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Monagle v. Scholastic, Inc.

United States District Court, S.D. New York
Mar 9, 2007
06 Civ. 14342 (GEL) (S.D.N.Y. Mar. 9, 2007)

Summary

holding that an executive earning more than the statutory amount was excluded from coverage by Section 198-c

Summary of this case from Kolchins v. Evolution Mkts. Inc.

Opinion

06 Civ. 14342 (GEL).

March 9, 2007

Robert L. Levy, Bantle Levy LLP, New York, NY, for Edward Monagle.

Elise M. Bloom and Nathaniel M. Glasser, Proskauer Rose LLP, New York, NY, for Scholastic, Inc.


OPINION AND ORDER


Plaintiff Edward Monagle brings this action for breach of contract, claiming that his former employer, defendant Scholastic, Inc., violated an agreement requiring it to pay him substantial severance pay. Scholastic moves pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss the second count of the complaint, which alleges that the failure to pay the agreed severance amount also violates provisions of the New York Labor Law. The motion will be granted.

BACKGROUND

According to the complaint, which for purposes of this motion to dismiss must be taken as true, Monagle was employed as Senior Vice President of Scholastic when, in July 2004, he was advised that he was being laid off as part of a restructuring of his department. In December 2004, in connection with his departure, Monagle entered a written Separation Agreement. The Separation Agreement provided that Monagle would be "deemed to have resigned his position" effective December 31, 2004, and would be "retained as an employee of Scholastic from January 1, 2005 through June 30, 2006." (Compl. ¶ 15.) The Separation Agreement also provided that, at the end of that period, Scholastic would pay Monagle 24 months' severance pay. Since Monagle's annual salary at the time of the agreement was $422,000, the total severance payment would have been $844,000.

In July 2006, following the end of Monagle's period of employment, Scholastic paid him $211,000 — in effect, six months' salary — and advised him that it would not make further payments. Monagle then brought this action for breach of contract and violation of "New York Labor Law Section 190 et seq." (Compl. ¶ 34.)

DISCUSSION

A defendant is entitled to dismissal of a claim if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). When deciding a 12(b)(6) motion to dismiss, the Court must take as true the facts as alleged in plaintiff's complaint, Bolt Elec., Inc. v. City of New York, 53 F.3d 465, 469 (2d Cir. 1995), and draw all reasonable inferences in plaintiff's favor. Freedom Holdings, Inc. v. Spitzer, 357 F.3d 205, 216 (2d Cir. 2004).

Scholastic does not dispute that Monagle's complaint states a claim for breach of contract. It argues, however, that the allegations cannot support a claim for violation of any New York Labor Law provision invoked, because Mongale was a highly-paid executive.

Courts have taken different views as to the scope of the term "employee" in the Labor Law. Dictum in Gottlieb v. Kenneth D. Laub Co., Inc., 82 N.Y.2d 457 (1993), led some courts to conclude that executives and professionals were entirely excluded from the definition of "employee" in N.Y. Lab. L. § 190(2), and therefore from all the protections of that statute. See, e.g., Rice v. Scudder Kemper Inv., Inc., No. 01 Civ. 7078 (RLC), 2003 WL 21961010 (S.D.N.Y. Aug. 13, 2003). As Monagle points out, however, Judge Marrero's scholarly analysis in Miteva v. Third Point Management Co., L.L.C., 323 F. Supp.2d 573 (S.D.N.Y. 2004), has persuaded most courts that this position is incorrect, and that there is no basis for excluding executives and professionals from § 190(2)'s broad definition of "employee" as "any person employed for hire by an employer in any employment." For purposes of this motion, this Court can and does assume, without deciding, that Judge Marrero is right.

But this hardly ends the analysis. That Monagle was a statutory employee does not determine whether he has a claim under any particular provision of the Labor Law, since many of the provisions defining particular rights do not apply to all "employees" as defined in the statute, but are limited by their own terms to particular categories of employee.

In particular, the Labor Law provision that directly protects severance payments excludes certain employees. Section 198-c prohibits an employer who has agreed to pay "benefits or wage supplements" to an employee from failing to do so. N.Y. Lab. L. § 198-c(1). "Benefits and wage supplements" are then defined to include, among other items, "separation . . . pay." Id. § 198-c(2). This provision, however, explicitly provides that "it shall not apply to any person in a bona fide executive, administrative, or professional capacity whose earnings are in excess of six hundred dollars a week." Id. § 198-c(3). Judge Marrero in Miteva expressly notes this exclusion, reasoning that the specific exclusion of executives and professionals from this protection extended to all other "employees" supports a broad reading of the latter term. 323 F. Supp.2d at 579.

Monagle's complaint refers to no particular provision of the Labor Law, instead generally citing the provisions of article 6 of that statute as "Section 190 et seq." (Compl. ¶ 34.) His response to Scholastic's motion is little more precise, citing "inter alia, sections 191(3), 193 and 198." The Court cannot guess at which sections are among the "alia" Monagle relies on, but the specifically cited sections do him no good. Section 191(3) by its very terms applies only to the four specific categories of employees listed in § 191. Kletter v. Fleming, 820 N.Y.S.2d 348, 350 (3d Dep't 2006); Miteva, 323 F. Supp.2d at 584. Section 193 has nothing to do with failure to pay wages or severance benefits, governing instead the specific subject of making deductions from wages. Kletter, 820 N.Y.S.2d at 350 (general allegation of failure to pay money due does not state a claim under § 193 absent allegation of "any specific deduction" from wages). And § 198 provides no substantive cause of action at all; it is a remedial provision authorizing recovery of costs and attorneys' fees to plaintiffs who recover on claims brought under other provisions of the Labor Law. Thus, Monagle cites no provision of the Labor Law other than § 198-c that protects severance benefits or otherwise entitles him to recovery on the facts alleged.

There can be no question that Monagle is excluded from recovering under § 198-c as an "executive . . . whose earnings are in excess of six hundred dollars a week." The complaint specifically alleges that Monagle was employed as a Senior Vice President of Scholastic whose "duties included management of all operational functions of Scholastic's Book Group, including without limitation, sales forecasting, inventory management, [and] purchasing inventory," as well as "management of Scholastic's Harry Potter franchise, strategic and operational input in Book Group acquisitions and management of the creation of web based informational systems for the Book Group." (Compl. ¶¶ 8, 9.) Such a person is unquestionably employed "in a bona fide executive, administrative, or professional capacity." N.Y. Lab. L. § 198-c(3). Monagle was paid $422,000 per year (Compl. ¶ 14), an amount more than thirteen times the $600 per week sufficient to exclude him from coverage by § 198-c.

Monagle's sole argument that § 198-c(3) does not exclude him is premised on the assertion that in his terminal year of employment he served only as an "internal consultant," and that "discovery and, perhaps, trial" would be required before the Court could determine whether he was an "professional, executive or administrative" employee during this period. (P. Mem. 8.) This argument is ludicrous. First, the complaint does not allege that Monagle was an "internal consultant." Second, Monagle does not need discovery to be able to allege what his duties were during his terminal year at Scholastic. If those duties were such as to exempt him from the category of "executive, administrative, or professional" employment, N.Y. Lab. Law § 198-c(3), during the year when, at a salary of nearly half a million dollars, he wound down from being a Senior Vice President with high-level executive and administrative responsibilities, he could easily have so alleged in the complaint, and still can by seeking leave to amend, if the claim can pass the straight-face test and the strictures of Rule 11 of the Federal Rules of Civil Procedure.

CONCLUSION

For the foregoing reasons, defendant's motion to dismiss Count II of the complaint for failure to state a claim is granted.

SO ORDERED.


Summaries of

Monagle v. Scholastic, Inc.

United States District Court, S.D. New York
Mar 9, 2007
06 Civ. 14342 (GEL) (S.D.N.Y. Mar. 9, 2007)

holding that an executive earning more than the statutory amount was excluded from coverage by Section 198-c

Summary of this case from Kolchins v. Evolution Mkts. Inc.
Case details for

Monagle v. Scholastic, Inc.

Case Details

Full title:EDWARD MONAGLE, Plaintiff, v. SCHOLASTIC, INC., Defendant

Court:United States District Court, S.D. New York

Date published: Mar 9, 2007

Citations

06 Civ. 14342 (GEL) (S.D.N.Y. Mar. 9, 2007)

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