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Guccione v. Bell

July 20, 2006

ROBERT C. GUCCIONE, PLAINTIFF,
v.
MARC H. BELL, DANIEL C. STATON, PENTHOUSE MEDIA GROUP, INC., CHARLES SAMEL, JASON GALANIS, DR. LUIS ENRIQUE MOLINA GALEANA A/K/A FERNANDO MOLINA, INTERNET BILLING COMPANY, LLC, AND PENTHOUSE INTERNATIONAL, INC., DEFENDANTS.



The opinion of the court was delivered by: Sidney H. Stein, U.S. District Judge

OPINION & ORDER

Robert Guccione filed the original complaint in this action on December 23, 2005 in New York Supreme Court. The complaint lists 11 separate causes of action -- all of which are pleaded pursuant to state law -- including breach of contract, unjust enrichment, fraud and failure to pay severance. Three of the defendants -- Penthouse Media Group, Inc. ("PMG"), Marc H. Bell and Daniel C. Staton -- removed the action to this Court, asserting that federal jurisdiction exists over Guccione's severance claim pursuant to both the Employee Retirement Income Security Act of 1974 ("ERISA") and the federal bankruptcy code. Because Guccione's claim for severance is not governed by ERISA, and because the equities weigh heavily in favor of Guccione's claims being adjudicated in state, not federal, court, the case is remanded to New York state court pursuant to 28 U.S.C. § 1452(b).

I. Background

Guccione, the founder of Penthouse Magazine, alleges that as his former company, General Media, Inc. ("GMI"), slid into bankruptcy, several of his former partners and employees fraudulently froze him out of managing the company and lured him into making a series of financially disastrous transactions -- and then fired him just after the bankruptcy plan was confirmed in October 2004, cut off payments they were obligated to make to him and sued him in bad faith in bankruptcy court. (Compl. ¶¶ 1-80.) Based on these allegations, the complaint asserts the following causes of action:

(1) Material breach of contract. Guccione alleges that PMG (which is the successor to GMI) and Bell and Staton (who acquired PMG out of bankruptcy) breached an agreement to pay Guccione $500,000 per year for ten years and provide him with an assistant and a secretary in exchange for his support for Bell's favored bankruptcy reorganization plan. (Id. ¶¶ 64, 81-87.)

(2) Fraud. Guccione alleges that PMG, Bell and Staton fraudulently induced him to support Bell's bankruptcy reorganization plan by promising that PMG would engage Guccione as chairman emeritus for ten years at a salary of $500,000 per year, plus staff and benefits amounting to an additional $250,000 per year, without any intention of actually paying these amounts. (Compl. ¶¶ 88-96.)

(3) Unjust enrichment, in that PMG, Bell and Staton have been unjustly enriched as a result of the wrongful actions alleged above. (Compl. ¶¶ 97-100.)

(4) Promissory estoppel. Guccione alleges that he detrimentally relied on promises by PMG, Bell and Staton that they would keep him on as chairman emeritus and honor GMI's severance plans. (Compl. ¶¶ 101-105.)

(5) Failure to pay severance. Guccione alleges that from its inception in 1967 through its filing for bankruptcy, GMI maintained a policy of providing severance in an amount equal to one month salary for every year that an employee worked for the company ten years or longer. Guccione alleges that he voted in favor of Bell's bankruptcy reorganization plan in reliance on the severance policy being honored, but that immediately after confirmation, Bell and Staton terminated the severance plan and fired Guccione without paying any severance. Guccione asserts that because he had been employed for 37 years at an annual salary of $500,000, he is owed severance of $1,541,667, plus interest. (Compl. ¶¶ 106-116.)

(6) Breach of contract. Guccione alleges that Charles Samel, a former employee, and Jason Galanis, a former consultant to GMI, breached an agreement that was to pay Guccione $1 million per year and provide him with continued access to the townhouse he was living in, or to provide housing valued at $20 million, or to pay him a single lump sum of $15 million, in exchange for his turning over certain trademarks and supporting Samel's reorganization plan. (Compl. ¶¶ 55-56, 117-123.)

(7) Fraud. Guccione alleges that in order to gain his support for Samel's reorganization plan, Samel, Galanis and a third defendant, Fernando Molina, made a number of false representations, including that they would pay Guccione $1 million per year and allow him to remain in the townhouse for the remainder of his life. (Compl. ¶¶ 124-132.)

(8) Breach of fiduciary duty. Guccione alleges that Samel and Galanis, who occupied positions of trust with Guccione and GMI, sold off assets without maintaining accurate records, falsely induced Guccione to guarantee a multi-million dollar "bridge" loan and forged Guccione's name on documents filed with the Securities and Exchange Commission. (Compl. ¶¶ 133-142.)

(9) Unjust enrichment, in that Samel and Galanis have been unjustly enriched as a result of their allegedly improper conduct. (Compl. ¶¶ 143-146.)

(10) Promissory estoppel. Guccione alleges that he detrimentally relied on promises by Samel and Galanis concerning payments he would receive in the future and his continued right to live ...


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