MAXINE DIAKOS v. BRENT RUDNICK
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2468-15T2
MAXINE DIAKOS, Individually and
as Administratrix of the Estate
of NICHOLAS E. DIAKOS,
Deceased,
Plaintiff-Appellant,
v.
BRENT RUDNICK, MO-NI-B, INC.,
Defendants-Respondents,
and
BARBARA LICHTMAN, JOHN J.
LICHTMAN, and STEVEN PECHTER,
Defendants.
_______________________________
Telephonically argued November 16, 2017 –
Decided December 15, 2017
Before Judges Koblitz, Manahan and Suter.
On appeal from Superior Court of New Jersey,
Chancery Division, Essex County, Docket No.
C-000210-13 and Law Division, Essex County,
Docket No. L-6061-14.
Joshua S. Lichtenstein argued the cause for
appellant (O'Toole Fernandez Weiner Van Lieu,
LLC, attorneys; Kenneth B. Goodman and Peter
Koenig, on the brief).
Lawrence N. Meyerson argued the cause for
respondent (Rubenstein, Meyerson, Fox,
Mancinelli, Conte & Bern, PA, attorneys for
respondents; Andrew P. Bolson, on the brief).
PER CURIAM
Plaintiff Maxine Diakos, individually and as administratrix
of the Estate of Nicholas E. Diakos, her late husband, appeals
from two separate court orders. The first, a June 30, 2014
Chancery order, granted summary judgment to defendants Brent
Rudnick, Mo-Ni-B, Inc., Barbara Lichtman, John J. Lichtman, and
Steven Pechter and dismissed plaintiff's claims of an ownership
interest in the Pilgrim Diner. The second, a January 8, 2016 Law
Division order, granted defendants' motion for summary judgment
dismissing plaintiff's amended claims of failure to receive
overtime pay in violation of the federal Fair Labor Standards Act
(FLSA), 29 U.S.C.A. §§ 201 to 219, and New Jersey Wage and Hour
Law (NJWHL),
N.J.S.A. 34:11-56a to -56a30. We affirm both orders.
Plaintiff argues that Nicholas Diakos (decedent) acquired a
partial ownership in Mo-Ni-B through the terms of an Employment
and Stock Purchase Agreement (Agreement). She claims that decedent
equalized his financial position with respect to the two other
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shareholders, Morton Pechter1 and Rudnick, thereby making the
decedent a one-third owner pursuant to the Agreement, and entitling
him to receive profit payments from Mo-Ni-B, which owns and does
business as the Pilgrim Diner in Cedar Grove.
Plaintiff argues that defendants are equitably estopped from
denying that the Agreement was a binding contract because Rudnick
made verbal assurances to decedent, and later to plaintiff, that
decedent was a part owner of the business and made $5,000 profit
payments to decedent on at least three occasions. Alternatively,
plaintiff argues that if decedent was not an owner of the business,
then plaintiff was an employee of the Pilgrim Diner and is entitled
to overtime pay.
Plaintiff commenced the initial action in the Chancery
Division on September 30, 2013, raising only claims that the
decedent was an owner of Mo-Ni-B and entitled to profits from the
business. Defendants filed a motion to dismiss, arguing that
plaintiff's claims were time-barred by the applicable six-year
contract statute of limitations and that laches also applied.
Because both parties relied on documents outside of the pleadings,
the Chancery court treated the motion as a summary judgment motion.
See R. 4:6-2. The court ruled that plaintiff's cause of action
1
We will refer to Morton Pechter, who died in 2004, as "Morton"
in this opinion to distinguish him from defendant Steven
Pechter.
3 A-2468-15T2
was barred by the statute of limitations because it accrued in
2004. The court also ruled that due to the deaths of Morton and
decedent, laches applied because defendants would be prejudiced
by the absence of those key witnesses, and plaintiff's failure to
bring a lawsuit timely constituted an unexplainable and
inexcusable delay. The court allowed plaintiff to amend the
complaint to add overtime-pay claims, after which the case was
transferred to the Law Division.
Plaintiff's amended complaint alleged that defendants
violated the FLSA and NJWHL by not paying plaintiff overtime during
her employment with the Pilgrim Diner. The Law Division ruled
that plaintiff was a manager of the Pilgrim Diner and was thus
exempt from receiving overtime pay. It granted defendants' summary
judgment motion, denied plaintiff's cross-motion for summary
judgment, and dismissed plaintiff's complaint.
I. Ownership Claim
Defendant Mo-Ni-B, Inc. was formed on November 25, 1997, for
the purpose of purchasing the Pilgrim Diner. In January 1998,
decedent and Morton, both individually and as president of Mo-Ni-
B, executed the Agreement, which stated that Morton and Rudnick
were both fifty-percent shareholders of Mo-Ni-B. The Agreement
further stated that decedent would become the manager of the
Pilgrim Diner and run the business with full authority to make
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decisions concerning the operation of the business, it being "the
intention of the parties that each shall become a 1/3 owner of
said restaurant business."
Although named in the Agreement, Rudnick did not sign it.
Rudnick claims he refused to sign because he never intended
decedent to become a partner.
With regard to the payment of profits, the Agreement states:
To compute the amount of moneys each
stockholder contributes for the purchase of
his respective stock, the following formula
shall be used:
. . . .
B. [Decedent] shall receive credit towards
his 1/3 stock purchase for the following
payments:
. . . .
b. In the event there is profit remaining in
the business at the end of any fiscal year,
such profits shall be distributed equally
between the three parties, provided any moneys
advanced by Pechter and Rudnick from sources
other th[a]n those which are being paid back
from the business, such as their personal
funds, or loans which were put into the
business, but are not being paid back from the
business, have been paid back to each of them.
In the event there is an outstanding balance
due to either Pechter o[r] Rudnick for such
advances, then [decedent's] 1/3 profit shall
be used first to pay back both parties for
such advances, and any remaining balance is
to be paid to [decedent].
. . . .
5 A-2468-15T2
C. As soon as [decedent] equalizes his
position with Pechter and Rudnick, by paying
his 1/3 contribution for any moneys advanced
by the other two, not considering any
outstanding loans which are being paid by the
business, 333 1/3 shares of Mo-N[i]-B, Inc.
[s]tocks shall be issued to him and he will
be an equal shareholder with Pechter and
Rudnick, and from that day on all profits
shall be distributed equally.
[Emphasis added.]
Regarding the sale of a shareholder's stock, the Agreement
states that "it is agreed between the parties, that the remaining
stockholder, or stockholders shall have a right of first refusal."
The lawyer who drafted the Agreement certified that decedent
became the manager of the Pilgrim Diner because of Rudnick's oral
assurances that "notwithstanding Mr. Rudnick's refusal to sign the
Agreement their business arrangement would proceed exactly as it
was set forth in that Agreement." Decedent worked as the manager
of the Pilgrim Diner until his death on December 23, 2011.
Plaintiff worked as the assistant manager earning $750 per week
until her husband's death.
Plaintiff claims that decedent fulfilled his financial
obligation to Morton and Rudnick, as per the Agreement, prior to
Pechter's death in 2004. As evidence, she asserts that prior to
Morton's 2004 death, Rudnick paid decedent $5,000 in profits on
at least three occasions. Plaintiff claims that since 1999, the
business has earned "significant profits" and "virtually none of
6 A-2468-15T2
those profits have been shared with [plaintiff] and [decedent]."
No profit payments were made to decedent after Morton died, in
spite of requests by decedent.
After Morton's death, his shares in Mo-Ni-B, which had passed
to Katherine Pechter, were sold in 2005 to defendants Barbara and
John J. Lichtman and Steven Pechter without an offer of first
refusal to decedent.
According to decedent's daughter, Pauline,2 in late 2007
decedent "asked Mr. Rudnick for the tax returns a number of times,
but Mr. Rudnick refused to provide the documents." After, decedent
"approached Mr. Rudnick about his ownership interest in the Diner,"
to which Rudnick made comments such as "trust me" and "we got this
diner for you." Pauline also claims in her certification that
starting in 2009, Rudnick began to bring prospective buyers to the
diner, which made decedent question Rudnick's promises and
assurances about his ownership interest.
After decedent's death in December 2011, plaintiff certified
that she "had to assume [her] husband's responsibilities."
Plaintiff claims that "two weeks after [decedent] passed away, Mr.
Rudnick brought a potential buyer into Pilgrim Diner without asking
[her] or even telling [her] in advance." Plaintiff told Rudnick
that he "seem[ed] to forget that [plaintiff] had an interest," to
2
At oral argument we were informed that Pauline has passed away.
7 A-2468-15T2
which Rudnick yelled back "I said if there was profit." With the
understanding that Rudnick was close to selling the Pilgrim Diner,
plaintiff filed a complaint against defendants in the Chancery
Division in 2013.
Our review of a ruling on summary judgment is de novo,
applying the same legal standard as the trial court. Globe Motor
Co. v. Igdalev,
225 N.J. 469, 479 (2016). Rule 4:46-2 provides
that a court should grant summary judgment when "the pleadings,
depositions, answers to interrogatories and admissions on file,
together with the affidavits, if any, show that there is no genuine
issue as to any material fact challenged and that the moving party
is entitled to a judgment or order as a matter of law." The court
must review the facts "in the light most favorable to the non-
moving party." R. 4:46-2.
Plaintiff certifies that the court "may read certain
statements [she] made in [her] certification dated September 30,
2013 . . . to mean that [decedent] and [plaintiff] were aware in
2004 that [they] should have gone to court at that time."
Plaintiff claims that neither she nor decedent "had any such
awareness at that time" and that decedent only "became aware
sometime in 2009 that [] Rudnick may not honor the many promises
that he made to [decedent] over the years" when Rudnick began to
bring prospective buyers to the diner without telling decedent.
8 A-2468-15T2
The statute of limitations on a breach of contract claim is
six years from the date of accrual.
N.J.S.A. 2A:14-1. A claim
accrues, for statute of limitations purposes, on the date on which
the right to institute and maintain a suit first arose. Cnty. of
Morris v. Fauver,
153 N.J. 80, 107 (1998). The discovery rule
generally does not apply to most contract actions. Id. at 110.
Most contract actions "presume that the parties to a contract know
the terms of their agreement and a breach is generally obvious and
detectable with any reasonable diligence." Ibid.
Rudnick refused to sign the Agreement. According to Pauline's
certification, "Rudnick and [decedent] never had an easy
relationship." According to plaintiff, after Morton's death,
Rudnick made no further profit payment to decedent. Decedent was
also not offered a right of first refusal when Morton's shares
were sold to defendants Barbara and John J. Lichtman and Steven
Pechter in 2005.
When taken together, these undisputed facts demonstrate that
decedent's relationship with Rudnick after Morton's death was
contentious and adversarial, and if an enforceable agreement did
exist, decedent was aware that Rudnick was not honoring that
9 A-2468-15T2
agreement. Thus, the cause of action accrued at the latest in
2005 when the stock transaction took place.3
Equitable estoppel does not arise under these facts. "To
establish a claim of equitable estoppel, the claiming party must
show that the alleged conduct was done, or representation was
made, intentionally or under such circumstances that it was both
natural and probable that it would induce action." Miller v.
Miller,
97 N.J. 154, 163 (1984). Further, the conduct must be
relied on, and the relying party must act so as to change his or
her position to his or her detriment. Ibid. That party's reliance
must also be reasonable. E. Orange Bd. of Educ. v. New Jersey
Schs. Constr. Corp.,
405 N.J. Super. 132, 148 (App. Div.), certif.
denied,
199 N.J. 540 (2009). Here, reliance on Rudnick's
assurances after 2004 was not reasonable given his failure to sign
the Agreement and repeated failures to abide by it.
Plaintiff argues the Agreement was a continuing contract,
similar to an installment agreement, and that the trial court
erred in rejecting the doctrine of continuing breach. Plaintiff
states the Agreement called for continuing performance by decedent
in exchange for, initially, credits toward his stock ownership,
followed by the installment payment of dividends to the extent
3
At oral argument for the first time plaintiff's counsel raised
the question of whether decedent was aware of the stock sale.
Plaintiff offered no evidence of decedent's lack of knowledge.
10 A-2468-15T2
that the corporation turned a profit. The Agreement does not call
for a monthly or annual payment of profits or any other set
periodic payment structure, but rather a payment of profits to the
extent there is any profit, thus it is not an installment contract,
where a new cause of action arises from the date each payment is
missed. See Metromedia Co. v. Hartz Mt. Assocs.,
139 N.J. 532,
535 (1995).
Decedent received profit payments prior to Morton's death in
2004, which, according to the Agreement, should only occur after
decedent paid sufficient funds into Mo-Ni-B to obtain a one-third
interest in the business. If decedent had acquired an ownership
interest in the business pursuant to the Agreement, he could have
asserted his ownership claim either after Rudnick stopped making
profit payments to decedent in 2004, or at the latest after
decedent was denied his right of first refusal before Morton's
shares were sold in 2005. The complaint was not filed within six
years of 2005.
II. Wage Claim
In plaintiff's certification from September 30, 2013, she
states she is "currently employed as the manager of the Pilgrim
Diner" and works more than 90 hours per week. She had to "assume
[decedent's] responsibilities when he passed away in late December
11 A-2468-15T2
2011." Plaintiff states that until his passing, decedent "was an
owner and the manager of the Pilgrim Diner."
Plaintiff filed a cross-motion for summary judgment with
regard to her overtime-pay claims, arguing that the facts were not
in dispute. "The filing of a cross-motion for summary judgment
generally limits the ability of the losing party to argue that an
issue raises questions of fact, because the act of filing the
cross-motion represents to the court the ripeness of the party's
right to prevail as a matter of law." Spring Creek Holding Co.
v. Shinnihon U.S.A. Co.,
399 N.J. Super. 158, 177 (App. Div.),
certif. denied,
196 N.J. 85 (2008). But, "there is no per se rule
that the existence of cross-motions for summary judgment precludes
a party from seeking, as alternative relief, a trial as to certain
issues." Ibid.
During plaintiff's deposition, when asked about her title and
role in the business, plaintiff answered "[d]oing managerial, you
know, what every diner owner does, that they have somebody on the
floor. They walk the people, they make coffee if they have to,
they take cash, I do everything." She sets her own hours of work
and does not ask anyone for permission to leave. She keeps track
of employee hours and "call[s] them in [to] payroll." Plaintiff
has also hired waitresses without asking Rudnick and "made sure
they did their side work." If an employee calls out sick,
12 A-2468-15T2
plaintiff is "the one that will have to come in and see if [she]
can find somebody else to fill in." Plaintiff also closes out the
diner's cash registers and sets the weekly schedules for the
waitresses.
Under both Federal and New Jersey law, employees who work "in
a bona fide executive, administrative, or professional capacity,"
are exempt from receiving overtime compensation.
N.J.S.A. 34:11-
56a4; N.J.A.C. 12:56-7.1; 29 U.S.C.A. § 213 (2014). The New Jersey
Department of Labor and Workforce Development regulations look to
the federal guidelines for determining which employees work in
such a capacity. N.J.A.C. 12:56-7.2.
The federal regulations define an "employee employed in a
bona fide executive capacity" as an employee:
(1) Compensated on a salary basis . . . at a
rate per week of not less than [$455 per week]
. . . exclusive of board, lodging or other
facilities . . . ;
(2) Whose primary duty is management of the
enterprise in which the employee is employed
or of a customarily recognized department or
subdivision thereof;
(3) Who customarily and regularly directs the
work of two or more other employees; and
(4) Who has the authority to hire or fire
other employees or whose suggestions and
recommendations as to the hiring, firing,
advancement, promotion or any other change of
status of other employees are given particular
weight.
13 A-2468-15T2
[29 C.F.R. § 541.100(a).]
29 C.F.R. § 541.700 states:
(a) [A]n employee's "primary duty" must be the
performance of exempt work. The term "primary
duty" means the principal, main, major or most
important duty that the employee performs.
Determination of an employee's primary duty
must be based on all the facts in a particular
case, with the major emphasis on the character
of the employee's job as a whole. Factors to
consider when determining the primary duty of
an employee include . . . the relative
importance of the exempt duties as compared
with other types of duties; the amount of time
spent performing exempt work; the employee's
relative freedom from direct supervision; and
the relationship between the employee's salary
and the wages paid to other employees for the
kind of nonexempt work performed by the
employee.
(b) The amount of time spent performing
exempt work can be a useful guide in
determining whether exempt work is the primary
duty of an employee. Thus, employees who
spend more than 50 percent of their time
performing exempt work will generally satisfy
the primary duty requirement. Time alone,
however, is not the sole test, and nothing in
this section requires that exempt employees
spend more than 50 percent of their time
performing exempt work. Employees who do not
spend more than 50 percent of their time
performing exempt duties may nonetheless meet
the primary duty requirement if the other
factors support such a conclusion.
(c) Thus, for example, assistant managers in
a retail establishment who perform exempt
executive work such as supervising and
directing the work of other employees,
ordering merchandise, managing the budget and
authorizing payment of bills may have
management as their primary duty even if the
14 A-2468-15T2
assistant managers spend more than 50 percent
of the time performing nonexempt work such as
running the cash register. However, if such
assistant managers are closely supervised and
earn little more than the nonexempt employees,
the assistant managers generally would not
satisfy the primary duty requirement.
The application of an exemption under the FLSA is a matter
of affirmative defense on which the employer has the burden of
proof. Brock v. Claridge Hotel & Casino,
846 F.2d 180, 187 (3d
Cir. 1988). The "remedial purpose of the Wage and Hour Law
dictates that it should be given liberal construction." New Jersey
Dep't of Labor v. Pepsi-Cola Co.,
170 N.J. 59, 62 (2001).
Plaintiff argues that she is a non-exempt employee and that
her title as manager did not reflect her actual responsibilities,
which plaintiff argues make her more akin to a hostess or waitress
entitled to overtime compensation under the Federal FLSA and the
NJWHL. The New Jersey Department of Labor and Workforce
Development regulations look to the federal guidelines for
determining which employees work "in a bona fide executive,
administrative, or professional capacity." N.J.A.C. 12:56-7.2.
Regarding the first prong under
29 C.F.R. 541.100(a),
plaintiff is paid a salary of $1,000 per week, although she was
not paid during the week that Hurricane Sandy hit.
Regarding the second prong, plaintiff argues she spent
"approximately 93%" of her time on non-managerial functions, such
15 A-2468-15T2
as bussing, cleaning, and waiting tables. Time spent on non-
exempt work is a factor, but not dispositive. See
29 C.F.R.
541.700.
Regarding the third prong, whether plaintiff customarily and
regularly directs the work of two or more employees, she has
authority to set weekly schedules, tracks employee hours and
manages the activities of the others when she is at the diner.
Regarding the fourth prong, whether plaintiff has authority
to hire or fire employees, plaintiff admitted she has the authority
to hire waitresses without Rudnick's permission.
Even giving her the benefit of all reasonable favorable
inferences, plaintiff fits well within the criteria for a manager
and is therefore not entitled to the protections of the FLSA or
the NJWHL. She also waited too long to institute suit against
defendants seeking to enforce the Agreement, thus falling afoul
of the six-year statute of limitation. Both the Chancery and the
Law Division dismissals were appropriate.
Affirmed.
16 A-2468-15T2
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