On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-2804-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Skillman, Fuentes, and Gilroy.
Plaintiffs are shareholders of Jersey Partners, Inc., a New York holding company that owns 43% of the stock of GFI Group, Inc. (GFI), a Delaware corporation, that engages through subsidiaries in the institutional brokerage of financial products as an inter-dealer broker. Plaintiff Michael Gooch is the Chairman and CEO of GFI, plaintiff Colin Heffron is the President and a Director of GFI, and most, if not all, of the other plaintiffs are also high-level GFI executives. GFI's principal office is in New York City, and it has other offices throughout the world.
Defendant Donald Fewer also is a shareholder of Jersey Partners and was formerly a high-level executive of GFI. In July 2000 Fewer entered into an employment agreement with Jersey Partners naming him President and Senior Managing Director of GFI. This agreement was subsequently amended to designate GFI as Fewer's employer. The agreement provided that it would be governed by New York law and that "any dispute arising from Fewer's employment" would be subject to the exclusive jurisdiction of the Supreme Court of the State of New York, County of New York or the United States District Court of the Southern District of New York.
In December 2000 and June 2003, Fewer entered into option agreements with Jersey Partners to purchase shares of its stock. These option agreements, like Fewer's employment agreement, provided that they should be construed in accordance with New York law and that any disputes arising thereunder would be subject to the exclusive jurisdiction of the Supreme Court of New York or the United States District Court for the Southern District of New York. In June 2006 Fewer became a shareholder of Jersey Partners by exercising those options.
Before Fewer became a shareholder, the persons who were then shareholders, consisting of a majority of the plaintiffs in this action, entered into a shareholders' agreement that, like Fewer's employment agreement and the option agreements allowing Fewer to purchase shares of Jersey Partners stock, provided that it would be governed by New York law and that any dispute arising thereunder would be subject to the jurisdiction of the Supreme Court of New York or the United States District Court for the Southern District of New York. The agreement also provided that persons who subsequently acquired shares of Jersey Partners as a result of the exercise of stock options would be subject to the shareholders' agreement. The first option agreement Fewer subsequently entered into provided that "[g]rantee [Fewer] specifically acknowledges that upon exercise of the Option, Grantee shall receive the New Shares subject to the terms and conditions of the Stockholders Agreement."
On April 14, 2008, Fewer left his employment with GFI and allegedly went to work for one of GFI's competitors.*fn1 A few days later, twenty-two GFI credit department employees also left GFI's employ and began to work for the same competitor.
On the same day he left his employment with GFI, Fewer filed an action in the Supreme Court of New York, County of New York, for a declaratory judgment that he had been constructively discharged by GFI and consequently was not required to comply with the restrictive covenants in his employment agreement. Fewer named both GFI and Jersey Partners as defendants in that action.
On May 5, 2008, GFI and Jersey Partners filed an answer and counterclaims against Fewer in the New York action. Those counterclaims asserted that Fewer had not only breached his employment agreement with GFI but also breached his option agreements with Jersey Partners and breached his fiduciary duties and duty of loyalty to GFI. Defendants' answer also asserted as an affirmative defense "[Fewer's] claims are barred in whole or in part by his breach of fiduciary duty to [GFI and Jersey Partners] and the companies they control."
Around the same time it filed these counterclaims, GFI also submitted an arbitration claim to the Financial Industry Regulatory Authority (FIRA) against Fewer, the competitors of GFI that Fewer and the other former GFI employees allegedly went to work for, and various individuals. GFI alleged in its statement of arbitration claim that Fewer had provided GFI's confidential information to, and conspired with, the other respondents to solicit the departure of a significant number of GFI employees, in violation of his fiduciary duties to GFI. At some point, GFI dismissed its claims against Fewer and some of the other individual respondents in the arbitration proceeding.
The Supreme Court of New York stayed the action brought in that court pending the resolution of this arbitration proceeding. However, that stay was subsequently reversed by the Appellate Division of the Supreme Court of New York, Fewer v. GFI Group Inc., 873 N.Y.S.2d 580 (App. Div. 2009), and Fewer, GFI and Jersey Partners are currently engaged in discovery in the pending action before the Supreme Court of New York. The arbitration proceeding is also still pending.
On June 17, 2008, plaintiffs filed this action against Fewer in the Law Division alleging breach of Fewer's fiduciary duties as a shareholder in Jersey Partners to plaintiffs as other shareholders in the same closely held corporation. The complaint alleged that Fewer breached those duties by conspiring with GFI's competitor to misappropriate ...