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Archbrook Laguna, LLC v. Marsh

June 17, 2010

ARCHBROOK LAGUNA, LLC, FORMERLY KNOWN AS BDI LAGUNA, INC., PLAINTIFF-APPELLANT,
v.
CHARLES L. MARSH, DEFENDANT/THIRD-PARTY PLAINTIFF-RESPONDENT,
v.
PETER CASTENFELT, JAY WERTHEIMER, KLAUS KIRCHBERGER AND PETER HANDY, THIRD-PARTY DEFENDANTS.



On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-8851-07.

The opinion of the court was delivered by: Fisher, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued March 3, 2010

Before Judges Fisher, Sapp-Peterson and Espinosa.

In this appeal, we conclude that the trial judge correctly dismissed this action pursuant to the entire controversy doctrine because plaintiff failed to pursue the claims asserted here in an action previously pending in Georgia state court.

BDI Laguna, Inc. (BDIL) commenced this action against Charles L. Marsh, its former president and a resident of Georgia. This action was subsequently dismissed by way of summary judgment. Because the standards governing summary judgment entitle the motion's opponent to have the facts viewed in the light most favorable to it, Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995), we accept the description of the relationship of the various business entities contained in BDIL's pleadings.*fn1

On April 13, 2004, more than three years before the suit at hand was commenced, Marsh filed a complaint in the Superior Court of Fulton County, Georgia, against BDIL. Marsh also asserted claims against Jay L. Wertheimer, who was alleged to have been the chief executive officer and primary shareholder of BDI Distributors, Inc., BDIL's predecessor, when in 1997 he approached Marsh and solicited him to abandon his business and accept a job with BDI Distributors, Inc. According to the Georgia complaint, Wertheimer enticed Marsh by offering him, among other things, the position of president with broad powers and a right to remain in Atlanta absent his express consent. In addition, Wertheimer allegedly promised Marsh that he would receive at least 8% and up to 15% of the stock of BDI Distributors, Inc. when it was sold, i.e., what the parties have referred to as the "commission promise." Marsh accepted. As the company grew, Marsh was allegedly promised an additional 2% of the company's stock ("the stock promise") in order to entice him to remain in the event of a merger. The Georgia suit commenced by Marsh asserted the breach of these two alleged promises.

In April 2006, BDIL filed a counterclaim against Marsh in the Georgia suit. The counterclaim's first two counts asserted that Marsh breached his fiduciary duty and committed fraud by abusing his expense account. The third and last count asserted that after Marsh was asked to explain his alleged expense account "indiscretions," Marsh filed the Georgia suit in retaliation; the counterclaim's third count also alleged that Marsh's complaint was frivolous and sought the fees, expenses and costs incurred by BDIL in defending the action.

On December 3, 2007, BDIL commenced the action in the Law Division, alleging that Marsh breached his fiduciary duties and committed fraud because he failed to tell BDIL about the commission promise, which was the subject of the Georgia action, and allowed BDIL to enter into an indemnification agreement with Wertheimer to protect Wertheimer against certain types of claims that might be asserted against him. BDIL alleged in its New Jersey complaint, after expressly referring to the Georgia action, that:

5. . . . Marsh fraudulently concealed this claim for substantial stock ownership against Wertheimer throughout his employment with BDIL. Moreover, Marsh concealed this potential claim from BDIL's management even when BDIL negotiated and entered into a 2003 Indemnification Agreement . . . with Wertheimer. Marsh was directly and personally involved in negotiating this agreement. The Indemnification Agreement contractually required BDIL to not only pay for any legal fees Wertheimer incurred, but also indemnify Wertheimer for judgment against him. Marsh's concealment from BDIL of his potential claim for the 8 to 15% interest against Wertheimer constitutes a breach of his fiduciary duty as a corporate officer under the laws of New Jersey and the State of Georgia. . . .

6. The Indemnification Agreement Marsh negotiated on behalf of BDIL with Wertheimer provided that the Company would indemnify Wertheimer in the event that claims were asserted against him and identified the categories of claims covered by the Indemnification Agreement. As an officer of BDIL, Marsh had a fiduciary duty to warn the company that he had a potential claim against Wertheimer which would trigger the company's indemnification obligations under the agreement. If Marsh had disclosed this potential claim against Wertheimer, BDIL would have removed disputes relating to that claim from the scope of the indemnity agreement or would have declined to enter into the Indemnification Agreement altogether. Marsh's failure to disclose this claim to BDIL constitutes a breach of his fiduciary duty to the Company and also constituted a fraud upon the Company.

7. Marsh's breach of his fiduciary obligation and fraud . . . has directly resulted in: (1) BDIL already incurring more than $700,000 in legal fees under the Indemnification Agreement; and (2) the possibility of additional legal fees and expenses if Marsh's claims filed in Georgia against Wertheimer continue to be prosecuted by Marsh.

On January 28, 2008, nearly two months after filing its New Jersey complaint, BDIL filed a stipulation dismissing its pending counterclaim in ...


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