Facts: The plaintiff Edward Melia (Melia)
entered into an executive employment contract with the defendant Zenhire, Inc.
(Zenhire). Zenhire is a Delaware
corporation with a principal place of business in Amherst, New York, a suburb
of Buffalo. Defendant Robert H. Fritzinger, a New York resident, was at all
pertinent times
Zenhire's president and chief executive officer. On
April 2, 2007, Melia and Zenhire entered into
an executive employment contract. Zenhire hired Melia as its vice president of product and business development. Melia accepted a three-year period of employment with automatic renewal of additional one-year terms, unless either party objected. Zenhire
reserved the right to terminate Melia at any
time for cause. Zenhire agreed to compensate
Melia with an initial base salary of $150,000.
Melia was also eligible to participate in an
executive bonus plan and a stock option plan. The contract contained choice-of-law and forum selection clauses.
Through August 29, 2007, both parties
performed their obligations under the
contract. Zenhire then experienced financial
difficulties and stopped paying Melia. On
September 28, 2007, Fritzinger told Melia that
he was finalizing a deal that would provide
Zenhire with financing. On November 16, 2007,
Fritzinger again confirmed that Zenhire would compensate Melia for his work.
Melia alleges he continued performing his duties pursuant to the contract
through February 2008, relying on Zenhire's repeated promises to compensate
him. In February 2008, Melia alleges he was forced to leave Zenhire for
financial reasons and began to collect unemployment compensation. As of the end
of February 2008, Melia was allegedly owed $103,400, including unpaid wages of
$75,000, vacation and sick day wages, severance pay, and unreimbursed expenses.
Procedural
history: Melia commenced the present action in the Superior Court alleging
breach of contract, fraud, quantum meruit, and violations of the Massachusetts Wage
Act. The Superior Court granted the defendants' motion to dismiss. Melia appealed.
Issues:
Under choice of law, whether or not the forum selection clause in
executive employment agreement was enforceable; whether Wage Act’s proscribes
“special contracts” that exempt employers from the Act’s provisions require the
claims filed in Massachusetts; whether or not employee can bring a Wage Act
claim against employer under forum selection clause in executive employment
agreement.
Holdings: The Supreme
Judicial Court held that: (1) forum selection clause in executive employment
agreement was valid and enforceable under New York law; (2) Wage Act's
prohibition against “special contracts” that exempt employers from the Act's
provisions did not require that claims brought under the Act be adjudicated in
Massachusetts; and (3) forum selection clause in executive employment agreement was
enforceable with respect to employee's Wage Act claim against employer.
Rulings
of Law: A “forum selection clause is prima facie valid and enforceable unless
it is shown by the challenging party to be unreasonable, unjust, in
contravention of public policy, invalid due to fraud or overreaching, or it is
shown that a trial in the selected forum would be so gravely difficult that the
challenging party would, for all practical purposes, be deprived of its day in court.” In the present
case, the forum selection clause is enforceable under New York law. Melia has
not demonstrated, or even argued, that litigating his claims in New York would
be unreasonable, unjust, or for all practical purposes deprive him of
his day in court. The forum selection clause is broadly worded to cover “all
disputes arising out of this Agreement or the employment relationship created thereby.”
Under New York law, this clause encompasses all of Melia's claims, including
the alleged statutory violation. Finally, Melia has not alleged any unfairness that
would compel this court to reject the parties' choice of a foreign forum, such
as fraud, duress, the abuse of economic power, or any other unconscionable means.
The forum selection clause is prima facie valid and enforceable.
The Wage Act requires “every person
having employees in his service” to pay “each such employee the wages earned”
within a fixed period after the end of a pay period. The purpose of the Wage
Act is “to prevent the unreasonable detention of wages. The Wage Act proscribes
“special contracts” that exempt employers from its provisions. In addition to
prohibiting waivers, the Legislature has highlighted the fundamental importance
of the Wage Act by repeatedly expanding its protections. Since the enactment of
the Wage Act, the Legislature has broadened the scope of employees covered, the type of
eligible compensation, and the remedies available to employees whose rights have been
violated. That the Wage Act prohibits waivers,
however, does not require that private Wage Act claims be adjudicated in
Massachusetts. Contrary to Melia's argument, the private and public enforcement
mechanisms of the Wage Act need not be enforceable in identical venues.
On the facts alleged in this
case, a New York court, applying New York's choice of law rules, would apply Massachusetts’s
law. Tort claims are outside the scope
of contractual choice-of-law provisions that specify what law governs
construction of the terms of the contract, even when the contract also includes
a broader forum-selection clause. Under New York law, in order for a
choice-of-law provision to apply to claims for tort arising incident to the
contract, the express language of the provision must be ‘sufficiently broad’ as
to encompass the entire relationship between the contracting parties. In the
present case, the contract's choice of New York law would not govern the Wage
Act claim. The contract states that “this agreement shall be governed and
construed in accordance with the laws of the State of New York” but makes no
reference to statutory causes of action. New York's general choice-of-law rules
must therefore determine the law pertinent to the Wage Act claim. Under tort
principles, New York's preference for the “law of the jurisdiction where the
tort occurred,” compels the application of Massachusetts’s law. Aside from the
initial meetings with Fritzinger in New York, Melia performed all of his work
for Zenhire—in particular, all the work for which he was allegedly not paid—in
Massachusetts. The conduct giving rise to the cause of action—the nonpayment of
wages—thus took place in Massachusetts. Therefore, a New York court analyzing this Wage Act claim under contract principles would choose Massachusetts’s law. (EC)
