Barbagallo v. Marcum LLP
925 F. Supp. 2d 275
E.D.N.Y2013Background
- Barbagallo, a Pennsylvania CPA, moved among firms as a non‑equity partner, bringing his clients to each new firm.
- In Sept. 2009 he signed a Marcum non‑equity partnership agreement covering salary, benefits, and post‑employment terms.
- Dispute centers on Barbagallo’s departure to Citrin Cooperman in Oct. 2010 and the purported retirement benefits, PTO, and commissions.
- Marcum counterclaims that Barbagallo breached loyalty/fiduciary duties and the non‑compete, diverting the Tuscano matter to Citrin.
- ERISA claims were asserted but the court ultimately treated the matter as contract law, not ERISA, and denied relief.
- Citrin settled; Barbagallo and Marcum proceeded to bench trial on the remaining claims; New York law governs all claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Barbagallo’s retirement benefit is payable after voluntary withdrawal. | Barbagallo relies on §15.1 stating retirement benefit upon withdrawal. | Marcum argues §10.3 notice required and §15.1 not triggered by resignation. | Barbagallo not entitled; material breach on Aug. 9, 2010 terminated obligation. |
| Whether Barbagallo may recover unused PTO and commissions. | Requests PTO and commissions under the Handbook and §7.1. | Handbook/applicability limited; contracts govern rights; no entitlements. | No recovery for unused PTO or commissions. |
| Whether ERISA governs retirement benefits in this contract dispute. | ERISA cover; seeks equitable relief. | No ERISA plan; benefits are contract‑based, not ERISA. | ERISA does not apply; NY contract law governs. |
| Whether Marcum can recover liquidated damages or other relief for Barbagallo’s loyalty breach. | Barbagallo’s conduct precludes damages; dispute about quantum meruit. | Barbagallo’s actions breached fiduciary duties; liquidated damages may apply. | No contract damages; Barbagallo’s conduct justified termination; damages awarded only on quantum meruit. |
Key Cases Cited
- Merrill Lynch & Co., Inc. v. Allegheny Energy, Inc., 500 F.3d 171 (2d Cir. 2007) (material breach excused performance; contract law principles apply)
- Frank Felix Associates, Ltd. v. Austin Drugs, Inc., 111 F.3d 284 (2d Cir. 1997) (material breach analysis under NY law; substantial performance concept)
- ESPN Inc. v. Office of the Commissioner of Baseball, 76 F. Supp. 2d 383 (S.D.N.Y. 1999) (contract/termination and remedies framework in NY)
- BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (N.Y. 1999) (employer interest in preventing client goodwill exploitation)
- Weiser v. Coopersmith, 74 A.D.3d 465 (1st Dep’t 2010) (enforceability of restrictive covenants; client relations context)
- Johnson Controls, Inc. v. A.P.T. Critical Systems, Inc., 323 F. Supp. 2d 525 (S.D.N.Y. 2004) (restrictive covenants; client relationships; control of goodwill)
- Good Energy, L.P. v. Kosachuk, 49 A.D.3d 331 (1st Dep’t 2008) (pre‑existing relationships affecting non‑compete reasonableness)