Heine v. Streamline Foods, Inc.

• Decision Date: 29 July 2011
• Docket Number: Case No. 1:10 CV 637.
• Citation: 805 F.Supp.2d 383
• Parties: Randall E. HEINE, Plaintiff v. STREAMLINE FOODS INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

805 F.Supp.2d 383

Randall E. HEINE, Plaintiff

v.STREAMLINE FOODS INC., et al., Defendants.

Case No. 1:10 CV 637.

United States District Court,N.D. Ohio,Eastern Division.

July 29, 2011.

Nicole R. Foley, R. Christopher Cataldo, Jaffe, Raitt, Heuer & Weiss, Southfield, MI, Eric S. Zell, Scott C. Matasar, Calfee, Halter & Griswold, Cleveland, OH, for Plaintiff.

J. Allen Jones, III, Benesch, Friedlander, Coplan & Aronoff, Columbus, OH, Mark A. Phillips, Benesch, Friedlander, Coplan & Aronoff, David A. Schaefer, Kimberly A. Brennan, Leslie E. Wargo, McCarthy, Lebit, Crystal & Liffman, Cleveland, OH, for Defendants.

ORDER

SOLOMON OLIVER, JR., Chief Judge.

Randall E. Heine (“Plaintiff”), as an individual and as a trustee of the Randall E. Heine Revocable Trust, brought the above-captioned action against Defendants Streamline Foods, Inc. (“Streamline”), Brantley Capital Corporation (“BCC”), Brantley Management Company d/b/a Pinkas Management Company (“BMC”), and Robert Pinkas (“Pinkas”) (collectively, “Defendants”), asserting various direct and derivative claims.

Currently pending before the court are: (1) BMC's Motion to Dismiss Count V of Plaintiff's First Amended Verified Complaint (ECF No. 30); (2) Pinkas's Motion to Dismiss (ECF No. 31); and (3) Streamline's Motion to Dismiss First Amended Complaint (ECF No. 32). For the following reasons, the court hereby denies BMC's Motion to Dismiss Count V of Plaintiff's First Amended Verified Complaint (ECF No. 30), grants in part and denies in part Pinkas's Motion to Dismiss (ECF No. 31), and grants in part and denies in part Streamline's Motion to Dismiss First Amended Complaint (ECF No. 32).

I. FACTS AND PROCEDURAL HISTORY

In April 2001, Randall Heine began negotiating with Robert Pinkas for the sale of his company Total Foods Corporation. (First Am. Compl., ECF No. 29, ¶ 19.) Mr. Pinkas controls both Brantley Capital Corporation and Brantley Management Corporation. ( Id. ¶ 8.) Streamline Foods, Inc. was formed to purchase the assets of Total Foods Corporation. ( Id. ¶ 20.) On February 8, 2002, the sale was completed and a Stockholders' Agreement was executed. ( Id. ¶¶ 20–21.)

In conjunction with the purchase of Total Foods' assets, Streamline entered into a pair of purchase agreements by which shares of the company's Series A Convertible Preferred Stock were sold to Brantley Capital Corporation and shares of the company's Series B Convertible Preferred Stock were sold to Randall Heine. ( Id. ¶¶ 22–23.) Later in 2002, Plaintiff transferred his shares in Streamline to the Randall E. Heine Revocable Trust (hereinafter, “Trust”). ( Id. ¶ 4.) Plaintiff currently serves as a trustee for this Trust. ( Id.) Furthermore, Plaintiff and Streamline entered into a Stockholder Agreement by which BCC became the majority shareholder in Streamline, and Plaintiff became the minority shareholder. ( Id. ¶ 13.)

Pursuant to the Stockholder Agreement, the corporate affairs of Streamline are managed by a five-member Board of Directors consisting of two representatives of the Series A stockholders, one representative of the Series B stockholders, one company representative, and one “Outside Director,” nominated jointly by the company representative and the Series B representative. ( Id. ¶ 24.) As of the filing of the Complaint, the Series A representatives are Robert Pinkas and Adam Bentkover, the Series B representative is Clark Bien, Don Hill is the company representative, and the fifth seat on the board, reserved for the “outside director,” is currently vacant. ( Id. ¶ 30.)

On December 9, 2009, Streamline paid $1.5 million to BMC. ( Id. ¶ 43.) On January 11, 2010, Streamline's Board of Directors retroactively approved the $1.5 million disbursement and approved an additional $250,000 in quarterly payments to BMC. ( Id. ¶ 50.)

Questioning the validity of these payments, Heine filed the current action against Defendants on March 26, 2010. (Compl., ECF No. 1.) Plaintiff filed a First Amended Complaint on October 19, 2010 (ECF No. 29). Plaintiff alleges the following counts: (1) breach of a February 8, 2002 Stockholders Agreement; (2) breach of fiduciary duties under Ohio law; (3) declaratory relief; (4) breach of fiduciary duties under Delaware law (in the alternative); (5) unjust enrichment; and (6) injunctive relief. ( Id.)

II. 12(b)(6) STANDARD

The court examines the legal sufficiency of the plaintiff's claim under Federal Rule of Civil Procedure 12(b)(6). See Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir.1993). The Supreme Court, in Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) and recently in Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949–50, 173 L.Ed.2d 868 (2009) clarified the law regarding what the plaintiff must plead in order to survive a Rule 12(b)(6) motion.

When determining whether the plaintiff has stated a claim upon which relief can be granted, the court must construe the Complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the Complaint contains “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955. The plaintiff's obligation to provide the grounds for relief “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555, 127 S.Ct. 1955. Even though a complaint need not contain “detailed” factual allegations, its “[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the Complaint are true.” Id. A court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986).

The Court in Iqbal, 129 S.Ct. at 1949, further explains the “plausibility” requirement, stating that “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Furthermore, “[t]he plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant acted unlawfully.” Id. This determination is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 1950.

The Sixth Circuit has held that a court may consider allegations contained in the complaint, as well as exhibits attached to or otherwise incorporated in the complaint, all without converting a Motion to Dismiss to a Motion for Summary Judgment. Fed.R.Civ.P. 10(c); Weiner v. Klais & Co., 108 F.3d 86, 89 (6th Cir.1997).

III. LAW AND ANALYSIS

Streamline seeks dismissal of all six causes of action brought by Plaintiff. (Streamline Mot. to Dismiss, ECF No. 32.) Pinkas incorporates all of Streamlines grounds for dismissal in his Motion. (Pinkas Mot. to Dismiss, ECF No. 31.) BMC seeks only dismissal of Count V, the unjust enrichment claim. (BMC Mot. to Dismiss, ECF No. 30.)

A. Claims brought in Heine's Individual Capacity

Streamline and Pinkas argue that Heine does not have standing to assert claims in his individual capacity and that Heine cannot obtain relief in his individual capacity.

Standing requires, among other things, that a plaintiff “assert his own legal rights and interests, without resting the claim on the rights or interests of third parties.” Wuliger v. Manufacturers Life Ins. Co., 567 F.3d 787, 793 (6th Cir.2009). In other words, Heine must be a “real party in interest,” which is defined as “one who has a real interest in the subject matter of the litigation, and not merely an interest in the action itself, i.e., one who is directly benefitted or injured by the outcome of the case.” Shealy v. Campbell, 20 Ohio St.3d 23, 485 N.E.2d 701, 702 (1985).

Streamline and Pinkas argue that the Stockholders Agreement precludes Heine from bringing suit for direct claims to enforce the Agreement because he no longer owns shares in Streamline. (Streamline's Memo. in Supp. of Mot. to Dismiss, ECF No. 32–1, at p. 9; Stockholders' Agr., ECF No. 1–1, § 24(d).) Defendants also argue that Plaintiff lacks standing to assert derivative claims on behalf of Streamline in his individual capacity.

Plaintiff admits that the Trust, not Heine himself, owns the Streamline shares. (Am. Compl., ¶ 4.) However, Plaintiff maintains that as the representative of the Trust, he can bring claims on the Trust's behalf. Federal Rule of Civil Procedure 17(a)(1)(E) specifically permits trustees of express trusts to sue in their own names. Id. (“An action must be prosecuted in the name of the real party in interest. The following may sue in their own names without joining the person for whose benefit the action is brought: ... (E) a trustee of an express trust.”); see also Navarro Savings Assoc. v. Lee, 446 U.S. 458, 462, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980) (“Federal Rule of Civil Procedure 17(a) now provides that such trustees are real parties in interest for procedural purposes.”).

Despite the contentious nature of the parties' positions, it is clear that Randall Heine can bring a claim on behalf of his Trust against the Defendants, as he is the representative of that Trust, and the Trust owns shares in Streamline. He is permitted to bring this suit in his own name on behalf of the Trust. Therefore, the court hereby denies Defendants' Motions to Dismiss on this issue.

B. Count I—Breach of Contract

Defendants Streamline and Pinkas argue that Plaintiff's claim for breach of contract must be dismissed because he cannot plausibly establish any damages caused by the alleged breach. Defendant argues:

the Amended Complaint fails to allege a basis for Heine's claim that Streamline's profits are for the benefit of all shareholders on a pro-rata basis, or that Streamline's board of directors declared and paid, or planned to...