Shipsey v. Katz

Zygmunt Turski, Respondent, v Anthony Chiesa et al., Individually, and as Trustees of Park Electrochemical Corp. Employees’ Profit Sharing Trust, et al., Appellants.

In an action seeking payment under defendant Park Electrochemical Corporation’s (Park) corporate profit sharing plan, and for damages due to the wrongful use of plaintiff’s trade secret in violation of the parties’ contract, defendants appeal (1) from an order of the Supreme Court, Queens County, dated March 4, 1977, which, inter alia, granted plaintiff’s motion (a) for partial summary judgment on the first cause of action against the "trustee” defendants in the sum of $15,647.35 and (b) for leave to serve an amended complaint and (2) the judgment of the same court, entered thereon on March 21, 1977. Order modified, on the law, by (1) deleting the first two decretal paragraphs thereof and substituting therefor a provision denying the motion for leave to serve an amended complaint and (2) deleting so much of the fourth decretal paragraph thereof as begins with the words "for the sum of’. As so modified, order affirmed and action remanded to Special Term for further proceedings in accordance herewith. Judgment reversed, on the law. In February, 1958 Park established a profit sharing plan on behalf of its employees which provided, inter alia, that an employee’s interest in the plan would be forfeited on the following twin separate and distinctive grounds: "if [the employee] shall enter into a business competitive with the Company or become an employee of a business concern competitive with the Company.” In January, 1960, the plan was amended by, inter alia, specifically deleting the clause "or become an employee of a business concern competitive”, while retaining the language, "if [the employee] shall enter into a business competitive with the Company.” Plaintiff, an organic chemist, was, according to the schedule of benefits, entitled to 100% of Park’s contributions to the plan, or $15,647.35, when he was terminated from the corporation in November, 1973. Upon plaintiff’s demand for payment, however, the trustees of the profit sharing plan refused to pay him on the ground that he forfeited his interest by becoming "employed by and associated with” a competitor of Park, in violation of the amended plan. Plaintiff commenced this action to recover his plan interest, as well as damages for conversion by Park of a trade secret chemical formula, which plaintiff exclusively owned, and which Park utilized according to an agreement of the parties. Thereafter plaintiff moved for summary judgment with respect to his first cause of action, the plan interest, and for leave to serve an amended complaint adding three causes of action for punitive damages against the trustees of the plan. The causes of action sought to be added were grounded in the trustees’ malicious motivations underlying their refusal to pay plaintiff his plan interest, and their breach of fiduciary duties. Special Term, in effect, granted both motions and the defendants appeal to this court. Upon the record we agree with Special Term that partial summary judgment for the plan interest was justified, limited, however, as hereafter stated. The original plan provided, in effect, that "competitive employment” and "entry into business competitive” were separate, distinct and nonsynonymous grounds for forfeiture. For this court to accept appellants’ argument that the amended phrase, "if he shall enter into a business competitive”, is broad or vague enough to encompass "employment” notwithstanding the 1960 deletion of the "employment” clause, would logically imply that the act of deletion was a void, purposeless and meaningless act. Accordingly, the intent can be ascertained within the four corners of the document, and the language is in need of neither extrinsic evidence nor judicial construction. However, the plan provides, in subdivision (b) of section 3 thereof, that any benefits under it shall be paid in the following manner: "Such resulting amount shall be paid to the terminated participant in a lump sum or in such installments and over such period of years (but not in excess of 10 years), and in such cash or other property as the Trustees, in their complete discretion, shall decide.” (Emphasis added.) Under such circumstances, Special Term was not warranted in awarding the plaintiff the full sum of $15,647.35, with interest thereon from November 30, 1973, without proof as to the prior practices of the trustees in cases where employees’ services had been terminated. The action has therefore been remanded for the taking of proof as to that purpose and for the taking of any other relevant proof, including, if necessary, the” present commuted value of said $15,647.35 of the ascertainment of what "other property” the trustees should give plaintiff. We are of the opinion that the three amended causes of action are insufficient as a matter of law and that leave to serve them should have been denied. It is well settled that plaintiff’s right to the profit sharing interest is a mere contract right for deferred compensation, flowing from an employment contract. The fact that the collective plan interest is kept in the form of a trust does not give the plaintiff any greater rights (see Gitelson v Du Pont, 17 NY2d 46, 48; accord Hadden v Consolidated Edison Co. of N. Y., 34 NY2d 88, 96). We also find that under the circumstances of this case the claim for punitive damages does not lie (cf. Wegman v Dairylea Coop., 50 AD2d 108, 113; accord Trans-State Hay & Feed Corp. v Faberge, Inc., 42 AD2d 535, affd 35 NY2d 669).