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P & E Properties, Inc. v. United Natural Foods

May 12, 2010

P & E PROPERTIES, INC., PLAINTIFF,
v.
UNITED NATURAL FOODS, INC., AND MILLBROOK DISTRIBUTION SERVICES, INC., DEFENDANTS.



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

OPINION

P & E Properties, Inc. ("P&E") sues Millbrook Distribution Services, Inc. ("Millbrook") for breach of contract, and sues United Natural Foods, Inc. ("UNFI") for tortious interference with contract. The complaint alleges that Millbrook failed to pay management fees to P&E and also failed to reimburse P&E for extraordinary expenses.

P&E moves for summary judgment on its claims of breach of contract, and Millbrook moves for summary judgment dismissing P&E's contract claim for extraordinary expenses. For the reasons that follow, P&E's motion is denied, and Millbrook's motion is granted only to the extent that P&E's claim of breach of contract by failure to reimburse extraordinary expenses is dismissed.

BACKGROUND

The following facts are undisputed, except where specifically noted.

P&E is a provider of administrative and executive services. Millbrook is a distributor of specialty foods. On or about February 15, 2007, P&E and Millbrook entered into a General Administrative Services Agreement (the "Contract") expressly governed by New York law.

UNFI is also a distributor of specialty foods. On or about October 5, 2007, Millbrook's parent company, DHI, entered into a merger agreement with UNFI under which a UNFI subsidiary merged with DHI. The merger transaction closed on November 2, 2007, and Millbrook became an indirect wholly-owned subsidiary of UNFI.

Richard Bernstein is the sole shareholder of P&E, and has served as its Chairman, President, and Chief Executive Officer at all relevant times. Mr. Bernstein also served as the Chairman of the Board of Millbrook and was its controlling shareholder prior to the merger.*fn1

Mr. Bernstein testified at his deposition that in about October of 2007, in his capacity as Chairman of the Board of Millbrook, he approved a "salary continuation plan" under which Millbrook would make "retention compensation payments" to ten P&E employees to ensure their cooperation and productivity through the merger. It is undisputed that there was never a written "salary continuation plan." It is also undisputed that there was never a writing approving payments by Millbrook to P&E employees.

On the day before the merger took effect, an employee of P&E, who also served as an officer of Millbrook, issued checks drawn on Millbrook's bank account to nine P&E employees in amounts totaling $855,023. Although four recipients were also officers of Millbrook, none of the individuals who received checks had ever before been directly compensated by Millbrook or had an employment agreement with Millbrook requiring severance payments in the event of a merger.

On about November 5, 2007, Millbrook stopped payment on these checks before they cleared.

On November 6, 2007, P&E submitted a memorandum to Millbrook with attachments including copies of the checks and check request forms. The check request forms listed the purpose of each check as "[s]everance."

On November 14, 2007, P&E sent an invoice to Millbrook for payments to ten P&E employees pursuant to the "salary continuation plan." The ...


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