DENNIS MAAS VS. HOYT CORPORATION ( 2017 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2983-15T3
DENNIS MAAS,
Plaintiff-Appellant,
v.
HOYT CORPORATION, a corporation
of the State of New Jersey;
MICHAEL BRADFORD; SUSAN NIXON
BRADFORD; NICHOLAS B. NIXON;
MARIA ESPARRAGUERA; THE WILLIAM
H. NIXON REVOCABLE TRUST; and
THE ESTATE OF WILLIAM H. NIXON,
Defendants-Respondents.
_________________________________
Argued September 14, 2017 – Decided October 17, 2017
Before Judges Alvarez, Currier, and Geiger.
On appeal from the Superior Court of New
Jersey, Law Division, Bergen County, Docket
No. L-10204-15.
William A. Feldman argued the cause for
appellant (William A. Feldman, LLC, attorneys;
Mr. Feldman and John J. Stern, on the briefs).
Michele L. Ross argued the cause for
respondents Hoyt Corporation, Michael
Bradford, Susan Nixon Bradford, Nicholas B.
Nixon and Maria Esparraguera (M. Ross &
Associates, LLC, attorneys; Ms. Ross and Jill
A. Ellman, on the brief).
Daniel Case Gibbons argued the cause for
respondents The William H. Nixon Revocable
Trust and The Estate of William H. Nixon
(Nixon Peabody LLP, attorneys; Mr. Gibbons,
on the brief).
PER CURIAM
Plaintiff Dennis Maas appeals from the February 12 and
February 16, 2016 orders dismissing his complaint against all
defendants with prejudice. The Law Division judge dismissed the
complaint under the entire controversy doctrine (ECD), asserting
that the complaint at issue was identical to a prior complaint
that had been dismissed without prejudice in the Chancery Division.
Because we find there was no adjudication on the merits of the
action in the Chancery Division, we reverse the dismissal orders.
Plaintiff was employed by defendant Hoyt Corporation from
1986 until his termination in 2015, serving as its vice president
and chief financial officer. In 1986, the two principals of Hoyt,
William Nixon1 and Donald Maguire, entered into a Shareholders
Agreement (Agreement) that restricted the two principals from
transferring stock. The Agreement also required Hoyt to purchase
life insurance policies on each of the stockholders. Upon the
1
Nixon was the majority shareholder and owned 206 shares; Maguire
owned a minority interest with thirty-nine and one-half shares.
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death of either of the principals, Hoyt was to purchase that
stockholder's shares.
On the same day the Agreement was executed, plaintiff was
sold one share of stock and he executed a different agreement,
memorializing the purchase and providing that upon his
termination, the stock would be sold to Hoyt. Plaintiff's
employment was defined as "at will."
In late 1986, Hoyt, Nixon, and Maguire executed an amendment
to the Agreement that permitted Nixon to transfer his majority
interest to defendant William H. Nixon Revocable Trust (the Trust),
a trust for the benefit of his spouse and descendants, making the
Trust the majority shareholder of Hoyt.
Nixon served as president of Hoyt until 1999, at which time
Maguire became president until his retirement in October 2014. In
November 2014, defendant Michael Bradford became the interim
president. A new Board of Directors was elected in December 2014
to include defendants Susan Nixon Bradford, Nicholas B. Nixon, and
Maria Esparraguera (the Nixon defendants). Hoyt purchased
Maguire's stock after his death in March 2015. In April, defendant
Michael Bradford purchased two shares of the corporation, ensuring
plaintiff's status as minority shareholder. Nixon died in May
2015, and in August, plaintiff was terminated on allegations of
improper conduct in the workplace.
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The Chancery Action
In June 2015, plaintiff filed an Order to Show Cause (OTSC)
and verified complaint in the Chancery Division against Hoyt,
Michael Bradford, the Nixon defendants, the Trust, and the Estate
of William H. Nixon (Estate).
Plaintiff's OTSC and complaint alleged that all of the
defendants had "mismanaged or acted oppressively . . . in breach
of their fiduciary duties to [p]laintiff as a stockholder and
employee [of] the [c]orporation" by refusing to effectuate
plaintiff's request to buy back the stock formerly owned by Nixon,
and currently held by the Trust. Plaintiff sought the appointment
of a custodian or provisional director to repurchase all of the
corporation's stocks, including the stock owned by the Trust and
Michael Bradford. He also sought a declaration that he was the
sole remaining stockholder.
The OTSC alleged additional causes of action for breach of
contract; breach of the implied covenant of good faith,
cooperation, and fair dealing; and specific performance. The
Chancery court denied the OTSC.
Following his termination, plaintiff amended his complaint
to assert three additional claims: violation of the Conscientious
Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -14;
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conspiracy; and tortious interference with contractual and
economic rights and expectations.
All of the defendants moved to dismiss the complaint under
Rule 4:6-2(e). They argued that plaintiff was not a party to the
Agreement, and therefore, had no standing to assert a claim as an
oppressed shareholder under N.J.S.A. 14A:12-7(1)(c) (the Act). As
there was no contract, defendants contended that plaintiff could
not establish a claim for breach of contract, breach of the implied
covenant of good faith and fair dealing or tortious interference
with contractual and economic rights and expectations. Defendants
asserted that plaintiff was only entitled to the value of his one
share of stock. Defendants argued further that plaintiff had not
alleged a violation of a law, rule, or regulation as required to
establish a claim under CEPA or for civil conspiracy.
On November 6, 2015, the Chancery judge issued a written
opinion granting defendants' motions. Quoting Kieffer,2 the judge
stated that as the motions were brought under Rule 4:6-2(e), he
was cognizant that the "non-moving party need not prove the case,
but need only 'make allegations which, if proven, would constitute
a valid cause of action.'" After advising that he had accepted
plaintiff's version of the facts and accorded it all legitimate
2
Kieffer v. High Point Ins. Co., 422 N.J. Super. 38, 43 (App.
Div. 2011).
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inferences, the Chancery judge found that the facts "set forth in
the pleadings are insufficient to state any causes of action
against Defendant[s] due to improper pleadings."
As to the Act, the judge stated that plaintiff had no legal
standing to allege a cause of action because he was neither a
party to nor a third-party beneficiary of the Agreement. He
advised, however, that plaintiff could raise this allegation under
a derivative theory in a new pleading.
The counts alleging breach of contract and implied covenant
of good faith and fair dealing were similarly dismissed without
prejudice as a result of the judge's conclusion that plaintiff was
not a party to the Agreement. The judge again noted, plaintiff's
allegation that he was an intended beneficiary of the Agreement,
and advised that the claims could be brought in a derivative
action.
Quoting Maw,3 the Chancery judge also dismissed the CEPA count
without prejudice, asserting that plaintiff failed to "plead a
violation of any activity on the part of [defendants] that was
'unlawful or indisputably dangerous to the public health, safety
or welfare.'"
3
Maw v. Advanced Clinical Commc'ns, 179 N.J. 439, 445 (2004).
6 A-2983-15T3
In addressing the allegation of civil conspiracy, the judge
found that the complaint failed to set forth sufficient facts to
"establish Defendants agreed to inflict a wrong or injury upon
Plaintiff, or that the Plaintiff suffered damages as a result of
any such agreement." The count was dismissed without prejudice.
Finally, the judge dismissed the tortious interference with
a contract claim, reiterating that plaintiff was not a party to
the Agreement and, therefore, had no standing to assert this
contractual claim. The judge advised again that if plaintiff was
an intended beneficiary, he could pursue claims to enforce any
rights of Hoyt in a derivative action.
In conclusion, the Chancery judge noted the general premise
that a dismissal for failure to state a claim is without prejudice
because there has been no adjudication on the merits of the claims.
He said:
Therefore, in granting Defendants' motions[,]
all of Plaintiff's claims are dismissed
without prejudice. The [c]ourt notes that
some of Plaintiff's claims seek money damages,
and Plaintiff also filed an Amended Complaint
seeking a jury trial. Should Plaintiff
continue to seek these claims, the claims may
more appropriately be brought in the Law
Division.
The Law Division Action
Plaintiff did not appeal from the Chancery court's order.
Instead, he filed an action in the Law Division asserting identical
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claims and adding a count for a shareholder derivative action
pursuant to Rule 4:32-3. Defendants moved to dismiss the
complaint, reiterating their arguments made before the Chancery
judge. In addition, defendants contended that plaintiff was unable
to maintain his derivative action, as he only sought to enforce
his own rights and not the rights of all stockholders.
The Law Division judge determined that the ECD required the
dismissal of all of the claims in the new complaint previously
asserted in the Chancery complaint. He stated that the Chancery
judge's decision to dismiss without prejudice "can only be read
as allowing plaintiff to address the deficiencies of the pleadings
when re-filed in the Law Division." Since plaintiff failed to set
forth any new facts or legal arguments in the second complaint,
the Law Division judge dismissed the previously asserted claims
with prejudice. He similarly dismissed the new derivative action
count as he concluded that because plaintiff was the only
stockholder, the derivative suit was "representative of only his
personal concerns and alleged injuries."
On appeal, plaintiff argues that the Law Division judge erred
in dismissing his complaint under the ECD. We agree.
"The [ECD] bars a subsequent action only when a prior action
based on the same transactional facts has been tried to judgment
or settled." Arena v. Borough of Jamesburg, 309 N.J. Super. 106,
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111 (App. Div. 1998). "Only a judgment 'on the merits' will
preclude a later action on the same claim." Watkins v. Resorts
Int'l Hotel & Casino, 124 N.J. 398, 415 (1991). The Chancery
judge did not adjudicate any of plaintiff's claims on their merits.
He reviewed the complaint under the standard set forth in Rule
4:6-2(e) and found plaintiff's pleadings insufficient to state a
cause of action. The Chancery judge specifically stated he was
dismissing the complaint without prejudice because the claims had
not been adjudicated on their merits. Anticipating that the
complaint would be re-filed, the Chancery judge advised that the
Law Division was the appropriate forum for any subsequent action.
The Law Division judge, therefore, erred in his determination that
the ECD barred the second complaint. The claims were neither
adjudicated nor settled.
Because we review judgments and orders, however, and not the
reasoning for their entry, see Neu v. Union Twp. Planning Bd., 352
N.J. Super. 544, 551 (App. Div. 2002), we must address whether the
dismissal was nevertheless proper. Our review of the trial court's
order is plenary; we apply the same test as the trial court,
granting a motion under Rule 4:6-2 "only if, accepting all well-
pleaded allegations in the complaint as true, and viewing them in
the light most favorable to plaintiff, plaintiff is not entitled
to relief." Smerling v. Harrah's Entm't Inc., 389 N.J. Super.
9 A-2983-15T3
181, 186 (App. Div. 2006). Moreover, we are not bound by the
trial court's legal conclusions. "A trial court's interpretation
of the law and the legal consequences that flow from established
facts are not entitled to any special deference." Manalapan
Realty L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
Limiting our review to the "legal sufficiency of the facts
alleged in the complaint[,]" Donato v. Moldow, 374 N.J. Super.
475, 482 (App. Div. 2005), we are satisfied that plaintiff provided
adequate and sufficient facts to support his allegations in the
Law Division complaint. The twenty-eight page complaint contains
detailed factual support for each asserted claim.
Plaintiff presented sufficient facts to support his claim
under the Act. The pertinent count provides detailed allegations
to meet the requirements of N.J.S.A. 14A:12-7(1)(c). As to the
contractual claims, plaintiff alleges that he was an intended
third-party beneficiary to the Agreement. Without the opportunity
for discovery to explore these allegations, it was an error to
dismiss the contractual claims.
In the CEPA count, plaintiff alleges that: (1) Hoyt employed
him; (2) defendants violated the Act and N.J.S.A. 14A:7-12; (3)
he complained of Hoyt's failure to repurchase Nixon's stock; and
(4) defendants retaliated against him by terminating his
employment. Plaintiff has factually supported his CEPA claim.
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Finally, we review the derivative shareholder claim.
Plaintiff alleges that the Nixon defendants have mismanaged the
corporation, including their refusal to purchase the Trust stock
following Nixon's death. Plaintiff further alleges that the Nixon
defendants' refusal deprived Hoyt from the benefits of
repurchasing the stock. Because the only other shareholders are
Michael Bradford and the Trust, plaintiff describes himself as the
only bona fide shareholder. He acknowledges that his individual
rights as a shareholder and his derivative rights on behalf of the
class of all bona fide stockholders overlap. These allegations
are sufficient to meet his pleading burden.
Whether any or all of the pled claims will remain viable
after discovery and potential summary judgment motions is not
before us and we express no view as to the likelihood of success
of any such motions. We need only be able to "glean" a cause of
action from the complaint for it to survive a dismissal motion
under Rule 4:6-2. See Printing Mart-Morristown v. Sharp Elecs.
Corp., 116 N.J. 739, 746 (1989). As a result, we reverse the
dismissal of the complaint and remand to the trial court for
further proceedings.
Reversed and remanded. We do not retain jurisdiction.
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