Opinion
CV165011834S
10-30-2018
Paul Sitar et al. v. Syferlock Technology Corp.
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh):Stevens, Barry K., J.
MEMORANDUM OF DECISION ON THE DEFENDANT’S SUMMARY JUDGMENT MOTION
STEVENS, J.
STATEMENT OF THE CASE
On December 11, 2017, the plaintiffs, Paul Sitar and Joseph Stage, filed an amended five-count complaint against the defendant, Syferlock Technology Corporation (Syferlock). Sitar alleges breach of contract in count one and failure to pay wages in count two. Stage alleges breach of contract in count three, failure to pay wages in count four, and breach of contract of a stock option contract in count five. Pending before the court is the defendant’s motion for summary judgment as to part of count one and counts two, three, four, and five in their entirety.
The amended complaint alleges the following as to Sitar. Prior to his employment with Syferlock, Sitar was employed by a company named Grid Data Security (Grid Data). In September 2007, after he had left Grid Data, Sitar executed an employment agreement with Syferlock under which he would receive an annual salary plus an accrued salary based on earnings carried over from his services at Grid Data. The accrued salary was carried over from Grid Data onto the financial books and records of Syferlock, with the approval of Syferlock’s Board of Directors, which consisted solely of Dr. Robert Russo. Sitar was employed as Chief Executive Officer of Syferlock from September 1, 2007 until August or September 2010. Then, Sitar served as president of Syferlock from September 2010 until September 2011. Sitar resigned on September 2, 2011, but agreed to serve as a consultant to Syferlock from September 3, 2011 until March 9, 2012, during which time Sitar retained the same compensation, but began accruing unpaid salary from Syferlock. According to the complaint, Sitar has not received payments for accrued salary, despite assurances from Dr. Russo and Christopher Cardell, the current Chief Executive Officer of Syferlock, that he would be paid the money owed.
The amended complaint alleges the following as to Stage. In September 1, 2007, Stage entered into an employment agreement with Syferlock. Pursuant to Stage’s contract, he was to be paid an annual salary. The parties’ submissions indicate that one-half of Stage’s salary was contingent on Syferlock obtaining adequate sales, cash flow, and/or financing. Stage would also be paid an accrued salary that he earned at Grid Data. The accrued salary from Grid Data was carried over onto the financial books and records of Syferlock, with the approval of Dr. Russo, and became the obligation of Syferlock. According to the complaint, on or about January 1, 2010, Stage began accruing unpaid salary despite adequate sales, cash flow, or financing for Syferlock, and despite demand, Stage has not been paid this accrued salary owed to him.
In counts two and four of the amended complaint, the plaintiffs respectively allege that Syferlock’s failure to pay wages to Sitar and Stage constitutes a violation of General Statutes § 31-72.
Finally, in count five, Stage alleges that Syferlock breached an Independent Sales Advisor (ISA) agreement. Pursuant to the ISA agreement, Stage was to be compensated in accordance with an Incentive Stock Option (ISO) agreement. Stage claims that Syferlock wrongfully terminated the ISA agreement and that he never received the compensation guaranteed to him under the ISA agreement. The plaintiffs allege that as a result, Syferlock breached the ISA agreement and Stage has been damaged.
On April 16, 2018, Syferlock filed a motion for summary judgment as to a portion of count one, and counts two, three, four, and five in their entirety. Syferlock filed a memorandum in support of its motion and supporting exhibits on the same day. On June 13, 2018, the plaintiffs filed an objection to the motion for summary judgment and supporting memorandum. On June 20, 2018, Syferlock filed a reply memorandum. Oral arguments were heard on July 9, 2018.
DISCUSSION
"Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Bozelko v. Papastavros, 323 Conn. 275, 282, 147 A.3d 1023 (2016). "In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law. The courts hold the movant to a strict standard. To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact ... As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent ... When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue." (Internal quotation marks omitted.) Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 10-11, 938 A.2d 576 (2008).
Count One and Count Three Accrued Salary from Grid Data
Syferlock argues that it is entitled to judgment as a matter of law as to (1) a portion of count one claiming breach of contract against Syferlock for failing to pay Sitar’s accrued salary from Grid Data, and (2) the portion of count three which similarly claims breach of contract against Syferlock for failing to pay Stage’s accrued salary from Grid Data for several reasons. Syferlock contends that the agreement to pay the accrued salary from Grid Data is unenforceable because the agreement was not reduced to writing as required by the statute of frauds. Syferlock also argues that the employment contracts for Sitar and Stage contained merger clauses, which would preclude reliance on this alleged prior oral promise. Moreover, the agreements contained a provision that required modifications of terms to be "with prior written consent of the company and the executive," and the plaintiffs have not complied with this provision.
Although the plaintiffs have failed to raise the issue of whether one can move for summary judgment as to one portion of a count, the court notes that summary judgment may enter as to a portion of a count only when judgment will dispose of a claim in its entirety and the claim can be reasonably and practically severed from the remaining cause of action. See Bridgeport Harbor Place, I, LLC v. Ganim, Superior Court, judicial district of Waterbury, Docket No. X-06-CV-040184523-S (October 5, 2007, Stevens, J.), aff’d, 131 Conn.App . 99, 30 A.3d 703 (2011). In the present case, the cause of action for breach of contract based on Syferlock’s failure to pay accrued salary from Grid Data can be practically severed from the remaining claim of breach of contract which is based on Syferlock’s failure to pay wages due to Sitar for his employment at Syferlock.
The motion for summary judgment that is addressed to the other part of count three is discussed in section III of this memorandum.
Syferlock also contends that there is no factual dispute about it agreeing to pay the plaintiffs’ salaries from Grid Data. The court summarily rejects this contention based on the parties’ submissions. Specifically, for example, Syferlock submitted Sitar’s testimony made during the prejudgment remedy (PJR) hearing of this action; Sitar’s testimony confirming and explaining this agreement is sufficient to create a factual dispute on this issue.
A
Statute of Frauds
There is no dispute that the plaintiffs’ accrued salary claims are oral obligations that were not reduced to writing. Syferlock argues that the plaintiff’s accrued salary claims are precluded under Connecticut’s statute of frauds, General Statute § 52-550(a)(2), because the terms of these obligations were not stated in any written agreement and because they constitute promises for Syferlock to answer for the debts of Grid Data. The court concludes that material issues of disputed fact exist requiring the denial of the defendant’s motion for summary judgment on this ground.
General Statutes § 52-550(a)(2) provides in relevant part: "No civil action may be maintained in the following cases unless the agreement, or a memorandum of the agreement, is made in writing and signed by the party, or the agent of the party, to be charged: (2) against any person upon any special promise to answer for the debt, default or miscarriage of another." "The statute of frauds provides that an oral promise made to answer for the debt of another is unenforceable ... The statute does not apply, however, if the promise is an original undertaking rather than a collateral one ... Fundamentally the distinction between a contract which falls within the condemnation of the statute of frauds and one which does not is that the former is a collateral undertaking to answer in case of a default on the part of the obligor in the contract, upon whom still rests the primary liability to perform, whereas in the latter the obligation assumed is a primary one that the contract shall be performed ... The test established by our cases is that, ... [i]f ... there is a benefit to the promisor which he did not before, and would not otherwise, enjoy and in addition the act is done upon his request and credit there ordinarily arises an original undertaking not within the statute. The question as to whom credit was given, which is determinative of whether the agreement was an original undertaking not within the statute, is one of fact." (Citations omitted; internal quotation marks omitted.) Kerin Agency v. West Haven Painting & Decorating, 38 Conn.App. 329, 331-32, 660 A.2d 882 (1995).
Based on the totality of the parties’ submissions, an issue of fact exists as to whether the alleged oral agreement is a collateral obligation, precluded under the statute of frauds, or a primary obligation, not so precluded. More specifically, the issue is whether under the alleged oral agreement, Syferlock was merely assuming a collateral obligation for which Grid Data remained primarily responsible or whether the parties were creating an obligation for which Syferlock was primarily responsible. The question is one of fact governed by evidence on how the parties viewed the agreement. Sadd v. Siegelbaum, 124 Conn. 383, 385-86, 200 A.346 (1938) ("[i]n such cases courts must rely upon the circumstances of each particular case, and its general features, in order to ascertain the intention of the parties, and how they viewed it, where it is doubtful whether it was a contract of suretyship or guaranty, or an original undertaking"); accord Kerin Agency v. West Haven Painting & Decorating, supra, 38 Conn.App. 332-33 ("[I]t is not necessary for an original undertaking to be taken out of the statute of frauds that the promisor receive any benefit from his promise. It is enough that the promise was an inducement ..."); Advanced Environmental Interface, Inc. v. Archer Cissell Associates, LLC, Superior Court, judicial district of Middletown, Docket No. CV-05-4003437-S (June 20, 2006, Dubay, J.) (41 Conn.L.Rptr. 525, 526) ("[i]t is clear that the inquiry into whether an agreement is an original undertaking is often fact intensive").
Numerous factual issues were presented by the parties creating disputes about their understanding on whether the debt was taken as a primary or collateral obligation. Indeed, some of Syferlock’s own submissions reflect these disputes. For example, the evidence suggests that the plaintiffs were induced to work for Syferlock by Syferlock’s promise to pay this accrued salary and by Dr. Russo’s expressed desire to have people with experience to help the new company. Sitar testified at the PJR hearing that he placed the debt on the books of Syferlock with the permission of Dr. Russo. Def.’s Ex. A, Sitar PJR Testimony, p. 63. These facts support the plaintiffs’ position that through Dr. Russo’s actions the defendant obtained a benefit that it would not otherwise have had for promising to pay the accrued salary from Grid Data.
B
Merger Clause
As previously stated, the defendant also contends that it is entitled to judgment on the plaintiffs’ claim that the defendant breached an alleged oral agreement to pay the accrued salary from Grid Data because this oral agreement merged into the parties’ written employment contracts. The court concludes that material issues of disputed fact exist as to the defendant’s merger argument because the defendant’s own evidence demonstrates that there are issues of fact as to whether the plaintiffs’ written employment contracts encompass the alleged oral agreements. Specifically, the parties have submitted testimony from Sitar indicating that the oral agreements were separate and distinct from the written employment agreements; see Def.’s Ex. A, PJR Testimony, Sitar, p. 64; and these conflicting factual positions cannot be resolved on motion. Accordingly, the court denies the defendant’s motion for summary judgment as to the applicable portion of count one and the portion of count three that deals with the alleged oral promise to pay the accrued salary from Grid Data.
II
Count Two and Count Four
Statutory Violations
The court next turns to the portion of Syferlock’s motion for summary judgment seeking summary judgment as to counts two and four, claiming double damages, costs, and attorneys fees pursuant to General Statutes § 31-72. General Statutes § 31-72 provides in relevant part: "When any employer fails to pay an employee wages in accordance with the provisions of sections 31-71a to 31-71i, inclusive, or fails to compensate an employee in accordance with sections 31-76k ... such employee ... shall recover, in a civil action, (1) twice the full amount of such wages, with costs and such reasonable attorneys fees as may be allowed by the court, or (2) if the employer establishes that the employer had a good faith belief that the underpayment of wages was in compliance with the law, the full amount of such wages or compensation, with costs and such reasonable attorneys fees as may be allowed by the court."
"An amendment, effective October 1, 2015, to Connecticut General Statutes § 31-72, shifted the burden of proving the requisite good faith belief for the purposes of determining whether the employer can avoid otherwise mandatory double damages, from the plaintiff to the defendant." Morrison v. Ocean State Jobbers, Inc., 180 F.Supp.3d 190, 196-97 (D.Conn. 2016).
Contrary to Syferlock’s argument, it is not entitled to summary judgment on the plaintiffs’ claims based on § 31-72 because disputed issues of fact exist as to whether it failed to pay the plaintiffs’ lawful wages, and if so, whether it had a good faith basis that any underpayment complied with the law. In short, Syferlock has failed to meet its burden of demonstrating that there are no genuine issues of material facts and that it is entitled to judgment as to a matter of law as to the plaintiffs’ claims under § 31-72.
III
Count Three
Adequate Sales & Cash Flow
A separate and distinct claim asserted by Stage in count three is that Syferlock breached their employment agreement by failing to pay him wages after the defendant attained "adequate sales and cashflow," which was a precondition to the payment of these wages. Syferlock’s motion for summary judgment on this claim requires little discussion and is denied because the defendant essentially concedes that disputed facts exist as to whether this precondition triggering the payment of these wages was met. For example, the defendant’s own evidence indicates that the salary of another employee and present chief executive officer, Christopher Cardell, was paid by the defendant; Def.’s Ex. C, Cardell PJR Testimony, P. 40; despite being similarly conditioned on the company attaining "adequate sales." See Pl.’s Ex. C, PJR Testimony, Dr. Russo, p. 154.
IV
Count Five
Option Contract
The court turns next to Syferlock’s motion for summary judgment as to count five alleging that Syferlock breached their option contract. Syferlock argues that summary judgment should enter in its favor on this claim because Stage failed to comply strictly with the terms of the ISA and ISO contracts. Under the terms of the ISA agreement, Stage agreed to be an independent advisor for Syferlock, and be compensated solely pursuant to the ISO agreement. See Def.’s Ex. J, ISA. Under the terms of the ISO agreement, Syferlock granted Stage the right and option to purchase all or any part of an aggregate of 36,700 shares. The ISO agreement provides in relevant part: "Subject to the terms and conditions of the [ISO agreement], the [option] may be exercised by written notice to [Syferlock] or its designee, in substantially the form of Exhibit A ... Such notice shall state the number of [shares] with respect to which the [option] is being exercised and shall be signed by the person exercising the [option]. Payment of the purchase price for such [shares] shall be made in accordance with Paragraph 9 of [the Syferlock Technology Corporation 2010 Employee, Director and Consultant Equity Incentive Plan (plan) ]." Def.’s Ex. H, ISO Agreement, ¶5. Exhibit A, attached to the ISO Agreement, is a form which contains blanks wherein Stage could insert the number of shares he wanted to purchase and the price at which he was purchasing each share (strike price). Exhibit A also provides a space for Stage to indicate how he would pay for the shares. Thus, the contracts required Stage to provide written notice and pay for the shares in accordance with the plan. There is no dispute that Stage did not comply fully with these requirements. Stage’s only attempt to exercise the stock option of the ISO agreement is a June 20, 2012 e-mail to Cardell. This email only indicates that Stage "intended" to exercise his option, but did not have and needed the correct strike price. Specifically, the letter provided: "I want this letter to serve notice that I intend to exercise all rights to all options owed to me, and any amounts owed by me in regards to this exercise to be deducted from moneys [owed] to me by [Syferlock]." (Emphasis added.) Def.’s Ex. I, Stage’s E-mail to Cardell. Thus, Stage failed to provide notice pursuant to the ISO agreement and tender any payment whatsoever as required under the ISO agreement.
Neither party provides a copy of the plan.
The court rejects Stage’s response that strict compliance with the contracts were unnecessary and that he substantially complied with the requirements. The court rejects this "substantial" compliance argument because Stage fails to explain sufficiently how his actions even constituted substantial compliance and, as a general rule, in exercising an option pursuant to a contract, the party must strictly adhere to the terms in the contract. See Pack 2000, Inc. v. Cushman, 311 Conn. 662, 672, 89 A.3d 869, 876 (2014) (holding that strict compliance standard applies to actual exercising of an option as opposed to compliance with terms of contract). Alternatively, Stage states that he asked Syferlock for an updated strike price, and because Syferlock did not respond, Syferlock frustrated the purpose of the contract and excused Stage’s failure to comply strictly with the conditions of the option contract. The court is unpersuaded.
"The doctrine of frustration of purpose ... excuses a promisor in certain situations where the objectives of the contract have been utterly defeated by circumstances arising after the formation of the agreement ... Excuse is allowed under this rule even though there is no impediment to actual performance." (Citations omitted.) Hess v. Dumouchel Paper Co., 154 Conn. 343, 350-51, 225 A.2d 797 (1966). "A party claiming that a supervening event or contingency has frustrated, and thus excused, a promised performance must demonstrate that: (1) the event substantially frustrated his principal purpose; (2) the nonoccurrence of the supervening event was a basic assumption on which the contract was made; (3) the frustration resulted without the fault of the party seeking to be excused; and (4) the party has not assumed a greater obligation than the law imposes." Howard-Arnold, Inc. v. T.N.T. Realty, Inc., 315 Conn. 596, 605, 109 A.3d 473 (2015). In evaluating a frustration of purpose claim, the court may look at the purpose of the contract as to the party seeking to have its performance under the contract excused. Cf. Hess v. Dumouchel Paper Co., supra, 154 Conn. 351 (our Supreme Court determined that doctrine of frustration did not excuse performance by evaluating purpose of contract from point of view of defendant, party seeking to have performance under contract excused).
In the present case, the purpose of the contract from Stage’s viewpoint was to be compensated for his work as an independent advisor. Stage has failed to point to any evidence that shows that Syferlock had a duty to give the strike price to Stage, or that Stage could not have determined the strike price by any other means or from any other person. Indeed, it appears that Stage should have known that a strike price was needed to appropriately tender payment and exercise the option at the time he made the agreement, and should have foreseen that he would need to obtain that information from a source other than Cardell. "[T]he event upon which the obligor relies to excuse his performance cannot be an event that the parties foresaw at the time of the contract." Dills v. Enfield, 210 Conn. 705, 718, 557 A.2d 517 (1989). Under these circumstances, Stage has failed to establish that any failure to obtain the strike price specifically from Cardell through email was an actual obstacle or impediment operating to preclude performance or otherwise frustrating the purpose of the contract. Accordingly, Syferlock has established that there are no disputed issues of material fact and that it is entitled to judgment as a matter of law as to count five.
CONCLUSION
Therefore, for these reasons, the defendant’s motion for summary judgment as to count five of the amended complaint is granted. In all other respects, the motion for summary judgment is denied.
So ordered.