Henry Tan, Plaintiff, v. AI LLC BREATHING AI INC (2023)

This action concerns an employment-compensation dispute between plaintiff-employee Henry Tan and defendants-employers Breathing.AI LLC and Breathing.AI Inc. Plaintiff brought this action in January 2023 seeking compensation for his work for defendants from December 2020 through May 2022. Plaintiff is asserting statutory claims under New York City's Freelance Isn't Free Act (FIFA) and common-law claims for breach of contract, unjust enrichment, and promissory estoppel.

Defendants move under CPLR 3211 (a) (1) and (a) (7) to dismiss plaintiff's FIFA claims based on documentary evidence and for failure to state a cause of action. Defendants also move under CPLR 3211 (a) (7) to dismiss plaintiff's other claims for failure to state a cause of action.

With respect to plaintiff's FIFA claims, the motion is granted only in limited part, and otherwise denied. The motion to dismiss plaintiff's breach-of-contract claims is denied. The motion to dismiss plaintiff's unjust-enrichment and promissory-estoppel claims is granted.

BACKGROUND

Defendants, affiliated entities underlying a technology start-up company, hired plaintiff to work as a software engineering contractor in December 2020. Plaintiff alleges that he requested but not did not receive a contract in compliance with FIFA when he began work for defendants.

Plaintiff alleges that he was not compensated from December 2020 to August 2021. On August 12, 2021, the parties signed a consulting agreement and a restricted-stock-purchasing agreement. These agreements provided that Plaintiff could buy 150,000 shares of defendants' stock at $.0001 per share, totaling $15.00 for 150,000 shares. This right to purchase was provided in exchange for plaintiff's working a minimum of 40 hours per week and additional hours as reasonably requested by defendants. It is undisputed that plaintiff did not receive the shares from defendants.

Plaintiff alleges that in January 2022 the parties agreed that defendants would pay plaintiff $3,333.00 for each subsequent month plaintiff worked for them. (NYSCEF No. 1 at ¶ 22). Defendants do not dispute that the January 2022 agreement occurred. Plaintiff alleges defendants owe him $6,666.00 for work he performed under this contract in April and May 2022.

DISCUSSION

I. Plaintiff's FIFA Claims

Plaintiff's first cause of action alleges that defendants violated two sections of FIFA: New York City Administrative Code §§ 20-928 and 20-929. Plaintiff seeks statutory damages for these alleged violations under Administrative Code § 20-933. Defendants move to dismiss this cause of action under CPLR 3211 (a) (1) and (a) (7).

A. Defendants' CPLR 3211 (a) (1) Motion to Dismiss the FIFA Claims

Defendants argue first that documentary evidence precludes plaintiff's FIFA claims. According to defendants, plaintiff worked for defendants from December 2020 to August 2021 in anticipation of being offered Breathing.AI shares (rather than for cash compensation), and plaintiff received an opportunity to purchase the desired shares in the August 2021 agreements. (See NYSCEF No. 6 at 10.) But plaintiff's opportunity under the August 2021 agreements to purchase Breathing.AI shares does not also give him retroactive compensation for the work he did between December 2021 and August 2021. Neither agreement can be reasonably read as contemplating, in effect, retroactive back pay, in addition to forward-looking compensation.¹ The August 2021 agreements thus do not provide a documentary-evidence-based ground for dismissing plaintiff's FIFA claims.

B. Defendants' CPLR 3211 (a) (7) Motion to Dismiss the FIFA Claims

Defendants make four arguments that plaintiff fails to state a cause of action for its claims under FIFA: (i) FIFA does not govern this dispute at all; (ii) plaintiff lacks a claim under Administrative Code § 20-928; (iii) any § 20-928 claim is time-barred under § 20-933; (iv) plaintiff lacks a claim under § 20-929.

1. FIFA's applicability to this action

Defendants contend first that FIFA does not apply to this action to begin with. Defendants lean on the act's purpose of "ensur[ing] that people working in the City are afforded protection in an economy where workers are increasingly hired for discrete or short-term tasks rather than for full-time employment." (Turner v Sheppard Grain Enters., LLC., 68 Misc 3d 385, 388 [Sup Ct, NY County 2020].) Defendants imply that plaintiff's "voluntary investment of time in a start-up in the hopes of getting a larger payoff in the future" does not qualify as a discrete or short-term task and is therefore not protected by FIFA (NYSCEF No. 6 at 8). But FIFA's language is not so limited: It covers "any natural person . . . that is hired or retained as an independent contractor by a hiring party to provide services in exchange for compensation." (Administrative Code § 20-927.) Protecting gig workers may be a central purpose of FIFA; but FIFA's reach is not limited to affording those protections.

2. Administrative Code § 20-928

Plaintiff alleges that defendants violated Administrative Code § 20-928 (a) by failing to furnish plaintiff with a written contract for work he performed between December 2020 and August 2021. (NYSCEF No. 1 at 4). These allegations state a cause of action.

Section 20-928 (a) provides that "whenever a hiring party retains the services of a freelance worker and the contract between them has a value of $800 or more, either by itself or when aggregated with all contracts for services between the same hiring party and freelance worker during the immediately preceding 120 days, the contract shall be reduced to writing."

Here, the complaint alleges that plaintiff worked for defendants from December 2020 through August 2021 without receiving a written contract. Drawing "every possible favorable inference" in plaintiff's favor, as required on a CPLR 3211 motion to dismiss (Leon v Martinez, 84 NY2d 83, 87 [1994]), one can reasonably conclude that this nine months of work was worth at least $800. The complaint sufficiently alleges that defendants were required to—but did not—provide plaintiff with a written contract for that work.

Defendants argue that their "Work for Equity Contracts" satisfy the requirements of § 20-928. (See NYSCEF No. 6 at 8-9.) But defendants did not provide plaintiff with those agreements until August 2021. And as discussed above, the language of the agreements cannot reasonably be read as having retroactive effect.

As defendants contend, claims under § 20-928 have a two-year limitations period. (See Administrative Code § 20-933 (2). Plaintiff brought this action on January 4, 2023. (NYSCEF No. 1.) Plaintiff's § 20-928 claim is therefore untimely with respect to the work he performed between December 1, 2020, and January 3, 2021, inclusive.

3. Administrative Code § 20-929

Plaintiff alleges that defendants also violated Administrative Code § 20-929 by failing to compensate him at all for work he performed for defendants from December 2020 through August 2021 and in April and May 2022.²

Section 20-929 provides that a freelance worker must be paid on or before the contracted due date, or if no due date is specified, within 30 days after completion of the freelancer's contracted-for services. Plaintiff has alleged facts that, taken as true, state a cause of action under § 20-929.

With respect to the December 2020—August 2021 period, defendants argue that plaintiff agreed to work for free. But absent contemporaneous documentary evidence to that effect—which defendants do not provide—that argument is not a ground for dismissing plaintiff's § 20-929 claim at the pleading stage.³

With respect to April and May 2022, plaintiff alleges that he and defendants "agreed that Defendants would pay Plaintiff a monthly fee of $3,333.00 for his continued work"; that he "continued providing services to Defendants through May 2022"; and that defendants nonetheless did not pay him "for work performed in April and May of 2022." (NYSCEF No. 1 at ¶¶ 22-24.) This court is not persuaded by defendants' argument that these allegations are too vague to satisfy the pleading requirements of CPLR 3013. (NYSCEF No. 6 at 7-8, 10.) Nor do defendants provide any other basis to dismiss plaintiff's 20-929 claim for compensation for those two months.

Defendants' motion to dismiss plaintiff's FIFA claims is granted only with respect to plaintiff's § 20-928 claim relating to the period December 1, 2020, through January 3, 2021, and otherwise denied.

II. Defendants' CPLR 3211 (a) (7) Motion to Dismiss the Breach-of-Contract Claim

In addition to his FIFA claims, plaintiff also raises a breach-of-contract claim. He alleges that under the parties' August 2021 agreements, defendants were required to, but did not, issue him 150,000 shares of defendant's stock.

Defendants argue that plaintiff's complaint should be dismissed because he has failed to allege that he performed 40 hours of work per week for defendants or that he paid the $15.00 purchase price for the 150,000 shares. But plaintiff's affidavit filed in opposition to the motion to dismiss represents that he "satisfactorily performed the duties required of [him] under the Consulting Agreement" throughout his work for defendant from December 2020 to May 2022. (NYSCEF No. 12 at ¶ 4.) Plaintiff also represents that he "was never given the opportunity

to pay for the shares owed to me." (Id. at ¶ 5.) Defendants, to be sure, dispute these representations. (See NYSCEF No. 7 at ¶¶ 9, 11.) But that disagreement alone is not enough to warrant dismissal of plaintiff's claim. (See Tsimerman v Janoff, 40 AD3d 242, 242 [1st Dept 2007].) Nor have defendants otherwise provided a basis to resolve definitively this disagreement in their favor at the pleading stage.

Defendants' motion to dismiss plaintiff's breach-of-contract claim is denied.

III. Defendants' CPLR 3211 (a) (7) Motion to Dismiss the Unjust-Enrichment and Promissory-Estoppel Claims

In addition to his first two causes of action, plaintiff brings claims for unjust enrichment and promissory estoppel for his time working for defendants from December 2020 to May 2022. Defendants argue that these claims are subject to dismissal because (i) they duplicate plaintiff's breach-of-contract and FIFA causes of action (see NYSCEF No. 6 at 6); and (ii) the existence of a valid contract, the August 2021 agreements, precludes recovery under quasi-contractual causes of action (see NYSCEF No. 17 at 2). This court agrees that the unjust-enrichment and promissory-estoppel claims should be dismissed.

In seeking dismissal of these claims, defendants rely on the principle that "[t]he existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter." (Clark-Fitzpatrick, Inc. v Long Island R. Co., 70 NY2d 382, 388 [1987].) This principle applies to both unjust-enrichment and promissory-estoppel claims. (See Wald v Graev, 137 AD3d 573, 574 [1st Dept 2016].) The principle would not, however, bar recovery in unjust enrichment or promissory estoppel for the work plaintiff alleges he performed in December 2020 to August 2021 (before execution of the August 2021 contracts), or April and May 2022 (which allegedly was governed by a supplemental oral agreement). These periods of work are not governed by an enforceable written contract covering the subject matter of the claim.

That said, these two periods of work are covered by plaintiff's FIFA claims discussed above. The FIFA claims arise from the same facts (defendants' alleged failure to pay plaintiff the full value of the work that he performed for them) and would result in the same damages (the value of that work). (See Administrative Code § 20-933 [b] [2] [b].) Plaintiff's unjust-enrichment claim and promissory-estoppel claims thus duplicate plaintiff's FIFA claims and are subject to dismissal on that basis.⁴

Accordingly, it is

ORDERED that the branch of defendants' motion under CPLR 3211 seeking to dismiss plaintiff's FIFA claims is granted only with respect to the period December 1, 2020, through January 3, 2021, and otherwise denied; and it is further

ORDERED that the branch of defendants' motion under CPLR 3211 seeking to dismiss plaintiff's breach-of-contract claim is denied; and it is further

ORDERED that the branches of defendants' motion under CPLR 3211 seeking to dismiss plaintiff's unjust-enrichment and promissory-estoppel claims are granted; and it is further

ORDERED that defendants shall serve and file an answer to plaintiff's remaining claims within 20 days of entry of this order; and it is further

ORDERED that the parties shall appear before this court for a preliminary conference on July 14, 2023.

DATE 6/20/2023

FOOTNOTES

1.   This Court does not reach whether the existence of a written contract that expressly provides for retroactive compensation for previously unpaid work could defeat FIFA claims brought under Administrative Code §§ 20-928 and 20-929.

2.   The complaint alleges that defendant failed to compensate plaintiff for 10 months' work. (NYSCEF No. 1 at ¶ 32.) Defendants' arguments in support of their motion assume that plaintiff is referring to December 2020—August 2021 period. (See NYSCEF No. 6 at 10.) This court's decision does likewise.

3.   Defendants rely instead on the August 2021 contracts. But those contracts are not probative on plaintiff's FIFA claims for work performed before their execution.

4.   As discussed above, plaintiff's FIFA claim is untimely for the period December 2020 through January 3, 2021. That time-bar does not enable plaintiff to take advantage of the longer limitations period for quasi-contractual claims (see CPLR 213 [2]) and bring what would otherwise be a duplicative claim covering the December 2020—January 2021 period. (See APR Energey Holdings Ltd. v Deloitte Tax LLP, 209 AD3d 402, 404 [1st Dept 2022].)

Gerald Lebovits, J.