Biocore, Inc. v. Khosrowshahi
| Decision Date | 05 January 1999 |
| Docket Number | Civ. A. No. 98-2031-KHV.,Civ. A. No. 98-2175-KHV. |
| Parties | BIOCORE, INC. and BioCore Medical Technologies, Inc., Plaintiffs, v. Hamid KHOSROWSHANI and Margaret Callaci, Defendants. Hamid Khosrowshani and Margaret Callaci, Plaintiffs, v. Biocore, Inc., et al., Defendants. |
| Court | U.S. District Court — District of Kansas |
Joseph W. Hemberger, Daniel B. Denk, Michael M. Shultz, Ryan B. Denk, McAnany, Van Cleave & Phillips, P.A. Kansas City, KS, BioCore Medical Technologies, Inc., BioCore, Inc., Topeka, KS, for Plaintiffs.
David W. Hauber, Boddington & Brown, Chtd., Kansas City, KS, Timothy F. Butler, New York City, Thomas A. Butler, Butler, Fitzgerald & Potter PC, New York City, Ruth M. Benien, Benien Law Offices, Chtd., Kansas City, KS, for Defendants.
Hamid Khosrowshahi, Tarrytown, NY, pro se.
This matter comes before the Court on plaintiffs' Motion For Partial Judgment On The Pleadings On [Defendants'] Accounting Claim And On All Claims Against Manoj And Ritu Jain (Doc. # 345) filed September 17, 1998; plaintiffs' Motion To Reconsider Court's Decision On Choice Of Law (Doc. # 378) filed October 13, 1998; plaintiffs' Motion For Summary Judgment On Choice Of Law And Statute Of Limitations, (Doc. # 400) filed October 21, 1998; and plaintiffs' Motion For Summary Judgment (Doc. # 442) filed November 16, 1998; as well as defendants' Motion To Strike The Reply Memorandum In Support Of Plaintiffs' Motion for Judgment On Choice Of Law And Statute Of Limitations (Doc. # 474) filed December 1, 1998 and the Memorandum In Support of Defendants' Motions For Summary Judgment On Plaintiffs' Unauthorized Contract Claims (Doc. # 444) filed November 16, 1998, which the Court construes as a motion for summary judgment.1
A motion for judgment on the pleadings under Fed.R.Civ.P. 12(c) is governed by the same standards as a motion to dismiss under Rule 12(b)(6). Mock v. T.G. & Y. Stores Co., 971 F.2d 522, 528 (10th Cir. 1992). In reviewing a Rule 12(c) motion, the Court assumes the truth of plaintiffs' "well-pleaded factual allegations" and draws all reasonable inferences in their favor. Shaw v. Valdez, 819 F.2d 965, 968 (10th Cir.1987); see Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). The issue in reviewing the sufficiency of plaintiffs' complaint is not whether they will prevail, but whether they are entitled to offer evidence to support their claims. Scheuer, 416 U.S. at 236, 94 S.Ct. 1683. Although plaintiffs need not precisely state each element of their claims, they must plead minimal factual allegations on those material elements that must be proved. Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir.1991).
Summary judgment is appropriate if 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 and that the moving party is entitled to a judgment as a matter of law. Fed. R.Civ.P. 56(c); accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Vitkus v. Beatrice Co., 11 F.3d 1535, 1538-39 (10th Cir.1993). A factual dispute is "material" only if it "might affect the outcome of the suit under the governing law." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. A "genuine" factual dispute requires more than a mere scintilla of evidence. Id. at 252, 106 S.Ct. 2505.
The moving party bears the initial burden of showing that there is an absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Hicks v. City of Watonga, 942 F.2d 737, 743 (10th Cir.1991). Once the moving party meets its burden, the burden shifts to the nonmoving party to demonstrate that genuine issues remain for trial "as to those dispositive matters for which it carries the burden of proof." Applied Genetics Int'l, Inc. v. First Affiliated Securities, Inc., 912 F.2d 1238, 1241 (10th Cir.1990); see also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir.1991). The nonmoving party may not rest on its pleadings but must set forth specific facts. Applied Genetics, 912 F.2d at 1241.
"[W]e must view the record in the light most favorable to the parties opposing the motion for summary judgment." Deepwater Invs., Ltd. v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10th Cir.1991). Summary judgment may be granted if the nonmoving party's evidence is merely colorable or is not significantly probative. Anderson, 477 U.S. at 250-51, 106 S.Ct. 2505. "In a response to a motion for summary judgment, a party cannot rely on ignorance of facts, on speculation, or on suspicion, and may not escape summary judgment in the mere hope that something will turn up at trial." Conaway v. Smith, 853 F.2d 789, 793 (10th Cir.1988). Essentially, the inquiry is "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52, 106 S.Ct. 2505.
BioCore, Inc. [BioCore] develops and markets collagen products which promote the healing of wounds. BioVet, Inc. [BioVet] and BioFoods, Inc. [BioFoods] are subsidiaries of BioCore. Manoj Jain [Jain] is a member of the board of directors and chief executive officer for all three corporations, and a shareholder in BioCore. Ritu Jain, his wife, was a member of the board of directors of BioCore and BioCore Medical Technologies, Inc. [BMT] until November of 1996, and served as treasurer of BioCore.
In November of 1993, Jain agreed to employ Hamid Khosrowshahi as vice president of BioCore. As part of the negotiations, which occurred in New York, Jain promised that Khosrowshahi would receive a ten percent interest in BioCore and an annual salary of $120,000.00.2 Khosrowshahi started work in April of 1994 and around this time, Jain told Khosrowshahi that he was a shareholder in BioCore.
In late 1995, Jain agreed to employ Khosrowshahi as president of BMT, which was to be incorporated in January of 1996. Jain promised that upon accepting the position, Khosrowshahi would receive a ten percent interest in BMT.3 Khosrowshahi assumed the position in January of 1996 and around this time, Jain told Khosrowshahi that he was a shareholder in BMT. Through June of 1997, Jain continued to tell Khosrowshahi that he was a shareholder in BioCore and BMT. In 1996, the parties discussed taking BMT public and Jain repeatedly told Khosrowshahi that he would benefit from doing so because he was a shareholder.
Khosrowshahi had no written employment contract with BioCore or BMT, and they have no corporate records which confirm any agreement to pay him an annual salary of $120,000.00 or, later, to increase his salary to $150,000.00. Similarly, the corporations have no records which reflect any stock conveyance or any promise to convey stock to Khosrowshahi. Jain in fact had no authority to convey BioCore stock to third persons. Sam Campbell, an investor and former member of the board of directors of BioCore, has no recollection that Khosrowshahi was to receive a ten percent ownership interest in BioCore.
In June of 1997, Khosrowshahi resigned from BioCore and BMT and demanded his ten percent interest in both corporations, along with back pay and expenses. Khosrowshahi wrote a resignation letter which objected to the way Jain was running BioCore. Khosrowshahi did not allege that BioCore was engaged in illegal activity and indeed, before he resigned, Khosrowshahi did not tell any of plaintiffs' officers or directors that BioCore or BMT were violating federal or state law.4 Campbell and Jain unsuccessfully tried to dissuade Khosrowshahi from resigning.
As part of his job duties, Khosrowshahi helped prepare financial reports and records and tax returns.5 He had no check signing authority and only limited authority to negotiate contracts for either BioCore or BMT. Khosrowshahi had authority to negotiate contracts, but not to finalize contracts or otherwise obligate BioCore or its subsidiaries. On January 22, 1996, BMT adopted a corporate resolution which stated that no person was authorized to spend, negotiate or oblige BMT in any way financially without the written consent of the board of directors, the chairman of the board or the vice-president of finance. It also required BMT employees, including Khosrowshahi, to submit written requests for expenditures over $500.00, for approval by the BMT board of directors, chairman of the board or vice president of finance. Khosrowshahi did not believe, however, that he had only limited authority to contract on behalf of BioCore or BMT.6 Also, Tim Metz, BioCore's general counsel, was unaware of the BMT corporate resolution which limited expenditures.
Plaintiffs claim that Khosrowshahi entered into nine contracts that violated the foregoing limitations on his authority:
Contract between BioCore and Plasystems. Plasystems Inc. manufactures packaging materials. In 1995, BioCore was looking for a new packaging design and established a packaging committee which included Swaren Jain (Jain's uncle) and Sanjiv Jain (Jain's brother) but not Khosrowshahi. On January 17, 1996, BioCore ordered $15,720.00 worth of clam shell trays from Plasystems. On June 26, 1996, it placed a second order, for $7,650.00 worth of materials. Khosrowshahi's name is not on either order. Kamal Ghandi requested the first order and Sanjiv Jain placed the second order.7 On December 15, 1997, BioCore disputed its bill by arguing that BioCore products had been broken in shipping, due to Plasystems' packaging, and that it was...
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