Ketner v. Widell, 5:20-cv-6360
| Decision Date | 06 July 2021 |
| Docket Number | No. 5:20-cv-6360,5:20-cv-6360 |
| Parties | JOHN M. KETNER and FORGEDALE TRADING, LLC, Plaintiffs, v. GREGORY S. WIDELL, ROBINSON DELAWARE HOLDINGS, INC. d/b/a ROBINSON TECHNICAL PRODUCTS CORPORATION, INWELD CORPORATION, and ROBINSON TECHNICAL PRODUCTS, INC., Defendants. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
This case involves claims arising out of a business venture between Plaintiff John Ketner and Defendant Gregory Widell. The parties created a company to develop and sell a product line of welding equipment. Ketner alleges, among other things, that Widell violated the federal Racketeer Influenced and Corrupt Organizations ("RICO") statute by diverting funds from their joint venture into his personal accounts. Plaintiffs filed suit in this Court by invoking jurisdiction under both 28 U.S.C. § 1331 and 28 U.S.C. § 1332. Defendants now move to dismiss Plaintiffs' Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1).
In 2011, Plaintiff Ketner discussed pursuing a joint business venture to develop a new product line of welding equipment with Defendant Widell and Widell's business partner Timothy Cachia. Compl., ECF No. 1., ¶ 28. Specifically, they discussed the development and sale of a product line of tools, safety equipment, and other welding related supplies under the name "Coplay Norstar" ("CN") which, at the time, was merely a brand name and had no formal corporate existence. Id. ¶ 31. Ketner, Widell, and Cachia agreed that Inweld, the public face of an umbrella entity owned by Mr. Widell and Mr. Cachia on a 50-50 basis, would oversee CN. Id. ¶ 29.
In 2013, Ketner began working with Inweld to develop the CN product line. To do this, Mr. Ketner began traveling abroad to source and develop the CN product line. Id. ¶ 33. Later that year, Inweld began marketing and selling products under the Coplay Norstar designation. Id. ¶ 34.
Several years later, a formal agreement was drafted which established that ownership of CN would be split equally between Ketner's corporation, Forgedale Trading, LLC ("Forgedale"), and Widell's corporation, Robinson Delaware Holdings, Inc. ("RHD"). Id. ¶ 39. This agreement provided that Ketner would be the manager of CN and was granted "all powers necessary to carry on the ordinary, everyday business of [CN]," that business being described as "[t]hemanufacture and wholesale distribution of products for the welding industry including welding machines, plasma machines, clamps, hand tools, helmets, gas apparatus, carts, hand tools, and other items used in the welding industry." Id. ¶ 40.
From its creation, Inweld maintained much of CN's back-office operations including serving as a conduit for payment for CN products. Id. ¶ 44. Ketner alleges that CN's finances were clouded by the fact that Widell and Cachia were taking "consulting fees" from CN's revenues without segregating on Inweld's balance sheet what portion of those fees was related to work for Inweld and what portion was related to work for CN. Id. ¶ 45. Ketner further alleges that CN's finances were also clouded by Inweld's operation of MasterWeld which also included line charges for Widell and Cachia's consulting fees, fees that were never apportioned among Inweld, MasterWeld, and CN. Id. ¶ 46.
Ketner alleges that he repeatedly insisted on transparency from Inweld and Widell about the accounting for CN's operations, however Widell was not forthcoming with details and was generally non-responsive to Ketner's inquires. Id. ¶ 48. Moreover, Ketner states that his corporation, Forgedale, which owned 50% of CN, was entitled to distributions under the parties' agreement. Id. ¶ 50. Still, absent an accounting of what funds Inweld believed it was due for its back-office support operation, Forgedale could not know whether CN was profitable and whether a distribution was due. Id. ¶ 52.
In response to Ketner's repeated inquiries, Widell gave Ketner a $20,000.00 payment from the entity which owned the real estate in Coplay, Pennsylvania on which Inweld's and CN's Pennsylvania operations were located. Id. ¶ 50. This was to be the only distribution made relative to Forgedale's interest in CN, although the payment did not come from CN and was not made payable to Forgedale—it was made payable to Ketner. Id.
Through 2016 and most of 2017, Ketner acted in his capacity as manager of CN collecting his salary and receiving reimbursement for his expenses. Id. ¶ 51. Throughout this period, Widell would not permit Ketner to review CN's finances. Id. ¶ 52. Other than knowing how much goods cost and how much was deemed to be CN's profit, Ketner was unaware what Inweld's costs were to operate CN including the cost of Widell and Cachia's consulting fees. Id.
Ketner did know what products cost to procure and at what price they were being sold. Id. ¶ 54. Ketner contends that the margins were high enough across the product line that, after applying reasonable operating expenses, there should have been significant profits. Id. Even so, CN was merely breaking even, and no distributions were being made. Id. Widell continued to refuse to provide Ketner with any information regarding Inweld's expenses to operate CN. Id. ¶ 55. Several times, Mr. Ketner, both in his individual capacity and in his capacity as the sole member of Forgedale, demanded to meet with Widell and RDH regarding Ketner's compensation, but such demands were refused. Id. ¶ 59.
On October 23, 2019, Widell presented Ketner with a letter on Inweld letterhead stating it was terminating Ketner's employment with Inweld. Id. ¶ 62. The same letter advised Ketner that RDH would also be terminating the 2015 Agreement. Id. Ketner alleges that since October 2019, Inweld has commandeered the CN business and its inventory which is housed in Inweld warehouses in Coplay, Pennsylvania, Houston, Texas, and Oakland, California. Id. ¶ 64. Additionally, Ketner alleges that Inweld has rebranded Coplay Norstar products under the brands ArcUnion, Fahrenheit, and others, bringing products into the United States market which were previously sold under the CN mark. Id. ¶ 65. Inweld has also bought CN products under the CN name, including $65,000.00 of welding products with Weihai Maxpower Group, a long-term CN supplier. Id. ¶ 66. Inweld also continues to sell welding products under the CN name. Id. ¶ 68.
On December 18, 2020, Ketner and Forgedale Trading, LLC commenced suit with the filing of the Complaint against Defendants Gregory Windell, Coplay Norstar, LLC, Inweld Corporation, Robinson Delaware Holdings, Inc. d/b/a Robinson Technical Products Corporation, and Robinson Technical Products, Inc. See ECF No. 1. On February 19, 2021, Defendants moved to dismiss Plaintiffs' Complaint for failure to state a claim upon which relief could be granted and for lack of subject matter jurisdiction. See ECF No. 10. On April 8, 20201, this Court dismissed the complaint, without prejudice pursuant to Federal Rule of Civil Procedure 4(m) as to Defendant Coplay Norstar, LLC, for Plaintiffs' failure to timely file proof of service. See ECF No. 19.
Under Rule 12(b)(6), a court must "accept all factual allegations as true [and] construe the complaint in the light most favorable to the plaintiff." Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (quoting Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)) (internal quotation marks omitted). Only if "the '[f]actual allegations . . . raise a right to relief above the speculative level'" has the plaintiff stated a plausible claim. Id. at 234 (quotingBell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). "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." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Importantly, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. As the Supreme Court has observed, "whether a complaint states a plausible claim for relief . . . [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. The defendant bears the burden of showing that a plaintiff has failed to state a claim upon which relief can be granted. See Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991)).
"In deciding a Rule 12(b)(6) motion, a court must consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents." Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010). Additionally, "a document integral to or explicitly relied upon in the complaint may be considered." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (internal quotations omitted).
Before the Court considers the sufficiency of a plaintiff's RICO claims under 18 U.S.C. § 1962, it must address the threshold question of the adequacy of the pleadings as they relate to RICO standing under § 1964(c). See Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494, 520-21 (3d Cir. 1998) (). To bring a civil RICO claim, a plaintiff must allege two statutory elements to confer standing: (1) that she suffered an injury to her "business orproperty"; and (2) that her injury was proximately caused by the...
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