of all of these, given the attendant circumstances, the situation of the parties, and the objectives they were striving to attain.” 41 N.Y.2d at 399-400. As the Dissent noted, “[t]he majority c[ould] only reach its result by putting ‘disproportionate emphasis’ on … 17 3 emails [R.112-113], while disregarding the documentary evidence of the parties’ ensuing negotiations, including 17 emails exchanged during the period from July 20 to August 23, 2012.” (R. 182.) The First Department also disregarded the language of the very e-mail it held to be an acceptance (R. 112). The First Department stated that Kolchins “must show either that both parties understood that their correspondence was to be of no legal effect or that plaintiff had reason to know that defendant contemplated that no obligations should arise until a formal contract was executed.” (R. 176.) Its conclusion that EvoMarkets “referred to no documentary evidence” establishing either of these ignored that Kolchins wrote, in the July 16, 2012 e-mail, “pls send contract.” (R. 112, emphasis added.) This “establishes that both parties understood that the ‘deal,’” even if there were a “deal” at that point (which there was not), would still need to “be effectuated by ‘documents,’ the details of which were still to be settled.” CAC Group Inc. v. Maxim Group LLC, 523 Fed. Appx. 802, 804 (2d Cir. 2013). See also Dratfield v. Gibson Greetings, Inc., 269 A.D.2d 294, 295 (1st Dep’t 2000) (“Although neither party expressly reserved the right not to be bound prior to the execution of the signed contract, the language used in both of defendant’s March letters establishes an intention to be bound only after a formal signing.”). That intent is further manifested by the fact that the parties had always executed written employment agreements (three times before). (R. 57-58, ¶ 18 13.) As the Dissent stressed, for “more than a month of proposals and counter- proposals for changes from the terms of the 2009 agreement,” neither Kolchins nor his counsel asserted that EvoMarkets “had no right to propose changes to the terms of the 2009 agreement.” (R. 192, 182-183.) Nor did they “object that an agreement to renew the terms of the 2009 agreement had already been reached.” (R. 182.) Rather, Kolchins requested changes. The correspondence between the parties expressly referred to the agreement being negotiated as a “draft” and “proposed agreement.” (R. 115-160.) Even Kolchins’ own lawyer referred to the “proposed agreement” in Kolchins’ August 13, 2012 email to Zeliger (R. 156), and Kolchins’ August 15, 2012 email acknowledged that negotiations were continuing: “Understanding we are negotiating...” (R. 155.) This objectively demonstrates it was not the parties’ intent to be bound until a formal employment agreement was finally executed. The First Department’s conclusion that Ertel’s June 15, 2012 e-mail “specified the material terms of the employment contract” (R. 175) ignored that, as the Dissent correctly observed, the parties could not agree on: [W]hether defendant would pay plaintiff, after the end of his employment, for the entire period during which he would be forbidden to communicate with defendant’s clients and to solicit defendant’s employees (three months and nine months, respectively, following the end of the compensated six-month non-compete period) . . . [and] defendant’s proposal to extend by nine months the post- 19 employment period during which plaintiff would be forbidden to solicit defendant’s employees. (R. 183, emphasis added.) Kolchins acknowledged that the issue of restrictive covenants constituted a material term (or in fact, material terms), stating “I cannot accept non-compete language that prevents me from doing my or a job without getting paid.” (R. 154.) Kolchins also sought to negotiate a higher payment for his non-compete, indicating that even the compensation level (which the First Department held was a material term, R. 175) had not been finalized. Kolchins wrote: You have to understand that my base salary is a mere portion of my compensation and if you hold me out of the market (in a worst case scenario) than you are really not paying me to sit out as my comp is mainly determined thru my bonus. In otherwords [sic], you already have a VERY RESTRICTIVE non compete, which i am fine with...but you have to pay me to enforce it. [R. 155, emphasis in original.] In fact, Kolchins sought to make the vast majority of the changes to the 2009 Employment Agreement during the negotiations. For example, in Zeliger’s email to Kolchins on July 24, 2012, EvoMarkets addressed seven of Kolchins’ proposed changes (rejecting three). (R. 117-118.) In early August 2012, Kolchins stated he engaged counsel to negotiate the terms of the new draft contract. (R. 156.) Then, on August 13th and 15th, Kolchins sought to increase the amount paid to him during the Non-Compete Period from the amount in the 2009 Employment Agreement. (R. 154-156.) Kolchins also sought to renegotiate a compensation guarantee to 20 exclude a certain bonus payment from his compensation guarantee, which would have increased such guarantee. (R. 117.) These examples, as well as others, demonstrate there was never a new agreement in place, only negotiations to hopefully reach an agreement -- which failed. Parties who do not intend to be bound until the agreement is reduced to a signed writing are not bound until that time. Ciaramella v. Reader’s Digest Ass’n, 131 F.3d 320, 322 (2d Cir. 1997). “There is a strong presumption against finding binding obligation in agreements which include open terms, call for future approvals and expressly anticipate future preparation and execution of contract documents.” Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 73 (2d Cir. 1989) (quotation omitted); see also CAC Group Inc., 523 Fed. Appx. at 804. “While an exchange of emails may constitute a binding contract under New York law…that is not the case ‘where the parties contemplate further negotiations and the execution of a formal instrument.’” Rubinstein v. Clark & Green, Inc., 395 Fed. Appx. 786, 788 (2d Cir. 2010) (quoting Adjustrite Sys., Inc. v. GAB Bus. Servs., Inc., 145 F.3d 543, 547 (2d Cir. 1998)). As in Rubinstein, “[h]ere, the emails at issue plainly establish the parties’ intent to execute a formal contract beyond their email exchange.” Id. Where, as here, parties exchange a formal agreement that includes additional terms shortly after reaching a preliminary understanding on certain terms, such 21 conduct itself “indicates that neither party intended to be contractually bound by the email exchange” which preceded the transmission of the formal agreement containing such additional terms. Olivo v. City of N.Y., 09 Civ. 5894 (AKH), 2010 U.S. Dist. LEXIS 81951 at *4 (S.D.N.Y. Aug. 12, 2010). Despite the ample amount of evidence establishing that the parties never intended to be bound before the execution of a formal employment agreement, the First Department overlooked all of this, and thus failed to engage in an analysis based on the “totality” of the circumstances as required by Zheng.6 B. The Decision Will Harm Those Doing Business In New York Finding a binding contract in cases such as this means parties will have little or no comfort in knowing exactly when they have bound themselves to significant agreements. As Judge Easterbrook of the Seventh Circuit emphasized in the context of a disputed merger agreement, clear rules of law about when 6 Stonehill Capital Mgt., LLC v. Bank of the West, 28 N.Y.3d 439 (2016), is inapposite. Stonehill involved an auction sale of a syndicated loan and, as this Court noted, “[w]ith respect to auctions, the general rule is that a seller’s acceptance of an auction bid forms a binding contract, unless the bid is contingent on future conduct” and an auction “will not be deemed conditional absent explicit terms.” Id. at 449. The Court held that to find there was no binding agreement in Stonehill would be “in direct contravention of…the usual manner in which reserve auctions proceed.” Id. at 452. There are no such peculiar rules in the employment context, and to find a binding agreement here would be in contravention of the established manner in which EvoMarkets and Kolchins negotiated employment agreements. Also, in Stonehill, the Court did exactly what the First Department failed to do: consider “[t]he totality of the parties’ conduct and the ‘objective manifestations’ of their intent,” including the email exchanges between the parties that indicated the deal was moving ahead and that at no time after Bank of the West accepted Stonehill’s bid did it communicate its objection to the form that Stonehill had sent its counsel. Id. at 450. In stark contrast, the parties here had several issues during negotiations and both requested deal terms after Ertel’s “Mazel” e-mail. 22 communications can become a binding agreement are a necessity: The ability to fix the consequences with certainty is especially important in commercial transactions that are planned with care in advance…the parties should be able to choose with precision the point at which they can no longer back out . . . A rule of law that could bind these parties to a deal in the midst of resolving these uncertainties - perhaps, worst of all, inject the random element of a jury’s determination about subjective intent - would make transactions riskier. Some beneficial transactions would be foregone. Others would become more cumbersome, as the parties refused to commit intermediate steps to paper or inserted elaborate disclaimers. The commercial practice of describing intermediate steps as “agreements in principle” or “letters of intent” - and distinguishing these from binding “formal agreements” - makes complex transactions easier to plan and ultimately works to the advantage of all concerned. Skycom Corp. v. Telstar Corp., 813 F.2d 810, 815 (7th Cir. 1987). The same logic applies to a multi-million dollar, multi-year employment contract. In an earlier case, Judge Easterbrook similarly said: Letters of intent and agreements in principle often, and here, do no more than set the stage for negotiations on details. Sometimes the details can be ironed out; sometimes they can't. Illinois . . . allows parties to approach agreement in stages, without fear that by reaching a preliminary understanding they have bargained away their privilege to disagree on the specifics. Approaching agreement by stages is a valuable method of doing business. Empro Mfg. Co. v. Ball-Co Mfg., Inc., 870 F.2d 423, 426 (7th Cir. 1989). New York law is, and should be, the same. This Court echoed these same concerns in Zheng and rejected the view of the dissent in that case that “even the clearest of contract terms on which public and private entities routinely rely to efficiently coordinate their transactions 23 apparently will grant no assurance that the law will recognize an agreement and provide a remedy for its breach.” 19 N.Y.3d at 575. This Court countered: “the ‘clearest of contract terms’ are generally to be found in a written agreement executed by contracting parties …” Id. In 1993, the Southern District of New York wisely noted “fear of entanglement in unintended commitments, and of failure of others to honor commitments, are [] inimical to the efficient conduct of business….” Durable Inc., v. Twin County Grocers Corp., 839 F. Supp. 257, 260 (S.D.N.Y. 1993) (citations and internal quotation marks omitted). In 1984, even prior to the advent of routine negotiation by e-mail, the Second Circuit stated: The actual drafting of a written instrument will frequently reveal points of disagreement, ambiguity, or omission which must be worked out prior to execution. Details that are unnoticed or passed by in oral discussion will be pinned down when the understanding is reduced to writing. These considerations are not minor; indeed, above a certain level of investment and complexity, requiring written contracts may be the norm in the business world, rather than the exception. R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 75 (2d Cir. 1984) (emphasis added). At least the same holds true for e-mail negotiations. In fact, that is exactly what happened here: details that were unnoticed, passed by or deferred in e-mail discussions were then pinned down, by Kolchins and EvoMarkets, when the understanding was sought to be reduced to writing. E-mails are less formal and, in fast-paced business environments, more 24 convenient than telephone discussions. Unlike a call, only an email can be sent to someone not immediately available. Unlike voice-mail, an email is not automatically ended by the recipient’s recording device. On the other hand, just like oral communications, emails are informal, transmitted instantly when the send button is pressed, and without the care, attention, and counsel that sophisticated business people use when entering into multi-million dollar transactions. For that, due diligence and focused drafting play an essential role so that, to the extent possible, a full meeting of the minds takes place and is memorialized. The Southern District’s decision in Beastie Boys v. Monster Energy Co., 983 F. Supp. 2d 338 (S.D.N.Y. 2013), is persuasive. There, a music group sued a disc jockey and an energy-drink company for copyright infringement based on use of a remix of the group’s song in the company’s promotional video. The company then sued the disc jockey for allegedly breaching a contract that it claimed allowed the company to use the remix. The company asserted that a contract was formed when it asked the disc jockey to approve the use of the remix and the disc jockey replied “Dope!” and gave suggestions on how to use it. The court held: In proper context, the word "Dope!" could certainly be taken as an expression, albeit unorthodox, of approval and acceptance of another's antecedent offer. But here, Z-Trip's exclamation, “Dope!” was in response to Phillips's query, "Please have a look at the video from this past weekend and let me know if you approve."…Viewed in this context, Z-Trip's response of "Dope!" plainly communicated that, in some sense, he "approve[d]" of "the video." But such approval is quite distinct from conveying assent to a mutual exchange of promises or 25 other consideration…There is no fair reading of the facts under which Z-Trip, by exclaiming "Dope!," accepted such a contractual offer. Z- Trip's locution, although memorable, was entirely too enigmatic and elliptical to constitute the "clear [and] unambiguous" acceptance necessary for contract formation. Id. at 350 (emphasis added). Similarly, here, “Mazel,” like “Dope,” was insufficiently clear to unambiguously form a binding agreement. The Second Circuit has observed that: [I]f either party communicates an intent not to be bound until he achieves a fully executed document, no amount of negotiation or oral agreement to specific terms will result in the formation of a binding contract…Because of this freedom to determine the exact point at which an agreement becomes binding, a party can negotiate candidly, secure in the knowledge that he will not be bound until execution of what both parties consider to be [the] final document. Winston v. Mediafare Entm’t Corp., 777 F.2d 78, 80 (2d Cir. 1985). A party need not “expressly reserve[] the right not to be bound prior to the execution of a document.” Id. at 81. Writing about preliminary negotiations/agreements concerning settlements, the Second Circuit observed that “[p]eople may hesitate to enter into negotiations if they cannot control whether and when tentative proposals become binding.” Ciaramella, 131 F.3d at 323 (emphasis added). In Teachers Ins. & Annuity Asso. v. Tribune Co., 670 F. Supp. 491, 497 (S.D.N.Y. 1987), the Southern District agreed that: A primary concern for courts in such disputes is to avoid trapping parties in surprise contractual obligations that they never intended…It is fundamental to contract law that mere participation in negotiations and discussions does not create binding obligation, even 26 if agreement is reached on all disputed terms. More is needed than agreement on each detail, which is overall agreement (or offer and acceptance) to enter into the binding contract. Nor is this principle altered by the fact that negotiating parties may have entered into letters of intent or preliminary agreements if those were made with the understanding that neither side would be bound until final agreement was reached. The Court of Appeals in several recent cases has stressed the importance of recognizing the freedom of negotiating parties from binding obligations, notwithstanding their having entered into various forms of non-binding preliminary assent. [Emphasis added.] Given the Decision and prior New York law, negotiating parties have little certainty and only shaky guidance as to what actions will be formally binding. There is a troubling patchwork of inconsistent decisions that exist in New York on this issue.7 Reversing the Decision and holding that parties intending to be bound 7 See cases finding no contract including Zheng, 19 N.Y.3d 556; Matter of Express Indus. & Term. Corp. v. N.Y.S. Dep’t. of Transp., 93 N.Y.2d 584 (1999); Joseph Martin, Jr., Delicatessen v. Schumacher, 52 N.Y.2d 105 (1981); Scheck v. Francis, 26 N.Y.2d 466 (1970); Northern Stamping, Inc. v. Monomoy Capital Partners, L.P., 129 A.D.3d 448 (1st Dep’t 2015); Chapman, Spira & Carson, L.L.C. v. Helix BioPharma Corp., 115 A.D.3d 526 (1st Dep’t 2014); Galesi v. Galesi, 37 A.D.3d 249 (1st Dep’t 2007); Jordan Panel Sys. Corp. v. Turner Constr. Co., 45 A.D.3d 165 (1st Dep’t 2007); Spier v. Southgate Owners Corp., 39 A.D.3d 277 (1st Dep’t 2007); Yenom Corp. v. 155 Wooster St. Inc., 23 A.D.3d 259 (1st Dep’t 2005); Dratfield, 269 A.D.2d 294; Brause v. Goldman, 10 A.D.2d 328 (1st Dep’t 1960), aff’d, 9 N.Y.2d 620 (1961); Dahan v. Weiss, 120 A.D.3d 540 (2d Dep’t 2014); Geller v. Reuben Gittelman Hebrew Day Sch., 34 A.D.3d 730 (2d Dep’t 2006); Credit Suisse First Boston Corp. v. Cooke, 284 A.D.2d 365 (2d Dep’t 2001); Estate of Wyman, 128 A.D.3d 1157 (3d Dep’t 2015); Venture Mfg. (Singapore) Ltd. v. Matco Grp., Inc., 6 A.D.3d 850 (3d Dep’t 2004); King v. King, 208 A.D.2d 1143 (3d Dep’t 1994); May v. Wilcox, 182 A.D.2d 939 (3d Dep’t 1992); In re Estate of Argersinger, 168 A.D.2d 757 (3d Dep’t 1990); Wald v. Graev, 2014 N.Y. Misc. LEXIS 4158, 2014 NY Slip Op 32433(U) (Sup. Ct. N.Y. Cty. Sept. 15, 2014); Piller v. Marsam Realty 13th Ave., LLC, 41 Misc. 3d 1217(A), 2013 NY Slip Op 51722(U) (Sup. Ct. Kings Cty. 2013); Blinds & Carpet Gallery, Inc. v. EEM Realty, Inc., No. 2215/10, 34 Misc.3d 1228(A), 2012 NY Slip Op 50278(U) (Sup. Ct. Kings Cty. 2012); Guggenheim Corp. Funding, LLC v. Access.1 Comms. Corp.-NY, 26 Misc. 3d 1210(A), 2009 NY Slip Op 52702(U) (Sup. Ct. N.Y. Cty. 2009); 2004 McDonald Ave. Realty LLC v. 2004 McDonald Ave. Corp., 25 Misc. 3d 1204(A), 2007 NY Slip Op 52638(U) (Sup. Ct. Kings Cty. 2007); Benedict Realty Co. v. City of N.Y., 11 Misc. 3d 1086(A), 2006 NY Slip Op 50720(U) (Sup. Ct. Richmond Cty. 2006); Adams v. Banc of Am. Sec. LLC, 7 Misc. 3d 1023(A), 27 by a formal written agreement are not bound until then and/or until all material terms are expressly agreed upon is the only way to provide those doing business in New York a workable, objective framework. Without it, people will act in gray spheres of uncertainty, unable to negotiate with the necessary comfort of knowing that they, not a court in hindsight, will determine when they are bound. C. Neither Party Intended To Be Bound Without An Executed Writing As the First Department noted in Kowalchuk v. Stroup, 61 A.D.3d 118, 123 (1st Dep't 2009), cited multiple times in the Decision, federal courts applying New York law “have set out factors to consider in determining whether the parties intended not to be bound without an executed writing”:8 2005 NY Slip Op 507149(U) (Sup. Ct. N.Y. Cty. 2005); CAC Group, 523 Fed. Appx. 802; Reprosystem, B.V. v. SCM Corp., 727 F.2d 257, 262 (2d Cir. 1984); Turner v. Temptu Inc., 2013 U.S. Dist. LEXIS 114298, 18-19 (S.D.N.Y. Aug. 13, 2013); Ogden Martin Sys. of Tulsa v. Tri- Continental Leasing Corp., 734 F. Supp. 1057 (S.D.N.Y. 1990). Compare cases finding a potential contract, including Flores v. Lower E. Side Serv. Ctr., Inc., 4 N.Y.3d 363 (2005); Matter of 166 Mamaroneck Ave. Corp. v. 151 E. Post Rd. Corp., 78 N.Y.2d 88 (1991); Cobble Hill Nursing Home v. Henry & Warren Corp., 74 N.Y.2d 475 (1989); Brown Bros. Elec. Contrs. v. Beam Constr. Corp., 41 N.Y.2d 397 (1977); Metro-Goldwyn-Mayer v. Scheider, 40 N.Y.2d 1069 (1976); Eastern European Trading, Corp. v. Knaust, 128 A.D.3d 589 (1st Dep’t 2015); Art & Fashion Grp. Corp. v. Cyclops Prod., Inc., 120 A.D.3d 436 (1st Dep’t 2014); Aiello v. Burns Intl. Sec. Servs. Corp., 110 A.D.3d 234 (1st Dep’t 2013); Newmark & Co. Realty Estate Inc. v. 2615 East 17th St. Realty LLC, 80 A.D.3d 476 (1st Dep’t 2011); Edelman v. Poster, 72 A.D.3d 182 (1st Dep’t 2010); Kowalchuk v. Stroup, 61 A.D.3d 118 (1st Dep’t 2009); Four Seasons Hotels v. Vinnik, 127 A.D.2d 310 (1st Dep’t 1987); Agosta v. Fast Sys. Corp., 46 Misc. 3d 1217(A), 2015 NY Slip Op 50107(U) (Sup. Ct. Suffolk Cty. 2015); Hostcentric Techs., Inc. v. Republic Thunderbolt, LLC, 2005 U.S. Dist. LEXIS 11130 (S.D.N.Y. June 9, 2005). 8 New York state and federal common law do not materially differ in this regard. See, e.g., Ciaramella, 131 F.3d at 322. 28 (1) whether there has been an express reservation of the right not to be bound in the absence of a writing; (2) whether there has been partial performance of the contract; (3) whether all of the terms of the alleged contract have been agreed upon; and (4) whether the agreement at issue is the type of contract that is usually committed to a signed writing.9 See also CAC Group, 523 Fed. Appx. at 803-04. “No single factor is decisive, but each provides significant guidance.” Ciaramella, 131 F.3d at 323. With respect to the first factor, the First Department found dispositive Kolchins’ July 16, 2012 e-mail stating, in part, “I accept.” (R. 112-13.) But, Kolchins’ full response was “I accept, pls send contract.” (Id., emphasis added.) Indeed, in finding a contract, the First Department only considered a portion of the sentence that allegedly formed it and ignored Kolchins’ reservation. Thus, the first factor weighs in favor of finding against a binding contract. The second factor (partial performance) also weighs against finding a binding contract as Kolchins never performed a single day of work for EvoMarkets under the Alleged 2012 Agreement. The third factor analyzes whether the parties 9 These mirror the factors laid out in the Restatement Second of Contracts § 27 cmt. C (1981): Among the circumstances which may be helpful in determining whether a contract has been concluded are the following: the extent to which express agreement has been reached on all the terms to be included, whether the contract is of a type usually put in writing, whether it needs a formal writing for its full expression, whether it has few or many details, whether the amount involved is large or small, whether it is a common or unusual contract, whether a standard form of contract is widely used in similar transactions, and whether either party takes any action in preparation for performance during the negotiations. Such circumstances may be shown by oral testimony or by correspondence or other preliminary or partially complete writings. 29 had “literally nothing left to negotiate or settle, so that all that remained to be done was to sign what had already been fully agreed to.” R.G. Grp., 751 F.2d at 76. As noted above, the subsequent emails and contract drafts firmly establish that this was not the case. The fourth factor, whether the agreement at issue is the type of contract that is usually committed to a signed writing, similarly weighs against a finding of a binding contract. In addition to Kolchins’ e-mail requesting EvoMarkets to “pls send contract” (R. 112), indicating he knew the agreement was dependent on it being reduced to a signed writing, every day of Kolchins’ seven- year employment at EvoMarkets was pursuant to three formal, written employment agreements executed by the parties.10 (R. 73-82, 83-94, and 95-111.) Moreover, EvoMarkets’ employment agreements all contain merger clauses providing that: (i) they represent the complete understanding of the parties with respect to employment and supersede all prior understandings and agreements between the parties; and (ii) any modifications, clarifications or amendments must be made in writing signed by the parties. (R. 79, 89, 102.) Such clauses constitute “persuasive evidence that the parties did not intend to be bound prior to the execution of a written agreement.” Ciaramella, 131 F.3d at 324; CAC Grp. Inc., 523 Fed. Appx. at 805; R.G. Grp, 751 F.2d at 76; Kargo, Inc. v. Pegaso PCS, S.A., 10 Kolchins’s argument that during his employment with EvoMarkets he signed an employment agreement after first coming to agreement via email or orally is irrelevant. In all instances the parties entered into formal, written employment agreements. 30 No. 05 Civ. 10528, 2008 U.S. Dist. LEXIS 81888, *27 (S.D.N.Y. Oct. 14, 2008). II. THE FIRST DEPARTMENT ERRONEOUSLY FAILED TO DISMISS KOLCHINS’ CLAIM FOR BREACH OF THE 2009 EMPLOYMENT AGREEMENT CONCERNING THE “PRODUCTION BONUS” Kolchins’ claim for the Production Bonus is barred by the express terms of the 2009 Employment Agreement. Both the Motion Court and the First Department improperly sub silencio added language to, and thus rewrote, the 2009 Employment Agreement: They deleted its express and unambiguous requirement that in order to receive a Production Bonus, Kolchins must be actively employed by EvoMarkets at the time such firm-wide bonuses are paid (it is undisputed he was not). (R. 105-106.) The First Department ignored that this Court has held these types of express contractual pre-conditions for compensation are enforceable. The First Department held that “if plaintiff’s contention is correct that the production bonus was actually earned through his own performance, plaintiff would be entitled to such bonus as wages, which are not subject to forfeiture.” (R. at 179.) There are multiple problems with this conclusion. First, the First Department erred in finding that plaintiff’s contention was “supported by contractual language stating that the production bonus was ‘based on [plaintiff’s] performance’ and calculated as ‘no less than 55% of the Net Earnings of the Desk.’” (R. 179.) This was a clear mistake of fact. The actual contractual language states: 31 The total bonus pool available to the Eastern U.S. renewable energy brokerage desk (the “Desk”) will be no less than 55% of the Net Earnings of the Desk . . . [I]n order to be eligible to receive any Production Bonus . . . you must be actively employed by us at the time of our firm-wide bonus payment dates. (R. 105-106, emphasis added.) Second, based on the express terms of the 2009 Employment Agreement, Kolchins never earned the Production Bonus. What is not earned cannot be due or forfeited. The law is well-settled that a payment is only “earned” when the conditions of a contract are satisfied (which did not occur here). The Decision (unlike in the Dissent) did not even mention the controlling cases on this point, Truelove v. Northeast Capital & Advisory, Inc., 95 N.Y.2d 220, 225 (2000) and Pachter v. Bernard Hodes Group, Inc., 10 N.Y.3d 609 (2008). In Truelove, 95 N.Y.2d at 225, this Court held that a former employee had no vested right to discretionary bonus compensation requiring active employment despite that the bonus had been set with a portion awarded and another portion deferred. In Pachter, this Court specifically held that when it comes to determining if and when a commission is “earned” and becomes a “wage,” the “parties to a transaction are free to depart from the common law by entering into a different arrangement” and “are free to add whatever conditions they may wish to their agreement.” 10 N.Y.3d at 617 (citations omitted). Further, the “commission will not be deemed earned or vested” except pursuant to the agreed-upon 32 arrangement. Id. at 617. Here, Kolchins seeks an incentive bonus (in addition to his $200,000 base salary), not a commission, so the rationale in Pachter applies with at least equal if not greater vigor. Since a condition the parties agreed to for payment of the incentive bonus in the 2009 Employment Agreement was not met, Kolchins never earned the incentive bonus. Putting aside that the Production Bonus was discretionary (as it was a non- formulaic payment coming from a pool created for multiple persons), Truelove and Pachter stand for the basic and well-settled rule of law that the express terms of a compensation agreement are binding upon the employee and employer. Here, as in Pachter, the parties agreed that the Production Bonus became earned only: (a) at a time within sixty days after the close of a trimester when bonuses are paid; and (b) contingent on Kolchins’ employment on the date of payment. Indeed, and consistent therewith, New York courts have repeatedly dismissed claims by employees where the terms of bonus plans require employment on a specific date. See, e.g., Hall v. United Parcel Serv., Inc., 76 N.Y.2d 27, 36-37 (1990) (enforcing condition precedent of active employment on payment date against a former employee seeking a bonus); Karmilowicz v. Hartford Fin’l Servs. Grp., Inc., 494 Fed. Appx. 153, 157 (2d Cir. 2012) (affirming dismissal of breach of contract and Labor Law claims concerning failure to pay incentive compensation because “each of the compensation plans at issue . . . 33 expressly stated . . . that active employment with [the defendant employer] was a condition precedent to receiving payment” and the employee had been terminated prior to when payment was due); Welland v. Citicorp, Inc., No. 00-CV-738, 2003 U.S. Dist. LEXIS 22721 at *50 (S.D.N.Y. Dec. 17, 2003) (“[W]here the relevant bonus policy requires employment through a certain date and the employee was discharged before that date, the employee does not have a valid claim to the bonus”), aff’d, 116 Fed. Appx. 321 (2d Cir. 2004); Bader v. Wells Fargo Home Mortgage, Inc., 773 F. Supp. 2d 397, 408 (S.D.N.Y. 2011) (quoting various cases holding that “entitlement to a bonus only exists where the terms of the relevant contract require it” and that “New York Courts have repeatedly upheld, as a valid condition precedent, an employer’s requirement that an employee be employed through a certain time period,” internal citations omitted); Ireton-Hewitt v. Champion Home Builders Co., 501 F. Supp. 2d 341, 355 (N.D.N.Y. 2007) (dismissing former employee’s claim for bonus compensation where employer conditioned payment upon active employment on payment date); O’Dell v. Trans World Entertainment Corp., 153 F. Supp. 2d 378, 397 (S.D.N.Y. 2001) (citations omitted) (“It is well established under New York law that ‘[a]n employee’s entitlement to a bonus is governed by the terms of the employer’s bonus plan.’”). The First Department incorrectly relied on the inapposite and effectively overruled decision Weiner v. Diebold Group, Inc., 173 A.D.2d 166 (1st Dep’t 34 1991). (R. 179.) First, Truelove came down nearly a decade after Weiner, enforcing an employer’s contractual provision setting forth when wages were deemed earned. Truelove, 95 N.Y.2d at 225. Second, Weiner is a far different case than the instant one. In Weiner, the payment at issue was a previously earned bonus that was deferred by the company, which the First Department found was already earned prior to the termination of employment and therefore might not be subject to forfeiture. Weiner, 173 A.D.2d at 167-168. Kolchins was paid a base salary and, subject to the terms of the 2009 Employment Agreement, was eligible for a bonus from a pool that EvoMarkets set up each trimester. No specific amount was guaranteed to Kolchins from this pool (nor does Kolchins even allege one was), unlike the plaintiff in Weiner who was owed a sum certain. Additionally, the 2009 Employment Agreement made clear that in order to be paid a bonus from such pool, Kolchins had to be employed on the date of payment. (R. 105-106.) He was not. Thus, Kolchins never earned the Production Bonus. The First Department similarly erred in relying upon Ryan v. Kellogg Partners Inst. Servs., 19 N.Y.3d 1, 16 (2012), which addressed a “guaranteed and non-discretionary” bonus of a set amount of $175,000, which was not based on any performance factors. As one court which distinguished Ryan noted: The amount of the guaranteed bonus [in Ryan] was fixed regardless of the company's or some sub-set of the company's performance. In contrast, the amount of Mr. Beach and Mr. Vollero’s claimed compensation depended at least on [] management, the team's contributions and bonuses, and the financial success of the [] Fund. Beach v. Touradji Capital Mgt., LP, 2014 N.Y. Misc. LEXIS 859, 2014 NY Slip Op 30486(U), 10-11 (Sup. Ct. N.Y. Cty. Feb. 26, 2014). Similarly, the amount of Kolchins' Production Bonus depended on many factors within EvoMarkets' discretion, including the performance of the desk as a whole, not just Kolchins' performance. More importantly, in Ryan there was no agreement (as there was here) that conditioned receipt of the guaranteed amount on Mr. Ryan being employed on a particular date. Kolchins has no legally cognizable claim for a Production Bonus. The First Department misapprehended the contractual language detailing the bonus at issue. CONCLUSION For the foregoing reasons, EvoMarkets respectfully requests that the Court reverse the First Department's Decision, dismiss the Complaint in its entirety, and order such other and further relief it may deem just. Dated: New York, New York April13, 2017 35 WECHSLER & COHEN, LLP By:~~~~;=;======- Davi echsler To Gutfleisch Kim Michael Attorneys for Defendant-Appellant 17 State Street, 7th Floor New York, New York 10004 Certificate of Compliance Pursuant to Part 500.13(c)(1) of the Rules of Practice of the Court of Appeals, State of New York The foregoing brief was prepared on a computer. A proportionally spaced typeface was used, as follows: Name of typeface: Point size: 14 Line spacing: Double The total number of words in the brief, inclusive of point headings and footnotes and exclusive of pages containing the table of contents, table of citations, proof of service, certificate of compliance, or any authorized addendum containing statutes, rules and regulations, etc. is 9,435 words.