Lau v. Constable
| Citation | 2019 NCBC 69 |
| Decision Date | 24 September 2019 |
| Docket Number | 16 CVS 4393 |
| Court | Superior Courts of Law and Equity of North Carolina |
| Parties | GREGORY LAU and VENT TECH CORPORATION, Plaintiffs, v. DOUGLAS CONSTABLE, ROBERT MARTIN, TIFFANY WILLARD, and JENNIFER CONSTABLE, Defendants. |
THIS MATTER is before the Court upon Plaintiffs Gregory Lau and Vent Tech Corporation's Motion for Summary Judgment ("Plaintiffs' Motion", ECF No. 155), and Defendant Robert Martin's Motion for Summary Judgment. ("Martin's Motion", ECF No. 157; collectively the "Motions".) The Court, having considered the Motions, the briefs in support of and in opposition to the Motions, the evidentiary materials filed by the parties, the arguments of counsel at the hearing on the Motion, and other appropriate matters of record, concludes that the Motions should be GRANTED, in part, and DENIED, in part, for the reasons set forth below.
Terpening Law PLLC by William R. Terpening for Plaintiffs Gregory Lau and Vent Tech Corporation.
Blanco Tackabery & Matamoros, P.A. by Chad A. Archer, Elliot A Fus, and Peter J. Juran for Defendant Robert Martin
Gregory P. McGuire Special Superior Court Judge.
1. Ehmann v. Medflow, Inc., 2017 NCBC LEXIS 88, at *6 (N.C. Super. Ct. Sept. 26, 2017).
2. Plaintiff Gregory Lau ("Lau") is the founder and current sole owner of Plaintiff Vent Tech Corporation ("VTC").[1] [2] Lau formed VTC as a New Jersey company in the late 1980s and moved it to Mocksville, North Carolina by the early 1990s. (ECF No. 159.2, at pp. 12-13; Martin Aff., at ¶ 2.) VTC was in the business of developing, manufacturing, and selling medical devices with a focus on resuscitation products. (Martin Aff., at ¶ 13.) In addition to its U.S. operations in Mocksville, VTC had significant operations in China where it manufactured its products. (Id. at ¶¶ 9, 19.) Lau served as VTC's chief executive officer and the chairman of its Board of Directors. (Id. at ¶ 19.) However, during the relevant time period, he spent most of his time in China managing the overseas manufacturing aspects of VTC's operations. (Id. at ¶¶ 9-10, 19; Martin Depo. Supp. of Pls., ECF No. 159.5, at p. 20.)
3. Defendant Robert Martin ("Martin") is a former employee, shareholder, and officer of VTC. Martin joined the company as Director of Sales and Marketing in 1993, was promoted to the position of Vice President of Sales and Marketing in 2000, and ultimately was named President of VTC sometime in 2004 or 2005. (Martin Aff., at ¶¶ 1-12.) As President, Martin's primary focus was managing sales, marketing, and product development for VTC. (Id. at ¶ 11; ECF No. 159.12, at p. 28.) From 1999 until at least 2009, Martin was a minority shareholder of VTC holding a membership interest of up to 11 to 11.5% of the company. (ECF No. 159.12, at ¶ 26.) In 2009, Martin notified Lau of his intent to exercise his buyout rights and Martin was paid out for his ownership interest over a period of time. (Id. at ¶¶ 26-30.)
4. Defendant Doug Constable ("Constable") is a former employee, shareholder, and officer of VTC. On Martin's recommendation, Lau hired Constable around 2000 or 2001. (Martin Depo. Supp. of Pls., ECF No. 159.5, at p. 20; ECF No. 159.2, at p. 54.) During his time at VTC, Constable served as the Executive Vice President and operated as VTC's Chief Financial Officer. (Martin Aff., at ¶¶ 16, 19.) Constable, inter alia, was in charge of all of VTC's financial. (Id.) Constable also became a minority shareholder in VTC in or around 2009 and held as much as a 5% ownership interest in the company. ("Fahey Report", ECF No. 159.4, at p. 4.)
5. VTC remained in operation until December 31, 2012, at which time its assets were sold to a third-party company (the "Sale") and its operations effectively ceased. (Martin Aff., at ¶ 35.) Lau, Martin, and Constable were employed by VTC until the Sale.
6. In May of 2013, following the Sale of VTC, a representative of the purchaser of VTC, Dan Bowen ("Bowen"), visited Lau in China. (ECF No. 159.2, at pp. 176-77.) According to Lau, during the visit Bowen suggested that VTC would have been more valuable if Lau had been more careful managing the finances of the company, including accumulating alleged American Express credit card expenses of $110, 000 to $120, 000 a month. (Id.) Lau states that this conversation with Bowen sparked his curiosity into whether Constable and Martin had acted improperly in managing the company's resources. (Id.)
7. In October 2013, Lau engaged Alex Fahey, a certified public accountant and certified fraud examiner, to investigate potential corporate wrongdoing carried out by Constable, Martin, and others employed by VTC. Fahey performed an initial fraud analysis, discovered alleged fraud, and recommended that Lau hire an attorney. (Fahey Depo., at p. 15.)
8. At some point following Lau's discovery of the potential fraud, Lau, Constable, and Martin began to engage in discussions about claims Lau believed he had against Martin and Constable and vice versa. ("2015 Tolling Agreement", see generally, ECF No. 167.11.) On December 28, 2015, Lau, Constable, and Martin entered into a Tolling Agreement "in their individual capacities and to the extent they were owners, officers, or managers of [VTC] or Ventlab Holdings with the authority to bind said entities[.]" (Id. at p. 1) Lau, Constable, and Martin entered the 2015 Tolling Agreement to toll the applicable statutes of limitation until June 30, 2016 for Lau's potential claims "relating to or arising out of the ownership, management, operations, and sale of [VTC or Ventlab Holdings], or the use, misuse, or disposition of [VTC or Ventlab Holdings] funds or resources[.]" (Id.) The parties subsequently entered into another Tolling Agreement extending the tolling period until July 21, 2016. ("2016 Tolling Agreement", ECF No. 167.12; collectively with the 2015 Tolling Agreement, the "Tolling Agreements".)
9. On July 21, 2016, Plaintiffs filed this lawsuit, and on January 25, 2018, Plaintiffs, with leave of Court, filed the Amended Complaint. (ECF Nos. 1, 110.)
10. The gravamen of the Amended Complaint is that Defendants, led by Constable, carried out a far-reaching scheme to misuse and steal millions of dollars from Plaintiffs. ("Amended Complaint", ECF No. 110, at ¶¶ 1-14.) Specifically, Plaintiffs assert that Constable falsified and manipulated VTC company records and diverted Plaintiffs' funds through unrelated entities ("Self-Dealing Entities") and accounts to himself and others, and that all named Defendants were aware of and personally benefitted from these diversions of Plaintiffs' financial resources. (Id.)
11. Plaintiffs and the Defendants other than Martin ("Settling Defendants") subsequently entered into a confidential settlement agreement. On September 18, 2018, Plaintiffs and the Settling Defendants filed a stipulation of dismissal dismissing Plaintiffs' claims against the Settling Defendants with prejudice. ("Stipulation of Dismissal", ECF No. 135.) Martin is the only remaining Defendant in this lawsuit.
12. The current dispute between Plaintiffs and Martin centers on Plaintiffs' contention that Lau--while residing in China and focusing his efforts on managing VTC's manufacturing operations--entrusted Martin with the responsibility of overseeing and managing VTC's United States operations, and that Martin breached that trust to the damage of Lau and VTC. (Pls.' Supp. Br., ECF No. 156, at pp. 1-3.) More specifically, Plaintiffs argue the evidence shows that Martin encouraged Lau to focus his attention on VTC's manufacturing operations in China and promised to oversee and protect VTC's U.S. Operations. (ECF No. 159.2, at pp. 53, 78-79.) Lau claims he would not have worked and lived in China for so long if he knew that Martin "[was] not watching the shop for [him.]" (Id. at pp. 78-79.) Lau expected Martin's oversight to include, inter alia, review of VTC's financial operations, including direct oversight of Constable. (Id. at pp. 53, 78-79, 81-82.)
13. Plaintiffs assert that the evidence shows Martin neglected his duties to Lau and VTC and injured Lau and VTC by (1) diverting Plaintiffs' funds to himself, and (2) knowingly allowing his co-Defendants, primarily Constable, to divert Plaintiffs' funds to themselves. (ECF No. 156, at p. 5.) Plaintiffs further contend that the evidence shows Martin diverted Plaintiffs' funds to himself by: (1) receiving illegal payments from VTC "sometimes directly, but often through the ownership of third party entitites[;]" (2) using VTC's credit card to pay for hundreds of thousands of dollars of personal expenses; and (3) receiving improper payments following the December 31, 2012 Sale of VTC. (Id. at p. 6.) Plaintiffs point to the Report of Alex Fahey, a certified fraud examiner and certified financial forensics expert employed by Plaintiffs, as the primary evidence that establishes Constable and Martin's improper diversion of VTC's funds and assets. ("Fahey Report", ECF No. 159.4.)
14. Martin, however, denies knowledge, or involvement in, any of the wrongful transactions asserted by Plaintiffs and argues that the evidence does not establish any wrongdoing on his part. (Martin Br. ISO. Mot....
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