Stec v Passport Brands, Inc.

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Stec v Passport Brands, Inc. 2018 NY Slip Op 32052(U) August 22, 2018 Supreme Court, New York County Docket Number: 152069/2014 Judge: Marcy Friedman Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [* 1] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 SUPREME COURT OF THE STATE OF NEW YORK COlJNTY OF NE\V YORK ---·PART 60 ROBERT STEC, Plaintiff; Index No.: 152069/2014 ~against~ PASSPORT BRANDS, INC. and ERNEST JACQUET, Defendants. --~"""""""""""""""""""""'"""""""""""_______'""''"~---~ x DECISIONiORDER Plaintiff Robert Stec, a forrner executive of defendant Passport Brands, Inc. (Passport), brings this action to recover unpaid wages and other amounts from defondant company and from defendant Ernest Jacquet, Passport's majority shareholder and the chainnan of its board of directors. The complaint pleads one cause of action for violation of the New York Labor Law and two causes of action for breach of contract. Defendants now move, pursuant to CPLR 3212, for summary judgment dismissing the comp.taint in its entirety. fit\CKGROUND The following facts are not in dispute: On or about November 13, 2007, Stec began his employment as the President and Chief Executive Officer (CEO) of Passport, then known as LC. Isaacs & Company, Inc. (Joint Statement [JS], ,-r 2.) Pursuant to an Employment Agreement between Passport and Stec, dated as of February 10, 2011, the company extended Stec's employment tem1 and agreed, among other things, that Stec would be paid "a base salary . , . at the annual rate of $410,000 through December 31, 2013." (2011 Ernployrnent Agreement, § 3 [a] [Jacquet AII In Supp., Exh. B].) Defondant Jacquet signed the agreement on behalf of Passport (kL, Signature Page.) 2 of 17 [* 2] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 Beginning in or about November 2011, Passport began to difficulties. (Jacquet A.ff. In Supp.,~· experienc~~ financial 53.) It is undisputed that, during this period, Stec \Vas not paid $158,076.92 of the base salary provided for in the 2011 Employment Agreernent. Passport also failed to fully repay a $100,000 loan made by Stec to Passport in May 2010 (the 2010 loan). On July 17, 2012, Stec and Passport entered into a "Consultancy Agreement" (JS,~ 5; Jacquet Aff. In Supp., Exh, L) Like the 2011 Employment Agreement, the Consultancy Agreement was executed by Jacquet, on behalf of Passport, and by Stec, In the Whereas Clause of the Consultancy Agreement, the parties stated that Passport "desires to further reduce its operating costs due to lower sales volume ... ,"and that Stec "desires to reduce his dedicated time to the Passport business and assjst Passport in its cost reduction and business strategy execution .... " Stec accordingly agreed to "resign[] his foll time position as President and CEO of Passport, maintain his position as a director of the Company at the discretion of the Company and accept the position as a strategic independent consultant to the company reporting to the Chaim1an." (Consultancy Agreement,§ 1.) As to the amounts then owed to Stec, the /\.greement provided: "4) PSJ§tQJJf;'. __(_QmJ2~U1?JltiQrr The Company [Passport] acknowledges and agrees to repay the past due wages due Stec in the amount of $158,076.92 that are currently recorded jn the company accounts payable system. These wages will be paid each month in the amount of not less than $5000 per month provided the compa11y generates the cash f1ow projected in the 6 months Cash Flow Projection dated July 2, 2012. If and \Vhen the Company receives funding from Uniglobal or Silver Pipe LTD in an amount of $3.0mm or more, the payment schedule will accelerate automatically and all past due balances will be paid in full within 30 days of funding going into the Company. The Company, at its discretion, may accelerate the payment schedule but under no circumstance, may they reduce the payments. "5) Q\JJ~1i1mlintdQJJJJJft£QDWSJnY: As of July 6, 2012, the company still O\Ves ~/Ir, Stec $30,464.36 from a personal note in the original amount of $100,000 executed in May, 2010. This amount will remain outstanding 2 3 of 17 [* 3] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 until r~a.id i11 fuJl . J\t th.e ti.t1"1e t11at ft.nH.iint1 corn.es .into th.e co.rr~l]J.1.n.y fror11 ~:U1)r sou.rce ir1 the a1T1otn1t of $3.0 n1n1 or rnt1re:i t11e ct;_rnpa~ny \~viU i:1~:.t;l this .r1ote off ir1 f1tn (princ.Ii:)a] ar1d in.terest). }~; otitstand.ing 10}2011 currently· scheduled to rtu1 throtagh lo~:u1 ,, 201-4~ rruu .' ""i/01Cl ~~.i\.s per otlr cHsc:ussior1 of last Fridav· re~~ar::.i.in_g the l-Jalar1c-e of tl.H.: l()an ar1ct' the back. pa.;l O\~~e(i to you \>..re .h.ave agrceci to th,e i(Jllo\~-l_h1g:: ~ Q t,;o(t.n bala_nee t1f $31 K: coJ11r~r·.n1~y \-vU1 .lJa:y $5~000.00 })f:r .r11otJ1s [sic] startint1 i11 Jt1ly anzi the loar1 ~vliH b·e re·paid fuJ1y t)~:l tl~e er1d of IJeceI11b~-:r 2013 .- ~ . . 13ac.k 1~~ayro1 l {)f $ l 58~K~; '"-lie \:\rD ~ h~:rvc a t1r1aI clisct1sslcn1 of 110"\:\1 this ~:uTsotn1t \V-f~l ·be :paicl to :you. r10 1a.h~:;r t11a11 Sel)l°~:[nl;t.~.r 30~ 2013 ()f earlier if tl1e fi.r1<1t1cial c.irctn11star1ces of I)aSSf)Ort I3r~:lJH.is allovv it.. " 9 ·'I'he Jltne 2013 as Senior Vice President of Passport. 2 1 It is unclear from the record on this motion >.:vhether and, if so, when these past due expemes were paid, 2 Although the June 2013 Agreement is not signed by Stec, defendants do not d1allenge its enforceability on that ground. 3 4 of 17 [* 4] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 To date, Passport has not paid Stec either the $158,076.92 in unpaid wages or the full balance of the 2010 loan. Stec commenced this action by fiiing a summons and complaint on March 7,.2014. The complaint pleads a first cause of action against both defendants for violation of New York Labor Lavv §§ 193, 198, and 663 (CompL, ~133-40); a second cause of action against Passport for breach of the Consultancy Agreement (id.,,, 41-46); and a third cause of action against Passport for breach of the June 2013 Agreement foL 4!147-52). RlS.CU,SSlQN The standards for summary judgment are vvell settled. The movant must tender evidence, by proof in admissible fonn, to establish the cause of action "sufficiently to warrant the court as a matter oflaw in directingjudgmt~nt." (CPLR 3212 [b]; 2\~~k~t!11®..YJ~itJ:'...ofNe"tYT9rk, 49 NY2d 557, 562 [1980J) "Failure to make such showing requires denial of the motion, regardless of the sufficiency of the opposing papers." (~!irn~2sad v ]"J§_\V York.!111iY"-~1Yhi,J::~Jr.,, 64 NY2d 851, 853 [1985].) Once such proof has been o11ered, to defeat summary judgment "the opposing party must 'show fucts suHicient to require a trial of any issue of fact' (CPLR 3212, subd. [b])." (Zllt:'.K~ill1fil1, 49 NY2d at 562.) "[I]ssue-finding, rather than issue-determination, is key. Issues of credibility in particular are to be resolved at trial, not by summary judgment." Bg~l~Y<lnLH_g_µ;;,___C_g_iJl,_, Gl9b~ {~1l~IUIQ..Y 70 AD3d 474, 475 [l st Dept 201 O], citing -~LL Capelin -(\§3.QS",_Jµg, __y __ Mfa_.___C9_1J\, 34 NY2d 338, 341 [1974] [other internal citations ornitted].) Ni;:~~Y.YQrK..LAtb.9.LL~w With respect to the Labor Law cause of action, defendants first contend that Stec "knowingly acquiesced to a reduced salary," creating an "implied agreement between the pmiies" to a "revised downward salary payment" or to "conditional repayment," which they contend does not violate the Labor Law. (Defs.' Memo. In Supp,, at 7,) In the alternative, 4 5 of 17 [* 5] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 defondants contend that no claim exists under any of the three sections of the Labor Law cited in Stec's complaint. According to defendants, there is no claim under Labor Law§ 193 because "payments "vhich were withh~lq by Passport \Vere not tmla\vfu! deductions [within the meaning of§ 193], but rather a mere failure to pay \vages," which they claim is not covered by that section. (Id., at 8 [emphasis in original].) Defendants further contend that no claim exists under Labor Lmv § 663 because that section "provides for recovery in the event an employee is paid less than the minimum wage established by the law," which is not alleged here. G~t., at 10-11.) Finally, Defendants contend that no claim exists under Labor Law § 198 because the remedies provided in that section are limited to claims based upon substantive violations of article 6 of the Labor Law. (Id,., at 11.)3 [n opposition, Stec denies that he ever agreed to accept a reduced salary, and contends that defendants' assertion of such an agreement is contradicted by the evidence in the record, including Passport's written acknowledgment of its debts to Stec in both the Consultancy Agreement and the June 2013 Agreement (See id., at 11-14.) Stec further contends that his claim for unpaid wages falls within the types of daims covered by Labor Law § 193 (id., at 1418), and that he is entitled to liquidated drunages and attorneys' foes under Labor Law§§ 198 (l~ a) and 663 (1 ). (Id., at 2 L) Defendants fail to tnake a prima facie show'ing that Stec either expressly or impliedly agreed to accept a reduction of his salary. At most, the record shows that Stec agreed to temporarily defer payment of his salary as ru1 accommodation to defendants, in acknowledgment of Passport's finru1ciai problems. (See Email from Stec to Jacquet, dated April 3, 2012 [4/3112 3 Defendants also contend that Jacquet cannot be individually liable to Stec under the Labor Law, because Jacquet was not Stec's "employer" for purposes of that law. iliL at 12-13.} As the comi holds, for the reasons stated in the text, that defendants are entitled to summary judgment dismissing the Labor Law claim, the court need not decide this issue. 5 6 of 17 [* 6] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 Email] [Jacquet Aff. In Supp., Exh. F].) Defendants also claim that Stec agreed to "condition" his entitlement to the approximately $158,000 in unpaid wages on the company's thereafter meeting certain fonding or revenue targets. (See Defa.' Memo. In Supp., at 1-2, 7.) This argument is more fully developed by defendants in support of the branch of their motion seeking dismissal of Stec's breach of contract causes of action. As held bekn.v, defendants fail to demonstrate on this record that these causes of action should be dismissed, The court therefore asstmles, for purposes of its analysis of the Labor Law cause of action, that Stec has a viable underlying claim for unpaid wages. The court nevertheless holds that the Labor Law does not provide a remedy for defondants' nonpayment of these wages. Labor Law§ 193, on which Stec relies, provides, in pe1iinent part, that "[n]o employer shall make any deduction from the wages of an employee," except those which, as relevant to this case, "are expressly authorized in w-riting by the employee and are for the benefit ofthe employee .... " (Labor Law§ 193 [1-b],) The statute sets forth a non-exclusive list of potential "authorized deductions," which include payments for, among other things, insurance premiums; pension or health and welfare benefits; dues or assessments to a labor organization; fitness center, health club, and/or gym membership dues; day care expenses; and '"similar payments for the benefit of the employee," (Id., § 193 [ 1-b] [i]-[xiv] .) Here, the issue is whether defendants' V.ithholding of and continuing failure to pay Stec his base salary constitutes an unauthorized "deduction" from wages within the meaning of section 193. In arguing that the withholding of wages is not a "deduction.," defendants principally rely on two recent federal decisions in a related Labor Law case, G2.htb.~rn:..Y..I~£aµet (2015 WL 5172939 [SD NY, Aug, 31, 2015, No, 14 Civ 1581, Crotty, J,J, §lffd 667 Fed Appx 313 [2d Cir, June 30, 2016].) There, Goldberg, another Passport executive, sued Jacquet in 6 7 of 17 [* 7] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 federal court for, among other things, violation of the Labor La\v after Passport "began v1rithholding a portion of Goldberg's salary to cover general business and operating expenses,'' (2015 WL 5172939, at* L) Jacquet moved for summary judgment dismissing the complaint, including Goldberg's Labor Law§ 193 claim. He argued, as he does here, that vvithheld salary payments "do not constitute deductions and are instead a failure to pay wages not addressed by § 193." (Id., at* 2.) The District Court agreed, holding that "[t]he majority, and more persuasive, interpretation of§ 193 is that it has nothing to do with failure to pay wages or severance benefits, governing instead the specific subject of making deductions from wages." (Id. [internal quotation marks and citations omitted].) As explained by the Court: '"[A] ~deduction' is more targeted and direct than the vdmlesale withholding at issue here, and New York courts recognize that the purpose of section 193 is to 'place the risk of loss for such things as damaged or spoiled merchandise on the employer rather than the employt~e. '" (ld., quoting Q:QkLv Ani,_~IlYllI!.~!~~L /~1~IL~Qti2,, 2015 WL 4887525, * 5 [SD NY, Aug. 17, 2015, No. 14 Civ 5485, Keenan, J<_].) The Court thus rejected "Goldberg's attempt to portray the withholding of his wages as a deduction, as this would sanction a skewed interpretation of§ 193," which "'requires something more [than the total withholding of wages]; a specific instance of qQyking the employee's pay."' (Id. [brackets and emphasis in original], quoting Gold, 2015 WL 4887525, at* 2.) The Second Circuit affirmed, expressly adopting the District Court's holding that "[i]n order to state a claim for a violation ofNYLL § 193, a plaintiff must allege a specific deduction from wages and not merely a failure to pay wages." (667 Fed A_ppx at 314.) According to the Court, "[t]he district court correctly ruled that although Goldberg did not receive wages to w'hich he was entitled, his wages were not n.:duced in the manner prohibited by NYLL § 193." (Id.) The Second Circuit also noted that"[ w]holesale withholding of wages is covered by NYLL § 7 8 of 17 [* 8] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 191, which the parties agree does not apply to the plaintiff because ht~ was an executive and therefore exempt from this provision." (Id., at 314 n L) Although the Q_gJ.Q.11-fili;: decisions are not binding on this court, their reasoning was expressly adopted by the First Department in P..~I~11£t.1Y.~inb~rn..P.m1n~.rn.1,_LG.xJZrggnex (153 AD3d 443, 449-450 [1st Dept 2017], affg 2016 WL 3906073, * 16-17 [Sup Ct, NY County, July 19, 2016, No. 653488/2015, Kornreich, .L]), a decision issued shortly after the briefing of this motion. Citing Q_gJdh~rn., numerous prior federal district court cases, and several New York cases, the Court held that "a wholesale withholding of payment is not a 'deduction' within the meaning of Labor Law § 193." (153 AD3d at 449.) The Court expressly stated that "[t]his issue was not addressed by the Court of Appeals in Rvan v:..KY..U.Q_ggJ:ru:tngr§J.11:'?L ..S.~.ry~_,_ (19 NY3d 1, 16 [2012]) or by this Court in ~Vqchter v Khn (82 AD3d 658, 663 [1st Dept 2011])." (153 AD3d at 449-450.)4 The Perella Court's characterization of Ryan and .\Y1=l£h1i,';I is significant because these, and other, cases have permitted recovery, under Labor Lm;v § 193, of unpaid. compensation, where the compensation was vested as opposed to discretionary, In Rvan, after holding that the employee's bonus payment was due and vested, the Court of A.ppeals reasoned: "Since [the employee's} bonus therefore constitutes 'wages' within the meaning of Labor Law§ 190 (1), [the employer's] neglecHo pay him the bonus violated Labor Law§ 193, and entitles [the employee] to an award of attorney's fees under Labor Law § 198 (1-a)," ( 19 NY3d at 16 [internal citation omitted].) In Wachter, which was decided before Ryan, an employee claimed "aggregate cash 4 It is noted that, although the Perella Court appears to have sided with the weigbt of authority, a number of pre-Perella cases decided in this Comt relied on Ryan and \Vachter in holding that Labor Law § 193 covered claims for total withholding of wages. (See ~ I9.rt9I~.U~x PQ,?1w:.m:k,?J:L'(,JJA;, 20 l l WL 3020860 [Sup Ct, NY County, July 13, 2011, Index No, 112686/2010, Madden, J.]; )'xf~~tI9.YtQ.Y.~~l1U!lY~rnJJ~.Y~nQXD.,_L.lC, 2015 WL 6508311, * 4-5 [Sup Ct, NY County, Oct. 16, 2015, Index No. 155204/2012, Bannon, J.J; P!..fi!H"J.. ~'..M.9.rnH~ltQ.~$.;. -~~-1':t9.LlL~AJng_,. 2012 WL 3527213 [Sup Ct, NY County, Aug, 9, 2012, Index No. 0109387/2008, Oing, J.].) 9 of 17 [* 9] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 compensation," which \Vas comprised of a number of elements, including an annualized draw and a bouus. The Court held that to the extent such compensation was non-discretionary, it constituted "'wages' that are protected by Labor Law § 193 (1) and § 198." (82 AD3d at 663.) At least two federal courts have noted the broad reading to which BTI.m and other similar cases are susceptible, and distinguished them on the grom1d that there was no indication in the cases "that the parties disputed whether the \vithholding was specific enough to be considered a 'deduction.' Indeed, those cases explicitly frame their analysis as interpreting the definition of 'wages,' not deduction." (Gold, 2015 \VL 488725, at* 3; accorq ;Kg.mJ.Q.~~yxJ'.,illYQL&:J:rinmi, L_L,P, 2017 WL 722033, * 14, n 8 [SD NY, Feb. 23, 2017, No, 15 Civ 9316, Polk Failla, l], affd without ~1i~~W"i~im1 of the Labor Law cause of action 714 Fed Appx 11 [2d Cir],) Decisions of this Court have sirnilariy distinguished these cases. (PereH_g, 2016 WL 3906073, at* 17 [the Comt (Kornreich, J.), in the underlying decision, explaining that Rvan "merely addressed the meaning of wages (and that a bonus can be considered wages), not whether all wholesal~ failures to pay bonuses are§ 193 violations"]; W:~~htecY. Kim, 2013 WL 144760, * 1 [Sup Ct, NY County, Jan. 11, 2013, No. 650532/2008] [this Court (Ramos, J.) explaining that in its 2011 decision in .W11~.-bJ~r., "the First Department did not address whether the non-payment of Wachter' s wages qualifies as a 'deduction from \vages,' within the meaning of section 193 of the Labor Law"], a2peal wi.tbs1rn.wn 109 AD3d 705.) Notably, in KQh~.hins v Evolution M~!:lsY..11'Lin~-·- (31 NY3d 100 [2018]), a recent decision upholding the denial of a motion to dismiss a claim for a production bonus, the Court of Appeals reasoned that "[t]o the extent the production bonus was not discretionary , .. [it] could constitute nonforfoitable 'wages,'" (kt at 110.) In support of this holding, the _Kgk.hin~ Court, citing Rvan (19 NY3d at 16), explained that nothing in its prior precedent "suggests that the parties may 9 10 of 17 [* 10] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 agree, in violation of the public policy reflected in the Labor Law, that wages ea.med .and vested before an employee leaves a job '\-Vil! be forfeited if the employee is no longer working for the employer when the employer is obligated to remit payment" (KPl~.hi.n;?, 31 NY3d at 110, n 6.) As in Ryan, it does not appear that the parties in KPkhin~ were disputing whether the Labor Law provided a remedy for ·wholesale withholding of wages (there, the bonus), as opposed to deductions from wages. Moreover, review of the electronically maintained court file in the KPk_hin.§ case shows that the complaint, w"hich was the subject of the determination of the motion to dismiss that ultimately made its \:vay to the Court of Appeals, pleaded a breach of contract cause of action for nonpayment of the bonus, but not a Labor Law cause of action. CS.~-~ [Sup Ct, NY County, Oct 22, 2015, Index No. 653536/2012, Bransten, J.] [noting that "Plaintiff had not pied a Labor Lmv claim in his original complaint" that was the subject of the decision appealed to the Court of Appeals].) This court accordingly concludes that the issue of whether Labor Law § 193 pennits a cause of action to be maintained for wholesale withholding of wages must mvait further clarification by the appellate courts, but that Perella remains viable and convincing law. Compelling reasons exist for rejecting a reading of Labor Law § 193 that would pem1it a cause of action to be maintained for wholesale withholding of, as opposed to specific deductions from, wages. As noted in recent federal court decisions, the total vvithholding of wages is the essence of a breach of contract claim. (See Gold, 2015 WL 4887525, at* 2; 119-f:~~r4 K~nrllQ.~~y, 2017 WL 722033, at* 14; see also Kletter v Flemilw,, 32 AD3d 566, 567 [3d Dept 2006]5,) Moreover, a 5 In Kletier, the Third Department held that the defendant-counterclaimant's "claim for unpaid work was a 'common-law contractual remuneration daim."' (32 AD3d at 567 [internal citation omitted}.) The Court also dismissed the counterclaim, reasoning that ii did not "allege any specific deduction in violation of section 193." (Ido) Kletter was cited in Pe.rnll1i for this latter holding. (Perella, 153 AD3d at 449.) 10 11 of 17 [* 11] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 "'deduction' is more targeted and direct than the wholesale \Vithholding' of wages." (Cif1l9.be1:11., 667 FedAppx at 314 [quoting UQJd, 2015 WL4887525, at* 5]; KmrJ,l9_~~s. 2017 WL 722033, at * 14.)6 The extensive itemization of authorized deductions in section 193 supports the conclusion that a deduction is more targeted than a wholesale V\ritbholding. In the instant action, Stec's Labor Law§ 193 claim is based on defendants' wholesale withholding of his past due wages. Stec does not, either in his pleading or in opposition to this motion, identify any specific unauthorized deduction taken from his 'vages. Rather, the evidence in the record shows that defendants v.1thheld Stec's wages due to Passport's financial problems and, arguably also, due to disagreements as to the terms of payment agreed to by the parties. This \Vithholding is not the type of "deduction" Labor Law§ 193 was designed to prevent In addition, it is undisputed that Labor Law§ 191 authorizes a cause of action to be brought for nonpayment of vvages by employees identified in that section (manual workers, railroad workers, commission salespersons, and clerical and other workers). It is settled that this 615, 616 [2008] [explaining that, under prior precedent, "employees serving in an executive, managerial or administrnti ve capacity do not fall under section 191 of the Labor Law and, as a result, those individuals are not entitled to statutory attorney's foes under section ] 98 (1-a) if they assert a successfhl common-law claim for unpaid wages"], rearg deniQ4 11 NY3d 751; Qglc,lb~~tg, 667 Fed Appx at 314, n 1.) To permit Stec, a former executive of Passport, to recover 6 In support of this holding that a deduction is more targeted than wholesale withholding of wages, the federal courts have relied on M_~tt~LQftlJJQ~§;-~--~y_J:)j~Q_:b'.iJl~,JpgJ {90 NY2d 342, 349 [1997].) The issue there was whether the Labor Law§ 193 prohibition on unauthorized deductions from \Vages was violated by the employer's requirement that salespeople remit to the employer funds collected from customers upon the deli.very of inventory. ln holding that it was not violated, l11e Court cited the legislative history of section 193, stating that this section "was intended to place the risk of loss for such things as damaged or spoiled merchandise on the employer rather than the employee." (s._~~ G_QJ_gJ;l~rg., 667 Fed Appx at 3 !4 [quoting Gold, 2015 \\11, 4887525, at* 5, quoting H\!dacs].) 11 12 of 17 [* 12] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 unpaid wages under section 193 would create an exception that would effectively swallow the limitation in section 191 as to the categories of workers authorized to sue for unpaid wages" (See Q2l~l2~rg, 667 Fed Appx at 314, n 1.) As no cause of action exists under Labor Law § 193, Stec cannot avail himself of the remedies provided for under Labor Law § 198, which are reserved for claims based upon substantive violations of article 6. (See Gqj!H_~l?-YKY.MY.1!JP,J,,gµb &J~g-~, 82 NY2d 457, 463 [1993], rearg denied 83 NY2d 801 [1994].) Nor can Stec maintain a claim for attorney's foes pursuant to Labor Law§ 663, which covers violations of article 19, the Minimum Wage Act. (Recov§1::vJ\~J?JDK LLC v Abate, 2007 V/L 2302451, * 3 [Sup Ct, Nassau County, Aug. 10, 2007, Index No. 017764/2005, Warshawsky, J.]; see also 52 NY Jur2d Employment Relations,§ 187.) The first cause of action, for violation of the New York Labor Law, will accordingly be dismissed in its entirety. Breach of Contrac_t Stec's second and third causes of action are for breach of the Consultancy Agreement and for breach of the June 2013 Agreement, respectively. For the reasons discussed above in connection with Stec' s Labor Law cause of action (supra at 5-6), the court bolds that defendants fail to show that Stec agreed to reduce his salary by the amount of the unpaid wages. Stec' s breach of contract claim for the $158,000 in unpaid wages is pleaded in the third cause of action for breach of the June 2013 Agreement, which is asserted only against defendant Passport (Compl., iJ 49.) The parties disagree as to the enforceability of the provision in this Agreement regardins payment of Stec's withheld wages, whieh states: "Back payroll of $158K: we will have a final discussion of how this amount will be paid to you no later than Septefaber 12 13 of 17 [* 13] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 30, 2013 or earlier if the financial circumstances of Passport Brands allow it" Defendants }_Q, '.f.QlJ. as to how the withheld wages were to be paid to Stec, (Defs.' Reply Memo., at 7.) Stec interprets the provision as requiring the parties to have a final discussion thereaHer as to hovv Passport was to l1ro:'. the wages no later than S.~nl~.m1?.~I }O, 2013. (Pt's Memo. In Opp,, at 23.) It .ls \\~ell settlecl that the dcterrninatio11 of vvh.etb.er a contract is {:tr11biguou.s lS ot1e of ia\~1 ii1terpretatiorls ar1ct' 1s 13 14 of 17 [* 14] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 [alleging a balance due on the loan of $5,778 in principal as of November 2013].) A triable issue of fa.ct also exists on the amount of principal and interest due on the loan. The second cause of action pleads a claim for breach of the Consultancy Agreement and is also asserted only against defondant Passport. This cause of action alleges that Passport breached the Consultancy Agreement by failing to pay the balance of the 2010 loan and "by fa.Hing to return Plaintiff 'to a compensation package equal to the base pay [in the February 2011 Employment AgTeement],,,,"' (CompL, ~ 43 [brackets and ellipsis in original].) Defendants do not claim, let alone make a prhna fade shmving, that they complied with section 5 of this Agreement, which required Passport to repay the 2010 loan in foll "[a]t the time that fonding comes into the company from any source in the amount of $3.0 mm or more!' (Consultancy Agreement, § 5.) Defendants further fail to address Stec' s evidence that Jacquet himself injected more than $3 million in fo:nds into Passport after the execution of the Consultancy Agreement (See Pl.'s Memo. In Opp,, at 22 fciting deposition transcript and financial summaries].) If defendants breached section 5 of the Consultancy Agreement, they may also have breached section 13, the "Default clause," which provided that "[i]n the event that the company fails to completely satisfy the tenns of this agreement or obtain agreement from Mr. Stec to modify this agreement, JVIr. Stec i,vi!l return to a compensation package equal to the base pay currently in his employment agreement:' It is undisputed that Passport never "return[ed]" Stec to his prior base salary. 7 Defendants' arguments with respect to the second cause of action primarily concern 7 Questions offai:t exist concerning the interplay between the Consultancy Agreement and the June 2013 .Agreement with respect to repayment of the 2010 loan. The parties do not address, among other issues, the extent to which the June 2013 Agreement constituted a modification of the Consultancy Agreement, and \vhether this modification occurred before or after Passport received the $3 miilion in funding referenced in section 5 of the Consultancy Agreement and purportedly defaulted on that agreement Nor do they address the effect of the possible unenforceability of the June 2013 Agreement on the loan repayment and default provisions of the Consultancy Agreement. 14 15 of 17 [* 15] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 section 4 of the Consultancy Agreement, which addressed Stec's withheld wages. 8 As held in connection with Stec's Labor Law claim, defendants fail to show that Stec agreed to a reduced salary" (See su12ra, at 5-7.) In addition, defendants argue that Stec agreed to a condition to repayment ofthe wages that vvas not met. (Defa' Memo. In Supp., at 13-14.) l\ 1ore particularly, 1 defendants ru·gue that Passport's achievement of the revenue targets set forth in the "6 months Cash Flow Projection dated July 2, 2012," referenced in section 4 of the Consultancy Agreement, was a "condition precedent" to Passport's obligation to pay Stec's pa.st due wages under that agreem.ent (Id., at 14.) In claiming that the projected ca.sh flm.v was not met, defundants rely on the conclusory assertion of Mr, Jacquet (Jacquet Aff In Supp.,~ 72.) Even assuming that Passport failed to meet the specified revenue targets, the court does not find, on the record as briefed, that this failure dischru·ged or released the company from its liability to Stec for his "past due wages." Section 4 of the Consultancy Agreement m1equivoca1Iy stated that "[t]he Compru1y acknowledges and agrees to repay the past due \Vages due Stec in the amount of $158,076.92 .... " (Consultancy Agreement,§ 4.) The sentence that follows stated that "[t]hese wages will be paid each month in the runow1t of not less than $5000 per month provided the company generates the cash flow projected in the 6 months Cash flow Projection dated July 2, 2012.'' Section 4 thus, by its terms, provided that the new pa:n:rr~fil .1:19JlJ~-~ivis; to which the parties agreed was conditioned on the company's achievement of the projected cash flows, not that Passport's pre-existing contractual liability to Stec for unpaid wages would be conditioned on, released, or waived if the company did not achieve the specified 8 The second cause ofaction alleges Passport's breach of the Consultancy Agreement by failing to pay the loan and to return Stec to the base pay in the 2011 employment agreement. (Compl., '1f 43.) This cause of action, however, ~- 43, incorporating~ 23.) Defendants assume that the incorporates allegations regarding past due wages. pleading of the second cause of action includes a claim for unpaid wages. (See Defs.' Memo. In Supp., at 14 ["Additionally, the breach of contract claims, Counts 2 and 3, fail because the conditions precedent to repayment under the 'Agreements' did not occur, thus no repayment was required"],) The court will do so as well. mL 15 16 of 17 [* 16] INDEX NO. 152069/2014 NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 08/22/2018 revenues. The parties have not submitted authority on the legal effect on the wage claim of the company's failure to meet projected revenues. Nor have they addressed the interplay between the provisions of the Consultancy Agreement and the June 2013 Agreement as to the unpaid wage claim. The branch of the motion to dismiss the second and third causes of action will accordingly be denied, It is accordingly hereby ORDERED that the motion of defendants Passport Brands, Inc. Rnd Ernest Jacquet for summary judgrnent dismissing the complaint is granted solely to the extent of dismissing the first cause of action (for violation of the New York Labor Law) in its entirety with prejudice. This constitutes the decision and order of the court. Dated: New York, New York August 22, 2018 16 17 of 17

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