Puig v. Seminole Night Club, LLC, et al.

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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE LOUIS PUIG, Plaintiff, v. SEMINOLE NIGHT CLUB, LLC, a Delaware limited liability company, MACROVEST SEMINOLE VENTURES, LLC, a Delaware limited liability company, and SEMINOLE CLUB INVESTMENT PARTNERS, LLC, a Delaware limited liability company, Defendants. : : : : : : : : : : : : : : C.A. No. 5495-VCN MEMORANDUM OPINION Date Submitted: April 12, 2011 Date Decided: July 29, 2011 Richard D. Kirk, Esquire, Stephen B. Brauerman, Esquire, and Vanessa R. Tiradentes, Esquire of Bayard, P.A., Wilmington, Delaware, Attorneys for Plaintiff. Carolyn S. Hake, Esquire and Andrew D. Cordo, Esquire of Ashby & Geddes, Wilmington, Delaware, and John A. Ross, Esquire and Abram J. Pafford, Esquire of Pafford Lawrence & Ross PLLC, Washington, D.C., Attorneys for Defendants. NOBLE, Vice Chancellor I. INTRODUCTION nt in and employment by a nightclub at the Seminole Hard Rock Hotel & Casino in Seminole Complaint Amended rescission of certain contractual agreements he entered into when he invested $400,000 in the nightclub venture. Defendants Seminole Night Club, Macrovest Seminole Ventures, LLC Partners, LLC , and Seminole Club Investment ) have moved to dismiss the Amended Complaint under Court of Chancery Rule 9(b) and Rule 12(b)(6). They contend that dismissal is appropriate because (1 (2) the Amended Complaint fails to state a claim for which relief can be granted under either Delaware or New York law; and (3) by various principles status quo ante Amended Complai 1 II. BACKGROUND1 SNC, a Delaware limited liability company, was formed in May 2004 for the purpose of operating a nightclub at the Seminole Hard Rock. three membership classes, SCIP holds all of the Class A interests, Macrovest holds all of the Class B interests, and Puig holds all of the Class C interests. SNC has four directors by Fowler. In August 2004, Nargiso approached Puig because of his involvement in the Florida nightclub industry. Nargiso introduced Puig to Douglas, Osceola, and Fowler and solicited his interest in helping to launch a new nightclub at the Seminole Hard Rock. Around that time, Puig also met with Max Osceola, Jr., the Seminole tribal representative for the Seminole Hard Rock. Although he had some reservations based on competition from other nightclubs at the Seminole Hard Rock and the sufficiency of parking at the hotel, Puig ultimately entered into certain agreements to become involved in the project both as an investor and as an operator. In the Amended Complaint, he asserts that that decision was the result of 1 The factual background is drawn from the well-pleaded allegations in the Amended Complaint The Court refers to certain undisputed Florida litigation documents for motion to dismiss or to the Amended Complaint. 2 numerous meetings and some purportedly misleading statements regarding regulatory approval of the the to remain open later than others at the hotel. rights and obligations in the Seminole Hard Rock nightclub venture are memorialized in three documents, all dated September 22, 2004 the SNC . He contends that these three documents jointly -level, multi-room 2 Under the SPA, Puig purchased all of the Class C interests of SNC a class that affords him neither voting rights nor a seat on the SNC board of directors for $400,000. Through the Operating Agreement, however, he claims to have certain management rights that govern his ability to develop the nightclub and his terms of employment. Specifically, he contends that the Operating Agreement entitles him to receive a salary of $2,000 per week monthly revenues) for operating the nightclub during the ten-year term of that 2 Am. Compl. ¶ 11. 3 agreement s defined by that agreement. After executing the Governing Agreements, Puig oversaw the development of the nightclub from some point in 2004 until its public launch in October 2005. He alleges that, although the nightclub became profitable nearly a year later, Fowler on behalf of SNC purported to terminate him for cause in a letter delivered around September 28, 2006. Puig contends that no basis for termination was specified in that letter and that he received no prior notice of any breaches, which was required under the Operating Agreement. Puig suggests that his experiences with SNC are representative of an ongoing trend at the Seminole Hard Rock in business transactions involving Osceola, Nargiso, Douglas, and their affiliates within the Seminole Tribe; specifically, entrepreneurs are fraudulently induced to open businesses at the Seminole Hard Rock and, once they become profitable, the operating principals like Puig are removed from those businesses.3 Because of his failed business relationship with SNC, Puig filed suit in Florida state court on November 15, 2006, and alleged various causes of action based on the Governing Agreements 3 Counts III and IV sought analogous relief to See id. ¶¶ 17-20. 4 that requested here.4 In its consideration of a motion to dismiss the Florida Complaint, the court appears to have determined that any claims implicating the ory forum selection clause.5 Thereafter, Puig filed an amended complaint,6 which curtailed the number of claims raised but still referenced the LLC Agreement.7 At an April 2008 hearing before the Florida court, some of the claims asserted in the Amended Florida Complaint.8 More importantly, in May 2008, the Florida court entered an order dismissing other of that were asserted in that complaint ;9 of relevance to the issues co Count III.10 That claim, grounded in tortious interference, seemingly implicated forum selection clause required that claim to be brought in this Court.11 Although some claims in the Amended Florida Complaint were dismissed voluntarily and others were dismissed by operation of 4 See ( Florida Complaint ). 5 See id. -15. 6 Ex. 3 ( Amended Florida Complaint ). 7 Id. ¶ 14. 8 Apr. 10, 2008 Florida Hearing Tr. at 3. 9 Am. Compl., Ex. B (May 2008 Dismissal Order). 10 The May 2008 Dismissal Order also dismissed Count IV of the Amended Florida Complaint, which requested relief for alleged false and defamatory comments made about Puig following his termination. 11 See Apr. 10, 2008 Florida Hearing Tr. at 16-18, 24-25. 5 claims relating to breach of contract and the payment of wages under the Operating Agreement remain viable and are still being litigated before the Florida court. After the May 2008 Dismissal Order was entered, there appears to have been no further prosecution of the claims implicating the LLC Agreement until this action was filed on May 14, 2010. That filing was preceded by an April 16, 2010 order of the Florida court where Puig was instructed that he ha[d] thirty (30) days to make th[e Florida] court aware that suit ha[d] been filed or transferred in 12 After Puig filed his initial complaint in this action, the Defendants moved to dismiss under Court of Chancery Rules 12(b)(4), 12(b)(5), 12(b)(6), and 23.1. In response, Puig filed the Amended Complaint on November 30, 2010, which is the focus of the Defendants current motion. III. ANALYSIS Before considering the Defendants arguments for dismissal, the Court first considers whether the claims raised in the Amended Complaint are time barred.13 12 Am. Compl., Ex. B (Apr. 16, 2010 Florida Court Order). It is wellcommenced too late, a defendant may properly seek dismissal under the statute of limitations or In re Coca, 2007 WL 3122370, at *5 (Del. Ch. Oct. 17, 2007). 13 6 The Defendants argue that the three-year statute of limitations under 10 Del. C. § 8106 applies by analogy to the claims raised here; the Amended Complaint, according to the Defendants, seeks rescission of the SPA and the LLC Agreement because of th fraudulent statements that induced Puig to enter into those agreements. Where fraudulent inducement is alleged, the Defendants contend that the cause of action accrues at the time the misrepresentation induced the execution of the contract. For that reason, they assert that claims at issue here accrued on September 22, 2004 the date he signed the SPA and the LLC Agreement (along with the Operating Agreement) and, as a result, the analogous limitations period expired on September 22, 2007. Moreover, although related claims were originally brought in the Florida Statute;14 the Florida court dismissed certain counts related to the LLC Agreement in the May 2008 Dismissal Order and, as a result, any savings period that may have existed expired on May 9, 2009. In response, Puig asserts that his claims were timely filed and that the contentions fail for two reasons. First, because his claims are equitable, and, thus, not directly governed by a limitations period, the Court need not apply the analogous statute of limitations. He suggests that certain factors 14 10 Del. C. 7 for example, procedural complexity in the Florida litigation, delay outside of his control, and the lack of prejudice to the Defendants counsel against applying the analogous limitations period. Second, even if a statute of limitations is applied, this action is saved by the Savings Statute. The May 2008 Dismissal Order, according to Puig, dismissed as a matter of form the claims in the Florida action that were based upon the LLC Agreement. The savings period, however, will not begin to run until a final judgment has been issued in that proceeding in other words, the one-year period under the Savings Statute, argues Puig, cannot commence until a final judgment is rendered on the contract claims under the Operating Agreement (including a tolling period during the pendency of all appeals) that are still at issue in the Florida proceeding. As a result, Puig contends 15 bar equitable claims[,] 16 a limitations period is not necessarily controlling in an equity action 15 ompl. at 10. Although of the Savings Statute, he suggests that that mandate to file in Delaware within thirty days explains why this action was filed on May 14, 2010. See id. at 13. 16 Coca-Cola Enters., Inc., 2007 WL 3122370, at *4. 8 17 Accordingly, some unusual circumstances, a court of equity will deny a plaintiff relief when suit is brought after the analogous statutory period. 18 to rescind the SPA and the LLC Agreement sound in fraudulent inducement. As a result, the Court looks to 10 Del. C. § 8106, which applies a three-year statute of limitations to fraud claims.19 Under Delaware is unaware of the cau 20 For that reason, because the claims raised in the Amended Complaint must have accrued by September 22, 2004 Puig entered into the SPA and the LLC Agreement the date that the statutory period within which to assert those claims expired by September 22, 2007. Even if the statutory 17 Id.; Whittington v. Dragon Group, L.L.C. here the plaintiff seeks equitable relief . . . the Court of Chancery applies the statute of limitations by ). 18 U.S. Cellular Inv. Co. of Allentown v. Bell Atl. Mobile Sys., Inc., 677 A.2d 497, 502 (Del. offered no justification for its delay in bringing suit, and it [was] thus appropriate to apply the statutory period set forth in 10 Del. C. § 8106. Id. In Envo, Inc. v. Walters, 2009 WL 5173807, at *8 (Del. Ch. Dec. 30, analogous statute of limitations creates a presumptive time period during which the claim must 19 See Solow v. Aspect Res., LLC, 2004 WL 2694916, at *3 (Del. Ch. Oct. 19, 2004) (applying the 10 Del. C. § 8106 three-year limitations period to claims grounded in fraudulent inducement). 20 Smith v. Mattia, 2010 WL 412030, at *3 (Del. Ch. Feb. 1, 2010) (quoting Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 319 (Del. 2004)); see also Coca-Cola Enters., Inc., 2007 WL not when the harmful effects of the act are felt 9 period was tolled under a recognized exception,21 the statute of limitations on at issue in the Amended Complaint must have commenced running by November 15, 2006; on that date, he filed his original complaint in Florida state court,22 which raised claims in Counts III and IV analogous to those filed here. Thus, even assuming that the statutory period was tolled until November 15, 2006, it expired by November 15, 2009, nearly six months before Puig filed suit in this Court on May 14, 2010. Thus, under the foregoing analysis, the Court concludes that the claims asserted here were not timely filed based on the analogous statutory period. Moreover, contention determination that any analogous limitations period should be inapplicable is unavailing. the Savings Statute. The Savings Statute provides, in relevant part, as follows: If in any action duly commenced within the time limited therefor in this chapter, the writ . . . is abated, or the action otherwise avoided or defeated . . . for any matter of form; . . . or if a judgment for the 21 See, e.g., Smith There are, however, several circumstances in which the running of the statute of limitations can be tolled. These exceptions include: 1) fraudulent concealment; 2) inherently unknowable injury; and 3) equitable tolling. based on the statute of limit Coca-Cola Enters., Inc., 2007 WL 3122370, at *6; see also Solow, 2004 WL 2694916, at *3 (observing that the plaintiff had failed to plead specific facts in order to establish tolling of the three-year statute of limitations applicable to his fraud claims). 22 Am. Compl. ¶ 2. 10 plaintiff is reversed on appeal or a writ of error; a new action may be commenced, for the same cause of action, at any time within one year after the abatement or other determination of the original action, or after the reversal of the judgment therein.23 The Savings Statute is a remedial provision that Delaware courts construe liberally so that actions may be decided on the merits, as opposed to procedural technicalities.24 It permits refiling of certain actions notwithstanding the statute of limitations when the actions originally were timely filed, but were dismissed as defective in some other respect. 25 plaintiff, within prescribed limitations, one year to file a second cause of action following a final judgment adverse to his position if such judgment was not upon 26 Assuming the other requirements have been met, the Savings Statute may be applicable (1) whenever the writ has abated or (2) the action was avoided or defeated for any matter of form.27 A recent decision 28 plaintiff to bring his case to a full resolution in one forum before starting the clock 23 10 Del. C. § 8118(a). Reid v. Alenia Spazio, 970 A.2d 176, 180-81 (Del. 2009); see also Empire Fin. Servs., Inc. v. Bank of New York, 2001 WL 755936, at *1 (Del. Super. Jan. 12, 2001). 25 In re Rich, 2004 WL 1366978, at *2 (Del. Ch. June 15, 2004). 26 Gosnell v. Whetsel, 198 A.2d 924, 926 (Del. 1964). 27 See Allstaff, Inc. v. Wilmington Trust Co., 2010 WL 4056122, at *2 (Del. Super. Sept. 7, 2010), d, 16 A.3d 937 (Del. 2011) (TABLE). 28 Reid, 970 A.2d at 181. 24 11 in Delaware, which the Supreme Court observed 29 Turning to the procedural history in the Florida proceeding, the May 2008 Dismissal Order appears to be a form of interlocutory, non-final order under Florida law30 it dismisses some, but not all, of the claims raised in the Amended to take an interlocutory appeal from non-final orders.31 dismissal of a complaint is only reviewable when it is established that the dismissed claims are not legally and factually interrelated with the remaining 32 Thus, piecemeal appeals are generally not permitted in Florida.33 29 Id. at 181-82. See, e.g., Rollins Fruit Co., Inc. v. Wilson, 923 So.2d 516, 519-20 (Fla. Dist. Ct. App. 2005) r is required or contemplated to end the litigation between the parties. . . . An order that merely grants a motion to dismiss is not a final 30 31 See Fla. R. App. P. 9.130(a)(3). Harrison v. J.P.A. Enters., L.L.C., 51 So.3d 1217, 1219 (Fla. Dist. Ct. App. 2011) (internal quotations omitted); see also Mass. Life Ins. Co. v. Crapo, 918 So.2d 393, 394 (Fla. Dist. Ct. 32 final judgment under [Florida Rule of A It may be worth noting that Gries Inv. Co. v. Chelton, 388 So.2d 1281, 1282 (Fla. Dist. Ct. App. 1980). accomplished at the trial court level (upon appropriate application) is an order dismissing the Scott v. Waste Mgmt., Inc. of Fla., 537 So.2d 686, 687 (Fla. Dist. Ct. App. 1989); see also Dedge v. Crosby But see Cordani v. Roulis, 395 So.2d 1276, 1277 (Fla. Dist. Ct. App. 1981) granting a motion to dismiss with prejudice is not a final appealable order . . . we adhere to our 33 Harrison, 51 So.3d at 1219. 12 Florida Rule of Appellate Procedure 9.130(a)(3)(A), however, authorizes interlocutory appeals from a non-final order relating to dismissal for improper venue.34 Subsection (b) of that rule further provides that, for a permissible interlocutory appea 35 Moreover, Subsection (g) specifies that -final order on appeal from the final order in the cause 36 Based on the above examination of Florida law, the non-final May 2008 Dismissal Order was likely immediately appealable at least in part, and despite 37 under Florida Rule 34 Mgmt. Computer Controls, Inc. v. Charles Perry Constr., Inc., 743 So.2d 627, 629-30 (Fla. Dist. Ct. App. 1999) (reviewing a timely appeal of a non-final order that denied a motion to reement included a forum selection clause Haws & Garrett Gen. Contractors, Inc. of Fort Worth v. Panhandle Custom Decorators & Supply, Inc., 500 So.2d 204, 205 n.1 (Fla. Dist. Ct. -final, appealable order, in that it is one relating to he -final order concerning venue and subject to 35 Fla. R. App. P. 9.130(b). Id. 9.130(g). In Lidsky Vaccaro & Montes, P.A. v. Morejon, 813 So.2d 146 (Fla. Dist. Ct. -final, appealable order under Rule 9.130(a)(3)] within thirty (30) days of its rendition did not extinguish its right t Id. at 36 Saul v. Basse, 399 So.2d 130, 133 (Fla. Dist. Ct. App. 1981). 37 If no exception applied under Florida law, Puig likely could not have immediately appealed the May 2008 Dismissal Order as a partial final judgment because the claims that remain to be litigated in that action arose from an interrelated transaction that involved the same parties and factual circumstances as the claims that were dismissed. See Harrison, 51 So.3d at 1219-20. 13 of Appellate Procedure 9.130(a)(3)(A) because it concerned venue. Nonetheless, extinguished thirty days after the order was rendered on May 9, 2008. Although no immediate interlocutory appeal was sought by Puig, the May 2008 Dismissal Order may be reviewed if a future appeal is taken of any final order that may be rendered in the Florida proceeding. Thus, assuming a final judgment is ultimately implemented by the Florida court, Puig may then seek appellate review of the May 2008 Dismissal Order in a plenary appeal of a future final order. Returning to the Savings Statute, the May 2008 Dismissal Order seemingly fits within the framework of avoiding or defeating the action based on a matter of form because that order dis of the Amended Florida Complaint specifically, Count III for improper venue based on a forum selection clause in the LLC Agreement.38 Because that order is non-final and, thus, potentially appealable in the future, however, it seemingly did not cause the Florida action to abate and did not result in a determination in that matter, as is required before the Savings Statute could operate to salvage the claims filed in this 38 See Savage v. Himes, 2010 WL 2006573, at *2 (Del. Super. May 18, 2010) (internal qu directed toward instances such as lack of jurisdicti see also Allstaff, Inc., 2010 rd to . . . the avoiding or defeating of the action for any matter of form, Delaware courts have concluded that this prong of the statute is directed toward instances such as lack of jurisdiction or filing in the wrong venue as well as lack of subject matt 14 Court.39 Accordingly, because the Florida action persists and the May 2008 Dismissal Order was a non-final, interlocutory order, the savings provision in the Savings Statute is not applicable at this juncture. At some future stage, that analysis may change should the duly commenced Florida proceeding abate or result in a final judgment. Although the determination that the Savings Statute is not presently applicable creates a peculiar situation where Puig is, in a sense, both too early and too late in asserting the claims raised in this action, that conclusion is Reid, which was based upon the 40 policy within the analogous statutory period and (2) are not saved at this stage by operation of the Savings Statute, the Court will grant the Defendants motion to dismiss on that basis. For that reason, no further consideration of the other grounds for dismissal raised by the Defendants in their motion is necessary. 39 See, e.g., Gosnell, 198 A.2d at 926 (recognizing that the Savings Statute affords a plaintiff final judgment adverse to his position . . . Empire Fin. Servs. ismissal of the action against [the defendant] . . ., and the subsequent affirmance of that dismissal by the Delaware Supreme Court, abated, i.e., effectively destroyed, the cause of action. 40 Reid, 970 A.2d at 181-82. 15 IV. CONCLUSION For the foregoing reasons, the Defendants motion to dismiss is granted. The claims asserted in the Amended Complaint are time barred and not presently saved by operation of the Savings Statute. Counsel are requested to confer and to submit an implementing form of order. 16

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