Sipos v Fastrack Healthcare Sys., Inc.
Annotate this CaseDecided on August 15, 2005
Supreme Court, Nassau County
STUART SIPOS, Plaintiff,
against
FASTRACK HEALTHCARE SYSTEMS, INC., Defendant.
4567/05
COUNSEL FOR PLAINTIFF
Steven M. Weinstein, Esq.
32 Bond Street
Westbury, New York 11590
COUNSEL FOR DEFENDANT
Duncan, Fish & Vogel, LLP
317 Middle Country Road - Suite 5
Smithtown, New York 11787
Leonard B. Austin, J.
BACKGROUND
Fastrack is a business involved in providing information technology, software and consulting services to customers in the healthcare industry. Plaintiff, Stuart Sipos ("Sipos"), was employed by Fastrack in January 1997 as a sales representative and then as a National Sales Manager. Sipos' compensation was defined by various employment contracts between the parties, based on his sales quotas.
His recent employment agreement ("Agreement"), dated May 2004, was for the period from January 1, 2004 through December 31, 2006. The Agreement provided for Sipos' compensation, as National Sales Manager, as follows:
a) 18% of Sipos' net sales on gross sales of Fastrack up to $3,000,000.00;
b) 20% of Sipos' net sales on gross sales of Fastrack up above $3,000,000.00;
c) bonus of $75,000.00 in the event Fastrack's gross sales reached $3,200,000.00; and
d) Agreement automatically renewed for the calendar year of 2005.
Sipos' compensation in 2005 was essentially the same except he was to receive a bonus of $90,000.00 in the event Fastrack's gross sales reached $3,680,000.00.
According to Sipos, Fastrack's gross sales for 2004 exceeded $3,200,000.00. He calculates the aggregate total of all of 2004 sales of Fastrack to be $3,211,564.11.[FN1]
Sipos' last day of employment was March 18, 2005.
In his complaint, Sipos alleges breach of contract as his first cause of action. He claims that Fastrack, despite reaching and/or exceeding $3,200,000.00, has refused to pay Sipos the bonus of $75,000.00, as provided in the 2004 Agreement. He seeks to recover that amount together with interest thereon from January 1, 2005.
Sipos' third, fourth and ninth causes of action also allege breach of contract for $1,847.08, $10,395.58 and $2,618.75, respectively. Sipos claims he was not paid according to the commission schedule of 18% of sales as provided in the Agreement for January 2005 ($1,847.08) and February 2005 ($10,395.58) but at a rate of 15% on "Hosting" and five percent on "Upgrades". As for the ninth cause of action, he claims he [*2]was entitled to reimbursement for expenses incurred, which remain unpaid by Fastrack.
In his fifth, seventh, and eighth causes of action Sipos seeks an accounting. Sipos requests an accounting to ascertain all gross sales in order to calculate his earned commissions through March 18, 2005, his date of termination. Sipos also seeks Fastrack's books and records to ascertain its sales since March 18, 2005 to determine Sipos' commission on sales he was in the process of completing or sold at the time of his termination and Sipos' portion of commission on sales that were completed but listed as "Not Shipped".
In his second and sixth causes of action, Sipos seeks a declaratory judgment. In the second cause of action, he requests judgment for renewal of the Agreement for
2005, claiming Fastrack's Gross Sales to exceed $3,000,000.00. The sixth cause of action seeks judgment finding Fastrack to be in breach of contract of the Agreement, resulting in his termination.
Fastrack denies any bonus is due Sipos because he submitted a false contract to meet the quota. In addition, he also submitted false documentation with respect to expenses. Fastrack claims that Sipos violated Fastrack Employee Regulations by not coming into work and failing to call in a week before the complaint was served.
Fastrack brings this motion to dismiss the second through ninth causes of action in the complaint pursuant to CPLR 3211 (a) (7) claiming they each fail to state a cause of action.
DISCUSSION
A.CPLR 3211 (a)(7) - Standard
CPLR 3211 (a) (7) permits the court to dismiss a complaint that fails to state a cause of action. In deciding such a motion, the court must determine if the pleader has a cause of action and no whether the cause of action has been properly plead. Guggenheimer v. Ginzburg, 43 NY2d 268 (1977); and Rovello v. Orofino Realty Co., 40 NY2d 633 (1976). The question is not whether an issue of fact exists, but whether it can be determined from within the complaint itself if the Plaintiff has stated any cognizable cause of action. Morris v. Morris, 306 AD2d 449 (2nd Dept. 2003); and Frank v. DaimlerChrysler Corp., 292 AD2d 118 (1st Dept. 2002).
In addition, the court must accept the allegations of the complaint as true and give the pleader the benefit of every inference which may be drawn from the pleadings. Leon v. Martinez, 84 NY2d 83 (1994). All facts alleged in the complaint and as well as any evidentiary submissions made in opposition to the motion must be accepted as true by the court. 511 West 232rd Street Owners Corp. v. Jennifer Realty Co., 98 NY2d 144 (2002); and Sokoloff v. Harriman Estate Development Corp., 96 NY2d 409 (2001). It is then for the court to decide whether the facts alleged fit within any cognizable legal theory.
In deciding such a motion, the Court must determine if Plaintiff has pled a cognizable cause of action, not whether the action has been properly pled. Guggneheimer v. Ginzburg, supra; and Rovello v. Orofino Realty Co., supra. See also, [*3]Well v. Yeshiva Rambam, 300 AD2d 580 (2nd Dept. 2002).
B. Breach of Contract - Third, Fourth and Ninth Causes of Action [FN2]
In order to plead a cause of action for breach of contract, the Plaintiff must plead the existence of a contract between Plaintiff and Defendant, performance by the Plaintiff, breach by the Defendant and damages sustained by Plaintiff as a result of the breach. Furia v. Furia, 116 AD2d 694 (2nd Dept.1986).
The third, fourth and ninth causes of action are all based upon Sipos written employment contract with Fastrack.
Fastrack is a computer software company. Sipos was its national sales manager.
Although Sipos had a written contract for the period January 1, 2004 through December 31, 2006, Fastrack terminated Sipos' employment on March 18, 2005.
Pursuant to the provisions of his contract, Sipos was to receive commissions of "Up to $3,000,000 in Annual Sales by the Sales Department, 18% of New Sales made by Stuart Sipos."
The third cause of action seeks to recover additional commissions due Sipos for sales made in January 2005. Sipos alleges that he made "Hosting" sales of $9,102.48 and "Upgrades" sales of $12,107.70 in January 2005. Fastrack paid Sipos commissions of 15% on the "Hosting" and 5% on the "Upgrades". Sipos seeks to recover the difference between the amount paid and the amount he claims is due.
If Sipos' commissions for January 2005 were not computed and paid in accordance with the terms of the contract, Fastrack breached the contract. Thus, the third cause of action sets forth a claim upon which relief can be granted.
The fourth cause of action is identical to the third cause of action in all respects except that it seeks to recover the difference between commissions earned and commissions paid for February 2005. As with the third cause of action, if Fastrack did
not pay commissions in accordance with the provisions of Sipos contract, it breached the contract.
Paragraphs 5 and 6 of the Sipos contract obligate Fastrack to make a car payment of $594.00 per month, reimburse Sipos for all company related travel expenses in accordance with published corporate policy and pay for a company car phone. The ninth cause of action seeks to recover the sums Sipos alleges is due pursuant to the terms of these provisions of his contract. If Fastrack has failed to pay Sipos sums due and payable pursuant to these contract provisions, it has breached the contract. As with the third and fourth causes of action, the ninth cause of action sets forth a claim upon which relief can be granted. [*4]
Fastrack argues that the third, fourth and ninth causes of action are duplicative of the first cause of action, which also alleges a breach of contract claim. However, each cause of action seeks damages for a different and discrete breach of contract. While Sipos might have alleged in a single cause of action containing all of the alleged breaches of his contract, this is not required. Each of the causes of actions alleges sufficient facts to sustain an independent cause of action. Therefore, Defendant's motion to dismiss these causes of action must be denied.
C. Declaratory Judgment - Second and Sixth Causes of Action
Paragraph 9 of Sipos contract provides that if annual gross sales do not reach the amount established in Paragraph 1(c) of the contract, Fastrack had the right to
terminate Sipos' employment. If the annual gross sales for 2004 were $3,200,000 or greater, Sipos alleges his contract automatically renewed.
Sipos alleges that since Fastrack's gross sales for 2004 exceeded the target amount his contract automatically renewed for 2005.
In the second cause of action, Sipos seeks a declaratory judgment that his contract automatically renewed for the year 2005.
The sixth cause of action seeks a declaratory judgment holding that Fastrack terminated the contract.
A declaratory judgment action may be an appropriate method for resolving the rights and obligations of a party to a contract. Kalisch-Jarcho, Inc. v. City of New York, 72 NY2d 727 (1988). However, a party may not seek a declaratory judgment when the party has other available remedies, such as an action for breach of contract. Id. See also, James v. Alderton Dock Yards, Ltd., 256 NY 298 (1931); and Apple Records, Inc. v. Capital Records, Inc., 137 AD2d 50 (1st Dept. 1988).
The Court should decline to hear a declaratory judgment action when it will result in piecemeal resolution of the dispute. City of Rochester v Vanderlinde Electric Corp., 56 AD2d 185 (4th Dept. 1977).
In this case, it is unclear as to what relief Sipos is actually seeking in the second and sixth causes of action.
As presently plead, a determination of the second cause of action would lead to piecemeal resolution of the action. If the Court were to determine that Sipos made his sales goal for 2004 and that he should not have been discharged, Sipos would still need additional relief such as reinstatement to his position or money damages. He has sought neither in his demand for relief.
If Fastrack improperly terminated Sipos' contract, he should bring an action to recover money damages for breach of contract. See, Hollwedel v. Duffy-Mott Co., 263 NY 95 (1933); and Siegel v. Laric Entertainment Corp., 307 AD2d 861 (1st Dept 2003).
Similarly, the sixth cause of action seeks unnecessary, duplicative or incomplete relief. If Fastrack breached Sipos' employment contract, then Sipos is entitled to some form of relief, such as money damages. See, 2 NY PJI 4:21. Furthermore, Sipos will [*5]have to establish that Fastrack breached the contract in order to prevail on the first, third, fourth and ninth causes of action. Therefore, the sixth cause of action seeks relief which is duplicative of the relief sought in those causes of action.
Since Sipos has other adequate remedies, the Court declines to hear the second and sixth causes of action. See, Matter of Morgenthau v. Erlbaum, 59 NY2d 143, cert. den., 464 U.S. 993 (1983); and Gaynor v. Rockefeller, 15 NY2d 120 (1965).
However, if Sipos was improperly terminated, he would be entitled to damages for breach of contract for the year 2005. If Sipos seeks to serve an amended complaint alleging such a cause of action, he may do so provided that the amended complaint is served with twenty (20) days of the date of this order. CPLR 3211(e)
D. Accounting - Fifth, Seventh and Eighth Causes of Action
The fifth, seventh and eighth causes of action seek Fastrack to account for sales so that Sipos can properly calculate his commissions.
In order to maintain an action for an accounting, the party seeking the accounting must establish the existence of a fiduciary or trust relationship. Schantz v. Oakman, 163 NY 148 (1900); Hartzler v. Shrug Productions Unlimited, Inc., 118 AD2d 543 (2nd Dept.1986); and Darlagiannis v. Darlagiannis, 48 AD2d 875 (2nd Dept. 1975).
The employer-employee relationship is not a fiduciary relationship unless there is an agreement by which the employee shares losses. Vitale v. Steinberg, 307 AD2d 107 (1st Dept. 2003); and Michnick v. Parkell Products, Inc., 215 AD2d 462 (2nd Dept. 1995). Sipos' employment agreement only provides for a payment of salary in the form of commissions and bonus. Sipos did not agree to share in any losses sustained by Fastrack.
The fact that a former employer may owe money to a former employee does not
make the former employer a fiduciary. Waldman v. Englishtown Sportswear, Ltd., 92 AD2d 833 (1st Dept. 1983).
Since a fiduciary relationship is required to obtain an accounting and since there is no fiduciary relationship between Sipos and Fastrack, the fifth, seventh and eighth causes of action fail to state a cause of action and must be dismissed.
E. Punitive Damages - All Causes of Action
The ad damnum clause of all of Plaintiff's causes of action seeking money damages contain a demand for punitive and exemplary damages.
The only causes of action which survive the motion to dismiss are Sipos breach of contract actions.
Punitive damages are awarded to punish a Defendant who engages in morally reprehensible conduct and to deter the Defendant and others from engaging in similar conduct. Walker v. Sheldon, 10 NY2d 401 (1961).
Punitive damages are recoverable in a breach of contract action only to vindicate [*6]a public right. New York University v. Continental Ins. Co., 87 NY2d 308 (1995); and Rocanova v. Equitable Life Assur. Society, 83 NY2d 603 (1994). To recover punitive damages in a breach of contract action, the Plaintiff must establish that Defendant's conduct involved "evil and reprehensible motives" or constituted "wanton dishonesty as to imply a criminal indifference to civil obligations." Walker v. Sheldon, supra at 404-5.
Plaintiff cannot recover punitive damage for a breach of a private agreement even if the Defendant breached the private agreement wilfully and without justification.
Cross v. Zyburo, 185 AD2d 967 (2nd Dept. 1992); and J.G.S., Inc. v. Lifetime Cutlery Corp., 87 AD2d 810 (2nd Dept. 1982).
This action seeks to recover damages sustained by Sipos as a result of the breach of his private employment contract with Fastrack. No public rights are at issue in this action. Therefore, even if Sipos is successful in this action, he will not be entitled to recover punitive damages. Therefore, the demand for punitive and/or exemplary damages must be stricken and dismissed.
Accordingly, it is,
ORDERED, the Defendant's motion for an order dismissing the second, third, fourth, fifth, sixth, seventh, eighth and ninth causes of action in Plaintiff's complaint is granted only to the extent of dismissing the second, fifth, sixth seventh and eighth causes of action and is otherwise denied; and it is further,
ORDERED, that Plaintiff's demand for punitive and/or exemplary damages is dismissed as to all of causes of action; and it is further,
ORDERED, that, if Plaintiff is hereby granted leave to re-plead the second cause of action to allege a cause of action to recover damages for breach of contract consistent herewith provided that such amended complaint is served within twenty (20) days of the date of this order; and it is further,
ORDERED, that if Plaintiff does not serve an amended complaint, Defendant shall serve its answer thirty (30) days after the date of this Order or, if Plaintiff serves an amended complaint as provided for herein, Defendant shall serve an answer within twenty (20) days of service of the amended complaint; and it is further,
ORDERED, that counsel for the parties are directed to appear for a Preliminary Conference on October 6, 2005 at 9:30 a.m.
This constitutes the decision and Order of the Court.
Dated: Mineola, NY _____________________________
August 15, 2005 Hon. LEONARD B. AUSTIN, J.S.C.
Footnotes
Footnote 1:$2,709,627.78 (gross sales from commission statement for 2004) + $483,936.33 (amount that has not been shipped listed under Commission Balance Statement) + $18,000.00 (Purchase Order of Doyle's Medical Supply).
Footnote 2:The first cause of action also alleges a claim for breach of contract. Defendant does not move to dismiss that cause of action.
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