Arnold v. Alfonse D'Amato, Armand D'Amato, Jerry Barbanel, Park Strategies, LLC
| Decision Date | 23 July 2015 |
| Docket Number | 14 Civ. 6457 (PAE) |
| Parties | MARY ARNOLD, Plaintiff, v. ALFONSE D'AMATO, ARMAND D'AMATO, JERRY BARBANEL, PARK STRATEGIES, LLC, and PRECISION DISCOVERY, LLC, a/k/a PRECISION DISCOVERY, INC., Defendants. |
| Court | U.S. District Court — Southern District of New York |
In this diversity action, Mary Arnold brings breach of contract and other claims against Precision Discovery, LLC ("Precision") and its affiliates. Arnold's principal claim is that she was retained to generate business for Precision under an independent contractor agreement (the "Agreement"), but was denied commissions and the opportunity to earn other commissions to which she was entitled under that Agreement. She separately claims that she was party to an unwritten joint-venture agreement with the defendants, which was breached when the defendants attempted to involve her in a scheme to solicit, by means of fraudulent representations, contracts from a government agency.
The defendants—Precision, Alfonse D'Amato ("Alfonse"), Armand D'Amato ("Armand"), Jerry Barbanel, and Park Strategies, LLC ("Park Strategies")—now move to compel arbitration pursuant to a binding arbitration clause in the Agreement. For the following reasons, the Court grants that motion, and stays this action pending the outcome of arbitration.
Precision, originally founded as a Delaware limited liability company, is a New York corporation that provides its clients with eDiscovery, computer forensics, and software solutions. Pearson Letter, Ex. A ¶ 3. Park Strategies, a Delaware limited liability company and affiliate of Precision, raises money for Precision. Compl. ¶ 14; Pearson Letter, Ex. B ¶ 2.
Alfonse and Armand, both New York citizens, are managing directors of Park Strategies and were equity partners of Precision when it was a limited liability company. Id., Ex. A ¶ 4, Ex. B ¶ 3. Barbanel, a New Jersey citizen, is Precision's current president and chief executive officer ("CEO"), and a member of its board of directors. Id., Ex. A ¶ 2.
Arnold, a Florida resident, was an independent contractor for Precision between December 1, 2009 and October 18, 2013. Compl. ¶ 10; Pearson Decl., Ex. B, at 1.
In 1981, Arnold, a congressional aide, met Alfonse, then a United States Senator from New York; she worked with him in Congress until 1992. Id. ¶¶ 16-17. That year, Arnold received a law degree, and became a senior government relations consultant at Black, Manafort, Stone & Kelley ("BMSK"). Id. ¶ 18. While working as a lobbyist at BMSK, Arnold took on AT&T as a client; later, in 1998, she joined AT&T as its vice president for congressional affairs and federal government affairs. Id. ¶¶ 19, 21. In 2004, Arnold joined SAG AG, a multinationalsoftware corporation, as vice president of government relations; in that role, she hired Park Strategies, which aids clients in "business policy, development and regulatory issues." Id. ¶¶ 23-24.
In 2009, Armand, Alfonse's brother, encouraged Arnold to meet with Barbanel, Precision's president and CEO. Id. ¶ 27. In December 2009, as detailed below, Arnold entered into the Agreement to serve as a business generator, or "rainmaker," for Precision. Arnold claims, however, that defendants (1) deprived her of commissions she was owed under the Agreement, and (2) attempted to involve her in a fraudulent scheme to gain special contracts from a government agency, which was in breach of a joint-venture agreement she had orally entered into with them. More specifically, Arnold alleges the following:
1. Deprivation of Commissions
On December 1, 2009, after negotiating with Barbanel, Armand, and other Precision executives, Arnold entered into the Agreement to work as an independent contractor for Precision. Id. ¶ 27. The parties to the Agreement were Arnold and Precision; Barbanel signed on behalf of Precision. Alfonse Decl., Ex. A, at 4.
Under the Agreement, Arnold was to "assist Precision . . . [in] win[ning] engagements" by "facilitating introductions to potential Precision . . . clients, coordinating meetings between Precision . . . representatives and potential clients, making necessary follow-up contacts with potential clients, and providing such additional services, as requested by Precision . . . , that are designed to secure client engagements." Id. at 1. Arnold alleges that Armand and Barbanel told her that their goal was for her to bring in clients—specifically, AT&T and the Federal Deposit Insurance Corporation ("FDIC")— as accounts for Precision. Compl. ¶¶ 28-29. Under the Agreement, Arnold was to be paid a "straight ten (10) percent of the fees earned and collected byPrecision . . . for any engagement awarded to Precision . . . due to [her] efforts, specifically [her] efforts in referring the client and assisting [Precision] to close the engagement." Id.
Arnold thereafter secured several clients for Precision. For example, on January 24, 2011, Precision, as a result of Arnold's connections and her meetings with representatives from AT&T, signed a contract with AT&T worth between $15 million and $25 million for Precision. Id. ¶ 46. Arnold also helped Precision gain Nestle Waters M.T., Kimberly-Clark Corporation, and Reynolds Consumer Products, LLC, as clients. Id. ¶ 56.
In February 2010, Arnold began to express concern to Precision officials, including Alfonse and Armand, about her compensation. Id. ¶¶ 59-62. She alleges that she had given Precision a list of potential clients and their contact information, which Precision had assigned to other sales associates for development. Id. However, Precision did not tell her how, or whether, she would be compensated for business generated from those client leads. Id. In 2010 and 2011, Arnold repeatedly asked defendants about her commissions. Id. ¶¶ 60, 78, 81.
On December 5, 2011, Arnold, by email, told Barbanel that he, and Precision, were in breach of contract because Precision had failed to pay her commissions for client accounts she had assisted Precision in obtaining, and specifically for failing to pay her commissions on the AT&T account within 10 days of receiving payments from AT&T, as the Agreement required. Id. ¶ 84. In November 2012, Arnold obtained copies of the documents reflecting AT&T's payments to Precision from AT&T these, she states, revealed that Precision had underpaid her commissions between January 2011 and November 2012. Id. ¶ 105.
In August 2013, defendants terminated the Agreement. Id. ¶ 156. Arnold alleges that Precision continues to receive millions of dollars in payments from AT&T and other clients thatArnold brought in, and that she is entitled to, but has not received, commissions based on these payments. Id.
2. Attempted Involvement in a Fraudulent Scheme
Separately, Arnold alleges, she entered into an oral joint-venture agreement2 with Precision to found AEDiscovery, a Precision subsidiary and Delaware limited liability company for which Arnold is majority owner, and Precision is minority owner, and to apply for federal contracts in that entity's name. Id. ¶¶ 132-33; Barbanel Decl. ¶ 5. Arnold alleges that she alerted defendants, when negotiating the Agreement with them, that women- or minority-owned businesses were given "favorable treatment" when applying for certain federal contracts, including from the FDIC. Compl. ¶¶ 119-20. She claims that the purpose of founding AEDiscovery was to capitalize on the advantage. Id. Arnold further alleges that, on December 7, 2009, six days after signing the Agreement, she put defendants Armand and Barbanel in touch with an FDIC official in charge of a part of the agency's program to assist women- and minority-owned businesses. Id. ¶ 120. Arnold alleges that defendants thereafter attempted to solicit contracts from the FDIC on the premise that the entity applying for such benefits was majority-owned by a woman, Arnold, even though that entity, AEDiscovery, had not yet been founded. Id. ¶ 123. Because AEDiscovery did not yet exist, Arnold states, at various points in late 2009 and 2010, she told defendants that their representations to the FDIC might be misleading and unlawful. Id. ¶¶ 123-24.
Defendants eventually founded AEDiscovery and registered it with the FDIC as a woman-owned business, with Arnold designated as the company's 51% owner, chairman, chiefexecutive officer, and president, and Precision as the owner of the remaining 49% of the company. Id. ¶¶ 132-33. Barbanel was appointed AEDiscovery's chief operating officer and general counsel. Id. ¶ 133. In 2012, Barbanel sought to renegotiate Arnold's ownership share in, and compensation from, AEDiscovery. Id. ¶ 137. Under the "secret" agreement that Barbanel proposed, Arnold's ownership share of and compensation from AEDiscovery would be reduced to levels at which it could no longer qualify as a woman-owned business. Id. ¶ 137. Specifically, Barbanel proposed, he would secretly receive half of Arnold's ownership share and 43.5% of her AEDiscovery compensation, although the company would continue to be publicly held out as majority-owned by Arnold. Id. ¶ 139.
On April 30, 2012, Arnold notified Barbanel via email that she rejected the proposed agreement. Id. ¶ 138. She alleges that she "demand[ed] that" AEDiscovery be formed "100% by the book," and stated that she would "only agree to do this business if [she was] the one in charge" and if the defendants "follow[ed] the law to the letter." Id. ¶ 138. Arnold alleges that Barbanel attempted to hide this proposed secret agreement from Armand and Alfonse. Id. ¶ 142.
On February 28, 2013, uneasy about whether defendants' conduct with respect to AEDiscovery was lawful, Arnold sent an email to a Small Business Administration ("SBA") representative, seeking advice on how to "deal with defendants' bullying of her and their threats that they would sever her relationship with Precision and AEDiscovery unless she fully participated in their...
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