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Sevenson Environmental Services, Inc. v. Diversified Royalty Corp.

United States District Court, D. New Jersey

October 16, 2018

DIVERSIFIED ROYALTY CORP., et al., Defendants.

          PHILLIPS LYTLE LLP By: Alan J. Bozer, Esq. Erin C. Borek, Esq. Counsel for Plaintiff

          GORDON MCDONALD, pro se



         This matter comes before the Court upon the Motion for Summary Judgment filed by Plaintiff Sevenson Environmental Services, Inc. against its former employee, Defendant Gordon McDonald.[1] McDonald has not filed opposition to the motion. For the reasons set forth herein, the motion will be granted.

         I. Facts[2]

         Plaintiff Sevenson provides environmental clean-up and site remediation services. (McDermott Aff., Dkt No. 401-9, ¶ 4) McDonald was employed by Sevenson from 1996 through late 2007. (Id. ¶ 5) During that time, McDonald served as a project manager for Sevenson at two New Jersey sites which are relevant to the instant motion: the Diamond Alkali Site and the Federal Creosote Site. (Id.)

         Sevenson alleges that, in the course of his employment, McDonald stole from it in at least five different ways. First, while working at the Diamond Alkali site, McDonald, in his capacity as project manager, received a $28, 576.98 check for payment on an invoice Sevenson had issued to Tierra Solutions. (McDermott Aff., Dkt No. 401-9, ¶¶ 8-9) The check was drafted as payable to Sevenson. (Id. ¶ 7) McDonald deposited the check “into the bank account of his shell company GMEC, Inc.” (Id.) “McDonald was not authorized to take the check for his personal benefit.” (Id. ¶ 8) “McDonald [did not] inform Sevenson that he had received the funds.” (Id. ¶ 11) Instead, “McDonald told his supervisors that the customer had adamantly refused to pay the invoice in question and that in the interest of maintaining good relations with that customer the invoice should be written off, which it was.” (Id. ¶ 12)

         Second, after learning of the alleged conversion of the Tierra Solutions check, Sevenson conducted an audit of field accounts, whereupon it was discovered that on other occasions, “McDonald wrote checks from Sevenson's field accounts (primarily at the Diamond Alkali Site) to certain payee ‘entities' and individuals which investigation has found to be either (a) fictitious or (b) affiliated with McDonald.” (McDermott Aff., Dkt No. 401-9, ¶ 14-15) Specifically, the audit revealed 99 “irregular checks issued out of Sevenson's funds in the Diamond Alkalai Site field account” over the course of 1999 through 2006, totaling $193, 836.58. (Id., Ex. 2) After a review of records, Sevenson has concluded that “no services or materials were received” for any of the 99 checks identified on Exhibit 2. (McDermott Aff. ¶ 16)

         Third, “McDonald also periodically withdrew from Sevenson's field account certain monies intended for per diem cash payments to job site employees. McDonald was found to have been withdrawing more cash than needed to pay per diems and concealing that fact by entering false (i.e., higher) totals in the weekly record of per diems paid, improperly keeping excess funds for himself.” (McDermott Aff. ¶ 26) Sevenson's audit revealed that those excess funds totaled $23, 640.00. (Id. ¶ 27 and Ex. 3)

         Fourth, over the course of 2002 to 2007, McDonald wrote 35 checks either to himself, or to cash, and deposited the total amount- $41, 599.77-- into the account of his shell company, GMEC. (McDermott Aff. ¶ 28-29 and Ex. 4)

         Fifth, Sevenson has found other checks drawn on the field account which were payable to, and apparently cashed by, existing businesses but were not payments for any Sevenson expense. For example, Sevenson discovered “checks to RAC Marine for repairs to a pleasure boat owned by McDonald, and not owned by Sevenson.” (McDermott Aff. ¶ 31) Sevenson has concluded that the “total thus converted [in this manner] was $51, 297.24.” (Id. and Ex. 5)[3]

         All of these asserted thefts, however, were not “discovered [until] after McDonald was terminated from his employment with Sevenson.” (McDermott Aff. ¶¶ 8, 15) McDonald was officially “fired on October 18, 2007, ” however, he had been suspended without pay beginning on September 30, 2007 because he “was absent from work in August and through the last part of September, 2007.” (Id. ¶¶ 44, 85) During the time of McDonald's suspension, McDonald was “unresponsive” to Sevenson's attempts to communicate with him. (Id. ¶¶ 44-45)[4] On October 12, 2007-- six days before McDonald was fired, and while McDonald was still suspended-- “Sevenson learned that McDonald had received illegal kickbacks from BEI.” (Id. ¶ 47) “Sevenson fired McDonald because he stopped coming to work, and because he was discovered to have taken kickbacks from BEI.” (Id. ¶ 43)

         From March 2000 through October 2007, Sevenson paid McDonald compensation-- in the form of a salary, bonuses, pension and profit sharing contributions-- totaling $1, 088, 086.41. (McDermott Aff. ¶ 36-37)

         Sevenson moves for summary judgment as to the following claims against McDonald: (1) conversion of the Tierra Solutions ...

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