Goldfarb v. Romano
2018 NY Slip Op 2411 (2018)
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Rule of Law:
An oral agreement with an at-will employee to share legal fees based on cases originated and worked on is not barred by the Statute of Frauds, as the at-will nature of the employment renders the agreement capable of performance within one year.
Facts:
- Plaintiff Jason Goldfarb allegedly had an oral agreement with defendant law firm (Joseph A. Romano, P.C. and Law Offices of Joseph A. Romano, P.C.).
- Under this agreement, the law firm was to pay Goldfarb 50% of the legal fees earned on cases he procured or originated and performed work on.
- Goldfarb was an at-will employee of the defendant law firm, meaning his employment could be terminated at any time.
- Legal fees earned within a one-year period might not be paid until after that period had ended.
- Goldfarb's allegations were supported by emails and affidavits from other firm associates, attesting to a course of dealing.
- There were no allegations that Joseph Romano individually entered into any agreement with Goldfarb or was personally enriched by Goldfarb's work separately from the law firm.
Procedural Posture:
- Plaintiff Jason Goldfarb initiated a lawsuit in the Supreme Court, New York County (the trial court/court of first instance), against Joseph A. Romano, Esq., Joseph A. Romano, P.C., and Law Offices of Joseph A. Romano, P.C.
- Defendants moved to dismiss the causes of action for breach of express contract, breach of implied contract, and unjust enrichment as against all defendants (Joseph A. Romano, Esq., Joseph A. Romano, P.C., and Law Offices of Joseph A. Romano, P.C.).
- Defendants also moved to dismiss the cause of action for quantum meruit as against defendant Joseph A. Romano, Esq. individually.
- The Supreme Court granted defendants' motion to dismiss the breach of express contract, breach of implied contract, and unjust enrichment causes of action as against all defendants.
- The Supreme Court also granted defendants' motion to dismiss the quantum meruit cause of action as against Joseph A. Romano, Esq. individually.
- The Supreme Court denied defendants' motion to dismiss the quantum meruit cause of action as against the law firm entities (Joseph A. Romano, P.C., and Law Offices of Joseph A. Romano, P.C.).
- Plaintiff Jason Goldfarb (appellant-respondent) appealed the Supreme Court's order regarding the dismissed claims.
- Defendants Joseph A. Romano, Esq., Joseph A. Romano, P.C., and Law Offices of Joseph A. Romano, P.C. (respondents-appellants) cross-appealed the Supreme Court's denial of their motion to dismiss the quantum meruit claim against the firm entities, bringing the case to the Appellate Division, First Department.
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Issue:
Does the Statute of Frauds bar an oral agreement for legal fee sharing with an at-will employee, and were the plaintiff's claims for breach of contract, unjust enrichment, and quantum meruit adequately pleaded against the law firm and its individual principal?
Opinions:
Majority - Richter, J.P.
No, the Statute of Frauds does not bar the alleged oral agreement between Goldfarb and the law firm, and Yes, Goldfarb's claims for breach of express contract, breach of implied contract, unjust enrichment, and quantum meruit were adequately pleaded against the law firm entities, but No, these claims were not adequately pleaded against Joseph Romano individually. The court reasoned that the Statute of Frauds (General Obligations Law § 5-701[a][1]), which voids agreements not to be performed within one year, does not apply here because Goldfarb was an at-will employee. The at-will nature of the employment meant the oral agreement was capable of completion within the one-year period, as either party could terminate the relationship at any time, thereby completing the agreement without breach (citing Murphy v American Home Prods. Corp., 58 NY2d 293, 300-301 [1983] and D & N Boening, Inc. v Kirsch Beverages, 63 NY2d 449, 456 [1984]). The court distinguished cases where termination was not possible as of right. Furthermore, the fact that payment of legal fees earned during the one-year period might not occur until after the period ended did not make the agreement incapable of completion within one year (citing Gold v Katz, 193 AD2d 566, 566 [1st Dept 1993]). The court found that Goldfarb's allegations, supported by emails and affidavits, sufficiently stated causes of action against the law firm entities for breach of implied contract (citing Sivin-Tobin Assoc., LLC v Akin Gump Strauss Hauer & Feld LLP, 68 AD3d 616, 617 [1st Dept 2009]) and unjust enrichment (citing Georgia Malone & Co., Inc. v Rieder, 86 AD3d 406, 408 [1st Dept 2011]). These claims are properly pleaded in the alternative. The quantum meruit claim against the law firm was also adequately pleaded (citing Balestriere PLLC v BanxCorp., 96 AD3d 497, 498 [1st Dept 2012]). However, the court affirmed the dismissal of the claims against Joseph Romano individually because the complaint failed to allege that he personally entered into any agreement with Goldfarb or was enriched by Goldfarb's work separately from the law firm (citing Newman v Berkowitz, 50 AD3d 479 [1st Dept 2008]).
Analysis:
This case clarifies the application of the Statute of Frauds to oral agreements involving at-will employment, particularly in professional contexts like law firms. It reinforces that an agreement that can be terminated or completed without breach within one year, even if payments extend beyond that period, does not fall within the Statute of Frauds' one-year rule. The decision also highlights the distinction between corporate liability and individual liability for principals, requiring specific allegations of individual agreement or enrichment to hold an individual liable for firm obligations. Future cases involving oral compensation agreements with at-will employees will likely rely on this precedent to avoid Statute of Frauds defenses.
