Court Opinion

ID: 9823416
Source: CourtListenerOpinion
Date Created: 2023-09-01 09:56:14.27333+00
Date Added: 2024-06-11T07:39:20.430728
License: Public Domain

Order, Supreme Court, New York County (Jeffrey K. Oing, J.), entered June 25, 2014, which granted plaintiffs motion for summary judgment with respect to liability for breach of contract and dismissing defendant’s counterclaim, referred the issue of damages to a special referee or judicial hearing officer to hear and report, and denied defendant’s motion for summary judgment on its counterclaim, modified, on the law, to deny plaintiff’s motion for summary judgment, and otherwise affirmed, without costs.
By letter agreement dated September 26, 2008, defendant hired plaintiff to be its president (the employment agreement). The terms of employment provided, inter alia, that plaintiff was to receive: an annual salary “[p]ayable at the gross rate of $275,000 per year”; a bonus of 3% on new “ARMZ” contracts paid monthly; medical and other insurance benefits; a housing allowance of $25,000 “to be paid in 24 equal payments per year”; 375,000 shares of class B stock, to vest 125,000 units per year; a $50,000 loan, forgivable on specified terms (the forgivable loan); a $250,000 separation payment, subject to reduction on specified terms; and 25 vacation days per year. The employment agreement also provided that plaintiff would be subject to the confidentiality and nonsolicitation provisions set forth in an agreement annexed thereto.
The employment agreement did not state a fixed duration for *552plaintiff’s employment or that he could only be terminated for cause. Nor did it expressly state that plaintiff was an “at-will employee.” However, it contained a provision that prohibited modification of “any provision” thereof without “a writing signed by the party against whom enforcement is sought” (the no oral modification clause).
In conformity with the no oral modification clause, on September 16, 2009, the parties executed a “First Amendment” to the employment agreement, which reduced plaintiff’s salary to $150,000 and increased his ARMZ bonus from 3% to 7.5%. The housing allowance was changed to $4,000 per month, payable on the first day of each month. A “Retention Loan” of $90,000 was added, which, along with the forgivable loan, would be forgiven over a three-year period in three equal installments beginning on January 1, 2011, provided that plaintiff was employed by defendant on the anniversary dates. The separation payment was deleted.
Plaintiff was removed as president in February 2010. For the next six months, he continued to attend conferences and trade shows on defendant’s behalf and was paid a reduced salary and benefits. After efforts to negotiate a written consulting agreement to supersede the employment agreement failed, in July 2010, plaintiff wrote defendant a letter that included a notice to cure alleging that defendant had breached the employment agreement. In August 2010, defendant drafted a revised consulting agreement, which plaintiff rejected. After defendant stopped paying him, plaintiff commenced this action asserting claims for breach of contract based on the failure to pay the salary, bonus, housing allowance, insurance premiums, and stock allegedly due under the employment agreement.
While the employment agreement does not state a fixed duration, plaintiff alleges in his complaint that “ [i] t was agreed by the parties that the contract was to run no less than five (5) years.” Defendant denies liability on the ground that it had the right to alter the terms of plaintiff’s employment because it was “at will,” and asserts counterclaims for the repayment of the forgivable and retention loans.
Supreme Court granted plaintiff summary judgment on liability and referred the issue of damages to a special referee or JHO to hear and report. It denied defendant summary judgment on its counterclaim. While finding that the employment agreement was unambiguous and created an “at-will employment . . . terminable at any time by either the Plaintiff or the Defendant,” the court held that “it[ ] still is governed by [its] terms,” which “provide [ ] [for] no modification, amendment, *553extension, discharge, termination or waiver of any provision . . . unless the same shall be in writing, signed by the party against enforcement is sought.” Thus, although it rejected plaintiff’s argument that the no oral modification clause provided “a duration of time,” the court held that when defendant removed plaintiff as president in February 2010 and altered his salary and benefits without a signed writing, it violated the no oral modification clause and breached the employment agreement. The court stated further: “With respect to damages, I had asked Plaintiff’s Counsel how far out we are going because if it’s infinite, he has a problem. He says there is age 67 is where he goes or where the damages go to, so that’s where we are at and I believe he represents the Plaintiff is 67 so that’s where we are at in terms of figuring out the damages.”
“[A]bsent an agreement establishing a fixed duration, an employment relationship is presumed to be a hiring at will, terminable at any time by either party” (Sabetay v Sterling Drug, 69 NY2d 329, 333 [1987]; Rooney v Tyson, 91 NY2d 685, 689 [1998]). The presumption can be rebutted by evidence of a limitation on the employer’s right to discharge the employee at will (Weiner v McGraw-Hill, Inc., 57 NY2d 458 [1982]; Talansky v American Jewish Historical Socy., 8 AD3d 150 [2004]).
The inclusion of the no oral modification clause in the employment agreement does not, in and of itself, suffice to rebut the at-will presumption. While the clause precluded the modification of “any provision” of the agreement without a writing signed by the party against whom enforcement was sought, there is no express provision in the agreement that precluded defendant from terminating plaintiff without cause. However, as Supreme Court found, the no oral modification clause is an enforceable contract term even if the employment was at will (see JCS Controls, Inc. v Stacey, 57 AD3d 1372, 1373 [4th Dept 2008] [“terms set forth in the . . . employment agreement, which was signed by plaintiff’s president, are binding on plaintiff despite defendant’s status as an at-will employee”]; see also Israel v Chabra, 12 NY3d 158, 163 [2009] [General Obligations Law § 15-301 (1) “indicates that where a contract contains a ‘no oral modification’ clause, that clause will be enforceable”]).
General Obligations Law § 15-301 (1) provides that “[a] written agreement . . . which contains a provision to the effect that it cannot be changed orally, cannot be changed by an executory agreement unless such executory agreement is in writing and signed by the party against whom enforcement of *554the change is sought or by his agent.” Although a no oral modification clause does not take precedence over other contract terms, “Section 15-301 (1) places this type of clause on the same footing as any other term in a contract” (Israel v Chabra, 12 NY3d at 167). “[W]hen a ‘no oral modification’ clause purportedly conflicts with another clause in a contract, every attempt should be made to harmonize the two provisions using common-law tools of contract interpretation” (id.). Here, consistent with the no oral modification clause, the parties, through their course of conduct, confirmed the need for “a writing signed by the party against whom enforcement is sought” in order to effect any change or modification to the express provisions of the agreement, such as those relating to plaintiff’s duties and compensation (see Firtell v Update, Inc., 17 Misc 3d 1101[A], 2007 NY Slip Op 51786[U] [Sup Ct, NY County 2007]). This course of conduct includes the execution of the written amendment to the employment agreement in September 2009 and the commencement of negotiations to draft a new agreement to supercede the employment agreement when plaintiff’s duties changed in February 2010.
Nevertheless, while the court correctly found that the no oral modification clause was enforceable and barred defendant from unilaterally altering the terms of plaintiff’s employment agreement without a writing, issues of fact exist that preclude the granting of summary judgment in plaintiff’s favor. These include whether or not defendant terminated plaintiff’s employment or merely modified it when it removed plaintiff as president in February 2010, whether plaintiff waived the no oral modification clause by partially performing an alleged oral agreement to become a consultant at a reduced salary (see Rose v Spa Realty Assoc., 42 NY2d 338 [1977]), and, if plaintiff was not terminated and did not waive the clause, the period for which he is entitled to damages.
The dissent would go further and grant defendant summary judgment dismissing the complaint and on its counterclaim for the repayment of the loans, based on its belief that the record establishes as a matter of law that defendant exercised its right to terminate plaintiff’s at-will employment no later than February 2010, when it changed plaintiff’s title, duties and compensation, and plaintiff chose to remain in its employ. However, none of the cases cited by the dissent in support of its position appear to discuss the effect of a no oral modification clause on an employer’s right to alter the terms of employment.
The dissent agrees that the no oral modification clause is *555enforceable but finds that its application is limited to preventing defendant from “unilaterally reducing [plaintiff]’s compensation while requiring him to perform substantially the same job.” However, no such limitation is contained in the clause, which provides: “No modification, amendment, extension, discharge, termination or waiver of any provision of this letter agreement shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought and then such waiver shall be effective only in the specific instance, and for the purpose, for which given” (emphasis added).
By this unambiguous language, defendant gave up any right it had to modify plaintiff’s duties, compensation and benefits, without a writing signed by plaintiff.
Contrary to the dissent, the record does not establish that defendant “validly” terminated, rather than modified, the employment agreement in February 2010. Although the record reflects that plaintiff’s duties and compensation changed at that time, plaintiff asserts that it was his belief that the employment agreement allowed defendant to change his title and responsibilities. Plaintiff also asserts that when defendant’s majority owner told him he could only afford to pay him $4,500 per month and had to reduce his benefits, he accepted the changes to avoid a confrontation but did not waive his rights to enforce the employment agreement by doing so, believing that defendant’s changes to the employment agreement were a breach of contract.
The first proposed consulting agreement drafted by defendant in June 2010 supports plaintiff’s contention that the employment agreement had yet to be terminated at that point in time and that the parties were negotiating a new written agreement to effectuate the change in plaintiff’s duties and compensation, as required by the no oral modification clause. In particular, the draft states in the first “Whereas” clause that “[t]he Consultant [i.e., plaintiff] and the Company desire to end Consultant’s employment relationship with the Company.” Paragraph 1 provides that: “except as may be set forth herein, the terms, conditions, rights and obligations set forth in the [original 2008 agreement and 2009 amendment] are superseded, of no force and effect, null and void as of the date this Consulting Agreement is executed. Consultant and the Company further agree that the following terms and conditions shall take effect immediately upon execution of this Consulting Agreement and will govern the relationship between Consultant and the Company, notwithstanding the continued ap*556plicability of Employment Agreement Exhibit C to such relationship as set forth below” (emphasis added).
The dissent contends that these statements are “merely legal conclusions . . . which do not change the facts of record establishing that [defendant] terminated the letter agreement in February 2010.” However, by this language, defendant made statements of fact, acknowledging that the employment agreement had yet to be terminated and would remain in effect until a consulting agreement was executed and that certain provisions of the employment agreement would survive even after a consulting agreement was executed.
The dissent’s reliance on an email defendant sent to plaintiff on August 30, 2010 as proof that the employment relationship between the parties was terminated in February 2010 is misplaced. The record shows that when plaintiff rejected defendant’s June 2010 draft consulting agreement in July 2010, he wrote defendant a letter in which he asserted that defendant had breached the employment agreement and that he had told defendant in February 2010 that he “would not waive any [of its] provisions.” As to the purported breaches, plaintiff identified the reduction of his salary from $150,000 to $54,000 per year without his consent, defendant’s failure to pay the ARMZ bonuses, medical and insurance coverage, and the housing allowance, and defendant’s failure to issue the 375,000 shares of stock, of which 125,000 shares were fully vested.
After waiting over a month, defendant sent plaintiff a revised consulting agreement dated August 24, 2010, in which it changed its position, now stating that “[t]he Consultant and the Company ended Consultant’s employment relationship as President of the Company in February 2010,” that “[t]he parties . . . reached agreement upon [the terms of the consulting agreement] in February 2010 and have been operating under these terms . . . since February 2010,” and that “except as may be set forth herein, the terms, conditions, rights and obligations set forth in the [original 2008 contract and 2009 amendment] are superseded, of no force and effect, null and void as of January 1, 2010 in accordance with the agreement reached between [the parties] in February 2010.” On August 30, 2010, defendant sent plaintiff the follow-up email relied on by the dissent, in which it reiterated its revised position that the employment relationship had terminated in February 2010. However, plaintiff disputed defendant’s assertions and rejected the revised offer, stating: “To be very clear on this point, I have never conceded any of my rights under my employment contract. Last February, Andy told me that ‘all the budget could *557afford to pay me was $4,500 per month’. He also told me that my duties and title were being changed by the Board, and that going forward my title would be ‘Director of Industry Affairs.’ I certainly did not agree to the drastic reduction in salary and benefits Andy was unilaterally implementing, however, I did agree that I wanted to avoid a confrontation if at all possible. Andy and I agreed that we both wanted a long term relationship. He said he hoped it would be at least five years. Since that time, I have been attempting, albeit unsuccessfully, to reach an agreement with [defendant] that would avoid a confrontation and provide for our continuing relationship.” Plaintiff further stated that “it seems to me the real question for us to decide by tomorrow is whether or not we wish to move forward together. If yes, then we should try to reach an acceptable settlement of my existing contract and the terms of the new contract. If no, and [defendant] simply intends to terminate our relationship, it must address the obligations it has incurred under my existing employment contract.”
Furthermore, when plaintiff was asked at his deposition if defendant had ended its employment relationship with him as president in February 2010, as stated in the August 30, 2010 email, plaintiff replied, inter alia, that: “ [i] t did not end my employment relationship, but assigned different duties to me”; that “[t]he portion that made reference that it ended my employment relationship is not correct. They did change my duties, but they did not end my employment relationship”; and that “the wording of that sentence is inappropriate and inaccurate. The correct statement would be, the company changed your responsibilities and duties as of February 2010. It is not accurate that the company ended my employment relationship as of February 2010.” Plaintiff further testified that while negotiations commenced in February 2010, he did not agree to any terms of his continued employment as either an employee or consultant at that time.
On the other hand, the employment agreement states that plaintiff will be responsible for the overall management and supervision of the Company “as well as such other duties and responsibilities as may from time to time be assigned by the Managers of the Company.” However, plaintiff was removed as president, and, rather than assuming additional duties, he took over a completely different role, acting as a consultant. Defendant asserts that this terminated the employment relationship and created a new consulting relationship and that the first time that plaintiff objected to the new arrangement was six months after it went into effect. Furthermore, *558plaintiff acknowledged that he reached some kind of understanding with defendant, stating in his July 2010 letter: “Our discussions also resulted in a change in my title from President to Director of Industry Affairs. In that role, you felt that I would best serve the company by representing it at various conventions, seminars, and trade association conferences, both as a speaker and attendee, a role I have actively pursued. Per our agreement, I am fulfilling my duties from my home, and you and I envisioned and hoped we would have a five year relationship.”
Thus, it cannot be determined as a matter of law that defendant fired and then rehired plaintiff in February 2010, as the dissent asserts. Rather, issues of fact exist as to if and when defendant terminated the employment agreement and entered into a new relationship to which plaintiff agreed.
The dissent posits that the finding of an issue of fact contradicts our own recognition that plaintiff was an at-will employee. However, the dissent itself states that “[g]iven that the letter agreement was terminable at will, the next question that arises is, when was it terminated?” While the dissent believes that termination occurred when plaintiff went from president to part-time consultant, the fact that we disagree with that conclusion, and find an issue of fact in that regard, in no way contradicts our finding that the employment relationship was at will.
Contrary to the dissent, it cannot be said that plaintiff’s performance of his new duties from February 2010 onward is, as a matter of law, unequivocably referable to his acceptance of defendant’s modifications of his rights under the employment agreement and therefore a waiver of the no oral modification clause (see Rose v Spa Realty Assoc., 42 NY2d at 343-344). “[I]n order to be unequivocally referable, conduct must be inconsistent with any other explanation” (Richardson & Lucas, Inc. v New York Athletic Club of City of N.Y., 304 AD2d 462, 463 [1st Dept 2003]). In other words, “the actions alone must be ‘unintelligible or at least extraordinary,’ explainable only with reference to the oral agreement” (Anostario v Vicinanzo, 59 NY2d 662, 664 [1983]). Given plaintiff’s protests and the conflicting evidence as to if and when the agreement was terminated, it cannot be determined as a matter of law whether or not plaintiff’s performance of his modified duties from February 2010 onward was unequivocally referable to a new oral agreement (compare Kronick v L.P. Thebault Co., Inc., 70 AD3d 648, 649 [2d Dept 2010] [“By remaining in the defendant’s employ under the new compensation terms, the plaintiff is *559deemed to have accepted them regardless of her failure to sign the notice advising her of the new terms” (internal citations omitted)], with Tierney v Capricorn Invs., 189 AD2d 629, 631 [1st Dept 1993], lv denied 81 NY2d 710 [1993] [“Plaintiff’s performance here, however, would be equally consistent with his desire to continue to earn his compensation under the written Employment Agreement, as with the alleged oral modification”]).
Even if defendant had breached the employment agreement, issues of fact would exist as to the period for which plaintiff is entitled to damages, and the court erred when it held that plaintiff had established his entitlement, as a matter of law, to damages until he reached age 67. Although plaintiff’s subjective belief may have been that this would be his last job, there is nothing in the agreement to support the conclusion that defendant agreed to keep plaintiff on for as long as plaintiff wanted the job. Furthermore, although plaintiff contends that the agreed-upon term was five years, various clauses in the employment agreement appear to be tied to lesser time periods.
Finally, until it is determined whether defendant breached the employment agreement, and whether that breach prevented plaintiff from being employed by defendant as of January 1, 2011, 2012, and 2013, it cannot be determined whether either party is entitled to summary judgment with respect to the loans.
Concur— Andrias, Gische and Kapnick, JJ.