Design Pallets, Inc. v. Grayrobinson, P.A.

• Decision Date: 06 August 2007
• Docket Number: No. 6:07-cv-655-0rl-31KRS.,6:07-cv-655-0rl-31KRS.
• Citation: 515 F.Supp.2d 1246
• Parties: DESIGN PALLETS, INC., Douglas Olvey, Larry Sketo, and Stan Smith, Plaintiffs, v. GRAYROBINSON, P.A., Defendant.
• Court: U.S. District Court — Middle District of Florida

515 F.Supp.2d 1246

DESIGN PALLETS, INC., Douglas Olvey, Larry Sketo, and Stan Smith, Plaintiffs, v. GRAYROBINSON, P.A., Defendant.

No. 6:07-cv-655-0rl-31KRS.

United States District Court, M.D. Florida, Orlando Division.

August 6, 2007.

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Christopher M. Faucett, Goldstein, Faucett & Prebeg, LLP, Houston, TX, Matthew J.M. Prebeg, Goldstein & Goldstein, Jacksonville, FL, Theresa L. Fiset, Theresa Fiset LLC, Clearwater, FL, for Plaintiffs. Kimberly D. Healy, Mayanne Downs, Thomas A. Zehnder, King, Blackwell, Downs & Zehnder, PA, Orlando, FL, for Defendant.

Kimberly D. Healy, Mayanne Downs, Thomas A. Zehnder, King, Blackwell, Downs & Zehnder, PA, Orlando, FL, for Defendant.

ORDER

GREGORY A. PRESNELL, District Judge.

This matter comes before the Court on a Motion to Dismiss Counts I through IX of Plaintiffs' Amended Complaint (Doc. 33) filed by Defendant GrayRobinson, P.A. ("the Law Firm"), and Plaintiffs' Response thereto (Doc. 36).

I. Background

This action was originally filed in this court on April 23, 2007, by Plaintiffs Design Pallets, Inc. ("DPI"), Douglas Olvey ("D.Olvey"), a member of the Board of Directors of DPI and a shareholder of DPI, and Larry Sketo ("Sketo") and Stan Smith ("Smith"), both shareholders of DPI. Plaintiffs' original complaint (Doc. 1) was dismissed by this Court sua sponte as a shotgun pleading (Doc. 28) and Plaintiffs filed an amended complaint (Doc. 31) on June 26, 2007. The following statement of facts is taken from the allegations made by Plaintiffs in their amended complaint.

In February 2000, D. Olvey and Ramon Chimelis ("Chimelis") incorporated DPI to acquire and utilize U.S. Patent No. 6,029,582 ("the '582 Patent"). At the time of incorporation, D. Olvey was President and CEO and Chimelis was Vice-President and Treasurer; each were 50% shareholders of DPI and co-chairmen of the DPI Board of Directors ("the BOD").

Shortly after incorporation, D. Olvey and Chimelis each contributed a portion of their shares of DPI stock to D. Olvey's brother, Michael Olvey ("M.Olvey") in exchange for services related to acquiring the '582 Patent from its original owner, ultimately leaving D. Olvey and Chimelis each with approximately 38% of DPI's shares of stock and M. Olvey with approximately 18%. D. Olvey and Chimelis subsequently purchased the '582 Patent for DPI. Smith later invested approximately $225,000.00 in DPI and became a shareholder.

Beginning in or around March 2000, M. Olvey began to disrupt DPI operations and to pressure D. Olvey and Chimelis to either give him total control of DPI and its '582 Patent or pay him several million dollars in cash and future payments. D. Olvey and Chimelis attempted to put a halt to M. Olvey's disruptive conduct by agreeing to pay him for some of his stock over time, with an additional payment once the business was operational. DPI made payments totaling $676,000.00 to M. Olvey, who only became more disruptive, demanding money faster than DPI could pay. In March 2001, DPI retained the Orlando law firm of Allen, Dyer, Doppelt, Milbrath and Gilchrest, PA to file suit against M. Olvey seeking to enjoin his interference with DPI's business and fund-raising efforts ("the Injunctive Action").

Defendant's records show that DPI originally became a client of the Law Firm sometime in 2000. William Grimm ("Grimm"), a senior partner at the Law Firm, was hired to act as corporate counsel for DPI and, among other things, help with the offering audit, review DPI's corporate books and prior dealings and to make certain that DPI's dealings complied with SEC regulations.

In February, 2002, M. Olvey entered into discussions with Frank Hamner ("Hamner") and David Canning ("Canning"), both associates with the Law Firm, regarding his desire to gain control of DPI and its '582 Patent, which he valued at $100 million. Hamner and Canning knew that the Law Firm represented DPI. On or about February 25, 2002, after discussing the scope of the representation with Grimm and obtaining his authorization to proceed, Hamner agreed to represent M. Olvey personally in the Injunctive Action. That same day, Grimm sent, via courier and U.S. Mail, a letter to DPI, D. Olvey, and Chimelis declaring that "our law firm has a conflict which will prevent me from serving as your counsel."

DPI, through D. Olvey and Chimelis, moved to have the Law Firm disqualified from representing M. Olvey in the Injunctive Action. To avoid disqualification, Grimm represented to the court that he had erected a "Chinese Wall" between himself and Hamner regarding DPI and would not discuss DPI with any other lawyer at the Law Firm.

On March 11, 2002, Hamner sent via Certified Mail a "Notice Letter For Insufficient Funds Check" to Chimelis. Plaintiffs allege that Hamner knew that Chimelis had been induced to write the "NSF check" on his personal account by M. Olvey through a false promise to "hold" the check until DPI had paid M. Olvey another $26,250.00. In addition to the March 11th demand, Hamner threatened to have Chimelis criminally prosecuted for writing the check and gave him the alternative option that he would be included in the profits to come from the acquisition of the '582 Patent. In reliance upon Hamner's threats and promises, Chimelis, aligned himself with M. Olvey against the interests of DPI, its investors, and D. Olvey and became a client of the Law Firm.

On December 2, 2002, Hamner conducted a telephonic "board meeting" for DPI, during which Hamner advised Chimelis and M. Olvey (who was not a member of the BOD) to "vote" to dismiss DPI's Injunctive Action and remove D. Olvey as CEO, even though Chimelis and M. Olvey did not constitute a quorum of DPI's board and the meeting was concealed from D. Olvey. Upon learning of the telephonic board meeting, D. Olvey applied to Florida Circuit Court for a temporary injunction. On December 10, 2002, at a hearing on the temporary injunction, Hamner represented to the court that DPI would be restored to its original position and agreed that all actions taken at the telephonic board meeting would be null and void.

On December 12, 2002, Hamner and M. Olvey, created an "Assignment Agreement," the purpose of which was to assign DPI's interest in the '582 Patent to the Law Firm, as escrow agent for a new company to be formed by M. Olvey and Chimelis. At no time did Hamner or anyone at the Law Firm inform D. Olvey. regarding the Assignment Agreement or seek the approval of the BOD for the assignment. The next day, under the direction of Hamner, M. Olvey and Chimelis attempted to hold a special meeting of the BOD, which was attended by Canning and Hamner, who at all times represented that they and their Law Firm were counsel to DPI. The agenda was wholly developed by the lawyers and the script for the meeting was prepared by Canning and called for the ouster of D. Olvey as president and CEO of DPI and for the assignment of the '582 Patent to the Law Firm's escrow account. Grimm reviewed the script and authorized the agenda for this meeting.

As it turned out, because M. Olvey was not a member of the BOD, the December 13, 2002 meeting was invalid due to the lack of a quorum. Hamner nevertheless composed a letter to DPI's shareholders which was sent via U.S. Mail on December 31, 2002 to said shareholders, stating that D. Olvey had been removed from the BOD and M. Olvey had been added thereto. The letter was relied upon by DPI and its shareholders, with a resultant withdrawal of material support for DPI and loss of shareholder confidence.

On January 27, 2003, Hamner directed M. Olvey to call yet another special meeting of the BOD without giving notice to D. Olvey, this time held at the offices of the Law Firm and attended by Canning, who again wrote the script with Grimm's authorization and for his review, during which actions were taken to facilitate the removal of D. Olvey and the appropriation of the '582 Patent. The January 27, 2003 meeting was invalid due to defective notice to D. Olvey.

On February 4, 2003, Hamner responded to D. Olvey's request on behalf of DPI for minutes of the invalid December and January board meetings by causing to be sent via facsimile transmission and U.S. Mail, a copy of the minutes of the two meetings to D. Olvey, but failed to disclose that the meetings were part of a plan to remove him as a shareholder and appropriate the '582 Patent.

On February 10, 2003, D. Olvey questioned Hamner as to whether there was any intention to sell the '582 Patent. On February 12, 2003, Hamner and Canning prepared and sent via U.S. mail to D. Olvey a notice of an upcoming special board meeting. On February 13, 2003, Ava Doppelt, the attorney originally retained by DPI to prosecute the Injunctive Action, sent an e-mail to Hamner and Canning regarding her understanding that the transfer of the '582 Patent had been accomplished, notwithstanding Canning's earlier assurances to her over the telephone on or about February 12, 2003 "that the company had not done so, and had no intention of removing DPI's asset and leaving the creditors and stockholders hanging out to dry." On February 14, 2003 Hamner replied via e-mail: "Ava, I have no idea of what you are talking about."

On February 14, 2003, at the direction of Hamner and Canning (who wrote the script for the meeting), a third. DPI board meeting was held in an attempt to correct the defects in the December 13 and January 27 board meetings. Grimm reviewed the script for the meeting, authorized the agenda, and attended the meeting, where M. Olvey and his wife, Ina Olvey, were added to the BOD.

Before the board meeting on February 14, 2003, Hamner transmitted via courier to M. Olvey and Chimelis a "Plan of Action" to get PalletKraft, Inc., ("PK") off the ground.¹ This "Plan of Action" was prepared by Hamner in consultation with Grimm and Canning and called for the sale of the '582 Patent to PK and additionally called for taking action...