## Facts

- Watson Enterprises, Inc. (WEI) operated a Mercedes-Benz dealership; Arthur Watson was the majority shareholder, and Ronald Pecunies owned 25% and served as COO.
- Emel Dilek began working for WEI in 2005 under an at-will arrangement; she later received promotions, raises, and certifications.
- Dilek and Pecunies were in a romantic relationship.
- In 2009, Dilek and Pecunies executed a written four-year employment agreement providing continued employment through 2013, specified compensation and benefits, and cause-based limits on early termination; Pecunies signed for WEI as COO.
- Pecunies died in May 2010; WEI terminated Dilek in August 2010.
- Dilek sued for breach of contract and breach of the implied covenant of good faith and fair dealing.
- WEI counterclaimed for unjust enrichment and civil theft under Connecticut law, alleging Dilek received compensation and benefits for little work and used company resources for personal expenses.
- The parties cross-moved for summary judgment, and Dilek sought Rule 11 sanctions based on WEI’s counterclaims.

## Issues

1. Whether the four-year employment agreement bound WEI, including whether Pecunies had actual or apparent authority to execute it for WEI and whether the transaction was outside ordinary corporate practice.
2. Whether the employment agreement lacked consideration and was unenforceable on that ground.
3. Whether WEI could recover for unjust enrichment for compensation and benefits paid to Dilek despite alleged knowledge and voluntary payment.
4. Whether WEI produced evidence sufficient to support a Connecticut civil theft claim, including felonious intent.
5. Whether WEI’s counterclaims warranted Rule 11 sanctions.

## Decision

- WEI’s motion for summary judgment on Dilek’s claims was denied due to genuine disputes about authority and related agency facts.
- Dilek’s summary judgment motion was granted on consideration; the agreement was supported by adequate consideration as a matter of law.
- Dilek’s summary judgment motion was granted on WEI’s unjust enrichment counterclaim; it failed as a matter of law.
- Dilek’s summary judgment motion was granted on WEI’s civil theft counterclaim; WEI failed to show felonious intent.
- Dilek’s Rule 11 sanctions motion was denied; the counterclaims were not sanctionably frivolous.
- The contract claim otherwise proceeded because fact issues remained as to authority, breach, and damages.

## Legal Principles

- A fixed-term employment agreement is not inherently “extraordinary or unusual”; when a transaction appears within ordinary business practice, the corporation may bear the burden to show the officer lacked authority.
- Actual and apparent authority of a corporate officer to bind the corporation is typically fact-dependent and may require trial where evidence conflicts regarding role, limitations, past practices, and reasonable reliance.
- Mutual obligations in a fixed-term employment contract (employer’s promise to employ and pay; employee’s promise to work for the term and forego at-will exit) constitute sufficient consideration.
- Unjust enrichment is generally unavailable where the plaintiff knowingly and voluntarily conferred the alleged benefit and contractual or internal controls existed to stop payments.
- Connecticut civil theft requires evidence comparable to larceny, including felonious intent; tolerated or management-known expenditures, without proof of intent to steal, are insufficient.
- Rule 11 sanctions require more than failure on the merits; unsuccessful claims are not sanctionable absent a showing of legal or factual baselessness.

## Conclusion

The court held that a jury had to resolve whether the COO had authority to bind the corporation to the four-year employment agreement, but it rejected the employer’s lack-of-consideration argument and dismissed the unjust enrichment and civil theft counterclaims on summary judgment, while declining to impose Rule 11 sanctions.


Dilek v. Watson Enters., Inc., 885 F. Supp. 2d 632 (S.D.N.Y. 2012)