DeGeorge v. DiGiorgio's Sportswear, Inc.

• Decision Date: 12 January 2021
• Docket Number: No. A-20-266.,A-20-266.
• Parties: JOHN DEGEORGE, APPELLANT, v. DIGIORGIO'S SPORTSWEAR, INC., ET AL., APPELLEES.
• Court: Nebraska Court of Appeals

JOHN DEGEORGE, APPELLANT, v. DIGIORGIO'S SPORTSWEAR, INC., ET AL., APPELLEES.

No. A-20-266.

NEBRASKA COURT OF APPEALS

January 12, 2021

MEMORANDUM OPINION AND JUDGMENT ON APPEAL

(Memorandum Web Opinion)

NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).

Appeal from the District Court for Douglas County: JAMES T. GLEASON, Judge. Affirmed.

Brian J. Brislen, Adam R. Feeney, and Ellen K. Geisler, of Lamson, Dugan & Murray, L.L.P., for appellant.

Scott D. Jochim and Matthew W. Harris, of Croker, Huck, Kasher, DeWitt, Anderson & Gonderinger, L.L.C., for appellees.

PIRTLE, Chief Judge, and MOORE and ARTERBURN, Judges.

MOORE, Judge.

I. INTRODUCTION

John DeGeorge appeals from the order of the district court for Douglas County, which granted summary judgment in favor of DiGiorgio's Sportswear, Inc. (DSI), Timothy DeGeorge (Tim), Anthony DeGeorge (Tony), Christopher Tribulato (Chris), Diana Tribulato (Diana), and Cinque Terre Holdings, LLC (Cinque). Finding no error, we affirm.

II. BACKGROUND

1. PARTIES

DSI is an apparel printing business founded by John in 1970 and incorporated in 2001. The initial shareholders included John and his two sons, Tim and Tony. Chris, a friend of Tim's, purchased shares of the company in 2003. At that point, John held a 34% interest in DSI, which was divided equally between John and his wife when they divorced in January 2013 (each taking 17%). Tim bought the shares belonging to John's ex-wife and to Tony in 2016. John currently holds a 17% interest, with Tim holding 71% and Chris holding 12%. Diana, Chris' wife, is the current treasurer and a director of DSI, and Cinque is the company which owns the real estate housing DSI's business. Two of Cinque's members are DSI (25% interest) and SDG Investments, L.L.C. (60% interest); Tim and Chris are members of SDG.

Cinque was formed in June 2008 to purchase the real estate housing DSI's business. Cinque receives rental payments from DSI for the business space utilized by DSI; this real property is Cinque's only asset. Cinque does not pay salary or wages to anyone and has never issued any dividend or distribution to its members.

2. PREVIOUS CASES

The current case, filed by John in May 2018 against DSI, Tim, Tony, Chris, Diana, and Cinque for, among other things, oppression of his minority interest, is the fourth case filed by him, alleging the same or similar causes of action (both personal and/or derivative) with the same underlying facts arising in 2011 when he was terminated from his employment by DSI.

(a) First Case

John filed the first case in February 2013, "individually, derivatively, and on behalf of [DSI]," against Tim, Tony, and Chris. John set forth claims for relief for declaratory judgment, conversion, accounting, dissolution of corporation, appointment of receiver, fraud, money had and received, breach of contract (stockholder agreement), breach of fiduciary duty, and self-dealing. After John was given an opportunity to amend his original complaint, the district court dismissed John's amended complaint with prejudice, finding that John's written demand required by Neb. Rev. Stat. § 21-2072 (Reissue 2012) (now found at Neb. Rev. Stat. § 21-277 (Cum. Supp. 2018)) in order to properly plead a derivative claim on behalf of DSI was insufficient.

John appealed, assigning error to the district court's determinations that a demand was required for his accounting action, that a demand was not excused because it would have been futile, and that his demand was insufficient. He also asserted that the district court erred in dismissing his individual claims. This court affirmed, finding no merit to John's assertions on appeal. See DeGeorge v. DeGeorge, No. A-13-1071, 2014 WL 7177834 (Neb. App. Dec. 16, 2014).

(b) Second Case

John filed the second case in October 2015, "individually, derivatively, and on behalf of [DSI]," against Tim, Tony, and Chris. John set forth claims for breach of fiduciary duty, conversion, accounting, dissolution of corporation, money had and received, and appointment of a receiver, first stating these claims individually and then repeating them on behalf of DSI. This second case was dismissed by operation of law for failing to timely perfect service.

(c) Third Case

John filed the third case in May 2016, "individually, derivatively, and on behalf of [DSI]," against Tim, Tony, and Chris. He asserted the same set of both personal and derivative claims set forth in the second case.

The district court entered an order, dismissing the third case with prejudice. In its order, the court noted that, other than John's assertion that his ownership of DSI shares was less than the percentage of shares owned by him at the time of the first case, his claims were identical to the claims made against the defendants in the first case. The court stated that John had failed again to sufficiently plead how the requirement of a written demand for accounting should be excused. It also noted that John had not shown that he had otherwise met the statutory demand requirements. The court stated further:

Except as noted above, [John's] claims against the Defendants are identical to the claims made . . . in the [first] case. [The district court] dismissed [John's] Complaint [first case], with prejudice, and his dismissal was affirmed in the Nebraska Court of Appeals. [John] argues that he is not precluded from bringing this case because the Defendants 'have committed new torts' since the dismissal of the [first] case, and the actions of the Defendants complained of in the [first] case have continued since the dismissal.

While it is true that [John] claims in this [third case] Complaint that his ownership interest in DSI is less than he claimed it was in the [first] case, he has not alleged in his complaint that the demand required . . . has been made since dismissal of the [first case], or how it would have been futile to make a demand. In deciding the issue of the . . . demand, the Nebraska Court of Appeals determined that the demand was not excused under the circumstances, and to establish demand futility, [John] would have to plead with particularity the facts which would demonstrate that proper demand would be excused. In its opinion, the Nebraska Court of Appeals made it quite clear as to exactly what [John] would have to plead in order to demonstrate futility, and he has not done so in this case, whether those facts existed prior to the [first] suit, or since the [first] suit was dismissed. The Court therefore finds that the Defendants' motion to dismiss [John's] Complaint should be granted under the doctrine of claims [sic] preclusion, or res judicata, as the [first] dismissal by [the district court] was rendered by a court of competent jurisdiction, and was a final judgment, on the merits, involving the same parties as involved in this case."

John filed a motion to reconsider, arguing that the third case was different from his first case because he was asserting individual claims in the third case (and not just derivative claims). The district court denied John's motion to reconsider, and John did not appeal that ruling.

3. CURRENT CASE

(a) Complaint

On May 10, 2018, John filed the complaint in the current case, naming DSI, Tim, Tony, Chris, Diana, and Cinque as defendants. We have referred to them throughout as the "Appellees." John alleged that the Appellees "[i]n recent years" had barred him from participation in the operation or management of DSI, had failed and refused to provide him with full access to thebooks and corporate records of DSI, and had failed for many years to provide him with his K-1 tax documentation. He alleged that he had not received any monetary benefits from his shareholding in DSI for many years and had had to take on other work in order to support himself. John alleged that the Appellees had mismanaged, wasted, and improperly used DSI's corporate funds by purchasing vehicles and real estate for personal use, paying salaries and other compensation in excess of market rates to shareholder employees, and self-dealing; that they had funneled DSI assets and/or funds to Cinque; and that they were misapplying and wasting DSI's assets, had gained control of DSI, and were acting in a manner illegal, oppressive, and contrary to the interests of John, who had been "singled out for exclusion from participation in, and the economic benefits of, DSI." John set forth eight claims for relief, alleging oppression by DSI and the individual Appellees; breach of fiduciary duty by DSI and the individual Appellees; conversion by all Appellees; accounting by DSI; breach of bylaws by DSI and the individual Appellees; money had and received by all Appellees; aiding and abetting breach of fiduciary duty by Cinque; and tortious interference by Cinque.

(b) Motion to Dismiss

The Appellees filed a motion to dismiss pursuant to Neb. Ct. R. Pldg. § 6-1112(b)(6). During the hearing on that motion, the district court received into evidence copies of pleadings, orders, and other material relating to the previous cases filed by John. On December 7, 2018, the court entered an order, denying the motion to dismiss, finding that John's claims in the present case were individual claims belonging to John alone and were not derivative actions sought to be brought on behalf of the corporation. The court further ruled that in none of the preceding actions did John assert individual claims against the Appellees, and it stated that any issues of res judicata (claim preclusion) and issue preclusion were not applicable.

(c) Motions to Strike and for Summary Judgment

After the Appellees filed their answer, the district court entered a scheduling order, setting deadlines for certain actions by the parties, including the filing of amended pleadings (June 28), the completion of "fact discovery" (September 16, 2019), and the filing of dispositive and nondispositive pretrial motions (October 7 and...