United States District Court, S.D. New York
April 7, 2004.
DEUTSCHE ASSET MANAGEMENT, INC. Plaintiff,-against-JOHN P. CALLAGHAN, Defendant
The opinion of the court was delivered by: CONSTANCE MOTLEY, Senior District Judge
This is a breach of contract action in which the plaintiff, Deutsche
Asset Management, avers that defendant John Callaghan owes plaintiff
monies mistakenly paid to him in excess of his salary during his tenure
as plaintiffs employee. Defendant counterclaims on the grounds that
plaintiff actually underpaid him and breached his employment contract. At
issue before the court are plaintiffs motion for summary judgment on
defendant's counterclaims for severance compensation, liquidated damages,
fraud, unjust enrichment and defamation, and defendant's motion for
summary judgment on breach of contract, severance compensation, and
liquidated pages: For the reasons stated below, plaintiffs motion for summary
judgment is hereby GUARANTED and defendant's motion for summary
I. Factual Background
A. Plaintiff and defendant's 1997 and March 1999
Morgan Grenfell Capital Management (hereinafter "MGCM"), a subsidiary
of plaintiff Deutsche Asset Management, Inc. (hereinafter "plaintiff or
"DAM"), hired John P. Callaghan (hereinafter "defendant" or "Callaghan")
in 1997 to co-manage small cap investment portfolios.*fn1 Callaghan
became a member of the Small Cap Team, consisting of Callaghan, Audrey
Jones and Dave Baratta. Pursuant to his employment agreement, the Team
would receive 50% of the gross revenues "received by MGCM from the
management of portfolios for which the Small Cap Team was primarily
responsible." In any event, the contract guaranteed that Callaghan's
total compensation would not be less than $470,000 for 1997 or less than
$800,000 for 1998.
In March of 1999, Callaghan signed a new contract with MGCM that
adopted by incorporation the 50% compensation scheme from the 1997
B. Discussions as to whether Callaghan and the Team
would manage Bankers Trust portfolios
In June of 1999, plaintiff merged with Bankers Trust, raising the
question of who would manage the Bankers Trust portfolios. Prior to the
merger, the Small Cap Team had a meeting with Rich Marin, the head of the
merger, and Paul Higgins, Marin's "right-hand man." Callaghan Dep. at
104. At the meeting, the Team expressed interest in managing the Bankers
Trust portfolios. Id. at 104-105. Callaghan recalls Baratta telling Marin
that the Team's interest in taking over the portfolios was "based on the
understanding that we have a contract that calls for us to share in the
revenues," and, while Callaghan does not remember the precise nature of
his words, that Marin responded by stating something to the effect that
the Team would be paid based on the contract or the agreement.
Id. Callaghan also testified on his deposition that Marin never
stated that the Team would earn 50% of the gross revenues received from
the Bankers Trust assets during the meeting. Thereafter, Higgins told the
Team members that they should renegotiate their contract if they were to
manage the Bankers Trust portfolios. Id at 105-06. Callaghan understood Higgins to mean that "he would like to
renegotiate the contract at a lower percentage than the 50 percent we had
in our agreement." Id. at 106-108.
DAM representatives aver that it was their understanding as well as the
Team's that if the Small Cap Team were to take over the Banker's Trust
portfolios, the 50% compensation scheme spelled out in the 1999 contract
would not apply to revenues generated by the Banker's Trust assets.
Weinreich Dep. at 80-81; Grohowski Dep. at 88; Kausch Dep. at 145-46;
Weinrich Decl. ¶ 7. Josh Weinreich was the Co-Head of the Private
Bank of Bankers Trust immediately before the merger. After the merger, he
became Co-Head of the Americas for Deutsche Asset. Weinrich swears that
while he and the Small Cap Team discussed the possibility of the Team
managing the Bankers Trust's small cap assets, he told them that "under
no circumstances" would the Team be compensated pursuant to the 50%
compensation scheme that applied to the MGCM small cap portfolios and
that he would not transfer the Bankers' assets to the Team's management
if the 50% scheme applied. See Weinreich Decl. at 3.
C. Discussions regarding Team compensation in the face
of Baratta's departure and the Team's management of the
Bankers Trust portfolios
When the merger occurred thereafter in early June, the Team took over
management of Bankers Trust small cap assets. Callaghan Dep. at 118.
According to Callaghan, the parties had not reached an agreement as to
what compensation the Team would receive for doing so. Id. According to
Jeanne Kausch, DAM's head of Human Resources, Leo Grohowski, Callaghan's
direct supervisor and Regional Chief Investment Officer, and Weinreich,
DAM did not understand the 50% scheme to apply to the Bankers Trust
Assets. Callaghan Dep. at 86, Grohowski Dep. at 12, 88; Barr Dep. at 13,
Kausch Dep. at 145-46, 172-73, 196-99; Weinreich Dep. at 81-82;
Weinreich Decl. 5-7.
At approximately the same time as the merger in early June 1999,
Baratta resigned his position with DAM, thereby raising the question of
Jones' and Callaghan's compensation as the two remaining members of the
Small Cap Team. Pursuant to the terms of Callaghan's 1999 employment
contract (incorporating, by reference, the relevant provisions of the
1997 contract), with the departure of any Team member from the Team, "in
the event the Co-Managers of the team and MGCM cannot reach agreement on
the allocation of the aggregate compensation, the allocation shall be
determined by the Chairman of the Board of MGCM, whose determination will
be final." Callaghan Dep., Exhibit 7. Kausch testified that there was "a
debate about what to do when Baratta left" and there were "differences of
opinion as to what was called for." Kausch Dep. at 102. Specifically,
"[a]t the time David Baratta resigned in approximately June of 1999,
there was an issue as to whether the 1999 agreement between MGCM and the
Small Cap Team (defined as Baratta, Callaghan and Audrey Jones) required
that the remaining members of the Small Cap Team would split the share
left on the table by the departing number, or rather contemplated that
the remaining share could be held in reserve in the event a new member of
the team had to be hired." Kausch Decl. ¶ 6 (February 25, 2003). On June 15, 1999 Jeanne Kausch sent Jones and Callaghan a letter via
email. The email reads: "Attached is a draft for your review . . . After
verbal agreement from you both that this is agreed, I will produce a hard
copy memo to each of you for your files." Callaghan Dep., Exhibit 9. The
letter, which is marked "draft", begins: `This letter outlines the
compensation agreement between you and Deutsche Asset Management and
replaces all prior compensation agreements between you and Morgan
Grenfell except noted herein." Id The letter provides that with
the departure of Baratta from the Team, Jones and Callaghan would each
receive 16.5% of total revenues from current Morgan Grenfell assets
[i.e., a larger share than they received before Baratta resigned his
position] but that "assets from the Bankers Trust Small Cap portfolio
will not be combined with those currently under your management for
purposes of evaluating the investment performance under the terms of the
March 9 letter." Id. The letter also increased Jones and
Callaghan's minimum compensation for 1999 to $750,000. In contrast to
1999, for the years 2000 and beyond, "revenues from Bankers Trust's Small
cap portfolio will be included in the calculation."
A second letter dated June 30, 1999, with a pen-line edit date of July
6, 1999, is substantially the same as the June 15th letter except it is
not marked "draft", is signed by Weinreich and Kausch, and is
increasingly specific as to compensation for 2000 and beyond and other
terms of employment. Like the earlier June 15th letter, it provides that
the 50% compensation scheme will not apply to revenues generated from
Banker's Trust portfolios in 1999.
On September 30, 1999, Jones and Callaghan sent an email entitled
"employment agreement" seemingly in reply to the June 30th letter.
Callaghan Dep., Exhibit. 10. Callaghan's email reads: "I have attached a
list of Audrey's and my comments about the employment agreement. We are
sorry about the delay . . . Please let us know when we can set up a
meeting to discuss this." Id The first paragraph of the
attached letter states: "This is a summary of the last remaining issues
we have with our employment agreement. The first part of the summary
attempts to state more precisely what we believe to be our mutual
understanding of the agreement reached." Id. The attached notes
are relatively exhaustive, covering a range of subjects including
offering additional terms. However, Callaghan and Jones do not address
the exclusion of Bankers Trust profits from their 1999 compensation
package anywhere in their letter. See Id. It is the last
document in which compensation for 1999 is mentioned.
D. Payment of 1999 bonus compensation
In October of 1999, DAM paid Callaghan his third quarter bonus,
pursuant to which Callaghan received his share of 50% of the revenues
generated for managing the MGCM assets, but not for managing the Banker's
Trust assets. Callaghan Dep. at 298-99. The payment would have been
several hundred thousand dollars higher had 50% of Bankers Trust revenues
been included. Kausch Decl., ¶ 7.
In early 2000, DAM paid Callaghan his fourth quarter 1999 bonus in the
amount of $780,000. DAM claims that by mistake, it overpaid Callaghan by
$482,739 because it did not calculate the amounts he had already received
throughout 1999. Callaghan did not address the overpayment with DAM at
that time. Id. at 299-300.
E. The 2000 employment contract
On February 23, 2000, Callaghan received a letter signed by Kausch and
Barr stating "this letter describes the compensation agreement between
you and DAM for your services in 2000 and 200L" Callaghan Dep., Ex. 4.
Under the agreement, for the years 2000 and 2001, Callaghan would earn
8.3% of the gross revenues received from portfolios managed by the Team,
with an annual base salary of $355,000 and a guaranteed minimum salary of
$950,000. The contract guaranteed his compensation as long as Callaghan
did not resign for other than "Good Reason." "Good reason" is defined as
"(i) any default by Deutsche Asset Management in its obligation to you
with respect to payment of compensation and provision of benefits when,
as and if due, occurring 10 business days after notice to Deutsche Asset
Management by you that such payment or benefit was not made when due,
(ii) the failure or refusal to appoint you to a job having the same or
equivalent official title as Managing Director or having the level of
responsibility or authority you currently exercise." Id. If
Callaghan resigned for "Good Reason", DAM agreed to pay him a pro-rata
share of his guaranteed compensation plus a severance payment equal to
salary and bonus. Pursuant to the letter, Callaghan's title was
"Principal Portfolio Manager of Small Cap Equity Investments." Callaghan
Dep., Exhibit 4.
F. Plaintiffs request for reimbursement of the alleged
overpayment and Callaghan's resignation
In August of 2000, DAM realized it had overpaid Callaghan for his
fourth-quarter 1999 bonus. Kausch Decl, ¶ 10. After a meeting on
August 4th in which DAM representatives communicated the error and asked
Callaghan to repay the $480,000 it had mistakenly transferred to him,
Callaghan charged that not only did he not owe DAM for this payment, but
that DAM owed him for his share of 50% of the revenues generates from the
Bankers Trust assets in 1999, totaling $550,000.
In February of 2001, without having resolved whether Callaghan owed DAM
or whether DAM owed Callaghan for 1999 compensation, Callaghan resigned
his employment with plaintiff.
Callaghan justified his resignation on two grounds. First, he maintains
that DAM breached his employment agreement by refusing to pay him his
share of 50% of the revenues generated from the Bankers Trust assets in
1999. Callaghan believed that the 50% bonus compensation formula spelled
out in his 1999 contract applied to revenues from those assets because a)
around the time that the parties were discussing how the Team should be
compensated for managing the Bankers Trust assets, Dean Barr, DAM's Chief
Investment Officer, said he was dropping renegotiation of the 1999
contract and b) although written correspondence previously circulated in 1999 provided that the Bankers Trust assets were
excluded from the 50% compensation scheme, the subsequent employment
agreement dated February of 2000 did not address 1999 compensation,
leading him to conclude that the renegotiation had in fact been dropped.
Callaghan Dep. at 230. Callaghan alleges that he did not complain about
the $550,000 underpayment in his third and fourth quarter 1999 bonuses
because the amount received was a "plausible number" for the amounts owed
to him and he did not have an accounting of revenues generated from the
Bankers Trust portfolios. Callaghan Dep., at 42.*fn3 Alternatively,
Callaghan suggests that he did not complain about alleged underpayment
because, at the time, the parties were in the middle of contract
negotiations. Callaghan Dep. at 299-300. "One of the demands that was
being made at the time was to exclude those assets [the Banker's Trust
assets] from the calculation; to have protested at that point, I was
afraid to raise the issue and "squash the negotiations" Id.
Second, Callaghan justifies his resignation on the grounds that
although his 2000 contract provides that "bonuses for other members of
the Small Cap Team will be determined by the Team principals," in late
2000/early 2001, when they were deciding employee compensation, DAM
excluded him from the second and third round of negotiations,
communicated with Jones to the exclusion of Callaghan, and did not follow
his recommendations for at least one employee. Audrey Jones, however,
testified that DAM did not bypass Callaghan during the 2000/2001
compensation decision process. Jones Dep. at 118. Human Resources
Director Jeanne Kausch testified that the decision-making process did not
differ from the way it had functioned in 1999. Kausch Decl. ¶ 14-18
(February 11, 2003). Callaghan admits that Jones was included in the
decision-making process and that he was consulted at the initial stages.
Callaghan Dep. at 27.
II. Procedural History & The Motions Before the Court
Plaintiff filed suit in May of 2001 alleging that due to an
administrative error, DAM overpaid defendant Callaghan $482,739 when it
paid him his fourth quarter incentive compensation for 1999. DAM seeks
repayment of this sum and claims breach of contract for defendant's
failure to remit the overpayment and unjust enrichment. See
Pl.'s Complaint, May 15, 2001.
In his Answer, defendant denies DAM's claims and affirmatively alleges
that DAM underpaid him by $550,000 for 1999. Defendant counterclaims for
two counts of breach of contract, the first on the grounds that DAM did
not pay him the full compensation owed in 1999, and the second on the
grounds that DAM refuses to pay him severance owed to him under the 2000
contract. See Def.'s Answer with Counterclaims (June 19, 2001).
His counterclaims further include defamation, violation of New York State and federal labor
laws, and fraud.*fn4
Presently before the court are both parties' motions for summary
judgment. Plaintiff DAM seeks summary judgment in its favor on
Callaghan's counterclaims for severance compensation, attorneys fees and
liquidated damages, fraud, unjust enrichment, and defamation. Defendant
Callaghan moves for summary judgment on his counterclaims that 1) DAM
breached the 1999 employment contract by failing to pay him his share of
50% of the revenues generated from the Bankers Trust assets in 1999, 2)
DAM owes him severance payments because he resigned for "good reason"
under the contract, and 3) he is entitled to liquidated damages under New
York Labor Law.
STANDARD OF REVIEW ON SUMMARY JUDGMENT
According to Fed.R.Civ.P. 56(c), summary judgment "shall be rendered
forthwith" if it is shown that "there is no genuine issue of material
fact and that the moving party is entitled to a judgment as a matter of
law." Celotex Corp. v. Catrett, 477 U.S. 317, 323 n.
4,106 S.Ct. 2548, 2552 n. 4 (1986). "[G]enuineness runs to whether disputed
factual issues can reasonably be resolved in favor of either party,
[while] materiality runs to whether the dispute matters, i.e., whether it
concerns facts that can affect the outcome under the applicable
substantive law." Mitchell v. Washingtonville Cent. Sch. Dist.
190 F.3d 1, 5 (2d Cir. 1999) (internal quotations and citations omitted).
In order to prove that a genuine issue of material fact exists, a
plaintiff "may not rest upon the mere allegations or denials of the
pleading[s]," but must by affidavit or otherwise "set forth specific
facts showing that there is a genuine issue for trial." Fed.R.Civ.P.
56(e). "Conclusory statements, conjecture or speculation by the party
resisting the motion will not defeat summary judgment." Kulak v.
City of New York, 88 F.3d 63, 71 (2d Cir. 1996).
Courts must resolve all ambiguities and draw all reasonable factual
inferences in favor of the non-moving party. See Nora Beverages.
Inc. v. Perrier Group of Am., Inc. 164 F.3d 736, 742 (2d Cir. 1998).
The moving party bears the initial burden of demonstrating an absence of
genuine issues of material fact. See Schwapp v. Town of Avon.
118 F.3d 106, 110 (2d Cir. 1997). If the initial burden is met, the
non-moving party "must produce specific facts indicating that a
genuine issue of fact exists. If the evidence [presented by the
non-moving party] is merely colorable, or is not significantly probative,
summary judgment may be granted." Scotto Almenas
143 F.3d 105, 114 (2d Cir. 1998) (internal quotations and citations omitted)
(alteration in original). ANALYSIS
I. Defendant Callaghan's Counterclaim for Severance
Compensation under his Employment Contract
Defendant Callaghan counterclaims for $950,000 in severance
compensation which he claims is owed to him under the 2000 employment
contract. Plaintiff moves the court to render judgment in its favor on
defendant's severance counterclaim, while defendant Callaghan moves the
court to award him severance as a matter of law.
A. In order to be entitled to severance, Callaghan had
to have "good reason" to terminate his employment
Defendant bases his claim for severance on his 2000 employment
contract. The letter forming that contract reads, in relevant part:
"If you . . . resign for Good Reason during 2001,
you will be paid the pro-rata portion of your 2001
guaranteed compensation plus a severance payment
equal to your salary and bonus paid for services
in 2000. The payment will be no less than
Callaghan Dep., Exhibit 4.
Appendix A defines "Good Reason":
"Deutsche Asset Management shall be deemed to have
given you "Good Reason" to terminate your
employment in case of any act or omission by
Deutsche Asset Management which constitutes a
material breach of this letter including (i) any
default by Deutsche Asset Management in its
obligation to you with respect to the payment of
compensation and provision of benefits when, as
and if due, occurring 10 business days after the
written notice to Deutsche Asset Management by you
that such payment or benefit was not made when
due, ii) the failure or refusal to appoint you to
a job having the same or equivalent official title
as Managing Director or having the level of
responsibility and authority you currently
B, Failure to pay full amount of 1999 bonus
First, relying on subsection (i) defining "Good Reason" as failure to
pay compensation, Callaghan argues that he had "Good Reason" to terminate
his employment because DAM did not compensate him for revenues plaintiff
received from the Bankers Trust assets in 1999.
"Summary judgment is only proper in contract disputes if the language
of the contract is wholly unambiguous." Lucente v. International
Business Machines Corp. 310 F.3d 243, 257 (2d Cir. 2002) citing
Mellon Bank v. United Bank Corp., 31 F.3d 113, 115 (2d Cir. 1994)
(internal quotations omitted); American Express Bank Ltd, v. Uniroyal,
Inc. 164 A.D.2d 275, 277, 562 N.Y.S.2d 613, 614 (if the parties'
intent is unambiguously conveyed in the plain meaning of the agreements,
then interpretation is a matter of law that may be resolved by summary
judgment or dismissal), appeal denied 77 N.Y.2d 807,
569 N.Y.S.2d 611, 572 N.E.2d 52 (1991). Whether the language of a contract is
ambiguous is a question of law for the court to decide. Id., citing
Mellon Bank, 31 F.3d at 115. A contract's language is ambiguous if
it is subject to more than one meaning when viewed objectively by a
reasonably intelligent person who has examined the context of the entire
integrated agreement Id., citing Savers v. Rochester Tel. Corp.
Supplemental Mgmt. Pension Plan, 7 F.3d 1091, 1095 (2d Cir. 1993)
(internal quotations omitted). However, contract language is unambiguous
when it has a definite and precise meaning, without the possibility of
misconception, and where there is no reasonable basis for difference of
opinion. Id., citing Savers, 7 F.3d at 1095. (internal
quotations omitted). If a court finds that a contract is unambiguous,
then it must enforce the intent of the parties, judged by the plain
meaning of the language employed. Paine Webber Inc. v. Bybyk
81 F.3d 1193, 1199 (2d Cir. 1996); Wallace v. 600 Partners Co.
86 N.Y.2d 543, 634 N.Y.S.2d 669, 658 N.E.2d 715 (1995).
Here, the first line of defendant's 2000 employment contract governing
his severance claim states: "This letter describes the compensation
agreement between you and DAM . . . for your services in 2000 and
2001" Callaghan Dep., Exhibit 4 (emphasis added). The letter further
provides that Callaghan would have "Good Reason" to terminate his
employment in the event of "material breach" of the letter governing
compensation for those services (i.e., "services in 2000 and
2001). Id, Callaghan admits that plaintiff paid him for his
services in 2000 and 2001. Callaghan Dep. at 21-22. Even assuming,
arguendo, that DAM owes Callaghan additional bonus compensation for 1999,
defendant's 1999 bonus compensation is outside the reach of the contract
because the contract, by its clear terms, applies only to compensation
for his "services in 2000 and 2001." As a matter of law, the contract is
unambiguous and the court is bound to enforce the parties' intent
according to its plain meaning. As such, as a matter of law, defendant is
not entitled to severance pay by virtue of plaintiffs alleged failure to
pay him his 1999 bonus.
B. Reduction in employment responsibilities
Relying on subsection (ii) defining "Good Reason" to include
diminishment of employment responsibilities, Callaghan claims he is
entitled to severance because plaintiff decreased his employment
responsibilities in late 2000 and early 2001.*fn5 According to the 2000 employment contract, "[b]onuses for other members
of the Small Cap Team will be determined by Team Principals and subject
to review and approval by the Chief Investment Officer." Callaghan Dep.,
Exhibit 4. Callaghan counterclaims for severance on the grounds that in
violation of this contractual guarantee, "[p]laintiff reduced Defendant's
position and authority by excluding Defendant from the 2001 compensation
review process for employees of the Small Cap Team reporting directly to
Defendant." See Def's Answer with Counterclaims, ¶ 73 (June
"Specifically, decisions concerning compensation
for Small Cap Team staff members were made in
three rounds. With respect to the decision making
process in late 2000 and early 2001 (i.e., after
Callaghan demanded that DAM pay him the 1999
incentive compensation still owed to him), whether
Callaghan's recommendations before the first round
were communicated to Kausch is not revealed by the
record. However, Callaghan was expressly denied
any input during the second and third rounds,
which included communications between Kausch,
Jones, and the Team staff members."
Statement of Def. Callaghan in Opp. to Pl's Statement of Undisputed
Material Facts, ¶ 21, (February 25, 2003).
First, defendant's conclusory allegations fall far short of the
specific facts necessary to sustain his burden on summary judgment.
See Kulak 88 F.3d at 71; Fed.R.Civ.P. 56(e). To rebut
plaintiffs motion for summary judgment on this claim, he simply states
that he was "removed from a critical part of the compensation-setting
process for all the members of the Small Cap Team," including "not
following his recommendation for at least one team member." See
Def's Reply Memorandum to Pl's Partial Motion for Summary Judgement, at 8
(Feb. 25, 2003). Callaghan does not provide specific evidence explaining
how he was excluded from the process other than a blanket allegation that
his recommendations were not followed. As such, Callaghan has not met his
burden in showing that a genuine issue of fact exists precluding summary
Second, even if the court accepts the conclusory allegations as true,
the contract unambiguously provides that the Chief Investment Officer
must review and approve the Team Principals' bonus determinations,
meaning that the Officer is the ultimate decision-maker regarding bonus
compensation, not Callaghan. Thus, the fact that Callaghan's
recommendations were not necessarily determinative does not establish a
reduction in Callaghan's employment responsibilities under the contract.
Further, the contract provides that Callaghan would have "Good Reason" to
terminate his employment in the face of a "material breach" of
the contract. At the very least, in light of the Chief Financial
Officer's role as the ultimate decision-maker, coupled with the fact that
Callaghan's central employment responsibility was to manage small-cap
equity investments, the fact that Callaghan's recommendations were not
necessarily followed as to employment compensation does not constitute
"material breach" of his contractually-guaranteed employment
Third, plaintiff has shown that any facts Callaghan raises to rebut
plaintiffs motion for summary judgment are merely colorable and not
sufficiently probative to defeat plaintiffs motion. See Scotto
Almenas 143 F.3d at 114. "Good Reason" to terminate exists under the
contract only if DAM failed or refused to give Callaghan "a job having
the same or equivalent official title as Managing Director or having the level of
responsibility and authority [he] currently exercise[s]," but Callaghan
admits that DAM appointed Callaghan to the same position, Managing
Director responsible for small cap assets, with the same pay, and with
the same assets under his control. See Callaghan Dep. at 18-19,
25, 425. The evidence shows that his recommendations regarding bonuses
were sought and communicated to Jeanne Kausch in Human Resources.
Callaghan Dep. at 27; Jones Dep. at 1 18. Although Callaghan argues that
the fact that the compensation form lists Jones as the signatory
representative from Callaghan's group shows that he was somehow excluded
from the process, plaintiff points out that the form only had one space
for a manager from each group, the form had never been used before 2000,
and Jones generally took the lead in administrative managers for the
Small Cap Team. Callaghan Dep. at 34; Kausch Decl. 14-18 (Feb. 11, 2003).
Defendant's motion for summary judgment compelling plaintiff to pay him
severance pursuant to his 2000 employment contract is DENIED. Plaintiffs
motion for summary judgment on defendant's counterclaim for severance is
II. Defendant's Counterclaim for Attorney's Fees and
Both plaintiff and defendant move for summary judgment on defendant's
counterclaim for attorney's fees and liquidated damages under New York
New York Labor Law § 198 provides, in pertinent part: "In any
action instituted upon a wage claim by an employee . . . in which the
employee prevails, the court shall allow such employee reasonable
attorney's fees and, upon a finding that the employer's failure to pay
the wage required by this article was willful, an additional amount as
liquidated damages equal to twenty-five percent of the total amount of
the wages found to be due." N.Y. Lab. Law § 198 (1-a)
In order to receive attorney's fees or liquidated damages under §
198, a party must first establish a violation of a substantive provision
of article 6 of New York Labor Law. Miller v. Hekimian Laboratories.
Inc., 257 F. Supp.2d 506, 519 (N.D.N.Y. 2003) citing Gottlieb v.
Kenneth D. Laub & Co., Inc. 82 N.Y.2d 457, 464, 605 N.Y.S.2d 213,
626 N.E.2d 29 (1993) ("the statutory remedy of an award of attorneys
fees . . . as well as the liquidated damages remedy where a willful
failure to pay wages has been established, are limited to actions for
wage claims founded on the substantive provisions of Labor Law article
6"). Reliance on § 190 alone is insufficient because it "is a
definitional section and does not provide a basis for a substantive cause
of action." Id. at 518.
Defendant Callaghan's counterclaim for attorney's fees and liquidated
damages under New York Labor Laws does not allege a violation of any of
the substantive provisions of the Labor Laws. See Def.'s Answer
with Counterclaims, ¶¶ 126-130. Absent the requisite substantive claim
under the New York Labor Laws, defendant cannot maintain a claim for
attorneys fees or liquidated damages as a matter of law. See
Defendant's motion for summary judgment on his claim for attorneys fees
and damages under New York Labor Law is DENIED. Plaintiffs
motion for summary judgment on the same claim is GRANTED. III. Defendant's Counterclaim for Fraud
Plaintiff moves for summary judgment on defendant's counterclaim for
According to Callaghan, in October of 1999, when the parties were
discussing the 1999 contract and compensation owed to the Team for its
management of the Bankers Trust assets, Dean Barr, plaintiffs Chief
Investment Officer, told him "that negotiations had bogged down, that he
wanted to jump start negotiations and he wanted to drop renegotiation of
the 1999 contract." Callaghan Dep. at 228. From this statement, Callaghan
concluded that the 50% compensation scheme set forth in the March 1999
contract would apply to revenues earned from the Team's management of the
Bankers Trust assets. Accordingly, the substance of his counterclaim for
fraud is that Barr represented that DAM "would abide by the terms of the
1999 Contract, as originally written" but that DAM "never intended to
compensate Defendant for managing the [Bankers Trust] Assets." See Def s
Answer with Counterclaims, ¶¶ 132-134. "Plaintiffs statement that it
would abandon its efforts to modify the 1999 Contract was a material
misrepresentation and, indeed critical, element of Defendant's decision
to execute the 2000 contract." Id at ¶ 135.
As a preliminary matter, DAM moves for summary judgment on the grounds
that because the only fraud Callaghan alleges arises out of the same
facts that serve as the basis for his breach of contract claim, Callaghan
has failed to state a claim for fraud on which relief can be granted.
Telecom Intern. America, Ltd, v. AT&T Corp.
280 F.3d 175, 196 (2d Cir. 2001); Papa's-June Music. Inc. v. McLean,
921 F. Supp. 1154, 1162 (S.D.N.Y. 1996) (dismissal of fraud claim on the
grounds that the "complaint does not allege a fraud claim that is
sufficiently distinct from the breach of contract claim" but
"merely appends allegations about [defendant's] state of mind for breach
of contract), citing Locascio v. Janes Aquavella, M.D., P.C.
185 A.D.2d 689, 586 N.Y.S.2d 78 (1992). Specifically, "(a)s a general rule,
`no cause of action for fraud is stated or exists where the only fraud
charged relates to a breach of the employment contract.'" Alter v.
Bogoricin 1997 WL 691332, at 9 (S.D.N.Y. Nov. 6, 1997). citing
Dalton v. Union Bank of Switzerland 134 A.D.2d 174, 176,
520 N.Y.S.2d 764, 766 (1987).
However, the ban on fraud claims that arise out of the same facts as a
breach of contract claim applies only in the context where the plaintiff
alleges that the defendant entered into a contract with no intention of
performance. Grappo v. Alitalia Linee Aeree Italiane. S.p.A.
56 F.3d 427, 434 (2d Cir. 1995); Rocanova v. Equitable Live Assurance
Society of the United States 83 N.Y.2d 603, 614, 612 N.Y.S.2d 211,
211 (1997). The rationale behind disallowing contract actions in those
situations is that "a party need not be expressing an unconditional
intention to perform by contracting, and may instead be expressing an
intention either to perform or suffer the ordinary contractual
consequences for a breach." Vtech Holdings Ltd, v. Lucent
Technologies, Inc. 172 F. Supp.2d 435, 439 (S.D.N.Y. 2001) citing
Briefstein v. P.J. Rotondo Constr. 8 A.D.2d 349, 187 N.Y.S.2d 866,
868 (1959). Here, counterclaim plaintiff Callaghan does not claim that
Barr promised to perform a contract as they entered into it with no
intention of performing, but that Callaghan was induced to enter into a
different contractual relationship and continued employment based upon
the allegedly fraudulent statement. Thus, the prohibition against a
separate tort action while simultaneously alleging breach of contract
does not apply in this instance The question, then, is whether defendant can otherwise survive
plaintiffs motion to for summary judgment on his fraud claim.
To prove fraud under New York law, "a plaintiff must show that (1) the
defendant made a material false representation, (2) the defendant
intended to defraud the plaintiff thereby, (3) the plaintiff reasonably
relied upon the representation, and (4) the plaintiff suffered damage as
a result of such reliance." Bridgestone/Firestone. Inc. v. Recovery
Credit Services. Inc. 98 F.3d 13, 19 (2d Cir. 1996) citing
Banque Arabe et Internationale D'Investissement v. Maryland Nat'l
Bank, 57 F.3d 146, 153 (2d Cir. 1995). The complaining party must
show each element by clear and convincing evidence. Dealtime.com v.
McNulty, 123 F. Supp.2d 750, 758-59 (S.D.N.Y. 2000), citing
Banque Arabe et Internationale D'Investissement v. Maryland Nat'l
Bank, 57 F.3d 146, 153 (2d Cir. 1995). With respect to the second
element, if a party attempts to rest a fraud claim on conclusory
allegations of intent, there must be a factual basis for the allegations
that give rise to a strong inference that the defendant possessed the
requisite fraudulent intent. Advanced Marine Technologies. Inc. v.
Burnham Securities. Inc. 16 F. Supp.2d 375, 383 (S.D.N.Y. 1998),
citing Beck v. Hanover Trust. Co. 820 F.2d 46, 50 (2d Cir.
1987), cert denied, 484 U.S. 1005, 108 S.Ct. 698,
98 L.Ed.2d 650 (1988) (citations omitted). "The requisite `strong inference'
of fraud may be established either (a) by alleging facts to show that
defendants had both motive and opportunity to commit fraud, or (b) by
alleging facts that constitute strong circumstantial evidence of
conscious misbehavior or recklessness." Id., citing Shields v.
Citytrust Bancorp. Inc., 25 F.3d 1124, 1128 (2d Cir. 1994).
Furthermore, allegations based on information and belief are sufficient
only if the facts are peculiarly within the knowledge of the defendant
and the complainant alleges facts setting forth a sufficient basis to
establish the inference of fraud. Id. at 384 citing Companiello
Imports. Ltd, v. Saporiti Italia S.p.A. 117 F.3d 655, 664 (2d Cir.
Here, as plaintiff makes clear, defendant Callaghan has not put forth
any facts to support an inference of fraudulent intent other than to
restate his allegation that Ban said he wanted to "drop renegotiation of
the 1999" contract but that DAM subsequently refused to pay him 50% of
the revenues earned from the Bankers Trust assets. Thus, Callaghan has
not sustained his burden to make out the requisite level of fraudulent
Also, as to the fourth prong required to show fraud, Callaghan seeks
the same damages for fraud as he does for breach of contract. However, an
action for fraud cannot lie where damages are merely sought for breach of
contract. Dealtime.com. 123 F. Supp.2d at 759 citing In re
Chateaugay Corp. 10 F.3d 944, 958 (2d Cir. 1993) (holding that a
fraud claim does not arise if the complainant essentially seeks
enforcement of the bargain); Fraser v. Doubleday & Company
Inc., 587 F. Supp. 1284, 1288 (S.D.N.Y. 1984); Matzan v. Eastman
Kodak Co. 134 A.D.2d 863, 521 N.Y.S.2d 917 (1987). To the extent
that he alleges that Barr's statement induced him to continue his
employment at DAM by entering into a second contract, Callaghan has not
alleged any damages that cannot be recovered under his breach of contract
claim. See R.H. Damon & Co. v. Softkey Software Prods. Inc.
81 1 F. Supp. 986, 992 (S.D.N.Y. 1993) (fraud claim not separately
maintainable where plaintiff does not `allege that [he] sustained damages
in addition to those [he] could have anticipated in the event of a
breach"). Thus, the fact that the damages he seeks for fraud are
identical to the damages he seeks for breach of contract is fatal to his
claim. Given the deficiencies Callaghan's fraud claim suffers regarding at
least two of the four elements of fraud, Callaghan has failed to sustain
his burden to rebut plaintiffs motion. Plaintiffs motion for summary
judgment on Callaghan's counterclaim for fraud is GRANTED.
IV. Defendant's Counterclaim for Unjust Enrichment
Callaghan also counterclaims that DAM was unjustly enriched by its
refusal to pay him a) bonus compensation for his management of Bankers
Trust assets in 1999, and b) severance compensation under the 2000
contract. Def's Answer with Counterclaims, ¶ 111. Plaintiff
DAM moves for summary judgment on this counterclaim.
To prevail on a claim for unjust enrichment, the moving party must show
that the defendant received money from or was otherwise enriched by the
plaintiff to the defendant's benefit and, pursuant to principles of
equity and good conscience, the defendant should not retain what
plaintiff seeks to recover. See Madison-Oneida-Herkimer Consortium
v. North American Administrators. Inc. 765 N.Y.S.2d 184 (N.Y.Sup.
2003); Clark v.Daby 751 N.Y.S.2d 622 (N.Y.A.D.3d Dept. 2002).
Accordingly, claims for unjust enrichment seek restitution and are based
upon theories of quasi-contract. Matter of Estate of Witbeck
666 N.Y.S.2d 315 (N.Y.A.D.3d Dept, 1997). A quasi-contract is one
implied by law, where none in fact exists. James v. State,
457 N.Y.S.2d 148 (N.Y.A.D. 4th Dept. 1982). As such, relief on the basis of
quasi-contract is only available in the absence of an enforceable written
contract governing the same subject matter between the parties. See
Seiden Associates. Inc. v. ANC Holdings, 754 F. Supp. 37, 39
Here, the terms of Callaghan's employment and related compensation are
covered by enforceable and express contracts between the parties. As
such, he may not recover under a theory of unjust enrichment. See
Phansalkar v. Andersen Weinroth & Co. L.P., 2002 WL 1402297, at
14 (S.D.N.Y. 2002) ("If Phansalkar's employment in 2000 was covered by an
express employment agreement setting the terms of his compensation, he
may not recover under a theory of quantum meruit or unjust enrichment").
Plaintiffs motion for summary judgment on defendant's counterclaim for
unjust enrichment is GRANTED.
V. Defendant's Counterclaim for Defamation
Plaintiff moves for summary judgment on Callaghan's counterclaim for
First, Callaghan avers that Paula Olenskyj told him that "she had heard
the accusation of embezzlement" from an unnamed person in the Compliance
Department, but she did not believe the rumor to be true. Callaghan Dep.
at 51. Second, Callaghan states that "Jim Capezutto told me that he had
heard rumors of misappropriation of money." Callaghan Dep. at 54.
Capezutto may have heard the rumors in the Legal Department, but, in
Callaghan's own words, he doesn't "remember that clearly." Callaghan Dep.
at 56. Third, Jones told Callaghan there were rumors that he had "done
something wrong." Jones did not say specifically what the rumors were,
except that "she had been speaking with David Baldt in the Philadelphia
office and that people had been talking about [Callaghan's] situation."Id. at 56-57*fn6
As to each of the three allegedly defamatory statements, Callaghan did
not hear any of the rumors himself, but received the information
second-hand from individuals who had heard the statements from someone
else. Callaghan Dep. at 67-68. ". . . Callaghan does not know who told
Olenskyj in the Compliance Department that he was being accused of
embezzlement, or who told Capezutto in the Legal Department that
Callaghan had misappropriated DAM funds . . ." Def's Memorandum of Law in
Opp. to Pl.'s Motion for Partial Summary Judgment, at 19. His theory is
that "these defamatory statements could only have been spread by the DAM
senior executives with whom he had been negotiating his compensation."
To make out a claim for defamation under New York law, a defamation
plaintiff must show: 1) the defendant made a false and defamatory
statement about the plaintiff, 2) the defendant published the statement
to a third party, 3) fault on the part of the defendant in doing so, and
4) injury to the plaintiff or per se actionability (defamation on its
face). See Weldy v. Piedmont Airlines. Inc. 985 F.2d 57, 61 (2d
Cir. 1993); Dillon v. City of New York, 261 A.D.2d 34, 37-38,
704 N.Y.S.2d 1, 5 (1999).
New York law requires plaintiffs in a defamation action to set forth
"the particular words complained of . . . in the complaint, but their
application to the plaintiff may be stated generally." CPLR Rule 3016(a).
The courts have interpreted this rule to require defamation plaintiffs to
allege the defamatory words in haec verba and to disallow mere
paraphrases of the words. Conley v. Gravitt 133 A.D.2d 966,
968, 520 N.Y.S.2d 672,674 (1987). In federal court, however, the Federal
Rules of Civil Procedure govern the pleading requirements for defamation
claims. Fed.R.Civ.P. 8 requires allegations of defamation that are
"simple, concise, and direct," allowing the defendant sufficient notice
of the communications complained of to allow the defendant to defend him
or herself. Odom v. Columbia Univ. 906 F. Supp. 188, 196-97
(S.D.N.Y.1995); Kelly v. Schmidberger 806 F.2d 44, 46 (2d Cir.
1986). To fulfill this standard, the plaintiff must specify who made the
statements, when they were made and in what context, whether they were
made to a third party, and whether they were written or oral. See
Bobal v. Rensselaer Polytechnic Inst. 916 F.2d 759, 762 (2d Cir.
1990) (dismissing defamation complaint because plaintiff failed to plead
the words actually spoken, publication, or damages), cert.
denied, 499 U.S. 943, 111 S.Ct. 1404, 113 L.Ed.2d 459 (1991);
Wanamaker v. Columbian Rop Co. 713 F. Supp. 533, 545 (S.D.N.Y.
1989) (dismissing defamation claim because plaintiff did not articulate
who made the statements, when they were made, in what context, whether
they were written or oral, and whether they were published to a third
party), aff'd 108 F.3d 462 (2d Cir. 1997).
Even under the less stringent requirements of the Federal Rules of
Civil Procedure, Callaghan's counterclaim for defamation cannot survive
summary judgment. Short of conjecture, he has not put forth evidence as
to who made the statements. Further, the court does not know whether the
statements were written or oral, the context in which they were made, or
when they were made. Statements to the effect that one of his co-workers
heard that he had been accused of embezzlement, that another heard rumors regarding misappropriation,
and that another "heard of his situation" do not constitute "simple,
concise, and direct" statements that allow DAM an opportunity to defend
Moreover, a defamation plaintiff cannot rely on an inadmissible hearsay
statement to defeat summary judgment unless the statement falls within
one of the exceptions to the hearsay rule. Haugh v. Schroder
Investment Management North America. Inc. 2003 WL 22119874 (S.D.N.Y.
Sept. 15, 2003) (dismissing defamation claims because plaintiff could not
rely on her own hearsay testimony of someone else's understanding of who
made the allegedly defamatory statement or an article containing the
statement); Jacobsen v. Deutsche Bank. A.G. 206 F. Supp.2d 590
(S.D.N.Y. 2002) (article that quotes defendant as making allegedly
defamatory statements about the plaintiff is hearsay and does not show
that defendant actually published the statement); Huntemann v. City
of Yonkers 1997 WL 527880, at 10 (S.D.N.Y. Aug. 25, 1007) (a
predicate to maintaining a defamation claim is an allegation, supported
by admissible nonhearsay evidence, that the statement was made by
Hearsay is "a statement, other than one made by the declarant while
testifying at the trial or hearing, offered in evidence to prove the
truth of the matter asserted." Fed.R.Evid. 801(c). Here, Callaghan's
allegations of defamation are quintessential hearsay: he relies on
statements conveyed to him by Olenskyj, Capezutto, and Jones that a third
party made to prove the truth of the matter that the defamatory
statements were actually made. Thus, unless Callaghan can identify an
exception to the hearsay rule that takes the statements outside the
auspices of inadmissible hearsay, the court cannot consider the
statements upon summary judgment.
Callaghan avers that the statements are admissible under Fed.R.Evid.
804(b)(3). That rule provides that if the declarant is unavailable as a
witness, "a statement which was at the time of its making so far contrary
to the declarant's pecuniary or proprietary interest, or so far tended to
subject the declarant to civil or criminal liability, or to render
invalid a claim by the declarant against another, that a reasonable
person in the declarant's position would not have made the statement
unless believing it to be true." Callaghan has not satisfied the
prerequisite to the exception's applicability insofar as there is no
showing that the individuals who made the allegedly defamatory
statements, whomever they may be, are unavailable, or that Jones,
Olenskyj, or Capezutto are unavailable. Further, because the statements
themselves are so vague, Callaghan cannot show that they were so far
contrary to the declarant's interest as to fall within the exception.
While Callaghan relies exclusively on Rule 804(b)(3) to circumvent
hearsay limitations, the court reviewed the other exceptions enunciated
in Rule 804 and the statements not excluded under Rule 803 to
conclusively determine whether there is a basis for admitting the
statements in question. The court concludes that the statements are not
admissible under either of these Federal Rules. The court also considered
Rule 807, the "residual exception," which provides that "a statement not
specifically covered by Rule 803 or 804 but having equivalent
circumstantial guarantees of trustworthiness, is not excluded by the
hearsay rule, if the court determines that A) the statement is offered as
evidence of a material fact; B) the statement is more probative on the
point for which it is offered than any other evidence which the proponent
can procure through reasonable efforts; and C) the general purposes of
these rules and the interests of justice will best be served by admission of the statement into evidence."
Fed.R.Civ.P. 807. offered proof of circumstantial guarantees of
trustworthiness to warrant application of the residual exception.
Because Callaghan has failed to satisfy the pleading requirements for
defamation under the Federal Rules, Callaghan's defamation claim fails as
a matter of law. Alternatively, Callaghan's counterclaim for defamation
rests exclusively upon inadmissible hearsay that cannot defeat a motion
for summary judgment. As such, plaintiffs motion for summary judgment on
Callaghan's counterclaim for defamation is GRANTED.
VI. Defendant's 1999 Bonus Claim
Callaghan moves for summary judgment on the grounds that plaintiff owes
him an additional $569,274 in bonus compensation for 1999. He argues that
the incentive compensation owed to him for 1999 is governed by the 1997
contract (incorporated by reference in the March, 1999 contract), which
provides that the Team would receive 50% of the first $6 million of the
gross revenues received by MGCM from the management of portfolios for
which the Team was primarily responsible during that calendar year. He
further alleges that because the Team was primarily responsible for
management of Bankers Trust portfolios during the last seven months of
1999, and those portfolios generated, by his calculation, $4,208,500, he
is entitled to one half of 50% of those revenues, representing
$1,052,013.*fn7 Thus, while DAM already paid Callaghan $487,739 in bonus
compensation for 1999, Callaghan avers that he is owed an additional
For its part, DAM does not seem to contest the assertion that Callaghan
and the Team managed the Bankers Trust portfolios after the 1999 merger,
but alleges that there is a material question of fact as to whether the
50% bonus compensation scheme set out in the 1999 contract applied to
revenues generated from those portfolios. Specifically, DAM objects to
summary judgment because a) the contract is ambiguous as to whether it
applied to the Bankers Trust assets, b) even assuming it did apply, there
is a material question of fact as to whether it was modified, and c)
there is a material question of fact of whether Callaghan is equitably
estopped from applying the contract to the Bankers Trust assets.
In order to show that a contract has been modified, a party must
establish the modification "in the same way as any other contract. No
one will be held to have surrendered or modified any of his contract
rights unless he is shown to have assented thereto in a manner that
satisfies the requirements of a valid contract." Louis Dreyfus
Negoce S.A. v. Blystad Shipping & Trading Inc. 252 F.3d 218, 228
(2d Cir. 2001) (emphasis in original) citing 6 Arthur Linton
Corbin, Corbin on Contracts § 1293 (1962). See also
Jofen v. Epoch Biosciences. Inc., 2002 WL 1461351, at 5 (S.D.N.Y.
July 8, 2002) ("fundamental to the establishment of a contract
modification is proof of each element requisite to the formulation of a
contract, including mutual assent to each of its terms") citing
Beacon Terminal Corp. v. Chemprene, Inc. 75 A.D.2d 350, 429 N.Y.S.2d 715, 717 (1980). In short, the inquiry that governs
contract formation applies equally the question of contract
Under New York law, the required elements of contract formation are a)
offer, b) acceptance, and c) consideration. See Lumhoo v. Home Depot
USA. Inc., 229 F. Supp.2d 121, 161 (E.D.N.Y. 2002); see
also Restatement (Second) of Contracts §§ 24, 50, 71 (1981).
To determine whether a contract was formed, `the intent of the parties is
of central importance." Precision Testing Labs., Ltd, v. Kenyon
Corp. of Am. 644 F. Supp. 1327, 1343 (S.D.N.Y. 1986). The inquiry
focuses on the "objective manifestations of intent of the parties as
gathered by their expressed words and deeds" "given the attendant
circumstances, situation of the parties, and the objectives they were
striving to attain." Brown Bros. Elec. Contractors, Inc. v. Beam
Constr. Corp. 41 N.Y.2d 397, 399-340, 393 N.Y.S.2d 350, 352,
361 N.E.2d 999 (1977).
A written contract can be formed from more than one writing, including
letters or memoranda signed by only one party or unsigned by either
party. Consarc Corp. v. Marine Midland Bank, N.A.
996 F.2d 568, 572-73 (2d Cir. 1993) citing Crabtree v. Elizabeth Arden Sales
Corp. 305 N.Y. 48, 53-55, 110 N.E.2d 551 (1953). "The failure of the
writings to contain a disavowal is one of the common law principles
courts rely on in deciding whether several writings together form a
contract between the parties." Id. at 573, citing Arcadian
Phosphates. Inc. v. Arcadian Corp. 884 F.2d 69, 72-73 (2d Cir. 1989).
If the parties negotiating a proposed contract intend not to be bound
until their agreement is reduced to an executed, written contract, the
contract is not binding until their agreement is so formalized. Jim
Bouton Corp. v. Wm. Wrigley Jr. Co. 902 F.2d 1074, 1081 (2d Cir.
1990). See also Feick v. Fleener 653 F.2d 69, 74 (2d Cir. 1981)
("Events are moving very rapidly and it will be to the family's advantage
if we can formalize our understanding as soon as possible.");
Tebbutt v. Niagara Mohawk Power Corp. 124 A.D.2d 266, 268,
508 N.Y.S.2d 69 (1986) (mem.) ("Please advise whether the foregoing terms are
satisfactory to your clients and we can proceed to prepare whatever
contract documents may be required."); Rosenzweig v. Salkind
5 A.D.2d 58, 60, 169 N.Y.S.2d 213 (1957), affd. 5 N.Y.2d 902,
183 N.Y.S.2d 82, 156 N.E.2d 712 (1959) (mem.) ("Will you please go over same,
and if it is satisfactory, advise me, and I will have them executed, and
arrange to meet with you within the next day or two for the purpose of
concluding this matter."); ABC Trading Co. v. Westinghouse Electric
Supply Co. 382 F. Supp. 600, 602 (E.D.N.Y.1974) ("If your client finds
this proposal agreeable in principle, we can proceed to reduce it to a
written agreement. . . ."). At the same time, if the parties reach an
agreement through correspondence or other writings, and intend merely to
execute a contract as evidence of their agreement, the parties may be
bound even absent a more formal writing or before the written documents
are drawn up. See Consarc Corp. 996 F.2d at 574-76.
Furthermore, the parties' conduct plays a central role in contract
formation and, by extension, contract modification. "(T)he existence of a
contract may be established through conduct of the parties recognizing
the contract." Apex Oil v. Vanguard Oil and Serv. Co. 760 F.2d 417,
422 (2d Cir. 1985). In the same vein, "a contract can be modified
by agreement, whether express or implied." Southern Federal Sav.
and Loan Ass'n of Georgia v. 21-26 East 105th Street Associates,
145 B.R. 375, 386 (S.D.N.Y. 1991); Marine Transp. Lines. Inc. v.
International Ore, of Master. Mates & Pilots, 878 F.2d 41, 45
(2d Cir. 1989) ("an agreement to modify a contract may be proven circumstantially the conduct of the
parties") (citation omitted). See also Dallas Aerospace, foe. v/CIS
Air Corporation, 352 F.3d 775, 783 (2d Cir. 2003) ("under New York
law, parties may modify a contract by another agreement, by course of
performance, or by conduct amounting to a waiver or estoppel) (internal
citation omitted). Similarly, although acceptance "must comply with the
terms of the offer and be clear, unambiguous, and unequivocal," King
v. King, 208 A.D.2d 1143, 1143-44, 617 N.Y.S.2d 593 (1994) (citations
omitted), "a unilateral offer can be accepted by another party's conduct
and thereby give rise to contractual obligations," Consarc Corp. v.
Marine Midland Bank. N.A. 996 F.2d 568, 572-73 (2d Cir. 1993) citing
John William Costello Assocs. v. Standard Metals Corp.,
99 A.D.2d 227, 231, 472 N.Y.S.2d 325 (1984).
The guiding principle behind all of these inquiries into contract
formation is that they are for the factfinder. "[T]he issue of whether or
not the parties ever came to a meeting of the minds so as to have entered
into an enforceable agreement should properly be left to the
determination of the trier of fact." Bauman Assoc., Inc. v. H &
M Int'l Transport. Inc. 567 N.Y.S.2d 404, 408, 171 AJD.2d 479 (1991)
See also Ronan Associates, Inc. v. Local 94-94A-94B. Intern. Union
of Operating Engineers. AFL-CIO, 24 F.3d 447, 449 (2d Cir. 1994)
("Under traditional principles of contract law, questions as to what the
parties said, what they intended, and how a statement by one party was
understood by the other are questions of fact; however, the matter of
whether or not there was a contract, in light of the factual findings on
these questions, is an issue of law") citing Four Seasons Hotels.
Ltd, v. Vinnik 127 A.D.2d 310, 317, 515 N.Y.S.2d 1, 6 (1987);
Cortland Asbestos Products. Inc. v. J. & K. Plumbing &
Heating Co. 33 A.D.2d 11, 12, 304 N.Y.S.2d 694, 696 (1969) ("while
the existence of a contract is a question of fact, the question of
whether a certain or undisputed state of facts establishes a contract is
one of law for the courts. . . ."). Whether or not contract formation can
be implied from the parties' course of conduct is question for the trier
of fact. See Brown Bros. Elec. Contractors. Inc. 41 N.Y.2d 397,
393 N.Y.S.2d 350. Similarly, even in cases where the evidence strongly
suggests that the parties did not intend to be bound absent a written
agreement, whether they so intended is a question for the factfinder to
decide. See Consarc Corp. 996 F.2d at 576. As such, just as the
question whether the parties intended to form a contract is a question of
fact, so is the question whether the parties' conduct expresses an
intention to modify an existing agreement. Marine Transp. Lines.
Inc. 878 F.2d at 45 (affirming the lower court's finding of a
contract modification after a bench trial because intent to modify was
shown by clear and convincing evidence); see also Three S. Dev. Co.
v. Santore 193 Conn. 174, 474 A.2d 795, 798 (1984).
Here, the evidentiary record contains sworn statements by DAM
representatives that they told Callaghan that the 50% compensation scheme
would not apply to the Bankers Trust assets, yet Callaghan agreed to
manage the portfolios nevertheless. Weinreich Decl., at ¶ 7;
Weinreich Dep. at 71-72. DAM submitted two agreements to Jones and
Callaghan around the time Jones and Callaghan began to manage the Bankers
Trust portfolios, both of which explicitly provided that revenues from
Banker's Trust assets would not be included in their bonus compensation
for 1999, one of which was signed by two DAM officials and was not
preceded with the word "draft" like the earlier version. At the same
time, in Jones' and Callaghan's "summary of last remaining issues with [their] agreement," they did not object to
the provision.*fn8 Finally, Callaghan accepted third fourth quarter
bonus payments excluding compensation for the Bankers Trust assets,
although these payments were, in total, over half a million dollars shy
of what Callaghan would have received had the 50% compensation scheme
applied to the Bankers Trust portfolios. In light of this evidence, there
are material triable issues of fact regarding whether the parties
expressly or impliedly modified their agreement. Specifically, a trial is
necessary to determine whether Callaghan's conduct constituted acceptance
of DAM's offer to transfer the portfolios to the Team in exchange for a
modified compensation scheme, whether they intended to modify the
contract without formalizing their agreement in a written contract,
whether they came to a meeting of the minds as to a modification, whether
Callaghan's silence in the face of the two proposals excluding the
Bankers Trust assets from the 50% compensation scheme constituted
acceptance, or whether Callaghan's acceptance of third and fourth quarter
bonus payments excluding the Bankers Trust revenues illustrates that the
parties did in fact modify their agreement.
Because there are material factual questions regarding a possible
modification of the 1999 contract, the court does not address whether the
contract applies to the Bankers Trust assets or whether Callaghan is
equitably estopped from relying on the contract to seek bonus
compensation relating to those assets. Callaghan's motion for summary
judgment on his 1999 bonus compensation claim is DENIED. CONCLUSION
Plaintiff's motion for summary judgment on Callaghan's counterclaims
for severance compensation, liquidated damages and attorneys fees, fraud,
unjust enrichment, and defamation is GRANTED. Defendant's
motion for summary judgment on his counterclaim for severance pay,
liquidated damages, and additional bonus compensation for his management
of Bankers Trust portfolios in 1999 is DENIED.