FILED: NEW YORK COUNTY CLERK 08/30/ :50 PM INDEX NO /2014 NYSCEF DOC. NO. 138 RECEIVED NYSCEF: 08/30/2021

STEC, ROBERT

Plaintiff,

-against-

PASSPORT BRANDS, INC., et al.,

Defendant.

---X NOTICE OF APPEAL

PLEASE TAKE NOTICE, that Defendant Passport Brands, Inc. (the “Defendant”) hereby appeals to the Appellate Division of the Supreme Court, First Department, from the Decision After Trial of the Honorable Melissa Anne Crane, a Justice of the Supreme Court of the State of New York, County of New York, (the “Decision”) entered with the Clerk of the Court on August 3, 2021, which in accordance with the August 2, 2021 Transcript of Proceedings granted the Plaintiff Robert Stec (the “Plaintiff”) judgment in his favor on the breach of contract claims asserted against Defendant in the Action. The Decision after Trial and August 2, 2021 Transcript of Proceedings is annexed hereto as Exhibit 1. Defendant hereby appeals from each and every part of said Decision by which it is aggrieved.

Dated: August 30, 2021 New York, New York

LAZARUS & LAZARUS, P.C.

____________________________

Harlan M. Lazarus, Esq.

Yvette J. Sutton, Esq.

240 Madison Avenue, 8

Floor New York, New York 10016 (212) 889-7400

Attorneys for Defendants

EXHIBIT 1

PRESENT: HON. MELISSA ANNE CRANE PART IAS MOTION 60 Justice

---X

INDEX NO.

152069/2014

Decision af ter Trial STEC, ROBERT

Plaintif f , - v -

PASSPORT BRANDS, INC.

Def endant.

---X

The trial is decided in accordance with the reasoning on the record of August 2, 2021. The parties are directed to provide the court with a proposed judgment by August 13, 2021.

The clerk is directed to mark this matter disposed.

DATE:

8/3/2021

Check One: x Case Disposed Non-Final Disposition

Check if Appropriate: Other (Specify )

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SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: CIVIL TERM: PART 15

---X ROBERT STEC,

PLAINTIFF,

Index No:

-against- 152069/2014

PASSPORT BRANDS, INC. AND ERNEST JACQUET,

DEFENDANTS.

---X Via Microsoft Teams August 2, 2021

B E F O R E:

THE HONORABLE MELISSA A. CRANE J U S T I C E A P P E A R A N C E S:

STULBERG & WALSH, LLP

Attorneys for the Plaintiff One Penn Plaza - Suite 2601 New York, NY 10119

BY: Patrick J. Walsh, Esq.

Zachary Bergman, Esq.

LAZARUS & LAZARUS, PC

Attorneys for the Defendants 240 Madison Avenue - 8th Floor New York, NY 10016

BY: Yvette Sutton, Esq.

VANESSA MILLER

Senior Court Reporter

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THE COURT: So I'm ready to render the

decision. So are you ready for that? Does anyone else have anything to say before I do that?

Oh, actually, put appearances on, that would be better.

MR. WALSH: Patrick Walsh for the plaintiff.

MR. BERGMAN: And Zachary Bergman for the plaintiff as well, your Honor. Good morning, or afternoon I should say.

MS. SUTTON: Good afternoon, your Honor.

Yvette Sutton for the defendant, Passport Brands.

THE COURT: Thank you. Okay. So here we go.

Just a little preliminary background. Defendant has agreed not to contest liability as to, one, the

breach of contract claims for unpaid salary due in the total amount of $158,076.92, and to the breach of

contract claim for the balance of the 2010 loan due to plaintiff in the amount of $5778. And, therefore, the only issue for me to decide from the trial is whether plaintiff is entitled to base pay through the end of December 2013 per the default provision of the

consultancy agreement. Does everybody agree with what I've just said?

MR. WALSH: Yes, your Honor.

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Court's Decision THE COURT: Okay. Great.

Ms. Sutton, do you agree as well that that's the issue on --

MS. SUTTON: Through December 2013.

THE COURT: Right.

MS. SUTTON: I guess it's also a question of from when and through.

THE COURT: Yes, I know, but I'll get to that.

MS. SUTTON: Okay. Thank you.

THE COURT: Sure. I didn't ignore that issue, and thank you for flagging it on Friday.

So just in terms of factual background, plaintiff was the CEO of Passport Brands & Apparel Company in or about May of 2010 when Passport was

experiencing financial difficulties. Mr. Stec agreed to loan $100,000 to Passport. On or about February 10, 2011, Mr. Stec's term of employment was extended for an additional two-year period and there was a contract dated February 10, 2011 where his salary, Mr. Stec's salary, was reduced to $410,000 annually. The term of the

contract was January 1st, 2011 and ended December 31st, 2013, and this contract can be found at Trial Exhibit #2.

I would ask if you're not speaking to mute just because I'm hearing feedback. Thanks.

In or about November 2011, Passport began

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experiencing even more severe financial difficulties.

Plaintiff had not been paid for months and his loan was past due. Therefore, plaintiff agreed to end his

employment and enter into a consultancy agreement.

Just so everyone knows, I think e-filing crashed today. We're having serious computer issues down here at the court.

So the consultancy agreement is Trial Exhibit

#3, it's dated July 5th, 2012 but not signed until July 17th, 2012. It contains a provision, Paragraph 4,

whereby the company agreed to pay Mr. Stec's past due salary, and a provision, Paragraph 5, to pay the balance of the loan which was then $30,464. The consultancy was to end on December 31st, 2012.

Paragraph 13 contains a default clause. It

states, "in the event the company fails to completely

satisfy the terms of this agreement or obtain agreement

from Mr. Stec to modify this agreement, Mr. Stec will

return to a compensation package equal to the base pay

currently in his employment agreement." It is clear that

the default provision was important to Mr. Stec. First,

there would've been no incentive for Mr. Stec to give up

his contractual salary without it. He had a contract, he

could have insisted upon it, however, the company was in

financial straits and he knew that, so why would he give

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Court's Decision

up his salary for nothing without incentivizing defendant to pay back what it already owed him? Thus, the Court holds the default provision operated as an incentive by which defendant could owe much more if it did not live up to its contractual obligations; that's more of a finding than a holding, actually, but we won't split hairs.

As Mr. Stec said when he refused to give up the default provision during the negotiations of the

consultancy agreement, this was his only, "insurance"

that he would ever get what was owed to him, and you could see that language in Exhibit #10 where Stec refers to the default provision as his insurance. And the

default provision really must have been especially

important to Mr. Stec given the surrounding circumstances that his salary had been cut once already, he had not even received his lower salary and the loan he had given to the company was not repaid.

Mr. Jacquet's interpretation of the agreement that plaintiff was supposed to be paid, "if and when the company receives funding from Uniglobal", is not a fair reading of the agreement. This language appears in

Paragraph 4 of the consultancy agreement that is entitled

"Past Compensation". The full clause states, if and when

the company receives funding from Uniglobal in the amount

of three million or more, the payment schedule will

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accelerate automatically and all past due balances will be paid within 30 days of funding. Clearly then, even if this clause had anything to do with the default

provision, which it doesn't, it's an acceleration clause meant for plaintiff to receive his money earlier if and when the company saw better times.

Mr. Jacquet's view of events is subject to some skepticism considering his apparent lack of awareness of what was going on with the company. For instance, at trial, he was surprised to learn that Mr. Stec's loan still had a balance due even though this case has been going on since 2014 and the loan balance has been an issue from the beginning. For this reason, the Court finds the only defense witness, Mr. Jacquet, somewhat lacking in credibility. The remaining witnesses, Mr.

Stec and Mr. Goldenberg, were entirely credible.

So continuing on in the sequence of events,

things went so badly at Passport that Mr. Stec agreed to

amend the repayment schedule of the loan and back salary

yet again, and this is reflected in Exhibit #4 which is

an e-mail amending the repayment schedule for the loan

and backpay dated June 24th, 2013. In Exhibit #14, an

e-mail dated the next day, June 25th, 2013, plaintiff

agreed to withhold legal action regarding past due wages

until September 30th, 2013 and confirm the payment

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Court's Decision schedule in Exhibit #4.

Defendant argues that Exhibits 4 and 14 cancel the default clause in Exhibit #3, however, neither

Exhibits 4 or 14 contain language voiding the default clause. And, again, there would've been no incentive for Mr. Stec to revise the contract for now a third time

without the insurance of receiving the balance on the original contract he gave up for the consultancy and the default clause. Moreover, if you look at Exhibit #9 where Mr. Jacquet tried to take the default clause out during the negotiations leading up to the consultancy agreement, plaintiff insisted in no uncertain terms that the default provision must remain, and you can see that in Exhibit #10.

Eventually, Mr. Jacquet agreed to the default clause. Thus, the default clause being so important to Mr. Stec, it would stand to reason that the parties

would've mentioned something where they were moving that condition. Therefore, on liability, the Court finds that the parties did not intend to cancel the default

provision and that the default provision triggered

because defendant did not, "completely satisfy the terms of the agreement" because the loan still has a balance and the salary remains outstanding.

Now, the parties also disagree about the amount

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that would be due if defendants are liable. Defendants believe that the period should be measured from the date of the breach of the June 2013 agreement, which they put at November 2013, until the end of the employment term which is December 31st, 2013. So, roughly, a month of salary. They claim the default clause is ambiguous and should be construed against the plaintiff, but it's difficult to understand defendants' position.

The default clause triggered, "in the event the company fails to completely satisfy the terms of the agreement". This means that unless all the outstanding amounts were paid, Mr. Stec, and the agreement states,

"will return to a compensation package equal to the base pay currently in his employment agreement". This is not ambiguous. Plaintiff now gets to receive an amount equal to the base pay currently in his employment agreement.

The contract says completely there is no break for

partial payments, and, indeed, defendants' reading would

not create much of an incentive. However, in order to be

equal to the base pay, we must subtract out any amounts

Mr. Stec received as a consultant because that would

amount to a windfall and would not be equal to his base

pay. In reaching this conclusion, I am persuaded by the

testimony not only of Mr. Stec but also of Mr. Goldenberg

who testified that he warned Mr. Jacquet about the

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Court's Decision

default provision several times. And why would he have to do that repeatedly if it were just for a small amount of, roughly, one month's salary? So there's really

nothing to support defendants' view. Plaintiff has made a prima facie case that he's entitled to an amount equal to the entire basis pay.

And now I do need the attorneys' help on the math, okay, because I'm going to craft a judgment today and we need to figure out the math. So the loan balance is -- and it's mostly on the interest, I think. The loan balance is $5,788, and that's with ten percent interest.

Am I wrong? Stop me if I'm wrong. From when?

I can't hear you, Mr. Walsh.

MR. WALSH: That's correct. The only

observation is that because the default clause, or the loan clause from July 2012 at the time, had a balance of, approximately, 30,000, interest started to accumulate on that balance in July 2012. So there'd be sort of a

staggered reduction in the accumulation of interest from July --

THE COURT: But you didn't sue for 30,000, you sued for 5,000; no?

MR. WALSH: Well, that's what the suit's for,

that's correct, but the loan provision said that he would

get ten percent starting as of the consultancy agreement

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on the outstanding balance.

THE COURT: What did you ask for in the complaint?

And while Mr. Walsh is looking for that, Ms.

Sutton, you did a great job, I want you to know that.

This case was almost unwinnable, and I don't want you to, you know, take away anything about your -- you did a

great job. So --

MS. SUTTON: Thank you. Well, we won one

portion of the case that's subject to -- so I'll take my win for that.

THE COURT: Okay. So I couldn't get into the e-filing before, let's see if I can now.

So do you have a position on when the ten percent runs from, Ms. Sutton?

MS. SUTTON: I have to go back to the language on the document to determine that.

THE COURT: The operating complaint is the first one; right?

MR. BERGMAN: Yes, your Honor.

THE COURT: Okay. That's what I thought.

MR. BERGMAN: Your Honor, it's the second cause of action, and I would direct the Court to Paragraph 43 of the complaint.

THE COURT: Thank you.

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Court's Decision

Okay. So what we do with statutory interest is we run it from a reasonable middle point if we can't figure it out. Do you want to try agreeing right now on a date to run the ten percent interest from? Because you've got 30,000 at ten for a portion and then you've got 5,000 at ten from -- I don't know, I don't remember at what point the loan was paid down. So if you take a middle point between the date the complaint's filed and July of 2012, you're, roughly, at sometime in 2013, like --

MR. WALSH: I think it's about 18 months.

Maybe nine months would be the midpoint.

THE COURT: Yeah. So how do you feel about that, Ms. Sutton? Otherwise, we'd have to sit here -- and, I mean, we can do it, but what a pain, we'd have to sit here and act like -- I mean, I can have the clerk do it, but it would be -- I'd have to look at the -- I mean, if you want to settle an order and get it exact, that's fine if you'd rather do that. But it would be -- if the plaintiff's going to insist on the ten percent, I was going to run ten percent from the complaint on the 5,778, or whenever that amount came, but that's overly

simplifying it. And I know it cuts you off, but we can

actually do it as per the agreement if you want, but I'd

need a settled order on that. I'd need some proposed

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judgment on that aspect.

MR. WALSH: We'd be happy to work with Ms.

Sutton to try to figure out what that precise number is.

THE COURT: All right. Why don't you do that?

Okay. Because that's not really in my discretion because it's in the loan document; right? So I can't, like the other aspects I guess, to use my discretion which is not --

All right. So the 158, the salary -- hold on, let me get it right, 158,076.92, I can compute when I would run statutory interest from the date of the complaint and then the base salary -- oh, yeah. So that's where I really needed your help. Did he receive any consultancy fees, the 3000?

MR. WALSH: Yes, I believe so, your Honor. But we'd have to see if this is --

THE COURT: Okay. So why don't you do this?

Why don't you run your ten percent, work with counsel,

work together to run the ten percent as per the -- and

you have to really look at what you were asking for too

because that's important. You can't ask for something

after the fact, that's not fair to the defendant. So

work on that aspect. The 158 we will have statutory

interest from the date of the complaint and the base

salary of 410 minus the consultancy fees. You'll get

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Court's Decision

back to me on that number, but I am going to mark the case disposed as of today because it's so old and I've rendered a trial decision and this is just math. Does anyone have any issue with that?

MR. WALSH: Thank you, your Honor.

THE COURT: Can I mark the case disposed today because it's just math and we have a decision?

MR. WALSH: We're okay with that, your Honor.

THE COURT: And the defense is okay with that.

You don't want this thing hanging around anymore. Can you get me a proposed judgment in ten days?

MR. WALSH: We can do that.

THE COURT: Okay. Great.

Is that a problem for, you Ms. Sutton?

MS. SUTTON: No. That should be fine. Thank you.

THE COURT: Okay. Great.

All right. Well --

MR. WALSH: Can I clarify one point, your Honor?

THE COURT: Sure.

MR. WALSH: The statutory interest then will be on not simply the 158 and whatever the loan balance is, but also on the default wage balance?

THE COURT: Yes.

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MR. WALSH: Okay.

THE COURT: Yes. So I always award statutory interest because it compensates a party for the loss of use of the income, but I will not double up the interest on the loan amount, so that's got to be called out. I'm not giving you nine percent on top of the ten percent.

MR. WALSH: I see. Okay.

THE COURT: Okay?

MR. WALSH: Okay. Thank you, your Honor.

THE COURT: All right. Thank you.

MR. BERGMAN: Your Honor, one further question.

THE COURT: Sure.

MR. BERGMAN: With respect to the amounts to be calculated, it's the $410,000 minus the amount he

received?

THE COURT: Yes, because the contract says equal to his base pay and that was 410,000. So he can't have 413,000 if he was paid one set of consultancy fees.

I just don't know what he was paid. And, I mean, I could've figured it out but I ran out of time, so --

MR. WALSH: We appreciate the quick turnaround on this order, your Honor.

THE COURT: No problem. That's what I'm here

for. And I'm glad we finally got this very old case

resolved, on the merits at least. And, you know,

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Court's Decision

hopefully -- and so you're trying to go to the Court of Appeals on the wages issue?

MR. WALSH: That's right. The Labor Law.

THE COURT: Which I suspect they will do, but I'm just guessing.

MR. WALSH: I guess the final judgment will reflect both this order as to the contract claims as well as the preceding order on the --

THE COURT: Oh, okay.

MR. WALSH: -- Labor Law claims.

THE COURT: Do you need more than ten days to get that done?

MR. WALSH: I don't believe so. If we run into trouble, we can let you know.

THE COURT: Yeah. That's fine. Just, I need to give you a deadline because of the age of the case and I just don't want to lose track of it. So let's say

about August -- otherwise, if I don't give you a date, I'll completely forget this case even exists.

So today is the 2nd. How about by August 13th?

Can you get me --

MR. WALSH: That's fine.

THE COURT: Then get it over the weekend.

(Certification on the next page.)

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**********************************

CERTIFIED TO BE A TRUE AND ACCURATE TRANSCRIPT OF THE ORIGINAL STENOGRAPHIC MINUTES TAKEN OF THIS PROCEEDING.

__________________________

VANESSA MILLER

Senior Court Reporter