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New Line Books, Ltd v. Whitehurst & Clark Book Fulfillment

April 5, 2011


On appeal from the Superior Court of New Jersey, Law Division, Hunterdon County, Docket No. L-671-07.

Per curiam.


Argued January 5, 2011

Before Judges Lihotz and J. N. Harris.

Plaintiff, New Line Books, Ltd., appeals from the summary judgment dismissal of its action for breach of contract and various torts against defendant Whitehurst & Clark Book Fulfillment, Inc. Plaintiff published and sold "coffee table books." Defendant provided book storage and order fulfillment services pursuant to the parties' contract. Plaintiff alleged defendant wrongfully released plaintiff's inventory upon the direction of one officer-shareholder in the midst of an ownership dispute. The Law Division judge determined, as a matter of law, plaintiff could not maintain a cause of action because the books were shipped at the direction of a "director and/or principal" of the company. Further, the court found plaintiff's claims were precluded by "principles of judicial estoppel" and Rule 4:5-1(b)(2), because a prior suit to determine the ownership of the corporation's assets, including the inventory in question, was pending in the United Kingdom. Consequently, the court dismissed plaintiff's action without prejudice until the litigation in England was concluded.

Plaintiff argues summary judgment was inappropriately granted as the competent evidence, viewed in a light most favorable to plaintiff, created a factual dispute regarding whether defendant was justified in releasing the inventory. Contrary to plaintiff's assertions, its action was dismissed without prejudice. Consequently, this appeal is dismissed.


These facts are established by the summary judgment record. Plaintiff, a New Jersey corporation, was formed in 2004. The company is equally owned by Eyal Zeller of Israel and Grange Books, Ltd. (Grange), a British corporation owned by brothers Stephen and Michael Ash. Earlier in 2004, Zeller had separately formed a related corporation (New Line Books, Ltd., Israel), which acquired the intellectual property rights (copyrights) and publishing assets of Todtri Productions Ltd. (Todtri). Todtri was owned and operated by Robert Tod. Plaintiff, as a sales and marketing company, distributed Todtri's inventory and marketed Todtri's titles, reprinted under plaintiff's brand in the United States. Tod was designated the manager of U.S. operations and was given "full authority in all day-to-day operational matters" regarding Todtri's U.S. inventory.*fn1

Defendant, also a New Jersey corporation, is owned and managed by Brad Searles. Prior to plaintiff's creation, defendant had a contract relationship with Todtri. On April 23, 2004, Zeller, as the owner of New Line Books, Ltd., Israel, informed Searles plaintiff had acquired Todtri, including its inventory held by defendant. Thereafter, on March 1, 2005, the Ashes and Tod met with Searles to discuss Grange's interest in plaintiff. At that time, the parties executed a Warehouse Agreement (agreement) in which defendant agreed to store plaintiff's inventory and fulfill its orders. Stephen Ash signed the agreement as "V.P. New Line Books" and managing director of Grange. Zeller was plaintiff's president and Michael Ash was chairman of the board of directors, until his purported resignation on May 18, 2007.

The parties' contract obliged plaintiff to remit payments within thirty days of the date of defendant's invoice. Authorized signatories on plaintiff's checking account included Zeller, Stephen Ash, Michael Ash, and Elliot Schwartz, plaintiff's accountant. Finally, the agreement stated it was terminable by either party on sixty days notice.

On March 8, 2007, Searles sent an email to Tod and Stephen Ash giving plaintiff sixty days to bring its account within the terms of the parties' agreement by paying its outstanding balances and he cautioned plaintiff that it needed to correct its pattern of late payments that had been exhibited over the prior twelve months. Plaintiff asserts that by May 7, 2007, it had paid its account in full and accumulated a credit balance of $10,000. Despite these efforts, by May 8, defendant informed plaintiff it was terminating the parties' contract.

On May 16, 2007, Searles emailed Tod and Stephen Ash, stating "the inventory [could] be removed from our facility" once the account was settled. On behalf of plaintiff, Stephen Ash proposed to resolve any outstanding receivables in exchange for defendant's agreement to honor all existing orders. He also requested defendant suggest acceptable terms for a new agreement.

By this time, plaintiff's shareholders were in conflict. In a June 2, 2007 email, Tod wrote to Searles explaining he was "hopeful of being able to work matters out amicably with Michael & Stephen [Ash], but so far this has not happened." Tod urged defendant to continue to fulfill its orders, as the personal dispute should not interfere with "day-to-day operations" of the corporation. Tod then learned defendant already released plaintiff's inventory to Stephen Ash "at Grange's request." Tod accused Searles of "conceal[ing] the truth [] and [] conspir[ing] with Michael Ash, Stephen Ash and Grange to defraud [plaintiff]. The inventory all belongs to [plaintiff]" and defendant "[knew] all along . . . that all operations issues" were to be handled by Tod. Defendant admitted "it was [Stephen] Ash"*fn2 who came to defendant "as the authority partner" and directed disposition of the inventory. Soon thereafter, Tod filed an action against Grange in the United Kingdom, on behalf of plaintiff. Plaintiff described this suit as a "dispute among partners over corporate assets," which was not limited to, but included the inventory released by defendant.

On July 26, 2007, plaintiff filed this matter. Plaintiff's five-count complaint averred causes of action for unlawful interference with prospective economic advantage, unlawful interference with contractual relations, conversion, breach of contract, and negligence causing $2,500,000 in actual and other damages as a result of defendant's ...

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