Andrew Kolchins, Respondent,v.Evolution Markets, Inc., Appellant.BriefN.Y.February 13, 2018To 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. REPLY 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 i TABLE OF CONTENTS PRELIMINARY STATEMENT ............................................................................... 1 ARGUMENT I. THERE WAS NO “EXTENSION AGREEMENT” ....................................... 3 A. As A Matter Of Law, No Binding Contract Was Formed .................... 6 B. Kolchins Does Not Cite Any Authority Requiring Denial Of The Appeal ....................................................................................... 7 II. KOLCHINS HAS NO CLAIM FOR AN UNEARNED PRODUCTION BONUS UNDER THE 2009 EMPLOYMENT AGREEMENT .................. 14 CONCLUSION ........................................................................................................ 20 ii TABLE OF AUTHORITIES New York State Cases Express Indus. & Term. Corp. v. N.Y.S. Dep’t of Transp., 93 N.Y.2d 584 (1999) ........................................................................................... 6 Greenfield v. Philles Records, 98 N.Y.2d 562 (2002) ................................................................................... 14-15 Guggenheimer v. Bernstein Litowitz Berger & Grossmann LLP, 11 Misc. 3d 926 (Sup Ct. N.Y. Cty. 2006) ................................................... 17, 18 Kaplan v. Capital Co. of Am. Llc, 298 A.D.2d 110 (1st Dep’t 2002) ....................................................................... 15 Keitel v. E*Trade Fin. Corp., 2017 N.Y. Misc. LEXIS 1399, 2017 NY Slip Op 50531(U) (Sup. Ct. N.Y. Cty. Apr. 17, 2017) ........................................................... 10 (n. 3) Kowalchuk v. Stroup, 61 A.D.3d 118 (1st Dep’t 2009) ..................................................................... 7, 10 Marin v. AI Holdings (USA) Corp., 35 Misc. 3d 1227(A) (Sup. Ct. N.Y. Cty. 2012) ...................................... 18 (n. 5) Mirchel v. RMJ Secs. Corp., 205 A.D.2d 388 (1st Dep’t 1994) ................................................................. 17, 18 Modugu v. Continuum Health Partners, Inc., 3 A.D.3d 422 (1st Dep’t 2004) ........................................................................... 15 Newmark & Co. Real Estate Inc. v. 2615 E. 17 Realty LLC, 80 A.D.3d 476 (1st Dep’t 2011) .................................................. 7, 9, 10, 10 (n.3) Pachter v. Bernard Hodes Group, Inc., 10 N.Y.3d 609 (2008) ................................................................................... 16, 18 Rhodium Special Opportunity Fund, LLC v. Life Trading Holdco, LLC, 2014 N.Y. Misc. LEXIS 1525, 2014 N.Y. Slip. Op. 30840(U) (Sup. Ct. N.Y. Cty. Mar. 31, 2014) .......................................................... 10 (n. 3) Scheck v. Francis, 26 N.Y.2d 466 (1970) ....................................................................................... 4, 5 iii Schwartz v. Greenberg, 304 N.Y. 250 (1952) ............................................................................................. 5 Smalley v. Dreyfus Corp., 40 A.D.3d 99 (1st Dept 2007) rev’d on other grounds, 10 N.Y.3d 55 (2008) ... 15 Snakepit Auto., Inc. v. Superformance Intl., LLC, 19 Misc. 3d 1114(A), 2008 NY Slip Op 50683(U) (Sup. Ct. Nassau Cty. Mar. 31, 2008) ................................................................. 11 Stonehill Capital Mgt., LLC v. Bank of the West, 28 N.Y.3d 439 (2016) ....................................................................................... 7, 8 Truelove v. Northeast Capital & Advisory, Inc., 95 N.Y.2d 220 (2000) ................................................................................... 16, 18 Wald v. Graev, 2014 N.Y. Misc. LEXIS 4158, 2014 N.Y. Slip Op. 32433(U) (Sup. Ct. N.Y. Cty. Sept. 15, 2014), aff’d in part, modified in part, 137 A.D.3d 573 (1st Dep’t 2016) ................................................................. 13, 14 Weiner v. Diebold Group, Inc., 173 A.D.2d 166 (1st Dep’t 1991) ................................................................. 17, 18 Williamson v. Delsener, 59 A.D.3d 291 (1st Dep’t 2009) ..................................................................... 7, 10 Zheng v. City of New York, 19 N.Y.3d 556 (2012) ....................................................................................... 6, 7 Federal Cases Bader v. Wells Fargo Home Mortg., Inc., 773 F. Supp. 2d 397 (S.D.N.Y. 2011) .................................................... 15, 19, 20 CAC Grp. Inc. v. Maxim Grp. LLC, 523 F. App’x 802 (2d Cir. 2013) .............................................................. 12 (n. 4) IBM v. Martson, 37 F. Supp. 2d 613 (S.D.N.Y. 1999) .................................................................. 15 Kargo, Inc. v. Pegaso PCS, S.A., 2008 U.S. Dist. LEXIS 81888 (S.D.N.Y. Oct. 14, 2008) ................................. 3-4 Winston v. Mediafare Entm’t Corp., 777 F.2d 78 (2d Cir. 1985) ................................................................................. 11 1 Defendant-Appellant Evolution Markets Inc. (“EvoMarkets”) respectfully submits this reply brief in further support of its appeal from the First Department’s Apr. 2, 2015 Decision and Order (the “Decision”) affirming, in part, the Aug. 22, 2013 Decision and Order of the New York County Supreme Court. PRELIMINARY STATEMENT The opposition of Andrew Kolchins (“Kolchins”) highlights that his claims fail as a matter of law. Kolchins realizes his Complaint is deficient because, instead of rebutting EvoMarkets’ arguments or ample case law demonstrating the First Department erred (as the Dissent observed), Kolchins repeatedly improperly references alleged “discovery” in the trial court, which is dehors the record.1 Attempting to distract from the merits, Kolchins fails to adequately explain how his email saying, “I accept, pls send contract” (R. 112, emph. added) creates a binding agreement after he rejected the offer to which he was responding. Rather, such language objectively conveyed that a written, signed formal contract had to be delivered for a deal to be made. As the record shows, over the following six weeks, the parties manifested an intent to be bound only by a signed, formal agreement by exchanging multiple drafts before exhausting their efforts to agree on material terms. The parties agree that to form a binding contract there must be a meeting of the minds such that there is a manifestation of mutual assent sufficiently definite to 1 Kolchins’ improper submission is the subject of a separate motion to the Court. 2 assure the parties are truly in agreement as to all material terms. The uncontested documentary evidence shows there was no meeting of the minds and the parties did not intend to be bound until they signed a written contract, consistent with years of their custom and practice. In short, Kolchins seeks a windfall, primarily a “sign- on” bonus, for an agreement he never signed and under which he never performed. Kolchins also seeks a “Production Bonus” by ignoring the terms of the parties’ 2009 Employment Agreement (the very agreement he claims was “extended”) which merely provided him an opportunity to participate in a bonus pool for EvoMarkets’ Eastern Renewables Energy Brokerage Desk. Kolchins had no entitlement to any specific share of the bonus pool funded by the revenue production of everyone on the desk (not just Kolchins). Further, and critically, the 2009 Employment Agreement required Kolchins to “be actively employed by [EvoMarkets] at the time of [] firm-wide bonus payment dates,” (R. 106-07), which he admittedly was not. The First Department erred by not applying this Court’s well-settled precedent mandating that parties are free to agree on, and courts must enforce, contract terms including conditions to be met before a bonus is deemed earned (and specifically this exact condition). Contrary to Kolchins’ mischaracterization, EvoMarkets does not claim he “forfeited” the Production Bonus. Rather, Kolchins never earned such a bonus based on the unambiguous terms of the 2009 Employment Agreement. 3 ARGUMENT I. THERE WAS NO “EXTENSION AGREEMENT” Kolchins claims that his sparse July 16, 2012 email with EvoMarkets’ Chief Executive Officer, Andrew Ertel (“Ertel”), created a new, comprehensive, and binding three-year employment contract he coins an “Extension Agreement.” Kolchins dismisses that the parties previously always had written, formal employment agreements and that his own actions attest to their mutual expectation and intention that a formal contract needed to be finalized, signed, and delivered for there to be a binding agreement. While Kolchins states that he responded to Ertel’s proposal email from a month prior (while ignoring that in the interim he rejected it), with the phrase “I accept” (R 112-13), his full response was “I accept, pls send contract.” (Id., emphasis added.) The parties’ actions from July 16, 2012 until September 1, 2012, when negotiations ended, objectively demonstrate that they had not agreed to all terms, that neither believed a contract had been formed, and there was no meeting of the minds. As the Dissent stated, “[t]he conclusion that the documentary evidence…utterly refutes plaintiff’s claim, so as to render appropriate dismissal pursuant to CPLR 3211(a)(1), is ‘inescapable.’” (R. 181, emphasis added.) “Various provisions in the [draft written 2012 employment] Agreement itself further indicate that a formal, executed agreement was required,” Kargo, Inc. v. 4 Pegaso PCS, S.A., 2008 U.S. Dist. LEXIS 81888, *25 (S.D.N.Y. Oct. 14, 2008), including Section 8 (notices must be written and delivered) and: This Agreement represents your and our complete understanding regarding the terms of your Employment and…supersedes all prior written and/or oral understandings and agreements between us. Any modifications, clarifications or amendments to this Agreement must be made and agreed to in writing by both us and you… [Sec. 11] YOU ACKNOWLEDGE BY YOUR SIGNATURE TO THIS CONTRACT THAT YOU HAVE READ THIS CONTRACT BEFORE SIGNING IT AND HAVE HAD AN OPPORTUNITY TO HAVE IT REVIEWED BY YOUR ATTORNEY… [R. 126-127.] The 2009 Employment Agreement had the same language. (R. 102-103.) “These repeated variations on the same theme demonstrate the parties’ intent and understanding that the document was not merely memorializing a prior oral agreement, but rather that the [a]greement needed to be formally executed by both parties to take effect.” Id. at *22. (See also EvoMarkets’ Opening Br. at 29-30.) For years this Court has provided the necessary commercial comfort to those doing business in New York that they would know exactly when they have been bound. For example, in Scheck v. Francis, 26 N.Y.2d 466 (1970), the Court held the parties did not intend to be bound before signing a written agreement where, like here, they were negotiating a new employment agreement. In Scheck: The defendants’ attorney…had submitted a number of proposed agreements for the plaintiff’s approval which [the plaintiff] found unsatisfactory. After a final negotiation session, [the defendant’s attorney] mailed to the plaintiff the four agreements…in quadruplicate, with a covering letter…requesting the plaintiff to “sign 5 all copies” and “have [the defendant] sign” them. [Id. at 469.] While the defendant did not sign the agreements, the plaintiff did and continued to work for months. The Scheck Court affirmed the dismissal, holding: The writings before us likewise evidence the intention of the parties not to be bound until the agreements were signed…It appears quite clear, from [the] letter alone, that the agreements were to take effect only after both parties had signed them. Thus, [defendant’s attorney] had instructed the plaintiff that he was to sign them and “have [the defendant] sign” them, expressly advising him to call if there were “any questions or comments”…This combination of circumstances unquestionably gave the plaintiff an opportunity to decline to go through with the deal before he signed. Certainly, the defendant … enjoyed the same privilege, and she never did sign. In short, both parties must plainly have understood that the agreements were to take effect only after they had signed them and, until that time, the matter was still in the stage of negotiations. [Id. at 470.] The Court cited Schwartz v. Greenberg, 304 N.Y. 250 (1952), where: The parties met for the purpose of signing a written contract dealing with the transaction [to sell stock]. Each signed his own copy but, because the check offered by the buyer was not certified, each picked up his contract and left, arranging to meet the next day. The defendant then refused to go through with the agreement, and this [C]ourt upheld a determination in his favor on the ground that “[it] is entirely plain…that the parties did not intend to be bound until a written agreement had been signed and delivered.” [26 N.Y.2d at 470.] Thus, even where parties have signed agreements and agreed on all terms, if they manifest an intent only to be bound by delivery of a signed agreement, they cannot be bound until then. Just as the request to “have [defendant] sign” established an intent not to be bound in Scheck, so did “pls send contract.” Both parties here could back out before signing (which, as noted, is crucial in employment deals). 6 The concept that parties must be able to trust that they are not bound before they intend to be is a bedrock principle crucial to the efficient transaction of business and employment in New York. It provides the opportunity to negotiate freely, without risk of unintended consequences, and allows for informed decision- making. In contrast, the Decision traps the unwary (e.g., subjecting employees to post-employment restrictive covenants before they have vetted same with counsel). The advent of e-mail, text messages, and/or any other modern technology has not altered, and should not alter, this fundamental and necessary rule. In fact, it has heightened the need for absolute clarity before an agreement can be held binding. A. As A Matter Of Law, No Binding Contract Was Formed Kolchins correctly states that “[t]o create a binding contract, there must be an objective manifestation of the parties’ intent to be bound by an agreement.” (Kolchins Br. at 12.) As in the case he cites, Express Indus. & Term. Corp. v. N.Y.S. Dep’t of Transp., 93 N.Y.2d 584 (1999), where this Court found no contract as a matter of law, neither party objectively manifested an intention to be bound by an e-mail (only by a signed contract). Kolchins’ boilerplate argument that issues must be put to a jury is wrong in the context of whether he states a cause of action. As evident from the scores of decisions cited in EvoMarkets’ opening Brief and herein, New York courts routinely determine issues such as this as a matter of law. Kolchins cites to Zheng v. City of New York, 19 N.Y.3d 556 (2012), to 7 contend that a jury is necessary but Zheng affirmed the finding that there was no contract, holding: “the clearest of contract terms are generally to be found in a written agreement executed by contracting parties...” Id. at 575 (citations omitted). The Zheng Court stated “it is the responsibility of the court to interpret written instruments.” Id. at 573 (emphasis added). It is only “where a finding of whether an intent to contract is dependent as well on other evidence from which differing inferences may be drawn,” that a question of fact arises. Id. at 573 (emphasis added). Here, the email on which Kolchins relies, and the parties’ subsequent failed bartering, confirm that one isolated email did not form a binding deal, there were material open issues concerning Kolchins’ continued employment that were never resolved, and the parties intended to be bound only by a formal, written, signed, and delivered contract. There is no issue dependent on any other evidence. B. Kolchins Does Not Cite Any Authority Requiring Denial Of The Appeal Kolchins relies on one decision by this Court and three by the First Department (none of which are employment cases) for the proposition that email exchanges are sufficient to form enforceable agreements: Stonehill Capital Mgt., LLC v. Bank of the West, 28 N.Y.3d 439 (2016), Newmark & Co. Real Estate Inc. v. 2615 E. 17 Realty LLC, 80 A.D.3d 476 (1st Dep’t 2011), Kowalchuk v. Stroup, 61 A.D.3d 118 (1st Dep’t 2009), and Williamson v. Delsener, 59 A.D.3d 291 (1st Dep’t 2009). The issue here, however, is not whether email can form a contract, 8 but whether one particular email here did form a contract. It did not, as is clear from Kolchins’ own words (“pls send contract”) and subsequent negotiations on material terms and the parties’ past practice. Further, the cases are inapposite. EvoMarkets addressed Stonehill in its opening Brief, noting that it involved the “general rule that a seller’s acceptance of an auction bid forms a binding contract” and an auction “will not be deemed conditional absent explicit terms.” 28 N.Y.3d at 449. This Court held that to find 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 direct contravention of the usual manner in which EvoMarkets and Kolchins negotiated employment agreements. Stonehill reiterated that what the First Department did -- putting “disproportionate emphasis” on a single Yiddish word, “mazel” -- is improper. 28 N.Y.3d at 449. To affirm the Decision would be the opposite of what the parties were “striving to attain” (id.) by allowing Kolchins to seek a windfall under an alleged agreement under which he never performed. The Stonehill Court did what the First Department did not: consider “[t]he totality of the parties’ conduct and the ‘objective manifestations’ of their intent,” including the parties’ emails indicating the deal’s progress and that at no time after the defendant accepted Stonehill’s bid did it communicate an objection to the contract form Stonehill sent. Id. at 450. In 9 contrast, the parties here had several issues during negotiations and both requested deal terms after Ertel’s “Mazel” e-mail. As the Dissent stated: [Kolchins’] position is that the parties’ documented and undisputed inability to resolve their differences on issues they both regarded as essential to concluding an agreement should not prevent him from suing on that putative agreement…[He] is arguing that he should have a chance to persuade a factfinder to make for the parties a bargain that – as established by undisputed documentary evidence – the parties themselves could not reach...[The record] conclusively establish[es] that…neither party intended simply to renew the terms of their previous agreement (the 2009 agreement)…Rather, in those negotiations, both parties – [Kolchins] no less than [EvoMarkets] – proposed terms that varied substantially from the terms of the 2009 agreement…It is telling that, at the outset of negotiations, [Kolchins] did not object that an agreement to renew the terms of the 2009 agreement had already been reached when, by email dated July 20, 2012, [EvoMarkets] first sent him a draft for a new contract that included at least three significant changes from the terms of the 2009 agreement…[Kolchins] did not assert that [EvoMarkets] had no right to propose changes to the terms of the 2009 agreement. In fact, [he] proposed a different “clawback” provision that…had not been present in the 2009 agreement…[I]t is plain from the record that the parties considered them to be material and essential…[E]ach side regarded the issues that remained outstanding at the end of their negotiations as deal-breakers. [R. 181-184, emph. added, citing Spier v. Southgate Owners Corp., 39 A.D.3d 277, 278 (1st Dep’t 2007); Galesi v. Galesi, 37 A.D.3d 249, 249 (1st Dep’t 2007); Yenom Corp. v. 155 Wooster St. Inc., 23 A.D.3d 259, 259-60 (1st Dep’t 2005); Dratfield v. Gibson Greetings, 269 A.D.2d 294, 295 (1st Dep’t 2000); May v. Wilcox, 182 A.D.2d 939, 940 (3d Dep’t 1992).]2 In Newmark, a real estate case, the contract at issue was a draft brokerage agreement sent by email, not the emails alone. Further, the First Department found 2 Kolchins has not addressed any of the cases cited above by the Dissent. 10 persuasive that the parties exchanged multiple drafts of the contract and: Plaintiff invited defendant’s revisions and defendant sent back, also by e-mail, handwritten revisions…Plaintiff incorporated those revisions and sent the final copy back to defendant’s agent, and the record contains no evidence that defendant objected to, protested, or rejected any of the provisions in the last version of the agreement. 80 A.D.3d at 477 (emph. added). Unlike here, both Newmark parties performed.3 Kowalchuk and Williamson both concerned a negotiated settlement of claims, which is, by its nature, quite different from a multi-faceted, multi-year employment agreement. Also, in Williamson, “the e-mail communications indicate that [defendant] was aware of and consented to the settlement.” 59 A.D.3d at 292. Kolchins did the opposite, demonstrating, as always, that the parties needed to enter into a formal contract which they tried and failed to do. In Kowalchuk, the parties agreed to settle a NASD arbitration, after which the NASD issued an award for less than the settlement and the defendant tried to back out. The dispositive facts there included that the attorney for the party disputing the settlement in court had previously represented that his client had executed the written settlement agreement and advised the NASD that the arbitration had been settled. Tellingly, while Kolchins’ opposition cites Kowalchuk several times, he ignores the four-factor test the First Department laid out in that case (and others). 3 Newmark has been distinguished by multiple courts. See, e.g., Keitel v. E*Trade Fin. Corp., 2017 N.Y. Misc. LEXIS 1399, 2017 NY Slip Op 50531(U) (Sup. Ct. N.Y. Cty. Apr. 17, 2017); Rhodium Special Opportunity Fund, LLC v. Life Trading Holdco, LLC, 2014 N.Y. Misc. LEXIS 1525, 2014 N.Y. Slip. Op. 30840(U) (Sup. Ct. N.Y. Cty. Mar. 31, 2014). 11 61 A.D.3d at 123. As set forth in the opening Brief, the test examines whether: (1) there was an express reservation of the right not to be bound in the absence of a writing; (2) there has been partial performance; (3) all terms of the alleged contract were agreed upon; and (4) the agreement at issue is the type of contract that is usually committed to a signed writing. Every one of these factors establishes that there was no contract entered into between Kolchins and EvoMarkets by the July 16, 2012 email. (See EvoMarkets’ Opening Br. at 27-29.) The Second Circuit and several New York Supreme Court Justices have used an alternative test: (1) the language of the agreement; (2) the context of the negotiations; (3) the existence of open terms; (4) partial performance; and (5) the necessity of putting the agreement in final form, as indicated by the customary form of such transactions. See, e.g., Winston v. Mediafare Entm’t Corp., 777 F.2d 78, 80 (2d Cir. 1985). No one factor is dispositive. See, e.g., Snakepit Auto., Inc. v. Superformance Intl., LLC, 19 Misc. 3d 1114(A), 2008 NY Slip Op 50683(U) (Sup. Ct. Nassau Cty. Mar. 31, 2008) (dismissing claim even where parties did “not expressly reserve enforcement pending the negotiation and execution of a final, formal…agreement”). For example, as the Dissent stated: [T]he absence of an express reservation of the right not to be bound before the execution of a formal, written agreement does not mean that the existence of an enforceable agreement cannot be negated, as a matter of law, by uncontroverted evidence of the parties’ negotiations after the promise sought to be enforced allegedly was made, as this Court, among other New York courts, has ruled numerous times. [R. 12 184-85.]4 Regardless of which test one uses, all factors support EvoMarkets’ position: Kolchins’ own words -- “pls send contract” -- indicate an intent not to be bound until the written contract is signed. Kolchins’ attorney referred to a “proposed agreement” on August 13, 2012 and on August 15, 2012 Kolchins wrote, “[u]nderstanding we are negotiating...” (R. 154-155, emphasis added.) Negotiations were lengthy with Kolchins demanding changes. (R. 115-160.) The emails and drafts exchanged establish open material issues remained. In fact, even the July 16th e-mail on which Kolchins relies explicitly states the parties needed to agree on an unidentified “clarification around the issue of departed members of the team.” (R. 112-13, 115-16.) Kolchins never performed under an alleged “Extension Agreement.” Kolchins always worked pursuant to written contracts with EvoMarkets. Kolchins tries to muddy the waters by claiming that EvoMarkets is arguing that the terms he requested go to the “reason” the parties failed to execute a written contract (Kolchins Br. at 20) but in fact the ongoing negotiations objectively prove he never intended to be bound by an e-mail. Kolchins’ belated, self-serving contention that his requests were to “tinker” and “clarify” does not change that they concerned significant and material issues including, for example: (i) seeking to increase his Non-Compete payment to far more than in his prior agreement; (ii) 4 Similarly, contrary to Kolchins’ assertion, in CAC Grp. Inc. v. Maxim Grp. LLC, 523 F. App’x 802, 804 (2d Cir. 2013), the court found that “neither party expressly reserved the right not to be bound prior to the execution of a document,” but that “[t]he email exchange establishes that both parties understood that the ‘deal’ would be effectuated by ‘documents,’ the details of which were still to be settled.” Id. The court then noted that “reference to a binding sales agreement to be completed at some future date” (akin to “pls send contract”) “shows that [the parties] did not intend to be bound.” Id. 13 whether the clawback of his sign-on bonus would be pro rata or the same amount based on when he resigned (notably, as the Dissent observed, Kolchins did not object to a clawback per se despite that it was not in his prior agreement, indicating the parties had never agreed that all terms were going to be the same as in the 2009 Employment Agreement); (iii) whether other employees’ bonuses would limit Kolchins’ eligibility for a management override; (iv) whether bonuses for commissions received by EvoMarkets in the second trimester of 2012 would be counted against the proposed new compensation guarantee; (v) who at EvoMarkets could approve management overrides; (vi) whether Kolchins would serve on the management committee; and (vii) to whom Kolchins needed to disclose potential employment opportunities. (R. 112-13, 115-18, 137-160.) As the Dissent noted, these attempts to change terms from the 2009 Employment Agreement is compelling evidence that Kolchins knew no agreement had been reached. Just last year, the First Department affirmed the dismissal of a complaint in a similar case. In Wald v. Graev, 137 A.D.3d 573 (1st Dep’t 2016), the plaintiff alleged a binding agreement was reached where the defendant sent the plaintiff a “Letter Agreement” in May 2011 for compensation. See 2014 N.Y. Misc. LEXIS 4158, 2014 N.Y. Slip Op. 32433(U) (Sup. Ct. N.Y. Cty. Sept. 15, 2014). The plaintiff claimed he found the agreement “acceptable and responded…that he only had some minor changes,” sent e-mails concerning these suggested changes, but 14 never received a response. Id. at 10. Plaintiff then signed the Letter Agreement in August 2011 without any changes and sent it to the defendant. The defendant, however, said that he “changed his mind, would not sign the Letter Agreement, and would make a different offer...” Id. In December 2011, the defendant sent a new agreement the plaintiff rejected. The Supreme Court found dispositive that “negotiations on key terms continued between [the parties] into December 2011, with each party making offers and counteroffers,” indicating “no meeting of the minds with respect to the Letter Agreement.” Id. The First Department agreed, holding “the facts alleged show there was no meeting of the minds as to the agreement, but rather that plaintiff rejected the agreement's terms by making a counteroffer, which was never accepted by defendants.” 137 A.D.3d at 574. The documentary evidence objectively demonstrates that neither party thought that the email from Kolchins on July 16th was a binding contract. This Court need only look at the undisputed record to conclusively determine that Kolchins and EvoMarkets never reached any alleged “Extension Agreement.” II. KOLCHINS HAS NO CLAIM FOR AN UNEARNED PRODUCTION BONUS UNDER THE 2009 EMPLOYMENT AGREEMENT Kolchins thinks his best chance of defeating this appeal as to the Production Bonus is to claim it cannot be determined as a matter of law. Yet, the 2009 Employment Agreement is “complete, clear and unambiguous on its face” and thus “must be enforced according to the plain meaning of its terms.” Greenfield v. 15 Philles Records, 98 N.Y.2d 562, 569 (2002). In order for Kolchins to earn such a bonus, he needed to be employed on the payment date. In Kaplan v. Capital Co. of Am. Llc, 298 A.D.2d 110, 111 (1st Dep’t 2002), as a matter of law, the plaintiff: [H]ad no contractual right to the bonuses he seeks to recover. Although ordinarily the question of whether unpaid compensation constitutes a discretionary bonus or nonforfeitable earned wages is a question of fact…the bonus compensation sought was clearly stated in the company handbook to be purely discretionary …Defendant signed documents providing that he understood these terms… As the Southern District has observed, where a contract “either leaves the bonus in the employer’s discretion or conditions it on an event that has not occurred, such as employment through a specific date, courts have decided such questions as a matter of law.” Bader v. Wells Fargo Home Mortg., Inc., 773 F. Supp. 2d 397 (S.D.N.Y. 2011) (citation omitted); see also, e.g., Smalley v. Dreyfus Corp., 40 A.D.3d 99, 106 (1st Dept 2007), rev’d on other grounds, 10 N.Y.3d 55 (2008) (affirming dismissal where plan authorized employer to modify/annul bonuses); Modugu v. Continuum Health Partners, Inc., 3 A.D.3d 422, 449 (1st Dep’t 2004) (“supplemental compensation was expressly made discretionary under the parties’ agreement.”); IBM v. Martson, 37 F. Supp. 2d 613, 617 (S.D.N.Y. 1999) (whether stock options are earned wages “is a question of law”). The terms of the 2009 Employment Agreement controlling Kolchins’ eligibility for the Production Bonus are clear, unambiguous, and indisputably not satisfied. The First Department not only refused to honor and enforce those terms, 16 it changed them, violating controlling law; specifically, this Court’s pronouncements in Pachter v. Bernard Hodes Group, Inc., 10 N.Y.3d 609 (2008) and Truelove v. Northeast Capital & Advisory, Inc., 95 N.Y.2d 220, 225 (2000). In Pachter, this Court held that with respect to 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 “free to add whatever conditions they may wish to their agreement.” 10 N.Y.3d 617 (citations omitted). Here, the parties agreed that for Kolchins to be eligible to receive (i.e., earn) a Production Bonus, he had to be employed on a certain date (he was not). Moreover, Pachter applies with greater force because here an incentive bonus is at issue, not a commission. Kolchins tries to escape Pachter by claiming the pertinent condition of employment is a “timing requirement” (Kolchins Br. at 34), but Pachter explicitly addressed a timing argument, holding that the “legality” of charges to Pachter’s commissions “depend[ed] on when Pachter’s commission was ‘earned’ and became a ‘wage.’” 10 N.Y.3d at 617 (emphasis added). In Truelove, this Court held that a former employee had no vested right to a discretionary bonus where active employment was required on the date of payment despite that the bonus had been set with a portion awarded and another portion deferred. 95 N.Y.2d at 225. Kolchins argues that “the Truelove line of cases” (holding that the express terms of a compensation agreement are binding upon the 17 employee and employer) do not apply here by misstating the 2009 Employment Agreement’s terms. Kolchins claims the cases concern “discretionary bonuses” and that the Production Bonus was not discretionary because it was “based on a percentage of revenues generated by [him] during the trimester in question.” (Kolchins Br. at 4.) The 2009 Employment Agreement, however, provides that the bonus was to be “based on a percentage of the revenues generated by the Eastern Renewables Energy Brokerage Desk [i.e., not just the revenues earned by Kolchins as claimed] during the trimester in question.” (R. 105, emphasis added.) Kolchins’ bonus was discretionary in that he was merely “eligible” for a bonus from a pool. (Id.) (Later in his Brief, Kolchins admits the bonus was based on the performance of the entire “desk,” not just him. (See Kolchins Br. at 8, 31.)) Kolchins argues that the First Department correctly altered the 2009 Employment Agreement because he worked the entire Term and, therefore, despite the express language he agreed to years earlier (and to which he claims he was prepared to agree again), he should have “earned” the Production Bonus. In support of this wrongful rewriting of the deal, Kolchins relies on Weiner v. Diebold Group, Inc., 173 A.D.2d 166 (1st Dep’t 1991) (as did the First Department), Mirchel v. RMJ Secs. Corp., 205 A.D.2d 388 (1st Dep’t 1994), and Guggenheimer v. Bernstein Litowitz Berger & Grossmann LLP, 11 Misc. 3d 926 (Sup Ct. N.Y. Cty. 2006). 18 In Weiner, the payment at issue was a previously earned and awarded bonus payment that the company had deferred. The First Department held that a jury could find that the already awarded wage might not be subject to forfeiture. Here, the Production Bonus was never awarded to Kolchins and, thus, per the 2009 Employment Agreement, never earned. In Mirchel, unlike here, there was no written bonus agreement and the plaintiff’s claim for a bonus depended entirely upon an alleged oral agreement (as did the claim in Guggenheimer).5 Where a plaintiff claims an oral agreement, “it is not the court’s role to pass upon issues of credibility.” 205 A.D.2d at 390. Kolchins does not claim any oral agreement; the only agreement alleged is written, clear and unambiguous. In any event, all of these cases were long ago superseded by Pachter and Truelove. Kolchins’ further argument that the express terms of the 2009 Employment Agreement are “unreasonable” is both irrelevant and wrong. Pursuant to Pachter, the express terms of the 2009 Employment Agreement control and cannot be avoided. Kolchins should not be allowed to escape the express terms of his deal based on his after-the-fact claim as to what is sound -- a deal that ensured him a minimum of $3 million over three years (and under which he made far more). Even a case cited repeatedly by Kolchins establishes that his claim fails. In 5 See also Marin v. AI Holdings (USA) Corp., 35 Misc. 3d 1227(A) (Sup. Ct. N.Y. Cty. 2012) (“the parties orally agreed to the bonus” and thus “credibility issues may not be resolved on th[e] motion” to dismiss). 19 Bader, 773 F. Supp. 2d 397, the Southern District held that because plaintiff employees were terminated prior to the date on which the bonus plan stated they needed to be employed to be eligible for the bonuses, they “could not have fulfilled the condition precedent to receiving” such bonuses. Id. at 409. The court stated: “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.’” O'Dell v. Trans World Entm't Corp., 153 F. Supp. 2d 378, 397 (S.D.N.Y. 2001) (quoting Hall v. United Parcel Serv. of Am., Inc.,…76 N.Y.2d 27…([]1990)). Thus “entitlement to a bonus only exists where the terms of the relevant contract require it.” Vetromile…, 706 F. Supp. 2d [at] 448…“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.” Berardi v. Fundamental Brokers, Inc., Nos. 89-CV-5143, 90- CV-646, 1990 U.S. Dist. LEXIS 11388…(S.D.N.Y. Aug. 30, 1990). See also, e.g., Truelove…, 95 N.Y.2d 220…; “[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.” Welland v. Citigroup, Inc., No. 00- CV-738, 2003 U.S. Dist. LEXIS 22721…(S.D.N.Y. Dec. 17, 2003)...See also Ireton-Hewitt v. Champion Home Builders Co., 501 F. Supp. 2d 341, 355 (N.D.N.Y. 2007)…; Anderson v. Sotheby's, Inc., No. 04-CV-8180, 2006 U.S. Dist. LEXIS 42539…(S.D.N.Y. June 22, 2006)…Criscuolo v. Joseph E. Seagram & Sons, Inc., No. 02-CV- 1302, 2003 U.S. Dist. LEXIS 18991…(S.D.N.Y. Oct. 21, 2003)… Id. at 407-08 (emphasis added, internal quotations omitted). Kolchins has not addressed any of these cited cases. Bader also rejected the employees’ arguments that “restrictions on the payment of the bonuses they claim are unenforceable because those bonuses are wages under the New York Labor Law,” holding that, as a matter of law, the bonuses "are not 'wages' under the New York Labor Law."' Id. at 409. The Bader court noted that it did not need to: [R]esolve the extent to which [the employees'] bonuses were tied to their own performance. Under New York law, "the term wages does not include bonus, profit-sharing, and other forms of incentive compensation unless the incentive compensation is already 'earned' by the employee." Koss v. Wackenhut Corp., 704 F. Supp. 2d 362, 369 (S.D.N.Y. 2010). "A bonus is 'earned' when the employee acquires a vested interest in the award and its payment is not conditioned upon some occurrence or left to the discretion of the employer." Jd ... Accordingly, courts have held that compensation conditioned on an employee's remaining employed as of a certain date or the occurrence of some other event is not wages ... [T]he NOI Bonuses were conditioned on employment at the end of a given period. Accordingly, those bonuses were not "wages."6 [Jd. at 417- 18 (emphasis added).] 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 June 15, 2017 WECHSLER & COHEN, LLP By~ avi:ecllsler Todd Gutfleisch Kim Lauren Michael Attorneys for Defendant-Appellant 1 7 State Street, 7th Floor New York, New York 10004 6 The same was held "with respect to the Volume Overrides" which "were conditional on the Volume Override True-Ups ... " 20 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: Times New Roman 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 5,429 words.
