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Levinson v. Primedia Inc.

August 9, 2007

DEBORAH LEVINSON, THERESE JANSEN, ET AL., INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
PRIMEDIA INC., ABOUT.COM, INC., AND SCOTT KURNIT, DEFENDANTS,



The opinion of the court was delivered by: Deborah A. Batts, District Judge

MEMORANDUM & ORDER

The eighty-two Plaintiffs in this suit allege that they did not receive full payments for services they rendered to Defendant About.com, Inc. ("About"). Their claims are brought on behalf of themselves and a putative class of all others who are similarly situated.*fn1 They allege claims against About and its parent, Defendant Primedia, Inc. ("Primedia"), under both the Fair Labor Standards Act (Count I) and Articles 6 and 19 of New York Labor Law (Count II). They also assert a claim against these two Defendants for breach of contract (Count III). Plaintiffs further assert two claims for tortious interference with contractual relations, one against About's former CEO, Defendant Scott Kurnit ("Kurnit") (Count IV), and the other against Primedia (Count V). Finally, Plaintiff Therese Jansen has brought a separate Fair Labor Standards Act claim against Defendants for allegedly discharging her in retaliation for complaining to them about unpaid back wages (Count VI).*fn2

Defendants now move for summary judgment on each count. Defendants aver that no issue of material fact exists with respect to Counts III, IV, V, and VI. Defendants also argue that summary judgment should be granted in their favor on certain Plaintiffs' claims pursuant to Counts I and II because they fail as a matter of law.

For the reasons contained herein, Defendants' Motion for Summary Judgment is GRANTED IN PART and DENIED IN PART. Summary judgment also shall be GRANTED IN PART to Plaintiffs. Finally, the claims of Plaintiffs who did not comply with discovery requirements shall be DISMISSED WITHOUT PREJUDICE, subject to the provisions stated herein.

I. BACKGROUND

In June of 1996, William Day ("Day") and Scott Kurnit founded General Internet, which later became known as The Mining Company. (Day Decl. ¶ 1.) In May 1999, The Mining Company changed its name to About.com, Inc. and then to About, Inc. ("About"). (Id.) Scott Kurnit served as General Internet/About's CEO from its inception as General Internet until September 2001 when William Day succeeded him. Day remained in the CEO position until December 2003. (Id.)

In February 2001, while Kurnit was its CEO, About merged with Primedia and became its subsidiary. (Daecher Decl. ¶ 8.) On or about March 25, 2005 -- three years after this case was filed -- Primedia sold About, and About is no longer a subsidiary of, or otherwise affiliated with, Primedia. (Id.)

About operates About.com, a website consisting of hundreds of topic-specific, special-interest sites. (Day Dec. ¶ 3.) The sites' topics are varied, and include pregnancy, mutual funds, and "Switzerland for Visitors." (Daecher Decl. ¶ 4.) Each topic-specific site is managed by a "Guide" who has expertise in the site's topic and who is charged with posting content on it. (Day Decl. ¶ 3.) Plaintiffs are all former or current Guides for About. Defendants allege -- and Plaintiffs do not contest -- that Named Plaintiffs Shane Dell, Diane Dobbs, Wendy Hogan, Peter Lathan, Walter Logie, Murray Lundberg, Debra Macaulay, Walter Metcalf, Gayle Olson, Roboert Olson, John Ross, Paivi Suomi, Andrew Vadas, and Stephen Venter have never worked as Guides within the United States. (See Defs.' Mem. of Law at 13, n.6.) Of the other Named Plaintiffs, only Julie Altebrando, Angela Thor, and Jim Zwick ever worked as Guides in the State of New York. (See id. At 13, n.7.)

A. About's Agreements with the Guides

(1) The 1997 Agreements

Contracts govern the Guides' relationships with About. The first relevant set of contracts consists of agreements executed in 1997 between The Mining Company and each Plaintiff. (Defs.' 56.1 Statement ("Defs.' 56.1 Stmt."), Exhibit 5 (hereinafter cited as "1997 Agreements").) The 1997 Agreements provide each Guide with a monthly stipend termed "basic compensation." (1997 Agreements, Att. A, ¶ 1.) The stipend varies from Guide to Guide, but generally is between $100 and $500. (See, e.g., id.; see also Defs.' Mem. of Law at 4.)

The 1997 Agreements provide that each Guide would be eligible to share in an "advertising revenue pool." ("Revenue Pool") (1997 Agreements, Att. A, ¶ 2.) The Revenue Pool is equal to 30% of net advertising revenues, such revenues being defined as "gross ad revenues received by The Mining Company less (i) commissions to advertisers, third party sales agents, and advertising agencies, (ii) fees paid for traffic based on ad revenue, (iii) reasonable reserves for returns, make goods or other adjustments, and (iv) other sales expenses based on a share of ad revenue."*fn3 (Id. ¶ 3.) Each Guide's share in the Revenue Pool would be "calculated based on the number of page views recorded on the [Guide's] site as compared with the number of page views for all sites of The Mining Company." (Id. ¶ 2.) The monthly stipends were meant to "guarantee against, and [to] be recoupable out of, any advertising revenues payable to [each Guide]." (1997 Agreements, Att. A, ¶ 1.) The parties agree that this means each Guide would receive either the monthly stipend or their share of the Revenue Pool, whichever was greater.*fn4

The 1997 Agreements also fashion an "Advertising Bonus Pool" ("Bonus Pool") which is defined as "10% of the Mining Company's advertising sales revenues".*fn5 (Id. ¶ 3.) Each Guide was "eligible to share in" the Bonus Pool, such share to be "determined by The Mining Company in its discretion." (Id.)

(2) The 1999 Agreements

The second relevant set of contracts to govern the relationships between the Guides and About were executed in 1999. (See Defs.' 56.1 Stmt., Exh. 6 (hereinafter cited as "1999 Agreements").) These Agreements replaced the 1997 Agreements beginning in the second quarter of 1999, and governed the Guides' duties and compensation up through the filing of this lawsuit.

(Id.; Pls.' Mem. of Law at 3.) The latter Agreements closely resemble the 1997 Agreements, with a few relevant distinctions.

Like the 1997 Agreements, the 1999 Agreements provide for a monthly stipend to "be a guarantee against and recoupable out of, any revenues payable" to each Guide. (1999 Agreements, Att. A, ¶ 1.) The 1999 Agreements also make each Guide eligible to share in a Revenue Pool equal to 30% of the Company's net advertising revenues (id. ¶ 2), but define "net advertising revenues" differently. According to the 1999 Agreements, "net advertising revenues" is to be calculated as "gross ad revenues actually received by the Company, less (i) sales commissions, (ii) fees paid for traffic, (iii) reasonable reserves for make goods or other adjustments, and (iv) other third-party payments and expenses for sales, advertising, and revenue." (Id. ¶ 3.) As with the 1997 Agreements, each Guide's share in the Revenue Pool is to be "calculated based on the number of page views recorded on the [Guide's] Site during the relevant month as compared with the number of page views for all sites of the Company." (Id.)

The Bonus Pool provision under the 1999 Agreements also differs from its counterpart in the 1997 Agreements. The 1999 Agreements provide that each Guide "will be eligible to share in a bonus pool based upon a percentage of the Company's net advertising revenues. The pool, if any, and [the Guide's] share of the pool will be determined by the Company in its sole discretion." (Id. ¶ 3.) Plaintiffs concede that Bonus Pool compensation under the 1999 Agreements is not mandatory, and thus Plaintiffs do not seek to recover bonus payments for any period after the first quarter of 1999. (Pls.' Mem. of Law at 4.)

(3) The Guides' Compensation Under the Agreements

While the parties agree on the words of the Agreements, they do not agree on the interpretation to be given them. The parties dispute the meaning of "advertising", "gross ad revenues", and "net advertising revenues" as provided in either set of Agreements and thus have calculated very different revenue pools*fn6 ; they do not agree on the meaning of the Agreements' formulas for calculating each Guide's share of the Revenue Pool; they disagree on whether discretionary bonus payments should be credited toward payments owed to Guides; and they disagree on how much the Guides were actually paid.*fn7

According to Plaintiffs, they were not paid their correct shares of the Revenue Pool in the third and fourth quarters of 1998, in the first quarter of 1999, and in every quarter prior to the filing of this lawsuit from 2000 to 2002.*fn8 (Pls.' Mem. of Law at 4.) Plaintiffs further contend that the Guides were not paid their share of the Bonus Pool in 1998 or in the first quarter of 1999. (Pls.' Mem. of Law at 4.) Specifically, Plaintiffs complain that the allegedly under-compensated Guides are owed $213,682 for 1998; $298,007 for the first quarter of 1999; $6,741,534 for 2000; $887,763 for 2001; and $942,474 for the first half of 2002.*fn9 (See Pls.' 56.1 Stmt, Attachment A, citing Exh. A - E therein.) (See Pls.' 56.1 Stmt., Attachment B, citing Exs. A & B therein). Defendants argue that Plaintiffs' calculations are erroneous, see supra, and that they therefore do not owe compensation to any Guide. Plaintiffs' and Defendants' computations appear in the tables at the Background Appendix.

B. Therese Jansen's Alleged Retaliatory Discharge

Plaintiffs further argue that Therese Jansen, a former Guide, complained to the Defendants that she was owed back wages. Plaintiffs argue that her subsequent discharge was retaliatory and that therefore she should recover damages. Plaintiffs do not point to any evidence which might corroborate these bare allegations.

APPENDIX TO BACKGROUND

PLAINTIFFS' COMPUTATIONS (*numbers from Pls.' 56.1 Stmt., Att. A.) (** 1997 numbers not included because not in dispute)

 GROSS AD REVENUESNET AD REVENUESAMT. ACTUALLY PAID TO GUIDESAMT. STILL OWED TO GUIDES 1998$3,342,288$3,073,788$1,730,408$213,682 1999 (1st QUARTER)$2,122,024$2,103,801$688,097$298,007 2000$90,963,310$57,153,774$10,740,409$6,741,534 2001$28,436,919$18,904,845$7,804,189$889,763 2002$30,887,987$18,869,476N/A thru end of yr.$942,763 (thru first half of 2002 only

APPENDIX TO BACKGROUND

DEFENDANTS' COMPUTATIONS (* numbers from Defs.' 56.1 Stmt., Att. A.) (** 1997 numbers not included because not in dispute)

 GROSS AD REVENUESNET AD REVENUESAMT. ACTUALLY PAID TO GUIDESAMT. STILL OWED TO GUIDES 1998N/A<>$1,758,800.32$0 1999$12,791,980.90<>$3,836,462.84$0 2000$87,828,928.78$33,565,293.13$10,961,096.52$0 2001$15,402,138.18<>$8,038,090.88$0 2002$11,553,613.00<>$3,941,198.34$0

II. DISCUSSION

A. Legal Standard for Summary Judgment

A district court should grant summary judgment when 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); see also Hermes Int'l v. Lederer de Paris Fifth Ave., Inc., 219 F.3d 104, 107 (2d Cir. 2000). Genuine issues of material fact cannot be created by mere conclusory allegations; summary judgment is appropriate only when, "after drawing all reasonable inferences in favor of a non-movant, no reasonable trier of fact could find in favor of that party." Heublein v. United States, 996 F.2d 1455, 1461 (2d Cir. 1993) (citing Matsushita Elec. Industr. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 89 L.Ed. 2d 538 (1986)).

In assessing when summary judgment should be granted, "there must be more than a 'scintilla of evidence' in the non-movant's favor; there must be evidence upon which a fact-finder could reasonably find for the non-movant." Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed. 2d 202 (1986)). While a court must always "resolv[e] ambiguities and draw[ ] reasonable inferences against the moving party," Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986) (citing Anderson), the non-movant may not rely upon "mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment." Id. at 12. Instead, when the moving party has documented particular facts in the record, "the opposing party must 'set forth specific facts showing that there is a genuine issue for trial.'" Williams v. Smith, 781 F.2d 319, 323 (2d Cir. 1986) (quoting Fed. R. Civ. P. 56(e)). Establishing such facts requires going beyond the allegations of the pleadings, as the moment has arrived "'to put up or shut up.'" Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d Cir. 2000) (citation omitted). Unsupported allegations in the pleadings thus cannot create a material issue of fact. Id.

B. Breach of Contract

"Contract remedies exist to give injured parties the benefit of their bargain." Capital Nat. Bank of New York v. McDonald's Corp., 625 F. Supp. 874, 883 (S.D.N.Y. 1986) (citing County of Suffolk v. Long Island Lighting Co., 728 F.2d 52, 63 (2d Cir. 1984); Clalit Health Services v. Israel Humanitarian Foundation, No. 02 Civ. 6552, 2003 WL 22251329, at *3 (S.D.N.Y. Sep. 30, 2003); International Customs Associates, Inc. v. Ford Motor Co., 893 F. Supp. 1251, 1255-56 (S.D.N.Y. 1995). Only parties to a contract have standing to assert a claim for breach of contract. See Clalit, 2003 WL 22251329, at *3. Without a contractual relationship, there cannot be a contractual remedy. Capital Nat. Bank of New York, 625 F. Supp. at 883.

The Agreements are governed by the law of the State of New York. (See 1997 Agreements ¶ 3; 1999 Agreements ¶ 13.) To state a claim for breach of contract in New York, a claimant must allege: (1) the existence of a contract; (2) that the plaintiff has performed his or her obligations under the contract; (3) that the defendant failed to perform his or her obligations thereunder; and (4) resulting damages to the plaintiff. See W.B. David & Co., Inc. v. DWA Communications, Inc., No. 02 Civ. 8479, 2004 WL 369147, at *2 (S.D.N.Y. Feb. 26, 2004); Global Intellicom, Inc. v. Thomson Kernaghan & Co., No. 99 Civ. 342, 1999 WL 544708, at *18 (S.D.N.Y. July 27, 1999). "In pleading these elements, a plaintiff must identify what provisions of the contract were breached as a result of the acts at issue." Wolff v. Rare Medium, Inc., 171 F. Supp. 2d 354, 358 (citing Levy v. Bessemer Trust Co., N.A., No. 97 Civ. 1785, 1997 WL 431079, at *5 (S.D.N.Y. July 30, 1997)).

When a summary judgment motion concerns a question of a contract's ambiguity, "summary judgment may be granted when its words convey a definite and precise meaning." Seiden Assoc.'s, Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992). On the other hand, "[w]here the language used is susceptible to differing interpretations, each of which may be said to be as reasonable as another . . . the meaning of the words become an issue of fact and summary judgment is inappropriate." Id. (citations omitted). However, New York follows the "well established contra proferentem principle which requires that equivocal contract provisions are generally to be construed against the drafter." McCarthy v. Am. Int'l Group, 283 F.3d 121, 124 (2d Cir. 2002) (internal quotations and citations omitted).

The dispute between the parties in this case pertains chiefly to the third element, i.e., whether Defendants breached the Agreements by not paying the Guides their allotted shares of the Revenue Pool and Bonus Pool. Specifically, the parties disagree on: (1) the revenues which are advertising-related and therefore part of gross ad revenues; (2) the appropriate method for calculating net advertising revenues; (3) the appropriate method for calculating each Guide's share of the Revenue Pool; (4) whether voluntary bonus payments to certain Guides ought to be credited against Revenue Pool shares owed to those same Guides; and (5) the amount actually paid to the Guides.

(1) The Meaning of "Gross Ad Revenues"

Neither the 1997 Agreements nor the 1999 Agreements define "advertising" or "gross ad revenues". The parties do not agree on which revenues and expenditures are part of "gross ad revenues". Specifically, they do not agree on whether Pay Per Click revenue, as well as overhead costs like rent, ...


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