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Sullivan v. Dumont Aircraft Charter, LLC

United States District Court, D. Massachusetts

March 7, 2019

JUSTIN B. SULLIVAN, Plaintiff,
v.
DUMONT AIRCRAFT CHARTER, LLC, DUMONT AVIATION, LLC, and KEVIN WARGO, Defendants.

          MEMORANDUM AND ORDER

          DOUGLAS P. WOODLOCK UNITED STATES DISTRICT JUDGE.

         Plaintiff Justin B. Sullivan, a former employee of Dumont Aircraft Charter, LLC, brings this lawsuit against his former employer, its affiliate, Dumont Aviation, LLC, and the owner of the businesses, Kevin Wargo (together “Defendants” or “Dumont”). Mr. Sullivan claims that the Defendants failed to pay him compensation for the work he did. The Defendants have responded with counterclaims against Mr. Sullivan, in which they contend Mr. Sullivan has unlawfully retained money he did not earn. Both parties have moved for summary judgment on Mr. Sullivan's claims. For the reasons explained below, I will grant in part and deny in part each motion.

         I. FACTUAL BACKGROUND[1]

         A. The Parties

         Defendant Kevin Wargo is a director and co-owner of the Dumont Group, LLC, a non-party to this litigation. Defendants Dumont Aircraft Charter, LLC and Dumont Aviation, LLC, are both wholly-owned subsidiaries of the Dumont Group. The Defendants manage and operate charter flights on Federal Aviation Administration Part 135 certificates. These certificates permit an operator to sell charter flights on a particular plane to customers. Dumont generally receives a percentage of the revenue, typically around 10%, from charters sold on aircrafts they operate and manage, although it does not receive revenue from every such charter.

         The Plaintiff Justin B. Sullivan made his living in the aircraft charter industry as a broker. For a time, before he was engaged as an employee, Mr. Sullivan worked as a broker selling charter to the Defendants.

         B. Mr. Sullivan's Pre-Employment Interactions with the Defendants

         1. The Cook Plane and Charter Commissions

         In August 2015, three months before Mr. Sullivan became an employee of Dumont, he introduced a potential aircraft customer, Gregg Cook, to Kevin Wargo. Based on this introduction, Mr. Sullivan and Dumont agreed that Dumont would pay Mr. Sullivan $50, 000 if Mr. Cook purchased an aircraft from Dumont, and that Mr. Sullivan would receive 5% of future charter sales on the aircraft. This agreement was wholly separate from any employment relationship and did not identify any further responsibilities, conditions, or duties that Mr. Sullivan needed to perform in order to be entitled to the 5% commission. The understanding of the parties with respect to the 5% commission was also not part of any written agreement and the agreement did not include a specific end date for residual commissions.

         Mr. Cook signed an agreement to purchase the aircraft from Dumont Aircraft Sales, LLC, a subsidiary of the Dumont Group, in August 2015, and he paid a deposit at that time. On November 1, 2015, Falcon 50-054, LLC (“Falcon”), an entity controlled by Mr. Cook, purchased an aircraft with tail number N954DP from Dumont Aircraft Sales, LLC, a Dumont affiliate that is not a defendant in this case. Falcon also signed an agreement to pay Dumont Aircraft Charter, LLC, a 15% charter commission on flight charges. The Cook aircraft was placed in the Defendants' charter fleet, where it would be made available to the public for charter flights. The Cook plane ceased to be part of the aircraft charter program on August 22, 2017.

         On November 6, 2015, the Defendants gave the Plaintiff a check for $50, 000, in accordance with their agreement regarding purchase of the Cook plane.

         On December 31, 2015, the Defendants paid Mr. Sullivan his first residual commission payment, in the amount of $3, 772, for the November revenue generated by Mr. Cook's plane. On January 19, 2016, Kevin Wargo instructed Keith Wargo, the Chief Financial Officer (“CFO”) for Dumont, to continue paying Mr. Sullivan the 5% commission for charter sales of Mr. Cook's plane. On January 31, 2016, the Defendants paid Mr. Sullivan his second residual commission payment, in the amount of $11, 527.78, for December 2015 charter revenue generated by the Cook plane.

         Both the November and December 2015 commission payments were paid as W-2 wages with applicable withholdings.[2] On February 18, 2016, Kevin Wargo instructed Keith Wargo, the CFO, not to pay any further commissions to Mr. Sullivan. Dumont, nevertheless, continued to collect charter revenue from the Cook plane from January 1, 2016 through August 22, 2017, when the Cook plane left the Defendants' charter program.

         2. The Selldorff Aircraft Sale

         Before Mr. Sullivan became an employee of the Defendants, he also introduced the Defendants to a second potential aircraft buyer, Frank Selldorff. Mr. Sullivan tried to encourage Mr. Selldorff to purchase a particular Dumont aircraft, with registration number N957DP. Mr. Selldorff decided not to purchase that plane. Though Mr. Sullivan did not broker the sale of a different aircraft to Mr. Selldorff, he remained in contact with Kevin Wargo about Mr. Selldroff's plans after the introduction had been made. For example, on September 2, 2015, Mr. Sullivan emailed Kevin Wargo to let him know that Mr. Selldorff seemed to be “narrowing in on a 601.” Just over one month later, Mr. Selldorff came back to Dumont and purchased a Challenger 601 from Dumont Aircraft Sales, LLC. The sale closed on October 14, 2015.

         C. Mr. Sullivan's Employment with Dumont

         In September 2015, Mr. Sullivan and the Defendants began discussions about Mr. Sullivan formally joining Dumont as an employee. During the conversations regarding his employment, Mr. Sullivan and Mr. Wargo negotiated the terms of Mr. Sullivan's compensation structure via email and during an in-person meeting. In the electronic communications, Mr. Wargo never enumerated any deductions or withholdings from Mr. Sullivan's commission payments for costs or expenses of any kind. However, in an email exchange from September 14, 2015, Kevin Wargo asked Mr. Sullivan about “ongoing expenses” for Mr. Sullivan's business and, in an email dated September 25, 2015, the parties contemplated a number of “ongoing expenses, ” including compensation for Maria White, Mr. Sullivan's associate.

         The terms of Mr. Sullivan's employment were set forth in a written agreement (“the Term Sheet”) that Mr. Sullivan signed on October 19, 2015. His employment as the Sales Director for Dumont formally began on November 4, 2015.

         1. The Term Sheet

         The parties agree that the terms of Mr. Sullivan's employment were largely governed by the Term Sheet, which the Defendants authored. In its initial draft, the Term Sheet contained no provisions regarding expenses. The final version included one provision regarding expenses, noting that Mr. Sullivan's reasonable travel expenses were to be covered by the Defendants. After several discussions and email communications regarding a structure for compensation, Mr. Sullivan and Dumont ultimately agreed to and signed a written Term Sheet agreement, which set out the terms of Mr. Sullivan's employment with Dumont and his commission-only compensation structure. Mr. Sullivan specifically requested that he be compensated by sales commission only. He did not ask to be paid by the hour.

         Mr. Sullivan received an offer letter from the Defendants, which he signed and returned by November 4, 2015. That offer letter incorporated the Term Sheet by reference, noting that Mr. Sullivan's “initial compensation package includes financial compensation based on the agreement signed October 19, 2015.” It also made clear that Mr. Sullivan's start date for employment was November 4, 2015 and that his employment was at-will.

         The Term Sheet further provided that Mr. Sullivan would be eligible for a commission on aircraft charter flight sales. Specifically, the Term Sheet made clear that “[t]hree percent of gross flight charges revenue sales will be allocated as sales department commissions. Justin may receive up to 75% of this number leaving 25% to be split amongst the remaining team. Under mutual agreement . . . Justin can opt to reduce his share of the profit.” Any commission not paid to Mr. Sullivan was retained by the Defendants.

         The commission was calculated based on flight charges, which were determined when a customer accepted a flight quote and the Defendants added it to the flight schedule. Flight charges were reported to owners in monthly statements issued by the 20th of the month following the flight activity. Flight charges typically did not change unless there was an issue with the flight or the routing changed. Mr. Sullivan's commission, then, was calculated by adding up flight charges and paying him the agreed percentage. He received paychecks from Dumont Crewing Services, LLC and Dumont Aircraft Charter, LLC.

         According to the Term Sheet, Mr. Sullivan was also entitled to a commission on aircraft sales of “50% of aircraft sales profit, up to $100, 000, for closing aircraft sales.” The Term Sheet defined “closing aircraft sales” as follows: “Customer is brought by Justin, worked by Justin, brought thru the process by Justin, and Justin receives the signed contract, and the transaction closes.”

         The Term Sheet included no reference to costs, expenses, or other money to be deducted from Mr. Sullivan's commission.

         2. Mr. Sullivan's Role as Sales Director

         As the Sales Director, Mr. Sullivan's duties involved proactive outreach to prospective aircraft buyers to discuss aircraft sales opportunities. Mr. Sullivan also provided quotes to customers, engaged with brokers about potential charters, and monitored air charter boards. He regularly solicited customers over the internet and by phone. Mr. Sullivan worked from his home in Massachusetts much of the time that he was employed by the Defendants. He also traveled to numerous states, including Florida, New York, New Jersey, and Connecticut, to visit aircraft sales clients or for business conferences. Mr. Sullivan rarely traveled to Delaware, where the Defendants are located, making only five or six trips there.

         Mr. Sullivan does not have records of how many hours he worked per day, week, or month because he did not keep track of his hours. However, he estimated that he worked approximately 250 hours per month based on the timestamps on his emails. As an employee of Dumont, Mr. Sullivan also booked charter flights for the Defendants.

         3. Wage Issues

         From November 4, 2015 to December 31, 2015, Mr. Sullivan worked for the Defendants without receiving payment — whether in the form of wages for in his role as Sales Director or in the form of commissions for the Cook plane. The Defendants paid Mr. Sullivan's portion of sales department commission on charter flights for this period in February 2016. Specifically, around February 15, 2016, [3] the Defendants paid Mr. Sullivan two-thirds of the sales department commissions for November and December 2015, in the amount of $7, 523.59. The Term Sheet indicated that Mr. Sullivan would be entitled to up to 75% of the sales department commissions and, on December 29, 2015, Keith Wargo wrote an email indicating the commission calculation was 75%. Between November 4, 2015 and February 16, 2016, Mr. Sullivan and the Defendants never agreed to modify the terms of Mr. Sullivan's commission structure.

         The Defendants did not pay any commissions, including for sales of charter flights, to Mr. Sullivan for the period between January 1, 2016 and February 16, 2016. Mr. Sullivan was also not paid any commissions for any charter flights that were booked after December 31, 2015.

         4. Maria White & Deductions from Mr. Sullivan's Commissions

         When he was engaged as an employee with the defendants, Mr. Sullivan introduced a prospective employee, Maria White, to the Defendants. The Defendants hired Ms. White to perform flight operations work. Ms. White was paid an annual salary of $60, 000 in bi-weekly installments. She also received employee benefits from the Defendants, including health and dental insurance. The Defendants deducted $12, 500 from Mr. Sullivan's commission payments in order to cover the wages and benefits for Ms. White despite the fact that there was no written agreement between Mr. Sullivan and the Defendants that authorized this. Mr. Sullivan objected to this deduction on February 10, 2016 in an email to Keith Wargo. He maintains that he and the Defendants never discussed that he would pay for Ms. White's salary or benefits out of his commission. Kevin Wargo testified that he spoke with Mr. Sullivan and obtained his authorization to deduct the cost of Maria White's salary from Mr. Sullivan's commission. After Mr. Sullivan's employment with the Defendants ended, Ms. White continued to work for them.

         5. The Saperstein Sale

         During Mr. Sullivan's employment with Dumont, Guy Saperstein, a prospective aircraft buyer, signed an agreement to purchase an aircraft from Dumont and paid a non-refundable deposit of $250, 000. This sale never closed, and Mr. Saperstein ultimately filed a lawsuit against Dumont seeking a refund of his deposit. The deposit was paid to the owner of the aircraft, through Dumont, and spent on customizing the aircraft to Mr. Saperstein's specification. The Defendants were involved in other transactions with this plane, and they ultimately sold the improved plane to another buyer.

         6. Lyon Aviation Flights

         When Dumont started its charter business, it struck an agreement with another aircraft charter company, Lyon Aviation (“Lyon”), to book charter flights with Lyon. At that point, Dumont had not yet received its charter company certificate, and it was seeking to build a client base for its charter business. During Dumont's “start-up” period, it was willing to earn no money on flights in order to build a loyal client base, and so Dumont generated no profit on Lyon charter bookings prior to January 1, 2016.

         At the time Mr. Sullivan joined Dumont, Dumont had only one plane on its own Part 135 charter certificate, and the other planes Dumont considered in its “fleet” were on Lyon's charter certificate. Lyon's charter certificate covered approximately 12 planes. During Mr. Sullivan's employment, in emails with Kevin Wargo, Mr. Sullivan referenced their agreement, indicating that he expected to be compensated on the Lyon bookings. The Defendants did not object to this understanding or correct Mr. Sullivan's impression. In fact, Mr. Sullivan was instructed to ease up on booking flights on planes on Lyon's certificate because he was already being compensated on these flights and the increased wear on the planes could lead to maintenance problems. Moreover, representatives from Lyon and Dumont met during Mr. Sullivan's employment and agreed that Lyon would receive revenue when a charter was sold on a plane on their certificate and that Mr. Sullivan would be commissioned regardless of who sold the trip or what certificate the charter flew on.

         The Defendants did not calculate the charter commission portion of Mr. Sullivan's commission until after they had developed concerns with Mr. Sullivan's performance. At that point the Defendants excluded Lyon bookings from Mr. Sullivan's charter commission. Before that point, however, the Defendants had paid Mr. Sullivan for some charter activity on planes on Lyon's certificate.

         The Defendants collected gross flight charge revenue from charter customers and reported this income to plane owners on monthly customer statements. This revenue was reflected under “Aircraft Income” on monthly statements, regardless of whether the plane was on Lyon's or Dumont's certificate. In addition to collecting gross flight charges, building a client base, and keeping individual plane owners happy with high plane utilization, Dumont also received monthly income from owners for each plane in its fleet, including those on Lyon's certificate. The monthly income included a monthly hangar rent of $4000 and a monthly management fee of $4000. In addition, flying charters added wear and tear to the planes, which generated maintenance income for Dumont.

         7. Owner Flights, Dry Leases, and Other Revenue

         An “owner” flight, when a person who owns an aircraft books a charter flight on that aircraft, does not generate any revenue for Dumont. The owner of the aircraft pays only the operating costs and expenses related to the flight. Because Mr. Sullivan was only entitled to a commission if a flight generated revenue, he was not entitled to, and does not seek, commissions for owner flights.

         Dry lease flights, where one owner books a flight on another owner's aircraft, and all other instances of someone other than the aircraft's owner flying on their own plane, is flight activity that is reported to aircraft owners as aircraft revenue. Any dry lease flights that occurred during Mr. Sullivan's employment were set up prior to his start date. Mr. Sullivan did not contemplate whether dry leases were excluded from the contract when he negotiated the terms of the employment agreement with Dumont.

         8. Mr. Sullivan's Departure from Dumont

         Just before Mr. Sullivan left Dumont, Dumont discovered that Mr. Sullivan had accepted a charter client's payment directly and had failed to remit the entire payment to Dumont. Mr. Sullivan ultimately paid the balance of the funds owed to Dumont after Dumont's accounting department discovered this payment and asked Mr. Sullivan to return the money.

         In an email exchange on February 16, 2016, Mr. Sullivan voluntarily terminated his employment and the parties outlined an agreement to separate and move forward. It was Dumont's understanding that the parties had agreed to part ways amicably, with no past or future monetary obligations owed by either side. In this email exchange, Mr. Sullivan did not mention being owed any commissions or compensation; nor did he indicate that he was owed commissions in perpetuity after his employment had ended. However, Mr. Sullivan did indicate that he believed Ms. White's wages and benefits were being improperly deducted from his pay and that his commission statement had excluded significant gross charter revenue flight activity.

         II. PROCEDURAL BACKGROUND

         On April 13, 2016, Mr. Sullivan filed this action alleging violations of the Massachusetts Wage Act (the “Wage Act”) M.G.L c. 149 § 148, the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 207, breach of contract, and unjust enrichment and quantum meruit. After the Defendants filed a motion to dismiss, I allowed Mr. Sullivan to file an amended complaint.

         On April 11, 2017, Mr. Sullivan filed a motion to compel the Defendants to comply with discovery, alleging that the Defendants had refused to produce documents necessary to calculate his unpaid commissions. On April 25, 2017, I referred the case to Magistrate Judge Donald L. Cabell. Judge Cabell heard argument from the parties concerning the motion to compel discovery, and on May 26, 2017, he ruled that the motion should be allowed in part and denied in part.

         On July 5, 2017, Mr. Sullivan filed a motion for sanctions under Rule 37 because the Defendants had failed to produce owner statements, records of flight activity, and other relevant discovery materials. The Defendants filed an opposition on July 26, 2017. On September 12, 2017, Judge Cabell granted the motion for sanctions, ordering the Defendants to pay Mr. Sullivan's “reasonable fees incurred in filing the motion for sanctions.” On September 26, 2017, the Defendants filed an objection to Judge Cabell's order.

         On February 16, 2018, the Defendants filed a motion for partial summary judgment, requesting summary judgment in their favor on “each of Counts I through V.”[4] The same day, Mr. Sullivan filed a motion for partial summary judgment on Counts I, II, and III, and sought dismissal of the Defendants' counterclaims.

         On March 9, 2018, Mr. Sullivan filed a motion to strike the Defendants' motion for summary judgment on two grounds. First, Mr. Sullivan requested that the Defendants' motion be stricken to the extent it exceeded twenty pages. Alternatively, Mr. Sullivan requested that the motion be stricken in its entirety because the Defendants' counsel failed to meet and confer with Mr. Sullivan's counsel prior to filing the motion. On March 23, 2018, the Defendants filed an opposition to the motion to strike.

         On May 13, 2018, I held a hearing on the motions for summary judgment and Mr. Sullivan's motion to strike. Recognizing the complexity of the factual record in this case, I sought further briefing from the parties with respect to certain elements of the factual record. The parties thereafter filed supplemental submissions.

         The objection to Judge Cabell's order, the motions for summary judgment, and the motion to strike are now ripe for review and resolution by me. I will first address the motion to strike because its disposition frames how I approach the motions for summary judgment. I will then turn to the motions for summary judgment. Finally, I will address the Defendants' objections to Judge Cabell's order.

         III. ...


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