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Seidenberg v. Summit Bank

February 28, 2002

RICHARD SEIDENBERG AND ERIC RAYMOND, PLAINTIFFS-APPELLANTS,
v.
SUMMIT BANK, CORPORATE DYNAMICS AND PHILADELPHIA BENEFITS CORPORATION, DEFENDANTS-RESPONDENTS.



On appeal from Superior Court of New Jersey, Law Division, Burlington County, Docket No. BUR-L-2173-00.

Before Judges King, Winkelstein and C.S. Fisher.

The opinion of the court was delivered by: Fisher, J.S.C. (t/a)

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued November 15, 2001

After settling all their disputes concerning the express terms of their commercial transaction, plaintiffs filed a second amended complaint alleging a breach of the implied covenant of good faith and fair dealing. The Law Division dismissed the action, finding that plaintiffs failed to state a claim upon which relief may be granted. Because we conclude the assessment of the validity of the claim was both erroneous and premature, we reverse.

I.

Plaintiffs' second amended complaint was dismissed pursuant to R. 4:6-2(e) for failure to state a claim upon which relief may be granted. The invocation of that rule requires an assumption that the allegations of the pleading are true and affords the pleader all reasonable factual inferences. Independent Dairy Workers Union v. Milk Drivers Local 680, 23 N.J. 85, 89 (1956). This requires that the pleading be searched in depth and with liberality to determine whether a cause of action can be gleaned even from an obscure statement. Printing Mart-Morristown v. Sharp Elec. Corp., 116 N.J. 739, 746 (1989). Because R. 4:6-2(e) requires that the pleading be generously examined and that all matters outside the pleadings be excluded, the motion is granted only in rare instances. See F.G. v. MacDonell, 150 N.J. 550, 556 (1997). Indeed, when the legal basis for the claim emanates from a new or evolving legal doctrine, even greater hesitancy is warranted. Appellate review of an order dismissing an action on this basis is governed by a standard no different than that applied by the trial courts. Accordingly, we base our review of the order in question in light of the facts pleaded by plaintiffs and the reasonable inferences that may be drawn therefrom.

II.

Plaintiffs Richard Seidenberg and Eric Raymond formed two Pennsylvania corporations – Corporate Dynamics and Philadelphia Benefits Corporation – in 1971 and 1985, respectively. These entities marketed, provided consultation services and sold health insurance benefit plans to employers. Plaintiffs were the sole shareholders of the two entities.

In 1997, plaintiffs sold their stock in Corporate Dynamics and Philadelphia Benefits Corporation (hereafter collectively referred to as "the brokerage firms") to defendant Summit Bank ("Summit") in exchange for 445,000 shares of the common stock of Bancorp Corporation, Summit's parent corporation*fn1; in addition, plaintiffs agreed to place 49,500 shares of Bancorp Corporation into escrow until December 12, 2001 as security for any existing but unknown or undisclosed liabilities. As part of the transaction, plaintiffs retained their positions as executives of the brokerage firms and also were to be placed in charge of the daily operations of any other employee benefits insurance business which might be acquired by Summit.

Plaintiffs' employment agreements with Summit acknowledged the parties' joint obligation to work together with respect to the future performance of the brokerage firms:

Summit and [plaintiffs] shall work together to formulate joint marketing programs which will give [the brokerage firms] access to the market resources of Summit to the extent permitted by applicable laws, regulations and administrative policies and guidelines, including but not limited to those relating to customer privacy, issued by Federal or state regulatory authorities or agencies or self-regulatory organizations or financial industry trade groups.

In the second amended complaint, plaintiffs contend, among other things, that Summit (a) failed to allow for the creation of a close working relationship between the entities, (b) failed to create an effective cross-selling structure to generate leads, (c) failed to introduce the brokerage firms to vendors doing business with Summit as a way of increasing their potential customer base, (d) failed to develop existing relationships (referred to in the pleadings as "low hanging fruit") which could easily be picked and turned into clients for the brokerage firms, (e) failed to provide plaintiffs with information necessary to provide full advice concerning health and other employee benefits, thereby precluding plaintiffs from quoting coverage to Summit, (f) unreasonably delayed a direct mail campaign, (g) thwarted an agreed-upon joint marketing campaign, and (h) failed to advise of Summit's pursuit of the acquisition of another entity which plaintiffs claim would fall within their ambit and right to operate.

Plaintiffs claimed that Summit's lack of performance in these areas impacted their reasonable expectations of compensation and future involvement. For example, plaintiffs' salaries were reduced in exchange for a bonus to which they would be entitled based on the growth of the brokerage firms. They claim this was agreeable due to the anticipation of a substantial bonus upon the growth of the business. Accordingly, the allegations contained in the second amended complaint, briefly outlined above, are linked to plaintiffs' compensation. In addition, plaintiffs claim there was an expectation of continued employment since their employment agreements contained a minimum term of five years and provided also that, in the absence of termination by Summit, employment would continue until each reached the age of 70.

Plaintiffs assert that these allegations give rise to an inference of bad faith. They claim that these circumstances demonstrate that Summit "never had any intention to perform to begin with," and that Summit "from the start, . . . never [was] committed to developing the business with [plaintiffs], but rather simply wanted to acquire the business and seek out their own broker to run it or grow it." In December 1999, Summit terminated plaintiffs from their positions, triggering this lawsuit.

III.

On February 10, 2000, plaintiffs filed a complaint in the Chancery Division. After the joinder of issue, the parties reached a partial settlement of their disputes and, on July 25, 2000, a consent order was entered which eliminated all claims except plaintiffs' claim of a breach of the implied covenant of good faith and fair dealing. With the resolution of the equity claims, the Chancery judge, as was his prerogative, transferred the matter to the Law Division. On August 16, 2000, plaintiffs filed a second amended complaint and defendants quickly filed a motion to dismiss for failure to state a claim upon which relief may be granted, pursuant to R. 4:6-2(e).*fn2

The motion was granted. In essence, the Law Division judge held that plaintiffs were not claiming a breach of the implied covenant of good faith and fair dealing but were seeking to prove the existence (and obtain enforcement) of an oral agreement allegedly made beyond the four ...


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