Mar–Cone Appliance Parts Co. v. Mangan

• Decision Date: 20 July 2012
• Docket Number: No. 10–CV–999A.,10–CV–999A.
• Citation: 879 F.Supp.2d 344
• Parties: MAR–CONE APPLIANCE PARTS CO., Plaintiff, v. Michael MANGAN, Servall Company, Defendants. Michael Mangan, Third–Party Plaintiff, v. John Giardino, Adam Greenberger, Third–Party Defendants.
• Court: U.S. District Court — Western District of New York

879 F.Supp.2d 344

MAR–CONE APPLIANCE PARTS CO., Plaintiff,

v.Michael MANGAN, Servall Company, Defendants.

Michael Mangan, Third–Party Plaintiff,

v.John Giardino, Adam Greenberger, Third–Party Defendants.

No. 10–CV–999A.

United States District Court, W.D. New York.

July 20, 2012.

Phillips Lytle LLP, James D. Donathen, Chad W. Flansburg, of Counsel, Buffalo, NY, for Plaintiff.

Duke, Holzman, Photiadis & Gresens, LLP, Patricia Gillen, of Counsel, Buffalo, NY, for Defendant and Third–Party Plaintiff Michael Mangan.

Jaeckle Fleischmann & Mugel, LLP, B. Kevin Burke, Jr., of Counsel, Buffalo, NY, for Defendant Servall Company.

Litchfield Cavo LLP, Edward M. Fogarty, Jr., of Counsel, New York, NY, for Third–Party Defendants Giardino and Greenberger.

ORDER

RICHARD J. ARCARA, District Judge.

The above-referenced case was referred to Magistrate Judge Leslie G. Foschio, pursuant to 28 U.S.C. § 636(b)(1)(B). On June 4, 2012, Magistrate Judge Foschio filed a Report and Recommendation, recommending that third-party defendants John Giardino and Adam Greenberger's motion to dismiss be granted.

The Court has carefully reviewed the Report and Recommendation, the record in this case, and the pleadings and materials submitted by the parties, and no objections having been timely filed, it is hereby ORDERED, that pursuant to 28 U.S.C. § 636(b)(1), and for the reasons set forth in Magistrate Judge Foschio's Report and Recommendation, third-party defendants John Giardino and Adam Greenberger's motion to dismiss is granted. The case is referred back to Magistrate Judge Foschio for further proceedings.

SO ORDERED.

REPORT and RECOMMENDATION

LESLIE G. FOSCHIO, United States Magistrate Judge.

JURISDICTION

This matter was referred to the undersigned for all pretrial matters by order of Hon. Richard J. Arcara on December 13, 2010 (Doc. No. 31). It is now before the court on Third–Party Defendants' Motion to Dismiss filed October 4, 2011 (Doc. No. 119).

BACKGROUND

This action was initially commenced on September 1, 2010 by Plaintiff's subsidiary MarCone APW, LLC (“Mar–Cone APW”) in the Eastern District of Missouri (St. Louis) alleging inter alia breach of contract and fiduciary duty against Defendant Michael Mangan (“Mangan”) and tortious interference, unfair competition and conversion claims against Mangan and the Servall Company (“Servall”). The case was transferred to this district on December 10, 2010, for lack of personal jurisdiction over Mangan and improper venue (Doc. No. 27). Plaintiff's motion for leave to file a second amended complaint was granted by Decision and Order filed April 28, 2011 (Doc. No. 59).¹ On April 29, 2011, Plaintiff filed its Second Amended Complaint (“Second Amended Complaint”) (Doc. No. 60) alleging several state law claims against Mangan, specifically breaches of (1) an employment agreement (“Plaintiff's First Claim”), (2) a non-disclosure agreement (“Plaintiff's Second Claim”), (3) the implied covenant against solicitation of former customers under the so-called Mohawk Doctrine ² (“Plaintiff's Third Claim” or “Mar–Cone's Mohawk Doctrine Claim”), and (4) Mangan's fiduciary duty of loyalty to Plaintiff (“Plaintiff's Fourth Claim”). Plaintiff also alleges a tortious interference claim against Servall (“Plaintiff's Fifth Claim”).

Following filing, on May 15, 2011 (Doc. No. 65), of an answer to the Second Amended Complaint with counterclaims Mangan moved as required by Fed.R.Civ.P. 14(a), on June 7, 2011, for leave to serve a Third–Party Complaint (Doc. No. 69), which was granted on August 9, 2011 (Doc. No. 102). Mangan's Third–Party Complaint was filed on August 11, 2011 (Doc. No. 105) (“Third–Party Complaint”) against Third–Party Defendants John Giardino (“Giardino”) and Adam Greenberger (“Greenberger”) (together “Third–Party Defendants”).³ In the Third–Party Complaint Mangan sought indemnification and contribution from Third–Party Defendantsfor any damages awarded to Plaintiff under Plaintiff's Third Claim, along with Mangan's costs of defense, including attorneys fees, based on Third–Party Defendants' breach of fiduciary duty (“Mangan's First Claim for Relief”) and from Third–Party Defendant Greenberger based on Greenberger's false representation (“Mangan's Second Claim for Relief” together “Mangan's Contribution Claims”).

By papers filed October 4, 2011, Third–Party Defendants moved, in lieu of answer, pursuant to Fed.R.Civ.P. 12(b)(1), 12(b)(6), and 12(c), to dismiss the Third–Party Complaint (Doc. No. 119) (“Third–Party Defendants' motion”). At the same time, Third–Party Defendants filed the Declaration of Edward Fogarty, Jr. in Support of Motion to Dismiss Third–Party Complaint (“Fogarty Declaration”) (Doc. No. 120) together with Exhibits A–H (“Fogarty Declaration Exh(s). ____”) ⁴ and a Memorandum of Law in Support of Motion to Dismiss Third–Party Complaint (Doc. No. 121) (“Third–Party Defendants' Memorandum”).

On November 4, 2011, in opposition to the Third–Party Defendants' motion, Mangan filed the Affidavit of Patricia Gillen (Doc. No. 126) (“Gillen Affidavit”) and the Affidavit of Michael G. Mangan (“Mangan Affidavit”) (Doc. No. 126–1) together with Exhibits A–D (“Mangan Affidavit Exh(s). ____”) ⁵ and Defendant and Third–Party Plaintiff Michael Mangan's Memorandum of Law (Doc. No. 126–2) (“Third–Party Plaintiff's Memorandum”). On November 15, 2011, Third–Party Defendants filed their Reply Brief in Opposition to Motion to Dismiss Third–Party Complaint (Doc. No. 129) (“Third–Party Defendants' Reply”). At the court's request, (Doc. No. 141), Mar–Cone submitted, on May 30, 2012, an explanation of its claims pending against Mangan in this court, and those pending against Mangan in New York Supreme Court, Erie County (Doc. No. 142). On May 31, 2012, Third–Party Plaintiff filed a reply to Mar–Cone's submission (Doc. No. 143). Oral argument was deemed unnecessary. Based on the following, Third–Party Defendants' motion should be GRANTED.

FACTS⁶

A.P. Wagner, Inc. (“APW”), based in Depew, New York, was a major supplier of appliance replacement parts to wholesalers located in the Northeast region of the United States. Second Amended Complaint ¶ 8. Mangan joined APW in 1990, becoming executive vice-president in 2006 and later its president. Id. ¶ 10; Mangan Affidavit I ¶¶ 2–3. In June 2006, APW was acquired by APW Holding, Inc. (“APW Holding”), a Delaware corporation of which Giardino and Greenberger were majority shareholders, at which time Mangan received 75 shares of APW Holding constituting 1.709% of this company's stock. Mangan Affidavit II ¶¶ 4, 6; Third–Party Complaint ¶¶ 20–21; Fogarty Declaration Exh. E ¶ 1 (Subscription Agreement for Non–Voting Common Stock of APW Holding, Inc. (“Subscription Agreement”)).⁷ Several other APW employeesalso received shares in APW Holding at this time. Mangan Affidavit II ¶ 7. Third–Party Defendants owned the balance of the shares of APW Holding. Third–Party Complaint ¶ 20. Under a stockholders' agreement, executed by Mangan in July 2006, Mangan, as a minority shareholder in APW Holding, lacked voting rights and was required to sell his shares to APW Holding in the event the company was sold.⁸ Fogarty Declaration Exh. E ¶¶ 8–10 (“Stockholder's Agreement”); Mangan Affidavit ¶ 8 (acknowledging Mangan was subject to “drag along” rights to receive payment for his shares in the event majority shareholders exercised their sole authority to sell company). In June 2006, Mangan and APW entered into an employment agreement which provided for Mangan's at will termination upon six-months notice and termination for cause upon five-days notice. Fogarty Declaration Exh. G (“Employment Agreement”) ¶¶ 1.1–1.2; 2; 3. In the event of Mangan's termination of employment with APW, APW had the right to immediately repurchase any shares in APW then owned by Mangan. Third–Party Complaint ¶ 24; Mangan Affidavit ¶ ¶ 9 n. 1, 21; Mangan Affidavit Exh. B, Employment Agreement Revised 2/14/2007 (“Revised Employment Agreement”) ¶ 2.6. Mangan was granted severance pay for six months of his salary if terminated without cause, Revised Employment Agreement ¶ 3(d); a provision in the agreement required Mangan not to compete with APW for two years following termination for cause; however, in the event of a termination without cause, Mangan's non-competition period was reduced to one-year. Id. ¶ 4. The agreement additionally required Mangan not to disclose APW's confidential and proprietary information, including customer information. Id. ¶ 5.

Mar–Cone is also a major distributor of appliance replacement parts headquartered in St. Louis, Missouri. Second Amended Complaint ¶ 1. Servall, headquartered in Michigan, is one of Mar–Cone's prime competitors. Id. ¶ 9. In January 2010, Mar–Cone acquired all of the assets of APW Holding particularly APW and its customer lists and goodwill. Id. ¶ 11; Mangan Affidavit I ¶ 4.⁹ At the time of the acquisition, Mangan was president of APW. Mangan Affidavit ¶¶ 4, 7.

In connection with Mar–Cone's asset purchase of APW, Mangan signed, on December 30, 2009, a Non–Disclosure Agreement with Mar–Cone APW, LLC as a shareholder of APW Holding, Fogarty Declaration Exh. F (“Non–Disclosure Agreement”), which required Mangan to maintain as confidential Mar–Cone's proprietary information including APW's customer lists and prospective customer information acquired by Mar–Cone through its purchase of APW Holding's assets pursuant to a purchase agreement between Mar–Cone APW LLC and APW Holding (“the Purchase Agreement”).¹⁰ As a selling shareholder of APW Holding, Mangan received payment for the value of his ownership interest in APW Holding and APW. Second Amended Complaint ¶ 18; Mangan Affidavit ¶ 21; Non–Disclosure Agreement at 1, ¶ D. Thereafter, Mangan was employedby Mar–Cone at the APW facilities in this district as a senior manager. Second Amended Complaint ¶ 14. After terminating his employment with APW in March 2012, Mangan commenced employment with Servall in July 2010 in...