Opinion
No. 05 Civ. 7890 (HB).
October 25, 2006
OPINION ORDER
On September 8, 2005, Stephen Goll, ("Plaintiff" or "Goll"), filed a complaint against First Tennessee Capital Markets ("Defendant" or "First Tennessee" or "FTN") that alleged breach of an express contract, and sought damages for unpaid compensation pursuant to an unjust enrichment, quantum meruit, or promissory estoppel theory. The Plaintiff subsequently withdrew his promissory estoppel claim. Earlier motion practice has resolved all the claims but for Plaintiff's equitable claim that he was owed an additional $230,000 for his work in 2004. A bench trial was held on September 18, 2006 on the remaining claim and post-trial findings of fact and law were received from all parties on October 10, 2006.
I. FINDINGS OF FACT
On April 10, 2000, Goll began his at-will employment with First Tennessee Capital Markets as a Vice President, Corporate Trading Officer. Stephen Goll Declaration ("Goll Decl.") ¶ 4. Goll was fired on January 14, 2005, soon after First Tennessee completed a merger with Spear Leads. Goll Decl. ¶ 34.
A. Goll's Offer of Employment
On March 20, 2000, Goll received an offer letter from Maureen Wilson, Vice President of FTN Financial Human Resources, which set forth Goll's employment package. The letter stated that Goll would be guaranteed minimum compensation, when annualized, of $350,000 for the first 12 months of his employment. The March 20, 2000 offer letter provides, in pertinent part, that:
The following compensation package will become effective upon your date of hire which will be on April 10, 2000. For your first twelve months of employment, your total guaranteed minimum compensation, when annualized, will be $350,000. Your base salary will be $3,076.92/payday, which is $80,000 when annualized, and your guaranteed draw will be $4,615.38/payday, which is $120,000 when annualized. . . . You will receive a lump sum when incentive payments are made in Jan/Feb. 2001. This lump sum will be for the remaining balance of your annualized guaranteed compensation. This remaining balance will be $150,000.
Ex. A to Maureen Wilson Declaration ("Wilson Decl."), Letter from Maureen Wilson, Vice President of FTN Financial Human Resources, to Stephen Goll (Mar. 20, 2000). The clear language of this letter limits the compensation package to the first 12 months of Goll's employment and Goll testified that he was "not aware of any other documents setting forth the terms and conditions of [his] employment or compensation." Goll Decl. ¶ 5.
There is no other testimony or documentation to the effect that Plaintiff was guaranteed compensation past the first 12 months of employment. See Goll Decl. ¶ 14 ("First Tennessee Capital Markets did not notify me in writing, or verbally, that compensation after the first 12 months was guaranteed."). Nor is there testimony of an oral agreement that guaranteed the Plaintiff minimum compensation after his first year of work. In fact, he testified at his deposition as follows.
Q: Did you ever go back to any of your supervisors and ask to revise this first letter that you received from Maureen Wilson?
A: No, I did not.
Q: Did you ever go back and ask for any additional guarantees?
A: No.
Def. Ex. A., Stephen Goll Deposition ("Goll Dep.") at 89:5-11. Not only did Goll never initiate a conversation with senior management with regard to his compensation, he admits that no one at First Tennessee ever used the word "guarantee" in connection with his annual compensation after his first year of employment.
Q: I've asked you and I believe you testified that no one used the word "guarantee" in terms of guaranteeing you a specific amount of bonus for 2004; is that correct?
A: That's correct.
Q: Did anybody, not using the word "guarantee," using any words, tell you that you would get a certain dollar amount of bonus for 2004?
A: A specific dollar amount?
Q: Right.
A: No.
Def. Ex. A., Goll Dep. at 54:10-22.
B. First Tennessee's Compensation Structure
Maureen Wilson, as Vice President of FTN Financial Human Resources, among other things, is responsible for processing employee compensation for First Tennessee. Wilson Decl. ¶ 4. She testified that an employee's compensation may consist of any of the following four components: a salary, draw, a lump sum payment, and a bonus or incentive payment. Trial Transcript ("Tr.") at 17:4-7.
As she explained, other than salary, compensation of any kind is discretionary. Although management considers the draw to be a form of bonus compensation, and thus discretionary, traders based in New York generally receive both a salary and draw payment. Wilson Decl. ¶ 6 ("In general, traders receive compensation in the form of a salary and draw amount each pay period whether under a guaranteed compensation package or not."). At trial, Wilson explained that
Most of our traders in Memphis are paid salary only. Outside of Memphis, in New York, they are given the draw which goes against any discretionary incentive, because it has to be deducted out of the pool.
Tr. at 18:12-19. A lump sum payment is only paid to traders that have a guaranteed compensation package with the company. Id. ¶ 7. Discretionary bonuses, as the name suggests, are given at the discretion of the company. Id. ¶ 8. An executive management committee at First Tennessee makes all bonus decisions, but there is no written policy as to which factors should be considered in their decision. Id. ¶ 13. As Wilson testified,
Wilson testified that the terms lump sum and bonus payment were used interchangeably by First Tennessee. Wilson Decl. ¶ 8.
The determination of whom, if anyone, should receive such a discretionary bonus and the amount of such a discretionary bonus is not subject to any formula, policy, or agreement. Management seeks to reward the entire team when the Company is successful. The amount of the discretionary bonuses varies based on how management views the employees' importance to the organization, its future and both its current and long-term success. Discretionary bonus amounts are not based directly on an individual employee's contribution.Id.
After the Company's prior year's accounts are reconciled in January or February, the draw, lump sum and bonus payments are withdrawn from the same pool of funds. Id. ¶ 9. Payments are generally made in January and February each year and are dependent on the amount of the funds in the pool at that time. Wilson Decl. ¶ 9, 12. The Company's financial performance the prior year dictates how much money is available in the pool.Id. ¶ 10; Tr. at 17:11-12 (stating that "there is a pool created by the profits of the company."). It is undisputed that in 2004, First Tennessee experienced a poor financial year. Wilson Decl. ¶ 22.
First Tennessee operates on a calendar year, January 1 — December 31. Tr. at 20:15-20.
Q: In general terms, how did FTN capital markets do in '04?
A: Much poorer than we did in '03.
Tr. at 30:18-19. As a result, in 2005, the pool of funds from which to distribute discretionary payments was significantly smaller than in prior years.
Discretionary payments are removed from the pool and paid out in a specific order. Draw payments are withdrawn first, Tr. at 18:17-19, then lump sum payments are paid out of the general pool of funds since they are contractually guaranteed. Id. ¶ 11. Any remaining funds are used for bonus payments, distributed on a discretionary basis. Id. ¶ 12. In short,
We deduct the draws, like I said. Then anybody that was under a guarantee, we make those payments to those people. And then any money that is left in the pool, then we figure out how it is doled out.
Tr. at 19:11-14. So in a bad year when little money is left in the pool, it may be that nobody gets a bonus.
The Court: So all he's saying — all I gather that Overstreet [FTN manager] is saying and all I'm asking you, if you know, were the bonuses based on performance?
The Witness [Maureen Wilson]: No. They were not based 100 percent on performance, but the important thing is how much money is left to allocate after paying out the guarantees and the draws, and if there's very little left to allocate, a lot of good performers got zero.Id. at 27:17-24. And even if an employee received a bonus one year, it does not assure that same bonus, or any bonus, in subsequent years. Wilson Decl. ¶ 18 ("When discretionary bonuses are paid, an employee may be paid a greater bonus than before, a smaller bonus than before, a bonus that is the same as before, or no bonus."). In sum, if a trader does not have a guaranteed compensation package with First Tennessee, there is no assurance that they will receive a set amount of money for any period of time.
C. Goll's Compensation Up to 2004
In 2001, as set forth in his March 2000 offer letter, Goll was paid a lump sum payment of $150,000, as well as a bonus, for a total of $230,000. Wilson testified in her declaration that after 2001, without a writing, First Tennessee was under no obligation to pay Goll either a lump sum or a bonus. See Wilson Decl. ¶ 5 ("If a trader does not have a guaranteed compensation package, the trader is not guaranteed any set amount of compensation for any period of time."). Thus, after 2001, Goll was only entitled to receive a salary and draw for his work for First Tennessee.
He received merit increases of an unspecified amount to his base salary through 2004. Goll Decl. ¶ 10. Additionally, while there was no legal entitlement to anything but a salary and his draw after 2001, Goll received bonus payments in the amount of $230,000 in 2002, 2003, and 2004 for his prior year's work. Id. ¶ 19; Goll Decl. ¶¶ 22, 25, 27. These payments were above and beyond and not part of his salary or draw. Wilson Decl. ¶ 19.
D. Goll's Compensation in 2004
During 2004, Goll was entitled to his salary and draw for his work that year and he received those sums. He received a draw of $120,000, which had been the same during all his years at First Tennessee, as well as salary of at least $80,000. Tr. at 18:5-9. His salary and draw were earned compensation and paid over to Goll in the regular course. See Wilson Tr. at 18:12-19. Consequently, these sums are not at issue here.
However, Goll did not receive, nor was he entitled to receive, a lump sum or bonus payment in 2004. Those sums were discretionary and without a written guarantee, there was no assurance that he would receive any discretionary income that year.
It is undisputed that the pool for lump sum and bonus payments was considerably smaller at the beginning of 2005 as compared to prior years. Wilson Decl. ¶ 22. In fact, Wilson testified that not only was the 2004 pool 50% smaller than in the previous year but First Tennessee also had more guaranteed payments promised to employees. Tr. at 30:21-31:3. As a result, Goll, along with several other traders, did not receive a lump sum payment or a bonus in 2005 for work in 2004. Wilson testified that not only was Goll one of the 20 traders, out of a group of 32, that did not receive a bonus at the start of 2005, "[t]he 20 traders who did not receive a discretionary bonus in the beginning of 2005 all received a discretionary bonus in the beginning of 2004." Id. ¶ 22.
II. CONCLUSIONS OF LAW
After my decision on the summary judgment motion, only the equitable claim with regard to monies allegedly owed to Goll for 2004 remained. Unjust enrichment and quantum meruit claims apply when there is no express agreement between the parties, and such is the case here. See, e.g., Phansalkar v. Weinroth Co., 2002 WL 1402297, *14 (S.D.N.Y. 2002). Under New York law, these two claims are analyzed together as a quasi-contract claim.Mid-Hudson Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp., 418 F.3d 168, 175 (2d Cir. 2005); See also Seiden Assoc., Inc. v. ANC Holdings, Inc., 768 F.Supp. 89, 96 (S.D.N.Y. 1991) (stating that "unjust enrichment is a required element for an implied-in-law, or quasi contract, and quantum meruit, meaning `as much as he deserves,' is one measure of liability for the breach of such a contract."), rev'd on other grounds, 959 F.2d 425 (2d Cir. 1992).
Unjust enrichment is a prerequisite for any quasi-contract claim. Id. To establish a claim for unjust enrichment, the plaintiff must demonstrate that the defendant was enriched at the plaintiff's expense and equity and good conscience militate against permitting the defendant to retain that money.Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 306 (2d Cir. 2004). If unjust enrichment is established, Goll must then show: 1) he performed the services in good faith, 2) First Tennessee accepted his services, 3) he expected compensation for such services, and 4) the reasonable value of the services rendered. Martin H. Bauman Assocs., Inc. v. HM Int'l Transp., Inc., 567 N.Y.S.2d 404, 408 (N.Y.App.Div. 1991) (internal citation omitted). Goll has failed to show that First Tennessee was unjustly enriched when they did not pay him a lump sum or bonus for his work in 2004.
For Goll's work in 2004, First Tennessee paid him $217,830.46 in salary and draw. Wilson Decl. ¶ 24. He also received deferred compensation, stock options, and other employee benefits that year. Id. The Plaintiff has not submitted any evidence that First Tennessee guaranteed him a lump sum payment after his first year of employment or that he had a contractual right to either a lump sum payment or bonus after that time. In fact, all the evidence suggests that after the first year, he received additional money, but only at the discretion of First Tennessee.
This sum includes $120,000 in draw plus $97,830.46 in salary (which consists of his $80,000 starting salary and the merit increases he received over the years).
Under such circumstances, Plaintiff has not met his burden that First Tennessee was unjustly enriched when they failed to pay the Plaintiff a bonus of $230,000, or any portion thereof, for his work during the calendar year 2004. Consequently, it is unnecessary to consider damages under a quantum meruit analysis.
III. CONCLUSION
For the reasons above, the Plaintiff is not entitled to any additional compensation for 2004. The Complaint is dismissed and the Clerk of the Court is instructed to close this matter and remove it from my docket.
IT IS SO ORDERED.