Stevens & Company, LLC v. Espat

Background

Stevens & Company LLC, doing business as The Chef Agency ("TCA"), employed Jason Espat from approximately September 2022 through December 2022. TCA and Espat used a Regional Partnership Agreement that described Espat as a partner and independent contractor. Espat alleged that he was actually an employee. He claimed that he performed unpaid training, regularly worked approximately 50-hour weeks, secured two placements for TCA clients, and was not paid commissions for those placements.

Espat also alleged that he raised concerns about unpaid training and commissions with Steven Kamali, TCA’s sole member, and that he was terminated shortly afterward. He later began administrative proceedings in California concerning alleged minimum-wage and overtime violations. TCA then sued Espat in New York state court, alleging breach of contract and breach of fiduciary duty. Espat asserted counterclaims against TCA and third-party claims against Kamali, including wage claims under federal, California, and New York law; claims involving a non-compete provision; retaliation claims; a declaratory-judgment claim; and claims for abuse of process and malicious prosecution.

TCA and Kamali moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a pleading does not state a legally sufficient claim. They sought dismissal of Espat’s Third, Sixth, Seventh, Ninth, Tenth, Fifteenth, and Sixteenth causes of action.

Choice-of-Law Ruling

The Regional Partnership Agreement states that New York law governs the agreement. Judge Liman held that the provision was enforceable under the standard the Second Circuit has identified for New York law: the selected state must have sufficient contacts with the transaction, and enforcement must not violate fraud or public policy principles. The court found a reasonable relationship to New York because TCA is based there and Espat performed at least some work there.

The court also held that the provision was narrow. It governed contractual claims but did not automatically determine which law applied to separate statutory employment claims. As a result, the choice-of-law provision required application of New York law to the contractual claims but did not, by itself, require dismissal of Espat’s California statutory claims. The court declined to decide whether California Labor Code Section 925 would otherwise make the provision voidable because New York law governed the provision’s validity.

Rulings on the Challenged Claims

Sixth Cause of Action: Non-Compete Restrictions

The court dismissed Espat’s Sixth Cause of Action, which alleged that the agreement’s non-compete provision violated California law. Because New York law governed the agreement and Espat did not claim that New York law prohibited TCA and Kamali from seeking to enforce the provision, the court held that they could not be liable merely for attempting to exercise contractual rights.

Third, Ninth, and Tenth Causes of Action: California Statutory Claims

The court denied dismissal of the Third, Ninth, and Tenth Causes of Action. These claims alleged violations of California statutes involving minimum wages, retaliation, and accurate wage statements. The court held that the agreement’s narrow choice-of-law clause did not reach these statutory claims. Whether the California statutes ultimately apply must be decided under other conflict-of-laws principles and statutory interpretation.

Seventh Cause of Action: Contract and Unjust Enrichment

The court dismissed the Seventh Cause of Action to the extent it alleged unjust enrichment. Espat alleged that TCA and Kamali failed to pay him for services, but the parties had a contract governing those services. The court held that unjust enrichment was unavailable because the agreement defined the value and obligations concerning Espat’s work. The motion was otherwise denied as to this cause of action, including the contract theory.

Fifteenth Cause of Action: Abuse of Process

The court dismissed Espat’s abuse-of-process claim. Under New York law, this claim requires the use of regularly issued legal process, an intent to cause harm without justification, and a collateral objective outside the legitimate purposes of that process. Espat alleged that TCA filed the lawsuit to pressure him regarding his California administrative claims. The court held that filing a lawsuit by summons and complaint is not the type of legal process that supports an abuse-of-process claim. Espat also did not allege improper use of process after it was issued.

Sixteenth Cause of Action: Malicious Prosecution

The court dismissed Espat’s malicious-prosecution claim as premature. A New York malicious-prosecution claim requires, among other things, that the earlier proceeding ended successfully for the person bringing the claim. Because TCA’s lawsuit was still pending, Espat could not satisfy that requirement. Judge Liman declined to stay the claim, reasoning that it was based on the same lawsuit and depended on Espat eventually prevailing in that lawsuit.

Disposition

The court stated: "The motion to dismiss is GRANTED IN PART and DENIED IN PART." It granted the motion as to Espat’s Sixth, Fifteenth, and Sixteenth causes of action and the unjust-enrichment portion of the Seventh Cause of Action. It denied the motion in all other respects. The clerk was directed to close the motion at Docket Number 43.