United States District Court, E.D. New York
COSA XENTAUR CORPORATION, f/k/a COSA INSTRUMENT CORPORATION and XENTAUR CORPORATION, Plaintiff,
DAVID BOW, Defendant.
Loretta M. Gastwirth, Esq., Paul M. Rubell, Esq., Meltzer, Lippe, Goldstein & Breitstone, LLP, Mineola, NY, for Plaintiff.
Colleen M. McLaughlin, Esq., Law Offices of Colleen McLaughlin, Wheaton, IL, Melissa E. Pierre-Louis, Esq. Outten & Golden LLP, New York, NY, Defendant.
MEMORANDUM & ORDER
JOANNA SEYBERT, District Judge.
Plaintiff Cosa Xentaur Corporation "Plaintiff" or "COSA") commenced this action on May 17, 2013 against defendant David Bow ("Defendant" or "Bow"), a former COSA executive, alleging, inter alia, that Bow breached his employment agreement with COSA when he failed to return commission payments, which, according to COSA, were in excess of the amounts agreed upon under Bow's employment agreement. Bow has moved to dismiss the Complaint for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3) and 28 U.S.C. § 1406(a) or, in the alternative, to transfer venue to the Northern District of Illinois pursuant to 28 U.S.C. § 1404(a). (Docket Entry 7. COSA has opposed Bow's motion and filed a cross-motion pursuant to the first-filed rule seeking to enjoin a later-filed, related lawsuit that Bow filed in the Northern District of Illinois. (Docket Entry 15. Bow has also moved to strike four declarations that COSA submitted in connection with its opposition and cross-motion. (Docket Entries 19 & 26. For the following reasons, Bow's motion to dismiss for improper venue is DENIED, Bow's motion to transfer venue is DENIED, COSA's motion to enjoin the Illinois action is GRANTED, and Bow's motions to strike are DENIED.
COSA is a Delaware corporation that provides high technology instrumentation for use in various industrial and energy industries. (Compl. ¶¶ 1, 9.) It maintains its corporate headquarters and principal place of business in Yaphank, New York, which is located in this District. (Compl. ¶ 1.) COSA employed Bow-who is a resident of Vernon Hills, Illinois-as Senior Vice President of Commercial Development from September 30, 2010 until March 8, 2013. (Compl. ¶ 10; Bow Decl., Docket Entry 10, ¶ 19.) As discussed more fully below, during the course of his employment, Bow worked primarily from his home office in Illinois and spent the remainder of his time traveling to other domestic and international locations for sales purposes.
In the Spring of 2010, COSA posted a job advertisement on the social networking website, Linkedin, for the position of Vice President of Global Sales-a new position that would entail supervising COSA's domestic and international sales and also included responsibility for direct sales to domestic accounts on the West Coast. (Allshouse Decl., Docket Entry 16, ¶¶ 6-8.) Bow responded to the advertisement and had an initial phone interview. (Bow Decl. ¶ 4.) In August 2010, COSA "flew Bow from Chicago to Islip, New York" for a "full day of meetings" with COSA's President and Chief Operating Officer, Craig Allshouse ("Allshouse"), and COSA's Chief Executive Officer and Chief Financial Officer. (Allshouse Decl. ¶ 7.) Bow contends that the meeting in New York was "essentially nothing more than an initial interview." (Def.'s Reply Br. in Supp. of Mot. to Dismiss and in Opp. to Pl.'s Cross-Mot. ("Def.'s Reply Br."), Docket Entry 21, at 2.)
In September 2010, Bow visited COSA's Houston offices where some of COSA's sales personnel were located. (Allshouse Decl. ¶ 7.) Bow claims that the parties began "talking about the terms of employment" during the Houston meeting and that the parties conducted the remainder of the employment negotiations by phone. (Bow Decl. ¶ 4.)
On September 17, 2010, Allshouse, who works in COSA's New York office, e-mailed Bow stating that the prior meeting "was very positive" and that he "want[ed] to move forward towards getting [Bow] on board the Cosa Xentaur team." (Allshouse Decl. Ex. C. Allshouse provided a "draft outline" of the initial position objectives, including that the position would be "Vice President of Global Sales based in Cosa Xentaur's Houston Office" and that Bow would receive a base salary in the "$160K range with a commission plan that [would] put the total compensation in the $225K range based on current sales" of the company. (Allshouse Decl. Ex. C.)
On September 20, 2010, Bow responded to Allshouse by email from Illinois requesting $20, 000 in additional base salary and a change of position title to "Executive Vice President of Global Sales, Services and Marketing" or "Chief Commercial Officer." (Allshouse Decl. Ex. C.) Bow also requested a severance agreement that would provide Bow a pre-determined amount of severance pay in the event he was terminated without cause or if he lost his job due to a "change in control." (Allshouse Decl. Ex. C.)
COSA agreed in part to Bow's requests and, on September 30, 2010, Allshouse e-mailed Bow a formal offer of employment (the "Employment Letter"). (Allshouse Decl. Ex. D.) The Employment Letter stated that Bow's position title would be "Senior Vice President, Commercial Development reporting to the President/COO" and that COSA's offer was "contingent upon [Bow's] relocation to the COSA Houston office within 18 months from the start date of [Bow's] employment." (Allshouse Decl. Ex D. The Employment Letter also provided that Bow's base salary would be $170, 000 and that he would receive monthly commissions based on a percentage formula of all net paid sales of the company, not just the direct sales Bow made. (Allshouse Decl. Ex D.)
Bow accepted the offer by e-mail from his home in Illinois but conditioned his acceptance upon the parties entering into a severance agreement. (Bow Decl. ¶ 5.) On October 5, 2010, Allshouse e-mailed Bow a severance agreement (the "Severance Agreement"), which Bow signed in Illinois and e-mailed back to Allshouse. (Bow Decl. ¶ 6.) Allshouse signed the Severance Agreement the same day and sent an executed version back to Bow. (Bow Decl. ¶ 6; Allshouse Decl. Ex. E.) During the negotiations, no employee of COSA ever traveled to Illinois and Bow never traveled to New York, with the exception of the initial meeting at COSA's New York headquarters in August 2010.
As noted above, the parties initially agreed that Bow position would be based out of COSA's Houston office. However, Bow subsequently asked if he could work remotely from his home office in Illinois until his son graduated from high school. (Allshouse Deci. ¶ 11; Bow Decl. ¶ 7.) COSA accommodated Bow because his job would require significant travel time anyway. (Allshouse Decl. ¶ 11.) Thereafter, Bow remained in Illinois for the duration of his employment for additional personal reasons. (Allshouse Decl. ¶ 11.)
As Senior Vice President of Commercial Development, Bow reported directly to Allshouse and was responsible for the sale of scientific instrumentation to laboratories and manufacturers globally. (Bow Decl. ¶ 8.) Bow claims that he performed approximately fifty percent of his job duties from his home office in Illinois and that he spent the remainder of his time in COSA's Houston office and other locations around the world for sales purposes and to mentor and train sales representatives. (Bow Decl. ¶ 11. COSA does not dispute Bow's characterization of his time spent in Illinois. Instead, COSA contends that although Bow had responsibilities in Illinois and on the road, he was a top executive in the New York-based company and therefore "had... physical presence and importance in COSA's headquarters in [New York]." (Allshouse ¶ 12.) COSA states, for example, that Bow "connected to COSA's main servers in New York althost every day to carry out his responsibilities" and that he frequently reported to Allshouse in New York and COSA's former Chief Financial Officer, Bob Striedl, who both worked in COSA's New York headquarters. (Allshouse Decl. ¶¶ 12, 16.) Bow also reviewed regional sales reports that were generated in New York and also oversaw and directed the company's sales compensation and commission structures, which were determined, approved, and, implemented from COSA's New York headquarters. (Allshouse Decl. ¶ 16.) In addition, as Bow admits, he made one to two visits per year to COSA's New York office for work. (Bow Decl. ¶ 12.)
As noted above, Bow received commissions based on a percentage formula set forth in his Employment Letter. (Allshouse Decl. Ex. D.) By letter dated January 25, 2013, COSA's Chief Financial Officer, Arthur Wasserspring ("Wasserspring"), informed Bow that COSA had incorrectly calculated Bow's commission payments for the fiscal year of 2012, resulting in an overpayment of $89, 256.28 to Bow. (Allshouse Decl. Ex. F.) Wasserspring proposed that the overpayment be deducted from Bow's future commission payments. (Allshouse Deci. Ex. Bow objected and Allshouse claims that he "pressed [Bow] for a return of the overpaid commissions." (Allshouse Decl. ¶ 22.
The parties were unable to resolve the dispute. On March 8, 2013, COSA terminated Bow's employment effective that same day. (Bow Decl. ¶ 19; Allshouse Decl. Ex. By letter dated March 14, 2013, COSA sent Bow a general release, which the Severance Agreement required Bow to sign as a condition to receiving severance payments under the agreement. (Allshouse Decl. Exs. E & I.) The March 14th letter further advised that upon execution of the general release, COSA would initiate Bow's severance payments but that it would deduct the $89, 256.28 in alleged overpaid commission from the payments. (Allshouse Decl. Ex I.) Bow declined to sign the release, and COSA did not make any severance payments to Bow.
Starting at the end of March 2013 through the middle of May 2013, attorneys for Bow and COSA exchanged a series of letters and e-mails regarding the dispute. On March 28, 2013, Bow's attorney, Colleen McLaughlin ("McLaughlin"), wrote to Allshouse stating that COSA's failure to pay Bow his full severance "would result, at a minimum, in violations of New York and Illinois wage laws as well as [ERISA]." (Rubell Decl. Docket Entry 17, Ex. A, ) McLaughlin demanded that COSA "reconsider its decision to offset [the] alleged overpayment from [Bow's] severance payment" and stated that Bow "hope[d] that [the parties could] nip any potential conflicts in the bud" and "arrive at a mutually agreeable release." (Rubell Decl. Ex. A.) The March 28th letter did not contain a specific threat of litigation, a deadline for the commencement of litigation, or a potential venue for litigation. (See Rubell Decl. Ex. A.
By letter dated May 2, 103, COSA general counsel, Paul Rubell "Rubell" responded to McLaughlin. (Rubell Decl. Ex. B.) Rubell rejected Bow's position, demanded the immedimmediate return of the $89, 256.78 in alleged overpaid commissions, and suggested that COSA would commence an action against Bow to recover the alleged overpayment: "Unless COSA receives an immediate return of the overpayment of $89, 256.78 made to Bow on or before May 9, 2013, COSA will have no alternative but to take all steps necessary to retrieve that sum." (Rubell Decl. Ex, B.)
By e-mail dated May 6, 2013, Rubell advised McLaughlin that COSA wanted "to review [Bow's] mathematical computation of the commission that was paid to (Bow] for 2011 and 2012." (McLaughlin Reply Decl., Docket Entry 21-2, Ex. 2.) However, Rubell reiterated that COSA believed that it had overpaid Bow but that was "willing to listen to [Bow's] point of view." (McLaughlin Reply Decl. Ex. 2.
By letter dated May 8, 2013, McLaughlin responded, stating that "it [was] COSA who [was] in breach of the Severance Agreement" and that COSA would "face major hurdles in court should it continue to refuse to pay the full amount of the severance owed to [Bow]." (Rubel) Decl. Ex. C.) McLaughlin further demanded that COSA reimburse Bow for $30, 000 in business expenses Bow had allegedly incurred. (Rubell Decl. Ex. C. McLaughlin stated that Bow was "willing to make a reasonable compromise of his claims" in that he would "waive recovery of [his attorney's] fees and provide COSA with a signed General Release, if COSA agree[d] to pay the agreed upon severance and the business expenses for which [Bow was] to be reimbursed by Friday May 10." (Rubell Decl. Ex. C.) She concluded her letter stating COSA is serious about avoiding litigation, it will give due consideration to this settlement offer." (Rubell Decl. Ex. C.)
Although McLaughlin's May 8th letter contained a May 10th deadline for COSA to pay Bow's full severance, Rubel' did not respond until May 13, 2013, three days after the deadline, and Bow did not commence litigation. Rubell's May 13th letter indicated that COSA preferred to settle the matter but made clear that COSA believed that Bow had not made a "substantive settlement offer" and that COSA "would need a meaningful settlement offer from [Bow]" to resolve the dispute. (Rubell Decl. Ex. D.)
On Wednesday, May 15, 2013, McLaughlin e-mailed Rubell and advised him that she would be traveling but could speak with him on either Thursday afternoon or Friday morning of that week. (McLaughlin Reply Decl. Ex. 3.) Rubell e-mailed McLaughlin on the morning of Friday, May 17, 2013 and advised McLaughlin that he was available to speak all day. (McLaughlin Reply Decl. Ex. 4.) According to McLaughlin, she did not respond to Rubell's e-mail because she "was attending [her] sister's wedding in Florida the weekend of May 17." (McLaughlin Reply Decl. ¶ 11.)) At this point, having not received what COSA believed to be a reasonable settlement offer, COSA determined that it should commence litigation to recover the alleged overpaid commission. (Rubell Decl. ¶ 21. Accordingly, COSA filed the Complaint in this action on May 17, 2013 (the "New York Action"). The Complaint alleges claims for (1) breach of the Employment Letter; (2) money had and received; (3) unjust enrichment; and (4) a declaratory judgment that the alleged overpaid commissions constituted advances against any severance payments owed Bow under the Severance Agreement.
McLaughlin and Rubell spoke briefly on the morning of Monday, May 20, 2013, but McLaughlin's cell phone battery died before they could finish their conversation. (Rubell Decl. ¶ 23; McLaughlin Reply Decl. ¶ 13.) Before her cell phone died, however, McLaughlin presented a revised settlement offer that Bow would waive any additional commissions he believed he was owed and the statutory penalty Bow believed he was entitled to under the Illinois Wage Payment and Collection Act. (McLaughlin Reply Decl ¶ 13.) However, because Bow would not agree to compromise any portion of the amount COSA alleged it had overpaid, COSA decided to serve Bow with the Summons and Complaint in the New York Action. (Rubell Decl. ¶ 23.)
Bow was served with the Summons and Complaint on the evening of May 21, 2013. (Docket Entry 4.) Before service was made, however, McLaughlin and Rubell spoke again by telephone that morning. According to McLaughlin, she "advised [Ruben] that [the parties] were approaching [the] dispute from two very different angles" and that Bow "want[ed] that to which he [was] entitled and ha[d] no interest in arriving at a middle ground." (McLaughlin Reply Decl. ¶ 15.)
Two weeks later, on June 4, 2013, Bow filed a complaint against COSA in the Northern District of Illinois asserting claims for: (1) unpaid severance and commission under the Illinois Wage Payment and Collection Act ("IWPCA"); (2) breach of the Severance Agreement; (3) an accounting of unpaid commissions under the IWPCA; and (4) breach of the Employment Letter for unpaid business expenses Bow incurred during his employment (the "Illinois Action"]. (Bow Decl. Ex. 1.)
Bow moves to dismiss the Complaint for improper venue under Federal Rule of Civil Procedure 12(b)(3) and 28 U.S.C. § 1406(a), or in the alternative, to transfer venue to the Northern District of Illinois pursuant to 28 U.S.C. § 1404(a). COSA has filed a cross-motion pursuant to the first-filed rule seeking to enjoin the second-filed Illinois Action. Because Bow has challenged venue, COSAAfirst has the burden of proving that venue is proper in this forum. See Jaguar Cars, Ltd. v. Nat'l Football ...