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Knutson v. G2 FMV, LLC

United States District Court, S.D. New York

January 3, 2018


          Attorneys for Plaintiff LAWRENCE R. GELBER Lawrence R. Gelber, Esq.

          Attorneys for defendants BOND SCHOENECK & KING, PLLC Dennis A. Lalli, Esq.


          Sweet, D.J.

         Defendants G2 FMV, LLC ("FMV"), G2 Capital Markets, LLC ("G2CM"), and J. Todd Morley ("Morley" and, together with FMV and G2CM, the "New Defendants") have moved to dismiss the Second and Fifth Claims of the First Amended Complaint ("FAC") of Plaintiff Robert Knutson ("Knutson" or the "Plaintiff") pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendants G2 Investment Group, LLC ("G2IG"), FPCG LLC d/b/a Forbes Private Capital Group ("FPCG"), StoneCastle Securities LLC ("StoneCastle"), Robert Holmen ("Holmen"), and John Ou ("Ou" and, together with GI2G, FPCG, StoneCastle, and Holmen, the "Original Defendants, " and, together with the New Defendants, the "Defendants") have moved for a judgment on the pleadings on the Second and Fifth Claims of the FAC pursuant to Federal Rule of Civil Procedure 12(c). Lastly, Defendants have moved to dismiss the First and Third Claims of the FAC as against Morley, Holmen, and Ou pursuant to Federal Rule of Civil Procedure 12(b) (6).

         Based on the conclusions set forth below, Defendants' motions are granted.

         Prior Proceedings

         On March 3, 2014, Plaintiff filed his Complaint. Dkt. No. 2. The Complaint alleged six claims for relief: (1) a violation of the Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12101 et seq. (the "ADA"); (2) discrimination under the Age Discrimination in Employment Act of 1967, 29 U.S.C. §§ 623 et seq. (the "ADEA"); (3) discrimination under the New York State Human Rights Law, N.Y. Exec. Law § 296 (the "NYSHRL"); (4) breach of contract; (5) breach of the implied covenant of good faith and fair dealing; and (6) intentional and/or negligent misrepresentation. See generally Dkt. No. 2. Several attorney substitutions and fitful discovery proceedings ensued. See Dkt. Nos. 7, 39, 43-53, 63, 65, 78.

         On July 8, 2017, Plaintiff moved to amend his Complaint, which was granted on September 6, 2017. Dkt. Nos. 92, 108. Plaintiff's FAC added several additional Defendants and alleged five claims for relief: (1) violation of the ADA; (2) fraudulent inducement; (3) age discrimination under the ADEA; (4) age discrimination under the NYHRL; and (5) breach of contract and the implied covenant of good faith and fair dealing.

         On October 19, 2017, Defendants filed the instant motions, which were heard and marked fully submitted on November 15, 2017.


         The Complaint sets forth the following allegations, which are assumed true for the purpose of this motion to dismiss. See Koch v. Christie's Int'l PLC, 699 F.3d 141, 145 (2d Cir. 2012).

         As useful background, it is worth first outlining the interplay between the different corporate defendants. FMV was the parent company of G2IG, and G2CM was GI2G's wholly-owned subsidiary. FAC ¶¶ 12, 20. FPCG was G2IG's wholly-owned distribution business. FAC ¶ 25. FMV and FPCG were founded by Morley. FAC ¶¶ 17, 25, 39. StoneCastle is a Financial Industry Regulatory Authority ("FINRA") registered broker-dealer through which G2IG and G2CM passed securities transactions, as G2IG and G2CM were not FINRA registered. FAC ¶¶ 18, 22, 28. Holmen was StoneCastle's Chief Compliance Officer ("CCO") and Chief Financial Officer ("CFO"). FAC ¶ 30. Ou possessed supervisory capacity at ¶ 2IG and was a registered representative of StoneCastle. FAC ¶¶ 35, 37.

         Knutson started in the financial services industry as a broker at Merrill Lynch in 1977. FAC ¶ 43. Over decades in the industry, Knutson developed a successful book of business and was regularly engaged by large, financially sophisticated institutional clients. FAC ¶ 46. Knutson also suffers from several physical ailments, including rheumatoid arthritis and diverticulitis, and has a pronounced shuffle which at times requires use of a cane. FAC ¶¶ 7-8.

         By August 2011, Knutson was a senior vice president at the Royal Bank of Canada ("RBC") and earned over $300, 000 a year. FAC ¶¶ 44, 46. Around this time, Knutson was approached by Holmen, who solicited Knutson to leave RBC to work for G2CM.[1] FAC ¶ 46. As part of the sales pitch, Holmen made the following representations about G2CM: that it was the "next Goldman Sachs" and growing fast, FAC ¶¶ 48, 95(a), 95(o); that it was "extremely" well-capitalized and had access to substantial additional capital, FAC ¶¶ 50, 95(b)-(c); that is was well-organized and well-run and with a large aviation-based portfolio, FAC ¶¶ 95(d), 95(n); that it had a substantial list of Forbes clients that Knutson could access and that information was regularly provided, FAC ¶¶ 95(e), 95(i); that G2CM was hiring respected and knowledgeable traders, FAC ¶¶ 95(g), 95(1);. that Knutson could keep his sales assistant, FAC ¶¶ 66, 95(h); that Knutson could work for FPCM, have autonomy in cross trades, and continue to speak to the press, FAC ¶¶ 53, 95(f), 95(m); that trades would be backed by a subsidiary of Merrill Lynch, FAC ¶ 95(j); and that Morley would be available to meet with major clients to assist in closing transactions and developing relationships, .FAC ¶ 74. Based on these representations, Knutson left RBC and started working at ¶ 2CM in September 2011. FAC ¶¶ 59-60, 99.

         Holmen's solicitation of Knutson was with Morley's knowledge. FAC ¶¶ 58, 98. At the time of Holmen's representations to Knutson, Holmen knew that the statements were false. FAC ¶¶ 47, 98. As opposed to $52 million, as stated, in fact the company only had net capital amounting to $1.2 million. FAC ¶ 52. Moreover, Holmen did not intend to grant Knutson any autonomy while employed. FAC ¶ 54.

         In October 2011, Holmen informed Knutson that Knutson would not be permitted to cross corporate bond trade without prior approval of the company's Corporate Bond Private Placement Department, which went against a "trading authorization list" issued by the company that should have allowed Knutson to make such trades.[2] FAC ¶¶ 61-62. Knutson was also asked to report to Ou. FAC ¶ 64. Knutson viewed both as delaying his trades and negatively affecting his business. FAC ¶ 63. In December 2011, Holmen terminated Knutson's assistant. FAC ¶ 66.

         Knutson found the environment at ¶ 2CM challenging to conduct business. Ou refused to share information with Knutson and harassed Knutson, such as using foul language and calling Knutson "old man." FAC ¶¶ 67, 72, 77. Morley cancelled meetings with clients that Knutson would set up, which embarrassed Knutson and affected his business. FAC ¶¶ 75-76. While working at ¶ 2CM, Knutson learned that the company had no mortgage or corporate bond inventory. FAC ¶ 68. In contrast to pre-hire representations, G2CM also delayed Knutson's expense reimbursements and changed Knutson's health insurance policy is a less favorable option. FAC ¶ 71.

         In February 2012, Knutson was diagnosed with diverticulitis, which required Knutson to go to the hospital for several days. FAC ¶ 72. While at the hospital, Ou harassed Knutson and demanded to know when Knutson would return. FAC ¶¶ 79-80. Knutson returned from the hospital, but continued stress caused by Ou required Knutson to return to the hospital for three days. FAC ¶ 80. During that three day readmission, Holmen worked with Ou to reassign Knutson's accounts to other employees. FAC ¶ 81. Around this time, Knutson filed a complaint with the Human Resources Department, which had no results. FAC ¶ 82.

         In March 2012, Knutson was diagnosed with Lyme disease. FAC ¶¶ 72, 83. While at work, Ou took a photograph of Knutson napping in his chair, a physical ...

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