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Kaible v. Gropack

Superior Court of New Jersey, Appellate Division

June 14, 2013

GARY KAIBLE, Plaintiff-Respondent,
v.
RANDI GROPACK, an individual, ALAN GROPACK, an individual, MICHAEL LAKE, an individual, and PARTNERS IN STAFFING, INC., Defendants-Appellants.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted May 20, 2013

On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-3446-09.

Keith, Winters & Wenning, attorneys for appellants (Michael J. Wenning, on the brief).

Nicoll, Davis & Spinella, LLP, attorneys for respondent (Jack T. Spinella and Steven C. DePalma, on the brief).

Before Judges Parrillo, Fasciale and Maven.

PER CURIAM

Defendants Randi Gropack, Alan Gropack, [1] Michael Lake, and Partners In Staffing, Inc. (the "Company") (collectively, "defendants') appeal from a July 28, 2011 order entering a judgment in plaintiff's favor on liability, and a May 31, 2012 judgment awarding plaintiff damages and attorneys' fees. Defendants argue primarily that the judgments are against the weight of the evidence. We disagree and affirm.

In July 2009, plaintiff filed his complaint alleging that defendants "froze[]" him out of his own [C]ompany, N.J.S.A. 14A:12-7(1)(c) (Count One); committed fraud (Count Two); and acted with malice and intentional disregard for the consequences of their actions (Count Three). The court bifurcated liability and damages and conducted two bench trials. In July 2011, Judge John T. Mullaney, Jr., tried the case on liability and issued a written decision in plaintiff's favor. In March 2012, Judge Jamie S. Perri tried the case on damages and issued a written decision awarding to plaintiff $289, 000 in compensatory damages and awarding $22, 380.30 in post-judgment interest, and $102, 300.73 in counsel fees. We discern the following facts adduced at the trials.

In early 2007, plaintiff and Alan formed the Company, which provided information technology consulting services. The Company's original shareholders were plaintiff and Randi. Alan placed his shares in his wife's name because, according to plaintiff, Alan owed money to the IRS. Alan's name was not used in forming the business. The Company struggled in the beginning.

At some point towards the end of 2007, Alan and plaintiff offered Lake a position in the Company as an equal partner. Lake then consulted his own counsel and presented a Stock Transfer Agreement (STA) to plaintiff, which provided that Lake, Randi, and plaintiff's ownership would now each become 33.3%. Plaintiff signed the STA and returned it to Lake, and Lake subsequently informed him that it had been executed but Lake did not provide plaintiff with a copy, despite plaintiff's repeated requests. Alan became the president, Lake the CEO, and plaintiff the sales director.

In 2007, the Company performed well, and in 2008, the Company generated additional profits primarily because of one client: HSCB, which plaintiff asserts he brought to the Company in large part due to his prior years-long work experience with HSCB. According to plaintiff, he was responsible for ninety-five percent of the revenue, while both Lake and Alan made up about five percent.

Plaintiff began asking Alan for certain financial information, but Alan denied plaintiff any access to the Company's books or records and stated that plaintiff "had to focus on [their] business and that [Alan] was in control of" the books. The Company's 2008 tax disclosure shows gross income of $2, 978, 884, substantially more than the Company earned in 2007.

In January 2009, Alan and Lake approached plaintiff, informed him that the Company was experiencing "financial difficulties, " and stated that they wanted him to step down as an owner. According to plaintiff, they were "trying to push [him] out . . . to get direct relationships with [his] customers." On January 20, 2009, Lake sent plaintiff an email instructing plaintiff to continue performing his duties for the Company, but that he would no longer receive a salary; rather, he would be paid based on commission. In the email, Lake noted that there were some disagreements between plaintiff and the others. The email provides that Lake and Alan would determine plaintiff's payment structure, and that this "is a transition into a new role for [plaintiff]." Plaintiff testified that nothing in particular preceded the email – it "c[a]me out of the blue." Subsequently, Lake told plaintiff that plaintiff would no longer render services as an officer or a partner in the Company, and that he and Alan would "work out a [c]ompensation [p]lan and a [c]ommission [s]tructure for" plaintiff.

Plaintiff testified that the owners were due to be paid three days after the email, on January 23, 2009, but he never received his payment. When he asked for his check, Alan and Lake responded that they could not "believe [he would] even ask[] that"; they "told [plaintiff that he's] no longer working for the [C]ompany" and "why would [he] expect to get paid." Plaintiff expressed to both of them that they had no right to remove him. Thereafter, plaintiff left and began working for a company he used to work for (Infinite Technology), and he also drove a taxi.

Alan conceded that when they first started the Company, all of the stock was in Randi's name. Alan admitted that Randi opened the bank account for the Company, that she had signature authority to write checks on the account, that the Company used his and Randi's home address for business purposes. Alan testified that they did not terminate plaintiff, and that they never indicated to plaintiff that his corporate stock or ability to discuss corporate matters would be affected.

Lake testified that he sent the January 20 email as a "recommendation to allow [plaintiff] to earn the money that he needed to stay on board with [the C]ompany." He also stated that the email served as a "recommendation of how [plaintiff could] continue on" with the Company. Lake explained that "transition" in the email meant a change in plaintiff's "daily responsibilities" – "transition[ing] from an outside sales [position] into inside sales." According to Lake, it was a "simple recommendation."

On appeal, defendants argue that the court erred by finding (1) they violated N.J.S.A. 14A:12-7(1)(c); (2) plaintiff was a full one-third owner of the Company; (3) Randi was personally liable; and (4) the STA was binding on all of the parties. Defendants also contend that the judge erred by awarding plaintiff attorneys' fees.

Our "review of a trial judge's findings is a limited one." Bd. of Educ. of City of Clifton v. Zoning Bd. of Adjustment, 409 N.J.Super. 389, 425 (App. Div. 2009). We "will reverse only if we are convinced the trial judge's factual findings and legal conclusions are so manifestly unsupported by or inconsistent with the competent, relevant[, ] and reasonably credible evidence as to offend the interests of justice." Ibid. (internal quotation marks omitted). "However, '[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference[]' and is subject to de novo review." Ibid. (quoting Manalapan Realty v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).

"Deference is especially appropriate when the evidence is largely testimonial and involves questions of credibility." Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011) (quoting Cesare v. Cesare, 154 N.J. 394, 411-12 (1998)). Moreover, this court gives "'substantial deference to a trial court's evidentiary rulings'" and reviews such rulings under an abuse of discretion standard. Benevenga v. Digregorio, 325 N.J.Super. 27, 32 (App. Div. 1999) (quoting State v. Morton, 155 N.J. 383, 453 (1998)), certif. denied, 163 N.J. 79 (2000). "An abuse of discretion 'arises when a decision is made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis.'" Milne v. Goldenberg, 428 N.J.Super. 184, 197 (App. Div. 2012) (quoting Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002)).

We reject defendants' argument that the court erred by finding they violated N.J.S.A. 14A:12-7(1), the Oppressed Shareholder Statute, which provides in pertinent part:

(1) The Superior Court, in an action brought under this section, may appoint a custodian, appoint a provisional director, order a sale of the corporation's stock as provided below, or enter a ...

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