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Ciolino v. Ameriquest Transportation Services

November 22, 2010

JOSEPH CIOLINO, PLAINTIFF,
v.
AMERIQUEST TRANSPORTATION SERVICES, INC., DEFENDANT.



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

OPINION

HONORABLE JOSEPH E. IRENAS

This case involves Plaintiff Joseph Ciolino's ("Ciolino") claim that Defendant Ameriquest Transportation Services, Inc. ("Ameriquest"), a New Jersey corporation, violated the terms of Ciolino's employment contract by diluting his ownership interest in Ameriquest.*fn1 Ciolino seeks declaratory relief that he is entitled to a current and continuing undiluted 5% interest in Ameriquest. A one day bench trial was held on October 19, 2010. The Court now issues this Opinion in accordance with Federal Rule of Civil Procedure 52(a)(1).

I.

The factual recitation that follows sets forth the uncontested background facts of this case. Findings of fact from trial will be included in the Court's analysis of Ciolino's claim.

Prior to his employment with Ameriquest, Ciolino held an executive position at Ryder Systems, with which he had been employed for twelve and a half years. (Pl's Direct Test. at 3)

In March 1998, Ciolino and Ameriquest entered into a Memorandum of Understanding ("MOU") in connection with Ciolino's acceptance of an executive position with Ameriquest.*fn2 (Compl. ¶ 5) Pursuant to the MOU, Ciolino's compensation package included a base salary, performance bonuses, commissions, and a grant of stock options. (See MOU ¶ 1) The instant dispute centers on paragraph 1D, which was the product of extensive, hand-written alterations to the original typed text:

Stock options amounting to 2% of the outstanding and issued shares as of the date of employment will be awarded to "employee" upon his first day of employment. The per share price of the options will be at the Initial Offering price (adjusted for stock splits) of $25 per share. The exercise date of the options will be five years at offering (I.P.O.) from the first day of employment. Anti dilution provisions will be incorporated with the options so that the options associated with the original 2% will not fall below that percentage of the outstanding stock prior to any Initial Public Offering of the company. Options will fully vest after five years or at initial public offering within I.P.O. Guidelines[] of employment and should the employee leave the company prior to the five year vesting period or Initial Public Offering he will forfeit all interest in the aforementioned stock options.

Additional stock options will be made available to employee as performance compensation. A pool of up to 8% of the outstanding and issued stock will be set aside for management stock options from which the performance compensation options will be issued. The 8% pool will be in addition to the aforementioned 2% stock option. Performance compensation will be awarded on [an] annual basis. Additional stock options will be made available of up to 3% of outstanding and issued stock over a 5 year period or prior to an initial public offering. Antidilution provisions will be incorporated as is stated in Item 1D regarding the original 2% stock optio[n] award . . . for a tota[l] of 5%.*fn3

(MOU ¶ 1D)

Ciolino timely exercised his stock options between February 2000 and May 2003.*fn4 (Compl. ¶ 7) His total purchases amounted to 5% of Ameriquest's stock. Subsequently, Ameriquest issued additional shares of its stock to other shareholders, but did not offer to issue additional shares to Ciolino.*fn5 (Id.) As a result, Ciolino currently owns less than five percent of the outstanding Ameriquest stock. (See id.) Ciolino's employment with Ameriquest ended in July 2004. (Pl's Direct Test. at 2)

By letter to Ameriquest dated December 22, 2008, Ciolino sought an accounting of the outstanding shares of Ameriquest stock, as well as tender of sufficient shares, the purchase of which would restore Ciolino's ownership interest to 5%. (Compl. ¶ 8) Ameriquest rejected Ciolino's requests. (Compl. ¶ 9)

Ciolino initiated the instant action by filing a two count Complaint on March 23, 2009. Count I alleges that Ameriquest breached the MOU by diluting Ciolino's stock ownership interest, and seeks a declaration that Ciolino is "entitled to a current and continuing undiluted five percent (5%) interest in Ameriquest." (Compl. ¶¶ 14, 15) Count II alleges that Ameriquest violated the New Jersey Business Corporation Act by refusing Ciolino's demand to review its books and records, and asks the Court to direct Ameriquest to provide Ciolino with access to those documents. (Compl. ¶¶ 17-20)

On August 10, 2009, this Court denied Ameriquest's Motion to Dismiss the Complaint. A bench trial was held before this Court on October 19, 2010. This Opinion constitutes the Court's findings of fact and conclusions of law pursuant to Fed. R. Civ. P. 52(a). Pierre v. Hess Oil Virgin Islands Corp., 624 F.2d 445, 450 (3d Cir. 1980)(compliance with Rule 52(a) does not ...


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