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Arbeeny v. Kennedy Executive Search

January 14, 2010

DANIEL N. ARBEENY, PLAINTIFF-APPELLANT,
v.
KENNEDY EXECUTIVE SEARCH, INC., ET AL., DEFENDANTS-RESPONDENTS,
KENNEDY ASSOCIATES, ET AL., DEFENDANTS.



Plaintiff appeals from an order of the Supreme Court, New York County (Eileen Bransten, J.), entered April 29, 2008, which granted the motion of defendants Kennedy Executive Search, Inc., and Jack Kandy to dismiss the complaint.

The opinion of the court was delivered by: Acosta, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

David B. Saxe, J.P., John W. Sweeny, Jr., Rolando T. Acosta, Rosalyn H. Richter, JJ.

105733/07

On or about January 5, 2006, plaintiff and defendant Kennedy Executive Search (KES), an executive recruitment firm, entered into an agreement whereby KES employed plaintiff as a Senior Executive Search Consultant. The agreement, drafted by KES's lawyers and governed by New York law, states that employment may be terminated by plaintiff or KES at any time, with or without cause or prior notice.

The agreement set plaintiff's salary at $125,000 per year and provided that "[s]uch salary shall be reviewed by Management from time to time, and any adjustment to such Salary shall be in the sole discretion of Management." In addition to salary, section 5.1 of the agreement provided that plaintiff was eligible "to earn commission compensation in respect of placements arranged by Employee on behalf of KES" as set out in Article 5 (emphasis added). Section 5.2 of the agreement set forth a formula by which commissions were to be calculated*fn1. Sections 5.3 and 5.7 provided that the commission amount would be paid to plaintiff in the calendar month following the month in which payment in full of the Net Fee Income was received by KES from the client, provided KES had recovered plaintiff's salary and other costs. Section 5.6(a), the portion at issue in this case, provides that "[n]o commission shall be due" in the event plaintiff "is not in the employ of KES at the date the commission payment would otherwise be made."

KES unilaterally reduced plaintiff's salary to $100,000 a year in October 2006, and terminated him on March 28, 2007 because he refused to accept KES's demand that he accept a reduction in his commissions*fn2. According to KES, it received a fee in March for a placement plaintiff had handled. Pursuant to section 5.3, payment to plaintiff would have been due in April if plaintiff were still employed. To avoid unnecessary disputes, however, KES paid plaintiff $35,000 "without prejudice."*fn3 KES received other fees originated by plaintiff after March 2007, but no further commissions were paid to plaintiff.

In April 2007, plaintiff brought the instant action against KES, Kennedy Associates, Jason Kennedy, Jack Kandy (the president of KES), and Joel Kandy. He alleged that he was owed $12,500 in unpaid salary for six months, $223,970 in unpaid commissions, and another unspecified amount for placements that he was working on when he was terminated. The complaint asserted claims for breach of contract, unpaid salary and commissions pursuant to Labor Law §§ 191 and 198, quantum meruit/unjust enrichment, and violation of Business Corporation Law § 630.

In September 2007, defendants KES and Jack Kandy, the only defendants to have been served, moved to dismiss the complaint pursuant to CPLR 3211(a)(1) and (7). In granting the motion, the court noted that "the employment agreement expressly deprives plaintiff of post-termination commissions," and there was "no allegation that [KES] failed to pay to [plaintiff] commissions for placements he finalized and for which fees were received prior to his termination."

With respect to the Labor Law claims, the court found that "[d]espite the fact that [plaintiff]'s title was senior executive search consultant,' [he] qualifies as an employee' under the Labor Law." Nevertheless, it dismissed the Labor Law claims because "[t]he statutory remedies against an employer for the wilful failure to timely pay earned wages and commissions are unavailable where . . . there is no enforceable contractual right to those wages or commissions." The court dismissed the quantum meruit claim because of "the existence of [an] enforceable contract covering the disputed issue of the plaintiff's compensation." It dismissed the complaint against the other defendants as well, noting that they had not been served and were "sued only as alter egos of" KES.

Plaintiff's claim for $12,500 in unpaid salary for the reduction in pay from $125,000 to $100,000 is unavailing inasmuch as the agreement clearly stated that "any adjustment to such Salary shall be in the sole discretion of Management."

Plaintiff, however, has sufficiently stated a breach of contract claim for unpaid earned commissions that he "arranged" prior to his termination. Although generally an at-will employee is not entitled to post-termination commissions, the parties are certainly free to provide otherwise in a written agreement. For example, in Yudell v Israel & Assoc. (248 AD2d 189 [1998]), the employee earned commissions based on a percentage of all fees actually received that were "originated by" her. She brought an action to recover commissions for her role in securing two placements that were completed post-termination. The employer contended that as a matter of law, the employee could not recover commissions for placements that were finalized after she left. In denying summary judgment, this Court held that the words "placements . . . originated by you" did not alone specify when or how the placement must be completed in order to entitle the employee to a commission. Had the employer meant to foreclose the possibility of the employee earning a post-termination commission on a placement unquestionably originated by her, it could have said so explicitly, such as "placements . . . originated and completed by you" or "placements . . . originated by you which occur during your employment here" (id. at 190 emphasis added).

In Yudell, we distinguished McEntee v Van Cleef & Arpels (166 AD2d 359, 360 [1990]), where the employee was not entitled to post-termination commissions because he had "failed to allege the existence of any contract entitling him to such unearned commissions nor the precise terms thereof." Accordingly, we rejected McEntee's "open-ended claim to commissions on unspecified future placements, where there was no contract setting forth either how such commissions would be calculated or what the limits of [the employer]'s purported obligation would be" (Yudell at 167). Likewise, in Mackie v La Salle Indus. (92 AD2d 821 [1983], appeal dismissed 60 NY2d 612 [1983]), we held that a salesperson was not entitled to commissions, on an account that she did not service for over a year, simply because she had originally obtained it. We noted in Yudell (at 190) that "[o]ther cases in which an at-will salesman has been denied commissions from post-termination sales similarly involve a plaintiff's indefinite and unlimited claim to commissions from all future transactions between its former employer and certain customers, simply because plaintiff was the one who initially secured these customers." The employee in Yudell, by contrast, sought commissions from two specific placements allegedly originated by her and could "point to a contract provision that ...


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