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THAYER v. DIAL INDUS. SALES
February 23, 2000
LEROY T. THAYER, PLAINTIFFS,
DIAL INDUSTRIAL SALES, INC., CHARLES A. MCDONNELL, FERGUS FITZGERALD AND JERROLD B. SPIEGEL, DEFENDANTS.
The opinion of the court was delivered by: William C. Conner, Senior District Judge.
Plaintiff Leroy Thayer brings this action alleging that
defendants Dial Industrial Sales, Inc. ("Dial"), Charles A.
McDonnell, Fergus Fitzgerald, and Jerrold B. Spiegel, breached
two contracts and defrauded plaintiff. Defendants Dial, McDonnell
and Spiegel ("defendants")*fn1 now move to dismiss plaintiff's
Amended Complaint (the "Complaint") pursuant to Federal Rules of
Civil Procedure 12(b)(6) and 12(f). For the reasons stated below,
defendants' motion is granted in part and denied in part.
The Complaint alleges that in or about June 1992, defendant
McDonnell approached plaintiff with the idea of forming a venture
for the sale of telescoping ladders. (Complt. ¶ 8.) Originally,
McDonnell offered plaintiff a fifty percent (50%) ownership
interest in the venture. (Id.) McDonnell also offered plaintiff
a monthly salary of $10,000, accruing from June 1992 until the
first payment in February 1993. After February 1993, plaintiff
was to be paid every month. (Id.) He was also to be paid a
bonus of sixty to one hundred percent of his annual salary.
Beginning in June 1992, plaintiff devoted his full time and
effort to the venture, which was incorporated as Dial Industrial
Sales, Inc. (Id. at ¶ 10.)
In or about July or August 1992, defendant McDonnell informed
plaintiff that defendant Fitzgerald had a fifteen percent
interest in Dial, and that McDonnell and plaintiff would each own
one half of the remaining eighty-five percent interest. (Id. at
¶ 11.) In September 1992, McDonnell informed plaintiff of a
further modification of the arrangement, specifically that
McDonnell and Fitzgerald together would control the majority of
shares in Dial, and plaintiff would be given a twenty-seven and
one-half percent (27.5%) interest in Dial. (Id. at ¶ 12.)
In February 1993, plaintiff did not receive the accrued
compensation originally proposed. (Id.) On or about April 2,
1993, plaintiff met with defendants McDonnell, Fitzgerald and
Spiegel for the purpose of finalizing stock subscription and
Employment Agreements. (Id. at ¶ 13.) At the meeting,
defendants presented plaintiff with a proposed subscription
agreement and a proposed Employment Agreement on a "take it or
leave it" basis. (Id.) Plaintiff alleges that defendants told
him that if he rejected the agreements he would be terminated
compensation. Plaintiff signed both agreements on April 2, 1993.
The subscription agreement required plaintiff to pay $10,000
for 7,500 shares of Dial. Plaintiff also was listed as Vice
President, Secretary and Director of the company. The share
ownership of other Officers and Directors was disclosed in the
subscription agreement: McDonnell owned 37,750 shares, Fitzgerald
owned 29,250 shares and Leonard E. Silverman owned 7,500 shares.
On or about April 2, 1993, plaintiff made the $10,000 payment and
7,500 shares were issued in the names of plaintiff and his wife
as joint tenants. (Id. at ¶ 14.) Plaintiff's ownership of 7,500
shares represents less than a ten percent interest in Dial.
The Employment Agreement was for a three-year term beginning
March 1, 1993 and fixed plaintiff's salary at one hundred and
twenty thousand dollars ($120,000) per year, payable no sooner
than August 1, 1993 and thereafter upon Dial's Board of
Directors' determination that the corporation had adequate cash
flow for that purpose. (Id. at ¶ 16.) The Employment Agreement
also stated that plaintiff "shall report to and be under the
direction of the Corporation's Chief Executive Officer and Board
of Directors," (Employment Agreement ¶ 1(a)), and that plaintiff
"may be entitled to a bonus in the discretion of the
Corporation's Board of Directors." (Employment Agreement ¶ 3(b).)
In reference to termination, the Employment Agreement stated in
After the first anniversary of the date hereof, the
Corporation may at any time dismiss Employee on
written notice to Employee and such notice shall be
effective fifteen (15) days after the date of the
notice. In addition to the amounts set forth in
Paragraph 5(d) hereof, the Corporation shall be
obligated to pay and the Employee shall be entitled
to receive the following severance payments:
(a) In the event that such termination occurs prior
to the second anniversary of this Agreement, the
Corporation shall pay and Employee shall be
entitled to receive three (3) months' salary as
severance payment; and
(c) Severance shall be payable in accordance with
the Corporation's normal payroll practices and
shall be subject to accrual based upon the cash
flow provisions of paragraph 3(a) of this
(d) Except for the amounts set forth in this
Paragraph 6, the Corporation shall have no further
liability or obligation to Employee.
(Employment Agreement ¶¶ 6(a), (c), (d).)
The Employment Agreement also stated that:
This Agreement represents the entire agreement
between the parties with respect to Employee's
employment with the Corporation. This Agreement may
not be modified or terminated unless in writing
signed by both parties hereto.
(Employment Agreement ¶ 9(b).)
Plaintiff received no salary or bonus for 1993 and received
approximately $45,000 in salary for 1994 and no bonus. (Complt.
¶¶ 17, 18.)
On or about January 25, 1995, defendant McDonnell notified
plaintiff orally that his employment was being terminated. A week
later, on February 1, 1995, plaintiff received written notice
that his employment was terminated, effective February 16, 1995.
(Id. at ¶ 29.) The notice was in the form of a letter from
McDonnell to plaintiff written on Dial letterhead. Subsequent to
termination, defendants have paid plaintiff $9,333.33, including
salary and severance pay. (Id. at ¶ 30.)