Are executives who make more than $1,300 per week precluded from seeking civil liability against their former employers under Labor Law §§ 193 and 198 for failure to pay out severance? The First Department tackled that question recently, holding that the Legislature in the No Wage Theft Loophole Act meant to protect all employees, including executives, so long as they were seeking only civil, and not criminal, liability. Let’s take a look at that opinion and what else has been happening in New York’s appellate courts over the past week.
Appellate Division, First Department
Patel v Maybank Kim Eng Sec. USA INC., 2025 NY Slip Op 05194 (1st Dept Sept. 30, 2025)
Labor Law, Unpaid Severance
Issue: May high earning executives hold their former employers liable under Labor Law §§ 193 and 198 for failure to pay out severance?
Facts: “Defendant Maybank Kim Eng Securities USA Inc. hired plaintiff Ankit Patel in 2019 to serve under the title, ‘Executive Director, Asian equities’ . . . In September 2022, defendant terminated plaintiff’s employment. Pursuant to the parties’ separation agreement executed on November 11, 2022, defendant agreed to pay plaintiff a lump sum of five months of his base salary as severance. On January 3, 2023, plaintiff received $63,123, only three months’ salary. Plaintiff alleges defendant has refused to pay the balance.”
Plaintiff sued defendant, seeking the remainder of his severance pay, “attorneys’ fees, costs and liquidated damages under Labor Law §§ 193 and 198.” Defendant moved to dismiss, arguing that plaintiff’s claim was “barred under Labor Law § 198-c because plaintiff was an executive.” Supreme Court dismissed the claim, “reasoning that severance pay is considered a wage supplement under the Labor Law, and claims for such supplements may not be made under the Labor Law by any person in a bona fide executive, administrative, or professional capacity whose earnings are in excess of one thousand three hundred dollars a week. The court noted that plaintiff served as an executive director for defendant and that at the time of his termination, he was earning a yearly salary of $252,492, ‘well in excess of the statutory bar.’ It rejected plaintiff’s argument that the 2021 amendments to Labor Law §§ 193 and 198 provide that all employees, without exception, who successfully bring an action to collect unpaid wages or wage supplements, including severance pay, are entitled to recover attorneys’ fees, costs and liquidated damages. The court found that ‘none of the amendments mention section 198-c’s bar on claims for wage supplements by executives, or alter the definition of wage supplements to exclude severance pay.’”
Holding: The Appellate Division, First Department reversed, explaining that in 2021, “the Legislature enacted the No Wage Theft Loophole Act. The Act amended the Labor Law to provide that ‘there is no exception to liability’ under sections 193 and 198 ‘for the unauthorized failure to pay wages, benefits or wage supplements.’ The purpose of the Act was to clarify ‘that Article 6 of New York’s Labor Law completely and without exception prohibits lack of distribution of earned wages’ . . . the Legislature was emphatic in its intention ‘to clarify for the courts once and for all that wage theft remains completely and without exception in violation of statute and all employees are entitled to full wages, benefits and wage supplements earned.’”
Contrary to Supreme Court’s holding, the Court held, “section 198-c’s criminal liability exception” for executives did not shelter defendant from civil liability under sections 193 and 198. “”If, as defendant claims, executives are not employees in the first instance, these two unambiguous exclusions would be wholly superfluous; there would be no need to eliminate executives from the enumerated subcategories of employees if they were not within the ambit of the general definition of ‘employee’ in subdivision (2) of section 190. In addition, under the interpretation of ‘employee’ proposed by defendant, Labor Law § 194 would not prohibit employers from paying similarly situated executives at different rates of compensation solely on account of their gender—an absurd proposition that the Legislature surely did not intend.
Sections 193 and 198 do not ‘expressly’ exclude executives from the definition of employees. Thus, ‘all employees’ under section 198 means just that — all.” Because plaintiff was not precluded from seeking civil liability against defendant, merely because he was an executive, Supreme Court erroneously dismissed his claim.
Appellate Division, Second Department
Laurelton Estates, LLC v Prince, 2025 NY Slip Op 05226 (2d Dept Oct. 1, 2025)
Real Property Law, Partition, Uniform Partition of Heirs Property Act
Issue: When has a party negotiated in good faith to resolve a “heir property” partition action under the Uniform Partition of Heirs Property Act?
Facts: When a husband and wife divorced, they each became 50% owners of a property in Queens as tenants-in-common. When the husband passed away in 2009, the property passed to his son, who sold his interest to a third party and was then purchased by plaintiff. The wife passed away in 2016, leaving her 50% interest in the property to Anthony Jeffers and defendant. Jeffers then sold his 25% interest to the plaintiff. Plaintiff then immediately commenced a partition action seeking “a judgment directing the partition and sale of the property, allocating the proceeds from the prospective sale of the property in accordance with the respective interests of the parties, and declaring that the defendant is responsible for all liens, judgments, and charges that have been or will be levied against the property, together with damages in the amount of $100,000.”
Plaintiff moved for summary judgment, and Supreme Court declared that “Plaintiff and Defendant own the property as tenants-in-common with Plaintiff owning a seventy-five (75%) percent interest in the property and Defendant owning a twenty-five (25%) percent interest in the property and appointed a referee, among other things, to ascertain and report the rights, shares, and interests of the parties with respect to the property.” In the first referee report, the Referee determined that “defendant is liable for her use and occupancy of the property and collection of rents in the amount of . . . $2,000 per month . . . calculated from August 1, 2020, to the date of sale, which amounts shall be deducted against Defendant’s share of the ultimate proceeds, and that Plaintiff is not liable for any repair or maintenance charges inasmuch as Defendant has had full occupancy of the property.” Supreme Court confirmed the report, but required the parties to attend a mandatory settlement conference under RPAPL 993(5) before entering judgment.
The parties thereafter attended seven settlement conferences between September 2022 and May 2023, but ultimately were unable to resolve the action. In a Referee’s report following the settlement conference (the “Gordon Report”), the Referee concluded that the plaintiff “failed to negotiate in good faith as mandated by RPAPL 993(5)(e) and, therefore, recommended that the action be dismissed pursuant to RPAPL 993(5)(f). In addition to the aforementioned factual and procedural history, the Gordon Report noted that the defendant stated in an affidavit that the defendant’s mother had purchased the property in 1970, that the defendant had grown up in the property, that the defendant’s children had grown up in the property, and that the defendant’s son still lived there.” In particular, the Gordon Report noted that plaintiff’s offers failed to consider “the equitable factors that under RPAPL 993(5)(c) and (9)(a) were required to be part of the good faith negotiations during the settlement conferences. Plaintiff proceeded in this action only considering the value of the property and the alleged interest owned by each party and proceeded as if this was a regular partition action rather than an action under RPAPL 993. Plaintiff’s offer does not take into account the equitable factors outlined in subdivision 9(a), which favor the defendant, including the defendant’s sentimental value in the property, the harm that it might cause if she were caused to lose the property, and the degree to which the defendant has contributed to expenses associated with the maintenance and upkeep of the property, and were not considered in the negotiations by the plaintiff.”
After plaintiff moved to reject the Gordon report and defendant cross-moved to confirm it, Supreme Court held that under the totality of the circumstances, “the plaintiff failed to negotiate in good faith as mandated by RPAPL 993(5)(e).”
Holding: The Appellate Division, Second Department affirmed, explaining that “a party who jointly owns property with another may seek physical partition of the property or partition and sale when he or she no longer wishes to jointly use or own the property. However, a certain class of partition actions involving what has been classified as ‘heirs property’ was identified by the New York State Legislature as warranting certain protections and procedures that must be followed in those matters by the courts to ward off deed-theft and equity-stripping schemes, resulting in the enactment of the UPHPA under RPAPL 993.”
“Following the commencement of a partition action involving ‘heirs property,’ RPAPL 993(5)(a) mandates that the matter shall proceed to a settlement conference, for the purpose of holding settlement discussions, pertaining to the relative rights and obligations of the parties with respect to the subject property. At any conference held pursuant to this section, the plaintiffs and the defendants shall appear in person or by counsel, and each party’s representative at the conference shall be fully authorized to dispose of the entirety or any portion of the case . . . RPAPL 993(5)(e) further requires that both the plaintiff and defendant shall negotiate in good faith during the UPHPA mandated settlement conferences to reach a mutually agreeable resolution. Notably, ‘good faith’ is not defined in the statute.”
To determine whether a party negotiated in “good faith,” the Court held it was appropriate to look to the equitable factors in section 993(9), including whether the offers made considered: “”(iii) evidence of the collective duration of ownership or possession of the property by a co-tenant and one or more predecessors in title or predecessors in possession to the co-tenant who are or were relatives of the co-tenant or each other; (iv) a co-tenant’s sentimental attachment to the property, including any attachment arising because the property has ancestral or other unique or special value to the co-tenant; (v) the lawful use being made of the property by a resident or other co-tenant and the degree to which any such co-tenant would be harmed if the co-tenant could not continue the same use of the property; (vi) the degree to which the co-tenants have contributed their pro rata share of the property taxes, insurance, and other expenses associated with maintaining ownership of the property or have contributed to the physical improvement, maintenance, or upkeep of the property; (vii) the price, terms and conditions of the acquisition of the co-tenant’s interest in the property . . . ; and
(viii) any other relevant factor.”
Examining these factors, the Court held, “the plaintiff’s arguments concerning the reasonableness of its final settlement offers demonstrate the plaintiff’s lack of good faith in the settlement conference process . . . at no point did the plaintiff indicate that it considered the equitable factors set forth in RPAPL 993(9)(a) in making its final settlement offers. Importantly, as the defendant contends, the equitable factors set forth in RPAPL 993(9)(a) strongly favored her position that she was primarily interested in reaching an agreement that would allow her to maintain her ownership interest in the property. As the Gordon Report found, the defendant’s mother had purchased the property in 1970, approximately 50 years before the plaintiff acquired its interest in the property and commenced this action. Moreover, the defendant had grown up in the property, her children had grown up there, and her son still lived there. Additionally, the plaintiff, who is not a relative of either person from whom it purchased its 75% interest in the property, allegedly purchased that interest for $136,000. Despite purchasing its interest in the property for approximately one quarter of the appraised value of that interest of $521,250, the plaintiff made a final offer to sell its interest in the property for $500,000, which would afford the plaintiff a significant profit even accounting for any award of use and occupancy. Thus, as determined in the Gordon Report, the record substantially supports the conclusion that the plaintiff’s offers did not adequately account for the price, terms and conditions of the acquisition of the plaintiff’s share of the property.” Therefore, the Court held, Supreme Court properly dismissed the partition action.
Appellate Division, Third Department
O’Brien v Sagbolt LLC, 2025 NY Slip Op 05280 (3d Dept Oct. 2, 2025)
Civil Procedure, Class Action, Unclaimed Funds
Issue: Did Supreme Court abuse its discretion in directing the unclaimed settlement funds be redistributed to authorized class members, rather than returned to defendants?
Facts: In 2018, plaintiffs filed a class action alleging violations of the Labor Law for unpaid tips since 2012, on behalf of all hourly waitstaff employees who worked catered events at The Sagamore, a resort and hotel on Lake George. The parties eventually settled and defendants agreed “’to make a total financial obligation’ of $1.2 million toward class counsel’s fees and costs, service payments to the named plaintiffs, expenses to the claims administrator and settlement payments to authorized class members.” Supreme Court granted preliminary approval of the settlement and, after a fair hearing, final approval.
Thereafter, the parties disputed “how to handle the unclaimed funds from uncashed checks sent to the authorized class members.” Plaintiffs moved “to enforce the settlement agreement and require defendants to pay into a settlement fund allegedly contemplated by the approved agreement, so that the claims administrator could redistribute the remaining money from uncashed checks back to the authorized class members. Defendants submitted opposition, contending that the settlement agreement did not require them to establish a settlement fund, but even if it did, they complied with the terms of the agreement by placing money into a settlement fund for the claims administrator to distribute payments to class counsel and the named plaintiffs, and then separately provided settlement checks for the claims administrator to send to authorized class members. Defendants further contended that the agreement did not provide for a redistribution, therefore any unclaimed funds should revert to them.”
Supreme Court held that “although the agreement was silent regarding how to handle the unclaimed funds, that redistribution was consistent with the terms of the agreement requiring a pro rata distribution of remaining settlement funds to the authorized class members.”
Holding: The Appellate Division, Third Department affirmed. Recognizing that “[c]lass action settlement agreements and releases are contracts to be interpreted in accordance with principles of contract law, and therefore carry a heavy presumption that a deliberately prepared and executed written instrument manifests the true intention of the parties,” the Court noted that the settlement agreement did not “specifically address how to distribute the unclaimed funds.” In light of that omission, the Court held, it was Supreme Court’s duty to use its discretionary powers in supervising class action settlements to fashion an equitable decree to distribute the unclaimed funds, “including to reallocate settlement proceeds amongst class members to ensure a more equitable allocation, or to control a distribution not provided for in an agreement. In considering a procedure for distributing unclaimed settlement funds, a court’s alternatives will generally include 1) reversion to the defendant, 2) pro rata redistribution to the class members who filed/accepted claims, 3) escheat to a government entity, or 4) a cy press or fluid distribution, usually to a charity whose goals are consistent with the underlying causes of action. In doing so, mindful of the principles of contract still interwoven in this context, courts overseeing a class action cannot rewrite a settlement agreement or impose additional terms after judicial approval, but rather must construe the agreement in accordance with the parties’ intent, gleaned from the terms of the agreement and through the lens of equity imbued within the inherent nature of class actions.”
Here, the Court held, Supreme Court properly exercised its discretion “in directing the unclaimed funds be redistributed to authorized class members. Such directive is not adding to or modifying the terms of the agreement, which expressly provided that the only entities to receive any compensation from the [gross settlement sum] were class counsel, the named plaintiffs, the claims administrator and the authorized class members; there was no provision affording return of funds to defendants. The other terms of the agreement provided that the authorized class members would receive their pro rata share of the [net settlement sum], which was defined as the remaining amount of money after deducting the awards to class counsel, the named plaintiffs and the claims administrator . . . When further considering other sections of the agreement, including that the provision for class counsel fees were based on one-third (33%) of the total amount to be paid by defendants—and not based on the total amount of claims made by class members—the underlying construction of the agreement evinces an intent for defendants to be disgorged of $1.2 million, with the exception to only receive a partial refund should Supreme Court reduce the award to class counsel or the named plaintiffs.” Because that did not occur here, the Supreme Court properly reallocated the unclaimed funds to the class members.
New York Appeals 