The opinion of the court was delivered by: William C. Conner, District Judge.
Plaintiff Leroy T. Thayer brings this action against
defendants Dial Industrial Sales, Inc. ("Dial"), Charles A.
McDonnell, Fergus Fitzgerald and Jerrold B. Spiegel*fn1 for
common law fraud, detrimental reliance, quantum meruit and
unjust enrichment. On November 22 and November 24, 2001, this
Court conducted a bench trial. Pursuant to an Opinion and Order
of this Court dated February 23, 2000, plaintiffs claim for
damages is limited to the period of June 1992 through March 1,
1993 for Counts Four through Seven in the Amended Complaint.
Familiarity with that opinion is presumed. For the reasons to
follow, we enter judgment in favor of plaintiff in the amount of
$25,000. Pursuant to Fed.R.Civ.P. 52(a), we set forth below our
findings of fact and conclusions of law.
In or about May 1991, McDonnell, a citizen of the State of New
York, incorporated Dial in New York. (Trial Tr. at 265.)
McDonnell's plan was for Dial to manufacture and sell an
innovative new product he and Fitzgerald hoped to discover.
(Id. at 266-67.) McDonnell and Fitzgerald selected the name
Dial, an acronym for Fitzgerald's successful Irish company,
Dublin Industrial Auctions Limited. (Id. at 266.) McDonnell is
the President, majority shareholder and a Director of Dial.
Fitzgerald, during the relevant time period, was a Director,
Vice President and shareholder.
After evaluating and rejecting a variety of products, in or
about January 1992 Fitzgerald learned of a telescoping ladder
through associates in Ireland who were manufacturing it for sale
in Europe. (Id. at 267-68.) Fitzgerald notified McDonnell, who
flew to Ireland in April 1992 to investigate. (Id. at 268.)
After touring the factory where the ladder was being produced,
McDonnell returned to the United States with several sample
ladders and sought the opinions of former colleagues and
friends. (Id. at 269.) McDonnell also visited two testing labs
to determine whether the ladders, which he knew did not satisfy
the safety standards of the American National Standards
Institute ("ANSI"), could be modified and adapted to meet ANSI
standards. (Id. at 269-70.) At some time during this period,
McDonnell and Fitzgerald decided to commit Dial to the
manufacture and sale of the telescoping ladders.
Plaintiff, a citizen of the State of New Jersey, has a juris
doctor degree and has completed two-thirds of the credits
necessary to obtain a masters degree in business administration.
(Id. at 3-4.) From 1975 through 1977, plaintiff was employed
as a contracts manager at Western Information Systems in Mahwah,
New Jersey. (Id.) From 1977 to 1984 he worked for Diagnostic
Retrieval Services as Vice President of Contracts, Program
Management and Administration and from 1984 to April 5, 1992,
plaintiff was employed by TimePlex, Inc., ultimately as an
Administrative Vice President for Contracts and Sales
Administration. (Id. at 4-5.) While at TimePlex, plaintiff
oversaw a department consisting of five or more attorneys and
fifty word processing employees. (Id. at 5.) His department
was responsible for negotiating and reviewing sales contracts
and administration of the sales commission plans. (Id.) After
falling victim to corporate downsizing, plaintiff was provided,
in his departure agreement, with six months of outplacement
services at Drake Beam Morin ("Drake"), a company that
specializes in finding new employment for recently unemployed
executives. (Id. at 5-6.) The agreement further specified that
if plaintiff did not find permanent employment within the
initial six months, TimePlex would continue to pay for Drake's
services for up to one year. (Id. at 76.) During the relevant
time period, McDonnell was also a temporary tenant at Drake
after his former employer of 25 years, Technicon Corporation
("Technicon"), decided to downsize in April 1992.
I. The Alleged Oral Agreement
In mid-June 1992, McDonnell was introduced to plaintiff by a
former Technicon colleague. (Id. at 271-72.) Over the next few
days, plaintiff and McDonnell had several conversations during
which plaintiff learned about the telescoping ladder project.
The specific content of these conversations is hotly disputed.
Plaintiff testified that McDonnell offered plaintiff a fifty
percent (50%) equity interest in the project and a $10,000
monthly salary. (Id. at 10-11.) The initial payment was to be
made in February 1993 for all salary accrued from June 1992.
(Id. at 11.) Plaintiff was also to receive a performance-based
bonus between sixty percent (60%) and one hundred percent (100%)
of his salary as well as normal benefits. (Id.) Although there
was no specific bonus structure, plaintiff claims that there
were specific performance goals to be accomplished, such as
finalizing a licensing agreement, testing the product and
finding a manufacturer. (Id. at 147.) Plaintiff testified that
this entire agreement was established within two or three days
of his initial meeting with McDonnell. (Id. at 12.) Plaintiff
alleges that McDonnell never told plaintiff of the existence of
Dial or
that it was owned in part by Fitzgerald. (Id. at 15.)
Plaintiff argues that based on these promises he accepted the
terms of the oral agreement and began work on behalf of Dial.
Plaintiff testified that he first learned of the existence of
Dial and of Fitzgerald in July 1992 when he was informed that
Fitzgerald had a fifteen percent (15%) interest in Dial, and
that McDonnell and plaintiff would each own one half of the
remaining eighty-five percent (85%) interest. (Id. at 17, 19.)
In September 1992, McDonnell informed plaintiff of a further
modification of the alleged oral agreement, specifically that
McDonnell and Fitzgerald would control the majority of shares in
Dial, and that plaintiff would be given a twenty-seven and
one-half percent (27.5%) equity interest. (Id. at 25.)
Plaintiff acquiesced in both of these alleged modifications and
understood that each new agreement replaced the old. (Id. at
98.)
Defendants, not surprisingly, recount a vastly different
agreement with plaintiff. Defendants contend that plaintiff
learned of the existence of Dial and the telescoping ladder over
the course of several weeks. McDonnell testified that he told
plaintiff at their first meeting about the creation of Dial and
of his partnership with Fitzgerald. (Id. at 272.) McDonnell
also told plaintiff that the ladder could not meet applicable
ANSI standards and that it would be some time, at least eighteen
months, before they would be able to generate any revenue from
sales. (Id.) Defendants dispute that plaintiff was ever
offered a fifty percent (50%) interest in Dial or that any
specific compensation terms were established. (Id. at 273.)
McDonnell testified, in particular, that plaintiff was never
promised $90,000 payable on February 1993. (Id.) Nonetheless,
plaintiff believed that the ladder was a quality product and
that the venture had promise and therefore agreed to begin work
on behalf of Dial with the hope and anticipation of being
compensated in the future.
We find defendants' version of the facts to be more credible
than plaintiffs. Plaintiffs claim that he was offered full
partnership in Dial within the first two or three days of
meeting McDonnell is implausible. It is unlikely that McDonnell
would proffer such a generous offer without consulting his
business partner of several years and without a thorough
evaluation of plaintiffs work. Furthermore, we found McDonnell
to be an articulate and credible witness. Plaintiff has offered
no tenable explanation why McDonnell would conceal the existence
of Dial and Fitzgerald. We also find it dubious that plaintiff,
a non-practicing lawyer well versed in contract terms, would
never reduce his oral agreement with McDonnell to writing,
especially in light of his allegations that his equity position
was so drastically reduced. Nonetheless, no such writing,
however informal, exists and plaintiff has little support for
his claims other than his own word.
II. June 1992 Through February 30, 1993
Plaintiff began working for Dial in June 1992. (Id. at 14.)
It is undisputed that at this early stage a number of tasks
necessarily had to be completed before Dial would be able to
generate revenue. Most importantly, a final license agreement
had to be negotiated with the European patent owners. (Id. at
277.) The other important tasks included, inter alia,
obtaining affordable products liability insurance, meeting
United States safety standards for ladders under ANSI,
developing a business and marketing plan and finding
manufacturing and testing facilities. (Id. at 14, 18, 277.)
Throughout June, plaintiff dedicated approximately fifty percent
of his time to Dial. (Id. at 15.) He assisted in numerous
tasks, most notably developing the marketing plan and assisting
McDonnell in finding a manufacturer for the ladders. (Id. at
14.)
Beginning in July 1992, plaintiff devoted his time almost
exclusively to Dial.*fn2 (Id. at 17-18.) His tasks included
meeting with Spiegel at his New York City office, daily meetings
with McDonnell, searching for products liability insurance,
negotiating with marketing research firms and investigating
potential manufacturing firms. (Id. at 18-20.) Plaintiff
performed similar work throughout the month of August. (Id. at
20-21.) In September 1992, plaintiff worked extensively with
Spiegel to negotiate the licensing agreement with the European
patent holders. (Id. at 24, 242-45.) Spiegel's billing records
indicate extensive contact with plaintiff throughout the month
of September. (Id.) Dial successfully executed the exclusive
North and South American license agreement for the ladder (the
"Licensing Agreement") on September 25, 1992. (Defs. Trial Ex.
A.) The balance of plaintiffs time in September was expended
formulating a business strategy with McDonnell and entertaining
the patent owners when they visited the United States. (Trial
Tr. at 24.)
Defendants argue that compensation was not discussed, and that
therefore plaintiff did not reasonably expect to be paid, until
the Licensing Agreement was finalized. (Defs. Post-Trial Mem. at
20-21.) We find this argument implausible. Without concrete
evidence suggesting otherwise, we are loath to assume that
plaintiff knowingly provided his services without an expectation
of compensation. Rather, it is more likely plaintiff expected to
be paid, but to defer payment until Dial was able to generate
revenue — after the Licensing Agreement was finalized. We find
that expectation both probable and reasonable.