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Kehler v. Albert Anderson, Inc.

United States District Court, D. New Jersey

April 18, 2017

NICHOLAS J. KEHLER, DIRECTLY AGAINST AND DERIVATELY ON BEHALF OF ALBERT ANDERSON, INC. D/B/A CONNECTED ENTERTAINMENT, Plaintiff,
v.
ALBERT ANDERSON, INC. d/b/a CONNECTED ENTERTAINMENT and ALBERT ANDERSON, Defendants.

          Christopher Joseph Macchi, Esq. MACCHI LAW GROUP LLC Attorney for Plaintiff

          Georgios Farmakis, Esq. WEIR & PARTNERS LLP Attorney for Defendants

          OPINION

          JEROME B. SIMANDLE Chief U.S. District Judge

         I. INTRODUCTION

         Plaintiff Nicholas J. Kehler (hereinafter, “Plaintiff”) brings this action arising out of a turbulent former employment relationship between Plaintiff and Defendant Albert Anderson, Inc., d/b/a Connected Entertainment and Defendant Albert Anderson (hereinafter, “Mr. Anderson”), the principal majority owner of Connected Entertainment (collectively, “Defendants”). Plaintiff asks the Court for a declaratory judgment that he is the 49% minority equity owner of Connected Entertainment, while also bringing direct and derivative claims against Defendants relating to compensation arising Plaintiff's termination from the company. Defendants move to dismiss Plaintiff's Complaint under Rule 12(b)(1), Fed.R.Civ.P. for lack of subject matter jurisdiction and under Rule 12(b)(6), for failure to state a claim. For the following reasons, the Court grants in part and denies in part Defendants' motion.

         II. BACKGROUND[1]

         A. Factual Background

         On October 3, 2012, Mr. Anderson hired Plaintiff as a Sales Associate with Connected Entertainment, a photo booth rental company. (Compl. at ¶ 10.) Plaintiff was initially paid $10.00 per hour as a “Sales Associate.” (Id.) On January 1, 2013, Plaintiff and Mr. Anderson allegedly entered into an oral contract agreement regarding their business relationship, the terms of which were as follows:

Mr. Anderson maintains 51% majority equity ownership in Connected Entertainment, as Mr. Anderson started the company by investing personal funds to commence business. Plaintiff maintains 49% minority equity ownership in Connected Entertainment through sweat equity. Mr. Anderson was given the title “Owner/Chief Executive Officer” of Connected Entertainment, and Plaintiff was given the title “Owner/Director of Operations” of Connected Entertainment.

(Id. at ¶ 12.)[2] After this point, Plaintiff began working under the assumption that he would be an equity owner of the company, eventually receiving 49% of the company in return for his sweat equity. (Id. at ¶ 13.) Plaintiff did not receive an hourly wage after agreeing to the terms of the oral contract with Mr. Anderson. (Id.) Instead, he received biweekly stipends ranging from $100 in January 2013 to $300 in February 2016. (Id. at ¶¶ 15-17.) These were the same amounts of money that Mr. Anderson paid himself. (Id. at ¶ 71.)

         In various client interactions after January 2013, Plaintiff referred to himself as an “Owner/Director of Operations” of Connected Entertainment, and Mr. Anderson never objected to any of these characterizations. This included Plaintiff changing his company email signature to reflect his new title (Id. at ¶ 18), changing his business cards (Id. at ¶ 19), and referring to Mr. Anderson as his “business partner.” (Id. at ¶¶ 20, 22, 24-25, 29.) Mr. Anderson also referred to Plaintiff as his “business partner” as well. (Id. at ¶ 33.)

         However, Plaintiff and Mr. Anderson eventually began to clash regarding the direction of the company. On April 23, 2015, Mr. Anderson emailed Plaintiff, “[i]t seems we have been drifting apart over the last few months on how to run this and the direction we are going.” (Id. at ¶ 27.) Then, on September 10, 2015, in an email to the company accountant, Mr. Anderson wrote, “[Plaintiff] is very interested in total control of the company. Long story short you can see his arrogance of how he feels he built the company and thinks he can force me out . . . He think he deserves the entire thing based on his work, which is clearly not going to happen. I'd like to devise a way he can buy me out of my 51% ownership while I also can receive certain levels of income.” (Id. at ¶ 30.) Two days later, in another email to the company accountant, Mr. Anderson wrote, “[w]hile [Plaintiff has] built the company to a position that is generating money, it's frankly not worth it anymore to work with him. You got a small taste of what it's like to work with him . . . The best option is to take a buyout, maybe $25, 000, on this investment and get some kind of percentage of the annual revenue generated . . . I'll step away and turn entire control and my 51% ownership over to him with all the risk now being on him.” (Id. at ¶ 31.) In June and October 2015, Mr. Anderson made K-1 Distributions to himself in the amounts of $3, 500 and $4, 200, but did not provide any K-1 Distribution to Plaintiff. (Id. at ¶¶ 28, 32.)

         Buyout negotiations between Mr. Anderson and Plaintiff commenced in January 2016, with Mr. Anderson stating that “[y]ou were advised your investment was through sweat equity. For your work, I offered 49%. This was offered to you several times last year and would come in to play this year when we divided the profits. You also make more than I do in a paycheck. You agreed to these terms when we talked and now wish to change them.” (Id. at ¶ 40.) Plaintiff countered that “[t]he reason we have so much money coming in is because of what I built. But I am the one who puts every free minute I have into the business. That's my main issue. Doing all the work and making less than half.” (Id. at ¶ 39.)

         Mr. Anderson scheduled a meeting for February 11, 2016 to further discuss the possibility of a buyout. (Id. at ¶ 43.) After Plaintiff missed a meeting on February 16, the next day, Mr. Anderson terminated Plaintiff via text message as Owner/Director of Operations of Connected Entertainment. (Id. at ¶ 45.) Mr. Anderson explained that “[b]ecause you missed last nights (sic) meeting I am informing you now that you are no longer employed with connected entertainment or Albert Anderson inc. I have paperwork to provide you with regarding this separation which will explain everything in detail.” (Id. at ¶ 46.)

         On March 1, 2016, Plaintiff requested copies of financial documentation from the company accountant to assess the value of Connected Entertainment, but she denied his request and informed him that he was not an equity owner and that he had no right to inspect the company's financial documents. (Id. at ¶ 48.) The accountant further asserted that Plaintiff was a “W-2 employee” of Connected Entertainment, and Defendants confirmed this in a letter to Plaintiff on the same day. (Id. at ¶ 48-49.) According to Plaintiff, Mr. Anderson essentially stopped buyout negotiations with Plaintiff, terminated and locked him out, and then failed to pay him the fair value of his 49% equity interest in the company, or a fair wage under federal and state law. (Id. at § 103.)

         B. Procedural History

         Plaintiff filed a seventeen-count Complaint against Defendants, asserting direct state law claims of fraud, breach of oral contract, breach of implied-in-fact contract, quantum meruit restitution/unjust enrichment, promissory estoppel, constructive fraud, negligent misrepresentation, tortious interference with business relations, and violations of N.J.S.A. § 34:11-4.3 (termination or suspension of employment), N.J.S.A. § 34:11-4.4 (withholding or diverting wages); N.J.S.A. § 34:11-4.8 (dispute over amount of wages); N.J.S.A. § 34:11-56a4; (minimum rate), and N.J.S.A. § 34:11-24.2 (penalty for violation). [Docket Item 1.] Plaintiff asserts derivative breach of fiduciary duty claims (duty of care, duty of loyalty, and duty of good faith and fair dealing), as well as waste of corporate assets. [Id.] Finally, Plaintiff asserts one federal law claim - a violation of 29 U.S.C. § 206, for failing to pay him minimum wage. [Id.] Plaintiff requests (1) a declaratory judgment stating that Plaintiff is the 49% minority equity owner of Connected Entertainment, (2) compensatory damages based on backpay owned to him or the value of the business at the time of his termination, (3) punitive damages, (4) rescission of the employment contract between Plaintiff and Mr. Anderson, (5) piercing of the corporate veil of Albert Anderson, Inc. d/b/a Connected Entertainment, (6) attachment of Mr. Anderson's wages and pension as a police officer to satisfy any judgment rendered against Defendant, and (7) attorney's fees. (Compl. Prayer for Relief).

         Defendants filed a motion to dismiss Plaintiff's Complaint for lack of subject matter jurisdiction under Rule 12(b)(1), Fed. R. Civ. P., and for failure to state a claim pursuant to Rule 12(b)(6), Fed.R.Civ.P. [Docket Item 4.] Plaintiff filed a timely opposition. [Docket Item 5.]

         III. ...


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