Gatto v. Fujitec America, Inc.

Background

Joseph Gatto sued his former employer, Fujitec America, Inc., over incentive compensation. His complaint asserted breach of contract, quantum meruit, unjust enrichment, violations of New York Labor Law §§ 191 and 193, retaliation under New York Labor Law § 215, and a request for declaratory relief.

Gatto worked for Fujitec beginning June 3, 2019, first in Service Sales and later as a Service Sales Manager. He signed Fujitec’s 2019 and 2020 Sales Incentive Program agreements. Those agreements described the plan as discretionary and stated that all incentive payments were subject to review and modification by Fujitec’s president and awarded at the president’s discretion. They also stated that ultimate discretion over whether a salesperson had shown the required sales effort rested with the president and that the decision was final.

The agreements required repair sales to be fully completed, billed, closed in Fujitec’s billing system, and paid in full by the customer before incentive compensation could be considered. The 2020 agreement applied the booked, closed, and paid-in-full requirements to sales covered by that agreement.

In July 2020, Gatto asked about receiving incentive compensation for a repair order that had not yet been closed in Fujitec’s billing system. In October 2020, Fujitec terminated Gatto for cause, stating that he had violated the 2020 Sales Incentive Program by arranging for repair contracts obtained by departed employees to be placed in his name or another employee’s name without supervisory authorization. Gatto disputed that he had violated a written company policy. Fujitec later paid Gatto $13,275 for sales he had booked that were completed and paid in full by the time of his termination.

Gatto sought incentive compensation for 29 repair orders with sales dates in 2019, 21 repair orders with sales dates in 2020, four service contracts, and new-service-business bonuses. The parties filed cross-motions for summary judgment, which asks whether the evidence requires judgment as a matter of law without a trial.

Breach-of-Contract Claim

The court held that the incentive agreements unambiguously gave Fujitec’s president absolute discretion to determine incentive payments. The court relied on the provisions stating that the plan was discretionary, that the president had ultimate discretion over demonstrated sales effort, and that all incentive payments were subject to review, modification, and award at the president’s discretion.

Because the agreements reserved that discretion, the court held that Gatto could not maintain a breach-of-contract claim based on Fujitec’s failure to pay the disputed incentive compensation. The court also gave an alternative reason for summary judgment: Gatto was not entitled to compensation for orders that had not been completed and paid in full when his employment ended, while the parties did not dispute that Fujitec had paid him for orders meeting those conditions by that time.

The court further stated that Gatto had abandoned any implied-covenant claim by failing to address it in his summary-judgment briefing. The court also found no factual support for that claim, noting that Gatto’s belief that Fujitec delayed billing to avoid paying him was based on his assumption. Because the compensation remained discretionary and was not owed when Gatto was terminated, the court held that the implied-covenant theory could not succeed.

New York Labor Law Claims

Gatto asserted claims under New York Labor Law §§ 191 and 193 for unpaid commissions and improper wage deductions, and under § 215 for retaliation. The court assumed, without deciding, that the New York Labor Law applied to his incentive-pay claims. It nevertheless granted summary judgment to Fujitec because Gatto had no enforceable contractual right to the disputed compensation under the agreements.

For the retaliation claim, Gatto alleged that Fujitec terminated him because he complained about unpaid commissions. The court assumed that Gatto was relying on his July 2020 email asking to be paid for a completed and fully paid repair in the second quarter. The court held that this email was a request for earlier payment, not a complaint that Fujitec was violating the incentive agreement or New York Labor Law. Gatto therefore did not establish the required protected activity, and Fujitec was entitled to summary judgment on the retaliation claim.

Quantum Meruit and Unjust Enrichment

The court granted Fujitec summary judgment on Gatto’s quantum-meruit and unjust-enrichment claims. It held that the written incentive agreements were valid, enforceable contracts governing the dispute. Because an equitable or quasi-contract remedy generally cannot be used when an express contract covers the subject matter, Gatto could not pursue those theories.

Declaratory Judgment

The court denied Gatto’s request for a declaration that Fujitec breached the incentive agreements and owed him additional compensation. Because the court concluded that Gatto was not entitled to additional incentive payments, it held that he was not entitled to the requested declaration.

Disposition

The court granted Defendant Fujitec’s motion for summary judgment and denied Plaintiff Gatto’s motion for summary judgment. It directed the Clerk of Court to enter judgment for Fujitec and close the case. The opinion does not state that either motion was granted or denied with prejudice or without prejudice.