Xue et al v. Koenig et al

Filing 78

OPINION & ORDER re: 73 MOTION to Dismiss . filed by Feng Xue, Calculus Trading Technology LLC, 49 MOTION to Dismiss for Lack of Jurisdiction . filed by Stewart Koenig, Prime Consulting International LLC. Defendants& #039; motions to dismiss Plaintiff's FLSA claims for lack of subject matter jurisdiction and for summary judgment are DENIED. Plaintiffs' motion for judgment on the pleadings with respect to Defendants' Amended Counterclaims are GRAN TED. Specifically, all Defendants' Counterclaims predicated upon the Noncompetition Agreement, or "Non-Compete," have already been dismissed with prejudice by this Court's Opinion and Order dated March 22, 2021. (ECF No. 66.) Al l Defendants' Counterclaims predicated upon the Indemnification Agreement, or "Indemnity Agreement," are hereby dismissed with prejudice. Defendants' remaining Counterclaims, to the extent they are predicated upon the Consultin g Agreement, are dismissed without prejudice. The Clerk of Court is respectfully directed to terminate the motions at ECF Nos. 49 and 73. The parties are directed to notify Judge Krause of this Opinion and contact Judge Krause's chambers to schedule a conference. SO ORDERED. (Signed by Judge Nelson Stephen Roman on 9/15/22) (yv)

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
FENG XUE; and CALCULUS TRADING
TECHNOLOGY, LLC,
Plaintiffs,

9/15/2022

-against-

No. 19 Civ. 07630 (NSR)
OPINION & ORDER

STEWART KOENIG; and PRIME CONSULTING
INTERNATIONAL, LLC,
Defendants.
NELSON S. ROMÁN, United States District Judge:
Plaintiffs Feng Xue (“Xue”) and Calculus Trading, LLC (“Calculus”) (collectively,
“Plaintiffs”) initiated this action against Defendants Stewart Koenig (“Koenig”) and Prime
Consulting International, LLC (“PCI”) (collectively, “Defendants”), asserting wage-related claims
under the Fair Labor Standards Act (FLSA) and state labor laws. (Complaint, “Compl.,” ECF No.
1.) Defendants answered by affirmative defenses and counterclaims sounding in tort and contract
law. (ECF No. 9.)
Presently before the Court are (1) Defendants’ motions to dismiss Plaintiff’s FLSA claims
for lack of subject matter jurisdiction and for summary judgment, respectively under Federal Rules
of Civil Procedure 12(b)(1) and 56 (ECF Nos. 49-57); and (2) Plaintiffs’ motion to dismiss
Defendants’ amended counterclaims (ECF Nos. 72-76).
For the following reasons, Defendants’ motions to dismiss Plaintiff’s FLSA claims for lack
of subject matter jurisdiction and for summary judgment are DENIED. Plaintiffs’ motion to
dismiss Defendants’ amended counterclaims is GRANTED.

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BACKGROUND
I.

The Wage Dispute1

At the center of this action is a wage dispute between Xue and Koenig. Xue is a software
engineer and a resident of New Jersey. Koenig is a resident of New York and controls PCI, a New
York staffing agency. (Compl., ECF No. 1.)
As a staffing agency, PCI specializes in “recruiting and placing information technology
experts in the financial services industry.” (Def Mot. at 7.) PCI itself does not provide the services
provided by the professionals it recruits and places with its clients. (Id. at 7.) PCI submits that its
clients “are in various areas of the financial services and technology industries and have a wide
variety of staffing needs.” (Id. at 7.) PCI’s past clients include “PR Newswire,” “Starwood Resorts
and Hotels,” “Direct Markets, LLC,” “Caxton Associates,” “JPMorgan Chase,” “Citigroup,” and
“Maverick Capital.” (Id.)
In 2005, non-party Bank of New York Mellon Securities Group 2 (“BNY” or “BNYCowen”), a securities trading firm, approached PCI about hiring an information technology (“IT”)
specialist for BNY’s office in Iselin, New Jersey. (Koenig Declaration, “Koenig Decl.,” ¶ 24, ECF
No. 50.) Meanwhile, Xue posted his resume on an employment website, through which PCI
contacted and interviewed Xue. (Xue Affirmation ¶ 6.) Following the interview, PCI hired Xue
for the BNY position. (Koenig Decl. ¶¶ 24-25.)
PCI then proceeded to make two logistical arrangements with Xue regarding his
employment with BNY, respectively referred to by the parties as (1) “Try and Buy” (Koenig Decl.
¶ 25); and (2) “corp. to corp.” (Xue Affirmation ¶ 9). “Try and Buy” describes an arrangement

1

The facts in this section are undisputed unless otherwise indicated.
BNY merged with another financial service firm, ConvergEx Group LLC, in 2007. The merged firm was
subsequently acquired by a different financial service firm, Cowen, in 2017. Throughout this series of mergers and
acquisitions, Xue remained employed with the resulting entity in the same capacity as software engineer.

2

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where Xue would first work for BNY-Cowen as an IT “consultant” on a temporary basis; if the
temporary employment “works out,” BNY-Cowen would then hire Xue on a full-time basis.
(Koenig Decl. ¶ 25.) “Corp. to corp” refers to Koenig’s suggestion that Xue set up his own limited
liability company (LLC) and conduct all transactions with PCI through this one-person LLC. (Xue
Affirmation ¶ 9.)
The “Try and Buy” arrangement was memorialized in an email from Koenig to Xue, dated
June 24, 2005. (Koenig June 24, 2005 email, ECF No. 50-7.) The “corp. to corp.” arrangement
was also mentioned therein. The email states, in relevant part:
As you [Xue] wish to be a full time employee of BNY and as BNY wishes to
employ you, you will participate in a “Try and Buy” arrangement that will be
facilitated by our company: [PCI]. During the 6 month “initial contract trial period”
of this Agreement you will be working at BNY as a Sub-contractor supplied
through PCI under the terms and conditions that follow. It is also understood that
during this initial contract trial period you will subcontract to our firm PCI which
will pay you as 1099 Employee, meaning that you will be liable for all your own
taxes, benefits and expenses. It is also understood that during this initial contract
trial period you may at your elect to assign this agreement with the same rights and
conditions to your own Limited Liability Company.
(Id, ECF No. 50-7.) Koenig’s email further stated that Xue would (1) report to and under the
direction of BNY-Cowen’s designated manager; and (2) be paid at a rate of $55 per hour by PCI.
Specifically, Xue was required to keep track of the hours he worked and submit a weekly report
to PCI: “[a]s agreed [,] payments to you are tied to PCI’s receiving payments from BNY[-Cowen].”
(Id.)
Xue responded on the same day, confirming that he would start on July 5, 2005 at BNYCowen’s Iselin, New Jersey office. (Id.) As suggested by Koenig, Xue set up an LLC, the Calculus
Trading Technology (“Calculus”), to serve as the vehicle through which Xue rendered his service
to BNY-Cowen and received payments from PCI. (Xue Affirmation ¶¶ 9-11.) Xue assigned to

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Calculus the ownership of the title and copyrights to the software he developed for BNY-Cowen.
(Id.)
From June 2005 to December 2017, Xue worked full-time as a software engineer for BNYCowen at Cowen’s facility. (Def. Mot. at 5, ECF No. 52; Xue Affirmation ¶¶ 25-26.) Throughout
this nearly thirteen-year period, BNY-Cowen’s payments for Xue’s service always flowed through
PCI: Xue, through Calculus, invoiced and received payments from PCI regularly on an hourly
basis. (Def. Mot. at 10-11; Xue Affirmation ¶ 19.) An email dated July 29, 20163 from Koenig to
Xue indicates that PCI was able to independently raise Xue’s hourly rate “without any help from
[BNY-Cowen] on a rate increase.” (Xue Affirmation Ex. C, ECF No. 53.) The record contains no
information as to the payment arrangement between PCI and BNY-Cowen regarding Xue’s
services.
In December 2017, the Calculus-PCI, or rather, the Xue-Koenig relationship, came to an
end. (Def. mem. at 10-11; Xue Affirmation ¶ 29.) Xue submits as exhibit an email from Koenig to
BNY-Cowen personnel, dated January 17, 2018, which indicates that (1) BNY-Cowen “would like
to hire Xue on a full time basis” and no longer through PCI as the intermediary; and (2) Koenig
sought compensation from BNY-Cowen “for . . . the costs [PCI] will incur as a result of Cowen
hiring away one of [PCI’s] consultants[, Xue].” (Xue Affirmation Exhibit A, ECF No. 53.)
Koenig’s email further provides, in pertinent part:
As I also explained we have a noncompete agreement with Steve that prohibits him
from accepting offers of direct employment from our client(s). In order to facilitate
his move to Cowen we will need to release him from that agreement. Again we are
happy to do so provided we receive a placement fee as compensation. The

3

The email states, in relevant part: “Hi Steve, I am not getting any help from [BNY-Cowen] on a rate increase.
However, I do want to try and help as much as I can. I know you said your health care went up $6000/year and you
want an increase as well. Accordingly I would like to increase you [sic] rate to $106/hour effective 8/1/2016. . . This
equates to an increase of roughly $12,000/year. That is based on an [sic] 168 hours/month but you typically put in
more time than that so it will actually be more . . .” (Xue Affirmation Ex. C, ECF No. 53.)

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calculation for the placement fee should be equal to 20% of Steve’s his [sic] annual
base salary as agreed with Cowen.
(Xue Affirmation Exhibit A.) While BNY-Cowen had paid PCI in full for Xue’s services during
the last three months of 2017, PCI admits that it did not render these payments to Xue. (Stipulation,
ECF No. 50-14; Koenig Affirmation ¶ 52, ECF No. 50.) The parties further dispute the amount of
the payments owed to Xue (“the Disputed Amount”). (Stipulation, ECF No. 50-14.) Xue claims
that the amount owed to him is $65,549. (Compl. at 2.) Koenig claims that the Disputed Amount
is $30,011. (Koenig Affirmation ¶ 53.) From these withheld wages arose the instant action.
II.

Contractual Counterclaims

On August 15, 2019, Plaintiffs Calculus and Xue commenced the instant action. (ECF No.
1.) On October 25, 2019, PCI and Koenig answered by filing of affirmative defenses and
counterclaims sounding in tort and contract law. (“Counterclaims”, ECF No. 9.) Defendants PCI
and Koenig asserted in their counterclaims that Plaintiffs breached three out of the four contracts
the parties entered throughout their 2005-2017 relationship, by either (1) initiating FLSA claims
in this action; or (2) leveraging the specter of FLSA violations to take one of Defendants’ clients,
namely BNY-Cowen. (Id.)
The three underlying contracts, in chronological order, are: (1) a Noncompetition
Agreement dated June 25, 2005 (“NA,” Counterclaims ¶ 49; Pl. 12(c) Mem. at 8, ECF No. 74);
(2) a Consulting Agreement dated July 1, 2009 (“CA,” Counterclaims ¶ 39; Pl. 12(c) Mem. at 9);
and (3) an Indemnification Agreement dated December 23, 2009 (“IA,” Counterclaims ¶ 29; Pl.
12(c) Mem. at 9). On June 1, 2020, Plaintiffs moved for partial judgment on the pleadings, seeking
to dismiss Defendants’ breach of contract and declaratory judgment claims pursuant to Rule 12(c).
(ECF No. 34.)

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By Opinion and Order dated March 22, 2021, this Court granted in part and denied in part
Plaintiffs’ motion for judgment on the pleadings. (“O&O,” ECF No. 66.) Specifically, the Court
(1) dismissed Defendants’ claims under NA with prejudice after finding NA to be unenforceable
(O&O at 17); (2) dismissed Defendants’ claims under CA without prejudice due to the express
terms’ expiration, and granted Defendants leave to plead additional details regarding an impliedin-fact agreement (O&O at 19-20); and (3) reserved determination on Defendants’ IA claims,
because such determination was premature and turned on whether Defendants were Xue’s
employer for FLSA purposes (O&O at 11).
On April 8, 2021, Defendants filed their Amended Counterclaims alleging an implied-infact progeny to the expired express CA (ECF No. 67), to which Plaintiffs responded on April 28,
2021 (ECF No. 68.) On June 29, 2021, Plaintiffs submitted a letter motion requesting a premotion
conference for a Rule 12(c) motion to dismiss Defendants’ Amended Counterclaims (ECF No.
69), to which Defendants objected by letter motion on June 30, 2021 (ECF No. 70). By order dated
on June 30, 2021, this Court denied in part and granted in part Plaintiffs’ requests. (ECF No. 71.)
Specifically, Plaintiff’s request for leave to file a motion for partial summary judgment was denied
without prejudice to renew at the end of discovery. (Id.) Plaintiff was granted leave to file a motion
to dismiss: (1) claims relating to the CA; and (2) Defendants’ promissory estoppel and tortious
interference claims. (Id. at 2.) In accordance with the June 30, 2021 order, the parties filed their
papers on September 14, 2021: Plaintiffs their motion to dismiss the Amended Counterclaims
(ECF Nos. 73-74), and Defendants their opposition and reply papers (ECF Nos. 72, 75-76).
LEGAL STANDARD
A. Rule 12(b)(1)

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A court properly dismisses a claim for lack of subject matter jurisdiction under Rule
12(b)(1) when it “lacks the statutory or constitutional power to adjudicate it, such as when ... the
plaintiff lacks constitutional standing to bring the action.” Cortlandt St. Recovery Corp. v. Hellas
Telecomms., 790 F.3d 411, 416-17 (2d Cir. 2015) (citations and quotation marks omitted). “[T]he
‘irreducible constitutional minimum’ of standing” requires that the plaintiff have “(1) suffered an
injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is
likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540,
1547 (2016) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)).
“The plaintiff, as the party invoking federal jurisdiction, bears the burden of establishing”
each element of constitutional standing. Id. (citations omitted). Because “the elements of Article
III standing are not mere pleading requirements but rather an indispensable part of the plaintiff's
case, each element must be supported ... with the manner and degree of evidence required at the
successive stages of the litigation.” Carter v. HealthPort Techs., LLC, 822 F.3d 47, 56 (2d Cir.
2016) (citations omitted). “At the pleading stage, general factual allegations of injury resulting
from the defendant’s conduct may suffice, for on a motion to dismiss we presum[e] that general
allegations embrace those specific facts that are necessary to support the claim.” Lujan, 504 U.S.
at 561.
“A Rule 12(b)(1) motion challenging subject matter jurisdiction may be either facial or
fact-based.” Id. Such a motion is facial when it is “based solely on the allegations of the complaint
or the complaint and exhibits attached to it.” Id. In such cases, at the pleading stage, “the plaintiff
has no evidentiary burden,” id., and the court accepts as true “all material allegations of the
complaint and construe[s] the complaint in favor of the complaining party.” Cortlandt Street, 790
F.3d at 417 (citations, quotation marks, and alterations omitted).

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B. Rule 12(c)
Under Federal Rule of Civil Procedure 12(c), “[a]fter the pleadings are closed—but early
enough not to delay trial—a party may move for judgment on the pleadings.” Fed. R. Civ. P. 12(c).
“To survive a Rule 12(c) motion, the complaint must contain sufficient factual matter to ‘state a
claim to relief that is plausible on its face.” Graziano v. Pataki, 689 F.3d 110, 114 (2d Cir.2012)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The standard for analyzing a
motion for judgment on the pleadings under Rule 12(c) is identical to the standard for a motion to
dismiss for failure to state a claim under Rule 12(b)(6). Cleveland v. Caplaw Enters., 448 F.3d
518, 521 (2d Cir.2006); see also Fed. R. Civ. P. 12(b)(6).
In ruling on a motion to dismiss, a “court may consider the facts as asserted within the four
corners of the complaint together with the documents attached to the complaint as exhibits, and
any documents incorporated in the complaint by reference.” Peter F. Gaito Architecture, LLC v.
Simone Dev. Corp., 602 F.3d 57, 64 (2d Cir.2010) (internal quotation and citation omitted). Courts
may also consider “matters of which judicial notice may be taken” and “documents either in
plaintiffs’ possession or of which plaintiffs had knowledge and relied on in bringing suit.” Brass
v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir.1993).
C. Rule 56
A “court shall grant summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). The moving party bears the initial burden of pointing to evidence in the record,
“including depositions, documents [and] affidavits or declarations,” id. at 56(c)(1)(A), “which it
believes demonstrate[s] the absence of a genuine issue of material fact.” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). The moving party may also support an assertion that there is

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no genuine dispute by “showing . . . that [the] adverse party cannot produce admissible evidence
[in] support” of such a contention. Fed. R. Civ. P. 56(c)(1)(B). If the moving party fulfills its
preliminary burden, the onus shifts to the non-moving party to identify “specific facts showing
that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)
(internal citation and quotation marks omitted).
A genuine dispute of material fact exists when “the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.” Id. at 248; accord Benn v. Kissane, 510 Fed.
Appx. 34, 36 (2d Cir. 2013) (summ. order). Courts must “constru[e] the evidence in the light most
favorable to the non-moving party and draw[ ] all reasonable inferences in its favor.” Fincher v.
Depository Trust & Clearing Corp., 604 F.3d 712, 720 (2d Cir. 2010) (internal quotation marks
omitted). The party asserting that a fact is genuinely disputed must support their assertion by
“citing to particular parts of materials in the record” or “showing that the materials cited do not
establish the absence ... of a genuine dispute.” Fed. R. Civ. P. 56(c)(1). “Statements that are devoid
of any specifics, but replete with conclusions, are insufficient to defeat a properly supported
motion for summary judgment.” Bickerstaff v. Vassar Coll., 196 F.3d 435, 452 (2d Cir. 1999). In
reviewing the record, “the judge’s function is not himself to weigh the evidence and determine the
truth of the matter,” nor is it to determine a witness’s credibility. Anderson, 477 U.S. at 249.
Rather, “[t]he inquiry performed is the threshold inquiry of determining whether there is the need
for a trial.” Id. at 250.
DISCUSSION
I.

FLSA Employee Status

Defendants aver that no employment relationship existed between Xue and PCI, and
instead characterize Xue as an independent contractor. Plaintiffs maintain that Xue was a

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“statutory employee” of PCI “as a matter of economic reality.” (Pl. Opp. Mem., ECF No. 55.)
Having now closely reviewed the parties’ Rule 56.1 statements, accompanying exhibits and
affidavits, and arguments,4 the Court concludes that Xue and Calculus have produced sufficient
evidence to demonstrate that Xue was an employee of PCI within the meaning of FLSA.
The FLSA defines “employee” as “any individual employed by an employer.” 29 U.S.C. §
203(e)(1). It further provides that an entity “employs” an individual under the FLSA if it “suffer[s]
or permit[s]” that individual to work. 29 U.S.C. § 203(g). An entity “suffers or permits” an
individual to work if, as a matter of “economic reality,” the entity functions as the individual’s
employer. Zheng v. Liberty Apparel Co. Inc., 355 F.3d 61, 66 (2d Cir. 2003) (internal citations
omitted). The FLSA definition of “employee” is so expansive as to have been deemed “the
broadest definition that has ever been included in any one act.” Zheng, F.3d at 69 (citing United
States v. Rosenwasser, 323 U.S. 360, 363 n. 3 (1945) (quoting 81 Cong. Rec. 7657 (1937)
(statement of Sen. Hugo L. Black)). FLSA employment encompasses “working relationships,
which prior to [the FLSA], were not deemed to fall within an employer-employee category.” Id at
69 (citing Walling v. Portland Terminal Co., 330 U.S. 148, 150–51 (1947)).
The Second Circuit applies two different tests to determine whether an employment
relationship exists under the FLSA: the joint employer test5, and the Superior Care test. Franze v.
Bimbo Bakeries USA, Inc., 826 F. App’x 74, 80 (2d Cir. 2020) (citing Zheng, 355 F.3d 61.) Only
the Superior Care test is applicable in the instant case. Crafted by the Second Circuit in Brock v.

4

This Court previously indicated in the June 30, 2021 memorandum endorsement (ECF No. 71) that it “does not have
an adequate record [to make the FLSA determination]” when it was still in the process of reviewing the record.
5
The joint employer test applies when “when it is undisputed that the worker is already employed by one entity, but
there is a question over whether that worker is also employed by the putative employer.” Id. at 80 (citing Zheng, 355
F.3d at 67 & n.2) While Plaintiffs characterize PCI and non-party BNY-Cowen as Xue’s joint employers, the parties
do not raise a joint employer argument in their briefing for purpose of the instant motion. Accordingly, the Court
applies the Superior Care test only.

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Superior Care, Inc, 840 F.2d 1054 (2d Cir. 1988), the Superior Care test determines if “particular
workers” are independent contractors and thus, by definition, “independent of all employers.” Id.
Under the Superior Care test, five enumerated factors “bear on whether workers are
employees or independent contractors: (1) the degree of control exercised by the employer over
the workers (“control”), (2) the workers’ opportunity for profit or loss and their investment in the
business (“investment”), (3) the degree of skill and independent initiative required to perform the
work (“skill”), (4) the permanence or duration of the working relationship (“permanence”), and
(5) the extent to which the work is an integral part of the employer’s business
(“integration”).” Franze v. Bimbo Bakeries USA, Inc., 826 F. App’x at 76 (citing Brock v. Superior
Care, Inc, 840 F.2d at 1058–59). The existence and degree of each factor is a question of fact.
Brock v. Superior Care, Inc., 840 F.2d at 1059. The legal conclusion to be drawn from those
facts—whether workers are employees or independent contractors—is a question of law. Id. at
1059. The “ultimate concern” behind these factors is “whether, as a matter of economic reality,
the workers depend upon someone else’s business for the opportunity to render service or are in
business for themselves.” Franze v. Bimbo Bakeries USA, Inc., 826 F. App’x at 76.
Guided by Brock v. Superior Care, which also involves a staffing agency, the Court applies
the five factors in turn and finds that the economic reality weighs in Plaintiffs’ favor. With respect
to the first Superior Care factor, control, the communication between Xue and Koenig makes clear
that (1) PCI dictated Xue’s initial hourly wage (Koenig June 24, 2005 email, ECF No. 50-7); (2)
PCI set the terms of Xue’s initial six-month “try” period (id.); (3) PCI required Xue to submit to
PCI weekly hour report and Xue continued to do so over the course of the parties’ relationship
(id.; Xue Affirmation Ex. C, ECF No. 53); and (4) PCI retained its ability to unilaterally raise
Xue’s hourly wage in 2016, towards the end of the parties’ relationship (Koenig July 29, 2016

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email, Xue Affirmation Ex. C, ECF No. 53). While the parties concede that Xue never worked at
PCI’s site or under PCI’s supervision, “[a]n employer does not need to look over his workers’
shoulders every day in order to exercise control.” Brock, 840 F.2d at 1060. In the instant case, the
record demonstrated a substantial degree of control over the terms and compensation of Xue’s
employment by PCI.
The second Superior Care factor, investment, inquires whether Xue was so heavily
invested in Calculus that he was “in business for [himself].” Brock, 840 F.2d at 1059. The record
indicates that Xue invested but “labor itself” 6 in Calculus, a finding that PCI provides no
information to refute.7 Accordingly, the investment factor also weighs in Plaintiffs’ favor.
As in Brock v. Superior Care, the third factor, Xue’s skill, does not tip the balance in PCI’s
favor. Brock, 840 F.2d at 1060. Comparable to the nurses in Brock, software engineers such as
Xue are skilled workers of specialized training, and yet nothing in the record indicates Xue “used
these skills in any independent way.” Id. at 1060. Instead, Xue worked full-time and exclusively
through PCI. See id. at 1060 (“[T]he fact that workers are skilled is not itself indicative of
independent contractor status. A variety of skilled workers who do not exercise significant
initiative in locating work opportunities have been held to be employees under the FLSA.”) (citing
as example Robicheaux v. Radcliff Material, Inc., 697 F.2d 662, 666–67 (5th Cir.1983); Walling
v. Twyeffort, Inc., 158 F.2d 944 (2d Cir.), cert. denied, 331 U.S. 851, 67 S. Ct. 1727, 91 L.Ed. 1859
(1947) (tailors); cf. Donovan v. DialAmerica Marketing, Inc., supra, 757 F.2d at 1387 (where

6

Saleem v. Corp. Transportation Grp., Ltd., 854 F.3d 131, 144 (2d Cir. 2017) (“In the economic reality test, large
capital expenditures—as opposed to “negligible items, or labor itself”—are highly relevant to determining whether
an individual is an employee or an independent contractor.”) (citing and quoting Dole v. Snell, 875 F.2d 802, 810
(10th Cir. 1989)).
7
Koenig and PCI redacted the entire section on this factor in its submissions. (ECF Nos 52, 56.)

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distributors in home research business exercised “business-like initiative,” in recruiting new home
researchers, skill factor weighed in favor of independent contractor status).
The fourth factor, permanence, weighs heavily in Xue’s favor. From June 2005 to
December 2017, the relationship between Plaintiffs and Defendants lasted 150 months, or
approximately 12.5 years. (Koenig Decl., ECF No. 50; Xue Affirmation, ECF No. 53.) This length
far exceeds that of the relationships found to be FLSA employment in Brock, 840 F.2d 1054, and
Zheng, 355 F.3d 61.
As to the fifth factor, integration, this Court follows the Brock Court and agrees with
Plaintiffs: “the services rendered by [Xue] constituted the most integral part of [PCI’s] business,
which is to provide [IT experts] on request.” Brock, 840 F.2d at 1059.
To address the ultimate concern behind the afore-analyzed five factors, Xue depended on
PCI to render services for BNY-Cowen from June 2005 to December 2017 as a matter of economic
reality. For twelve and a half year, PCI essentially “suffer[ed] and permit[ted]” Xue to work, for
BNY-Cowen, but only through PCI. 29 U.S.C. § 203(g). It is also clear from the record that PCI
derived substantial economic benefit from Xue’s services to such an extent that PCI attempted to
extract from BNY-Cowen its anticipated loss from BNY-Cowen “hiring away” Xue. (Xue
Affirmation Exhibit A, ECF No. 53.) Defendants’ emphasis on the parties’ references to Xue as
“contractor,” “subcontractor,” and “consultants” is misplaced. The FLSA broadly defines
employee to serve its remedial purpose, see United States v. Rosenwasser, 323 U.S. at 360, and
justice will be ill-served if parties are permitted to label themselves out of the statute’s reach.
Since the totality of circumstances reveals an employment relationship existed between
Plaintiffs and Defendants within the meaning of FLSA, this Court has subject matter jurisdiction

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over Plaintiffs’ claims. See 28 U.S.C. § 1331. Further, because Defendants were Xue’s FLSA
employer, the Indemnification Agreement (IA) is void as against public policy.8
Accordingly, Defendants’ motions for summary judgment and to dismiss for lack of subject
matter jurisdiction are denied. In accordance with this Court’s March 22, 2021 Opinion and Order,
Defendants’ IA claims are hereby dismissed with prejudice.
II.

Consulting Agreement

This Court’s March 22, 2021 Opinion granted Defendants leave to re-plead an implied-infact Consulting Agreement (CA). Presently before the Court are Defendants’ Amended
Counterclaims (“AC,” ECF No. 67) and Plaintiffs’ Rule 12(c) motion to dismiss the AC (ECF
Nos. 73-74).
As a threshold matter, Defendants’ assertion that “[the] Indemnity Agreement, the
Consulting Agreement, and the Non-Compete were all valid agreements enforceable under New
York law” (AC ¶ 75) is clearly erroneous with respect to the “Indemnity Agreement” and the
“Non-compete.” First, the Non-compete, or NA, was already found to be unenforceable under the
Statute of Frauds. (O&O at 15-17). Defendants’ breach of contract and declaratory judgment
claims under the NA have been dismissed with prejudice and this Court will not consider any

8

In its March 22, 2021 Opinion & Order at 10-11, this Court reserved judgment on the IA pending the determination
of Plaintiffs’ FLSA employee status. This Court further states that if Defendants were determined to be Plaintiffs’
FLSA employer, “then the [IA] is void as against public policy pursuant to [the following authorities]”:
The Second Circuit has held that “[t]here is no right of contribution or indemnification for employers
found liable under the FLSA” because, among other things, “the text of the FLSA makes no
provision for contribution or indemnification” and “the statute was designed to regulate the conduct
of employers for the benefit of employees, and it cannot therefore be said that employers are
members of the class for whose benefit the FLSA was enacted.” Herman v. RSR Sec. Servs. Ltd.,
172 F.3d 132, 144 (2d Cir. 1999), holding modified by Zheng v. Liberty Apparel Co. Inc., 355 F.3d
61 (2d Cir. 2003). “Subsequent decisions in this circuit have followed Herman and extended its
reasoning to contractual indemnification claims[.]” Garcia v. Cloister Apt Corp., No. 16 CV 5542LTS, 2018 WL 1353274, at *2 (S.D.N.Y. Mar. 15, 2018); see also Goodman v. Port Auth. of N.Y.
and N.J., 850 F. Supp. 2d 363, 389 (S.D.N.Y. 2012) (granting motion to dismiss cross-claim for
contractual indemnification in FLSA case because permitting indemnification would circumvent
purposes of FLSA); Gustafson v. Bell Atlantic Corp., 171 F. Supp. 2d 311, 328 (S.D.N.Y. 2001).
(ECF No. 66.)

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further claims predicated upon the NA. (O&O at 15-17). Second, all claims under the “Indemnity
Agreement,” or IA, have now been dismissed with prejudice for reasons discussed in the preceding
Section I.
With respect to the CA, Defendants allege that “Calculus accepted and agreed to be bound
. . . by [the written CA]” (AC ¶ 77) and that the parties continued their dealings “as if [the CA]
were in full force and effect.” (AC ¶¶ 79-80.) Under New York law, the elements of
a breach of contract claim are the formation of an agreement, performance by one party, breach of
the agreement by the other party, and damages. First Investors Corp. v. Liberty Mut. Ins. Co., 152
F.3d 162, 168 (2d Cir.1998); see also Roberts v. Karimi, 251 F.3d 404, 407 (2d Cir. 2001) (stating
that “a plaintiff in a breach of contract case must prove . . . that an enforceable contract existed”).
After the expiration of an enforceable written contract, “the parties’ conduct . . . in accordance
with the terms of the written contract” can establish “a contract implied in fact with substantially
the same terms and conditions as embodied in the expired written contract.” Andrews v. Sotheby
Int’l Realty, Inc., No. 12 CIV. 8824 RA, 2014 WL 626968, at *8 (S.D.N.Y. Feb. 18,
2014), aff’d, 586 F. App’x 76 (2d Cir. 2014) (emphasis added) (citing Watts v. Columbia Artists
Mgmt. Inc., 188 A.D.2d 799, 591 N.Y.S.2d 234 (3rd Dep’t 1992)). A new contract cannot be
implied “if the circumstances create an inference that the parties did not intend to continue their
relationship on the same terms.” Andrews, 2014 WL 626968, at *8 (citing Millenium Expressions,
Inc. v. Chauss Mktg., Ltd., 02 Civ. 7545(JCF), 2007 WL 950070, at *6 (S.D.N.Y. Mar. 30, 2007)).
In the instant case, because the enforceability of the express CA is in dispute, it is
insufficient for Defendants to merely plead, as they did in the AC, “the parties’ conduct after
the expiration of [the CA].” Cf. Andrews, 2014 WL 626968, at *8. Even under Rule 8’s simplified
pleading standard, Defendants must still allege sufficient facts to establish that Plaintiffs

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manifested assent to the unsigned written CA prior to its expiration, and thus, that an enforceable
contract had existed on June 30, 2010. See Berman v. Sugo LLC, 580 F. Supp. 2d 191, 202
(S.D.N.Y. 2008); Banco Espirito Santo de Investimento, S.A. v. Citibank, N.A., No. 03 Civ. 1537,
2003 WL 23018888, at *4, *4–5 (S.D.N.Y. Dec. 22, 2003) (dismissing a breach of contract claim
where insufficient facts were alleged to show an oral agreement existed). Stated differently, as
alleged, no reasonable inference can be drawn as to an implied-in-fact agreement “with
substantially the same terms and conditions as embodied in [the written CA],” if the written CA
itself was never in effect in the first place. Id. at 8.
Accordingly, the Court grants Plaintiffs’ 12(c) motion and dismisses Defendants’
Amended Counterclaims without prejudice.

CONCLUSION
For the foregoing reasons, Defendants’ motions to dismiss Plaintiff’s FLSA claims for lack
of subject matter jurisdiction and for summary judgment are DENIED. Plaintiffs’ motion for
judgment on the pleadings with respect to Defendants’ Amended Counterclaims are GRANTED.
Specifically, all Defendants’ Counterclaims predicated upon the Noncompetition Agreement, or
“Non-Compete,” have already been dismissed with prejudice by this Court’s Opinion and Order
dated March 22, 2021. (ECF No. 66.) All Defendants’ Counterclaims predicated upon the
Indemnification Agreement, or “Indemnity Agreement,” are hereby dismissed with prejudice.
Defendants’ remaining Counterclaims, to the extent they are predicated upon the Consulting
Agreement, are dismissed without prejudice.

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The Clerk of Court is respectfully directed to terminate the motions at ECF Nos. 49 and
73. The parties are directed to notify Judge Krause of this Opinion and contact Judge Krause’s
chambers to schedule a conference.
Date: September 15, 2022
White Plains, NY

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