McCoy Associates, Inc. v. Nulux, Inc.

• Decision Date: 29 July 2002
• Docket Number: No. 00 CV 3509(ILG).,00 CV 3509(ILG).
• Citation: McCoy Associates, Inc. v. Nulux, Inc., 218 F.Supp.2d 286 (E.D. N.Y. 2002)
• Parties: McCOY ASSOCIATES, INC., Plaintiff, v. NULUX, INC., Defendant. Nulux, Inc., Third-Party Plaintiff, v. Gene McCoy, Third-Party Defendant.
• Court: U.S. District Court — Eastern District of New York

218 F.Supp.2d 286

McCOY ASSOCIATES, INC., Plaintiff, v. NULUX, INC., Defendant.

Nulux, Inc., Third-Party Plaintiff, v. Gene McCoy, Third-Party Defendant.

No. 00 CV 3509(ILG).

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

July 29, 2002.

Jack Dweck, The Dweck Law Firm, LLP, New York City, for Plaintiff.

Martin S. Rapaport, New York City, for Defendant.

MEMORANDUM & ORDER

GLASSER, District Judge.

This dispute arises out of an oral agreement between plaintiff McCoy Associates, Inc. ("McCoy Associates") and defendant Nulux, Inc. ("Nulux") pursuant to which McCoy Associates agreed to sell certain lighting products manufactured by Nulux in return for commissions. Nulux now moves the Court for an Order, pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, granting it judgment on the pleadings. McCoy Associates "cross-moves" for summary judgment on the two claims in its complaint. For the reasons set forth below, the Court construes Nulux's motion as a motion for summary judgment, grants the motion in part and denies it in part. The Court also grants in part and denies in part McCoy Associates's "cross-motion."

BACKGROUND

Prior to 1993, McCoy Associates was known as Gemco, Inc. ("Gemco"), and was owned by Gene McCoy ("McCoy"). (See Bragdon Aff. ¶¶ 7, 10.) Until 1997, 99.9% of Nulux's shares were owned by its founder, Edison Price ("Price"). (See id. ¶ 4.) The other .1% of Nulux's shares were owned by McCoy, who had obtained his shares in return for loaning approximately $315,000 to Nulux. (See id. ¶ 5.)¹ McCoy also served on Nulux's board of directors, but Price apparently ran Nulux on his own until his death in the fall of 1997. (See id. ¶ 6.)

From approximately 1990 to 1993, Gemco orally contracted with Nulux to sell Nulux lighting products for a sales commission. (See id. ¶¶ 7-8.) That contract gave McCoy Associates the right to promote Nulux's products in a specified territory, consisting of Washington, D.C., Maryland, and Virginia. (See id. ¶ 8.)² McCoy Associates's commissions on the sale of Nulux products ranged from 5% to 10% of the sales price, depending on the location of the purchaser and the location of the purchaser's "specifier," if any.³

In 1993, McCoy sold his interest in Gemco to his daughters, who renamed the corporation McCoy Associates. (See id. ¶ 10.) McCoy Associates continued to serve as sales representative for Nulux until April 2000. (See id. ¶ 10; Compl. ¶ 6.) Nulux alleges that, after selling the corporation to his daughters, McCoy nonetheless continued to maintain control over, and a financial interest in, McCoy Associates. (See Bragdon Aff. ¶ 10.)

After Price's death in the fall of 1997, the executor of his estate, Brooks Bragdon ("Bragdon"), agreed to make McCoy the president of Nulux. (See id. ¶¶ 11-12.) Bragdon avers that he had no choice but to make McCoy Nulux's president, because if he refused, McCoy "threatened to call in the entire McCoy Promissory Note, which would have forced Nulux out of business." (Id. ¶ 12.) Bragdon and Delia Price, one of Price's daughters and the sole beneficiary of his estate under his will, also became directors on Nulux. (See id. ¶¶ 11-12.)

According to Bragdon, after becoming President of Nulux, McCoy took numerous steps detrimental to Nulux's interests, but which benefitted McCoy and his daughters. For example, McCoy allegedly gave McCoy Associates a written agreement which memorialized the terms of the prior arrangement between it and Nulux, but which also expanded McCoy Associates's promotion area to include Delaware. (See id. ¶ 18.) Because Nulux had a "major" client in Delaware which purchased hundreds of thousands of dollars of lighting equipment each year, this would have entitled McCoy Associates to $30,000 to $40,000 more in commissions per year. (See id.) McCoy allegedly took this action without authorization from Nulux's board of directors.

In addition, sometime in 1998, a dispute arose between McCoy Associates and Nulux regarding the amount of commissions McCoy Associates had earned which had not yet been paid by Nulux. Bragdon and Delia Price investigated McCoy Associates's claims, and determined that McCoy Associates's demands for commissions "were either inflated, not owed at all, stale, ... already ... paid, or ... insufficiently documented." (Bragdon Aff. ¶ 25.) Without the approval of Nulux's board of directors, however, McCoy, acting as Nulux's president, apparently signed a promissory note in McCoy Associates's favor for $131,000, purportedly representing the past-due commissions owed to McCoy Associates. (See id. ¶ 29.) Nulux subsequently performed an audit of its past-due commissions to McCoy Associates, and determined the amount due to be less than $30,000. (See id. ¶ 30.)

The overdue commissions form the crux of McCoy Associates's complaint in this case. In July of 2000, McCoy Associates commenced this action against Nulux, alleging that Nulux failed to pay commissions of $145,432.51 to McCoy Associates from its sale of Nulux's lighting products, and thus breached its contract with McCoy Associates. (See Compl. ¶ 9.)⁴ Furthermore, McCoy Associates alleges that the failure to pay these commissions constitutes a violation of New York Labor Law §§ 191-b and 191-c. McCoy Associates claims that it is entitled to recover double damages, or $290,865.02, for these violations, pursuant to New York Labor Law § 191-c. (See id. ¶ 12.) Nulux, in turn, has commenced a third-party action against McCoy, alleging that he breached his fiduciary duties to Nulux by engaging in the "unauthorized" conduct described above.

Nulux now moves for judgment on the pleadings, pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, dismissing most of McCoy Associates's complaint. As to McCoy Associates's count for breach of contract, Nulux asserts that, to the extent McCoy Associates is seeking commissions earned prior to June of 1994, the claim must be dismissed, because it is barred by the statute of limitations. (See Def. Mem. at 8-10.) Nulux next argues that McCoy Associates's claim under New York Labor Law Sections 191-b and 191-c also must be dismissed, because those sections apply only to "sales representatives." According to Nulux, McCoy Associates was not a "sales representative" under New York law, because it did not "solicit business" in New York. (See id. at 10-12.)

In response, McCoy Associates opposes Nulux's motion, and "cross-moves" for summary judgment. In opposition to Nulux's motion, McCoy Associates argues that (i) the breach of contract claim is not barred by the statute of limitations, because the arrangement between it and Nulux was a "mutual, open and current account," and (ii) Labor Law Sections 191-b and 191-c apply because it was, in fact, a "sales representative" under New York law. (See Pl. Opp. at 6-14.) In support of its "cross-motion," McCoy Associates argues that there is no factual dispute concerning Nulux's failure to pay commissions due and owing to McCoy Associates, and therefore it is entitled to summary judgment on its breach of contract claim. (See Pl. Opp. at 14-18.) McCoy Associates also argues that this failure is a per se violation of Labor Law Sections 191-b and 191-c, and that summary judgment should therefore be granted on its second claim, as well. (See id. at 17-18.)

DISCUSSION

I. Nulux's Motion Should be Converted to a Motion for Summary Judgment

As noted above, Nulux has moved for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure. Nulux, however, has submitted Bragdon's affidavit with its motion, and relies heavily on that affidavit in support of its arguments. As suggested by the name of such a motion, a court analyzing a motion under Rule 12(c) may look only at the "pleadings," i.e., the complaint, the answer, the counterclaims and replies thereto, the third-party complaint, and the answer to the third-party complaint. See Fed. R.Civ.P. 7(a) (defining the universe of pleadings allowed). However, "[i]f, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56." Fed.R.Civ.P. 12(c). Thus, the Court must decide whether to exclude Bragdon's affidavit and evaluate Nulux's motion under Rule 12(c), or consider the affidavit and evaluate the motion under Rule 56. The Court chooses the latter course.

It is appropriate for a court to consider matters outside the pleadings and convert a motion under Rule 12(c) into a motion for summary judgment if the non-moving party "should reasonably have recognized the possibility that the motion might be converted into a motion for summary judgment." Krijn v. Pogue Simone Real Estate Co., 896 F.2d 687, 689 (2d Cir.1990) (internal quotation marks and citations omitted). As long as the non-moving party is not "taken by surprise and deprived of a reasonable opportunity to meet facts outside the pleadings," conversion is proper. Id. Here, it is clear that McCoy Associates will not be "taken by surprise" or "deprived of a reasonable opportunity" to respond to Bragdon's affidavit. Indeed, McCoy Associates has "cross-moved" for summary judgment, and has submitted affidavits and documentary evidence in support of its "cross-motion." Accordingly, McCoy Associates cannot credibly argue that it would be blind-sided if the Court converts Nulux's motion into a motion for summary judgment. For these reasons, the Court will consider Bragdon's affidavit, and will treat Nulux's motion as a motion for summary judgment under Rule 56.

II. Standard for Summary Judgment

Summary judgment "shall be rendered forthwith if the pleadings, depositions ... together with the affidavits ... show that there is no genuine issue as to any material fact and ... the...