Keenan v. Artintype Inc.

• Decision Date: 15 August 1989
• Citation: 546 N.Y.S.2d 741,145 Misc.2d 90
• Parties: , 117 Lab.Cas. P 56,493 Stephen R. KEENAN, Plaintiff, v. ARTINTYPE INC., Seymour Gould and Grey Advertising Inc., Defendants.
• Court: New York Supreme Court

Page 741

546 N.Y.S.2d 741

145 Misc.2d 90, 117 Lab.Cas. P 56,493

Stephen R. KEENAN, Plaintiff, v. ARTINTYPE INC., Seymour Gould and Grey Advertising Inc., Defendants.

Supreme Court, New York County,

IAS, Part 11.

Aug. 15, 1989.

Summitt Rovins & Feldesman, New York City, for plaintiff.

Russo & Burke, New York City, for defendants.

HAROLD BAER, Jr., Justice.

This is an action between an employer and a former employee in which the latter claims damages based upon the former's alleged breach of contract and fraud and interference with the contract of employment by a co-defendant. Defendants move to dismiss the complaint pursuant to CPLR § 3211(a)(5) and (7) or for summary judgment, as well as for leave to amend the answers. Plaintiff moves for an order striking the answers or, in the alternative, compelling the testimony at a deposition of defendant Seymour Gould and another. ^*

Preliminarily, on the amendment issue, in December 1988, defendants submitted answers to the complaint. The answers did not contain the defense of the statute of frauds. The failure to include this defense (or to move on the basis of it prior to answer) constitutes a waiver of the defense. CPLR § 3211(e); D. Siegel, New York Practice § 274 (1978). Defendants move for leave to amend and to assert the defense. Leave to amend is to be freely granted (CPLR § 3025(b)), and the test is whether plaintiff has been prejudiced. Fahey v. County of Ontario, 44 N.Y.2d 934, 408 N.Y.S.2d 314, 380 N.E.2d 146 (1978). Only four months passed between the answers and the motion raising the statute of frauds, there has been no prejudice to plaintiff, and, indeed, plaintiff does not oppose the request. The motion is granted. Insofar as defendants seek to assert the statute of frauds now, their motion shall be considered one for summary judgment for which relief they have moved in the alternative.

Let us turn then, after a review of the allegations, to the statute of frauds issue--the issue on which defendants base their motion for summary judgment. The complaint in its first cause of action alleges that in 1987 Seymour Gould, president of defendant Artintype, Inc. ("Artintype"), offered plaintiff Stephen Keenan employment with Artintype. It is claimed that Gould told Keenan that his employment would be for five years; that Keenan would become president of Artintype upon Gould's imminent retirement; and that Keenan would receive a salary and commissions on Artintype's accounts and on accounts that Keenan brought with him from his former employer, Hertz Data Corp. ("Hertz"), of which he was the sole proprietor. Plaintiff claims that relying upon these representations, he closed Hertz and joined Artintype. Plaintiff charges that these representations were false and were made to allow Artintype to purloin Hertz's business, with the intent that Keenan would be dismissed once that end was achieved. In 1988, Gould, on behalf of Artintype, discharged Keenan. On the basis of the foregoing, plaintiff demands damages.

In his second cause of action, plaintiff claims that he built up business from certain Artintype house accounts. Plaintiff charges that defendant Gould took these accounts away from him, as a result of which plaintiff lost commissions to which he was entitled and for which he now seeks an accounting or damages.

Finally, in his third cause of action, plaintiff alleges that he discovered certain unethical conduct being engaged in by Grey Advertising, Inc. ("Grey"), the parent company of Artintype. Plaintiff claims that his protests about this behavior caused Grey to interfere with his contractual relations with Artintype. The heart of plaintiff's case is a five-year employment contract by which he was to receive certain alleged rewards. Plaintiff does not allege that this agreement was in writing. It is elementary that "an oral agreement which by its own terms must continue for more than a year unless terminated by its breach is void." D & N Boening, Inc. v. Kirsch Beverages, Inc., 63 N.Y.2d 449, 457, 483 N.Y.S.2d 164, 167, 472 N.E.2d 992, 995 (1984). See General Obligations Law § 5-701(a)(1). Since this agreement could not have been performed within one year and was not in writing, it is void and plaintiff cannot sue for its breach. The second cause of action is based upon Artintype's purported breach of the contract and therefore, must fail. In his brief (pp. 1-2) and at oral argument, counsel for plaintiff stated that his client actually worked for Artintype but was not paid for all of the time worked. Counsel has asserted, notwithstanding the allegations of the complaint, that plaintiff's employment was at will and that, insofar as it had been so performed, the arrangement was not within the statute of frauds. Defendants Artintype and Gould admit that Keenan was an at will employee working at a certain salary plus commissions. Plaintiff, however, has not pled a cause of action founded upon an at will employment. He will be granted an opportunity to amend his complaint to state it. The new claim may be for salary and commissions as actually paid in the at will employment. Wolin v. Perlco Venetian Blind Corp., 180 Misc. 544, 43 N.Y.S.2d 262 (App.Term 1943). Plaintiff cannot claim salary or commissions as promised in the oral agreement.

The third cause of action at first blush appears to present few problems, but problems begin to emerge upon reflection. One might suppose that if the contract alleged by plaintiff is void, then Grey cannot be held to answer in damages for having brought about its breach. Long Island Pen Corp. v. Shatsky Metal Stamping Co., 94 A.D.2d 788, 463 N.Y.S.2d 39 (2d Dep't 1983). But a contract that cannot be performed within one year, though described as "void" by the statute and by courts on occasion (e.g., the Court of Appeals in D & N Boening ), is actually voidable or unenforceable. See Holender v. Fred Cammann Productions, Inc., 78 A.D.2d 233, 434 N.Y.S.2d 226, 228-29 (1st Dep't 1980); Livoti v. Elston, 52 A.D.2d 444, 384 N.Y.S.2d 484, 485 (2d Dep't 1976). The Restatement (2d) of Torts § 766, Comment F distinguishes between void and voidable contracts and provides that a contract voidable by virtue of the statute of frauds may nevertheless form the basis for an interference claim until actually declared void. See also 2 F. Harper, F. James & O. Gray, The Law of Torts (2d ed. 1986), at ppp. 314-315. Some authorities limit a claim of interference with a contract barred by the statute to conduct amounting to fraudulent misrepresentation, threats or violation of a duty of fidelity. See, e.g., Papell v. Calogero, 114 A.D.2d 403, 494 N.Y.S.2d 127, 129 (2d Dep't 1985), modified, 68 N.Y.2d 705, 506 N.Y.S.2d 309, 497 N.E.2d 676 (1986), citing Guard-Life Corp. v. S. Parker Hardware Manufacturing Corp., 50 N.Y.2d 183, 428 N.Y.S.2d 628, 406 N.E.2d 445 (1980); Livoti v. Elston, supra, 384 N.Y.S.2d at 486 and if that be the law, such wrongful conduct is present here on plaintiff's allegations. It may well be, however, that no such conduct is required in view of the disrepute in which the statute of frauds is held. See Note, Tortious Interference with Contract: A Reassertion of Society's Interest in Commercial Stability and Contractual Integrity, 81 Colum L.Rev. 1491, 1502-03 n. 83 (1981).

Defendants argue that the statute of frauds precludes a claim here for tortious interference. Alternatively, defendants argue that Grey cannot be held liable for inducing the breach of a contract that, according to plaintiff, was never intended to exist. Plaintiff, however, may plead alternatively and inconsistently, claiming that there was fraudulent misrepresentation, but also that there was an employment at will. In fact, it is clear from plaintiff's papers that his claim in the third cause of action is for interference with an at will employment relationship. If he were allowed to amend, the question then becomes, can Grey be liable for inducing the breach of an employment at will?

It needs to be acknowledged straight away that there is authority on defendants' side that must not be ignored. In Kaminski v. United Parcel Service, 120 A.D.2d 409, 501 N.Y.S.2d 871 (1st Dep't 1986), the court held that the termination of an at will employment relationship is not a breach of contract and therefore an action founded on the tort of intentional interference will not lie. Plaintiff attempts to distinguish this case on the facts, but his effort is unavailing. This case would require that the third cause of action be dismissed.

Kaminski, however, does not take explicit note of Guard-Life Corp. v. S. Parker Hardware Manufacturing Corp., supra. See Mansour v. Abrams, 120 A.D.2d 933, 502 N.Y.S.2d 877 (4th Dep't 1986). In Guard-Life, the Court of Appeals held that interference with a contract terminable at will is actionable provided that the interference is improper, that is, that it involves fraud, threats or other wrongful conduct. 50 N.Y.2d at 190-91, 196, 428 N.Y.S.2d at 632, 636, 406 N.E.2d at 449, 453. Knowing interference through persuasion alone by a competitor is not actionable. The case before this Court does not involve alleged interference by a competitor, so that the fit between the facts of Guard-Life and those present here is not a neat one. Nevertheless, the principles set out there (derived from the Restatement (2d) of Torts) provide a basis for upholding the third cause of action, at least for now. The alleged retaliation against plaintiff due to his protests against unethical conduct by Grey is surely improper, involving as it does illegitimate motives on the part of Grey and the absence of a general social interest in the protection of such conduct. See Guard-Life, 50 N.Y.2d at 190 n. 2, 428 N.Y.S.2d at 632 n. 2, 406 N.E.2d at 449 n. 2.

The discussion of Guard-Life brings the Court back to the earlier examination of the effect of the statute of frauds on an interference claim. The Court of Appeals in Guard-Life held that a...