The opinion of the court was delivered by: J. Paul Oetken, District Judge:
"As you will see, it's not all about the money in life: it's about health, love, respect, happiness and then at some point about the money, which is the only thing that will survive all of us."
-Plaintiff Emel Dilek*fn1
This is a contract case. It concerns a Connecticut company and one of the company's employees. That employee worked for a number of years at-will, but she then signed, along with the company's chief operating officer, an employment agreement guaranteeing her four years in her position at the company. She and the COO were also lovers. When the COO passed away a year and a half into the agreement's four-year term, the company fired the employee, and she now sues for breach of contract. The company argues that the agreement is invalid and countersues, asserting that the employee contributed no value to the corporate enterprise but instead spent her days shopping on the company credit card in Manhattan and travelling the world on frequent vacations.
The employee is Plaintiff Emel Dilek, who filed her complaint in this action on May 3, 2011. (Dkt. No. 1. ("Compl.").) She alleges breaches of contract and of the duty of good faith and fair dealing by the company, her former employer, Defendant Watson Enterprises, Inc. ("Defendant" or "WEI" or the "Company"). (Id.) WEI's two counterclaims against Dilek allege unjust enrichment and civil theft and were filed on July 29, 2011. (Defendant's Amended Answer and Counterclaims, Dkt. No. 10 ("Ans.").) Currently before the Court are three motions: WEI's motion for summary judgment as to Dilek's claims (Dkt. No. 21); Dilek's motion for summary judgment as to her contract claim and WEI's counterclaims (Dkt. No. 36); and Dilek's motion for sanctions against WEI and its counsel on the ground that their counterclaims against Dilek are frivolous (Dkt. No. 41). For the reasons discussed below, WEI's motion for summary judgment is denied; Dilek's motion for summary judgment is denied in part and granted in part; and Dilek's motion for sanctions is denied.
This background statement of facts is drawn primarily from the four Rule 56.1 statements submitted by the parties.
A. Watson Enterprises, Inc.
Beginning in 1983, Defendant Watson Enterprises, Inc. operated a car dealership under the trade name Mercedes-Benz of Greenwich. (Watson's Statement Pursuant to Local Civil Rule 56.1 in Support of Its Motion for Summary Judgment, Dkt. No. 48 ("WEI 56.1 Statement"), ¶¶ 1, 3; Plaintiff's Response to Defendant's Statement Pursuant to Local Civil Rule 56.1, Dkt. No. 60 ("Dilek 56.1 Counterstatement"), ¶¶ 1, 3.) In 1995, the sole shareholder of WEI, Arthur "Kitt" Watson ("Watson"), sold a twenty-five percent share in the Company to Ronald Pecunies, who became WEI's chief operating officer ("COO"). (WEI 56.1 Statement ¶¶ 4, 7; Dilek 56.1 Counterstatement ¶¶ 4, 7; Stock Purchase Agreement including Shareholders' Agreement, Dkt. No. 10-1 ("Stock Purchase Agreement"), § 8.3, appended as Ex. 1 to Watson's Amended Answer and Counterclaims, Dkt. No. 10). Their agreement provided that "except as otherwise provided herein, decisions relating to day-to-day operations of the Corporation shall be determined by the holder(s) of the majority of the shares of the Corporation" and further provided that "[i]t [is] of the essence of this Agreement that [Pecunies] be active in the day to day management of the Corporation, and that [he] use due diligence and his best efforts and make the Corporation financially successful . . . ." (Stock Purchase Agreement §§ 7.6(e), 8.3.)
In practice, Watson's responsibilities at WEI included speaking to his accountant, signing payroll checks, and checking the books of the Company. (Deposition Transcript of Arthur Watson ("Watson Tr.") at 14:21-15:14, appended as Ex. 11 to Declaration of Elissa Fudim in Support of Plaintiff's Motion for Summary Judgment ("Fudim Decl.").) In the last five years of his presidency at WEI's Mercedes dealership (which ended July 18, 2011), Watson traveled to the dealership three or four times per month. (Id. at 8:13-20, 15:15-23.)
Dilek and Pecunies first met on January 28, 2004, and they began a romantic relationship shortly thereafter. (WEI 56.1 Statement ¶ 16; Dilek 56.1 Counterstatement ¶ 16.) On October 3, 2005, Plaintiff began living together with Pecunies at an apartment he leased at 220 Central Park South in New York City. (WEI 56.1 Statement ¶ 17; Dilek 56.1 Counterstatement ¶ 17.) On or about October 10, 2005, WEI hired Dilek as its Business Development Center Manager with a starting salary of $60,000. (WEI 56.1 Statement ¶ 18-19; Dilek 56.1 Counterstatement ¶ 18-19; Notice of Wages and Benefits, Dkt. No. 23-4 ("Employment Letter Agreement"), appended as Ex. 4 to Reiter Decl.) Dilek asserts that it was Pecunies who hired her. (Declaration of Emel Dilek, Dkt. No. 39 ("Dilek Decl."), ¶ 3.) Plaintiff's Employment Letter Agreement provided that WEI adheres to a policy of employment-at-will. Either the employee or the Company is at will to terminate the employment relationship at any time, with or without cause. Upon termination for any reason the Company will not pay accrued but unearned benefits. (Employment Letter Agreement at 2 (emphasis in original).) The letter agreement also delineated WEI's vacation and personal time policy, which allowed Plaintiff certain limited amounts of paid time off. (Id. at 1.) The letter agreement provided that its "terms . . . may be changed at any time, with or without notice, at the sole discretion of the management of Watson Enterprises Incorporated." (Id. at 2.)
C. Dilek's Accolades, Recognition, and Compensation
In 2006, Dilek's salary was raised from $60,000 to $100,000 per year. (Dilek's Statement of Material Facts Pursuant to Local Rule 56.1, Dkt. No. 38 ("Dilek 56.1 Statement"), ¶ 12; Watson's Counterstatement of Facts Pursuant to Local Civil Rule 56.1 in Opposition to Plaintiff's Motion for Summary Judgment, Dkt. No. 53 ("WEI 56.1 Counterstatement"), ¶ 12.) In 2007, her salary was raised again to $120,000 per year plus additional benefits. (Dilek 56.1 Statement ¶ 14; WEI 56.1 Counterstatement ¶ 14.) Dilek was informed of these raises by Pecunies and the dealership's general manager, Russ Baird. (Declaration of Emel Dilek, Dkt. No. 39 ("Dilek Decl."), ¶¶ 5, 6; Dilek 56.1 Statement ¶¶ 13, 15; WEI 56.1 Counterstatement ¶¶ 13, 15.) Also in 2007, Dilek was promoted from Business Development Center Manager to Business Development and Marketing Manager. (Dilek 56.1 Statement ¶ 16; WEI 56.1 Counterstatement ¶ 16.) She was informed of that promotion by Pecunies. (Dilek Decl. ¶ 6; Dilek 56.1 Statement ¶ 17; WEI 56.1 Counterstatement ¶ 17.)
During her tenure at WEI, Dilek received numerous certifications in the Mercedes-Benz Standards of Excellence Program. (Dilek Decl., Exs. 1-4; Dilek Decl. ¶ 6; Dilek 56.1 Statement ¶¶ 18-22; WEI 56.1 Counterstatement ¶¶ 18-22.) On June 27, 2008, she received an email message from WEI's president, Watson, telling her "[t]hank you Emel for doing a bang up job two thumbs up." (Email from Watson to Dilek, dated June 27, 2008, appended as Ex. 6 to Dilek Decl.) She received another email from Watson on November 18, 2008, which concluded, "Keep up the good work." (Email from Watson to Dilek, dated November 18, 2008, appended as Ex. 5 to Dilek Decl.; Watson Tr. 54:17.) During her employment at WEI, Dilek never received notice that there was any problem with her job performance. (Dilek 56.1 Statement ¶ 44; WEI 56.1 Counterstatement ¶ 44.) WEI paid Dilek her salary without complaint or reservation from January 2005 to August 2010. (Watson Tr. 69:20-70:10, 57:10-12, 66:20-67:5; Dilek 56.1 Statement ¶ 52; WEI 56.1 Counterstatement ¶ 52.)
During her employment with the Company, Dilek and Pecunies took numerous vacations together throughout the world. (Deposition Transcript of Emel Dilek ("Dilek Tr.") at 85:19-91:24, 94:13-99:20, appended as Ex. 2 to Reiter Decl.)
With Pecunies's permission, Dilek used his company credit card, and then her own company credit card, from 2007 until Pecunies's death in May 2010. (Dilek 56.1 Statement ¶¶ 54-56; WEI 56.1 Counterstatement ¶¶ 54-56.) The Company deducted from Pecunies's earnings amounts that Pecunies or Plaintiff identified as personal charges to those cards. (Dilek 56.1 Statement ¶¶ 57-59; WEI 56.1 Counterstatement ¶ 58.) WEI asserts that Pecunies had not repaid WEI for all of Dilek's personal credit card expenses before the time he died. (WEI 56.1 Counterstatement ¶ 61-62; Dilek 56.1 Statement ¶ 62 (partially agreeing).) Watson testified that WEI sought reimbursement for those charges in an arbitration against Pecunies's estate. (Watson Tr. 75:2-8, 76:3-9.) WEI and Pecunies's estate reached a confidential settlement of that arbitration in December 2011. (Declaration of Nicholas M. Reiter in Further Support of Watson's Motion for Summary Judgment and in Opposition to Plaintiff's Motion for Summary Judgment, Dkt. No. 50 ("2d Reiter Decl."), ¶ 20.)
Watson asserts that Dilek's company credit card use was improper. His deposition testimony includes the following exchange:
Q: When did you first become aware that Ms. Dilek was, in your words, misusing the company credit card?
A: Pretty near from the start.
A: Yes. (Watson Tr. at 69:20-25.) In a declaration submitted with WEI's motion papers, Watson has asserted that, although he "was aware during Plaintiff's employment that she, on occasion, used Mr. Pecunies's corporate credit card," he "did not learn until shortly before Mr. Pecunies's death in May 2010 of the considerable number of purchases Plaintiff made using the Company's corporate credit card." (Declaration of Arthur K. Watson in Further Support of Watson's Motion for Summary Judgment and in Opposition to Plaintiff's Motion for Summary Judgment, Dkt. No. 51 ("2d Watson Decl."), ¶ 4.)
WEI asserts that the Company paid Dilek's mobile phone bills. (Declaration of John Cox in Support of Watson's Motion for Summary Judgment and in Opposition to Plaintiff's Motion for Summary Judgment, Dkt. No. 52 ("Cox Decl."), ¶¶ 6-7; WEI 56.1 Counterstatement ¶ 64 (citing WEI financial documents, Dkt. No. 40-3 ("WEI Financial Documents"), appended as Ex. 13 to Fudim Decl., at WATSON 0000692-0000719).) Dilek concedes that WEI paid her mobile phone bills but avers that Pecunies charged those bills to the Company without her knowledge.*fn2
(Dilek Decl. ¶ 30.) However, WEI has submitted email messages apparently from Dilek to other Company personnel directing that they pay certain phone bills, partially with corporate funds.
(2d Reiter Decl., Ex. 3.) The first email, dated April 23, 2008, has the subject line "phone bill - please read asap-thanks a lot!!!!" and calls for a check to be written for $537.30. (Id. at 2.) The email also includes instructions that "[o]ut of that [amount] charge Ron $302.99 and charge the company $234.31." (Id.) That bill appears to be reflected in Company financial records as an expense of $234.31 and an advance of $302.99, both dated April 26, 2008 and both labeled "AT&T MOBILITY-EMEL PHONE." (WEI Financial Documents at WATSON 0000695.) The second email, dated November 18, 2008, calls for payment of an "ATT bill" for $807.02 and includes the message, "Ron had high bill cause he was in Bermuda." (2d Reiter Decl., Ex. 3, at 1.) That bill appears to be reflected in Company financial records as a Company expense, dated November 18, 2008, for $807.02 for "AT&T MOBILITY-EMEL'S PHONE." (WEI Financial Documents at WATSON 0000702.)
E. The 2009 Employment Agreement
On or about January 1, 2009, Pecunies (purportedly on behalf of WEI) and Dilek signed an employment agreement, which provided that Dilek would continue for a four-year term of employment as WEI's Business Development Center and Marketing Manager. (Compl. ¶ 11; Employment Agreement, appended as Ex. 1 to Compl; Dilek 56.1 Statement ¶¶ 28-29; WEI 56.1 Counterstatement ¶¶ 28-29.) The Employment Agreement promised Dilek "an annual (gross) salary of ONE HUNDRED TWENTY [sic] ($120,000.00) DOLLARS," in addition to commissions and other benefits. (Employment Agreement at 1.) The Employment Agreement called for Dilek to pay the Company consideration of one dollar. (Id.)
Dilek testified that she was aware that Watson sometimes prohibited Pecunies from firing certain employees at WEI, though Pecunies wanted to do so. (Dilek Tr. 60:4-23, 58:4-59:7; see also August 25, 2011 Dilek Email at 3-4 of 9.) Dilek did not ask Pecunies whether he had authority to enter into the Employment Agreement or whether he had discussed the Employment Agreement with Watson. (Dilek 56.1 Statement ¶¶ 35-36; WEI 56.1 Counterstatement ¶¶ 35-36.) When asked at her deposition whether Watson had said or done "anything that made you think he had authorized Mr. Pecunies to offer you an employment contract," Dilek answered, "I don't remember." (Dilek Tr. at 63:3-10.)
F. The End of Dilek's Employment
In October 2009, Pecunies was diagnosed with pancreatic cancer, and the Company granted Dilek leave as of May 7, 2010. (Dilek 56.1 Statement ¶¶ 66-67; WEI 56.1 Counterstatement ¶¶ 66-67.) During her leave, Dilek traveled to Germany and also attended the 2010 Cannes Film Festival in France. (WEI 56.1 Statement ¶ 55; Dilek 56.1 Counterstatement ¶ 55.)
Pecunies died on May 22, 2010. (WEI 56.1 Statement ¶ 51; Dilek 56.1 Counterstatement ¶ 51.) On August 26, 2010, WEI terminated Dilek's employment. (WEI 56.1 Statement ¶ 56; Dilek 56.1 Counterstatement ¶ 56.) When asked at his deposition what his basis had been for terminating Dilek, Watson answered, "[t]hat I don't want my ex-partner's girlfriend working for me. Or fiancee, excuse me." (Watson Tr. at 80:2-4.)
II. Legal Standard for Summary Judgment
Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The "mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Scott v. Harris, 550 U.S. 372, 380 (2007) (internal quotation marks and citation omitted). "A fact is 'material' when it might affect the outcome of the suit under governing law," and "[a]n issue of fact is 'genuine' if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 202 (2d Cir. 2007) (internal quotation marks and citation omitted).
When determining whether a genuine dispute of material fact exists, a court must view the facts in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. See Fincher v. Depository Trust & Clearing Corp., 604 F.3d 712, 720 (2d Cir. 2010).
"A court faced with cross-motions for summary judgment need not 'grant judgment as a matter of law for one side or the other,' but 'must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration.'" Cariou v. Prince, 784 F. Supp. 2d 337, 345 (S.D.N.Y. 2011) (quoting Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir.1993)) (internal quotation marks not referring to quotation from Heublein omitted).
The parties agree that Connecticut law governs this action. Accordingly, the Court may apply Connecticut law without engaging in a choice-of-law analysis. See Motorola Credit Corp. v. Uzan, 388 F.3d 39, 61 (2d Cir. 2004) (Even "implied consent is sufficient to establish choice of law." (internal quotation marks and ellipses omitted)).
This discussion addresses in turn (1) Dilek's motion and WEI's cross-motion for summary judgment as to Dilek's claims; (2) Dilek's motion for summary judgment as to WEI's counterclaims; and (3) Dilek's motion for sanctions.
A. Breach of Contract and of the Duty of Good Faith and Fair Dealing
Under Connecticut law, "[t]he elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages." Rosato v. Mascardo, 82 Conn. App. 396, 411, 844 A.2d 893 (2004) (internal quotation marks omitted). Plaintiff's claim for breach of the duty of good faith and fair dealing (addressed by WEI's summary judgment motion but not Dilek's) is considered together with her contract claim because both of these claims depend upon the existence of an enforceable contract between the parties. See Macomber v. Travelers Property & Cas. Corp., 261 Conn. 620, 638 (2002) ("As our case law makes clear, no claim for breach of the duty of good faith and fair dealing will lie for conduct occurring prior to, or during, the formation of a contract.").
Here, the parties' dispute centers on whether Pecunies had authority sufficient to bind WEI to the Employment Agreement and, as a result, whether the signing of the Employment Agreement was the formation of a valid contract that was binding on WEI. The Connecticut Supreme Court has held that, generally, "the principal in an agency relationship is bound by, and liable for, the acts in which his agent engages with authority from the principal, and within the scope of the agent's employment." Ackerman v. Sobol Family P'ship, LLP, 298 Conn. 495, 508 (2010) (internal quotation marks, alterations, and citation omitted). But as a threshold matter, the parties dispute which of them bears the burden to show that such authority did or did not exist.
1. Burden of Proof Concerning Pecunies's Authority
Plaintiff correctly notes that, under New York choice-of-law rules, the parties' choice of law governs substantive but not procedural issues. See Phillips v. Audio Active Ltd., 494 F.3d 378, 384-85 (2d Cir. 2007) (citing Woodling v. Garrett Corp., 813 F.2d 543, 551-52 (2d Cir. 1987)). "The question of burden of proof . . . is regarded by New York law as a question of procedure to which the law of the forum applies." Woodling, 813 F.2d at 552; see also Bensen v. American Ultramar, 1997 U.S. Dist. LEXIS 1608, at *47 n.26 (S.D.N.Y. Feb. 13, 1997).
New York law on the burden of proof as to a corporate official's contracting authority today remains largely as it was explained by Judge Learned Hand in 1934: "whatever powers are usual in the business may be assumed to have been granted; but the presumption stops there, as much in the case of a president as of any other officer, though naturally in degree they may greatly differ." Schwartz v. United Merchants & Mfrs., Inc., 72 F.2d 256, 258 (2d Cir. 1934). Thus, a corporate official's authority to bind a corporation without express say-so "exists only as to matters which are 'usual' or 'ordinary,' and . . . the burden rests upon the party challenging the [official's] authority to show that the transaction was 'unusual' or 'extraordinary.'" Pettit v. Doeskin Products, Inc., 270 F.2d 95, 99 (2d Cir. 1959). The Second Circuit has more recently elaborated that
[u]nder New York law it is settled that, in order to bind a corporation to an "extraordinary" or "unusual" contract entered into between a corporate official and another party, it is necessary to show that the official had express authority to enter into the contract. Pettit v. Doeskin Prods., Inc., 270 F.2d 95, 99 (2d Cir. 1959), cert. denied, 362 U.S. 910, 80 S. Ct. 660, 4 L. Ed. 2d 618 (1960); see also Scientific Holding Co. v. Plessey Inc., 510 F.2d 15, 23-24 (2d Cir. 1974); Schwartz, 72 F.2d at 258. In Pettit, we noted that "what is usual or ordinary necessarily ...