Kramer Levin Wins Summary Judgment in a Breach of Contract Case Brought Against Client Societe Generale

On September 30, 2011, Kramer Levin secured a significant victory for client Societe Generale in an action by a former senior executive seeking $34 million in allegedly unpaid compensation based on claims of breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment and violations of New York Labor Laws, Levion v. Societe Generale, No. 09 Civ. 5800 (RJS). The Court granted Societe Generale's motion for summary judgment in its entirety, and dismissed the plaintiff's case.

Stripped of its considerable complexities, the plaintiff's case centered on his claim that, because the parties essentially followed the same formula for awarding compensation for more than a decade, they had entered into binding contractual formula for calculating bonuses. Judge Sullivan of the United States District Court for the Southern District of New York rejected Plaintiff's compensation theories, holding that unless a contract expressly guarantees a certain bonus under New York law, bonuses are entirely discretionary. Agreeing with Defendant's interpretation of the facts and law, Judge Sullivan recognized that "Plaintiff's Complaint is an elaborate effort to recharacterize his relationship with [Societe Generale]. But such an after-the-fact recharacterization is not permissible." The Court specifically rejected the plaintiff's argument that he had a contractual right to continue to receive compensation in accordance with an annual formula, noting: "Plaintiff makes much of the fact that his bonus was 'formula-based' and not subjectively determined. But this observation, even if true, does nothing to alter the non-contractual nature of his bonus compensation. Whether based on a formula, seniority, a committee, or a Ouija board, Plaintiff's bonus was never guaranteed" and "[i]n the absence of such a contractual arrangement, Plaintiff cannot claim that he was entitled to a particular bonus." The Court elaborated: "A guaranteed bonus in year one, followed by comparable bonuses in years two and three does not create an entitlement to an equal bonus in years four and beyond . . . . Absent a guarantee, Plaintiff's expectations concerning his 2006 bonus were just that -- expectations, which are not the equivalent of a contract. He was an at-will employee whose ultimate recourse to an unsatisfactory bonus was to walk away." The Court also concluded that Societe Generale's policy that employees must be employed when bonuses are paid is enforceable, that formula-based compensation plans are excluded from the definition of wages under New York labor law where such plans are based on factors outside of the employee's control, and that New York law does not recognize a cause of action for good faith and fair dealing with regard to at-will employees. Finally, the Court rejected the plaintiff's claim for unjust enrichment, holding that "[t]he law is clear that a plaintiff may not allege that his former employer was 'unjustly' enriched at his expense when the employer compensated the plaintiff by paying him a salary."

The Kramer Levin team consisted of Employment Law partner Kevin B. Leblang and Litigation partner Norman C. Simon, and Litigation associates Jade A. Burns and Dannie Cho.