Blank v. Broadsword Grp., LLC, 4:14 CV 1550 DDN
| Decision Date | 06 November 2017 |
| Docket Number | No. 4:14 CV 1550 DDN,4:14 CV 1550 DDN |
| Parties | MICHAEL HENRY BLANK, Plaintiff, v. BROADSWORD GROUP, LLC Defendant. |
| Court | U.S. District Court — Eastern District of Missouri |
This action is before the court on the motion of plaintiff Michael Henry Blank for a default judgment against defendant Broadsword Group, LLC. (Doc. 150 oral). The parties have consented to the exercise of plenary authority by the undersigned United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). (Doc. 12). The court has subject matter jurisdiction over the action pursuant to 28 U.S.C. § 1332 by reason of the diversity of the parties' citizenship and the amount in controversy.
Plaintiff Michael Henry Blank alleges the following facts in his Fourth Amended Complaint. (Doc. 80). He was the founder and majority owner of Sharps Rifle Company, LLC, a Montana company, from 2007 to 2011. (Id. at ¶ 3). In 2011, he transferred various assets of this company to Sharps Rifle Company, Inc., ("Sharps") a Wyoming corporation owned by plaintiff and two others: Kevin Tierney and Bill Martin. (Id. at ¶ 4).
In November 2012, plaintiff met Jay Johnston at a gun show in Florida. (Id. at ¶ 5). At this meeting, Johnston told plaintiff he was interested in acquiring an ownership interest in Sharps, and they spoke about Johnston acquiring trademarks, patents, inventions, and ideas for inventions then owned by plaintiff. (Id. at ¶ 6). Johnston represented that he would be investing millions of dollars of his own funds to purchase and provide capital for the business, specifically stating he would not need to borrow any money. Id.
On November 9, 2012, Mr. Jay Lesser, representing Johnston, contacted plaintiff and offered a minimum ten percent stake in a new company if plaintiff assisted Johnston in acquiring the trademarks, patents, inventions, and other previously discussed items that plaintiff owned. (Id. at ¶¶ 7-8). Plaintiff contacted Johnston the same day, and Johnston confirmed that he had in fact made the offer. (Id. at ¶ 9). Johnston again represented that he would be investing his own money to purchase and provide capital for the business, and that therefore a ten percent ownership interest would have great value. Id. Plaintiff accepted the offer. (Id. at ¶ 9). Plaintiff refers to this oral agreement as the "Ownership Contract." Id. Plaintiff then proposed an acquisition strategy for acquiring Sharps from Tierney and Martin, which was later successful. Id.
In late December 2012, Johnston formed Broadsword Group, LLC, in Wyoming. (Id. at ¶ 10). On January 4, 2013, Johnston, as CEO of Broadsword, sent plaintiff a letter containing a written "offer of employment (as well as continued employment)" as the "Chief Armorer" at Broadsword, with a salary of $60,000 per year with eligibility for a year-end performance bonus. (Id. at ¶ 11; Pl. Ex. 14). The letter made no mention of the Ownership Contract allegedly formed between Johnston and plaintiff in November.
Plaintiff contacted Lesser, then Director of Manufacturing for Broadsword, to inquire about the contract. (Doc. 80, ¶ 12). Lesser told him he believed that the offer Johnston sent "was essentially to get everyone some money coming in for the time being and that actual salaries, commissions etc. would be firmed up in February." Id.; Pl. Ex. 16. Lesser then confirmed with Johnston that this was the case. Id. Relying on this representation, Blank signed and returned the offer of employment on January 5, 2013. (Doc. 80, ¶ 12). The employment contract provided that plaintiff could only be terminated upon 30 days' notice, unless the termination was for cause. (Id. at ¶ 13). The contract made no mention of the agreement between plaintiff and Johnston to exchange intellectual property for an ownership in Broadsword. (Id. at ¶ 14; Pl. Exs. 14 and 15).
Plaintiff began to work for Broadsword on January 15, 2013, and was paid at a rate of $75,000 per year. (Id. at ¶ 15, Ex. 1). He alleges that between January 5 and February 11, 2013, Lesser, as president of Broadsword, and Johnston, as CEO, confirmed to plaintiff that the agreement for a ten percent ownership share of Broadsword would still be honored. (Id. at ¶ 16; Pl. Exs. 17, 19). On February 11 and 20, 2013, plaintiff assigned to Sharps several trademarks he held either personally or in the name of companies of which plaintiff was the sole owner, because plaintiff believed he would be receiving a ten percent interest in Broadsword. (Doc. 80, ¶¶ 17-18, Exs. 2-5; Pl. Exs. 20-24). On February 24, 2013, plaintiff released Sharps from any and all claims he had and gave up his equity ownership interest. (Doc. 80, ¶ 19; Pl. Ex. 200). This allowed Broadsword to acquire full ownership in Sharps sometime subsequent to February 24, 2013. (Doc. 80, ¶¶ 19-20; Pl. Ex. 24).
On March 19, 2013, Johnston emailed plaintiff that Broadsword was working on putting the ten percent ownership interest into written form, which never happened. (Doc. 80, ¶ 21; Pl. Ex. 27). Plaintiff alleges that following Broadsword's acquisition of Sharps, plaintiff continued to design and develop inventions, some of which were patented, and some of which are only potential patents. (Id. at ¶ 22; Pl. Ex. 31). Plaintiff provided these inventions and patents, per the oral Ownership Contract, to Broadsword and Sharps. Id. On August 7, 2013, Johnston orally confirmed to plaintiff, again, that he was to receive ten percent ownership in Broadsword in return for his trademarks, patents, inventions, and products. (Id. at ¶ 23). Plaintiff alleges defendant's agents continued to represent that Broadsword was privately funded. (Id. at ¶ 16; Pl. Exs. 25, 204, 210).
Plaintiff alleges that Broadsword hired him to live and work in Missouri, but then began to demand that plaintiff report to work in Wyoming without relocation assistance or a raise, even though plaintiff could not afford to relocate his young children and elderly mother. (Doc. 80, ¶¶ 63-67, Pl. Exs. 26, 30, 38, 41-43). Plaintiff alleges that requiring him to engage in uncompensated commuting from Missouri to Wyoming puthim in dire financial need, and it was intended to force plaintiff to resign and abandon the intellectual property he had been induced to turn over. Id.
Plaintiff alleges that on March 6, 2014, Lesser and Johnston informed him that he was terminated effective March 7, 2014. (Doc. 80, ¶ 25-27; Pl. Ex. 44). On March 7, 2014, when plaintiff came to work , he was told to turn in his keys and vacate the premises. (Doc. 80, ¶¶ 25-27). Plaintiff was not provided 30 days' notice prior to the termination, nor was he paid after March 7, 2014. Id. A March 7, 2014 email from Lesser to plaintiff stated plaintiff's termination was not for cause. (Doc. 80, ¶¶ 25-27; Pl. Ex. 44). Plaintiff alleges that on March 17, 2014, he received a letter from Broadsword stating he was terminated as of March 7, 2014, and offering payment of plaintiff's salary through April 7, 2014, if he would waive any claim for further compensation or other expectation of remuneration related to plaintiff's employment at Broadsword. (Doc. 80, ¶ 28, Ex. 6). The letter also stated plaintiff would have to help in the filing of patents for some of the products plaintiff brought to Broadsword. Id. Plaintiff did not sign the letter and has not received any salary or other payments from Broadsword as of March 7, 2014. (Id. ¶ 29).
Plaintiff alleges that the trademarks, patents, inventions, and products he made available to Broadsword in fulfilling his duties under the Ownership Contract provided the foundation for the entire product line offered for sale by Broadsword and Sharps. (Id. at ¶ 24). It continues to provide Broadsword and Sharps with virtually their entire product line. Id.
Plaintiff also alleges that the funds used to acquire Sharps from Broadsword and to finance the operation of Broadsword were not provided by Johnston. Rather, funding came from several creditors, over whom Johnston has varying degrees of control, including the Ailsa Craig Trust, the Cima Aviacion LLC, and the El Morro LLC. Therefore, Broadsword would not be worth as much as it was represented to be worth. Additionally, because Johnston has some form of control over the creditors, he would be able to call in the loans funding Broadsword at any time, which could result in all of Broadsword's assets and worth being stripped. (Id. at ¶ 31).
Plaintiff Blank commenced this action pro se on September 10, 2014. (Doc. 1). In April 2015, an attorney entered his appearance for plaintiff and the parties proceeded with filing several dispositive motions. (Docs. 38, 41, 51, 85). In March 2016, a jury trial date was scheduled for October 3, 2016. (Doc. 104). In August 2016, the date was reset to October 11, 2016. (Doc. 107). The parties held a final pre-trial conference on September 23, 2016, at which time the trial was continued to November 7, 2016, and then, on September 27, 2016, it was continued to February 6, 2017. (Doc. 130).
On December 19, 2016, counsel for defendant Broadsword Group, LLC, moved for leave to withdraw from representing defendant; in this motion, counsel represented that defendant understood it would then be a pro se corporation. (Doc. 139). For the good order of the progress of the case, the court denied defense counsel's motion for leave to withdraw. (Doc. 140). Upon renewed motion, defendant's counsel sought leave to withdraw from representing defendant. (Doc. 141). Defendant's counsel stated that Broadsword had not paid its bills for legal services timely, that it had no more assets and would not be able to pay counsel to further defend the lawsuit, and that its CEO expected a default judgment might be issued against it. (Doc. 141). The court held a hearing on and subsequently granted this motion, on January 9, 2017, but upon the condition that counsel provide the Clerk of Court and opposing counsel the last known contact...
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