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Case 1:09-cv-09592-PAE-JLC Document 88 Filed 10/12/11 Page 1 of 3


DONALD L. SAPIR TEL: (914) 328-0366
WILLIAM D. FRUMKIN* FAX: (914) 682-9128



Admitted in N.Y. & CT
Admitted in N.Y. & CA
Admitted in N.Y. & N.J.
October 12, 2011

Via ECF and First Class Mail

Hon. Paul A. Engelmayer

United States District Judge
Southern District of New York
500 Pearl Street, Room 670
New York, New York 10007-1312

Re: Richard Malinowski v. Wall Street Source, et al.

Case No. 09-cv-09592
Our File No. 09-8083

Dear Judge Engelmayer:

We represent Defendants and Counterclaim-Plaintiffs Wall Street Source, Inc. (“WSS”) and
John Albert (collectively, “Defendants”) in the above-referenced matter. We submit this letter brief
in response to Plaintiff Richard Malinowski’s motion in limine to preclude evidence at trial of
Plaintiff’s post-termination job search and earnings. In his motion, Plaintiff argues that his post-
termination wages and earnings are irrelevant to this breach of contract claim because his
employment agreement contains a de facto “liquidated damages” clause in the event of a termination
without cause. According to Plaintiff, he was terminated without cause, entitled to a set severance
payment, and therefore, this liquidated damages clause renders his post-termination earnings

Plaintiff’s motion presents a limited view of this case and the issues to be tried. Plaintiff’s
motion presumes that the upcoming trial concerns only his breach of contract severance claim. It
does not. First, in addition to severance, Plaintiff’s Complaint seeks wages (including his annual
bonuses) earned but unpaid at the time of termination, which are payable under his Employment
Agreement even if he was terminated with cause. (See Complaint at ¶¶20-25, 28-31.) As Plaintiff
Case 1:09-cv-09592-PAE-JLC Document 88 Filed 10/12/11 Page 2 of 3

Hon. Paul A. Engelmayer -2- October 12, 2011

was a disloyal and faithless servant during his employment with WSS, he is not entitled to any
compensation allegedly owed under his Employment Agreement. See Phansalkar v. Andersen
Weinroth & Co., L.P., 344 F.3d 184, 207-08 (2d Cir. 2003) (holding that a disloyal employee was
to forfeit all salary earned during the period of his disloyalty); Maritime Fish Prods. v World-Wide
Fish Prods., 100 A.D.2d 81, 87-88 (1st Dep’t 1984), appeal dismissed, 63 N.Y.2d 675 (1984) (“An
employee is prohibited from acting in any manner inconsistent with his agency or trust and is at all
times bound to exercise the utmost good faith and loyalty in the performance of his duties. Not only
must the employee or agent account to his principal for secret profits but he also forfeits his right
to compensation for services rendered by him if he proves disloyal.”) (citations omitted).
Nevertheless, should Plaintiff prevail on this claim, then his “liquidated damages” argument is
inapplicable and his post-termination job search and earnings are relevant to the issue of mitigation.
See Sudul v. Computer Outsourcing Svcs., Inc., 917 F. Supp. 1033, 1048 (S.D.N.Y. 1996) (employee
has a duty to mitigate back pay damages stemming from breach of an employment contract); Cornell
v. T.V. Dev. Corp., 17 N.Y.2d 69, 74 (1966) (same);Woodford v. Benedict Community Health Ctr.,
188 A.D.2d 863, 864 (3d Dep't 1992) (same).

Next, Defendant has asserted counterclaims for breach of contract and breach of the duty of
loyalty in connection with Plaintiff’s anti-competitive conduct against WSS -- using WSS
equipment, employees and resources for the benefit of a competitive company run by Plaintiff.
Plaintiff’s post-termination wages and earnings are relevant to these claims. See, e.g., Gomez v.
Bricknell, 302 A.D.2d 107, 113-14 (2d Dep’t 2002) (damages for breach of duty of loyalty include
disgorgement of profits earned by disloyal employee who converted a corporate opportunity); Sager
Spuck Statewide Supply Co. v. Meyer, 298 A.D.2d 794, 797 (3d Dep’t 2002) (damages for breach
of contract in a non-compete context may include loss of opportunity for additional sales from
customer solicited by former employee). For example, Plaintiff may have finally reaped the rewards
of his ongoing disloyalty following the termination of his employment; he may have used the
converted proprietary information at a new employer to gain market share and earn profits and
wages that he would not have absent his conversion; or he may have engaged in self help by earning
wages following the termination of his employment from a competing entity he set up during his
period of disloyalty. Either way, Plaintiff’s post-termination earnings bear on a number of issues
in this case, and therefore, are relevant and should be admissible at trial.

Finally, we note that Plaintiff’s arguments regarding relevance were already rejected by
Magistrate Judge Cott who found that the information sought in discovery was relevant and
discoverable. (See Docket No. 37, Memorandum and Order dated September 29, 2010, at p. 3)
While Judge Cott noted that this evidence may not be admissible at trial, as set forth above, the
relevance of Plaintiff’s earnings do not end with the termination of his employment and should be
admissible. Plus, as a practical matter, preclusion of this evidence is unnecessary. Given that this
is a bench trial, we are confident that the Court can hear the evidence of post-termination
wages/earnings and make any necessary determinations as to how much weight, if any, to assign that
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Hon. Paul A. Engelmayer -3- October 12, 2011

For these reasons, Plaintiff’s motion in limine should be denied.

Thank you for you consideration of this submission.

Respectfully submitted,


William D. Frumkin (WF 2173)


cc: Raymond Nardo, Esq. (via e-mail)

Mr. John Albert (via e-mail)

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