`
`UNITED STATES DISTRICT COURT
`DISTRICT OF NEW JERSEY
`
`Hon. Stanley R. Chesler, U.S.D.J.
`Civil Action No.: 2:19-cv-19003-SRC-CLW
`
`
`JOSE ORTIZ, SAUL HERNANDEZ, and
`PEDRO URENA, individually and on behalf
`of all others similarly situated,
`
` Plaintiffs,
`
`v.
`
`GOYA FOODS, INC. and A.N.E.
`SERVICES, INC.,
`
` Defendants.
`
`:
`:
`:
`:
`:
`:
`:
`:
`:
`:
`:
`
`
`
`BRIEF IN SUPPORT OF DEFENDANTS’ MOTION FOR RECONSIDERATION OF
`THE ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FIRST AMENDED
`COMPLAINT
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`On the brief:
`
`
`
`Ryan T. Warden
`
`
`
`Ryan T. Warden
`Kevin P. Hishta (pro hac vice)
`Margaret Santen (pro hac vice)
`OGLETREE, DEAKINS, NASH,
`SMOAK & STEWART, P.C.
`10 Madison Avenue, Suite 400
`Morristown, New Jersey 07960
`Telephone: (973) 656-1600
`Facsimile: (973) 656-1611
`Attorneys for Defendants
`Goya Foods, Inc. and A.N.E. Service, Inc.
`
`
`
`
`
`
`
`Case 2:19-cv-19003-SRC-CLW Document 64-1 Filed 09/17/20 Page 2 of 17 PageID: 780
`
`
`
`TABLE OF CONTENTS
`
`PRELIMINARY STATEMENT .................................................................................................... 1
`
`RELEVANT PROCEDURAL HISTORY ..................................................................................... 3
`
`LEGAL ARGUMENT .................................................................................................................... 6
`
`
`
`
`
`
`A.
`
`B.
`
`C.
`
`Standard for Reconsideration ........................................................................................... 6
`
`In Declining to Dismiss Plaintiffs’ Failure-to-Reimburse Claims, the
`Court Committed a Clear Error of Law, Which Must be Corrected to Prevent a
`Manifest Injustice............................................................................................................. 7
`
`In Declining to Dismiss Plaintiffs’ “Unlawful Deduction” Claims Seeking
`Recovery of Amounts Retained by ANE to Fund Plaintiffs’ “Bad Debt Reserve
`Accounts,” the Court Committed a Clear Error of Law, Which Must be Corrected
`to Prevent a Manifest Injustice ........................................................................................ 9
`
`
`CONCLUSION ............................................................................................................................. 13
`
`
`
`
`
`i
`
`
`
`Case 2:19-cv-19003-SRC-CLW Document 64-1 Filed 09/17/20 Page 3 of 17 PageID: 781
`
`
`
`
`
`TABLE OF AUTHORITIES
`
`Cases
`
`Barvinchak v. Indiana Regional Med. Ctr.,
`2007 WL 2903911 (W.D. Pa. Sept. 28, 2007) ...........................................................................8
`
`
`
`Page(s)
`
`Certain Underwriters at Lloyd’s of London v. Alesi,
`2012 WL 2979037 (D.N.J. July 20, 2012) .................................................................................7
`
`Desantis v. Alder Shipping Co.,
`2009 WL 440953 (D.N.J. Feb. 20, 2009) ..................................................................................6
`
`Fox v. U.S. Dep’t of Hous. & Urban Dev.,
`680 F.2d 315 (3d Cir. 1982).....................................................................................................11
`
`Holick v. Cellular Sales of New York, LLC,
`2019 WL 3253941 (N.D.N.Y. July 19, 2019) appeal filed, Case No. 20-2037
`(2d Cir. 2020) .............................................................................................................................9
`
`Hunter v. Filip,
`2011 WL 6303257 (D.N.J. Dec. 15, 2011) ................................................................................6
`
`Max’s Seafood Café v. Quinteros,
`176 F.3d 669 (3d. Cir. 1999)......................................................................................................7
`
`In re Morgan Stanley Smith Barney LLC Wage and Hour Litigation,
`2013 WL 6255697 (D.N.J. Dec. 4, 2013) ............................................................................8, 10
`
`Oram v. SoulCycle LLC,
`979 F.Supp.2d 498 (S.D.N.Y. Oct. 28, 2013) ............................................................................8
`
`Reinig v. RBS Citizens, N.A.,
`2017 WL 8941217 (W.D. Pa. Aug. 2, 2017) .................................................................9, 11, 12
`
`Scott v. Bimbo Bakeries, USA, Inc.,
`2012 WL 645905 (E.D. Pa. Feb. 29, 2012) ...............................................................................8
`
`Sendi v. NCR Comten, Inc.,
`619 F.Supp. 1577 (E.D. Pa. 1985) .......................................................................................9, 12
`
`Stebok v. Am. Gen. Life and Acc. Ins. Co.,
`715 F.Supp. 711 (W.D. Pa. 1989) ..............................................................................................9
`
`
`
`ii
`
`
`
`Case 2:19-cv-19003-SRC-CLW Document 64-1 Filed 09/17/20 Page 4 of 17 PageID: 782
`
`
`
`Statutes
`
`New Jersey Wage Payment Law ................................................................................................8, 10
`
`New York Labor Law Section 193 ..................................................................................................8
`
`Pennsylvania Wage Payment and Collection Law ......................1, 2, 3, 4, 5, 7, 8, 9, 10, 11, 12, 13
`
`Rules
`
`Civ. R. 7.1(i) ....................................................................................................................................6
`
`Fed. R. Civ. P. 59(e) ........................................................................................................................6
`
`Fed. R. Civ. P. 60(b) ........................................................................................................................6
`
`Local Civil Rule 7.1(i) .....................................................................................................................6
`
`
`
`
`
`iii
`
`
`
`Case 2:19-cv-19003-SRC-CLW Document 64-1 Filed 09/17/20 Page 5 of 17 PageID: 783
`
`
`
`PRELIMINARY STATEMENT
`
`It is with great respect and only after thoughtful deliberation that Defendants A.N.E.
`
`Service, Inc. (“ANE”) and Goya Foods, Inc. (“GFI”) submit this motion seeking reconsideration
`
`and partial reversal of the Court’s order denying Defendants’ motion to dismiss the First Amended
`
`Complaint [D.E. 59]. Defendants respect the Court’s conclusions, while respectfully disagreeing
`
`with them, and are not suggesting that the order must be reversed in its entirety. However, for the
`
`reasons explained in greater detail below, the order should be reversed to the extent the Court
`
`would permit Plaintiffs to proceed with their claims to recover: (1) unreimbursed business
`
`expenses, and (2) alleged unlawful deductions to fund the Plaintiffs’ “bad debt reserve accounts”,
`
`as such claims fail as a matter of well-established law.1
`
`To be clear, even if Plaintiffs are assumed to be employees of Defendants, the PWPCL
`
`does not recognize a claim for failure to reimburse business expenses, where, as here, the putative
`
`employer has not agreed to reimburse them. Plaintiffs did nothing to challenge this established
`
`legal premise, and the Court did not specifically address it in its opinion. As such, this claim should
`
`be dismissed.
`
`
`1 While Plaintiffs plead a single count that Defendants have violated the Pennsylvania Wage Payment and Collection
`Law (“PWPCL”), they pursue two distinct legal claims: (1) unreimbursed business expenses due to alleged illegal
`shifting of costs; and (2) alleged unlawful deductions, including deductions for workers’ compensation insurance,
`“bad/uncollected invoices,” and to fund “reserve accounts” to cover “bad debts.” See First Amended Complaint at ¶¶
`10, 20, 33, 70, and 75. While Plaintiffs appear to challenge two “bad debt” “deductions,” the only “bad debt”
`“deduction” at issue in this motion is the retention of 15% of Plaintiffs’ explicitly unearned commissions,
`pursuant to Paragraph 16 of the Broker Agreements, to fund the “bad debt” reserve accounts referenced
`therein. Although Plaintiffs sometimes refer to amounts so retained as the “reserve account” deduction [First
`Amended Complaint at ¶ 33], “reserve fund deduction” [D.E. 54 at 7], or “first unlawful deduction” [id.], for
`purposes of consistency, such retentions will be referred to herein as amounts retained to fund the “bad debt
`reserve account.” To the extent Plaintiffs claim there was some other “deduction” relating to bad debts,
`sometimes referred to as by Plaintiffs as “bad/uncollected invoices” [First Amended Complaint at ¶ 33], “the
`second unlawful deduction” [D.E. 54 at 7], or “the bad debts deduction” [id.] (hereinafter “bad debt uncollected
`invoices”), such alleged unlawful deductions are not the subject of this motion and would be unaffected should
`the Court decide this motion in Defendants’ favor. Thus, to the extent Plaintiffs make any references to some
`other “bad debt” deduction in opposition to this motion, Defendants respectfully submit such references should
`be ignored.
`
`
`
`1
`
`
`
`Case 2:19-cv-19003-SRC-CLW Document 64-1 Filed 09/17/20 Page 6 of 17 PageID: 784
`
`
`
`Likewise, even if Plaintiffs are found to be employees of Defendants, the amounts retained
`
`by ANE to fund Plaintiffs’ “bad debt reserve accounts” cannot be found to be an unlawful
`
`deduction from earned wages under the PWPCL given the plain language of Plaintiffs’ Broker
`
`Agreements. Even employers and employees are free to structure their commission arrangements
`
`as they see fit. While commission calculations often start with a certain percentage of a larger
`
`number, the process may (and often does) include various downward adjustments from that point.
`
`In such circumstances, the distinction between a permissible adjustment, which is part of the
`
`commission-calculation process to determine what wages are due, and an “unlawful deduction”
`
`from earned wages, turns on whether the deduction or adjustment was made before or after the
`
`commission was “earned.” It is black-letter law that the operative contract between the parties
`
`governs whether and when a particular commission is “earned.” Here, the Broker Agreements
`
`state explicitly that the amounts retained to fund the Plaintiffs’ “bad debt reserve accounts” are not
`
`earned until withdrawn by or paid to Plaintiffs, and therefore, the retention of same cannot
`
`constitute an unlawful deduction from “earned” wages.
`
`These principles are not unique to Pennsylvania law. They are frequently applied in
`
`dismissing claims for unreimbursed business expenses and unlawful deductions under other state
`
`wage payment statutes (e.g., New York, New Jersey, etc.). For this reason, it is exceedingly
`
`important that the Court’s order be modified, as Plaintiffs’ counsel has already begun citing this
`
`Court’s opinion in other cases against Defendants involving other state wage payment statutes, in
`
`an effort to cast doubt on these two generally-accepted legal principles, which are otherwise not
`
`subject to serious challenge.
`
`Defendants advanced both of the aforementioned arguments in their briefs, but in denying
`
`Defendants’ motion, the Court focused on neither. Instead, the Court’s denial was premised on
`
`
`
`2
`
`
`
`Case 2:19-cv-19003-SRC-CLW Document 64-1 Filed 09/17/20 Page 7 of 17 PageID: 785
`
`
`
`two grounds: (1) that the absence of an employment contract for the payment of wages, in the face
`
`of detailed allegations supporting employment status (assuming such allegations to be true) did
`
`not preclude a PWPCL claim at this stage; and (2) that whether or not certain deductions might
`
`have been taken from “wages” that were “earned” raised questions of fact, which precluded
`
`dismissal of such deductions claims at this stage.
`
`As noted, the Court’s decision did not address Defendants’ argument for the dismissal of
`
`Plaintiffs’ failure-to-reimburse claims. While the Court held that it was premature to dismiss the
`
`unlawful deduction claims at this time due to material fact issues, the Court did not focus on the
`
`precise and unambiguous language in the Broker Agreement regarding the “bad debt reserve
`
`accounts.” Because the Broker Agreements clearly and unambiguously provide that the amounts
`
`retained to fund Plaintiffs’ “bad debt reserve accounts” are not earned until paid to the Broker,
`
`there is no factual dispute and no discovery is needed. It is a question of contract interpretation; a
`
`pure question of law for the Court to decide now.
`
`As such, Defendants respectfully request that the Court grant this motion for
`
`reconsideration and enter the enclosed order dismissing Plaintiffs’ PWPCL claims to the extent
`
`they seek recovery of (1) unreimbursed business expenses, and (2) alleged “unlawful deductions”
`
`retained to fund Plaintiffs’ “bad debt reserve accounts” pursuant to Paragraph 16 of their Broker
`
`Agreements.
`
`
`
`RELEVANT PROCEDURAL HISTORY
`
`Plaintiff, Jose Ortiz, commenced this action by filing the initial Complaint in this Court on
`
`or around October 15, 2019. [D.E. 1]. Therein, Mr. Ortiz asserted three separate claims arising
`
`under New Jersey law, on behalf of himself and a putative nationwide class of sales brokers he
`
`sought to represent. On April 3, 2020, this Court granted Defendants’ motion for judgment on the
`
`
`
`3
`
`
`
`Case 2:19-cv-19003-SRC-CLW Document 64-1 Filed 09/17/20 Page 8 of 17 PageID: 786
`
`
`
`pleadings and dismissed the initial Complaint in its entirety. [D.E. 39, 40]. However, rather than
`
`closing the case, the Court granted Plaintiff leave to assert a claim under the PWPCL, and to add
`
`two new named Plaintiffs, Saul Hernandez and Pedro Urena, who also lived and worked in
`
`Pennsylvania. [D.E. 39, 40].
`
`On April 10, 2020, Plaintiffs Ortiz, Hernandez and Urena (“Plaintiffs”) filed their one-
`
`count First Amended Complaint (“FAC”), asserting claims alleging violation of the PWPCL on
`
`behalf of themselves and a putative class of Pennsylvania brokers they seek to represent. [D.E.
`
`43]. The FAC asserts that Plaintiffs have been misclassified as independent contractors when they
`
`should be employees under the PWPCL, and that Defendants have violated the PWPCL by (1)
`
`“illegally shifting” business expenses to them without reimbursement, and (2) taking “unlawful
`
`deductions” from their pay to (a) fund their “bad debt reserve accounts” and otherwise cover
`
`alleged “bad debt uncollected invoices,” and (b) cover the workers’ compensation premiums paid
`
`by ANE on behalf of Plaintiffs’ businesses.
`
`On June 8, 2020, Defendants filed their motion to dismiss the FAC, in its entirety, in lieu
`
`of answer. [D.E. 50]. Therein, Defendants argued that Plaintiffs’ PWPCL claim to recover
`
`unreimbursed business expenses must be dismissed, because, inter alia, the PWPCL does not
`
`recognize a claim for unreimbursed business expenses where, as here, the employer did not agree
`
`to reimburse such expenses.2 [D.E. 50-2 at 13-15]. Defendants also argued Plaintiffs’ PWPCL
`
`claims to recover alleged “unlawful deductions” must be dismissed because, inter alia, Plaintiffs
`
`cannot demonstrate the existence of a contractual right to the payment of gross commissions
`
`
`2 Nowhere in the FAC did Plaintiffs allege that Defendants agreed to reimburse them for business expenses incurred
`in the performance of their obligations as brokers. Nor could they have done so in good faith, as the Broker
`Agreements, which are the only agreements of any kind alleged as between Plaintiffs and Defendants, specifically
`provide that Plaintiffs are solely responsible for such expenses. Defendants cited multiple decisions dismissing
`PWPCL failure-to-reimburse claims under similar circumstances.
`
`
`
`
`4
`
`
`
`Case 2:19-cv-19003-SRC-CLW Document 64-1 Filed 09/17/20 Page 9 of 17 PageID: 787
`
`
`
`undiminished by the complained of adjustments – namely, the amounts retained by ANE, pursuant
`
`to the terms of the Broker Agreements, to fund Plaintiffs’ “bad debt reserve accounts” and to cover
`
`the workers’ compensation premiums paid by ANE on behalf of Plaintiffs’ businesses – which is
`
`an absolute prerequisite for such a claim.
`
`On July 6, 2020, Plaintiffs filed their opposition to Defendants’ motion to dismiss the FAC.
`
`[D.E. 54]. Two aspects of Plaintiffs’ opposition are relevant for purposes of this motion. First,
`
`nowhere in their opposition did Plaintiffs acknowledge, much less substantively oppose,
`
`Defendants’ argument that Plaintiffs’ failure-to-reimburse claims must be dismissed. [Id.].
`
`Second, while acknowledging there can be no valid PWPCL claim for “unlawful deductions”
`
`unless the deductions are taken from earned wages, Plaintiffs misrepresented to the Court that the
`
`Broker Agreements specified the amounts retained to fund the “bad debt reserve accounts” had
`
`been earned prior to ANE’s retention of them, even though the Broker Agreements, in fact, say
`
`just the opposite. [Id. at 4, 6, 35].
`
`On July 27, 2020, Defendants filed their reply. Again, two aspects are relevant for purposes
`
`of this motion. First, Defendants highlighted Plaintiffs’ failure to oppose their arguments seeking
`
`dismissal of Plaintiffs’ failure-to-reimburse claims, and argued such claims had been abandoned.
`
`[D.E. 57 at 8-9]. Second, Defendants pointed out that Plaintiffs had misrepresented the terms of
`
`the Broker Agreements, directed the Court to the precise section of the Broker Agreements which
`
`specify the amounts retained by ANE to fund the “bad debt reserve accounts” are not earned by
`
`Plaintiffs until paid to them, and cited numerous cases dismissing PWPCL claims where, as here,
`
`the amounts plaintiffs sought to recover had not been “earned” pursuant to the terms of the parties’
`
`operative agreements. [D.E. 57 at 11-12].
`
`
`
`5
`
`
`
`Case 2:19-cv-19003-SRC-CLW Document 64-1 Filed 09/17/20 Page 10 of 17 PageID: 788
`
`
`
`On September 3, 2020, the Court issued its opinion and order denying Defendants’ motion
`
`in its entirety. [D.E. 58 and 59]. Two aspects of the Court’s opinion are relevant for purposes of
`
`this motion. First, the Court did not address Defendants’ argument that Plaintiffs’ failure-to-
`
`reimburse claims must be dismissed as a matter of well-established law, or that Plaintiffs had
`
`abandoned such claims by failing to address them in their opposition. [D.E. 58]. Second, while
`
`the Court did acknowledge Defendants’ argument that Plaintiffs cannot maintain “unlawful
`
`deduction” claims to recover amounts which the Broker Agreements specify were not earned at
`
`the time of retention, it concluded (incorrectly, in Defendants’ view) “that issues related to what
`
`amounts could be considered wages and when such wages could be considered earned raise
`
`questions of fact which go beyond the scope of this motion.” [D.E. 58 at 11].
`
`LEGAL ARGUMENT
`
`A.
`
`Standard for Reconsideration
`
`
`
`Motions for reconsideration are not expressly recognized in the Federal Rules of Civil
`
`Procedure. Desantis v. Alder Shipping Co., 2009 WL 440953, *1 (D.N.J. Feb. 20, 2009). Rather,
`
`a motion for reconsideration is generally treated as a motion to alter or amend a judgment under
`
`Fed. R. Civ. P. 59(e), or as a motion for relief of judgment under Fed. R. Civ. P. 60(b). Id.
`
`However, in the District of New Jersey, Local Civil Rule 7.1(i) creates a specific procedure by
`
`which a party may, within 14 days of the entry of an order, ask the Court, to take a second look at
`
`any decision. Hunter v. Filip, 2011 WL 6303257, *2 n. 2 (D.N.J. Dec. 15, 2011). Pursuant to
`
`Local Civil Rule 7.1(i), a party may seek reconsideration of an order if the Court has overlooked
`
`matters or decisions when it decided the original motion. L. Civ. R. 7.1(i).3
`
`
`3 L. Civ. R 7.1(i) provides that “Unless otherwise provided by statute or rule, a motion for reconsideration shall be
`served and filed within 14 days after the entry of the order or judgment on the original motion by the Judge or
`Magistrate Judge. A brief setting forth concisely the matter or controlling decisions which the party believes the Judge
`or Magistrate Judge has overlooked shall be filed with the Notice of Motion.”
`
`
`
`6
`
`
`
`Case 2:19-cv-19003-SRC-CLW Document 64-1 Filed 09/17/20 Page 11 of 17 PageID: 789
`
`
`
`On a motion for reconsideration, the movant has the burden of demonstrating either: (1) an
`
`intervening change in the controlling law; (2) the availability of new evidence that was not
`
`available when the court issued its order; or (3) the need to correct a clear error of law or fact or to
`
`prevent manifest injustice. Max’s Seafood Café v. Quinteros, 176 F.3d 669, 677 (3d. Cir. 1999).
`
`The Court should grant a motion for reconsideration when its prior decision has overlooked a
`
`factual or legal issue that may alter the disposition of the matter. Certain Underwriters at Lloyd’s
`
`of London v. Alesi, 2012 WL 2979037, *1 (D.N.J. July 20, 2012).
`
`Here, the Court overlooked (and respectfully, did not acknowledge) Defendants’ argument
`
`specific to the dismissal of Plaintiffs’ failure-to-reimburse claims (including that Plaintiffs had
`
`abandoned such claims by failing to address them in their opposition). [D.E. 58]. While the Court
`
`acknowledged Defendants’ argument that Plaintiffs’ unlawful deduction claims fail to the extent
`
`they seek recovery of amounts not “earned” under the express terms of the Broker Agreement, the
`
`Court incorrectly concluded that questions of fact preclude judgment in Defendants’ favor, at least
`
`insofar as Plaintiffs seek to recover amounts retained to fund their “bad debt reserve accounts.”
`
`[D.E. 58 at 11]. In so ruling, the Court overlooked that the Broker Agreements explicitly state that
`
`such amounts are not earned until they are ultimately paid to Plaintiffs, the interpretation of which
`
`is a clear question of law for the Court to decide. It is respectfully submitted that reconsideration
`
`and partial reversal is required here to correct clear errors of law and to prevent a manifest injustice.
`
`B.
`
`In Declining to Dismiss Plaintiffs’ Failure-to-Reimburse Claims, the Court
`Committed a Clear Error of Law, Which Must be Corrected to Prevent a
`Manifest Injustice
`
`
`
`First, to the extent Plaintiffs’ PWPCL claims seek recovery of unreimbursed business
`
`expenses, there is simply no question that such claims fail as a matter of law and must be dismissed.
`
`As Defendants explained in their opening brief in support of their motion to dismiss, “the PWPCL
`
`does not purport to apportion responsibility for business expenses as between employer and
`
`
`
`7
`
`
`
`Case 2:19-cv-19003-SRC-CLW Document 64-1 Filed 09/17/20 Page 12 of 17 PageID: 790
`
`
`
`employee” and “it is black-letter law that no PWPCL claim for unreimbursed business expenses
`
`can be maintained in the absence of an agreement to reimburse such expenses.” [D.E. 50-2 at 14].
`
`Defendants pointed out that Plaintiffs had not alleged Defendants agreed to reimburse them for
`
`such business expenses, nor could they in good faith, given that the Broker Agreements clearly
`
`and unequivocally state that Plaintiffs shall be responsible for all such expenses. [D.E. 50-2 at 14-
`
`15]. In support of this argument, Defendants relied on the plain language of the PWPCL, as well
`
`as Barvinchak v. Indiana Regional Med. Ctr., 2007 WL 2903911 (W.D. Pa. Sept. 28, 2007) and
`
`Scott v. Bimbo Bakeries, USA, Inc., 2012 WL 645905 (E.D. Pa. Feb. 29, 2012), two cases that
`
`dismissed PWPCL failure-to-reimburse claims for precisely this reason. [D.E. 50-2 at 14-15].
`
`
`
`Plaintiffs did not respond to this argument in their opposition, prompting Defendants to
`
`argue in reply that Plaintiffs had abandoned such claims. [D.E. 54; D.E. 57 at 8-9]. In its opinion,
`
`the Court addressed neither Defendants’ substantive argument regarding Plaintiffs’ failure-to-
`
`reimburse claims, nor Defendants’ contention that Plaintiffs had abandoned such claims by failing
`
`to oppose their dismissal in opposition. With all due respect to the Court, it simply appears the
`
`Court failed to recognize Defendants’ argument on this score, as well as Plaintiffs’ failure to
`
`oppose it. As such, Defendants respectfully submit that the decision constitutes a clear error of law
`
`which must be corrected to prevent a manifest injustice.4
`
`
`4 These principles are not unique to Pennsylvania law. Courts in other jurisdictions interpreting state wage payment
`statutes also routinely reject efforts by plaintiff-employees to shoehorn claims seeking reimbursement of business
`expenses into their “unlawful deduction” claims, for a variety of reasons. See, e.g., In re Morgan Stanley Smith Barney
`LLC Wage and Hour Litigation, 2013 WL 6255697, *6-7 (D.N.J. Dec. 4, 2013) (dismissing plaintiffs’ failure-to-
`reimburse claims under the New Jersey Wage Payment Law (“NJWPL”), observing “[w]ith explicit exceptions, [the
`NJWPL] prohibits ‘withholding or diverting any portion of an employee’s wage’ . . . . As such, [the NJWPL anti-
`deduction provisions] concern instances in which employers cut into a paycheck for various purposes. The statute[]
`do[es] not concern instances in which employers failed to reimburse employees’ expenses.”); Oram v. SoulCycle LLC,
`979 F.Supp.2d 498, 507 (S.D.N.Y. Oct. 28, 2013) (granting employer’s motion to dismiss indoor cycling instructor’s
`New York Labor Law Section 193 unlawful deduction claim to recover unreimbursed business expenses for items
`needed to perform his job, finding “under New York law, employers do not have to reimburse employees for business
`expenses, including ‘tools of the trade,’ so long as not doing so does not reduce the employee’s wage below the
`minimum wage”).
`
`
`
`8
`
`
`
`Case 2:19-cv-19003-SRC-CLW Document 64-1 Filed 09/17/20 Page 13 of 17 PageID: 791
`
`
`
`C.
`
`In Declining to Dismiss Plaintiffs’ “Unlawful Deduction” Claims Seeking
`Recovery of Amounts Retained by ANE to Fund Plaintiffs’ “Bad Debt Reserve
`Accounts,” the Court Committed a Clear Error of Law, Which Must be
`Corrected to Prevent a Manifest Injustice
`
`Second, there are no questions of fact required to determine when the amounts retained to
`
`fund the “bad debt reserve accounts,” discussed in Paragraph 16 of the Broker Agreement, are
`
`earned, because the Broker Agreements signed by Plaintiffs answers this question unambiguously.
`
`To the extent the Court held otherwise, this was an error of law.
`
`It is widely accepted, as a surefire defense to statutory wage payment claims (including
`
`those arising under the PWPCL), that there can be no statutory wage payment law claim where, as
`
`here, the operative agreement between the parties specifies that the amounts the plaintiff seeks to
`
`recover were not earned until after the complained of adjustments/deductions have been taken.
`
`See, e.g., Reinig v. RBS Citizens, N.A., 2017 WL 8941217, *15-18 (W.D. Pa. Aug. 2, 2017)
`
`(dismissing plaintiffs’ PWPCL claims in commissions context where, as here, the plain language
`
`of the commission plans specified that the commissions were not “earned” until the complained-
`
`of adjustments/deductions were taken); Sendi v. NCR Comten, Inc., 619 F.Supp. 1577, 1579-80
`
`(E.D. Pa. 1985) (dismissing plaintiff’s PWPCL claims where commissions were not “earned”
`
`pursuant to parties’ agreement, and rejecting plaintiff’s argument that the agreement contravened
`
`public policy, observing, “[s]ince the WPCL does not purport to outline what compensation is due
`
`in any particular case, a contractual restriction on when commissions are earned does not frustrate
`
`the statute’s purpose”); Stebok v. Am. Gen. Life and Acc. Ins. Co., 715 F.Supp. 711, 713-14 (W.D.
`
`Pa. 1989) (same); Holick v. Cellular Sales of New York, LLC, 2019 WL 3253941, *8-9 (N.D.N.Y.
`
`July 19, 2019) (dismissing New York Labor Law unlawful deduction claim finding “the
`
`challenged ‘chargebacks’ and equipment loss adjustments were not illegal wage deductions, but
`
`rather, were a valid and enforceable part of the parties’ agreed-to calculation of commissions.
`
`
`
`9
`
`
`
`Case 2:19-cv-19003-SRC-CLW Document 64-1 Filed 09/17/20 Page 14 of 17 PageID: 792
`
`
`
`Under the Sales Agreements, commissions were ‘earned’ when they became vested – after the
`
`agreed-to adjustments were calculated. Plaintiffs’ arguments to the contrary are unavailing.”)
`
`(emphasis in original), appeal filed, Case No. 20-2037 (2d Cir. 2020); In re Morgan Stanley Smith
`
`Barney LLC Wage and Hour Litigation, 2013 WL 6255697, *5-6 (D.N.J. Dec. 4, 2013) (granting
`
`employer’s motion to dismiss financial advisors’ unlawful deduction claims under the NJWPL
`
`where complained-of deductions made pursuant to the relevant compensation plans “were built
`
`into the formula for a financial advisor’s commission[, and a]ccordingly, deductions … were made
`
`before – not after – Plaintiff’s compensation was ‘earned’ or ‘accrued’”).
`
`The Court acknowledged this argument, but concluded fact questions precluded judgment
`
`in Defendants’ favor at this time.5 [D.E. 58 at 11]. While this may have been true with regard to
`
`the amounts retained by ANE to fund workers’ compensation premiums or cover the “bad debt
`
`uncollected invoices” about which Plaintiffs complain, Defendants respectfully submit the same
`
`cannot be said for the amounts retained by ANE to fund the “bad debt reserve accounts.” As
`
`Defendants explained in the underlying motion, the Broker Agreements clearly and
`
`unambiguously provide that amounts retained to fund the “bad debt reserve accounts” are not
`
`earned until paid, and therefore, ANE’s retention of such unearned amounts cannot constitute
`
`
`5 Indeed, from the language used by the Court throughout its opinion, it certainly appears the Court agrees that
`Plaintiffs’ PWPCL claims fail to the extent the amounts sought are not “earned” under the terms of the Broker
`Agreements, the Court simply incorrectly concluded that questions of fact preclude judgment at this time. See, e.g.,
`D.E. 58 at 6 (“The Third Circuit Court of Appeals, applying Pennsylvania law, has consistently emphasized that the
`WPCL does not create a right to compensation. Rather, it provides a statutory remedy when the employer breaches a
`contractual obligation to pay earned wages. The contract between the parties governs in determining whether specific
`wages are earned.”) (internal quotations and citations omitted, emphasis supplied); D.E. at 7 (“Thus, to state a
`plausible PWPCL claim, a plaintiff employee must allege facts demonstrating that he or she was deprived of
`compensation the employee has earned according to the terms of his or her contract with the defendant employer.”);
`D.E. 58 at 10-11 (citing Levy v. Verizon Info Svcs., Inc., 498 F.Supp.2d 586 (E.D.N.Y. 2007) for the proposition that
`deductions from earned wages must be expressly authorized by law or regulation, but acknowledging that the Levy
`Court dismissed the plaintiffs’ claims “because the complaint failed to allege that the wages plaintiffs claimed were
`owed had been ‘earned’ under the terms of the governing agreement”).
`
`
`
`10
`
`
`
`Case 2:19-cv-19003-SRC-CLW Document 64-1 Filed 09/17/20 Page 15 of 17 PageID: 793
`
`
`
`an unlawful deduction from earned wages under the PWPCL. [D.E. 50-2 at 4-5; D.E. 57 at 11-
`
`12].
`
`Paragraphs 13 and 16 are the relevant sections of the Broker Agreements. Paragraph 13 is
`
`entitled “Compensation” and sets forth the method of calculating Plaintiffs’ gross commissions.
`
`[D.E. 50-5 and 50-6 at ¶ 13]. It then goes on to state “[e]xcept as provided in Paragraph 16
`
`below, commissions shall be deemed earned when goods are delivered and the invoice paid.” See
`
`id. (emphasis supplied). Paragraph 16, in turn, is entitled “Bad Debts” and explains the purpose
`
`of the “bad debt reserve account,” the manner in which ANE would retain amounts (more
`
`specifically, 15% of weekly commissions) from Plaintiffs’ gross commissions to fund the account,
`
`and the circumstances in which Plaintiff would be entitled to withdraw and/or be paid out monies
`
`from the “bad debt reserve account.” See id. at ¶ 16. Critically, the final sentence of Paragraph 16
`
`states: “Commissi