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Leevson v. Aqualife Usa, Inc.

United States District Court, E.D. New York

November 1, 2017

VICTORIA LEEVSON, MICHAEL LEIBZON, MATANA ENTERPRISES, LLC, KATHERINE TSIGEL, VADKAT, INC., VLADISLAV PUSTOV, and IMPERIAL ENTERPRISE SERVICES, INC., Plaintiffs,
v.
AQUALIFE USA, INC., AQUALIFE, INC., ALEX GITELMAN, YAKOV SIONOV, and VLADIMIR GORBACH, Defendants. Overtime Interest Overtime Interest Wage Statement Wage Notice Liquidated Total

         On Behalf of Plaintiffs:

          Svetlana Sobel Sobel Law Offices 175 Eileen Way Syosset, NY 11791

         On Behalf of Defendants:

          Robert Bondar Law Office of Robert Bondar, Emanuel Kataev Milman Labuda Law Group, PLLC Joseph M. Labuda Milman Labuda Law Group, PLLC

          MEMORANDUM, ORDER & JUDGMENT

          Jack B. Weinstein, Senior United States District Judge

         Table of Contents

         I. Introduction .................................................................................................................. 4

         II. Facts .......................................................................................................................... 4

         A. Defendants' Product and Nature of Industry......................................................... 4

         B. Plaintiffs ................................................................................................................ 5

         C. Claims.................................................................................................................... 5

         D. Jury Verdict and Rule 50 Motions ........................................................................ 5

         1. Jury Verdict ....................................................................................................... 5

         2. Rule 50 Motions ................................................................................................ 6

         E. Testimony and Evidence ....................................................................................... 7

         1. Aqualife's Independent Business Owner Contract ............................................ 7

         2. Marketing Plan .................................................................................................. 7

         3. Vladislav Pustov ................................................................................................ 8

         4. Michael Leibzon ................................................................................................ 8

         5. Katherine Tsigel ................................................................................................ 9

         6. Victoria Leevson .............................................................................................. 10

         7. Yakov Sionov and the Individual Defendants ................................................. 11

         III. Law ......................................................................................................................... 11

         A. Rule 50 ................................................................................................................ 11

         B. Contract Formation and Modification ................................................................. 12

         1. Intent to be Bound ........................................................................................... 12

         2. Assent .............................................................................................................. 13

         3. Statute of Frauds .............................................................................................. 14

         C. Fair Labor Standards Act and New York Labor Law ......................................... 14

         1. Employee v. Independent Contractor .............................................................. 14

         i. Tax Return Status and Estoppel ........................................................................ 15

         ii. Worker Misclassification ................................................................................. 16

         iii. Commissioned Salespersons .......................................................................... 19

         iv. Written Consent for Collective Actions.......................................................... 19

         2. Overtime Pay ................................................................................................... 20

         i. “Work” from Home or “On-call” .................................................................... 20

         ii. Mixed Question of Fact and Law .................................................................... 22

         iii. New Technology and a Shifting Paradigm ..................................................... 22

         3. Statute of Limitations ...................................................................................... 23

         4. Notice and Statement Requirements ................................................................ 23

         5. Willfulness and Liquidated Damages .............................................................. 25

         6. Attorney's Fees and Costs ............................................................................... 25

         7. Pre-Judgment Interest ...................................................................................... 26

         8. New York CPLR Interest Calculations ........................................................... 26

         9. Post-Judgment Interest .................................................................................... 27

         IV. Application of Law to Facts .................................................................................... 27

         A. Plaintiffs Assented to the Terms of the Contract as Consistently Applied ......... 27

         B. Residual Commission is Barred by the Statute of Frauds ................................... 28

         C. Plaintiffs Leevson and Tsigel are Protected by the FLSA and NYLL ................ 28

         D. Inside Salespeople ............................................................................................... 30

         E. Written Consent................................................................................................... 30

         F. Overtime under the FLSA and NYLL................................................................. 30

         G. Compensation for On-Call or Wait Time ............................................................ 31

         V. Damages .................................................................................................................. 32

         A. Breach of Contract .............................................................................................. 32

         B. FLSA and NYLL ................................................................................................. 32

         C. Liquidated Damages ............................................................................................ 32

         D. Pre-Judgment Interest .......................................................................................... 33

         1. Leevson's Interest ................................................................................................. 34

         2. Tsigel's Interest ..................................................................................................... 34

         E. Post-Judgment Interest ........................................................................................ 34

         F. Costs .................................................................................................................... 34

         G. Attorney's Fees ................................................................................................... 35

         H. Damages Chart .................................................................................................... 35

         VI. Summation of Rulings on Jury Verdict Findings ................................................... 36

         VII. Conclusion ........................................................................................................... 38

         VIII. Appendixes A-D, Relevant Documents .............................................................. 40

         IX. Appendix E, Jury Charge and Verdict Sheet ....................................................... 44

         I. Introduction

         After a four-week trial and complex jury verdict, this memorandum and order addresses pre-and post-verdict Rule 50 motions.

         The case involves: (1) a simple contract question of whether critical terms of an agreement were in effect assented to by the consistent conduct of the parties; on this point the jury verdict, granting damages to the plaintiffs, is set aside; (2) whether employees working and classified as independent entities, but under individual contract and control of the employer were entitled to the protection of state and federal wage laws; on this point the jury verdict, finding the wage laws applicable, is affirmed; and (3) whether employees working or “on-call” for their employer after they physically leave the employer's office, while they are at home and under conditions that impede them from going about their normal life, are entitled to overtime pay; on this point the jury's verdict, finding that they were at work while at home, is affirmed.

         II. Facts

         A. Defendants' Product and Nature of Industry

         Defendant Aqualife USA, Inc., (“Aqualife”) sells and services water filtration systems to the Russian speaking community in New York City and its environs. Trial Tr. 1191:21. The company was formed in 2004, along with its subsidiary Aqualife, Inc. Trial Tr. 1190:3-11. It is owned and operated by defendants Yakov Sionov, Vladimir Gorbach, and Alexander Gitelman. Trial Tr. 1190:3-11.

         The company employs a number of salespeople, who are paid commissions, as well as office staff, who are paid hourly wages and perform clerical and “telemarketing” work under direction of management. Trial Tr. 1192:1-9. Some employees are required to create independent corporate entities through which they are paid for the services they render. Trial Tr. 1192:15-24.

         B. Plaintiffs

         All individual plaintiffs were under contract with Aqualife, but were paid through their personal corporations. Plaintiffs Victoria Leevson and her husband, Michael Leibzon, are owners and operators of Matana Enterprises, Inc. (“Matana”). Trial Tr. 1199:1-6. Plaintiff Katherine Tsigel and her husband Vadim Tsigel (who is not a party to this suit) own and operate VadKat, Inc. (“VadKat”). Plaintiff Vladislav Pustov is the owner and operator of Imperial Enterprise Services, Inc. (“Imperial”). Trial Tr. 1197:6-1198:22.

         C. Claims

         Each individual plaintiff and their corporation sues Aqualife USA, Inc., Aqualife, Inc., and owners Alex Gitelman, Yakov Sionov, and Vladimir Gorbach, individually, jointly and severally.

         They assert claims that they were not paid commissions and wages, in breach of their individual contracts.

         Plaintiffs Victoria Leevson and Katherine Tsigel also individually claim under state and federal labor laws that they were not paid wages earned and overtime, and not provided with proper wage statements and notices.

         D. Jury Verdict and Rule 50 Motions

         After four weeks of trial and thousands of pages of exhibits, the jury returned a verdict in favor of the plaintiffs on their claims for commissions and wages, overtime pay, and lack of wage statements and notices. See App. E, Jury Instructions and Verdict Sheet.

         1.Jury Verdict

         For breach of contract, the jury awarded: $5, 982 for commissions to Matana; $4, 056 for commissions to VadKat; $77, 500 for commissions to Imperial; $25, 680.54 for hourly compensation and $87, 989 for commissions to Victoria Leevson; $5, 982.60 for commissions to Michael Leibzon; $48, 320.45 for hourly compensation and $159, 691.89 for commissions to Katherine Tsigel; and $77, 500 for commissions to Vladislav Pustov. Mr. Pustov and his company Imperial were awarded “residual commissions” through 2026. See App. E.

         Under the FLSA and the NYLL, the jury awarded: $2, 500 for wage notice violations, $2, 500 for wage statement violations, and $25, 680.54 for overtime pay to Victoria Leevson; and $2, 500 for wage notice violations, $2, 500 for wage statement violations, and $48, 320.45 for overtime pay to Katherine Tsigel. Id.

         2.Rule 50 Motions

         The defendants orally and in writing made the following motions pursuant to Federal Rule of Civil Procedure 50(a)-(b):

(1) Motion for judgment as a matter of law on plaintiffs' FLSA and NYLL claims, ECF No. 164, Aug. 17, 2017.
(2) Motion for judgement as a matter of law on plaintiffs' breach of contract claims on the ground that plaintiffs assented to the contract terms offered by defendants, ECF No. 165, Aug. 17, 2017.
(3) Motion for judgement as a matter of law on plaintiffs' breach of contract claims for residual commissions as barred by the statute of frauds, ECF No. 166, Aug. 17, 2017.
(4) Letter in support of motion for judgment as a matter of law on plaintiffs' breach of contract claims, ECF No. 167, Aug. 17, 2017.
(5) Reply to plaintiffs' memorandum in opposition to defendants third motion for judgment as a matter of law, ECF No. 181, Aug. 23, 2017.
(6) Fourth motion for judgment as a matter of law on plaintiffs' breach of contract claims against the individual defendants, ECF No. 183, Aug. 27, 2017.
(7) Fifth motion for judgment as a matter of law on plaintiffs' FLSA and NYLL claims against defendants, ECF No. 184, Aug. 27, 2017.
(8) Sixth motion for judgment as a matter of law on the grounds that plaintiffs Leevson and Tsigel are exempt from overtime requirements as commissioned salespersons, ECF No. 187, Aug. 28, 2017.
(9) Motion for judgment as a matter of law, motion for new trial, ECF No. ...

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