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Bischoff v. Boar's Head Provisions Co.

June 29, 2006

ERIC BISCHOFF, INDIVIDUALLY AND AS A MEMBER OF FRANK BRUNCKHORST CO., L.L.C., AND IN THE RIGHT OF AND ON BEHALF OF FRANK BRUNCKHORST CO., L.L.C., PLAINTIFF,
v.
BOAR'S HEAD PROVISIONS CO., INC., FRANK BRUNCKHORST III AND ROBERT S. MARTIN, INDIVIDUALLY AND AS MANAGERS AND MEMBERS OF FRANK BRUNCKHORST CO., L.L.C., AND AS DIRECTORS AND OFFICERS OF BOAR'S HEAD PROVISIONS CO., INC., AND BARBARA BRUNCKHORST, INDIVIDUALLY AND AS A MEMBER OF FRANK BRUNCKHORST CO., L.L.C., AND AS A DIRECTOR OF BOAR'S HEAD PROVISIONS CO., INC., DEFENDANTS, AND FRANK BRUNCKHORST CO., L.L.C., NOMINAL DEFENDANT.



The opinion of the court was delivered by: Chin, D.J.

OPINION

In this diversity case, plaintiff Eric Bischoff sues the controlling members and managers of Frank Brunckhorst Co., LLC ("FB Co."), the nationwide distributor of the well-known Boar's Head delicatessen products, for purportedly diverting millions in profits from FB Co. to Boar's Head Provisions Co., Inc. ("Provisions"), one of FB Co.'s suppliers. Although Bischoff and defendants have ownership interests in both companies, he claims that defendants have a greater stake in Provisions and have abused their positions of control to structure transactions between the two companies in Provisions's favor.

Defendants move to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6). Plaintiff cross-moves to remand the case to state court for lack of subject matter jurisdiction pursuant to 28 U.S.C. § 1447(c). For the reasons set forth below, the motion to dismiss is denied and the cross-motion for remand is granted.

STATEMENT OF THE CASE

A. The Facts

For purposes of this motion, the facts in the complaint are assumed to be true and are construed in the light most favorable to Bischoff, the non-moving party.

In the early 1900s, Frank Brunckhorst ("Brunckhorst") first began peddling deli meats on the streets of Brooklyn, New York, from the back of a horse-drawn wagon bearing the distinctive "Boar's Head" logo. (Compl. ¶¶ 2, 17). Prior to 1918, Brunckhorst purchased the Boar's Head brand and logo, which now belong exclusively to FB Co. (Id. ¶¶ 2-3, 18, 33). The Boar's Head brand has become well-known nationwide, in part due to the millions of advertising dollars FB Co. spends each year promoting the Boar's Head name. (Id. ¶¶ 3, 33).

Over the past century, FB Co. has expanded from a local business serving "mom and pop" establishments in Brooklyn to a distributor of products to supermarkets and delicatessens in more than thirty states. (Id. ¶¶ 17, 30). In 1933, Brunckhorst's son and other relatives formed Provisions to manufacture processed meats for exclusive distribution by FB Co. under the Boar's Head name. (Id. ¶¶ 2, 20, 29). This relationship remains in place today, with FB Co. distributing 100% of Provisions's products. FB Co. also distributes additional meat and complementary products, such as mustard and sauerkraut, from other manufacturers. (Id. ¶¶ 29, 31).

Both companies have become hugely successful and are valued collectively at over $1 billion. (Id. ¶¶ 21-22, 29). The vast majority of these profits are attributable to the Boar's Head brand, and until the 1990s, FB Co. earned much higher profits than Provisions, even though most of its revenues came from Provisions-manufactured goods. (Id. ¶¶ 5, 40). Since then, a considerable reversal in the revenue-sharing of the two companies has taken place, as Provisions's profits now more than triple the amount of FB Co.'s profits. (Id. ¶¶ 40-41).

Plaintiff contends that this disparity in earnings is attributable to defendants' deliberate campaign to siphon hundreds of millions of dollars in profits from FB Co. to Provisions. (Id. ¶¶ 5-6, 41). While defendants possess ownership interests in both companies, they have a greater stake in Provisions because they each earn a greater percentage of Provisions's profits than FB Co.'s profits. (Id. ¶¶ 6, 11-13, 26). Thus, plaintiff alleges, defendants have an incentive to divert revenue from FB Co. to Provisions, and the means to do so as controlling members of both companies.

B. The Parties

FB Co. is a New York limited liability company ("LLC"), and Provisions is a Delaware corporation, with its principal place of business in Florida. (Compl. ¶¶ 9-10; Notice of Removal ¶ 3). Although their shareholders and management are not identical, both are primarily held by Brunckhorst's direct descendants and there is significant overlap between the two companies. (Compl. ¶¶ 1, 4).

Bischoff, a New York resident and Brunckhorst's great-grandson, is a member and 20.37% owner of FB Co. (Id. ¶¶ 8, 17). He is also a shareholder and employee of Provisions, with an 8.333% ownership interest in that company. (Id. ¶ 8).

The individual defendants, all residents of Florida, also have ownership interests in both companies. (Id. ¶¶ 6, 11-13). All three are directors and controlling shareholders of Provisions. (Id. ¶¶ 11-14). Barbara Brunckhorst, Brunckhorst's granddaughter, is a member of FB Co. (Id. ¶¶ 13, 17). Frank Brunckhorst III and Robert S. Martin, also great-grandsons of Brunckhorst, are managing and controlling members of FB Co. (Id. ¶¶ 11-12, 14, 17).

C. Procedural History

Plaintiff filed his complaint in New York State Supreme Court, New York County, on December 5, 2000, asserting seven causes of action, including breach of fiduciary duty, breach of the operating agreement, waste, unjust enrichment, and money had and received. All but the breach of ...


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