Spinac v. Carlton Grp. Ltd.

• Court: New York Supreme Court
• Writing for the Court: EMILY JANE GOODMAN.
• Decision Date: 13 July 2011
• Docket Number: Index No. 114579/07
• Citation: Spinac v. Carlton Grp. Ltd., Index No. 114579/07 (N.Y. Sup. Ct. Jul 13, 2011)
• Parties: LEVERETT J. SPINAC, Plaintiff, v. THE CARLTON GROUP, LTD., CARLTON ADVISORY SERVICES, INC., ROBERT GAETA and HOWARD MICHAELS, Defendants.

2011 NY Slip Op 31913

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

Index No. 114579/07

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: IAS PART 17

Dated: June 29, 2011

Filed: July 13, 2011

EMILY JANE GOODMAN, J.S.C.:

Motion sequence numbers 004 and 006 are consolidated for disposition.

This is an action brought by a commission salesperson to recover unpaid commissions. In motion sequence number 004, defendants move, pursuant to CPLR 2221, for leave to reargue and renew the court's decision and order dated April 9, 2010 (the prior decision), which granted plaintiff partial summary judgment as to defendants' liability on the sixth cause of action (violation of Labor Law § 190 et seq.). In motion sequence number 006, plaintiff Leverett J. Spinac (hereinafter, plaintiff or Spinac) moves for an order granting a money judgment for his "origination" commission and directing a hearing on his counsel fees.

BACKGROUND

The facts are set forth in detail in the prior decision, and will be repeated here only to the extent necessary to this decision. In this action, Spinac seeks to recover commissions for his work on two transactions for defendants: a real estate development in Hawaii known as "Royal Kunia"¹ (the Royal Kunia Transaction) and the refinancing of the Standard Oil Building in LosAngeles, California. Spinac and defendant Carlton Advisory Services, Inc. (CAS) entered into an agreement dated April 17, 2006 (the Employment Agreement), pursuant to which CAS agreed, inter alia, to employ plaintiff in a position having the title of "broker," and to pay him for transactions for his services in "originating" and "placing" financial transactions. Section 4 of the Employment Agreement provides as follows:

Commissions: Broker will receive fees and or commissions for consulting and brokerage services to Carlton which Broker procures as outlined below:

[1] For each brokerage commission earned by Carlton for transactions for which Broker is the sole broker of record for Carlton (the "Carlton Brokerage Commission") 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 (net defined as gross commission less direct expenses and/or referral fees or commissions paid to outside brokers or . finders). 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] Said commission increases to 30% for the origination and 30% for the placement of said transaction when Carlton receives additional net commissions . . . equal to $1,000,000 from transactions procured and generated by you....

[5] For purposes of this "step-up" arrangement, net commissions received on the [Royal Kunia Transaction] will count as 75% towards your step-up ....

[6] The basis for calculating commission splits reverts [sic] to 20% for origination and 20% for placement and follows the same split structure outlined above in year two.

[7] For transactions originated by HLM where Broker is materially involved and play[s] a significant and value added role in assisting HLM with the placement of such transaction, any fee due Broker will be at HLM's sole discretion and will be determined on a case-by-case basis.

[8] In the event any broker at Carlton in addition to Broker contributes to the earning of the Broker's commission, then Broker shall work out a mutually acceptable fee arrangement with such other broker in writing and Carlton shall have no responsibility or liability therefore (other than the responsibility to pay the normal broker's portion of the commission).

(Michaels Aff, Exh. A [paragraph numbering added]). Spinac also executed a fair competition agreement that same day with defendant The Carlton Group, Ltd. (Carlton).

The sixth cause of action² alleges that defendants violated Labor Law §§191 and 193, and are liable for attorney's fees, liquidated damages and certain statutory Costs pursuant to Labor Law § 198.

Spinac moved, pursuant to CPLR 3212, for partial summary judgment on the issue of defendants' liability on the sixth cause of action for his origination and placement commissions for both transactions. Spinac argued that he was an "employee" as a "commission salesperson" who was due "wages" under Labor Law article 6. Spinac further argued that defendants' withholding of his wages was willful as a matter of law.

Defendants opposed the motion and cross-moved, pursuant to CPLR 3212 and 3211 (a) (7), for an order dismissing the complaint as against defendants Robert Gaeta and Howard Michaels. In opposition to Spinac's motion, defendants argued that: (1) pursuant to the terms ofthe Employment Agreement, it was within Michaels's sole discretion to determine whether a commission was to be paid; and (2) such a commission was incentive compensation which was exempt from the provisions of the Labor Law. Defendants submitted an affidavit from Robert Gaeta, the controller and vice president of Carlton, who stated that:

plaintiff required substantial assistance in attempting to bring about the two transactions that are the subject of this matter. Indeed, two (2) senior brokers were brought into the deal at plaintiff's request to perform the tasks required to get it done. See Affidavit Leverett[] J. Spinac, sworn to December 11,2008 ("Spinac Affidavit") ¶¶ 18, 20 and 22. ("Ultimately, the Royal Kunia redemption financing was placed with California Mortgage and Realty, Inc. (CMR), with the participation of Mr. Romano and Snajderman who introduced CMR to the deal I [plaintiff] had originated and forwarded to them for aid in placement")

(Pencu Affirm, in Support, Exh. B [Gaeta Aff, ¶ 13]). Thus, according to defendants, Spinac did not "materially perform all the requisite responsibilities associated with the origination and/or placement" of the Royal Kunia Transaction, as required by the above-quoted paragraph 2 of the

Employment Agreement, because two senior brokers were brought into the transaction, at plaintiff's request, "to perform the tasks required to get it done" (id.). Yet, this affidavit only speaks to the placement phase of the transaction, and plaintiff did acknowledge the assistance of Romano and Snajderman in the placement phase. Defendants also contended that there was a bona fide dispute as to Spinac's entitlement to his wages, which precluded a finding, as a matter of law, that the failure to pay plaintiff was willful.

On April 9, 2010, the court granted Spinac partial summary judgment on the sixth cause of action only with respect to his claim for origination of the Royal Kunia Transaction as against CAS. Specifically, plaintiff established that he was an "employee" under Labor Law § 190 (2), and more particularly, a "commission salesperson" pursuant to Labor Law § 190 (6).Furthermore, plaintiff established that the commission for the Royal Kunia Transaction constituted "wages" within the meaning of Labor Law § 190 (1). The court rejected defendants' urged construction of the Employment Agreement, noting that defendants "appear to concede that Spinac was wholly responsible for the origination of the transaction" (Prior Decision, at 6). The court determined that the contractual provisions indicate an intent to treat the origination commission and placement commission as separable, and that the above-quoted paragraph 2 of the Employment Agreement controlled because it was more specific than the general, introductory paragraph 1. Additionally, the court found that:

the failure to pay was "willful" - in light of, inter alia: (a) the Employment Agreement's statement that, for purposes of the "step up" arrangement provided for therein, 75% of Carlton's net commissions on the Royal Kunia Transaction would be credited towards Spinac's "step-up"; (b) Carlton's failure to pay Spinac any commission in connection with the Royal Kunia Transaction despite Spinac's counsel's demand for such payment by letter dated August 29, 2007; and (c) defendants' failure to argue, on this motion, that any other broker besides Spinac was involved in the origination (as opposed to the placement of the placement) of the Royal Kunia Transaction (see P &L Group v Garftnkel, 150 AD2d 663, 664 [2d Dept 1989];see also Ayres v 127 Res. Corp., 12 F Supp 2d 305,309 [SDNY 1998]). Accordingly, pursuant to Labor Law 198 (1-a), Spinac is entitled to liquidated damages of 25% of the unpaid origination commission.

(Prior Decision, at 8). The court also rejected defendants' contention that the existence of a bona fide dispute precluded a finding of willfulness as a matter of law:

Defendants evidently concede that Spinac was owed at least $175,000 in commissions for the Royal Kunia Transaction, and it has been held that, where there is a dispute between an employee and an employer as to the amount of wages actually owed, the employer "must pay the employee the undisputed portion of wages claimed in order to avoid a finding that failure to pay was willful" (In re CIS Corp., Monaco v CIS Corp., 206 BR 680, 689-690 [Bankr Ct, SD NY 1997]). Defendants do not assert

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