Gold v. American Medical Alert Corp.
Filing
29
OPINION & ORDER re: 5 MOTION to Dismiss the Second Claim for Relief filed by American Medical Alert Corp. For the foregoing reasons, Defendant's motion dismiss Plaintiff's second claim is granted. (As further set forth in this Opinion.) (Signed by Judge John F. Keenan on 8/13/2015) (mro)
USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: Aug. 17, 2015
UNITED STATES DISTRICT COURT
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
SOUTHERN DISTRICT OF NEW YORK
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DANIEL MARTIN GOLD,
:
In re FANNIE MAE 2008 SECURITIES
:
08 Civ. 7831 (PAC)
:
LITIGATION
:
09 MD 2013 (PAC)
Plaintiff,
:
:
:
No. 14 Civ. 5485 (JFK)
:
OPINION & ORDER
-against:
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:
OPINION & ORDER
AMERICAN MEDICAL ALERT CORP.,
:
:
Defendant.
:
HONORABLE PAUL A. CROTTY, United States
-----------------------------------X District Judge:
APPEARANCES
For Plaintiff Daniel Martin Gold:
BACKGROUND1
KARLINSKY LLC
TheBy: years of this decade saw a boom in home financing which was fueled, among
early Martin E. Karlinsky
Amy A. Lehman
other things, by low interest rates and lax credit conditions. New lending instruments, such as
For Defendant American Medical Alert Corp.:
FOX ROTHSCHILD LLP
subprime mortgages (high credit risk loans) and Alt-A mortgages (low-documentation loans)
By: James Lemonedes
John A. Wait
kept the boom going. Borrowers played a role too; they took on unmanageable risks on the
Oksana Wright
JOHN F. KEENAN, market would continue to rise and Judge:
assumption that the United States District that refinancing options would always be
Before the Court is Defendant American Medical Alert
available in the future. Lending discipline was lacking in the system. Mortgage originators did
Corp.’s (“AMAC”) motion to dismiss the carry the rising risk on their books, the
not hold these high-risk mortgage loans. Rather than second claim in Plaintiff
Daniel Martin their loans into the secondaryFor the market, oftenthat follow,
originators sold Gold’s complaint. mortgage reasons as securitized packages
AMAC’s motion is granted.
known as mortgage-backed securities (“MBSs”). MBS markets grew almost exponentially.
But then the housing bubbleI. Background demand for housing dropped abruptly
burst. In 2006, the
and Unless otherwise noted, of the changing housing market, banks modified their
home prices began to fall. In light the following facts are drawn from
Gold’s complaint and assumed true for home mortgages withoutthis
lending practices and became unwilling to refinance the purposes of refinancing.
motion.
Gold is a citizen of Virginia, and AMAC is a New York
1
Unless otherwise indicated, all principal “(¶ _)” or of “Complaint” in Long Island
corporation with its references cited asplace to thebusinessare to the Amended Complaint,
dated June 22, 2009. For purposes of this Motion, all allegations in the Amended Complaint are taken as true.
City, New York.
AMAC is a healthcare communications company
1
that provides services such as emergency response systems and
electronic medication reminder devices. (Compl. ¶ 5.)
Gold
began acting as a consultant for AMAC in November 2008. (Compl.
¶ 9.)
On January 1, 2010 Gold entered into a three-year
employment agreement with AMAC whereby he would manage the
Healthcare and Safety Monitoring Systems team. (Compl. ¶ 10.)
On March 15, 2012, the parties entered into the superseding
employment agreement at issue here (“Agreement”).
It covered
the three-year period from January 1, 2012 through December 31,
2014. (Compl. ¶ 14.)
Under that Agreement, Gold became Senior Vice President of
AMAC and its Chief Business Development Officer.
His
compensation consisted of (a) a base salary; (b) participation
in AMAC’s bonus plan; (c) healthcare, retirement, and other
benefits such as a so-called Tranche II bonus; (d) an automobile
stipend, as well as reimbursement of business expenses and
gasoline costs; and (e) participation in AMAC’s Capital
Contribution and Incentive Compensation Plan (“CCICP”), in which
Gold invested just over $100,000 at the time he executed the
agreement. (Compl. ¶¶ 19–20.)
Pursuant to the Agreement, AMAC could only fire Gold if he
materially breached the Agreement; acted criminally, with gross
negligence, or in bad faith; was convicted of a felony or
misdemeanor of moral turpitude; violated AMAC’s ethics code or
2
sexual harassment guidelines; or willfully took or failed to
take an action that caused the deterioration of AMAC’s business
or brought AMAC into public disgrace. (Agreement ¶ 9(a).)
If
AMAC terminated Gold without cause, Gold was entitled to his
salary and benefits through December 31, 2014, as well as his
prorated bonus for the year of his termination. (Compl. ¶ 25.)
Additionally, Gold would receive a defined payment based on his
investment in the CCICP. (Compl. ¶ 21.)
Under the Agreement,
Gold could terminate his employment if AMAC failed to reappoint
him to his office, reduced Gold’s compensation, or adversely
changed the scope of his authorities or duties. (Compl. ¶ 23.)
Gold alleges that he fully performed under the Agreement
and did not act or fail to act in a way that justified a “for
cause” termination.
After a new CEO took over in September
2012, Gold alleges that his role at AMAC diminished.
He was
stripped of the title Chief Business Development Officer, had to
report to an intermediary instead of reporting directly to the
new CEO, and was no longer on the Executive Management Team.
(Compl. ¶¶ 31–35.)
He was also given “wholly unrealistic, and
for all intents and purposes unachievable financial objectives.”
(Compl. ¶ 36.)
Gold alleges that these changes demonstrate that
AMAC breached the Agreement.
Gold.
On October 31, 2012, AMAC fired
He alleges that the reasons given were pretextual and did
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not rise to the level of “cause” under the Agreement. (Compl. ¶
48–50.)
The complaint asserts two claims against AMAC.
Gold first
claims that AMAC breached the Agreement by failing to pay him
his salary and provide him benefits through December 31, 2014.
His second claim, at issue on this motion, is that the amounts
due under the Agreement were wrongfully withheld, entitling him
to double recovery as well as attorney’s fees and costs under
New York Labor Law.
Gold seeks damages in excess of $75,000,
which, along with the fact that Gold and AMAC are citizens of
different states, means that this Court has diversity
jurisdiction under 28 U.S.C. § 1332.
AMAC now moves to dismiss Gold’s second claim, arguing that
New York Labor Law does not cover the complete failure to pay
wages or severance benefits as it is limited to discrete
withholdings from wages.
II. Discussion
A. Legal Standard
A cause of action survives a motion to dismiss only if it
“states a plausible claim for relief.” Harris v. Mills, 572 F.3d
66, 72 (2d Cir. 2009) (internal quotation marks omitted).
deciding a motion to dismiss, a court must accept the
complaint’s allegations as true and draw all reasonable
4
In
inferences in the non-moving party’s favor. See Nielsen v.
Rabin, 746 F.3d 58, 62 (2d Cir. 2014).
B. Analysis
Gold’s second claim asserts a violation of New York Labor
Law § 190 et seq (“Article 6”).
Although initially framed
generally, the complaint later clarifies that Gold is alleging
that AMAC violated New York Labor Law § 193, which prohibits an
employer from making “any deduction from the wages of an
employee,” N.Y. Lab. Law § 193, by failing to pay and
withholding Gold’s “wages due upon termination of his
employment.” (Compl. ¶ 63.)
He seeks double recovery as
provided by New York Labor Law § 198 in the form of liquidated
damages, as well as attorney’s fees and costs. (Compl. ¶ 64.)
It is settled that section 198 does not “permit recovery
. . . on a common-law contractual remuneration claim” as the
recovery of attorney’s fees and liquidated damages is “limited
to actions for wage claims founded on the substantive provisions
of Labor Law article 6.” Gottlieb v. Kenneth D. Laub & Co., 82
N.Y.2d 457, 464–65 (1993).
Thus, Gold is only entitled to
section 198’s double recovery if he can show that AMAC violated
section 193, the only Article 6 claim he makes.
Plaintiff is not entitled to relief under section 198
because he has not sufficiently pled a violation of section 193.
As Defendant argues, Plaintiff has not pled “any deduction” from
5
wages because the deduction Plaintiff claims is merely the total
withholding of wages, which is the essence of the breach of
contract claim.
Section 193 requires something more:
specific instance of docking the employee’s pay.
a
Because Gold
only pleads a total withholding, his second claim must be
dismissed.
This conclusion is supported by several cases from this
district. See, e.g., O’Grady v. BlueCrest Capital Mgmt. LLP, --F. Supp. 3d ----, 2015 WL 3740701, at *9 (S.D.N.Y. 2015)
(“[S]ection 193 applies to amounts deducted from wages, not
unpaid wages and severance, which is alleged here.” (emphasis in
original)); Moras v. Marco Polo Network, Inc., No. 11 Civ. 2081,
2012 WL 6700231, at *11 (S.D.N.Y. Dec. 20, 2012); Malinowski v.
Wall St. Source, Inc., No. 09 Civ. 9592, 2012 WL 279450, at *3
n.5 (S.D.N.Y. Jan. 31, 2012); Monagle v. Scholastic, Inc., No.
06 Civ. 14342, 2007 WL 766282, at *2 (S.D.N.Y. Mar. 9, 2007);
see also Jankousky v. N. Fork Bancorporation, Inc., No. 08 Civ.
1858, 2011 WL 1118602, at *4 (S.D.N.Y. Mar. 23, 2011) (“Until
the wages are agreed upon, there can be no deduction within the
meaning of the NYLL.”).
Other courts in this circuit have reached the same
conclusion. See, e.g., Hinterberger v. Catholic Health Sys., 299
F.R.D. 22, 36 (W.D.N.Y. 2014) (“[A]n employer’s alleged failure
to pay for all hours worked does not constitute an improper
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deduction from wages for purposes of Section 193.”); Ellis v.
Common Wealth Worldwide Chaueffuered Transp. of NY, LLC, No. 10
Civ. 1741, 2012 WL 1004848, at *10 (E.D.N.Y. Mar. 23, 2012)
(“The provision does not cover failure to pay an employee for
time worked . . . .”); Strohl v. Brite Adventure Ctr., Inc., No.
08 Civ. 259, 2009 WL 2824585, at *9 (E.D.N.Y. Aug. 28, 2009)
(holding that employee’s section 193 claim failed because
employer “did not ‘deduct’ any amounts from her wages, but
simply failed to pay her all the wages she had earned.”);
Ireton-Hewitt v. Champion Home Builders Co., 501 F. Supp. 2d
341, 353 (N.D.N.Y. 2007) (holding that employee’s section 193
failed claim where employer never tendered payment).1
There are, however, two issues that give the Court pause.
First, Plaintiff cites another line of cases that allow an
employee to recover the full amount of a vested bonus under a
section 193 theory. (Gold Mem. 5.)
However, all but one of
those cases appear to assume, without deciding, that the
employee could recover the full bonus, and there is no
1
The genesis of this line of cases appears to be Monagle, which observes that
“Section 193 has nothing to do with failure to pay wages or severance
benefits, governing instead the specific subject of making deductions from
wages.” 2007 WL 766282, at *2. For this proposition, Monagle cites Kletter
v. Fleming, which found section 193 inapplicable because plaintiff had failed
to allege “any specific deduction.” Kletter, 32 A.D.3d 566, 567 (N.Y. App.
Div. 3d Dep’t 2006). As far the Court can tell, the case that Kletter cites
for its proposition has nothing to do with section 193. See Slotnick v. RBL
Agency Ltd., 271 A.D.2d 365, 365–66 (N.Y. App. Div. 1st Dep’t 2000).
Nevertheless, Monagle’s commonsense observation is supported by other
considerations, as discussed above.
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indication from any of the cases that the parties disputed
whether the withholding was specific enough to be considered a
“deduction.”
Indeed, those cases explicitly frame their
analysis as interpreting the definition of “wages,” not
deduction. See, e.g., Cloke-Browne v. Bank of Tokyo-Mitsubishi
UFJ, Ltd., No. 10 Civ. 2249, 2011 WL 666187, at *6-7 (S.D.N.Y.
Feb. 9, 2011) (“Plaintiff thus argues that his guaranteed bonus
compensation qualifies as ‘wages’ under New York Labor Law and
that, as such, Defendants cannot withhold those payments for
work done in 2008.”); Econn v. Barclays Bank PLC, No. 07 Civ.
2440, 2010 WL 9008868, at *4 (S.D.N.Y. June 10, 2010)
(“Defendants contend that the performance bonus falls outside
the definition of ‘wages’ according to the holding in Truelove
v. Northeast Capital & Advisory Inc.”); Farricker v. Penson
Dev., Inc., No. 07 Civ. 11191, 2009 WL 860239, at *7-8 (S.D.N.Y.
Mar. 31, 2009) (“The Amended Complaint alleges that the
Participation Payments for certain Deals completed during
Plaintiff’s employment constitute ‘wages’ within the meaning of
Labor Law § 190(1).”); Falk v. FFF Indus., Inc., 731 F. Supp.
134, 143 (S.D.N.Y. 1990) (“Accordingly, the Court finds that
wages for the purpose of §§ 193 and 198 includes salary and
other benefits.”); Ryan v. Kellogg Partners Inst. Servs., 19
N.Y.3d 1, 16 (2012) (“Since Ryan’s bonus therefore constitutes
‘wages’ within the meaning of Labor Law § 190(1), Kellogg’s
8
neglect to pay him the bonus violated Labor Law § 193 and
entitles Ryan to an award of attorney’s fees under Labor Law §
198(1-a).” (citation omitted)); Wachter v. Kim, 82 A.D.3d 658,
663 (N.Y. App. Div. 1st Dep’t 2011) (“Accordingly, such
compensation is “wages” that are protected by Labor Law § 193(1)
and § 198 . . . .”).
Plaintiff points to no case law, and the Court found none
on its own, interpreting these cases as resolving the issue of
what counts as a “deduction” in favor of Plaintiff’s
construction.
At least one court considered the reasoning in
one of Plaintiff’s cited cases, Wachter, and specifically
declined to extend it based on the majority view in this
circuit. See Malinowski, 2012 WL 279450, at *3 n.5.
The Court will, however, briefly distinguish Ryan because
it is a case from the New York Court of Appeals.
Although Ryan
includes broad language suggesting that Gold’s reading may be
correct, it is clear from its discussion of Truelove v. North
East Capital & Advisory Inc., 95 N.Y.2d 220 (2000), that the
Ryan court was, like Gold’s other cases, primarily focused on
the definition of “wages.” Ryan, at 19 N.Y.3d at 15-16.
In
Truelove, the New York Court of Appeals held that bonuses that
amounted to “[d]iscretionary additional remuneration, as a share
in a reward to all employees for the success of the employer’s
entrepreneurship,” did not constitute wages for purposes of
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Article 6. 95 N.Y.2d at 224.
In distinguishing Truelove, the
Ryan court held that the employee’s bonus was “guaranteed and
non-discretionary” and had been “earned and vested” before the
employee left his job. Ryan, 19 N.Y.3d at 16.
The court did not
squarely address what qualifies as a deduction, and therefore is
not particularly helpful here.
This Court’s other concern is that the statute is plausibly
susceptible to a broader interpretation.
It prohibits “any
deduction,” which could mean that an employer cannot withhold or
deduct any amount for any reason.
That would include an
employer withholding the entire amount of a salary because it
contends, as here, that it fired an employee for good cause.
The New York Court of Appeals lends at least some support to
this broad reading by defining “deduction” as “an act of taking
away or subtraction” without making reference to specific
instances of docking an employee’s pay. Angello v. Labor Ready,
Inc., 7 N.Y.3d 579, 584 (2006).
But there are strong reasons to reject this broad reading
of the statute.
First, the purpose of Article 6 is “to
strengthen and clarify the rights of employees to the payment of
wages,” id. at 583–84 (internal quotation marks omitted), and a
breach of contract action already sufficiently protects an
employee’s rights to his total earned wages and does not need
further reinforcement.
The other sections of Article 6
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“strengthen and clarify” the employee’s right to wages by
setting the frequency of payments, see § 191, and protecting,
inter alia, benefits and wage supplements, see § 198-c;
gratuities, see § 196-d; and sales commissions, see § 191-c.
These would not necessarily be protected in a bread-and-butter
breach of contract claim and therefore benefit from
fortification by statute.
Plaintiff’s reading of the statute
would simply make any employee’s common-law breach of contract
claim also actionable under section 193.
Second, the New York Court of Appeals has rejected a
reading of section 198 that includes recovery for a common-law
contract claim. See Gottlieb, 82 N.Y.2d at 464–65.
Part of the
reasoning was that such a recovery would lead to a “windfall”
for employees. See id at 465.
It is true that in Gottlieb the
employee raised no section 193 claim, or any other Article 6
claim for that matter. See id. at 460.
But a plaintiff that
raises a section 193 claim that wholly duplicates his common-law
breach of contract claim would receive the same type of windfall
that the Court of Appeals cautioned against.
Third, New York courts recognize that the purpose of
section 193 is to “place the risk of loss for such things as
damaged or spoiled merchandise on the employer rather than the
employee.” Hudacs v. Frito-Lay, Inc., 90 N.Y.2d 342, 349 (1997).
This demonstrates that the “deductions” are better understood
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as, and limited to, things like fines, payments, or other forms
of pay docking.
The list of authorized deductions in section
193 itself offers further support for that reading, as each
permissible deduction is for a discrete purpose such as payment
for insurance premiums, gym membership, tuition, and day care.
See
193 (b) (i)- (xiv).
§
These exceptions suggest that a
"deduction" is more targeted and direct than the wholesale
withholding at issue here.
With these considerations in mind, the Court rejects Gold's
broad reading of "any deduction" in section 193.
Based on these
considerations, this Court joins the other courts in this
circuit that have concluded that a section 193 claim requires
plaintiff to allege a specific withholding of wages.
III. Conclusion
For the foregoing reasons, Defendant's motion dismiss
Plaintiff's second claim is granted.
SO ORDERED.
Dated:
New York, New York
August 13, 2015
~?-[{.~
C
~JOHN
KEENAN
United States District Judge
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