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Beach v. HSBC Bank USA, N.A.

United States District Court, S.D. New York

November 20, 2017

HSBC BANK USA, N.A., Defendant.

          OPINION & ORDER


         HSBC Bank USA, N.A. (“HSBC”) moves to dismiss Stephen Beach's claim alleging HSBC's failure to pay wages under New York Labor Law (“NYLL”) § 193. Beach seeks at least $35, 000 representing payment of a second tranche of restricted HSBC stock that he received at the outset of his employment (the “Second Tranche”). Having carefully considered both parties' thorough briefs, oral argument is unnecessary, and this Court resolves the motion on submission. For the reasons that follow, HSBC's motion to dismiss the Second Cause of Action is granted.


         This dispute centers on the compensation that HSBC allegedly owes Beach after it terminated his employment in February 2017. Prior to Beach's decision to join HSBC, he was employed at Oppenheimer Asset Management, Inc. (“Oppenheimer”) as its Chief Compliance Officer. (Complaint (“Compl.”), ECF No. 1, Ex. A, ¶ 5.) In October 2014, HSBC began recruiting Beach for the position of U.S. Head of Regulatory Compliance, Asset Management. (Compl. ¶ 6.) By November 2014, Beach had agreed to accept HSBC's employment offer. (Compl. ¶ 7.)

         Beach's decision to depart Oppenheimer for HSBC around the end of the 2014 calendar year meant that he would forfeit certain remuneration-namely, his annual cash bonus and previous grants of restricted Oppenheimer stock that had not vested at the time of his departure. (Compl. ¶ 8.) To induce Beach to join HSBC at the beginning of 2015, the bank offered Beach a package that accounted for the compensation he would forego at Oppenheimer. (Compl. ¶ 9.) HSBC agreed to pay Beach: (1) a guaranteed bonus for 2014 in stock and cash equivalent to the bonus he would have received from Oppenheimer; (2) a restricted stock award of HSBC Holdings plc stock reflecting a value approximately equal to Beach's unvested Oppenheimer stock; and (3) future yearly bonuses of approximately $155, 000 to $160, 000. (Compl. ¶¶ 9-10.) The first two components of this compensation package were memorialized in an employment agreement between Beach and HSBC (the “Employment Agreement”). (Compl. ¶¶ 15-17.)

         With respect to HSBC's agreement to grant restricted HSBC stock, the Employment Agreement states, in relevant part:

[HSBC] will recommend [Plaintiff] for an exceptional one-off allocation of HSBC Holdings plc ordinary $0.50 shares to the value of USD $104, 587.00 (the “Incentive to Join Share Award”) . . . . [T]he Incentive to Join Share Award shall grant as soon as practicable following the Commencement Date and will vest in these proportions, 33%, 33% and 34% on each subsequent anniversary from the date of the grant. The number of HSBC plc ordinary $0.50 shares to be granted will be calculated based upon the Incentive to Join Share Award value using the closing middle market quotation of HSBC shares on January 5, 2015.

(Compl. ¶ 17.) The Employment Agreement further provides that “[a]ny installment of the Incentive to Join Shares Award will not vest where, prior to or on the relevant vesting date, you have resigned from employment with [HSBC] or have been terminated for cause.” (Compl. ¶ 17.)

         On January 5, 2015, Beach began his employment at HSBC. (Compl. ¶ 19.) Five months later, in May 2015, HSBC granted the restricted stock award. (Compl. ¶ 24.) In 2016, pursuant to the terms of the Employment Agreement, the first 33% of the restricted stock award vested. (Compl. ¶ 26.) Though the Second Tranche was scheduled to vest in May 2017-the second anniversary from the date of the grant-Beach was never paid those shares because he was terminated from the bank in February 2017. (Compl. ¶¶ 33, 35.)


         All well-pleaded allegations of Beach's complaint are accepted as true and considered in the light most favorable to him. See Famous Horse Inc. v. 5th Ave. Photo Inc., 624 F.3d 106, 108 (2d Cir. 2010). To withstand a Rule 12(b) motion, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 129 S.Ct. 1937. 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

         The core issue in HSBC's motion is whether the restricted, unvested HSBC shares awarded to Beach at the outset of his employment constitute “wages” under the NYLL such that HSBC's failure to pay the Second Tranche in 2017 constitutes a violation of NYLL § 193. Section 193 specifically provides that “[n]o employer shall make any deduction from the wages of an employee . . . .” The NYLL further defines the term “wages” as “the earnings of an employee for labor or services rendered, regardless of whether the amount of earnings is determined on a time, piece, commission or other basis.” N.Y.L.L. § 190 (emphasis added).

         HSBC contends that its decision to grant the restricted stock was made solely to induce Beach to leave Oppenheimer for HSBC, not to compensate him for his work performance. (See HSBC Memo. of Law in Support of Motion to Dismiss (“Mot.”), ECF No. 17, at 5.) Additionally, even if the stock award qualified as a “wage, ” HSBC argues that the NYLL applies only to an unlawful deduction of wages. HSBC characterizes its decision to withhold payment of the Second Tranche as a failure to pay, thus removing it from the ambit of the statute. (Mot. at 8.)

         Beach counters that equity-based or incentive compensation like the restricted stock award at issue may be considered a “wage” if it was earned and vested prior to termination. (Beach Memo. of Law in Opposition to Motion to Dismiss (“Opp.”), ECF No. 19, at 8.) Beach emphasizes the non-discretionary, defined nature of the stock award: “the amount of shares that [he] was to receive was fixed by the price of HSBC plc stock on January 5, 2016, and not based upon the price of HSBC plc stock.” (Opp. at 8-9.) In other words, Beach claims that the restricted stock ...

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