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Stephen Zacks v. Netjets Inc.

September 19, 2011


The opinion of the court was delivered by: Thompson, U.S.D.J.




This matter has come before the Court on the Motion to Dismiss [docket # 3] filed by Defendant NetJets Inc. (formerly known as Executive Jet, Inc.). Plaintiff Stephen Zacks opposes the motion [5]. The Court has decided the motion on consideration of the parties' written submissions, without holding oral argument, pursuant to Fed. R. Civ. P. 78(b). For the reasons stated below, Defendant's Motion is granted in part and denied in part.


Plaintiff filed this lawsuit against his former employer, NetJets Inc., alleging breach of his employment contract and breach of the implied covenant of good faith and fair dealing.

In 2000, Defendant hired Plaintiff as a Vice President of Strategic Marketing. (Compl. ¶ 7.) Under the parties' Employment Agreement ("the Agreement"), the initial term of Plaintiff's employment was three years, but the Agreement provided that it would be automatically extended for successive one-year periods unless either party objected to the extension.*fn2 (Id. at ¶ 9.) The Agreement also provided various grounds for termination of Plaintiff's employment "prior to expiration of the initial term . . . or any extension thereof[.]" (Id. Ex. A., Employment Agreement, at 6) [1]. Relevant to this case, Defendant could terminate Plaintiff "without cause" under Section 8(a)(iv). (Id. Ex. A, at 6.) If so, the termination would be "effective thirty days after delivery of the notice of termination." (Id.) Under the "Salary Continuation" provision, Plaintiff would also be entitled to "a lump sum amount equal to one-fourth (1/4th) of [Plaintiff's] Base Salary[.]" (Id. Ex. A, at 7.)

Plaintiff's Employment Agreement was renewed every year from 2003 to 2009. (Compl. at ¶ 12.) His base salary for the year beginning August 7, 2009, was $450,000. (Id. at ¶ 17.) However, on October 5, 2009, Plaintiff received a paycheck based on a $350,000 salary. (Id. at ¶ 18.) Plaintiff claims that this unilateral reduction of his salary constitutes a breach of the Agreement. (Id.) Plaintiff brought the alleged breach to the attention of the company and forwarded a copy of his Employment Agreement to a company executive. Two days later, Plaintiff received a response from Senior Vice President and General Counsel Jordan Hansell. According to the Complaint, "Hansell stated that he had 'now had a chance to review'" the Employment Agreement and that "he wished he had been aware of [the Agreement's] existence earlier." (Compl. ¶ 21.) Hansell further stated that Defendant's new parent company "has a policy against the use of such employment agreements" and is "moving away from their use." (Decl. of Peter J. Pizzi Ex. A, Hansell Letter 1) [3-2].*fn3 Accordingly, Defendant had "determined to terminate the Agreement pursuant to Section 8(a)(iv)," the without-cause provision. (Id.) The email professed to serve "as the thirty day notice of such termination required by that Section." (Id.) Plaintiff was given the choice between two alternatives: (1) Plaintiff's employment would terminate entirely after the thirty days and Defendant would pay Plaintiff one-quarter of his base salary; or (2) the Employment Agreement would terminate after the thirty days but Plaintiff could continue his employment under new terms, namely the $350,000 salary. (Id.); (Compl. ¶ 21). Plaintiff rejected the new terms and ceased his employment thirty days later, on November 7, 2009. (Compl. ¶ 23.) Plaintiff claims that the offer of materially different terms and attempt to change the terms of the Agreement without following the required procedures constitute breaches of the contract. (Id. at ¶ 35.) Plaintiff further claims that Defendant's actions violated New Jersey's implied covenant of good faith and fair dealing. (Id. at ¶ 40.)

Around the time Plaintiff ended his employment, Defendant made the following payments to Plaintiff: (1) $8,333.33 to compensate for the underpayment of Plaintiff's salary in October 2009 (i.e. the difference between the $450,000 salary and the $350,000 salary for the month of October); (2) $8,653.85 for the first six days of November 2009, based on the $450,000 salary; (3) payment for Plaintiff's unused vacation days accrued up to November 6, 2009; and (4) $112,500 as the lump-sum payment of one-quarter of Plaintiff's $450,000 salary. (Id. at ¶ 26.)

Plaintiff insists, nevertheless, that he is entitled to additional damages as a result of Defendant's alleged breaches of the Agreement. Plaintiff demands (1) six additional months of salary as compensation for the remaining unpaid months of the one-year term that would have run from August 7, 2009, to August 6, 2010; (2) payment for the fifteen additional days of vacation he would have accrued through the end of the contract term; (3) compensation for the health and other benefits he would have received through the contract term; and (4) a bonus of at least $90,000. (Compl. ¶ 27.)

Defendant NetJets Inc. now moves to dismiss the Complaint under Federal Rule of Civil Procedure 12(b)(6), arguing that Plaintiff has not asserted a viable claim for breach of the Employment Agreement or the covenant of good faith and fair dealing.


A.Legal Standard

Under Fed. R. Civ. P. 12(b)(6), a defendant bears the burden of showing that no claim has been presented. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). When considering a 12(b)(6) motion, a district court must accept as true all of a plaintiff's well-pleaded factual allegations and construe the complaint in the light most favorable to plaintiff, but may disregard any legal conclusions. Fowler v. UPMC Shadyside, 578 F.3d 203, 210--11 (3d Cir. 2009). Once the well-pleaded facts have been identified, a court must determine whether the "facts are sufficient to show that plaintiff has a 'plausible claim for relief.'" Id. (quoting Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 1949 (2009)). A claim is only plausible if the facts pleaded allow a court reasonably to infer that the "defendant is liable for the misconduct ...

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