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Richard J. Kramer, Report Christopher v. Thomas M. Pawlak

September 26, 2012

RICHARD J. KRAMER, REPORT CHRISTOPHER GATES, AND GLEN E. WEBSTER, INDIVIDUALLY AND ON BEHALF OF RECOMMENDATION NOMINAL DEFENDANT ARMOR ELECTRIC MOTOR & INDUSTRIAL SERVICES, INC., PLAINTIFFS, AND
v.
THOMAS M. PAWLAK, LISA PAWLAK, ARMOR ELECTRIC MOTOR & INDUSTRIAL SERVICES, INC., DEFENDANTS.



The opinion of the court was delivered by: Leslie G. Foschio United States Magistrate Judge

ORDER*fn1

DECISION

JURISDICTION

By order filed September 6, 2012, this matter was referred to the undersigned by Hon. Richard J. Arcara for all pretrial proceedings, pursuant to 28 U.S.C. § 636(B)(1)(A) and (B) (Doc. No. 5). It is presently before the court on Plaintiff, Richard J. Kramer's, motion for a temporary restraining order and preliminary injunction (Doc. No. 7) ("Kramer's motion") and ex parte motions for expedited hearings (Doc. No. 8, 9) ("Kramer's motions to expedite") filed September 18, 2012.

BACKGROUND AND FACTS*fn2

This action was commenced upon a summons and verified complaint filed in New York Supreme Court, Erie County, New York, on August 9, 2012 alleging violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961, et seq. ("First Claim"), asserting Defendants engaged in mail and wire fraud (21 U.S.C. §§ 1341, 1343) based on Defendants' scheme to defraud Plaintiffs Richard J. Kramer ("Kramer"), Christopher Gates ("Gates") and Glen E. Webster ("Webster") (together, "Plaintiffs"), as well as Armor Electric Motor & Industrial Services, Inc. ("Armor Electric" or "Armor"), a closely-held (Sub-Chapter S) corporation ("the corporation") of which Defendants Thomas M. Pawlak and Lisa Pawlak ("Thomas Pawlak" and "Lisa Pawlak," collectively "the Pawlaks" or "Defendants") are majority shareholders and Plaintiffs are minority shareholders. Armor Electric provides industrial motor refurbishing and crane equipment services, fabrication, controls, and balancing. Since it was organized in 2005 by Plaintiffs Kramer and Gates and the Pawlaks, it has increased revenues to $5 million from $750,000 and has now approximately 22 employees compared to four in 2005. Thomas Pawlak owns no shares in the corporation but serves as its president and chief executive officer; Lisa Pawlak owns 54.98% of the shares and serves as secretary. Kramer serves as vice-president and owns 26.41%; Gates serves as vice-president and treasurer and owns 12.60%; and Webster serves as vice-president and owns 6% of the shares of the corporation.

Plaintiffs also assert state law claims of breach of fiduciary duty owed to Plaintiffs and the corporation, based on Lisa Pawlak's position as majority shareholder and secretary and Thomas Pawlak's status as Armor Electric's president and chief executive officer and Defendants' improper transfer of the corporation's assets, including payment of approximately $227,000 for Defendants' personal expenses such as luxury automobiles and excessive salaries ("Second Claim"). Plaintiffs also allege claims for conversion of the corporation's property and assets ("Third Claim") and fraud ("Fourth Claim") based on Defendants' misrepresentation concerning the nature of approximately $150,000 of expenses incurred on behalf of the corporation and Defendants' alleged refusal to provide Plaintiffs with access to corporate books and records. Defendants removed the action to this court on August 29, 2012. Defendants' answer was filed September 5, 2012 asserting defenses and a counterclaim (Doc. No. 4). Plaintiffs' Amended Complaint was filed September 18, 2012 which added a state breach of contract claim against Defendants based on Defendants' violation of a Stipulation and Order entered in Plaintiffs' state court action. In Plaintiffs' state court action, Plaintiffs also sought to have Gates appointed receiver of the corporation. A Shareholder Agreement among the corporation's shareholders requires all directors vote in favor of all resolutions and corporate matters approved by the Pawlaks and against any opposed by the Pawlaks.

While the case was pending in state court, in order to resolve Plaintiffs' request that a receiver be appointed, the parties entered into a Stipulation and Order so ordered by the presiding justice, Hon. John A. Michalek, on August 29, 2012, which provided that during the pendency of the litigation, Plaintiffs shall have access to the corporation's financial records, accounts and credit card statements, the parties agree to the amount and payment of bonuses, or commissions to the parties, and that "all Plaintiffs and Defendants must agree to any adjustment to the salary of any of the Plaintiffs or Defendants before such adjustment shall take effect" ("the Stipulation and Order"). Plaintiffs allege that on September 14, 2012, Defendant Thomas Pawlak terminated Kramer as an employee of the corporation in violation of the Stipulation and Order. The Stipulation and Order also provides that "nothing in this Stipulation and Order shall preclude or limit in any way any and all rights the parties enjoy under New York law, including New York State Business Corporations Laws and/or the by-laws or amended stockholder agreement of Armor Electric, and the parties expressly preserve any such rights by entering into this Stipulation." Under Article 12 of the Amended Shareholder Agreement shareholders are prohibited from employment with another business within 200 miles of the corporation's offices on Elk Street in Buffalo that competes with the business of the corporation while employed by the corporation, a shareholder of the corporation and for three years following termination of the shareholders' employment with the corporation.

In support of Kramer's motion, Kramer filed the Plaintiff Richard J. Kramer's Memorandum of Law in Support of His Motion for a Temporary Restraining Order, Preliminary Injunction, and an Order of Contempt (Doc. No. 7-1) ("Kramer's Memorandum") together with Exhibits A - B ("Kramer's Exh(s) ___"), the Declaration of Richard Kramer ("Kramer Declaration") with Exhibits A and B ("Kramer Declaration Exh.(s) ___") and the Declaration of Reetuparna Dutta, Esq. in Support of Plaintiff's Motion for a Temporary Restraining Order, Preliminary Injunction, and an Order of Contempt (Doc. No. 7-4) ("Dutta Declaration") along with Exhibits A - C ("Dutta Declaration Exh(s). ___").

A hearing on Kramer's motion was conducted before the undersigned on September 19, 2012 (Doc. No. 10) ("the hearing"). Following the hearing, at the court's invitation, Kramer filed on September 19, 2012, Plaintiff Richard J. Kramer's Supplemental Memorandum of Law in Support of His Motion for a Temporary Restraining Order, Preliminary Injunction and an Order of Contempt (Doc. No. 11) ("Kramer's Supplemental Memorandum"), a Supplemental Declaration of Richard Kramer (Doc. No 11-1) ("Kramer Supplemental Declaration") and a Supplemental Declaration of Reetuparna Dutta, Esq. (Doc. No. 11-2) ("Dutta Supplemental Declaration"). On September 20, 2012, Defendants filed Defendants' Memorandum of Law in Opposition to Plaintiff Richard Kramer's Motion for a Temporary Restraining Order, Preliminary Injunction and an Order of Contempt (Doc. No. 12) ("Defendants' Memorandum"), a Declaration of Thomas Pawlak in Support of Defendants' Memorandum of Law in Opposition to Plaintiff Richard Kramer's Motion for a Temporary Restraining Order, Preliminary Injunction and an Order of Contempt (Doc. No. 12-1) ("Pawlak Declaration") attaching an Exhibit A ("Exh. A to Pawlak Declaration"), a Declaration of Fred Schmitt in Support of Defendants' Memorandum of Law in Opposition to Plaintiff Richard Kramer's Motion for a Temporary Restraining Order, Preliminary Injunction and an Order of Contempt (Doc. No. 12-2) ("Schmitt Declaration") and a Declaration of Steven K. Long, Esq. in Support of Defendants' Memorandum of Law in Opposition to Plaintiff Richard Kramer's Motion for a Temporary Restraining Order, Preliminary Injunction and an Order of Contempt (Doc. No. 12-3) ("Long Declaration") attaching Exhibit A ("Long Declaration Exh. A"). Further oral argument was deemed unnecessary. Based on the following, Kramer's motions for a temporary restraining order, preliminary injunction and contempt should be DENIED; Kramer's motions for expedited hearings are DISMISSED as moot.

DISCUSSION

The criteria for granting a temporary restraining order pursuant to Fed.R.Civ.P. 65(b) ("Rule 65(b)") or a preliminary injunction pursuant to Fed.R.Civ.P. 65(a) ("Rule 65(a)") are the same. Neopost USA, Inc. v. McCabe, 2011 WL 4368447, *3 (D.Conn. Sep't 19, 2011) (quoting Citigroup Global Markets, Inc. v. VCG Opportunities Master Fund Limited, 598 F.3d 30, 35 (2d Cir. 2010). A party seeking either form of preliminary equitable relief must "show '(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief.'" Citigroup Global Markets, Inc., 598 F.3d at 35 (quoting Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979)).

The injunctive relief requested must also be shown to be "'in the public interest.'" Carlson v. Medco Health Solutions, Inc., 2011 WL 3800017, *4 (W.D.N.Y. Aug. 29, 2011) (Arcara, J.) (quoting Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008)). It is "well-settled" that a showing of irreparable harm is a prerequisite for relief pursuant to both Rule 65(a) and 65(b). Neopost USA, Inc., 2011 WL 4368447, *3. To qualify as irreparable, the requisite harm must be "actual and imminent, not remote and speculative, and not adequately compensable by money damages." Id. (citing cases). The party seeking injunctive relief carries the burden of establishing each of these factors by a preponderance of the evidence. Carlson, 2011 WL 3800017, *4 (citing Procter & Gamble Co. v. Ultreo, Inc., 574 F.Supp.2d 339, 344 (S.D.N.Y. 2008)). "The irreparable harm requirement is the most important factor in determining whether preliminary injunct[ive] [relief] should issue." Chapman v. South Buffalo Railway Company, 43 F.Supp.2d 312, 318 (W.D.N.Y. 1999) (Arcara, J.) (bracketed material added). Moreover, absent "a showing of irreparable harm, it is not necessary to examine the second prong of the preliminary injunction requirements." Id. at 318 (citing Shady v. Tyson, 5 F.Supp.2d 102, 109 (E.D.N.Y. 1998)).

Further, as applicable to the case at bar, termination from employment alone does not constitute irreparable injury. See Moore v. Consolidated Edison Co. of New York, Inc., 409 F.3d 506, 511 (2d Cir. 2005) (holding negative employment performance evaluation that caused plaintiff to fear termination of employment was not an irreparable injury for purposes of preliminary injunction because termination of employment was insufficient); ...


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