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Edelstein v. Lucas Brand Equity, LLC

United States District Court, D. Connecticut

June 2, 2017

STEVEN J. EDELSTEIN
v.
LUCAS BRAND EQUITY, LLC, HYD USA, LLC, and JAY LUCAS CIV.

          RULING ON PLAINTIFF'S APPLICATION FOR PREJUDGMENT REMEDY AND TO DISCLOSE PROPERTY AND ASSETS

          JOAN GLAZER MARGOLIS UNITED STATES MAGISTRATE JUDGE.

         On August 9, 2016, plaintiff Steven J. Edelstein, a resident of Connecticut, commenced this action against New York defendants Lucas Brand Equity, LLC, HYD USA, LLC [“HYD”], and Jay Lucas (Dkt. #1), which Complaint was superseded by an Amended Complaint on September 27, 2016. (Dkt. #14). In his Amended Complaint, plaintiff alleges that defendants failed to pay plaintiff in violation of federal and state wage and hour laws. (Id.). Specifically, plaintiff, who was employed as the Chief Operating Officer of defendants Lucas Brand Equity, LLC and HYD, alleges that defendants improperly characterized plaintiff as an independent contractor, and in doing so, failed to pay him wages in violation of the Connecticut Minimum Wage Act [“CMWA”](Count One); breached the employment contract defendants had with plaintiff (Count Two); failed to pay plaintiff in violation of the Fair Labor Standards Act [“FLSA”](Count Three); failed to pay plaintiff overtime compensation in violation of the FLSA (Count Four); and wrongfully terminated plaintiff in violation of the FLSA (Count Six). (Id.). Plaintiff also seeks declaratory and injunctive relief against all defendants (Count Five). (Id.).[1] On October 11, 2016, defendants filed their Answer and Affirmative Defenses. (Dkt. #16).

         On December 20, 2016, plaintiff filed the pending Motion for Prejudgment Remedy and for Disclosure of Assets. (Dkt. #21).[2] One week later, the pending motion was referred from Senior United States District Judge Warren W. Eginton to this Magistrate Judge (Dkt. #22), and a telephonic scheduling conference was held on January 11, 2017. (Dkts. ##23-25).

         A hearing on plaintiff's Motion for Prejudgment Remedy and Motion for Disclosure of Assets was held on February 23, 2017 (Dkt. #37; see Dkts. ##26, 35, 38, 39), [3] at which plaintiff, Steven Edelstein, testified. (Dkt. #38). On April 6, 2017, plaintiff filed his brief in support (Dkt. #47), [4] and on April 20, 2017, defendants filed their brief in opposition. (Dkt. #50). Six days later, defendant filed a letter with the Court regarding evidence related to the prejudgment remedy motion. (Dkt. #52).[5] On May 4, 2017, plaintiff filed his reply brief to address defendant's letter. (Dkt. #54).

         For the reasons stated below, plaintiff's Motion for Prejudgment Remedy and for Disclosure of Property and Assets (Dkt. #21) is granted in large part in the amount of $140, 000.

         I. DISCUSSION

         A. FACTUAL BACKGROUND

         Plaintiff was hired as the Chief Operating Officer [“COO”] of HYD for Men, a portfolio company of Lucas Brand Equity, LLC on September 1, 2015 for a salary of $120, 000 plus healthcare benefits and expenses. (Exh. 1).[6] Plaintiff was offered his position as an employee of both Lucas Brand Equity, LLC and HYD for Men, LLC, which name changed to HYD USA, LLC (Exh. 2).[7]

         Plaintiff's title was initially Chief Executive Officer, but later changed to COO. (Dkt. #47, Exh. A at 20). He was responsible for entering into manufacturing agreements with third parties, for distribution of the products, for vendor relationships, and for overseeing all development and growth of the business. (Id. at 22). Plaintiff needed to obtain approval or authority from members of Lucas Brand Equity, LLC and specifically from Karen Ballou, a senior partner and co-CEO of Lucas Brand Equity, LLC (id. at 15, 24), in order to carry out his job duties and responsibilities as the COO of HYD. (Id. at 25).

         Plaintiff testified that in his position as COO, he worked on average more than forty hours a week. (Id. at 135-36 (he did not keep time sheets but his responsibilities warranted working over forty hours a week; he considered himself a “professional”)). Plaintiff was paid twice a month in installments of $5, 000 on the eighth and twenty-second day of each month. (Id. at 43). At some point, plaintiff became aware that his income was being reported as 1099-Miscellaneous income, such that taxes were not withheld from his pay. (Id. at 46-47). Plaintiff testified that he was concerned about being paid as a “1099 employee, ” and he raised his concerns with Jay Lucas, the Managing Director of Lucas Brand Equity, LLC (see Exh. 1), Michael Lanzaro, who was responsible for all accounting for the business, and Karen Ballou. (Dkt. #47, Exh. A at 12, 46-48). According to plaintiff, Lanzaro told him that he was being paid as a “1099 employee” because the accounting system “was not set up properly and they did not have a payroll service.” (Id. at 47).

         Plaintiff testified that he received his compensation checks from both entities, Lucas Brand Equity, LLC and HYD. (Id. at 14, 35). He testified that worked for HYD for four months, earning $40, 000 from September to December 2015. (Id. at 45). Plaintiff's 2015 1099-MISC reflects payment of $15, 000 from Lucas Brand Equity LP, and payment of $25, 000 from HYD. (Exh. 4; see also Dkt. #47, Exh. A at 43). The confirmations of wire payments paid directly to plaintiff's bank account reflect several payments from HYD between January 8, 2016 and May 27, 2016, and then from Lucas Brand Equity LP on June 29, 2016. (Exh. 17). Plaintiff explained that he received late payments in 2015, and the last payment he received was for work at the end of May 2016. (Exh. 17; see Dkt. #47, Exh. A at 52, 111, 113). Specifically, on April 25, 2016, he received $750, and over a month later, he received $4, 250. (Exh. 17). On June 29, 2016, plaintiff was paid $5, 000, which was the remainder of what he expected to receive in May. (Exh. 17; see Dkt. #47, Exh. A at 52, 111-13).

         According to plaintiff, he pressed Karen Ballou, Michael Lanzaro, and Jay Lucas for his outstanding payments, and was assured that he would be paid what he was owed. (Dkt. #47, Exh. A at 65-66, 110-11). Specifically, he was told that monies were being generated and he would be made whole and paid what was owed. (Id. at 49-51, 116-17). Despite not receiving another payment after the June 29, 2016 deposit, plaintiff continued to work. (Id. at 65-66, 114; see Exhs. 7-14).

         Plaintiff took legal action in August 2016 as a “last resort” in order to be paid for his services. (Dkt. #47, Exh. A at 56). On August 9, 2016, when he filed the initial complaint in this action (Exh. 5), he was still working, and he continued to have interactions with Ballou and Lanzaro. (See Exhs. 7-14 (reflecting plaintiff's business communications with parties)). Plaintiff brought his claims against Lucas Brand Equity, LLC, HYD and Jay Lucas. (Exh. 5).

         Plaintiff learned from an email dated September 12, 2016 between Lawrence Piekes, defendants' former counsel, and William Madsen, plaintiff's counsel, that “[i]t would behoove [plaintiff] to discontinue the activities he claims to have been engaged in on HYD's behalf.” (Exh. 6; see Dkt. #47, Exh. A at 56-57, 59-60, 62-64, 65). Attorney Piekes' email also contended that defendants stopped paying plaintiff in May 2016 “due to the fact that he was not providing the services he was retained to provide.” (Exh. 6).

         Plaintiff testified that he has been unemployed since September 12, 2016 (Dkt. #47, Exh. A at 138), but he does not consider himself terminated; in his words, he “left the company [on] September 12th.” (Id. at 148-49). Plaintiff receives unemployment compensation benefits. (Id. at 105-06). Plaintiff testified that he was not paid for the period of May 9 through September 12, 2016, and based on his salary of $120, 000, he is owed $45, 000 for that time period. (Id. at 115).

         B. LEGAL STANDARD FOR A PREJUDGMENT REMEDY

         A prejudgment remedy “is generally intended to secure the satisfaction of a judgment should plaintiff prevail.” Cendant Corp. v. Shelton, No. 3:06 CV 854 (JCH), 2007 WL 1245310, at *2 (D. Conn. Apr. 30, 2007)(citation omitted). Federal Rule of Civil Procedure 64 permits a plaintiff to utilize the state prejudgment remedies available to secure a judgment that might ultimately be rendered in an action. See Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers Local No. 70 of Alameda County, 415 U.S. 423, 436, n.10 & 437 (1974); Dill v. Ron's Golf Car Rental, Inc., No. 12 CV 137 (JBA)(JGM), 2013 WL 275690, at *8 (D. Conn. Jan. 24, 2013). Pursuant to the Connecticut Prejudgment Remedy statute, Conn. Gen. Stat. § 52-278d(a), the standard for issuing a prejudgment remedy is probable cause, so that a prejudgment remedy is appropriate

[i]f the court, upon consideration of the facts before it and taking into account any defenses, counterclaims or set-offs, claims of exemption and claims of adequate insurance, finds that the [movant] has shown probable cause that such a judgment will be rendered in the matter in the [movant's] favor in the amount of the prejudgment remedy sought . . . .Conn. Gen Stat. § 52-278d(a). In the words of United States District Judge Alvin W.

         Thompson:

The legal idea of probable cause is a bona fide belief in the existence of the facts essential under the law for the action and such as would warrant a man of ordinary caution, prudence and judgment, under the circumstances, in entertaining it. Probable cause is a flexible common sense standard. It does not demand that a belief be correct or more likely true than false.

Qualitative Reasoning Sys., Inc. v. Computer Scis. Corp., No. 3:98 CV 554 (AWT), 2000 WL 852127, at *10 (D. Conn. Mar. 31, 2000)(internal quotations & multiple citations omitted).

         A prejudgment remedy proceeding is “only concerned with whether and to what extent the plaintiff is entitled to have property of the defendant held in the custody of the law pending adjudication of the merits of that action.” Benton v. Simpson, 78 Conn.App. 746, 751-52, 829 A.2d 68, 72-73 (App. Ct. 2003)(citation & internal quotations omitted). Further, while a prejudgment remedy hearing “is not contemplated to be a full scale trial on the merits of the plaintiff's claim[, ]” Roberts v. TriPlanet Partners, LLC, 950 F.Supp.2d 418, 421 (D. Conn. 2013)(internal quotations & citation omitted), a plaintiff is “bound to furnish proof of his damage with reasonable probability, and not leave the trial court to speculation and conjecture.” Mullai v. Mullai, 1 Conn.App. 93, 95, 468 A.2d 1240, 1242 (App. Ct. 1983)(per curiam). After a hearing, the Court must “consider not only the validity of the plaintiff's claim but also the amount that is being sought.” Calfee v. Usman, 224 Conn. 29, 38, 616 A.2d 250, 254 (1992)(citation & internal quotations omitted). Additionally, the Court must "evaluate not only the plaintiff's claim but also any defenses raised by the defendant." Balzer v. Millward, Civ. No. 3:10 CV 1740(SRU)(HBF), 2011 WL 1547211, at *1 (D. Conn. Apr. 21, 2011), quoting Haxhi v. Moss, 25 Conn.App. 16, 20, 591 A.2d 1275, 1277 (1991)(citation omitted). See also Corey v. Hawes, No. 14 CV 1266 (JAM)(JGM), 2015 WL 5472507, at *7-8 (D. Conn. Sept. 17, 2015)(multiple citations omitted).

         C. PROBABLE CAUSE

         Plaintiff's application for prejudgment relief turns upon whether plaintiff has shown “probable cause” that a judgment will enter in his favor. Conn. Gen. Stat. § 52-278(d)(a)(1). “Probable cause” has been defined by the Connecticut courts as “‘a bona fide belief in the existence of the facts essential under the law for the action and such as would warrant a man of ordinary caution, prudence and judgment, under the circumstances, in entertaining it.'” Walpole Woodworkers, Inc. v. Atlas Fencing, Inc., 218 F.Supp.2d 247, 249 (D. Conn. 2002), quoting Three S. Development Co. v. Santore, 193 Conn. 174, 175, 474 A.2d 795 (1984)(citation omitted). The standard of “probable cause” is less demanding than the “preponderance of the evidence” or the “likelihood of success” standards. Cendant Corp., 2007 WL 1245310 at *3 (citation omitted). Plaintiff need not “prove its case by a preponderance of the evidence, but must show that there is probable cause to sustain the validity of its claim.” Walpole Woodworkers, 218 F.Supp.2d at 249 (citation omitted). "In ordering a prejudgment remedy or attachment, the court must only find that 'there is probable cause that a judgment in the amount of the prejudgment remedy sought, or in an amount greater . . . will be rendered in the matter in favor of the plaintiff.'" Metal Mgmt., Inc. v. Schiavone, 514 F.Supp.2d 227, 237 (D. Conn. 2007), quoting Conn. Gen. Stat. § 52-278d(a)(1).

         In his post-hearing brief, plaintiff contends that he has established probable cause with respect to his claim for a violation of the Connecticut Minimum Wage Act (Count One); breach of his employment contract (Count Two); and ...


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