Agerbrink v. Model Serv. LLC

• Decision Date: 20 July 2016
• Docket Number: 14-CV-7841 (JPO)
• Citation: 196 F.Supp.3d 412
• Parties: Eva AGERBRINK, individually and on behalf of all others similarly situated, Plaintiff, v. MODEL SERVICE LLC d/b/a MSA Models, Susan Levine, and William Ivers, Defendants.
• Court: U.S. District Court — Southern District of New York

196 F.Supp.3d 412

Eva AGERBRINK, individually and on behalf of all others similarly situated, Plaintiff,

v.MODEL SERVICE LLC d/b/a MSA Models, Susan Levine, and William Ivers, Defendants.

14-CV-7841 (JPO)

United States District Court, S.D. New York.

Signed July 20, 2016

Cyrus E. Dugger, The Dugger Law Firm, PLLC, New York, NY, for Plaintiff.

Evan J. Spelfogel, Jamie Fiedler Friedman, Ronald M. Green, Epstein Becker & Green, P.C., New York, NY, for Defendants.

OPINION AND ORDER

J. PAUL OETKEN, District Judge:

Plaintiff Eva Agerbrink filed this action on September 26, 2014, against Model Service LLC, Susan Levine, and William Ivers (collectively, "Defendants"), asserting wage-related claims under federal and state law. (Dkt. No. 1.) Agerbrink now moves for partial summary judgment with respect to Defendants' liability on her individual claim for unjust enrichment.¹ (Dkt. No. 92.) For the reasons that follow, the motion is granted.

I. Background

The following facts are undisputed unless otherwise noted.

Defendant Model Service LLC ("MSA") is a model management company. (Dkt. No. 102 at 13.) The named co-defendants, Susan Levine and William Ivers, are, respectively, the owner and Chief Operating Officer of MSA. (Id. ; Dkt. No. 77 at 4.)

On or about March 5, 2013, Agerbrink and MSA executed a contract (the "Modeling Contract") providing that Agerbrink would perform modeling work for clients contacted by MSA, and that MSA would receive a commission on "any and all gross monies or other consideration that [Agerbrink] receive[d] as a result of any agreements ... that [were] entered into during the [term of the contract]." (Dkt. No. 58-1 at 2-9.) The present motion centers on a clause in the Modeling Contract regarding MSA's remedies in the event that Agerbrink breaches the contract (the "Remedy Clause"). (Dkt. No. 102 at 2; Dkt. No. 94 at 6.) That provision states:

Model hereby agrees that in the event Model breaches this Agreement or otherwise refuses to fulfill Model's obligations hereunder ... MSA may, at its sole election, (i) retain as liquidated damages all funds then held and/or subsequently received by MSA on Model's behalf, or (ii) seek all legal and/or equitable remedies then available to MSA, in which event MSA shall, pending the resolution of MSA's claims, be entitled to hold the funds referred to in the preceding clause (i) as security for any judgment MSA may obtain against Model in connection with such claims.

(Dkt. No. 102 at 2; Dkt. No. 58-1 at 5.) The Modeling Contract also includes a severability clause, which "permits the Court to sever an unenforceable provision and uphold the rest of the" contract's terms. (Dkt. No. 104 at 9; see Dkt. No. 58-1 at 6.)

Agerbrink performed modeling work for MSA clients until approximately June 2014. (Dkt. No. 102 at 3.) At that time, Defendants allege, Agerbrink began working with a different management agency. (Id. ) MSA's attorney, David Schwartz, sent Agerbrink a letter stating that by "accept[ing] an employment position as a [ ] model with" the other management agency, she had "materially breache[d]" Section 4 of the Modeling Contract, and specifically her obligations "to (i) seek MSA's counsel regarding all matters in the field of [ ] modeling, (ii) advise MSA of all offers of employment as a [ ] model submitted to [her], and (iii) refer to MSA any inquiries regarding [her] services." (Dkt. No. 58-1 at 15; see id. at 3.)

Schwartz also stated that "MSA ha[d] the right under [the Remedy Clause] to retain as liquidated damages all monies that it receives, and has received, on [Agerbrink's] behalf, or [could] retain such amounts as security against a judgment." (Id. at 15.) He wrote that this money amounted to $17,946.41 as of the time of the letter,² and that MSA was "willing to refrain from pursuing legal action against [Agerbrink]" if she (1) authorized MSA in writing to retain the funds permanently and (2) instructed her alleged new employer to pay 20% of her gross salary to MSA. (Id. at 16.)

Defendants withheld funds from Agerbrink, and they "invoke[ ] the liquidated damages provision," i.e., the Remedy Clause, in continuing to do so. (Dkt. No. 83 ¶ 378.)

II. Procedural History

The relevant procedural history is ably sketched in the opinion of the Honorable James C. Francis IV dated January 6, 2016, and the parties' familiarity with that history is presumed. See Agerbrink v. Model Serv. LLC, 155 F.Supp.3d 448, No. 14–CV–7841, 2016 WL 93865 (S.D.N.Y. Jan. 7, 2016). It suffices for present purposes to say that Agerbrink filed the Second Amended Complaint on January 11, 2016, joining William Ivers as an individual defendant, and also adding an unjust enrichment claim. (Dkt. No. 77.) Defendants filed an Answer and Counterclaims on January 28, 2016. (Dkt. No. 83.)

Agerbrink filed the present motion on February 5, 2016. (Dkt. No. 92.)

III. Discussion

Defendants "invoke[ ]" the Remedy Clause in defense of their withholding of Agerbrink's earnings. (Dkt. No. 83 ¶ 378.) Agerbrink challenges the validity of the Remedy Clause, arguing that it is "an illegal and unenforceable penalty provision," and that Defendants are accordingly liable to her for unjust enrichment as a matter of law, because they have no right to withhold her earnings. (Dkt. No. 94 at 3.)

A. Standard of Review

Summary judgment is appropriate when "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). A fact is material if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is genuine if, considering the record as a whole, a rational jury could find in favor of the non-moving party. Ricci v. DeStefano , 557 U.S. 557, 586, 129 S.Ct. 2658, 174 L.Ed.2d 490 (2009) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ).

B. The Contract as a Bar to Agerbrink's Claim

Defendants argue at the outset that "there can be no claim of unjust enrichment" because the parties' relationship was governed by a contract. (Dkt. No. 104 at 12); see Mid – Hudson Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp. , 418 F.3d 168, 175 (2d Cir.2005) (Sotomayor, J.) ("[A] valid contract bars a quantum meruit action [ ] where ‘the scope of the contract clearly covers the dispute between the parties.’ " (quoting Clark–Fitzpatrick, Inc. v. Long Island R.R. Co. , 70 N.Y.2d 382, 521 N.Y.S.2d 653, 516 N.E.2d 190, 193 (1987) )) (alteration omitted).

The substance of that argument was already rejected on a previous motion. See Agerbrink, 155 F.Supp.3d at 459, 2016 WL 93865, at *6 (holding that "a claim for unjust enrichment may survive a motion to dismiss where the plaintiff challenges the contract's validity.") (citations omitted). As Judge Francis explained in that opinion, an unjust enrichment claim is not precluded by "a valid, enforceable contractual obligation" where "the contract imposed the allegedly unlawful penalty in the first place." Id. ; see Spirit Locker, Inc. v. EVO Direct, LLC , 696 F.Supp.2d 296, 305 (E.D.N.Y.2010) ; DeWitt Stern Grp., Inc. v. Eisenberg , 14 F.Supp.3d 480, 485 (S.D.N.Y.2014) (citing Dragushansky v. Nasser , No. 12–CV–9240, 2013 WL 4647188, *8 (S.D.N.Y. Aug. 29, 2013) ).³ Because Agerbrink's claim rests on the argument that the relevant contract provision is invalid, her claim is not barred by the contract. (Dkt. No. 94 at 3.)

C. Unjust Enrichment

"Under New York law, for a plaintiff to prevail on a claim of unjust enrichment, he must establish (1) that the defendant was enriched; (2) that the enrichment was at the plaintiff's expense; and (3) that the circumstances are such that in equity and good conscience the defendant should return the money or property to the plaintiff." Golden Pac. Bancorp v. F.D.I.C. , 273 F.3d 509, 519 (2d Cir.2001). Because Defendants do not dispute that they have withheld, and continue to withhold, Agerbrink's earnings, the first and second requirements are satisfied. (Dkt. No. 102 at 4).

As Judge Francis noted in his earlier decision, "[t]he crux of this claim—that the defendants have been unjustly enriched by retaining payments from clients and owed to the plaintiff for work performed—is that the defendants are not entitled to these monies because the [Remedy Clause] is unenforceable." Agerbrink , 155 F.Supp.3d at 459, 2016 WL 93865, at *7. If no valid contractual provision entitles Defendants to seize Agerbrink's earnings, then those earnings rightly still belong to her. Accordingly, if the Remedy Clause is invalid, Agerbrink will have satisfied the third and final requirement of her claim for unjust enrichment: that equity and good conscience require the return of Agerbrink's money to her.

D. The Remedy Clause

"[A] liquidated damage[s] provision is an estimate, made by the parties at the time they enter into their agreement, of the extent of the injury that would be sustained as a result of a breach of the agreement." Truck Rent – A – Ctr., Inc. v. Puritan Farms 2nd, Inc. , 41 N.Y.2d 420, 393 N.Y.S.2d 365,361 N.E.2d 1015, 1018 (1977) ). Under New York law, such a provision is enforceable only where "the specified amount is a reasonable measure of the anticipated harm."⁴

U.S. Fid. & Guar. Co. v. Braspetro Oil Servs. Co. , 369 F.3d 34, 71 (2d Cir.2004) (quoting BDO Seidman v. Hirshberg , 93 N.Y.2d 382, 690 N.Y.S.2d 854, 712 N.E.2d 1220, 1227 (1999) ) (internal quotation marks omitted); accord Restatement (Second) of Contracts § 356(1). A provision that does not serve the purpose of reasonably measuring the anticipated harm, but is instead punitive in nature, serving as a mere "added spur to performance," will not be enforced. Priebe & Sons v. United States , 332 U.S. 407, 413, 68 S.Ct. 123, 92 L.Ed. 32 (1947) (Douglas, J.); accord Truck Rent – A – Ctr. , 393 N.Y.S.2d 365, 361 N.E.2d at 1018.

To that end, "New York courts will construe a...