The opinion of the court was delivered by: Cooper, District Judge
This action, which involves multiple asserted claims against several individuals and entities, arises out of an agreement pursuant to which plaintiffs were to provide technical services for a company that was yet to be formed in consideration of receiving compensation, including certain stock ownership. Discovery is complete, and certain defendants move for summary judgment on some of the claims remaining in the action at this stage. For the reasons stated, the motion is granted in part and denied in part.
Plaintiffs, Jay B. Ross ("Ross") and Protocol Electronics, Inc. (together with Ross, the "Plaintiffs"), commenced this action against defendants, Celtron International, Inc. ("Celtron, Inc."), Allen Harrington ("Harrington"), Amanda Harrington, Marius Jordaan, Ron Pienaar, Celtron International, Ltd. ("Celtron International"), Satellite Security Systems, Inc. ("Satellite"), Kenneth Eade, Cordovano and Honeck, LLP ("C&H"), Rogelio Castro, and Zirk Engelbrecht ("Engelbrecht"), alleging, inter alia, (1) breach of contract, (2) promissory estoppel, (3) fraud, (4) violations of certain provisions of the Securities Exchange Act of 1934, 15 U.S.C. § ("Section") 78 et seq., and Securities Exchange Commission Rule 10b-5 ("Rule 10b-5"), 17 C.F.R. § 240.10b-5, (5) violations of the New Jersey Racketeer Influenced Corrupt Organization Act ("NJRICO"), N.J.S.A. § 2C:41-1 et seq., (6) professional negligence, (7) negligence of officers and directors, (8) tortious interference with contract, and (9) fraudulent conveyance. (Dkt. entry no. 43, Am. Compl.) C&H filed cross claims against the other defendants seeking contribution and indemnification. (Dkt. entry no. 27, C&H Ans., Aff. Defenses., & Cross Claims, at 41-44.)
The parties entered into a stipulation on October 16, 2006, pursuant to which Plaintiffs voluntarily dismissed (1) all of their claims against Ron Pienaar, (2) all of their claims against Satellite, (3) all of their claims against C&H, (4) all of their claims against Amanda Harrington, except their fraudulent conveyance claim (count 14), (5) their fraud in securities filings claim (count 5) as to all Defendants, and (6) their professional negligence claim against Kenneth Eade (count 8). (Dkt. entry no. 64, 1st 10-16-06 Stip.) Plaintiffs and Kenneth Eade entered into a separate stipulation on October 16, 2006, pursuant to which Plaintiffs voluntarily dismissed all of their claims against Kenneth Eade. (Dkt. entry no. 65, 2d 10-16-06 Stip.) Moreover, on June 7, 2007, Plaintiffs voluntarily dismissed all of their claims against Rogelio Castro. (Dkt. entry no. 84, 6-7-07 Pl. Ltr., at 1.)
Celtron, Inc., Harrington, Celtron International, and Engelbrecht (collectively, the "Defendants") now move for summary judgment on counts 1-4, 6-7, 12, and 13 of the amended complaint. (Dkt. entry no. 68.) Plaintiffs oppose the motion. (Dkt. entry nos. 70-72.) For the reasons stated herein, the Court will (1) deny Defendants' motion for summary judgment with respect to count 1 (breach of contract), count 2 (promissory estoppel), and count 13 (tortious interference with contract), as it pertains to Engelbrecht, of the amended complaint, and (2) grant Defendants' motion for summary judgment with respect to count 3 (common law fraud), count 4 (securities fraud), count 6 (NJRICO), count 7 (NJRICO conspiracy), count 12 (negligence of directors and officers), and count 13 (tortious interference with contract), as it pertains to Harrington, of the amended complaint.
Ross is the sole shareholder of Protocol Electronics, Inc., a New Jersey corporation with its principal place of business in Lambertville, New Jersey. (Dkt entry no. 43, Am. Compl., at ¶¶ 1-2.) Ross, on behalf of Protocol Electronics, Inc., entered into a letter agreement dated May 23, 1995 ("5-23-95 Agreement") with Harrington, who was acting on behalf of "a Company known as Celtron International . . . [that was] in the process of being formed in the Republic of Ireland." (Dkt. entry no. 72, Castronovo Aff., Ex. A, 5-23-95 Agmt., at 1.) The 5-23-95 Agreement provides, inter alia, that (1) Protocol Electronics, Inc. agrees to develop a mobile credit card based cellular pay phone system ("Product") for the new Celtron entity, (2) Protocol Electronics, Inc. will transfer the intellectual property rights to the Product to the new Celtron entity, (3) the new Celtron entity agrees to pay in cash all expenses incurred during the development of the Product, and (4) the new Celtron entity agrees to "allot and issue to Jay B. Ross 15% (fifteen percentage points) of the stock of Celtron International equated in relation to the controlling stockholder". (Id.) Shortly thereafter, Celtron International Public Limited Company ("Celtron PLC") was registered in Ireland on July 18, 1995. (Dkt. entry no. 68, Rosenbach Cert., Ex. B, Celtron Int'l Registration.)
Defendants assume, for purposes of this motion only, that Plaintiffs performed the services described in the 5-23-95 Agreement. (Defs. Stmt. of Mat. Facts, at ¶ 3.) Ross stated that when he asked Harrington about the stock he was entitled to receive under the 5-23-95 Agreement, Harrington responded, "[i]t's safe. We're going to keep it offshore. I don't want anybody monkeying around with the whole stock situation here. But you know, it is clear, you know, you're supposed to get stock." (Dkt. entry no. 68, Rosenbach Cert., Ex. C, Ross Dep. Tr., at 103.) Ross also stated that it was his understanding that his stock was being held for him on the Isle of Man for tax purposes. (Id. at 104-105; see Defs. Stmt. of Mat. Facts, at ¶ 4 (noting that shares in Celtron PLC were issued to Ross but were held by a trustee located on the Isle of Man for tax purposes).) Ross asserts that he did not receive any stock certificates or actually own any shares of Celtron PLC. (Pl. Resp. Stmt. of Mat. Facts, at ¶ 4.)
Celtron PLC owned all of the stock of Celtron Technologies, Inc., a South African company that developed technology for cellular credit card phones. (Defs. Stmt. of Mat. Facts, at ¶ 5; see Pl. Resp. Stmt. of Mat. Facts, at ¶ 5.) In 1997, Celtron Technologies, Inc. filed for bankruptcy and was eventually liquidated. (Dkt. entry no. 68, Rosenbach Cert., Ex. D, Harrington Dep. Tr., at 20.) On June 9, 2000, Celtron PLC was de-registered and dissolved. (Id., Ex. E, 6-16-00 List of De-registered Irish Cos.) Less than one year later, on April 17, 2001, Celtron International was incorporated in Niue, a Polynesian country, as an international business. (Id., Ex. F, Celtron Int'l Cert. of Incorp.) Thereafter, Celtron International and Et Voila! European Cafes, Inc. ("Et Voila"), a Nevada corporation, entered into an Asset Acquisition Agreement dated June 20, 2001 ("6-20-01 Agreement"). (Id., Ex. G., 6-20-01 Agmt.) The 6-20-01 Agreement states that it is between Et Voila and Celtron PLC, but Harrington contends that this was a typographical error because the agreement was actually between Et Voila and Celtron International. (Dkt. entry no. 72, Castronovo Aff., Ex. B, Harrington Dep. Tr., at 166, 169-171.)
The 6-20-01 Agreement provides, inter alia, that "[i]n consideration of the sum of 8,000,000 shares of common stock of [Et Voila], Celtron hereby transfers all right, title and interest, including good will, trade names, technology, intellectual property, trade names, patents, copyrights, equipment, and customer lists to [Et Voila]." (Dkt. entry no. 68, Rosenbach Cert., Ex. G., 6-20-01 Agmt., at 2.) On March 28, 2002, Et Viola filed a Certificate of Amendment to its Articles of Incorporation, in which it changed its name to Celtron, Inc. (Id., Ex. H, 3-28-02 Cert. of Amend.) Celtron, Inc. later changed its name to Satellite in 2006. (Dkt. entry no. 72, Castronovo Aff., Ex. I, Engelbrecht Dep. Tr., at 10-11.) Plaintiffs assert that they "have repeatedly demanded the shares in Celtron International PLC and its successor/alter ego Defendant Celtron International, Inc., but Defendants have refused to comply with the [5-23-95 Agreement]." (Pl. Stmt. of Add'l. Mat. Facts, at ¶ 5.)
Harrington, at all times relevant to the amended complaint, was the chairman of the board of directors, the chief executive officer ("CEO"), the secretary, a director, and a shareholder of Celtron, Inc. (Dkt. entry no. 43, Am. Compl., at ¶ 7.) Harrington's wife, Amanda Harrington, was the chief financial officer and a shareholder of Celtron, Inc. (Id. at ¶ 8.) Harrington and Amanda Harrington reside in South Africa. (Id. at ¶¶ 7-8.) Moreover, in 2001 and 2002, Engelbrecht was an indirect investor in Celtron, Inc. (Defs. Stmt. of Mat. Facts, at ¶ 14; see Pl. Resp. Stmt. of Mat. Facts, at ¶ 14 (stating that Engelbrecht was the "financier" of Celtron, Inc.).) After Celtron, Inc. became Satellite in January of 2006, Engelbrecht became chairman of the board of directors. (Pl. Resp. Stmt. of Mat. Facts, at ¶ 15; see Defs. Stmt. of Mat. Facts, at ¶ 15 (noting that Engelbrecht became a director of Celtron, Inc. in January of 2006).) Engelbrecht resides in Beverly Hills, California. (Dkt. entry no. 28, Ans., at ¶ 6; Dkt. entry no. 50, Ans. to Am. Compl.)
I. Summary Judgment Standard
Rule 56(c) provides that summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The party moving for summary judgment bears the initial burden of showing that there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the movant has met this prima facie burden, the non-movant "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). A non-movant must present actual evidence that raises a genuine issue of material fact and may not rely on mere allegations. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
The Court must view the evidence in the light most favorable to the non-movant when deciding a summary judgment motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). At the summary judgment stage, the Court's role is "not . . . to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249. Under this standard, the "mere existence of a scintilla of evidence in support of the [non-movant's] position will be insufficient [to defeat a Rule 56(c) motion]; there must be evidence on which the jury could reasonably find for the [non-movant]." Id. at 252. "By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Id. at 247-48 (emphasis in original). A fact is material only if it might affect the action's outcome under governing law. Id. at 248. "[T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Id. at 249-50 (internal citations omitted).
II. Summary Judgment Standard Applied Here
Plaintiffs allege that (1) Celtron International and its successors, Et Voila and Celtron, Inc., entered into a valid and binding contract with Protocol Electronics, Inc., (2) Ross is an express third-party beneficiary of that contract, (3) they fully performed their obligations under the contract, and (4) Celtron International and its successors failed to perform their obligations under the contract. (Dkt. entry no. 43, Am. Compl., at ¶¶ 94-97.) Plaintiffs further allege that Harrington was Celtron PLC's promoter at the time the 5-23-95 Agreement was executed, and thus, he is also liable for any breach of that agreement. (Pl. Br., at 7.) Similarly, Plaintiffs assert that Celtron, Inc. adopted and ratified the 5-23-95 Agreement because Harrington, the chairman and CEO of Celtron, Inc. repeatedly told Ross in email exchanges that he was entitled to 1.8 million shares of Celtron, Inc. under the 5-23-95 Agreement. (Id. at 8-9.) Lastly, Plaintiffs argue that because Celtron, Inc. has the same leadership, controlling shareholders, and products that Celtron, PLC had before it de-registered, these entities "are mere alter egos of each other." (Id. at 9-10.)
Celtron, Inc. and Celtron, International, in contrast, argue that they did not breach the 5-23-05 Agreement because (1) Ross was issued stock in Celtron PLC, but this stock lost all of its value when Celtron PLC de-registered in 2000, (2) Ross lost his entitlement to any stock when Celtron PLC de-registered in 2000, and (3) Celtron, Inc. is not a successor in interest to Celtron PLC, and thus, it has no duty to perform Celtron PLC's contractual obligations. (Defs. Br., at 2-3.) Thus, the parties do not dispute the meaning of the 5-23-95 Agreement's terms, but instead disagree about whether Celtron International and Celtron, Inc. may be held liable under that agreement, and whether the agreement entitles Ross to stock in either entity.
Based on the evidence presented by the parties in this motion, we find that genuine issues of material fact preclude summary judgment on Plaintiffs' breach of contract claim insofar as it is asserted against Celtron International and Celtron, Inc. Specifically, material factual issues exist regarding whether (1) Celtron PLC continued using the credit card based cellular phone technology that Celtron Technologies, Inc. developed after Celtron Technologies, Inc. liquidated its assets, (2) Celtron PLC had any assets other than the stock of Celtron Technologies, Inc., (3) Celtron PLC continued to conduct business after its major asset, Celtron Technologies, Inc., liquidated, (4) Celtron International ever owned any assets previously owned by Celtron PLC, (5) Celtron International acquired approximately 57% of the stock of Et Voila on June 11, 2001 pursuant to a contract dated February 13, 2001, (6) Et Voila acquired certain assets of either Celtron PLC or Celtron International under the 6-20-01 Agreement, and (7) Celtron, Inc. is a successor of Celtron International. (See Defs. Stmt. of Mat. Facts at ¶¶ 5, 7-8, 10-11; Pl. Resp. Stmt. of Mat. Facts at ¶¶ 5, 7-8, 10-11.) Therefore, the Court will deny the motion for summary judgment on Plaintiffs' breach of contract claim insofar as it is asserted against Celtron International and Celtron, Inc.
The Court will also deny the motion for summary judgment on Plaintiffs' breach of contract claim insofar as it is asserted against Harrington. The 5-23-95 Agreement does not contain a choice of law provision. Under New Jersey choice of law rules, the Court must use "the law of the place of contracting to determine the validity of a contractual provision." Farris Eng'g Corp. v. Serv. Bur. Corp., 406 F.2d 519, 520 (3d Cir. 1969) (noting that a New Jersey District court must apply New Jersey's choice of law rules). "New Jersey choice of law principles require a governmental interest analysis, in which the forum court compares the interest of the states whose laws are potentially involved in the underlying action and determines which state has the greatest interest in having its laws applied." ASCO Power Tech., L.P. v. PEPCP Tech., L.L.C., No. 03-1942, 2006 U.S. Dist. LEXIS 76368, at *11 (D.N.J. Oct. 19, ...