SCRANTON – A New York-based mattress company and its owner are looking to dismiss litigation from the company’s former President and CEO, which alleged that he was unlawfully terminated from his role during an approved leave of absence for medical reasons.
William Spudis Jr. of Duryea first filed suit in the Lackawanna County Court of Common Pleas on April 18 versus Metro Mattress Corporation of Syracuse, N.Y. and its Chairman and Owner David Adler, of Lantana, Fla.
“On or about Oct. 5, 2021, plaintiff Spudis and defendant Metro Mattress entered into the Employment Agreement. The Employment Agreement was signed by plaintiff Spudis and defendant Adler in his capacity as Chairman/Owner of defendant Metro Mattress. The Employment Agreement was signed on Oct. 5, 2021, but retroactive to Jan. 1, 2021. The Employment Agreement provided for a five-year term from Jan. 1, 2021 through Dec. 31, 2025. Pursuant to the Employment Agreement, plaintiff Spudis was employed as defendant Metro Mattress’s President and CEO and was also to perform executive services for affiliate company, Pennsylvania Bedding, Inc. The Employment Agreement provided that ‘all final hiring decisions for company, including as to members of the owner’s family, shall be made by [plaintiff Spudis],” the suit stated.
“The Employment Agreement provided that plaintiff Spudis would receive compensation for his services via (1) A base annual salary which increased on an annual basis in connection with the Consumer Price Index, (2) additional compensation for services provided to Pennsylvania Bedding, Inc., (3) profitability bonus, (4) discretionary bonus, (5) payment and reimbursement of business related expenses, (6) life insurance, (7) student loan repayment and (8) employee benefits and benefit plans, including health insurance, retirement savings plan, disability plan and paid time off. During the course of his employment, defendant Metro Mattress provided plaintiff Spudis with additional benefits, including the payment of: (i) Plaintiff’s housing costs in New York and Connecticut; (ii) plaintiff’s Mercedes Benz automobile lease; (iii) plaintiff’s Glenmaura National Golf Club membership; and (iv) plaintiff’s Jeep automobile lease. Pursuant to the Employment Agreement: Company may at any time terminate Executive’s employment hereunder ‘for cause,’ as defined below, by delivering written notice to Executive of his termination, effective upon delivery.”
The suit added the Employment Agreement defines ‘for cause’ as the occurrence of any of the following: (i) Executive’s failure to perform the duties of his position in a satisfactory manner, after company provides Executive with 30 days’ notice and opportunity to cure; (ii) Executive’s intentional acts of dishonesty, such as fraud, misappropriation or embezzlement; (iii) Executive’s conviction of a felony involving more turpitude; (iv) Executive’s illegal use of drugs or excessive use of alcohol in the workplace; (v) Executive’s intentional and willful misconduct that may subject the company to criminal or civil liability; (vi) Executive's breach of his duty of loyalty, including the diversion or usurpation of corporate opportunities properly belonging to the company; (vii) Executive’s willful disregarding company policies and procedures; (viii) Executive’s breach of any of the material terms of this agreement; and/or (ix) Executive’s insubordination or deliberate refusal to follow the reasonable instructions of the owner of company.
The Employment Agreement also provided that “if plaintiff Spudis were terminated without cause, he would be eligible to receive severance of two years of his base salary as well as continuation of health insurance, only in exchange for a separation agreement and release provided by defendant Metro Mattress.”
“On Feb. 27, 2024, defendant Adler contacted plaintiff Spudis to inform him that another individual was being hired by defendant Metro Mattress and that the new employee would be placed in a position above plaintiff Spudis. The news caused plaintiff significant mental distress, particularly due to the fact that the Employment Agreement provided that all final hiring decisions for defendant Metro Mattress ‘shall be made by [plaintiff Spudis]’. Consequently, defendant Adler did not have the authority to hire any employee. Due to the significant mental distress he was under as a result of defendant Metro Mattress's hiring of an individual in a position above plaintiff Spudis, on Feb. 28, 2024, plaintiff Spudis contacted defendant Metro Mattress’s Human Resources Department to request sick time from Feb. 29, 2024 through March 5, 2024. Plaintiff Spudis was at all times medically excused from work by his personal physician, who issued such a note on March 1, 2024. Plaintiff Spudis’s request for medical leave was granted on Feb. 28, 2024. However, the Human Resources Department did not advise plaintiff Spudis of his right to take FMLA leave at that time,” the suit said.
“On Feb. 29, 2024, while on approved medical leave, plaintiff Spudis received an email from defendant Adler stating that plaintiff Spudis was no longer employed as the President and CEO of defendant Metro Mattress. On March 4, 2024, plaintiff Spudis was locked out of his company email. He reached out to Human Resources regarding his employment status and was advised that he was given the opportunity to continue employment ‘in a different capacity’. He was told on March 5, 2024 to notify the company of his decision by the close of business the same day. Plaintiff Spudis did not respond. Following his return from a previously planned and scheduled family vacation, on March 25, 2024, plaintiff Spudis notified Human Resources that he continued to require sick time. On March 27, 2024, plaintiff Spudis was informed by Human Resources that defendant Metro Mattress was terminating certain of his benefits as President and CEO and cancelling his corporate credit cards. Plaintiff Spudis asked for the status of his employment and received no response. On March 28, 2024, plaintiff Spudis again asked for the status of his employment and received no response.”
The suit further provided that “on March 29, 2024, plaintiff Spudis was – post termination – advised of his rights pursuant to the FMLA. He was also advised on that date that as Chief Executive Officer, he was a key employee and could not be reinstated to his position as CEO due to the fact that it would result in a substantial and grievous economic injury to the company operations because it could not employ two CEO’s” – and at the same time, “plaintiff Spudis was threatened that if he did not abandon his FMLA leave, he would be terminated from his employment (despite the fact that he had already been terminated as President and CEO on Feb. 29, 2024).”
“Defendant Metro Mattress only advised plaintiff Spudis of his FMLA rights to cover up the fact that it had already terminated him following his advising the company that he needed medical leave – leave that ultimately qualified for FMLA leave. Likewise, Metro Mattress advised plaintiff Spudis that it was designating him as a key employee under the FMLA, and it was going to deny reinstatement because maintaining two CEO’s would result in a substantial and grievous economic injury to its operations. It advised plaintiff Spudis that if he decided to forego his FMLA leave and return to work, he would be immediately restored to work and then terminated. The foregoing was all inconsistent with Metro Mattress’s prior termination of plaintiff Spudis as President and CEO on Feb. 29, 2024. At the time of plaintiff Spudis’s termination as President and CEO on Feb. 29, 2024, 22 months remained on his employment term pursuant to the Employment Agreement,” the suit stated.
“Plaintiff Spudis’s employment as defendant Metro Mattress’s President and CEO was terminated for reasons other than for cause as that term is defined in the Employment Agreement. Plaintiff Spudis’s termination occurred during the employment period set forth in the Employment Agreement. Defendant Metro Mattress failed to pay to plaintiff Spudis or on his behalf, fringe benefits to which he was entitled pursuant to his employment.”
UPDATE
The defendants filed to remove the action to the U.S. District Court for the Middle District of Pennsylvania on May 17, citing the federal case law involved, diversity of citizenship between each of the parties, the amount of damages in question and propriety of service upon one of the defendant parties.
This was followed by a motion to dismiss from the defendants on May 24.
“Although plaintiff’s employment was not terminated until May 10, 2024, he filed the instant complaint on April 18, 2024 alleging that he was terminated ‘as President and CEO on Feb. 29, 2024’ even though he admits he was previously informed of this decision on Feb. 27, 2024. Plaintiff alleges that his ‘termination as President and CEO’ was ‘for reasons other than for cause.’ Thus, the basis of Count I of the complaint is that the Employment Agreement in Section 7, entitled ‘Severance,’ allegedly provides plaintiff with two years of Base Annual Salary as severance if his ‘employment is terminated by company without cause’. Thus, the section is only triggered when plaintiff’s employment is terminated, not when a label is changed, or he is assigned to a new position within the company. Count I fails as matter of law,” the dismissal motion stated.
“Plaintiff’s complaint does not allege that defendants terminated plaintiff’s employment. Rather, plaintiff alleges that defendant(s) removed him ‘as the President and CEO’. Indeed, plaintiff is well-aware that he was paid his normal salary into May 2024 when he was terminated with and for cause for and without limitation, failing to report to work on or then for week after May 6, 2024 after an extended leave, which itself only began after an extended international vacation ended, among other for cause reasons and justifications. Plaintiff concedes that he remained employed by defendants even after he was removed ‘as President and CEO’ on Feb. 27, 2024. Indeed, plaintiff avers: Following his return from a previous planned and scheduled family vacation, on March 25, 2024, plaintiff Spudis notified Human Resources that he continued to require sick time.’ In other words, plaintiff is judicially estopped from claiming he was terminated from employment in February when he concedes in his complaint he was an employee through March 25, 2024 and thereafter. Thus, as a matter of law, plaintiff cannot sustain a claim based on his label changing because the relevant contractual provision is implicated only by loss of employment, without cause, which never occurred.”
The motion continued that “even if plaintiff still claimed Section 7 of the Employment Agreement applied, it requires by its terms that plaintiff provide and enter into a Separation Agreement and Release acceptable to the company and any severance to be paid is conditioned upon ‘if Executive enters into a Separation Agreement and Release.’ – but here, plaintiff has not even sent such a document – which establishes plaintiff knows the provision is inapplicable – let alone has any such a document been executed.”
“Plaintiff does also aver that Metro Mattress Corporation’s hiring of an individual ‘above plaintiff Spudis is a material breach of the Employment Agreement.’ However, Section 1 of the Employment Agreement, entitled ‘Employment: Executive’s Duties and Responsibilities – Objectives’ clearly states ‘Executive shall report to the Owner, or such other individual as the Owner may from time-to-time determine as the person to whom Executive shall report.’ As such, plaintiff’s averments fail to state a claim for breach of the Employment Agreement (Count I) as a matter of law. In Count II, plaintiff avers a claim under the FMLA. The basis of the claim is that ‘as set forth fully above, defendants wrongly terminated plaintiff Spudis after plaintiff Spudis advised of his need to take medical leave. Defendant did this to prevent and/or discourage plaintiff Spudis from taking medical leave to which he was lawfully entitled.’ This is based on an alleged email he claims to have received on Feb. 29, 2024. However, plaintiff’s own complaint states that he was informed that he was out ‘as President and CEO’ on Feb. 27, 2024, i.e., the day before he allegedly requested leave. In fact, plaintiff alleges that the very reason he sought leave at all was because he learned he was out as President and CEO on Feb. 27, 2024,” the dismissal motion continued.
“As such, plaintiff’s own complaint shows that his FMLA claim is based on learning a fact he already knew before he ever sought leave (and which was also the very reason he sought leave). This circular logic does not state a claim under the FMLA and Count II must be dismissed for this and a number of reasons. In Count III, plaintiff avers a claim under the WPCL. The basis of the claim is that plaintiff remains entitled to fringe benefits he received during his employment; namely, housing costs in New York and Connecticut, a lease for a ‘Mercedes Benz’ and a Jeep and a membership at ‘Glenmaura National Golf Club.’ However, plaintiff’s Employment Agreement – which is fully integrated – does not entitled plaintiff to any of these benefits. If plaintiff never possessed a legal or contractual right to these benefits while an employee, he has no recourse under the WPCL, and he certainly has no legal or contractual right to a continuation of such benefits when he is no longer employee. As such, Count III also fails as a matter of law for at least this reason.”
For counts of breach of contract, interference/retaliation in violation of the Family and Medical Leave Act and violation of the Pennsylvania Wage Payment and Collection Law, the plaintiff is seeking compensatory damages in an amount equal to the fringe benefits unlawfully withheld by defendants, together with interest, liquidated damages, costs, reasonable attorney’s fees and such other and further relief the Court deems just and appropriate.
The plaintiff is represented by Joseph T. Wright Jr., Danielle M. Mulcahey and Alexander J. Tulaney of Wright Reihner & Mulcahey, in Scranton.
The defendants are represented by Roger J. Harrington Jr. and Thomas B. Helbig Jr. of Elliott Greenleaf, in Blue Bell.
U.S. District Court for the Middle District of Pennsylvania case 3:24-cv-00822
Lackawanna County Court of Common Pleas case 2024-CV-02749
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com