The opinion of the court was delivered by: John Gleeson, United States District Judge
This case involves a tangled web of corporations and claims. Gary DiMaria and Martin Goor were partners in the business of moving and installing furniture. Together, they owned various corporate entities, known for present purposes as the "CFT Entities," including Contract Furniture Transport, Inc. ("CFT, Inc."). In 1992, they signed a Stockholders Agreement in their capacities as shareholders in CFT, Inc., under which each was obligated to buy out the other's interest if the other died.
Gary DiMaria died in 2006, and his shares in the CFT Entities passed to his widow, Jean DiMaria. Relying on a course of dealing between her late husband and his partner, Jean DiMaria contends that Martin Goor is obligated under the Stockholders Agreement to buy her out of all the CFT Entities, not just CFT, Inc.
After the initial complaint was filed, Jean DiMaria amended her complaint to contend that, since her husband's death, Martin Goor has wrongfully stripped the CFT Entities of their assets and has unlawfully transferred those assets to a new corporation called CFT-IOS, Inc., whose President is Ryan Goor, Martin's son. The alleged wrongdoing includes the commencement of an assignment for the benefit of the creditors of CFT, Inc. and CFT Associates in New Jersey Superior Court. Jean DiMaria has now added various claims seeking damages against Martin Goor, the CFT Entities, Ryan Goor, and CFT-IOS. In addition, she purports to sue Steven J. Mitnick, an attorney who is serving as receiver of CFT, Inc. and CFT Associates in the New Jersey proceedings.
With the addition of the new claims and new parties, this litigation has become extremely complex. Several dispositive motions are now before me. First, Martin Goor, CFT, Inc., and Contract Furniture Transport Associates, Inc. ("CFT Associates") move for partial summary judgment, seeking to excise from the suit any claim to a buyout that extends beyond CFT, Inc. Defendants rely on the contract's plain language, which applies solely to CFT, Inc. As explained below, I agree that the Stockholders Agreement applies only to CFT, Inc., and grant partial summary judgment accordingly. However, I disagree with the defendants' construction of the Stockholders Agreement's price-determination mechanism.
Second, Martin Goor, CFT, Inc., CFT Associates, CFT-IOS, and Ryan Goor move to dismiss the complaint for failure to state a claim insofar as it asserts that those defendants are guilty of unlawfully diverting the CFT Entities' assets. For the reasons explained below, I agree that, for the most part, these claims are viable in this Court in their current form, and grant the motions to dismiss those claims in full, with the exception of Jean DiMaria's claim for repayment of a loan she allegedly made to the CFT Entities. In addition, I grant plaintiff leave to replead some of her claims.
Third, Mitnick, the assignee, moves to dismiss the complaint as against him, both for lack of personal jurisdiction and for failure to state a claim. A New Jersey resident, Mitnick argues that any suit may not properly be brought against him in a New York court. He also contends that the complaint states no claim as it pertains to him. As explained below, I grant the motion for failure to state a claim against Mitnick.
A. Martin Goor and Gary DiMaria
Martin Goor and Gary DiMaria each owned 50% of CFT, Inc., a corporation that they used to carry on the business of delivering and installing furniture, mostly in New Jersey. However, it appears that, since the mid-1990s, CFT, Inc. was no more than a payroll company of little intrinsic value to its shareholders. At least since then, the business's assets were held, in part, by CFT Associates.
According to the complaint, Gary DiMaria and Martin Goor were also joint owners of the following entities: Contract Furniture Warehouse Corp., Contract Furniture Painting, LLC, Contract Furniture Installations, LLC, Dependable Moving And Storage, Inc., Dependable Moving And Storage Corp., Service East, Inc., and Contract Furniture Transportation, LLC.
B. The Stockholders Agreement
On or about December 31, 1992, Gary DiMaria, Martin Goor, and CFT, Inc. entered into a "Stockholders Agreement."*fn1 The agreement states on its first page that "the Corporation" is CFT, Inc. Goor Cert., Ex A, at 1. The avowed aim of the agreement was to ensure "the continuity of the Corporation's business" by providing procedures for sale and purchase of stock in "the Corporation" during DiMaria's and Goor's lifetimes. Id. It also provided procedures "to guard against the possibility that, upon the Stockholders' deaths, their estates might be required to sell such stock ownership in the Corporation to persons not familiar with the business." Id. According to Martin Goor, however, the real purpose of the Stockholders Agreement was to allocate life insurance proceeds in the event that one of the stockholders died. The life insurance proceeds of the stockholder who died first were to be used by the survivor to buy out the decedent's interest.
Article 4 concerns the death of a stockholder. It provides that, upon a stockholder's death, the Corporation has the option to purchase the decedent's stock from his estate. If the corporation does not elect to do so within 30 days of the death, the Corporation is deemed to have elected not to exercise its purchase option. Goor Cert., Ex A, at 8-9. Under the Stockholders Agreement, if the Corporation does not choose to exercise its option, "the Surviving Shareholder shall then be obligated to purchase all of the Decedent's stock and the legal representatives of the Decedent's estate shall be obligated to sell to the Surviving Stockholder." Id. at 9. That sale is to take place on the terms set forth in the Agreement, including the "Death Purchase Price." Id. Article 4(a) states that the Death Purchase Price is to be agreed within 60 days of the decedent's death.
Article 4(c) provides that the survivor "shall receive proceeds of any insurance policies on the life of the Decedent listed in Exhibit A" to the Stockholders Agreement.
Goor Cert, Ex. A, at 10. These proceeds "shall be payable to and used by . the Surviving Stockholder . to fund the purchase price in whole or in part for the Decedent's stock." Id. The agreement states that "[p]ayment for the Stock shall be deferred until the date of closing." Id. Article 4(d) concerns the closing, which is to take place no more than 60 days of the qualification of the decedent's legal representatives "provided that the insurance proceeds have been received by . the Surviving Stockholder." Id. If the life insurance proceeds arrive later, the closing is supposed to take place no later than 10 days from receipt. Id. at 11.
Article 6 addresses the determination of the Death Purchase Price. It states that the total value of the Corporation shall be "the last dated amount set forth on the Certificate of Agreed Value." Goor Cert, Ex. A, at 19. The first Certificate of Agreed Value was annexed as Exhibit B to the Stockholders Agreement, and it stated that the Corporation was worth $2 million.*fn2 Article 6 states that the Stockholders were supposed to meet at least once a year to determine the agreed value of the Corporation, but in fact they never executed another Certificate of Agreed Value. The agreement provides that, in the event that no revaluation takes place for more than two years, the value of the corporation is determined by taking the last agreed valuation and adding or subtracting the amount by which the net worth of the Corporation has increased or decreased. That amount is to be calculated by "the certified public accountant regularly employed by the Corporation." Id. at 19-20.
C. Gary's Death and its Aftermath Gary DiMaria died on July 16, 2006.
On his death, Jean DiMaria inherited his ownership interests in the CFT Entities. In addition, Jean DiMaria is the adminstratrix of her husband's estate.
Prior to Gary DiMaria's death, the CFT Entities were the subject of a criminal investigation concerning an alleged scheme to defraud a Carpenters' Union by falsifying records. The investigation ended in a settlement that was agreed to after Gary DiMaria's death. According to Jean DiMaria, she loaned $284,000 of her own money at Martin Goor's urging to the CFT Entities to help them to pay the settlement.
After Gary DiMaria died, Jean DiMaria invoked the Stockholders Agreement and demanded that Martin Goor buy her out of CFT, Inc. for $1 million. Martin Goor refused to pay anything, asserting that CFT, Inc. was simply a payroll company and was worthless.
D. The Initial Complaint in this Court
Jean DiMaria, a New York resident, initially brought this action in the Supreme Court of Richmond County against Martin Goor, a New Jersey resident, and CFT, Inc., a New Jersey corporation that does its business largely in the Garden State.*fn3 Among other things, the complaint asserted that Martin Goor breached a contractual obligation to buy Jean DiMaria out of all the CFT Entities, not just CFT, Inc.
The defendants removed the action to federal court pursuant to diversity jurisdiction. On December 3, 2009, Martin Goor moved for partial summary judgment on the breach of contract claim.
E. The CFT Entities' Receivership and the Creation of CFT-IOS
On November 17, 2009, CFT, Inc. and CFT Associates entered into an assignment for the benefit of creditors, or "ABC proceeding," under New Jersey law. Stephen Mitnick was appointed receiver by the court. Pursuant to those proceedings, the assets of CFT, Inc. and CFT Associates were transferred to CFT-IOS, a new company of which Ryan Goor, Martin Goor's son, was the President. Jean DiMaria contends that the ABC proceedings were undertaken for the purpose of precluding her from exercising her rights to her late husband's shareholdings.
On December 4, 2009, Jean DiMaria moved to amend the complaint to incorporate allegations and claims relating to Ryan Goor, CFT-IOS, and the receivership of CFT, Inc. and CFT Associates. I granted leave to file the amended complaint, which purports to state nine causes of action and names as defendants Martin Goor, all the CFT Entities, Ryan Goor, CFT-IOS and Mitnick.
Count One asserts a cause of action for breach of contract, by Jean DiMaria and her husband's estate against Martin Goor. Am. Compl. ¶¶ 58-67. Jean DiMaria asserts that the Stockholders Agreement applies to all the CFT Entities, and that Martin Goor has breached the Agreement by refusing to buy her out of any of the Entities.
Count Two is a claim for breach of fiduciary duty by Jean DiMaria and the estate against Martin Goor. Am. Compl. ¶¶ 68-77. The complaint states that as a shareholder, officer, and director of the CFT Entities, Martin Goor owed a fiduciary duty to Gary DiMaria and, after Gary's death, to his widow. Martin Goor breached that duty, according to the complaint, by diverting the CFT Entities' business to his son and CFT-IOS. Jean DiMaria asserts that she suffered loss as a result of Martin Goor's breach of duty, and seeks compensatory damages.
Count Three purports to state a derivative claim against Martin Goor by Jean DiMaria on behalf of the CFT Entities for breach of fiduciary duty. Am. Compl. ¶¶ 78-85. The allegations of wrongdoing supporting Count Three are essentially the same as those in Count Two, but Count Three seeks to compensate the CFT Entities, rather than Jean DiMaria and the estate, for the losses the CFT Entities have suffered. The complaint also asserts that Martin Goor should disgorge to the CFT Entities any payments he received from the Entities themselves or from CFT-IOS after November 3, 2009.
Count Four is a derivative claim by Jean DiMaria on behalf of the CFT Entities against Martin Goor for corporate waste. Am. Compl. ¶¶ 86-89. Here, the complaint asserts that Martin Goor committed waste by diverting business to CFT-IOS, by failing to advertise the CFT Entities' furniture storage and installation services, by allowing the CFT Entities to go out of business, and by directing employees of the CFT Entities to perform work for CFT-IOS.
Count Five relates to the December 2007 loan. It asserts a claim by Jean DiMaria, solely in her individual capacity, for unjust enrichment against the Martin Goor and the CFT Entities. Am. Compl. ¶¶ 90-94. Jean DiMaria states she loaned the money to Martin Goor and the CFT Entities, and that Martin Goor told her that the money would be repaid to her from the CFT Entities' accounts receivable and from the ...