GTD Servs., Inc. v. Lewis, 998 N.Y.S.2d 306 (Table) (N.Y. Dist. Ct. 2014)

Todd E. Houslanger, Esq., Houslanger & Associates, PLLC, Huntington, Attorney for Plaintiff.

Franklin C. McRoberts, Esq., Farrell Fritz, P.C., Uniondale, Attorney for Defendant.

Opinion

SCOTT FAIRGRIEVE, J.

Plaintiff GTD Services, Inc. d/b/a BrightStar of North Shore Nassau County (“BrightStar”) commenced this action against Defendants Daniel Lewis, a person in his late 80's (“Lewis”) and Elizabeth Gershon, as his agent by power of attorney (“Gershon”), based upon a contract under which Plaintiff provided aides who rendered assistance to Daniel Lewis.

The Verified Complaint, dated February 15, 2013, alleges that BrightStar entered into the subject agreement (“Contract”), dated December 14, 2011, with Gershon and Lewis to provide for home health care services (Defendants' Exhibit 6).

The Contract provides that BrightStar will provide:

“Services to be provided: HHA

Paragraph 5.0 of the Contract provides for Defendants' liability in the event Defendants discharge the services of Plaintiff but separately hired the same aide referred by Plaintiff:

Hiring Process: If I choose to hire a BrightStar employee (defined as a BrightStar employee or former employee who has rendered services for me in the past 6 months) directly before I have used BrightStar services for a period of 12 months, a fee of 30% of full time (2080) hours at the employee's bill rate will apply. After 12 months, the fee is 15%. After 18 months, 12% and after 24 months, 10%.

Further, the Contract states, in Paragraph 1.0, that Defendants will pay 3% interest on all balances over 30 days including collection costs, attorney fees and court fees.

The first cause of action is for breach of contract. It is alleged that Defendants accepted home health care services from December 14, 2011, through June 15, 2012. Plaintiff seeks to recover the sum of $13,728.00 plus “interest at the near maximum allowed statutory rate of 24% per annum from June 15, 2012 (pursuant to Contract stating interest to be 3% per month), plus attorney fees and collection costs.” The second cause of action is based upon quantum meruit. The third cause of action seeks recovery for unjust enrichment.

Initially, summary judgment is proper when the proponent sets forth its entitlement by evidentiary proof in admissible form (Zuckerman v. City of New York, 49 N.Y.2d 557 [1980] ). Once a party makes a sufficient prima facie case for obtaining summary judgment, it then becomes the opponent's burden to produce proof in admissible form to show that there indeed exists a genuine triable issue of fact (McDermott v. South Farmingdale Water District, 167 A.D.2d 517, 562 N.Y.S.2d 191 [2d Dept 1990] ).

Moreover, a party opposing a motion for summary judgment must lay bare his proof to demonstrate the existence of a genuine material issue of fact (Illumalights Manufacturing, Inc. v. Neo Ray Products, Inc., 124 A.D.2d 644, 507 N.Y.S.2d 899 [2d Dept 1986] ). Only the existence of a bona fide issue raised by evidentiary facts and not one based on conclusory or irrelevant allegations will suffice to defeat a summary judgment motion (Rotuba Extruders, Inc. v. Ceppos, 46 N.Y.2d 223 [1978] ).

Defendants' Proof

In support of the motion at bar, Defendant Gershon states in her Affidavit dated April 11, 2014, that her father Defendant Lewis is 88 years old and suffers from artery disease, congestive heart failure, total blindness, hearing impairment and neurogenic bladder. He needs daily assistance with permanent in-dwelling Foley catheter care, food preparation, feeding himself, daily bathing activities, taking medications, bathroom functions, and other activities of daily living.

Gershon states that she decided to hire a nurse or home health aide to assist with her father. She contacted BrightStar to obtain assistance and believed that BrightStar was licensed as a home health care services agency. Gershon and Lewis entered into a Contract with BrightStar to provide for such services.

In January of 2012, BrightStar assigned Heather Parker to provide home health aide services to Lewis at his home in Bayside, New York for 2 hours a day, 5 days a week. BrightStar was paid $22 per hour, of which Ms. Parker received $12 and BrightStar retained $10.

On March 29, 2012, BrightStar called to inform Gershon that Ms. Parker was terminated and that another caregiver would be found for Lewis. Ms. Parker left her employment on April 4, 2012.

Lewis was without an aide because BrightStar failed to replace Ms. Parker. Gershon's sister, Melissa Meyer (a doctor) called Ms. Parker on or about April 14, 2012, to have her come back to work for Lewis. Ms. Parker returned to her duties on or about April 15, 2012. On April 29, 2012, 30 days after stating that it would find a replacement, BrightStar contacted Gershon with another aide, who was not accepted by Defendants.

On June 15, 2012, BrightStar sent a demand letter (“Letter”) claiming that Gershon and Lewis breached the Contract and demanding damages therefor. Gershon claims that BrightStar breached the Contract:

BrightStar's suggestion in its letter that my father and I cancelled our agreement with BrightStar with the intent to hire Parker directly is untrue and insulting. Parker gave BrightStar ample advance notice she was leaving BrightStar, but BrightStar failed to assign another aide to care for my father after she left. BrightStar abandoned us in our time of need. We asked BrightStar repeatedly to do precisely what we contracted with it to do—provide my father with a home health aide—but BrightStar ignored our requests for help. The only reason Lewis re-hired Parker was out of genuine desperation. If BrightStar has simply performed what it promised to do in the contract, we would never have needed to rehire Parker

(Defendant Gershon's Affidavit, ¶ 13).

Defendants also submit an Affidavit from Ms. Parker, dated April 15, 2014, in support of their motion for summary judgment. Ms. Parker states that she was hired by BrightStar in December of 2011 to provide “home health aide services to various patients and clients to whom I was referred by BrightStar.” Ms. Parker worked at Lewis' home as a home health aide. She states that the reference “HHA” in the BrightStar/Lewis Contract is a well-known acronym in the home care industry for “home health aide.”

Ms. Parker states that Lewis suffers from physical and mental disabilities, including total blindness. She provided home health aide services to Lewis for 2 hours per day, 5 days a week, which totals 10 hours per week or 520 hours on an annual basis. She was paid $12 per hour and BrightStar billed $22 per hour.

Ms. Parker states that she left her employment due to her plans to have surgery, and based upon her dissatisfaction with BrightStar for not giving her more money after she referred a new client to BrightStar.

Ms. Parker reports that she left BrightStar's employ on April 4, 2012. Ten (10) days later, she was contacted by Melissa Meyer to return to work for Lewis because BrightStar had failed to send a replacement aide.

Gershon indicates that they received the Letter (Defendants' Exhibit 9) dated June 15, 2012, from Don Nickel, CSA and owner of BrightStar, stating that $13,728.00 was owed because Defendants had hired Ms. Parker directly and discharged BrightStar:

Dear Mr. Lewis:

Thank you for your prior use of BrightStar Healthcare for your home care needs. We write to enforce the provision of your patient services agreement that requires you to pay BrightStar in the event that you hire directly or indirectly an employee of BrightStar within 6 months of that employee having provided service to you as a BrightStar employee. A copy of your signed agreement is attached hereto.

As you know, prior to April 4, 2012, BrightStar provided home care services to you via its employee Heather Parker. On April 8, 2012, BrightStar was advised that you were canceling your services with BrightStar and that the family would provide care, in lieu of BrightStar.

Since that time, we have learned, confirmed and documented that Heather Parker is still providing home care needs to you on a consistent basis. Although it may not have been intentional, the agreement that you signed with BrightStar prohibits you from hiring directly or indirectly a BrightStar Healthcare employee for the six month period following their having provided services to you as a BrightStar employee. Consistent with that agreement, under the Terms and Conditions 5.0, Hiring Process, a fee of 30 percent of the full time rate of the employee's hourly wage will be charged to you, for employment of a BrightStar worker directly.

Heather's hourly Billing rate is $22.00 per hour, at an annualized total of 2,080 hours, which equates to an annualized figure of $45,760–30 percent of this amount equals $13,728.00. Please let me know whether you would like to pay the $13,728.00 fee via one lump sum payment, or pay in two equal installments, and whether you would prefer to pay Certified Check or Credit Card.

PLEASE CALL OR SUBMIT THE PAYMENT NO LATER THAN JUNE 25, 2012.

Sincerely,

Don Nickel, CSA

Owner

Plaintiff's Proof

In opposition, Plaintiff submits the Affidavit of Don Nickel (“Nickel”), dated June 24, 2014. Nickel states that he is the CEO of GTD Services, Inc., d/b/a BrightStar of North Shore Nassau County. BrightStar is engaged in providing home companion care services which were provided to Lewis from December 14, 2011 to June 15, 2012.

Defendants move for summary judgment, in part, on the grounds that BrightStar was unlicensed at the time that it provided the services of Ms. Parker as a home health aide. BrightStar states that it only provided home companion care services and thus a license was not required. Nickel makes the following distinction between home companion and home health care services:

The Defendants erroneously contend that BrightStar has no right to recover funds owed by the Defendants pursuant to the Contract because BrightStar was an unlicensed home care services agency. During the time in question, BrightStar provided home companion care services and an agency providing such services need not be licensed. Home companion care services differ from home health care services in that the former are services that do not involve touching the client, such as housekeeping, cooking, and the like, while the latter are services that involve touching the client, such as bathing and dressing the client

(Nickel Affidavit, ¶ 8).

Nickel claims that the parties agreed that companion care services were to be provided to Lewis. The Contract dated December 14, 2011, was executed between the parties. Nickel points to the form (Plaintiff's Exhibit C) entitled Aide/Homemaker/Companion Plan of Care, dated December 14, 2011, which outlines the services to be performed. On the form, the box “Companion” is checked. Under the Perform box, the following is checked:

linen change, laundry, light cleaning, prepare meals, clean up, and med reminder

The further instructions on the form include:

Further Instructions—Low salt diet, refill reservoir in coffee maker, be sure phone is hung up, empty & refill humidifier.

Goal—home safety, fall prevention, light housekeeping, med reminders & maintain dignity & well being in client home.

Gershon supplied a list of services to be provided for Lewis by the aide:

Dan Lewis

Breakfast—protein pack

Organize things around house—eye glasses etc.

Medicine reminder

Coffee maker—refill reservoir

Humidifier filled

Low-sodium lunch—prepare chicken cutlet other lite meals

Laundry

Help with kindle use

Shopping if needed

BrightStar claims that it only provided companion care services and not home health services. They did not provide for services which involved total catheter care, daily bathing and assistance with bathroom functions. No license is needed to perform companion care services, whereas a license is required for home health care services.

Ms. Parker is a certified nursing assistant and not a certified home health aide. Ms. Parker signed the Employee Certification dated December 28, 2011, wherein she acknowledged “I understand BrightStar is a Companion Care.” She further agreed not to actively seek employment with a BrightStar customer:

I will not actively seek employment with a BrightStar customer . I further understand that accepting employment with a BrightStar customer in which I was placed on an assignment can result in monies owed to BrightStar by the customer and me up to $4,000.

Ms. Parker called BrightStar during the week of March 20, 2012, to inform that she was leaving her assignment, which became effective April 4, 2012.

BrightStar and Gershon exchanged communications about a replacement. BrightStar identified a new replacement which Gershon agreed to accept, effective April 30, 2012. However, Gershon claims that she called BrightStar and left a message on or about April 22, 2012, indicating that a local person had been retained and the replacement was no longer needed. Apparently, BrightStar didn't get the message. A private investigator hired by Plaintiff determined that Ms. Parker was working for Lewis.

As a result of the breach, BrightStar claims damages of $13,728 for violating Paragraph 5.0 of the Contract. According to Paragraph 26 of Nickel's Affidavit, the $13,728 is calculated as follows:

After discovering that Ms. Parker was now working for Ms. Gershon/Mr. Lewis privately, we sent a letter to Mr. Lewis (Exhibit “B”), explaining that he had violated Paragraph 5.0 of the Contract by hiring Ms. Parker and therefore, now owed BrightStar the sum of $13,728, equal to 30% of $45,760 ($45,760 is the annualized cost for services, calculated as follows: $22.00 per hour X 2,080 hours = $45,760).

The $13,728 is owed based upon a fee of 30% of full time annualized (2080) hours at $22.00 per hour. This amount is sought even though Ms. Parker didn't work full time; Plaintiff has no ability to determine precisely how many hours Ms. Parker worked.

Verified Complaint

BrightStar's attorney drafted the Verified Complaint (Defendants' Exhibit 1), dated February 15, 2013, wherein Plaintiff admits that it “entered into an agreement with BrightStar for home health services,” see Paragraph 5. Paragraph 6 states that “Defendant accepted home health care services from BrightStar from December 14, 2011 through June 15, 2012.” The Verified Complaint was verified by BrightStar CEO Nickel, on February 28, 2013. Also attached to the Verified Complaint is the Letter dated June 15, 2012, authored by Nickel, wherein he again refers to BrightStar as providing home care services via its employee Heather Parker. The Letter also states that Heather Parker continued to provide health services after Defendants discharged Plaintiff.

Plaintiff's attorney states that he amended the Verified Complaint by the pleading dated April 12, 2013, wherein he changed the reference from home health care to home companion home services, upon learning of his error. Plaintiff admits that it was unlicensed in 2011 and 2012 to provide home health aide services.

Issues Presented

Should summary judgment be granted to Defendants because Plaintiff was not licensed pursuant to Public Health Law Section 3602 ?

The court finds that Plaintiff was unlicensed at the time it provided the services of Ms. Parker to Defendants from December 14, 2011 through April 4, 2012, and is thus barred from any recovery.

The Contract between Plaintiff and Defendants states that the services to be provided were” “HHA”. HHA refers to home health aide. The Letter of Don Nickel (Plaintiff's owner), dated June 15, 2012, twice refers to Plaintiff providing home care services to Defendant. The Verified Complaint, dated February 15, 2013, verified by Don Nickel, CEO, states in Paragraphs 5 and 6 that Plaintiff provided home health care services.

The Amended Verified Complaint, dated April 12, 2013, is a belated attempt to avoid the consequences of Plaintiff's earlier admissions that it was providing home health services. See Rosenblatt v. Venizelos, 49 A.D.3d 519, 520, 853 N.Y.S.2d 578 (2d Dept 2008) ; Abramov v. Miral Corp., 24 A.D.3d 397, 398, 805 N.Y.S.2d 119 (2d Dept 2005), Fontana v. Fortunoff, 246 A.D.2d 626, 627, 668 N.Y.S.2d 394 (2d Dept 1998), and New Haven Props. v. Grinberg, 293 A.D.2d 386, 387, 741 N.Y.S.2d 206 (1st Dept 2002).

The failure of Plaintiff to be properly licensed causes Plaintiff to forfeit any claim for damages. See Mauceri v. Chassin, 156 Misc.2d 802, 594 N.Y.S.2d 605 (Sup Ct, Albany County 1993) ; Damian Services Corporation v. Freedom Personnel, 188 B.R. 107 (N.D.N.Y.1995).

Issue Two

Is the liquidated damages clause enforceable?

This court finds that Paragraph 5.0 of the Contract is a penalty and, therefore, not enforceable. The standard for enforcing liquidated damages clauses is:

A clause in a contract is one for liquidated damages if “the amount of actual loss is incapable or difficult of precise estimation” and the stipulated amount of damages “bears a reasonable proportion to the probable loss” (Truck Rent–A–Ctr. v. Puritan Farms 2nd, 41 N.Y.2d 420, 425 [1977] ; see BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 396 [1999] ; Vernitron Corp. v. CF 48 Assoc., 104 A.D.2d 409 [1984] ). Whether a contractual provision represents a liquidated damages provision is a question of law for the court to resolve (see United Tit. Agency, LLC v. Surfside–3 Mar. Inc., 65 A.D.3d 1134, 1135 [2090] ). Liquidated damages provisions will be upheld only if the amount fixed is a “reasonable measure of the probable actual loss in the event of a breach” (Central Irrigation Supply v. Putman Country Club Assoc., LLC, 57 A.D.3d 934, 935 [2009] ). If the amount fixed is grossly disproportionate to the amount of actual damages, then the liquidated damages provision amounts to a penalty and will not be enforced (see BDO Seidman v. Hirshberg, 93 N.Y.2d at 396, 690 N.Y.S.2d 854, 712 N.E.2d 1220 ; Truck Rent–A–Ctr. v. Puritan Farms 2nd, 41 N.Y.2d 420 [1977] ; Central Irrigation Supply v. Putman Country Club Assoc., LLC, 57 A.D.3d at 935–936, 871 N.Y.S.2d 319 )

(G3–Purves St., LLC v. Thomas Purves, 101 A.D.3d 37, 41–42, 953 N.Y.S.2d 109 [2d Dept 2012] ),

A liquidated damages clause based upon gross revenue is unenforceable. See McRoberts Protective Agency v. Lansdell Protective, 61 A.D.2d 655, 403 N.Y.S.2d 511 (1st Dept 1978), holding that it is error to base damages upon estimated gross profits rather than estimated net profits.

In the case at bar, Plaintiff seeks to recover 30% of full time (2080) hours at the annualized cost for services or $13,728. The record shows that Ms. Parker worked two hours a day for five days a week. Plaintiff billed Defendants $22 per hour, paid Ms. Parker $12 per hour, and received a net profit of $10 per hour. On an annual basis, Plaintiff's damages would equal $5,200 based upon Ms. Parker working 520 hours a year ($10 net profit per hour which Plaintiff earned times the yearly total of 520 hours). At most, Plaintiff would be entitled to its net profit, if it could provide a basis for recovery. See Weinrauch v. Kashkin, 64 A.D.2d 897, 407 N.Y.S.2d 885 (2d Dept 1978) ; Scientific Mgt. Inst. v. Mirrer, 29 A.D.2d 962, 289 N.Y.S.2d 338 (2d Dept 1968) ; and Epstein Engineering P.C. v. Cataldo, 2012 WL 4835533 (Sup Ct, N.Y. County 2012).

The court finds that Paragraph 5.0 of the Contract is unenforceable for two reasons: (1) the damages fixed are disproportionate to Plaintiff's injury, and (2) Plaintiff's actual loss is able to be calculated based upon the hours worked by Ms. Parker.

In Construction by Singletree, Inc. v. Lowe, 55 A.D.3d 861, 864, 866 N.Y.S.2d 702 (2d Dept 2008), the Court voided the liquidated damage clause because:

J.C. also established its prima facie entitlement to judgment as a matter of law in connection with Lowe's liquidated damages claim. Although the parties to an agreement may provide for the payment of liquidated damages upon breach of the agreement, such a provision will only be upheld if the amount fixed is a reasonable measure of the probable actual loss in the event of a breach, and the actual loss suffered is difficult to determine precisely (see Truck Rent–A–Ctr. v. Puritan Farms 2nd, 41 N.Y.2d 420, 423–424 [1977] ; Willner v. Willner, 145 A.D.2d 236, 239–240 [1989] ). Here the liquidated damages clause is unenforceable under any circumstances since the damages fixed are disproportionate to the injury, actual loss is susceptible of calculation and, as admitted by Lowe in his deposition, the sole purpose of the subject provision was to improperly secure J.C.'s performance of the agreement by compulsion (see Truck Rent–A–Ctr. v. Puritan Farms 2nd, 41 N.Y.2d at 425, 393 N.Y.S.2d 365, 361 N.E.2d 1015 ; Evangelista v. Ward, 308 A.D.2d 504, 505 [2003] ; Irving Tire Co. v. Stage II Apparel Corp., 230 A.D.2d 772, 773–774 [1996] ; Willner v. Willner, 230 A.D.2d at 241, 656 N.Y.S.2d 283 ).

The above law supports this court's ruling that Paragraph 5.0 is unenforceable.

Issue Three

Is the interest charge of 3% per month found in Paragraph 1.0 valid?

This court holds that the 3% per month on all balances over 30 days violates the public policy evidenced in Penal Law Section 190.40, which makes interest charges of more than 25% per year a criminal offense and unenforceable. See Sandra's Jewel Box v. 401 Hotel, 273 A.D.2d 1, 708 N.Y.S.2d 113 (1st Dept 2000).

Conclusion

1. The Defendants are granted summary judgment because Plaintiff was not licensed as required by Public Health Law Section 3602.

2. The liquidated damages clause is unenforceable because it constitutes a penalty and Plaintiff's damages can be determined.

3. The 3% per month interest charge on all outstanding balances over 30 days violates the spirit of Penal Law Section 190.40 and is, therefore, unenforceable.

4. Given all of the foregoing, Plaintiff's claims in quantum meruit and unjust enrichment are wholly unfounded.

So Ordered: