Brennan v J.P. Morgan Sec., Inc.
Annotate this CaseDecided on August 31, 2004
Supreme Court, New York County
Brian J. Brennan, Plaintiff,
against
J.P. Morgan Securities, Inc., Defendant.
602720/03
Richard B. Lowe, J.
Plaintiff Brian J. Brennan alleges that his former employer, defendant J.P. Morgan Securities, Inc., breached an employee compensation agreement when it failed to pay him his full bonus for the year 2000. Defendant makes a pre-answer motion to dismiss the complaint and plaintiff cross-moves to amend the complaint.
In 1985, plaintiff went to work as a trader for one of defendant's predecessors. In 2001, as the result of a merger with the last predecessor, Chase Manhattan Corporation (Chase), the instant defendant became plaintiff's employer. At the time that plaintiff was hired, he alleges that he and Chase agreed that, in addition to his base salary, he would receive a year-end bonus, based upon his personal performance, the performance of his division, and the performance of the company as a whole. Plaintiff alleges that defendant assumed this agreement.
Plaintiff alleges that his year-end bonus increased every year of his employment through 1999, as he gained experience and received promotions. For the year 1999, head traders who met their performance goals received bonuses of approximately $400,000, plus stock options. Plaintiff was promoted to the position of head trader of his division for 2000. Under his guidance, he alleges, his division met or exceeded all of the profit and performance goals set by the employer. For the year 2000, all of the other traders in his group that were supervised by him received the same bonus or more than they had received for 1999. Plaintiff anticipated a substantial increase in his year-end bonus and stock options. Instead, plaintiff was given a bonus of $225,000, $60,000 less than he received for 1999. Plaintiff alleges that two persons in management told him that defendant directed that any employee that it intended to terminate should not be paid his or her full and fair year-end bonus. Defendant dismissed plaintiff on January 17, 2001 as part of a firm-wide round of layoffs.
In addition to a greater bonus for 2000, plaintiff seeks a bonus for 2001, prorated for the two weeks that he worked that year. Plaintiff alleges that the total sum owed him is approximately $400,000. He asserts causes of action for breach of contract, quantum meruit, unjust enrichment, and violations of Labor Law § 198 (1)-a, under which an employer who fails to pay wages must pay the employee's attorneys' fees and, if the failure is found to be willful, must pay 25% of the wages found to be due, in addition to the wages. [*2]
Plaintiff states that he and his employer had an oral agreement. However, defendant alleges that plaintiff's bonus compensation was governed by the Global Markets Incentive Plan of the Chase Manhattan Corporation (the Plan). Apparently, plaintiff was employed in the Global Markets Group, which comprises several divisions or units. Defendant contends that the Plan vests the employer with absolute discretion as to the entitlement and amount of any payments thereunder. Therefore, plaintiff cannot recover based on a claim that the employer failed to pay him compensation. Defendant also argues that the Labor Law does not apply because the bonus is not wages.
The rule with respect to bonuses is that an employee's entitlement to a bonus is governed by the terms of the employer's bonus plan (Hall v United Parcel Serv. of Am., 76 NY2d 27, 36 [1990]; Weiner v The Diebold Group, Inc., 173 AD2d 166, 167 [1st Dept 1991]; see also Kaplan v Capital Co. of Am. LLC, 298 AD2d 110, 111 [1st Dept 2002]). An employer may agree to award a bonus to an employee, in which case the employee has a right to the bonus, or the bonus may be entirely up to the employer's discretion (see Mirchel v RMJ Securities Corp., 205 AD2d 388, 389-390 [1st Dept 1994]; Weiner, 173 AD2d at 167). An employee has no enforceable right to compensation under a discretionary compensation or bonus plan (Namad v Salomon Inc., 74 NY2d 751, 753 [1989]).
Regarding plaintiff's Labor Law claim for wages, section 190 (1) defines "wages" as "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." Earned wages, including those that come in the form of bonuses, may not be forfeited (Weiner, 173 AD2d at 167; see also Cohen v Lord, Day & Lord, 75 NY2d 95, 101-102 [1989]; Mirchel, 205 AD2d at 389). It is generally held that wages, despite the term's broad definition, do not encompass compensation based on incentive plans (Truelove v Northeast Capital & Advisory, Inc., 268 AD2d 648, 649 [3d Dept] affd 95 NY2d 220 [2000]; Magness v Human Resource Servs., 161 AD2d 418, 419 [1st Dept 1990]; Matter of Dean Witter Reynolds, Inc. v Ross, 75 AD2d 373, 381 [1st Dept 1980]). Nonetheless, whether compensation constitutes wages or something else depends not upon the title of the employer's plan, but upon "whether the compensation is vested and mandatory as opposed to discretionary and forfeitable" (Truelove, 268 AD2d at 649).
The Plan first became effective on January 1, 1992 (Plan, ¶ 2.1 [m]), and was amended every year through January 1, 1998 (id. at 5). The declared purpose of the Plan is to attract and retain employees who can "make a material contribution" to the success of the Global Market divisions (id., ¶ 1.1). Employees eligible for bonuses are called Participants and include all division heads (id., ¶ 3.1). Participation in the Plan precludes participating in any other annual bonus plan (id.).
At the end of each plan year, two bonus pools will be created (id., ¶ 4.1). One will be allocated at the discretion of the division head, and the other at the discretion of a specified executive (id.). A third pool may be created, based on the discretion of Chase's chair (id.). Each pool will comprise a set percentage of the profits of the Global Markets divisions (id. at 6). No obligation exists to distribute 100 percent of the funds in the pools, "nor to grant superior compensation levels to individuals who provide only adequate performance levels or who were not significant factors in generating the profitability or solid operations of the Group" (id., ¶ 4.6).
The Plan is administered by the Compensation Committee, whose interpretation or [*3]determination of any award "shall be final and binding on all Participants, including a determination by the Compensation Committee to adjust, defer, or completely eliminate the payment of any award hereunder or any current Plan Year ..." (id., ¶ 7.1). "In the unusual event it is deemed appropriate to agree in advance with a Participant that an award will be a specific size, the agreement and its conditions shall be reduced to writing and approved by the Plan Administrator" (id., ¶ 7.7). Also, the Plan states that in order to be eligible for a bonus, an employee must be actively employed by the corporation on the day of payment (id., ¶ 4.4).
In 2000, Chase distributed to employees a document entitled Features of the Plan, along with a cover letter. The letter, dated February 29, 2000, states that employees in the Global Market group receive bonuses based on a "'pay for performance' philosophy" (Letter). Compensation is based on "market competitive levels and performance, with performance being a combination of individual performance plus team performance" (id.). "While the [bonus pools] provide a concrete funding source, individual awards are discretionary, and they are based on a combination of profit performance, competitive market requirements and qualitative factors" (id.).
The Features of the Plan provides much the same information as the Plan. It also states that individual bonus awards are based on individual performance, market activity, and the profitability of the Global Market divisions (Features of the Plan, ¶ 2). "Payment of all monies in a bonus pool to participants in the pool is not mandatory. No employee should interpret this Plan as granting individual rights" (id., ¶ 7). The Features of the Plan states that, in the event of a discrepancy between it and the "official plan document," the latter, that is, the Plan, will apply (id., ¶ 9).
The Plan unambiguously provides that the employer has the discretionary authority to decide if and how much the employee is to be paid (see Modugu v Continuum Health Partners, Inc., 3 AD3d 422, 423 [1st Dept 2004]; Kaplan, 298 AD2d at 111). It also provides that any agreement as to an amount must be set in writing, and that participation in the Plan precludes participating in any other annual bonus plans. Hence, plaintiff's claims of an oral agreement for another amount or of another bonus agreement altogether are not tenable. The oral agreement was purportedly made when plaintiff was hired in 1985, but it is obvious that the employer since changed its policy. In addition, the fact that an employee receives bonuses throughout an employment relationship does not vitiate the employer's right to retain full discretion in determining the amount, if any, of an employee's bonus (Freedman v Pearlman, 271 AD2d 301, 303 [1st Dept 2000]). Nor does such a practice, by itself, create an implied contract. All that plaintiff says about the alleged oral contract is that it existed.
Plaintiff argues that the Plan cannot determine his rights, as it is not a contract, and that if it is a contract, he was never a party to it. However, the non-contractual nature of an employer policy does not render it inapplicable (see Kaplan, 298 AD2d at 111). The policy, whether contained in a plan, such as here, or in a handbook or manual covers the terms of the employment (see Matter of Salza, 297 AD2d 850 [3d Dept 2002]; Jagust v Brookhaven Mem. Assn., Inc., 150 AD2d 432, 433 [2d Dept 1989]), unless the contrary can be established, which has not been done here. Additionally, that the Features of the Plan and the Letter were circulated to plaintiff is shown by the fact that defendant was able to retrieve them from his email records. Defendant does not show that plaintiff also received a copy of the Plan; however, the Features of [*4]the Plan refers to the Plan. Therefore, plaintiff knew or should have known of the employer's policy regarding bonuses. Nor does plaintiff have a claim for wages. Wages are not forfeitable, as are the bonuses described in the Plan.
Plaintiff asserts causes of action for quantum meruit and unjust enrichment. These are quasi contract doctrines developed to ensure that a party whose work has benefitted another will be paid the worth of his or her services (Zolotar v New York Life Ins. Co., 172 AD2d 27, 33 [1st Dept 1991]). The doctrines do not apply where there is a written document that covers the subject matter of the dispute (id.).
On a CPLR 3211 (a) (7) motion to dismiss for failure to state a cause of action, plaintiff's allegations are regarded as true. Nonetheless, an exception exists for bare legal conclusions and factual claims which are contradicted by the evidence, which the court is not required to accept (Meyer v Guinta, 262 AD2d 463, 464 [2d Dept 1999]). Plaintiff's claim of an oral agreement reflects both of these deficiencies. To successfully seek dismissal on a CPLR 3211 (a) (1) motion, defendant must show that the "documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law" (Goshen v Mutual Life Ins. Co. of New York, 98 NY2d 314, 326 [2002]). Defendant has met this burden. The motion to dismiss the complaint is granted.
Plaintiff cross-moves to amend the complaint. The motion is denied. Although, as a rule, leave to amend a pleading is freely granted, it will not be granted "when the proposed pleading is palpably insufficient as a matter of law" (Ancrum v St. Barnabas Hosp., 301 AD2d 474, 473 [1st Dept 2003]). Plaintiff has given no indication of how an amended pleading would possess more merit than the present one.
In conclusion, it is
ORDERED that defendant's motion to dismiss is granted, and the complaint is dismissed with costs and disbursements to defendant as taxed by the Clerk of the Court; and it is further
ORDERED that the Clerk is ordered to enter judgment accordingly; and it is further
ORDERED that plaintiff's cross motion is denied.
Dated: August 31, 2004ENTER:
___________________
J.S.C.
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