joins material issues of fact. Neither dismissal under Rule 12(b)(6) nor summary judgment under Rule 56 is appropriate regarding this claim.
Plaintiffs allege that Daniel wrongfully permitted his sons William and Donald to conduct their own businesses in competition with Red Ball and that he diverted corporate assets and opportunities to their businesses. It is contended that Daniel was aware of his sons businesses and that he permitted his sons, while still salaried employees of Red Ball, to engage in these businesses.
The claim that Daniel "permitted" his sons to start Fortune and Supreme while still on Red Ball's payroll, with no more, fails to state a claim for which relief can be granted, since no harm came to plaintiffs by virtue of the existence of these businesses in and of themselves. Thus this element of plaintiffs' Third Claim will be dismissed.
However, the allegations of diversion of Red Ball equipment, "sweetheart" leasing of Red Ball real estate to Supreme at below-market rates and diversion of Red Ball's business opportunities require closer scrutiny. In opposition to these charges, defendants proffer a terse written agreement, executed by Daniel and John in June of 1993 (the "1993 Agreement"), which, according to defendants, anticipated and approved the diversion of Red Ball's business to Fortune and Supreme. The contractual language which purportedly addresses the conduct of Fortune and Supreme is: "Douglas, Willie and Donald will be free to do whatever they want to do, wherever and however they want to do it." At the very least it cannot be argued that such language, on its face, unequivocally indicates that both John and Daniel anticipated and agreed to the alleged diversion of profitable business opportunities, clandestine transfers of equipment and sweetheart leasing of Red Ball's real estate.
Although the mere assertion that Daniel permitted his sons to start their businesses in competition with Red Ball does not state a claim, a colorable claim is lodged by plaintiffs in their allegation that Daniel diverted equipment, real estate and business opportunities from Red Ball to Fortune and Supreme. At least one material issue of fact, regarding the parties intentions as expressed in the contract concerning Fortune and Supreme, has been joined. Neither dismissal nor summary judgment will be granted as to that element of plaintiffs' Third Claim which alleges diversion of resources and business to Fortune and Supreme.
D. Plaintiffs' Fourth and Fifth Claims - Breach of Employees' Duty of Loyalty and Conversion by Daniel William and Donald
Plaintiffs allege that Donald and William, by starting and conducting competing businesses, and Daniel by aiding and abetting them in this conduct, breached a duty of loyalty which they owed to Red Ball as employees. As with plaintiffs' Third Claim, defendants assert the June 1993 Agreement between Daniel and John as grounds for dismissal and/or summary judgment regarding these claims. As was discussed above, it cannot reasonably be maintained that the agreement unequivocally indicates, on its face, the parties' anticipation of and consent to the kinds of actions complained of in this Claim. For that reason, plaintiffs' Fourth and Fifth Claims have lodged colorable claims and have framed at least one triable issue of material fact, i.e. interpretation of the agreement's provision regarding future business endeavors of Daniel's sons. Neither dismissal nor summary judgment can be granted as to these claims.
E. Plaintiffs' Sixth Claim - Breach of Contract by Daniel
In their Sixth Claim plaintiffs assert that Daniel breached that provision of the 1990 Amendment which requires that Red Ball pay Daniel and John equal salaries and afford them equal perquisites. Plaintiffs assert that this contractual provision was breached by Daniel's diversion of Red Ball's assets. Defendants offer no specific challenge to the sufficiency of the pleading of these claims and their submissions suggest only that defendants contest whether Daniel did, in fact, divert Red Ball's resources, either to his property in West Milford, or to his sons businesses. Given that this disputed question is both material, and inherently a factual question, neither dismissal nor summary judgment will be granted.
F. Plaintiffs' Seventh and Eighth Claims - Payment for Goods and Services and Repayment of Alleged Loans
These claims are the subject not only of defendants' motions for dismissal and summary judgment, but of the later-filed motions by plaintiffs for summary judgment in their favor. As with Claim Six, defendants offer no specific challenge to the sufficiency of the pleading of these claims, thus dismissal pursuant to Rule 12(b)(6) will not be considered.
Plaintiffs assert in their Seventh Claim that defendants Fortune and Supreme are indebted to Red Ball for goods and services rendered to them. Defendants counter with factual assertions contrary to those of plaintiffs, accompanied by documentary evidence. The actual amount, if any, owed by Fortune or Supreme to Red Ball is a factual issue, and summary judgment will not be granted. Regarding Claim Eight, the parties competing assertions as to the historical meaning of "officer's loans" and "interest" accomplish nothing other than to highlight the material factual dispute presented by this claim. Therefore, both plaintiffs' and defendants' motions for summary judgment will be denied.
For all of the foregoing reasons, defendants' motion to dismiss is granted as to plaintiffs' First Claim (RICO), Second Claim (Common Law Fraud) and that element of plaintiffs' Third Claim (Breach of Fiduciary Duty) which pertains to Daniels alleged "permitting" or "allowing" his sons to commence and conduct the businesses of Sunset, Fortune and Supreme. In the prospective interest of clarity, it may need be said that the element of plaintiffs' Third Claim which pertains to the alleged diversion of resources and business to Fortune and Supreme is not dismissed, nor is summary judgment granted regarding that element of the Third Claim. Defendants' motion to dismiss is denied with regard to all of plaintiffs' other claims. Defendants' motions for summary judgment are denied. Plaintiffs' motions for summary judgment regarding their Seventh and Eighth Claims are also denied. Plaintiffs are granted leave to replead those claims which have been dismissed.
It is so ordered.
New York, N. Y.
January 17, 1995
ROBERT W. SWEET