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SSC Service Corp. v. Turen

United States District Court, D. New Jersey

August 27, 2018



          HON. KEVIN MCNULTY, U.S.D.J.

         The plaintiff, Southeast Service Corporation ("SSC"), alleges that it entered into an oral settlement agreement on January 20, 2015 with defendants Edward Turen ("Edward"), Neal Turen ("Neal"), and three entities owned by Neal and Edward. Neal, however, argues that there was no agreement because the parties did not agree upon a material provision: whether Neal and Edward are jointly and severally liable for the settlement amount. Neal contends that he is liable for only 33% of the settlement amount; SSC argues that Neal and Edward are jointly and severally liable for the entire amount.

         Now before this Court are SSC's motion for summary judgment and Neal's cross-motion for summary judgment. For the reasons herein, the motions will be denied.

         I. Background [1]

A. Introduction

         SSC is a provider of facility management, landscaping, snow removal, custodial, housekeeping and janitorial services for educational facilities and shopping centers throughout the United States. (PSMF ¶ 5). In March 2006, SSC entered into a contract with Control Facility Services, LLC ("Control Facility"). (Id. at ¶ 6). Pursuant to the contract, SSC agreed to act as a subcontractor to provide janitorial and housekeeping services at shopping centers owned by Macerich Partnership, L.P. (Id.) Thereafter, Control Facility assigned its right under the subcontract with SSC to Control TFS West, Inc. ("Control TFS"). (Id. at ¶ 7). SSC provided services to Control Facility and Control TFS for numerous years. (Id. at ¶ 8).

         Edward and Neal Turen, who are brothers, are principals of Control TFS, Control Facility, and Control Equity Group, Inc. (collectively the "Control entities") (PSMF ¶ 1). Control Equity is the parent company of Control TFS. (Id. at ¶ 17). Edward is the majority shareholder of each of the Control entities and "generally" owns 67% of the equity in the entities, while Neal is a minority shareholder who "generally" owns 33% of the equity in the entities. (Di Iorio Decl. ¶ 2; Neal Decl. ¶ 2). According to SSC, the Turen brothers did not pay SSC money due under the contract, and instead diverted funds to themselves while rendering all of the Control entities insolvent. (PSMF ¶¶ 10-12).

         This action is related to prior action, initially filed in New Jersey state court but removed to this Court.

         B. Previous Action- Control TFS West, Inc. v. Southeast Serv. Corp., Docket No. 12-cv-5321

         On July 13, 2012, Control TFS filed a complaint against SSC in the Superior Court of New Jersey, Hudson County, Law Division. (PSMF ¶ 2). See (Notice of Removal, Exh. A under 12-cv-5321). It asserted claims for tortious interference with prospective economic advantage and declaratory judgment. (Id.) On August 23, 2012, SSC removed the action to this Court: Control TFS West, Inc. v. Southeast Serv. Corp., Docket No. 12-cv-5321. (PSMF ¶ 3). Neal and Edward were not parties to the action; Neal, however, was identified as an interested party.

         On September 26, 2012, SSC filed an Answer with Affirmative Defenses, a counterclaim against Control TFS and third-party complaint against the two other Control entities (Control Facility and Control Equity). (PSMF ¶ 3). SSC's counterclaim/third-party complaint alleged the following claims:

Count 1: Breach of Contract - Control TFS and/or Control Facility
Count 2: Implied Contract/Unjust enrichment- Control TFS and/or Control Facility
Count 3: Breach of the Duty of Good Faith and Fair Dealing - Control TFS and/or Control Facility
Count 4: Promissory Estoppel- Control TFS and/or Control Facility Count 5: Constructive Trust- Control TFS, Control Facility, and Control Equity

(ECF no. 50 of 12-cv-5321 at ¶¶ 45-69); (PSMF ¶ 4). SSC alleged that the principal amount of $5, 556, 564.61, consisting of $3, 049, 501.16 in fees due for May and June, 2012 and $2, 507, 063.45 in improperly taken discounts, plus attorneys' fees, was due and owing from Control to SSC. (PSMF ¶ 12).

         On October 10, 2014, Control and SSC filed a Stipulation, pursuant to which Control TFS agreed to dismiss all of its affirmative claims against SSC. [Id. at ¶ 14). The Stipulation re-positioned SSC as the plaintiff and the Control entities as defendants. (Id. at ¶ 15).

         SSC now alleges that while conducting discovery in that case, it found evidence of fraudulent activities by Edward and Neal. In particular, SSC maintains that the evidence revealed that Edward and Neal diverted money to themselves rather than paying SSC and other known creditors. [Id. at ¶¶1622). Based on their findings, SSC's attorneys began drafting a complaint against Edward and Neal as individuals. (Id. at ¶ 23).

         On January 9, 2015, Magistrate Judge Steven C. Mannion held an in-person status conference with the named parties, SSC and the Control entities, and their respective counsel. After the conference, he issued a text order noting that the case had been settled: "The court has been notified verbally by both parties that this case has been settled and that counsel will either file a consent judgment or stipulation of dismissal by 1/23/15. Note that Fed. R. Civ. P 41(a)(1)(A)9ii) requires that any stipulation of dismissal be signed by all parties." (ECF no. 49 of 12-cv-5321).

         Based on that text order, this Court issued an order dismissing the case without costs and with prejudice, "subject to the right, upon good cause shown within sixty (60) days, to reopen the action if the settlement is not consummated." (ECF no. 50 of 12-cv-5321).

         C. January 20, 2015 Meeting

         SSC's potential claims against the Turen brothers remained. In contemplation of settlement, SSC's counsel did not immethately file a complaint against the brothers. (PSMF ¶ 24).

         At some point before January 20, 2015, Joshua W. Denbeaux, Esq., who represented the Control entities in 12-cv-5321 as well as Edward, contacted John Di Iorio, counsel for Neal. Edward's counsel[2] provided Neal's counsel with the factual background concerning the claims in the prior litigation involving SSC and the Control entities. (Di Iorio Decl. ¶ 6; Denbeaux Decl. ¶ 2). He also advised Neal's counsel that SSC was prepared to bring a new lawsuit against Neal and Edward. (Di Iorio Decl. ¶ 6; Denbeaux Decl. ¶ 2).

         Following that discussion, on January 20, 2015, the following individuals met at the offices of SSC's counsel to discuss settlement: 1) a principal of SSC; 2) SSC's counsel, Matthew A. Lipman; 3) Edward (on behalf of himself and as principal for the Control entities); 4) Edward's counsel; 5) Neal; and 6) Neal's counsel. (PSMF ¶ 26; DRSMF ¶¶ 25-26; Denbeaux Decl. ¶ 2).

         The parties offer differing versions of what occurred on January 20, 2015.

         Counsel for SSC contends that after a full day of negotiations, "an [oral] agreement was reached to settle" the impending claims against the Turen brothers. (PSMF ¶ 27; Lipman Cert. ¶ 25). According to SSC, "[a]ll parties and their counsel agreed to the terms of the settlement and departed from the meeting after thanking one another for reaching an agreement and shaking hands." (PSMF ¶ 28; Lipman Cert. ¶ 25). Neal and his counsel, however, maintain that the parties only agreed to the total amount, $3, 000, 000, and timing of the payments to be made to SSC, and that a full settlement agreement was not reached. (Neal Decl. ¶ 10; Di Iorio Decl. ¶ 8). Edward's counsel corroborates this account; he states only that "the parties agreed to the amount and timing of the payments to be made to SSC." (Denbeaux Decl. ¶ 3).[3]

         Neal claims that, during the day-long settlement meeting on January 20, 2015, SSC's counsel and its representative had a separate meeting with Edward and his counsel-without Neal. (DASMF ¶ 6). At this separate meeting, SSC allegedly stated to Edward that joint and several liability was a condition of the settlement. (Id. at ¶ 6). At the time, the substance of those discussions was not shared with Neal or his counsel. (Id.) Rather, Edward and Neal allegedly caucused in the presence of their respective attorneys-without representatives from SSC-and agreed between themselves that Neal would be responsible for 33% of the settlement payments, and Edward would be responsible for 67% of the payments. (Id. at ¶ 7; Di Iorio Decl. ¶ 13; Di Iorio Depo. 9:l-:25). At his deposition, Neal's counsel testified that the brothers agreed on those percentages because "that was their equity interest percentage generally speaking in by and large most of the Control entities." (Di Iorio Depo. 10:7-:9).

         Edward, through counsel, recognizes that "[d]uring the settlement conference the parties met in a conference room and also spent time separated." (Denbeaux Decl. ¶ 5). Edward's counsel "spoke to Neal Turen and his counsel and [he] spoke to SSC and its counsel together, and separately." (Id.) He corroborates Neal's recollection and remembered "specifically Case 2:15-cv-04160-KM-MAH Document 52 Filed 08/27/18 Page 7 of 21 PageID: 604 discussing the terms of the agreement" in a room with the SSC representative and counsel for SSC. (Id. at ¶¶ 6, 7). Edward's counsel also recalled SSC "making joint and several liability a condition for the settlement." (Id. at ¶ 7). According to Edward's counsel, Edward "did not take a position as to whether joint and several liability was a requirement." (Id. at ¶ 8). After the separate meeting, they "returned to the conference room where SSC put the proposed settlement to Neal Turen and his counsel." (Id.) Edward's counsel states that the settlement agreement was not then put into writing, he did not take notes, and he did not have any recollection of whether the joint-and-several-liability term was discussed at the meeting amongst all the parties. (Id. at ¶ 9).

         SSC concedes that at the January 20th meeting, the nature of the liability was not discussed among all of the parties and not discussed between SSC and Neal. (PRSMF ¶¶ 5-6). Neal and his counsel do not dispute this. In particular, Neal's counsel alleges that at no point during the meeting did all of the parties ever discuss, nor was it agreed by all of the parties, that the Control entities, Edward, and Neal would be jointly and severally liable for the payments due to SSC. (Di Iorio Decl. ¶ 11). See (Di Iorio Depo. 8:12-: 16) (stating that he "believe[d] that certain terms of the agreement were discussed at that meeting and certain terms were not discussed at that meeting and to be amplified in written documents"). See also (id. at 8:20-:25). Neal similarly claims that the topic of how much of the payments he would be responsible for was never discussed in his presence among all the parties at the meeting, nor "were the words joint and several ever used" in his presence at the meeting. (Neal Decl. ¶ 11). He asserts that he "did not, and would not" agree to be jointly and severally liable. (Id. at ¶ 12).

         D. Events After January 20, 2015 Meeting

         Nine days after the meeting, on January 29, 2015, SSC's counsel sent an email to Edward's counsel and Neal's counsel, attaching a "proposed settlement agreement for . . . review and comment." (Di Iorio Decl., Exh. B). The attached propose "Settlement Agreement" contained the following provision:

         "Control, Edward and Neal, jointly and severally, agree to pay to SSC the total sum of Three Million Dollars ($3, 000, 000.00) (the "Settlement Payment") ...." (Settlement Agreement Draft 1 ¶ 1 (emphasis added)). This was the first time joint and several liability was explicitly raised with Neal or his counsel. (DASMF ¶ 10; Di Iorio Decl. ¶ 14; PRSMF ¶ 10).[4]

         On February 9, 2015, Neal's counsel sent an email to SSC's counsel and Edward's counsel, attaching a redlined revision of the Settlement Agreement. (Di Iorio Decl., Exh. C). In this version, Neal's counsel deleted the phrase "jointly and severally" from the first paragraph. (Settlement Agreement Draft 2 ¶ 1) (showing a strikethrough horizontal line through the phrase "jointly and severally").[5] He also added this paragraph:

e. Control and Edward are jointly and severally liable for 2/3 of the amount due SSC under this Agreement. Neal is severally liable for 1/3 of the amount due SSC under this Agreement. All payments made pursuant to this Agreement will be applied 2/3 to the amounts Control and Edward are responsible for and 1/3 to the amount Neal is responsible for pursuant to this Agreement.

(Id. at ¶ 1(e)).

         According to Neal's counsel, at some unspecified time after he sent his email, SSC's counsel "followed up about revisions to the draft settlement agreement." (Di Iorio Decl. ¶ 16). Neal's counsel maintains that he advised SSC's counsel "that the issue of joint and several liability had not been discussed by SSC at the settlement meeting with Neal Turen, let alone agreed to, and that Neal Turen would not agree to be jointly and severally liable for the payments due." (Id., ) He also "further advised" SSC's counsel that he would make changes to his proposed revisions to the settlement agreement. (Id.)

         Three weeks later, on March 2, 2015, Edward sent an email to SSC's counsel, with a copy to Neal himself (not Neal's counsel). (Di Iorio Decl., Exh. F). In the email, Edward asked: "Could you send Neal and me the wire instruction[s] so we can make the $40, 000 payment today per agreement." [Id.)[6] Thereafter, SSC's counsel replied to Edward, with a copy to Edward's counsel and Neal, attaching instructions for wiring of funds. (Id.} Edward wired $26, 800 (67% of the $40, 000 payment) ...

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