JOSEPH A. UNANUE v. GOYA FOODS, INC.Annotate this Case
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
DOCKET NO. A-0986-05T20986-05T2
JOSEPH A. UNANUE,
GOYA FOODS, INC.,
Argued February 7, 2007 - Decided April 2, 2007
Before Judges Wefing, C. S. Fisher and Messano.
On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-225-05.
Michael R. Griffinger argued the cause for appellant (Gibbons, Del Deo, Dolan, Griffinger & Vecchione, attorneys; Mr. Griffinger, on the brief).
Steven R. Klein argued the cause for respondent (Cole, Schotz, Meisel, Forman & Leonard, attorneys; Mr. Klein, of counsel and on the brief; Susan M. Usatine, on the brief).
Plaintiff, Joseph A. Unanue, appeals from the motion judge's September 23, 2005 order dismissing his complaint against defendant, Goya Foods, Inc. (Goya). Plaintiff contends that the judge, relying upon an earlier decision in the parties' litigation in Delaware, mistakenly applied the doctrines of collateral and judicial estoppel to dismiss his complaint. He also contends that summary judgment was inappropriate because the parties had not engaged in any discovery.
Defendant argues the motion judge correctly decided that collateral estoppel, judicial estoppel, and the doctrine of election all precluded plaintiff from prosecuting this case. Furthermore, Goya argues summary judgment was appropriate as a matter of law and that no additional discovery was necessary.
After careful consideration of the record and applying appropriate legal standards, we reverse and remand the matter for further proceedings consistent with this opinion.
Much of what is on the record is not disputed by the parties. Goya was a closely-held Delaware corporation originally founded by plaintiff's father, Prudencio, in 1936. Over the years, it became a major distributor of Spanish foods throughout the United States. Upon Prudencio's death, the company's stock was eventually shared in roughly three equal parts by plaintiff, and the descendants of his two brothers. Plaintiff had been employed at Goya in various capacities since the 1940's. In 1974, plaintiff became the corporation's chairman of the board, president and chief executive officer (CEO).
In March, 1997, plaintiff and Goya entered into a written Salary Continuation Agreement (the Agreement) which provided, among other things, that plaintiff would receive one year's salary and other benefits in the event his "employment with [Goya was] terminated by reason of his death, retirement or 'Disability.'" The Agreement further provided that "the termination of [plaintiff's] employment shall be deemed to be by reason of Retirement if the [plaintiff] voluntarily terminates his employment with [Goya]."
Plaintiff's son, Andrew, was also employed by Goya and in 2000 plaintiff named him chief operating officer (COO) of the company. Plaintiff's nephews, Robert and Francisco Unanue, also worked for Goya for a number of years and became members of the board of directors in 1995 and 2003 respectively, and, together with plaintiff, comprised Goya's three-member board of directors. Trouble between the various family members began to brew, however, as plaintiff and his nephews clashed over governance of the corporation. Between January 22 and 24, 2004, from their own immediate family members who represented more than 60% of the voting shareholders, Robert and Francisco secured written consents to resolutions which authorized: 1) the removal of plaintiff as a director; 2) the removal of plaintiff as Chairman of the Board of Directors; and, 3) the remaining Board members -- Robert and Francisco -- to "take any and all actions necessary or appropriate to carry out the foregoing resolutions."
On February 3, 2004, Robert and Francisco delivered the executed consents to the defendant's registered agent. Later that day, acting as a unanimous two-person board, they executed written consents to resolutions which: 1) appointed Robert as defendant's president and chairman of the board; 2) immediately terminated plaintiff's employment as CEO, president, and "all other positions" he held with Goya; and 3) immediately terminated Andrew's employment as COO, vice-president, and "all other positions" he held with Goya. Also on February 3, Robert and Francisco commenced an action in Delaware pursuant to 8 Del. C. 225 seeking declaratory relief validating the removal of plaintiff from the board pursuant to the executed shareholder consents, and validating the actions they then took as a two-member board of directors.
Because the motion to dismiss was granted before discovery took place, it is difficult to ascertain whether the parties actually dispute what occurred next. The record before us is limited to the parties' various pleadings, defense counsel's and plaintiff's certification in support of and opposition to the motion to dismiss, and the findings of fact contained within the Delaware court's written opinion. Nevertheless, since our standard of review of a grant of summary judgment is the same as that employed by the trial court, Atlantic Mutual Ins. Co. v. Hillside Bottling Co., 387 N.J. Super. 224, 230 (App. Div. 2006), we will assume the plaintiff's version of the facts as true and give him the benefit of all favorable inferences available in the record. Brill v. Guardian Life Ins. Co., 142 N.J. 520, 536 (1995).
Plaintiff contends on February 4 Robert and Francisco met with him and advised him for the first time of the actions they took the previous day. In a letter dated and delivered that day, Robert and Francisco told plaintiff that as a result of the previous day's actions, plaintiff must "immediately cease taking any actions on behalf of [Goya]." However, after delivering the letter to him, plaintiff contends his nephews met with him and offered him the option of voluntarily retiring and obtaining the benefits of the Agreement.
That same day, plaintiff authored and delivered a letter to his nephews. In its entirety it said,
I am in receipt of your letter of February 4, 2004. Subsequently, you told me I had until the morning of February 5, 2004 to voluntarily terminate my employment rather than be fired, as you have stated in the February 4, 2004 letter.
Without detailing the circumstances that led up to your action today, including the meeting of the Board of Directors that was in progress, I am unaware of the basis for your action. I intend to contest it. Nonetheless, in order to protect my rights under [the Agreement], I hereby voluntarily terminate my employment with the Company as you have suggested, provided, however, that such termination is provisional and if I am reinstated by a court, or otherwise, subject to being reversed at my option.
His nephews also responded in writing on February 4. They acknowledged their previous offer giving plaintiff "the opportunity to choose retirement in lieu of termination." They also acknowledged receipt of plaintiff's letter and responded,
[Y]our letter . . . is not an acceptance in conformance with the offer that we made to you. Thus, the offer made in your letter of today is a rejection of our offer . . . . Notwithstanding your rejection of our offer to you to allow you to retire, we wish to give you a final opportunity to accept our offer. If, no later that 12:00 p.m., February 5, 2004, you send us a writing signed by you that clearly and unequivocally states your desire to retire from the Company, without reserving any rights to pursue an action against the Company for matters such as wrongful termination of your employment arrangement with the Company, then you will have the right to your benefits under [the Agreement].
Plaintiff did not forward the requested writing to his nephews.
On February 17, plaintiff filed an answer and counterclaim in the Delaware action which contested the validity of his removal from the board and from employment with Goya. On February 19, he, Andrew, and their immediate family member shareholders filed a complaint in New Jersey against Robert, Francisco, and their family member shareholders who had executed the earlier consents. The plaintiffs in that action alleged minority shareholder oppression and other claims, and they demanded a valuation of the company's assets, buy-outs of their shares, and/or reinstatement of plaintiff and Andrew.
On November 3, 2004, the Delaware Court of Chancery issued its opinion in the lawsuit brought by Robert and Francisco. In short, the judge concluded that they had validly secured the shareholder consents and that plaintiff was legally removed from Goya's board as of February 3. He also concluded that from that point, "the rest of the case was predetermined," and the actions taken thereafter by Robert and Francisco acting as a two-member board, including the firing of plaintiff and Andrew, were valid.
On June 22, 2005 plaintiff voluntarily dismissed his original New Jersey action. He asserts the dismissal was intended to be a "significant effort to try to end the fighting between the family." However, on June 24, 2005, plaintiff filed this complaint seeking specific performance of the Agreement. He alleged that he "accepted [the] offer" made by Robert and Francisco to "'choose retirement in lieu of termination,'" but they "reneged on their retirement offer" by not "honor[ing] [the Agreement] unless [he] "totally waive[d] his rights to pursue any and all wrongful termination claims . . . ." He alleged neither their original offer nor the Agreement contained such a condition. Furthermore, plaintiff contended that after the death of his brothers -- Robert and Francisco's fathers -- their spouses received continued benefits even in the absence of any written agreements.
Goya moved to dismiss the complaint or alternatively sought summary judgment in its favor. On September 23, the motion judge issued a written opinion and executed an order dismissing plaintiff's complaint. He reasoned that plaintiff was collaterally estopped from pursuing his claim under the Agreement because the "issue of whether [plaintiff] was validly removed from Goya was actually litigated and decided in the Delaware proceeding." He noted, "[w]hile the Delaware Chancery Court was not confronted with the issue as phrased in this action, logically this issue was a corollary issue to what was presented to and then decided . . . in the Delaware litigation." Since the issue was already litigated and decided, there was no factual dispute and summary judgment was appropriate despite the lack of any discovery.
The motion judge also concluded that plaintiff was judicially estopped from prosecuting this action because "[h]e cannot argue inconsistent positions in two litigated matters based on the same facts and same legal premises." He noted,
If [plaintiff's] removal had been found not to be valid, then he would have to be restored to the positions from which he had been ousted. The concept of removal is in apposition to the concept of resignation. Therefore, [plaintiff] asserting his having been improperly removed as President and CEO cannot advocate his having resigned. The basic premise of his legal position in the Delaware suit was that he had not resigned.
The judge concluded plaintiff could not base a claim for equitable relief on the corporation's alleged past practices with other family members because plaintiff had a specific contract with defendant. The judge did not consider defendant's argument that plaintiff was barred from prosecuting the complaint by "the doctrine of election."
We consider initially the motion judge's determination that plaintiff was collaterally estopped from prosecuting this action based upon the findings and conclusions reached by the Delaware court. In order to properly determine the issue, we must examine the nature of the Delaware proceeding and that court's resolution of the issues.
In the Delaware action, Robert and Francisco sought declaratory relief validating the actions they took up to and through February 3, 2004. These included the solicitation of the shareholder consents, the removal of plaintiff from the board, and the adoption of a resolution terminating plaintiff's and Andrew's employment with Goya. The Delaware court did not consider any of the events between plaintiff and his nephews that occurred thereafter, specifically on February 4 and 5, because those events and their legal significance, if any, were beyond the purview of the litigation and were not facts necessary to the determination of the issues presented.
Robert and Francisco initiated their suit in Delaware pursuant to 8 Del. C. 225(a) which provides,
Upon application of any stockholder or director . . . the Court of Chancery may hear and determine the validity of any election, appointment, removal or resignation of any director, member of the governing body, or officer of any corporation, and the right of any person to hold or continue to hold such office.
In rendering his decision, the Delaware judge noted, "[T]he primary issue in this case is whether the removal of [plaintiff] as director and chairman of the board of Goya by stockholder written consent is valid . . . . The secondary issues are whether Robert and Francisco are the only valid board members and whether their termination of [plaintiff] and Andrew as officers of Goya was valid."
Thus, the issues were narrowly framed around the validity of Robert and Francisco's actions through February 3. This is consistent with the narrow focus of an action brought under this section of Delaware's Code. As the Delaware Supreme Court noted in Box v. Box, 697 A.2d 395 (Del. 1997),
The purpose of section 225 is to provide a quick method for review of the corporate election process to prevent a Delaware corporation from being immobilized by controversies about whether a given officer or director is properly holding office. To preserve an expedited remedy, a proceeding brought pursuant to section 225 is a summary proceeding, and the Court of Chancery has consistently limited section 225 trials to narrow issues. Thus, a section 225 action is not to be used for trying purely collateral issues, issues of director misconduct or other breaches of duty.
[Id. at 398.]
While the Delaware court ultimately decided Robert and Francisco validly removed plaintiff from the board and validly terminated his employment, it reached those conclusions only in the context of whether the actions were properly taken under Delaware corporate law.
The decision issued by the Delaware trial judge does not reference any of the events plaintiff alleges took place after February 3. The decision does not consider the circumstances surrounding defendant's February 4 offer to plaintiff to retire, whether it was conditional or not, whether plaintiff's letter of February 4 was a valid voluntary retirement, or whether Robert and Francisco "reneged" on their offer as plaintiff now alleges. We cannot discern from the record before us whether the parties took discovery on these issues or presented them in any way to the Delaware court.
Our Supreme Court has held
For the doctrine of collateral estoppel to apply to foreclose the relitigation of an issue, the party asserting the bar must show that: (1) the issue to be precluded is identical to the issue decided in the prior proceeding; (2) the issue was actually litigated in the prior proceeding; (3) the court in the prior proceeding issued a final judgment on the merits; (4) the determination of the issue was essential to the prior judgment; and (5) the party against whom the doctrine is asserted was a party to or in privity with a party to the earlier proceeding.
[In Re Estate of Dawson, 136 N.J. 1, 20 (1994) (citations omitted) (emphasis added).]
The Delaware court did not decide an issue identical to the issue presented in plaintiff's complaint -- whether he voluntarily terminated his employment with the defendant under the terms of the Agreement -- because that issue was never litigated in Delaware. The fact that Robert and Francisco validly adopted the resolution terminating plaintiff and Andrew from Goya's employ did not resolve what was the legal effect, if any, of all that transpired between the parties thereafter. The determination of that issue, of course, was not "essential" to the judgment the Delaware court rendered. For these reasons, the motion judge mistakenly determined that plaintiff was collaterally estopped from prosecuting this claim.
We also conclude that the motion judge mistakenly concluded that plaintiff was judicially estopped from pursuing this action. Judicial estoppel "precludes a party from taking a position contrary to the position he has already successfully espoused in the same or prior litigation." McCurrie v. Town of Kearny, 174 N.J. 523, 533 (2002). Plaintiff did not prevail in the Delaware proceeding.
Although the motion judge did not consider defendant's argument that plaintiff's suit was barred by the doctrine of election of remedies, we consider that alternate argument once again urged in opposition to this appeal. We have recently noted that though "[t]he doctrine of election of remedies is recognized in New Jersey" it has long ago been "characterized [as] 'a harsh and now largely obsolete rule' and one 'to be strictly confined within its reason and spirit.'" Collins v. U.S. Fidelity & Guar. Co., 384 N.J. Super. 439, 448 (App. Div.) certif. denied, 188 N.J. 218 (2006) (quoting Schrage v. Liebstein, 16 N.J. Super. 384, 389 (App. Div. 1951). certif. denied, 8 N.J. 431 (1952)). We have also held "[t]he mere bringing of a suit asking one remedy rather than another practically never affords ground for an estoppel and is not sufficient reason to deny an application for an alternative remedy." Newark Paraffine Paper Co. v. Dugan, 162 N.J. Super. 575, 578 (App. Div. 1978) (quoting 5A Corbin, Contracts, 1220 at 461-465 (1964)). Here, plaintiff has essentially brought this suit seeking a remedy that was an alternative to that which he urged as a defense in the Delaware action. He is not barred from doing so under the doctrine of election of remedies.
We conclude, therefore, that the motion judge's order dismissing plaintiff's complaint must be reversed, and the matter remanded for further proceedings consistent with this opinion. In doing so, we do not imply that plaintiff is entitled to ultimately prevail on his claim or even that further discovery is necessary, though we do not foreclose that possibility. On the existing record, defendant may conclude that it is nevertheless entitled to summary judgment on the only remaining issues in the case -- did plaintiff and defendant reach an agreement, post February 3, that permitted plaintiff to resign and was plaintiff's letter of February 4 consistent with that agreement? The motion judge noted, "[Plaintiff's] claim that he resigned is contradicted by the letter of resignation itself, which was conditional, which conditions were rejected by the Board. Therefore, he never resigned." That conclusion may ultimately be correct. However, from our review of the record, we cannot conclude the issue was squarely presented to the motion judge and certainly was not the basis of his grant of summary judgment in favor of defendant.
Reversed and remanded.
For sake of clarity, we refer to several members of the Unanue family by their first names. We do not intend any disrespect by such informality.
April 2, 2007