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Hopkins v. Duckett

November 21, 2006

STEPHEN J. HOPKINS, PLAINTIFF,
v.
DENNIS J. DUCKETT, MICHAEL R. D'APPOLONIA, KEVIN I. DOWD, HOWARD S. HOFFMANN, AND NIGHTINGALE & ASSOCS., LLC. DEFENDANTS/THIRD PARTY PLAINTIFFS,
v.
STEPHEN HOPKINS ASSOCIATES, INC. THIRD PARTY DEFENDANT.



The opinion of the court was delivered by: Lifland, District Judge

(CLOSED)

OPINION

This matter is before the Court on Defendants' motions to dismiss, and motions for summary judgment on, Plaintiff Stephen J. Hopkins's ("Hopkins" or "Plaintiff") various New Jersey statutory and common law claims, and his claim under the Employee Retirement Income Security Act ("ERISA"). For the reasons that follow, the Court will grant Defendants' motion for summary judgment on Hopkins's ERISA claim. Because there are no remaining claims in this case over which the Court has original federal subject-matter jurisdiction, the Court declines to exercise supplemental jurisdiction pursuant to 28 U.S.C. § 1367(c)(3), and will dismiss, without prejudice, the remainder of Plaintiff's complaint, and Defendants' counterclaims and Third Party Complaint.

I. Background

Except where noted, the following facts are undisputed. Hopkins is a former member and shareholder of Defendant Nightingale & Associates ("Nightingale" or "the LLC"), a Delaware limited liability company ("LLC") with its principal place of business in Connecticut. Nightingale is a turnaround management consulting firm; it advises financially troubled businesses, their creditors, and insurance companies. The individually named Defendants, Dennis J. Duckett ("Duckett"), Michael R. D'Appolonia ("D'Appolonia"), Kevin I. Dowd ("Dowd"), and Howard S. Hoffmann ("Hoffmann"), are members and shareholders of Nightingale.

Nightingale became an LLC in 1997. At that time Hopkins, through his own closely-held corporation, Stephen Hopkins Associates, Inc. ("SHA"), served as Nightingale's managing member, and owned a 25% share of the LLC.*fn1 Hopkins provided consulting services to Nightingale as an independent contractor pursuant to a Services Agreement between SHA and Nightingale. The Services Agreement delineates the terms and conditions of Hopkins's work for the LLC.

On May 14, 2001, Nightingale's members, including Hopkins, unanimously voted to amend the LLC's operating agreement ("the Amended Operating Agreement"). Among other changes, the amendments reduced Hopkins's share of Nightingale to 15%, and reduced the number of votes required for a major business decision to 60% of Nightingale's shares. Thus, Hopkins no longer retained a blocking vote. He also relinquished his role as managing member.

Hopkins claims that his approval of the Amended Operating Agreement was conditioned upon Defendants' agreement to, and performance of, the terms of a Retirement Agreement he negotiated with Defendants the previous fall. The terms of the agreed-upon Retirement Agreement entitled him to year-end distributions from Nightingale for two years following his anticipated retirement on December 31, 2002--a retirement date that Defendants agreed to be "flexible" with, "both earlier and later." (Second Amend. Compl., Ex. C.) Hopkins claims that Defendants also agreed to continue giving him certain responsibilities at Nightingale both before and after his retirement.

Hopkins asserts that he was not given the responsibilities he was promised. Due to his fear of being excluded from Nightingale's work after retirement, and due to his improved health and changed financial situation, Hopkins informed Defendants in September 2002 that he no longer intended to retire on December 31, 2002. Defendants then allegedly attempted to pressure Hopkins into retiring by telling him he was too old to continue with the LLC, and by threatening to change the Amended Operating Agreement in order to make it easier to remove Hopkins without cause, and easier to decrease a removed member's entitlement to distributions. Hopkins persisted in his refusal, and the Amended Operating Agreement was in fact amended as threatened at a September 30, 2002 meeting over Hopkins's dissenting vote ("Second Amended Operating Agreement"). Under the new amendments, six of Nightingale's eight members, including Duckett, D'Appolonia, Dowd, and Hoffmann, voted on November 15, 2002 to give notice to Hopkins of their intention to vote on his removal as a member. Their stated reasons were their lack of confidence in Hopkins's work, the disruption caused by the parties' strained relations, and Hopkins's failure to retire.

Hopkins initiated this suit on November 22, 2002. His 12-count Second Amended Complaint asserts claims under the New Jersey Oppressed Minority Shareholder Statute, N.J.S.A. § 14A:12-7, under the New Jersey Law Against Discrimination, N.J.S.A. § 10:5-12, various breach of contract claims, fraud, retaliation, conversion, breach of fiduciary duty, and an ERISA claim. By motion for preliminary injunction, Hopkins sought to bar the Defendants from removing him and to have the Court appoint a custodian to manage Nightingale's affairs. Hopkins's motions were denied. On October 31, 2003 the members of Nightingale voted to remove Hopkins as a member. (Second Amend. Compl. ¶ 86.) His membership interest was purchased and presently is being held in escrow.

On February 26, 2003, Defendants filed counterclaims against Hopkins, and a Third Party Complaint against SHA, asserting various state law breach of contract and fiduciary duty claims. Defendants now move to dismiss Hopkins's claims, and for summary judgment. Hopkins responded with a cross-motion to dismiss the counterclaim and Third Party Complaint.

II. Discussion

A. Hopkins's ERISA Claim

Hopkins claims that by virtue of the Retirement Agreement, Defendants owed him a fiduciary duty under ERISA, and breached that duty by allegedly demanding that he either retire by December 31, 2002 or face removal from ...


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