The opinion of the court was delivered by: DUFFY
Plaintiff, Bernard Press, has brought this action to redress certain grievances which he claims resulted from the sale of stock in defendant White Lamps, Inc. (hereinafter referred to as "White"), by its parent corporation defendant TDA Industries, Inc., (hereinafter referred to as "TDA"), to defendant Marvalan Industries, Inc. Also named as defendants are Douglas Fields, Frederick Friedman and Mercia Danas, officers of TDA, as well as Andrew Greystoke, Alexander Kogan, Jr., and Marvin Gersten, officers and directors of Marvalan. The complaint charges that certain of the defendants breached their employment contract with Press and that the aforementioned sale of stock was accomplished pursuant to the false representations of defendants upon which plaintiff relied to his detriment.
Defendants Fields, Friedman, Danas, TDA and Gersten have all moved, pursuant to Fed.R.Civ.P. 41(b), to dismiss the complaint for plaintiff's failure to comply with my order directing that a proposed pretrial order be filed by October 11, 1978. Plaintiff finally filed the proposed order on December 19, 1978, three weeks after the matter had been set down for trial. The same defendants have also moved, pursuant to Fed.R.Civ.P. 56, for summary judgment on the ground that the material facts are not in dispute and they are entitled to judgment as a matter of law.
Defendants Fields, Friedman, Danas and TDA filed their motion to dismiss two weeks before the scheduled trial date, with a return date of November 21, 1978, five days before trial. On November 19, 1978 the same defendants filed a massive summary judgment motion. The effect of this motion was to postpone the trial date to give plaintiff an opportunity to respond and to give the Court an opportunity to review the papers.
This case is not presented in a simple factual posture: Defendants' statement of facts is made in a seventy page affidavit with thirty-eight numbered exhibits annexed thereto. In addition, there are many references to deposition testimony which is voluminous. Thus, I do not doubt that the task of preparing a proposed pretrial order was not an easy one. This fact, however, does not excuse plaintiff's failure to ask permission to delay filing his pretrial statement. The Court and litigants alike are inconvenienced, and may even be prejudiced, when time restrictions are ignored. However, I am not inclined to dismiss this case based upon delay alone. Much effort has gone into the preparation of the matter which was filed three years ago. Moreover, defendants' own motion for summary judgment has resulted in an adjournment of the trial. Finally, to the extent that plaintiff's belated pretrial statement raises issues that are not set out in the complaint, defendants have been given ample opportunity to respond thereto. Thus, they have not been severely prejudiced by the delay. In sum, while I do not in anyway condone plaintiff's dilatory tactics, I do not believe the drastic punitive measure sought by defendants is appropriate.
Turning to the motion for summary judgment, the following facts are before me. On August 29, 1974, plaintiff purchased from TDA 1.915 shares of White stock (representing 19.15% of its shares), for which he agreed to pay $ 100,000. $ 75,000 was paid in cash and the remaining amount was represented by a non-negotiable promissory note payable in twelve months bearing interest at 9.4% per annum. As collateral for the note, plaintiff pledged his White shares, as well as 59,000 shares of TDA common stock owned by him. Interest payments were to be tendered on the first of each month, but not later than the tenth, at TDA's office. The Purchase Agreement also provided that plaintiff was to have (i) the right of first refusal to purchase TDA's shares of White upon the same terms and conditions as offered to TDA by any purchaser;
and (ii) the right to require White Lamps to repurchase plaintiff's White Lamps shares if TDA sold all of the remaining shares. (This was known as his right to "put" his shares to White)
Plaintiff was elected president and a director of White and entered into an employment agreement with White for a period of 37 months. The salary specified in the Employment Agreement itself was $ 36,000 for the first year.
Plaintiff claims that this amount was later changed to reflect a salary of $ 41,600. This is a point of dispute between the parties. All concede, however, that the employment agreement was to terminate in the event of default on the aforementioned promissory note.
The agreement also provided that plaintiff would be reimbursed for his commuting and/or moving expenses until such time as he relocated to the New York metropolitan area (plaintiff was and is a Massachusetts resident).
Prior to the closing of this arrangement, plaintiff attempted to secure a salary increase. According to Press, defendant Friedman agreed to a $ 41,600 salary for the life of the contract with the proviso that in the first year Press would return to TDA $ 5,200 out of any profits he realized as a result of his ownership of the White Lamp stock. Friedman denies agreeing to this change. A letter was prepared reflecting an amendment to the agreement very similar to that understood by plaintiff but providing for the $ 41,600 salary in the second year of the contract, rather than the first. The letter was prepared twice: the first
draft contained an obvious error with respect to the repayment of dividend moneys. Plaintiff claims that when this error was corrected
the other error regarding the date of his salary increase was left unchanged in an attempt to defraud him of his rightful salary. At any rate, Press instructed White's bookkeeper to pay his salary at the $ 41,600 rate and he continued to receive this amount until December of 1974.
In the Fall of 1974, defendants Greystoke and Kogan apparently became interested in purchasing White. On December 6, 1974 Greystoke and Kogan together with defendant Gersten met to discuss the proposed sale of TDA's shares in White. The plan was to use assets of White to finance the acquisition so that very little of their own cash would be required. The sum of $ 200,000 was to be borrowed from Ambassador Factors secured by White's assets and Greystoke and Kogan's personal guarantees. Defendants also hoped to reach an agreement with Press to avoid the financial strain that would occur if he exercised his put. Additionally, they sought to have Press waive his right of first refusal so that the transaction could close without having to wait the thirty days he would ordinarily have to exercise it.
In order to avoid the possibility that Press would exercise his put, Marvalan, the corporation formed by Greystoke, Kogan and Gersten, offered to buy less than all the outstanding shares of White, that is 8.075 instead of 8.085. Press was notified of the proposed sale by letter dated December 6, 1974. Plaintiff claims that the terms of this sale were inequitable because, among other reasons, they provided for the financing of the purchase price by the use of White's own assets in which plaintiff had a 20% interest.
On December 9th, the Marvalan group met with Press and defendant Fields at TDA's office. Press was handed a copy of the December 6th letter as well as a supplementary letter dated December 9th which provided that the purchase price of White shares would be reduced if the book value of White went down as of the closing. Press had apparently been attempting to arrange the financing necessary to exercise his right of refusal and, by meeting with him, defendants were seeking to head off this effort.
On December 16, 1974, Press, Kogan and Gersten agreed to a plan whereby Press would waive his right of first refusal and contribute his White stock to Marvalan in exchange for 25% of Marvalan stock, $ 5,000 and an advantageous employment agreement. Marvalan also apparently agreed to provide an attorney for him and pay all his legal expenses.
None of the drafts memorializing this agreement were ever signed. Apparently, the scheduled closing date was adjourned until January 2, 1975. However, on that date Marvalan declined to execute the proposed agreement. Greystoke, speaking on behalf of the corporation, advised Press that he had learned of Press' salary dispute with TDA and of the fact that Press had refused to follow defendant Friedman's instructions to roll back the salary Press had ordered the bookkeeper to pay him. Friedman ordered this action taken in December, 1974 when he first learned of Press' alleged excesses. Greystoke also expressed his belief that because Press' right of first refusal had almost run, it was of little value. Greystoke did state, however, that he would consider entering into an agreement if, after investigating the charges, it appeared that Press had not acted dishonestly.
Thereafter Press departed for a trade show in Chicago. Before going, however, he furnished his lawyer with a power of attorney and general release, dated January 2, 1975, to close the transaction as he understood it. According to Press his agreement with Marvalan was settled and he executed the release in reliance upon Marvalan's assurance that it would, in fact, be consummated. Press asserts that he instructed his attorney to exchange releases with TDA only if this condition was met.
On January 6, the closing date of the TDA/Marvalan transaction, Press was telephoned in Chicago. Press was advised that the purchase price of the White shares had been reduced to $ 150,000 to be paid at the closing and $ 50,000 payable over the next four months. It is also asserted by defendants that they told him all the White shares were being sold. Press, however, has claimed that the communication was confused and that his understanding of what was to transpire was at odds with defendants' intent. For instance, defendants requested that he execute a new release specifically relinquishing his right of first refusal and right to put his stocks to White for repurchase. They also asked him to release them by telegram, which he did.
However, according to Press, he understood that the release was to be placed in escrow and only relinquished at the conclusion of his negotiations with Marvalan.
Because they did not yet have a second general release from Press, defendants decided to close the TDA/Marvalan deal in escrow. A two week escrow ...