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Gary Savage v. Galaxy Media & Marketing

July 5, 2012

GARY SAVAGE, PLAINTIFF,
v.
GALAXY MEDIA & MARKETING CORP.; CHARLSTON KENTRIST 41 DIRECT, INC.; JOHN THOMAS BRIDGE AND OPPORTUNITY FUND, LP; JOHN THOMAS CAPITAL MANAGEMENT GROUP, LLC; AND JOHN THOMAS FINANCIAL, INC., DEFENDANTS.



The opinion of the court was delivered by: Naomi Reice Buchwald United States District Judge

MEMORANDUM AND ORDER

Plaintiff Gary Savage brings this diversity action alleging tortious interference with contract, breach of contract, and violations of the New York Labor Law. Defendants John Thomas Financial, Inc. ("JTF"), John Thomas Bridge and Opportunity Fund, LP (the "Fund"), and John Thomas Capital Management Group, LLC (the "Group") (together, the "JT Defendants") have moved pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss the claims against them.*fn1

For the reasons stated herein, the JT Defendants' motions are granted.

BACKGROUND*fn2

I. The Parties

CK41 is a Nevada corporation for which plaintiff, a resident of New Jersey, began consulting in 2009. By April of that year, plaintiff had been hired as CK41's president and chief executive officer ("CEO").

CK41 merged with Amber-Ready, Inc. ("Amber") on April 8, 2010. As a result of the merger, Amber became the parent of CK41 and changed its name to Galaxy. After the merger plaintiff retained his titles with CK41 and was made the president and CEO of Galaxy, as well as a member of Galaxy's board of directors. Galaxy, a Nevada corporation with its principal place of business in New York, develops and markets products -- in particular, an acne treatment known as purEffect.

JTF is a privately held financial services firm organized and located in New York that provides individual brokerage and investment banking services. In the wake of the merger, Galaxy engaged JTF to obtain long-term funding for the company. Anastasios Belesis is JTF's CEO, and he allegedly promised plaintiff upon Galaxy's formation in 2010 that JTF would raise $1.3 million in equity to finish developing television commercials for purEffect and would utilize its best efforts to raise at least $6 million to launch the product.

The Fund is a Delaware limited partnership managed by the Group, an investment company formed under Delaware law and based in Texas.*fn3 George Jarkesy, Jr. is the managing member of the Group. Plaintiff alleges that the Fund promised him that, while JTF pursued long-term funding for Galaxy, the Fund would assist the company by providing bridge loans to finance it.

The JT Defendants are not alleged to have had any connection to CK41 or Galaxy prior to the merger.

II. Plaintiff's Employment Agreements with CK41 and Galaxy

Plaintiff entered into a written employment agreement with CK41 in April 2009 (the "CK41 Agreement"). The agreement made plaintiff the president and CEO of CK41, which positions gave him "primary responsibility for the business of the Company, including all activities related to the promotion, advertising, sale and marketing of the Company's products and all creative, packaging, and product fulfillment activities of the Company." (Compl. ¶ 17.) The CK41 Agreement granted plaintiff 15.5 million shares of CK41's common stock*fn4 and provided for a base salary of $275,000, to be paid in bi-monthly installments, with various increases upon reaching certain milestones, as well as incentive and discretionary bonuses. Moreover, it obligated CK41 to obtain and maintain directors and officers ("D&O") insurance covering plaintiff.

The CK41 Agreement commenced plaintiff's employment as of April 1, 2009 and was effective for three years unless an extension was granted, though it permitted plaintiff to terminate his employment for good reason upon provision of a thirty-day cure period. The agreement articulated a number of grounds that would constitute good reason for plaintiff's resignation. Relevantly, the agreement noted that resignation would be appropriate "if, without [plaintiff's] consent,"

(a) his salary, benefits, or other compensation were reduced,

(b) he was assigned any duties "inconsistent with [his] position and status as set forth in this Agreement," or (c) CK41 materially breached the agreement. (Compl. ¶ 26.)

Plaintiff signed another employment agreement with Galaxy in March 2010 (the "Galaxy Agreement"),*fn5 which contained provisions similar to those in the CK41 Agreement (id. ¶¶ 13, 28), except the three-year term under the agreement with Galaxy began on March 1, 2010. The Galaxy Agreement further provided that, if plaintiff resigned for good reason before the end of his three-year term, Galaxy would owe him "the full balance remaining on the contract including all terms and benefits contained herein."*fn6 (Id. ¶ 34.)

None of the JT Defendants is alleged to have been a party to these agreements or involved in any way with their negotiation.

III. Events Leading to Plaintiff's Resignation

Plaintiff alleges that, by 2010, CK41 had failed to pay him the money he was due under the CK41 Agreement by a significant margin. Amber, the predecessor to Galaxy, was apparently having its own financial difficulties at the same time. (Pl.'s Mem. of Law in Opp'n to Defs.' Mots. to Dismiss ("Pl.'s Opp'n") 2 (noting that Amber "had tried unsuccessfully to sell a technology that helped locate missing children").) When the companies merged and created Galaxy, JTF was enlisted to secure long-term financing through investors, and the Group and the Fund were brought in to provide interim financing to ensure the Galaxy could continue operations.

The complaint does not detail the months immediately following the merger, but it does allege that the JT Defendants had begun funding Galaxy's operations by October 2010, when --without seeking approval from plaintiff -- they appointed Steven Plumb to be Galaxy's Chief Financial Officer ("CFO"). Plaintiff was allegedly required by the JT Defendants to have Plumb cosign every check and wire transfer. Moreover, plaintiff alleges that, when he or Plumb submitted bills for payment, the JT Defendants would decide how to allocate money to Galaxy and which creditors would be paid.

Plaintiff further asserts that between September 2010 and his resignation on July 16, 2011, he was paid none of the money he was due under the Galaxy Agreement. In particular, plaintiff alleges, after his appointment and at the direction of the JT Defendants, Plumb refused to pay plaintiff any money, even when requested by plaintiff to do so. Belesis allegedly promised plaintiff at multiple points between December 2010 and May 2011 that JTF would pay him $50,000 on a semi-monthly basis until the deficit was paid off, but no such payments were ever made.

In addition to exerting influence over Galaxy's finances, the JT Defendants allegedly manipulated the company's January 5, 2011 shareholder vote.*fn7 Prior to that vote, plaintiff alleges that JTF had its brokers call Galaxy stockholders to tell them whom to vote off the board of directors. Moreover, plaintiff asserts that the JT Defendants threatened him by refusing to fund the purEffect development if plaintiff did not also vote for the directors they had approved. After the vote, the ...


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