Spinac v. Carlton Group, Ltd., 2010 NY Slip Op 30924(U) (N.Y. Sup. Ct. 4/9/2010)

• Court: New York Supreme Court
• Writing for the Court: Emily Jane Goodman
• Citation: Spinac v. Carlton Group, Ltd., 2010 NY Slip Op 30924(U) (N.Y. Sup. Ct. 4/9/2010), 2010 NY Slip Op 30924, No. 114579/2007. (N.Y. Sup. Ct. Apr 09, 2010)
• Decision Date: 09 April 2010
• Docket Number: No. 114579/2007.,114579/2007.
• Parties: LEVERETT J. SPINAC, Plaintiff, v. THE CARLTON GROUP, LTD., CARLTON ADVISORY SERVICES, INC., ROBERT J. GAETA and HOWARD L. MICHAELS, Defendants.

Page 1

2010 NY Slip Op 30924(U)

LEVERETT J. SPINAC, Plaintiff, v. THE CARLTON GROUP, LTD., CARLTON ADVISORY SERVICES, INC., ROBERT J. GAETA and HOWARD L. MICHAELS, Defendants.

No. 114579/2007.

Supreme Court, New York County.

April 9, 2010.

EMILY JANE GOODMAN, Judge.

In this action to recover commissions that he allegedly earned as an employee of defendants, plaintiff moves, pursuant to CPLR 3212, for partial summary judgment as to defendants' liability on the complaint's sixth cause of action. That claim seeks to recover attorney's fees, liquidated damages and statutory costs pursuant to Labor Law (LL) § 198.

Defendants cross-move, pursuant to CPLR 3212 and 3211 (a) (7), for an order dismissing the complaint as against defendants Robert Gaeta and Howard Michaels.

FACTUAL ALLEGATIONS

Plaintiff Leverett Spinac, a licensed real estate salesperson, was employed by defendants beginning in 2001. Defendants are engaged in the business of providing services relating to, inter alia, debt and equity placement and investment sale transactions. Spinac and defendant Carlton Advisory Services, Inc. (CAS) entered into an agreement, dated as of April 17, 2006 (the Employment Agreement), pursuant to which CAS agreed to employ Spinac in a position having the title of "broker," to pay him a "draw" of $1,500 per week against his future commissions, and to pay him commissions for his services in "originating" and "placing" financial transactions. As set forth in the Employment Agreement, originating a transaction means "bringing to [CAS] a client who engages [CAS] to list an asset for sale or financing," and placing a transaction means "finding the appropriate lender and/or investor who provides the necessary capital for [the] transaction". (Employment Agreement, ¶ 4 [A]).

On the same date that Spinac executed the Employment Agreement, he also executed a "fair competition agreement" between him and defendant The Carlton Group, Ltd. (Carlton Group; Carlton Group and/or CAS, Carlton), wherein he made various agreements "[i]n consideration of... [his] employment or other business relationship or affiliation ... with [Carlton Group] and/or any of its current or future subsidiaries, affiliates, and/or successors."

Defendant Robert Gaeta is allegedly the controller and vice president of CAS, and defendant Howard Michaels is also a principal of Carlton. The complaint alleges that Gaeta and Michaels are licensed brokers who are affiliated with Carlton, and who had responsibility for supervising Spinac, and for ensuring that he was paid the commissions and compensation that he earned pursuant to the Employment Agreement.

Carlton terminated Spinac's employment in July or August 2006. Spinac alleges that Carlton has not paid him certain commissions that he earned in connection with transactions which closed after his employment was terminated. Foremost among those are commissions for a transaction (the Royal Kunia Transaction) in which a Mr. Horita retained Carlton to obtain financing that would enable him to redeem a real estate development project in Hawaii, known as the Royal Kunia Phase II project, that was in bankruptcy proceedings. Spinac allegedly originated that transaction for Carlton, and performed placement services in connection with that transaction both before and after the termination of his employment, but was paid no commission after that transaction closed in March 2007.

By December 2006, Spinac had also allegedly earned other commissions, in connection with matters other than the Royal Kunia Transaction, which amounted to more than $100,000. Spinac has submitted an affidavit in support of his motion which asserts that he earned and was not paid commissions of between $60,000 and $90,000 in connection with mortgage financing for the Standard Oil Building in Los Angeles.

In December 2006, Spinac entered into a release agreement (the Release Agreement) with both Carlton Group and CAS, pursuant to which CAS agreed to pay Spinac $25,000 as full consideration for all monies, including all salary, bonuses, and commissions, now owed or which may be owed in the future, to Spinac by Carlton, except for fees or commissions, if any, which may be due to Spinac with respect to the Royal Kunia transaction, if such transaction is consummated.

In the Release Agreement, and in exchange for the foregoing payment, Spinac also agreed to release Carlton and its officers, directors, managers, shareholders and employees from any claims which he had or might in the future have against those parties, including, inter alia, claims under Labor Law §§ 194-198. Spinac allegedly executed the Release Agreement both (a) in reliance upon defendants' representations that he would be paid his commissions relating to the Royal Kunia Transaction when that transaction closed, and (b) because, at that time, he was unemployed, suffering from a heart condition which thereafter required surgery, not represented by counsel, and in need of the $25,000 that he would receive if he signed the agreement.

The complaint asserts six causes of action which allege claims: (1) as against all defendants for breach of contract; (2) as against all defendants seeking to set aside the Release Agreement on the ground of duress; (3) as against all defendants seeking to rescind the Release Agreement on the ground that it was procured by fraud; (4) as against Gaeta and Michaels, alleging that they are liable, as licensed brokers who supervised Spinac, for the commissions earned by, and owed to, him; (5) as against Carlton Group, Gaeta and Michaels for tortious interference with contract; and (6) as against all defendants, that they have violated LL §§ 191 and 193, and are liable, under LL § 198, for attorney's fees, liquidated damages and certain statutory costs.

DISCUSSION

Spinac's motion is granted, but only to the extent that summary judgment is granted in his favor as to CAS's liability on the complaint's sixth cause of action, and under LL § 198, with respect to Spinac's claim for a commission for the origination of the Royal Kunia Transaction.

Prior to November 29, 2009, and as relevant here, LL § 198 (1-a) provided that:

[i]n any action instituted upon a wage claim by an employee ... in which the employee prevails, the court shall allow such employee reasonable attorney's fees and, upon a finding that the employer's failure to pay the wage required by this article was willful, an additional amount as liquidated damages equal to twenty-five percent of the total amount of the wages found to be due.¹

Spinac has established that he was an "employee" for purposes of that provision, that the commission which he claims to be owed for the origination of the Royal Kunia Transaction constituted "wages" for purposes of that provision, and that CAS's failure to pay him that commission constituted a failure to pay a wage required by Article 6 of the Labor Law.

According to the definitions set forth in LL § 190, Spinac was an "employee" and, more particularly, a "commission salesman." LL § 190 (2) defines "employee" to mean "any person employed for hire by an employer in any employment," and LL § 190 (6) defines "commission salesman" to mean "any employee whose principal activity is the selling of any goods, wares, merchandise, services, real estate, securities, insurance or any article or thing and whose earnings are based in whole or in part on commissions." Spinac was an employee within the latter definition, because his principal activity as an employee involved the selling of certain of the services that Carlton provided, and because his earnings were based substantially upon commissions.

Pursuant to LL § 190 (1),"' [w]ages' means 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." Thus, the commission which Spinac claims for the origination of the Royal Kunia Transaction constituted wages.

Defendants contend that any commission which Spinac claims in connection with the Royal Kunia Transaction did not constitute wages under the Labor Law because: (a) pursuant to the terms of the Employment Agreement, it was within Michaels's sole discretion to determine whether such a commission would be paid; and (2) such a commission was incentive compensation which is exempt from the provisions of the Labor Law. However, those contentions are without merit.

The manner in which Spinac's commissions were to be determined is set forth in section 4 of the Employment Agreement, which provides that "Broker will receive fees and or commissions for consulting and brokerage services to Carlton which Broker procures as outlined below," and which further provides, in part (A) thereof:

[1] For each brokerage commission earned by Carlton for transactions for which Broker is the sole broker of record for Carlton ... and where Howard L. Michaels ("HLM") or no other Carlton broker has significant involvement (if HLM or another Carlton broker plays a material role in said transaction then any fee due Broker will be at HLM's sole discretion and will be determined on a case by case basis), Broker shall be paid as set forth below (the "Broker's Portion"):

[2] 20% for origination of a transaction (i.e. bringing to Carlton a client who engages Carlton to list an asset for sale or financing) and 20% for placement of a transaction (i.e. finding the appropriate lender and/or investor who provides the necessary capital for said transaction) of the total net commission received by Carlton.... Further, in order to earn the full listing or placement fee, Broker is expected to materially perform all the requisite responsibilities associated with the origination and/or placement.

[3] Said commission increases to 25% for the origination and 25% for the placement of said transaction when Carlton receives net commissions equal to $1,000,000 from transactions procured and generated by you... .

[4]...