Fetet v. Altice USA, Inc.

Background

Yohann Fetet and Said Haoual, described as former executives of Altice USA, Inc. and as the Chief Executive Officer and General Manager, respectively, of Altice Technical Services, challenged the defendants’ refusal to pay a 2020 incentive bonus and to provide a promised equity interest in a newly formed division, ATS US, LLC. The amended complaint asserted ten causes of action under the New York Labor Law and New York common law against Altice, Universal Cable Holdings, Inc., and CSC Holdings, LLC.

The plaintiffs alleged that they previously owned a combined 30% interest in ATS. In 2018, they transferred that interest to the defendants in exchange for $30,000, a temporary bonus plan, and an alleged promise of a 30% interest in a future restructuring and spin-off. In September 2018, they signed an Amended and Restated Employee Bonus Incentive Plan with Altice. That plan provided for a discretionary bonus and an incentive-plan bonus based on ATS’s earnings before interest, taxes, depreciation, and amortization margin, or EBITDA. It also gave Altice’s chairman authority to resolve bonus disputes.

In October 2019, the parties settled a dispute concerning the 2018 bonus. Altice paid an additional $4.8 million for 2018 performance, and the parties agreed that the bonus plan would continue until a replacement bonus or ownership plan was established. In September 2020, the plaintiffs signed an operating agreement for New ATS that provided for each plaintiff to own 15%, with CSC controlling the remaining 70%. The planned transfer of ATS operations did not occur. After the plaintiffs demanded assurances about the 2020 bonus and New ATS, the defendants terminated their employment on December 8, 2020, purportedly for cause, and returned each plaintiff’s $30,000 capital contribution.

Rulings on the Wage-Related Claims

The court granted dismissal of the New York Labor Law claims based on withholding the 2020 incentive bonus. It held that the bonus was not a statutory “wage” because it depended on ATS’s overall EBITDA margin rather than being expressly linked to the plaintiffs’ individual work. The court found it unnecessary to decide whether the plaintiffs properly submitted their bonus calculation or whether Altice had failed to timely dispute it.

The court also dismissed the New York Labor Law claim concerning six months of severance pay. It concluded that both plaintiffs were bona fide executives, based on their management responsibilities and annual base salaries of $350,000 each, and therefore fell within the statutory exclusion for certain executive, administrative, or professional employees.

The court dismissed the breach-of-contract claim based on the Amended Bonus Plan. Although the parties disputed whether the plaintiffs were terminated for cause, the court found that issue unnecessary to resolve because the plan gave Altice’s chairman unlimited final discretion over incentive-plan bonuses. The court also dismissed the unjust-enrichment claim concerning the bonus because it duplicated the contract claim and the parties did not dispute that the bonus plan was an enforceable contract.

Rulings on the Equity-Related Claims

The court dismissed the breach-of-contract claim based on the alleged 2018 oral promise to give the plaintiffs a 30% interest in New ATS. The court reasoned that an agreement involving sophisticated parties, large sums, and the transfer of millions of dollars’ worth of shares was the type of agreement ordinarily put in writing. It further held that the 2019 Settlement Agreement, which contemplated later negotiation of an ownership incentive plan and superseded prior agreements concerning its subject matter, cancelled and superseded the alleged oral agreement.

The court dismissed the fraud claim under the heightened pleading requirement of Federal Rule of Civil Procedure 9(b), which requires fraud allegations to identify the statements, speaker, time and place, and reasons the statements were fraudulent. The court found that the complaint lacked sufficient specificity about alleged statements made in 2016 and 2017 and did not adequately allege fraudulent intent. Because the statements were promises about future conduct, the plaintiffs also needed facts suggesting that the speakers had a preconceived and undisclosed intention not to perform; the court found that they had not pleaded such facts.

The court dismissed the promissory-estoppel claim because the alleged promises were vague, depended on several contingencies, and were not shown to be clear or unambiguous. The court also dismissed the equity-related unjust-enrichment claim because the allegations described a bargained-for exchange and because an enforceable contract addressed the same subject.

Claims Against Universal and CSC

The court dismissed the claims against Universal and CSC in their entirety. It found that the amended complaint directed the wage allegations toward Altice, identified Altice as the employer, and based the equity allegations on statements by Altice executives. Neither Universal nor CSC was a party to the Amended Bonus Plan, and the plaintiffs did not allege that CSC breached the New ATS operating agreement. The fact that Universal appeared as the payor on one earnings statement was insufficient to make it a proper defendant.

Request to Amend and Final Disposition

Judge Denise Cote denied the plaintiffs’ request for leave to file another amended complaint. The court noted that an earlier order had already allowed consolidation and amendment, had warned that another amendment was unlikely, and that the plaintiffs did not submit a proposed second amended complaint or explain how they would cure the pleading deficiencies.

The court granted the defendants’ April 23, 2021 motion to dismiss portions of the amended complaint. The plaintiffs’ claims against Universal and CSC were dismissed in their entirety. The claims against Altice that the defendants did not challenge may proceed, including counts 2, 3, and 8 and count 4 insofar as it concerns severance payments.