Opinion
No. 01 Civ. 7184 (LTS)(FM)
August 16, 2002
Leonard D. Steinman, Esq., BLANK ROME TENZER GREENBLATT, LLP, New York, New York; Attorneys for Defendant.
Elliot R. Polland, Esq., LIFSHUTZ, POLLAND HOFFMAN, P.C., New York, New York; Attorneys for Plaintiff.
OPINION AND ORDER
This diversity case arises from an employment contract dispute between Plaintiff John Needham, a citizen of the state of New Jersey, and Defendant Candie's, Inc., a corporation incorporated under Delaware law and having its principal place of business in New York State. Plaintiff brings this suit claiming, inter alia, that Defendant owes him six months' salary and benefits, amounting to $200,000, as severance pay pursuant to certain provisions of the contract regarding termination with "Good Reason." Defendant moves for summary judgment, contending that Plaintiff is not entitled to the severance pay because he breached the contract by terminating his employment without giving Defendant prior written notice and a reasonable chance to cure, as required by the employment agreement. Plaintiff asserts that he is entitled to recover notwithstanding any failure to provide the requisite notice and cure opportunity because providing notice and opportunity to cure would have been futile.
The Court has reviewed thoroughly all of the parties' submissions in connection with the motion. For the reasons set forth below, Defendant's motion for summary judgment is granted.
FACTS
The following facts are undisputed unless otherwise noted. On January 24, 2000, Defendant hired Plaintiff as Vice President of Finance pursuant to a written agreement of that date. Under the agreement, Plaintiff was to receive a yearly base salary of $170,000 as well as various benefits, including a discretionary bonus, health insurance, and benefits under a stock option plan. The employment contract provided that its initial one-year term would automatically extend for three-month intervals (thus effectively providing for a minimum three- month severance period) unless written notice to the contrary was provided on a three-month anniversary of June 24, 2000. (Letter Agreement dated as of January 24, 2000 ("Letter Agreement"), annexed as Ex. B to Def.'s Notice Mot. Summ. J.) Pursuant to paragraph 5(b) of the agreement, Plaintiff could terminate his employment at any time for "Good Reason," provided that he gave Defendant prior written notice of the basis for the proposed termination and a reasonable chance to cure. (Id. ¶ 5(b).) Upon such a termination, Plaintiff was to be entitled to six months' compensation, and all of his unveseted stock awards from Defendant's stock option plan would vest immediately. (Id. ¶ 6(b).) The Letter Agreement further provided that it was to be governed by New York law. (Id. ¶ 8(a).)
Paragraph 5(b) of the contract defines "Good Reason" to include, "(i) a breach by the Company of any of its payment obligations . . . (ii) relocation of the Company outside a 50 mile radius of New York City . . . (iii) a proposed material modification of your work duties or position as a senior financial executive." (Letter Agreement ¶ 5(b).)
This included Plaintiff's salary, bonus, car allowance, vacation, and continuation of all other benefits. (Letter Agreement ¶ 6(b).)
On September 22, 2000, Richard Danderline, Vice President of Finance and Operations for Defendant, met with Plaintiff. Danderline criticized Plaintiff's job performance and offered Plaintiff a "Vice President of Finance-Retail" position with reduced responsibilities, at a reduced base salary of $125,000. Plaintiff asserts that Danderline informed him that acceptance of the new position was the only way that Plaintiff could remain with the company. (Danderline Aff. ¶ 4; Needham Aff. ¶ 4.) Plaintiff met with Neil Cole, Defendant's President, on September 26, 2000. Cole reiterated the terms of the proposed new position and, according to Plaintiff, told Plaintiff that the reduction in salary was not negotiable. (Needham Aff. ¶ 4.) Defendant did not terminate Plaintiff's employment, change Plaintiff's title or reduce his compensation. (Danderline Aff. ¶ 5; Danderline Reply Aff. ¶¶ 3-4.) Under the parties' employment agreement, Defendant had the right to terminate the agreement by giving Plaintiff written notice on October 24, 2000 that it did not intend to continue his employment past January 24, 2001. (Danderline Aff. ¶ 4.) Defendant claims that, "by offering [Plaintiff] a different position, Candie's hoped that [Plaintiff] could remain as an employee and that it would not be necessary to terminate his services." (Id.)
After his meeting with Cole, Plaintiff chose to take some time off to consider the offer. (Needham Aff. ¶ 4; Danderline Aff. ¶ 5.) On October 2, 2000, Plaintiff sent a letter to Cole, stating in pertinent part that "I have decided to decline the position and terminate my employment for `Good Reason,' as stipulated in my employment agreement dated January 24, 2000." Consistent with his contention that the proposal of the new position justified Plaintiff's termination of his employment for "Good Reason," Plaintiff characterized Defendant's offer of the new position as a" 'proposed material modification' and `reduction'" of his duties. Plaintiff asserted in the letter that he was entitled to six months' continuation of salary and benefits, as well as vesting of all unvested options "on the date of termination." The letter did not demand rescission of the proposal to change Plaintiff's position or otherwise refer to the "cure" provision of the employment contract. (Def.'s Notice Mot. Summ. J., Ex. C.) Defendant made no further payments to Plaintiff. (Needham Aff. ¶ 4.)
Plaintiff seeks damages "in the amount of $200,000, representing six months' salary, benefits and the value of $75,000 stock options vested October 2, 2000," plus liquidated damages, pre-judgment interest and attorneys' fees. (Am. Compl., Prayer for Relief ¶¶ A-D.)
DISCUSSION
The Court has subject matter jurisdiction of this diversity action under 28 U.S.C. § 1332.
Summary Judgment Standard
Summary judgment "shall be rendered forthwith if the pleading, depositions... together with the affidavits . . . show that there is no genuine issue as to any material fact . . . and the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In deciding a summary judgment motion, a court should not resolve disputed issues of fact; rather, it must simply decide whether there is any genuine issue to be tried. Gallo v. Prudential Residential Services. Ltd., 22 F.3d 1219, 1224 (2d Cir. 1994); Eastman Mach. Co. v. United States, 841 F.2d 469, 473 (2d Cir. 1988). A genuine factual issue exists if there is sufficient evidence favoring the non-moving party such that a reasonable jury could return a verdict in her favor. Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 248-49 (1986); Holtz v. Rockefeller Co., Inc., 258 F.3d 62, 74 (2d Cir. 2001); Hill v. Taconic Dev. Disabilities Services Office, 181 F. Supp.2d 303, 316 (S.D.N.Y. 2002).
The moving party bears the initial burden of "informing the district court of the basis for its motion" and identifying the matter that "it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The substantive law governing the case will identify those facts which are material, and "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby. Inc., 477 U.S. at 248.
If the moving party meets its burden, the burden shifts to the non-moving party to come forward with "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); see also Legal Aid Society v. City of New York, 114 F. Supp.2d 204, 213 (S.D.N.Y. 2000). In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654 (1962)); Gallo, 22 F.3d at 1223. Plaintiff's Contract Claim
Where there is a condition precedent to performance, the party seeking to enforce the contractual obligation bears the burden of proving that the condition has been satisfied. The Rachmani Corp. v. 9 East 96th St. Apartment Corp., 211 A.D.2d 262, 269, 629 N.Y.S.2d 382, 386 (1st Dep't 1995). Defendant moves for summary judgment under Rule 56(b) of Federal Rules of Civil Procedure asserting that, given the undisputed facts, Plaintiff's failure to give prior notice and a reasonable chance to cure constituted a material breach that released Defendant from any further obligation. "Generally, `a party asserting nonperformance must afford a defaulting party any contractually-secured opportunity to cure prior to terminating a contract.'" Point Productions A.G. v. Sony Music Entertainment. Inc., 93 CIV 4001 (NRB), 2000 WL 1006236, *3 (S.D.N.Y. 2000) (quoting Karabu v. Pension Benefit Guaranty Corp., 96 CIV 4960 (BSJ); 1997 WL 759462, *8 (S.D.N.Y. 1997)); see also Filmline (Cross-Country Prods., Inc. v. United Artists Corp., 865 F.2d 513, 518 (2d Cir. 1989) (holding that defendant film company's contract termination was ineffective due to its failure to give contractually-secured opportunity to cure). "[U]nder New York Law, . . . where the agreement specifies conditions precedent to the right of cancellation, the conditions must be complied with." Bausch Lomb Inc. v. Bressler, 977 F.2d 720, 727 (2d Cir. 1992) (quoting Consumer Power Co. v. Nuclear Fuel Servs., Inc., 509 F. Supp. 201, 211 (W.D.N.Y. 1981)); see also Hanson v. Capital District Sports, Inc., 218 A.D.2d 909, 911, 630 N.Y.S.2d 429, 431 (3d Dep't 1995) (holding that, regardless of whether termination was for cause, it was ineffective because defendant employer failed to fulfill contractual condition precedent). Parties must adhere to contractually-secured cure provisions regarding contract termination when the cause for the termination is "the very situation to which the cure provision was intended to apply." Rebh v. Lake George Ventures, Inc., 233, A.D.2d 986, 987, 636 N.Y.S.2d 504, 505 (3d Dep't 1996).
Here, the employment contract clearly called for "prior written notice of the basis for the proposed termination and a reasonable chance to cure" as a condition precedent to any termination for Good Reason, including such termination by reason of "a proposed material modification or reduction of your duties or position as a senior financial executive." (Letter Agreement ¶ 5(b).) It is undisputed that Plaintiff failed to provide any notice of a "proposed termination" for "Good Reason" (rather, his October 2, 2000 letter notified Defendant that he had "decided . . . to terminate [his] employment for "Good Reason'"), much less a chance to cure the offending circumstances. Plaintiff argues that he should nonetheless be able to recover against Defendant because Defendant made no efforts to cure after receiving his termination letter. This argument has no basis in the contract or in law. The employment agreement required Plaintiff to give Defendant notice of the basis of a proposed Good Reason termination and an opportunity to cure that basis; Plaintiff failed to comply with this condition. As explained above, such a failure ordinarily would preclude the recovery of the damages sought here. Plaintiff claims, however, that he is nonetheless entitled to recover the benefits payable upon a termination for "Good Reason" because giving Defendant notice and a chance to cure would have been futile.
In limited circumstances, New York law permits a party to terminate a contract immediately, without affording the breaching party notice and opportunity to cure. See Wolff Munier, Inc. v. Whiting-Turner Contracting Co., 946 F.2d 1003, 1009 (2d Cir. 1991). Such circumstances include when the nonperforming party either expressly repudiates the parties' contract (Allbrand Disc. Liquors. Inc. v. Times Square Stores Corp., 60 A.D.2d 568, 568, 399 N.Y.S.2d 700, 701 (2d Dep't 1977)) or abandons performance thereof(Wolff Munier, Inc., 946 F.2d at 1009)., when the misfeasance is incurable (Delvecchio v. Bayside Chrysler Plymouth Jeep Eagle. Inc., 271 A.D.2d 636, 639, 706 N.Y.S.2d 724, 726 (2d Dep't 2000)), and when the cure is unfeasible, (Hicksville Mach. Works Corp. v. Eagle Precision, Inc., 222 A.D.2d 556, 557, 635 N.Y.S.2d 300, 302 (2d Dep't 1995)).
To constitute repudiation of a contract, a party's conduct must "indicate an unequivocal intent to forego performance of [its] obligations under the contract." Pitcher v. Benderson-Wainberg Assoc. II, Ltd. P'ship, 277 A.D.2d 586, 588; 715 N.Y.S.2d 104, 106 (3d Dep't 2000). Plaintiff argues that Defendant's offer, in conjunction with its purportedly nonnegotiable position, constituted a repudiation of the agreement, and that providing Defendant with notice and an opportunity to cure would, therefore, have been futile. Plaintiff's factual proffer, even constructed in the light most favorable to plaintiff does not support his position.
The undisputed facts show that Defendant continued to pay Plaintiff's then-current salary and benefits following its offer of the new position. Nor are the alleged statements regarding non-negotiability and the conditioning of continued employment on change of status indicative of an unequivocal intent on Defendant's part to forego performance of its obligations under the employment agreement. As noted above, that agreement provided Defendant with an opportunity, on specific dates at three-month intervals, to prevent automatic renewal of the contract. Such notice would effectively have triggered a three-month severance mechanism. Nothing in Plaintiff's account of the parties' communications and conduct indicates that Defendant had repudiated or rejected the available mechanisms for continuation and/or termination of the employment agreement. Cf. Allbrand Discount Liquors v. Times Square Stores, 60 A.D.2d at 568, 399 N.Y.S.2d at 700 (anticipatory breach and futility excusing failure to perform licensing condition precedent to commercial lease found where lessor had made it clear that lessee would not be permitted to take possession of premises absent renegotiation of lease).
Similarly, Plaintiff has proffered no factual or legal basis for concluding that Defendant abandoned the contract. The cases cited by Plaintiff involved factual situations distinguishable from those here. In Wolff Munier, Inc. v. Whiting-Turner Contracting Co., for example, the plaintiff subcontractor had reduced its manpower on the defendant's jobsite from 60 workers to, ultimately, four workers while also demanding that the defendant general contractor either pay additional charges or agree to expedited binding arbitration. Affirming a determination that "strict adherence to the Subcontract's two-day cure provision would have been a "useless act,'" the Court of Appeals held that, by stifling performance and refusing to resume until the defendant either increased the payments or submitted to arbitration, the plaintiff had abandoned the contract. Wolff Munier, Inc. v. Whiting-Turner Contracting Co., 946 F.2d at 1007. Here, Defendant's offer to Plaintiff was not inconsistent with the terms of the employment agreement, whose renewal and termination provisions included a provision permitting Defendant to terminate the contract without cause on three months' notice and a provision requiring prior notice and an opportunity to cure in the event Plaintiff wished to cite a proposed modification of the terms and conditions of his employment as "Good Reason" for termination and receive six months' severance.
Nor do the other decisions on which Plaintiff relies support his position that providing an opportunity to cure would have been futile under the circumstances of the case. In Delvecchio, the contract at issue did not provide for an opportunity to cure. As a result, and in light of the nature of the allegations underlying the employer's assertion in that case that the plaintiff employee had been terminated for cause, the court held that a termination notice provision of the contract at issue was not material. See Delvecchio v. Bayside Chrysler Plymouth Jeep Eagle, Inc., 271 A.D.2d at 639, 706 N.Y.S.2d at 726. Similarly, in Hicksville Machine Works Corp., the contract did not include a cure provision. Moreover, the contract at issue in that case concerned a sale of goods and was thus governed by the Uniform Commercial Code. Hicksville Machine Works Corp. v. Eagle Precision, Inc., 222 A.D.2d at 557, 635 N.Y.S.2d at 302. The instant case is not governed by the UCC, and the Needham-Candie's contract specifically provides for a notice to cure. Therefore, Hicksville Machine Works Copr. is inapposite.
There is no genuine issue of material fact as to whether Plaintiff's provision of notice of his proposed termination and opportunity to cure would have been futile. The undisputed facts establishing that Plaintiff failed to comply with a condition precedent to the relief he seeks in this action, Defendant is entitled to judgment in its favor as a matter of law on Plaintiff's cause of action for breach of contract.
Plaintiff's Claim for Liquidated Damages and Attorney's Fees
Pursuant to New York Labor Law, section 198, an employee is entitled to an additional 25% of the awarded wages as well as any reasonable attorneys fees, should the employee prevail in an action upon a wage claim. N.Y. Labor Law § 198(1-a) (McKinney 1986 and Supp. 2002). Leaving aside the question of whether a contractual recovery of severance benefits of the sort sought by Plaintiff constitutes a "wage claim" within the meaning of section 198, Plaintiff clearly is not a prevailing party in respect of his principal claim in this action. Accordingly, Defendant is entitled to judgment in its favor in respect of Plaintiff's Labor Law claim for liquidated damages and attorneys' fees.
CONCLUSION
For the foregoing reasons, Defendant's motion for summary judgment is granted in its entirety.
IT IS SO ORDERED.