Schwartz v Morse Bus. Machines Corp.
Annotate this CaseDecided on October 20, 2006
Supreme Court, Putnam County
Bruce Schwartz, Plaintiff,
against
Morse Business Machines Corporation EDWARD CONDON AND JEFFREY L. JOHNSON, Defendant.
1823/2004
Ira Berliner, Esq.
Attorney for Plaintiff
225 Westchester Avenue
Port Chester, NY 10573
O'Connor, Redd and Sklarin LLP
Attorney for Defendants
200 Mamaroneck Avenue
White Plains, NY 10601
Andrew P. O'Rourke, J.
Defendants move for summary judgment dismissing the complaint or in the
alternative a declaration that Plaintiff's potentially provable and recoverable damages are $57,401
pursuant to the terms of the employment agreement dated August 1, 1998.
Plaintiff commenced this action alleging breach of employment contract, breach of fiduciary duty and tortious interference with contractual relations.
Plaintiff was employed by Morse Business Machines Corporation from 1998 through 2003 on a yearly renewed employment agreement. Plaintiff was terminated by Morse on August 23, 2004 with 4 months left on his contract.
Plaintiff's title was Vice President of Technical Services. Defendants allege Plaintiff was not performing his duties as Vice President for approximately 14 months before he was terminated but always received the compensation package associated with his position. In fact [*2]another individual was hired to perform Plaintiff's duties.
During his employ, Plaintiff accrued 6 vested shares of stock of th 100 issued and outstanding shares of Morse.
In 1998 Morse entered into a purchase agreement with E & S Business Products Inc. for its customer base, product inventory and fixtures for $80,000. The Agreement stated that Edward Condon would not compete within a 50 mile radius for a period of 5 years with the seller.(E & S Business Products Inc.) or its stockholder.
During his deposition Bruce Schwartz stated he was not an officer or shareholder of E & S. He did however sign the agreement and listed his title as Vice President of E & S when in fact he was not. It is this non-compete clause in the Asset Purchase Agreement that Plaintiff seeks to enforce. Plaintiff further testified that he never received any of the $80,000 purchase. The same was paid solely to his brother Howard Schwartz. Defendants allege since there was no valid contract between Bruce Schwartz and Morse as pertains to the Asset purchase Agreement, Plaintiff's claim for breach of said contract should be dismissed because there is no mutuality of obligation, the claim is illusory and summary judgment should be granted.
The Asset Purchase Agreement further states "nothing in this Agreement shall be construed to give any person or entity other that Seller and Buyer any legal or equitable right, remedy or claim under this Agreement, and this Agreement shall be for the sole and exclusive benefit of Seller and Buyer." The seller being Howard Schwartz the sole officer and shareholder of E & S and the Buyer Edward Condon on behalf of Morse.
In May 2002 Edward Condon established Morse Business Systems in Manhattan and purchased the Panasonic sales branch in Manhattan. During his deposition, Plaintiff stated he was aware that Edward Condon and Jeffrey Johnson has established the new company. However, Plaintiff never asked to be part of MBSM because he did not know if he wanted to be a part of same. Mr Condon testified Plaintiff had the opportunity to participate financially in MBSM but never agreed to do so . Mr Condon testified as of December 2005 MBSM was not financially viable and no profits were realized.
As to Plaintiff's first. fourth and sixth causes of action of the complaint directed to Plaintiff's 1998 Employment Agreement, he alleges he was never provided "with reasonable standards or obligations related to his job duties as required by contract." However, Plaintiff then states he "performed all of his obligations and responsibilities in accordance with the employment agreement." At his deposition plaintiff stated he "certainly" had an understanding of his day to day responsibilities.. He ran the service department and took on different responsibilities as needed.
However, because, as Plaintiff states, "customer complaints and people weren't getting service quickly", Plaintiff was switched to sales June 2003 and another individual was hired to run the service department.
Nonetheless, Plaintiff had the titled of Vice President of Technical Services and was being paid at a rate commensurate with that position. While working in sales Plaintiff's rating went from $660,000 a year to $50,000 in 2004 shortly before he was terminated. The reason for the decrease, Plaintiff stated, was "when you're being transitioned out the door, you don't want to work."
Defendants allege Plaintiff's inability to run the service department ineffectively or sell [*3]Morse products and his purchase of supplies from Morse's competitor justify his being terminated under the terms of his employment contract.
As to Plaintiff's claims for loss of profit, Jeffrey Johnson stated that because of Morse's on going economic difficulties from 2002 to 2005, he was laid off on May 13, 2005 leaving Morse with no sales staff.
Johnson testified MBM Business System performs service work for Morse but received no compensation from Morse.
Since Defendants allege MBMS is making no money, the burden is now upon Plaintiff to prove there is a profit to which he might be entitled if he were party to then non-compete agreement.
Defendants further allege, assuming arguend, Plaintiff was not justifiably terminated, his 6 shares could have been purchased by Morse pursuant to the employment agreement. Plaintiff did not have the option to force Morse to buy his shares. Defendants allege Morse was not in a financial position to purchase Plaintiff's stock and if they could the value of same would be $54,701. This amount is based on the "shareholder equity figure of $911,685." as of March 31, 2004. Dividing 100 shares into $911,685 equals $9,116.85 per share times 6 equals $54,701.10. During his deposition Plaintiff agreed if Morse had no profits then his shares of stock would be worthless.
As to Plaintiff's claim for tortious interference by Jeffrey Johnson, Mr. Johnson testified he did not know that Plaintiff was a shareholder of Morse when he was negotiating with Condon to work for Morse. Defendant thus states there was no interference by Johnson with Plaintiff's employment contract with Morse.
Defendants allege Plaintiff is not entitled to an accounting of the Manhattan Business, service the Manhattan Morse is not a party to this action, Plaintiff was not a member of that partnership and had refused to become a member thereof.
Defendants therefore seek an order dismissing the complaint or a declaration that Plaintiff's provable and recoverable damages under the terms of the 1998 employment agreement are $54,701.10.
In opposition Plaintiff alleges there are many issue which cannot be determined by summary judgment.
Primarily the issue as to whether or not the Restrictive Covenant in the Asset Purchase Agreement was solely for the benefit of Bruce Schwartz. Plaintiff alleges there are issues surrounding his termination and the value of Morse Business Machine Corporation.
Furthermore, Plaintiff alleges discovery has not been complete.
Bruce Schwartz states in his affidavit that he believed he was a 50% shareholder of E & S his brother's company. In 1987 he became the Chief Operating Officer of E & S. However, a stock certificate giving Plaintiff 50% of the shares of the Corporation were never issued.
Plaintiff states in 1998 he and his brother negotiated with Ed. Condon to merge E & S with Morse. Plaintiff contends Ed Condon dealt with him as if he were a shareholder and an officer of E & S and the Restrictive Covenant was "to protect and preserve" his rights as a former Owner of E & S. Plaintiff states Condon's purchase of Panasonic was a competitive act and in violation of the restrictive covenant.
The Affidavit of Stuart Goldberg, the accountant for E & S states there was never a [*4]formal transfer of ownership of E & S to Bruce Schwartz but he was "the defacto owner of the business."
After reviewing all of the affidavits and exhibits submitted the Court finds there are issues of fact which cannot be resolved by summary judgment.
This matter is scheduled for conference on November 2, 2006 at 9:30 am. Plaintiff should be prepared to file a Note of Issue.
This constitutes the order of the Court.
____________________________
Hon. Andrew P. O'Rourke
Justice of the Supreme Court
Dated: October 20, 2006
Carmel, NY
Ira Berliner, Esq.
Attorney for Plaintiff
225 Westchester Avenue
Port Chester, NY 10573
O'Connor, Redd and Sklarin LLP
Attorney for Defendants
200 Mamaroneck Avenue
White Plains, NY 10601
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