Jensen v. AR Global Investments, LLC

Background

W. Todd Jensen sued AR Global Investments, LLC; AR Capital, LLC; ARC Advisory Services, LLC; American Realty Capital Advisors, LLC; Healthcare Trust Advisors, LLC; American Realty Capital Healthcare Trust III Advisors, LLC; Bellevue Capital Partners, LLC; and American Realty Capital II, LLC. He alleged breach of contract and violations of the New York Labor Law (NYLL) based on the defendants’ alleged failure to pay profits bonuses, severance pay, and accrued benefits under his employment agreement.

Jensen alleged that he worked for the defendants in executive positions from 2011 until the company terminated his employment in August 2018. The employment agreement, as amended, provided for an annual bonus, a profits bonus based on the annual net profits of two healthcare advisors, payments upon a termination without cause, accrued profits bonuses, accrued benefits, and severance payments. Jensen alleged that the defendants initially terminated him without cause and later recharacterized the termination as one for cause. The court did not decide that issue because it was not necessary to resolve the motion.

The operative amended complaint asserted a breach-of-contract claim and NYLL claims concerning the profits bonuses, severance pay, and accrued benefits. The defendants filed a partial motion to dismiss the NYLL claims under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not allege enough facts to state a legally plausible claim. The breach-of-contract claim was not at issue in this motion, and the court assumed for purposes of the opinion that Jensen had a valid contract claim.

Legal Analysis

The court first held that NYLL Section 190 is a definitions provision and does not create an independent cause of action. It also held that Sections 198(3) and 198(1-a) provide remedies for violations of other substantive NYLL provisions but do not independently create liability. The court therefore considered whether Jensen had stated a claim under NYLL Section 193, the provision that prohibits certain deductions from wages.

The court distinguished between a deduction from wages and a complete failure to pay wages. Under the court’s interpretation of Section 193, a deduction is a specific reduction or docking of pay, such as a fine or another targeted charge. A wholesale withholding of wages or benefits is not a deduction under that section. The court found that Jensen alleged that the defendants withheld all of his claimed profits bonuses, severance pay, and accrued benefits, rather than alleging any specific deduction from those amounts.

Because Jensen did not allege a specific deduction, the court concluded that he failed to state a claim under Section 193. The court also stated that, because he had no Section 193 claim, he could not obtain relief under Section 198. In addition, the court noted that NYLL protections for certain benefits and wage supplements do not apply to an employee in an executive position, although it did not need to rely on that issue to dismiss the claims.

The court did not decide whether Jensen’s profits bonus was guaranteed, nondiscretionary, and tied to his personal work, or instead discretionary and dependent on broader business performance. Those questions were unnecessary because Jensen had not alleged a specific deduction.

Disposition

Judge Ronnie Abrams granted the defendants’ partial motion to dismiss. The court dismissed the Second, Third, and Fourth Causes of Action, which were Jensen’s NYLL claims concerning profits bonuses, severance pay, and accrued benefits. The order did not state that the dismissal was with or without prejudice. The court directed the Clerk of Court to terminate the motion at Docket 24.