My EZ WEB Sols., Inc. v. Thomas

• Decision Date: 24 May 2019
• Docket Number: DOCKET NO. A-4725-17T1
• Citation: My EZ WEB Sols., Inc. v. Thomas, DOCKET NO. A-4725-17T1 (N.J. Super. App. Div. May 24, 2019)
• Parties: MY EZ WEB SOLUTIONS, INC. and JOSEPH V. THOMAS, Plaintiffs-Appellants, v. JOSEPH P. THOMAS and SYMBIOSIS EDUCATIONAL CONSULTANTS, INC., Defendants-Respondents.
• Court: New Jersey Superior Court — Appellate Division

MY EZ WEB SOLUTIONS, INC. and JOSEPH V. THOMAS, Plaintiffs-Appellants, v. JOSEPH P. THOMAS and SYMBIOSIS EDUCATIONAL CONSULTANTS, INC., Defendants-Respondents.

DOCKET NO. A-4725-17T1

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION

Argued March 26, 2019

May 24, 2019

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

Before Judges Yannotti, Gilson and Natali.

On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-7382-17.

Joseph V. Meyers argued the cause for appellants.

Maurizio Savoiardo (Miranda Slone Sklarin Verveniotis) of the New York Bar, admitted pro hac vice, argued the cause for respondents (Miranda Slone Sklarin Verveniotis, attorneys; Michael A. Miranda and Maurizio Savoiardo, on the brief).

PER CURIAM

Plaintiffs appeal from an order dated March 29, 2018, which dismissed their complaint with prejudice pursuant to Rule 4:6-2(e) for failure to state a claim upon which relief can be granted. Plaintiffs also appeal from an order dated May 25, 2018, which denied their motion for reconsideration. We reverse.

I.

In October 2017, plaintiffs filed a complaint in the trial court, which they thereafter amended. Plaintiffs alleged that in February 2007, defendant Joseph P. Thomas (JPT) contacted plaintiff Joseph V. Thomas (JVT) with a business proposal. At the time, JPT was employed by Fairleigh Dickinson University (the University) in a full-time management position with responsibility for decisions regarding online education. According to an exhibit attached to the complaint, JPT is married to the daughter of JVT's second cousin.

JPT allegedly agreed that he would provide outsourced information technology (IT) services to the University in his spare time and bill the University through a New Jersey entity that JVT would incorporate. All payments from the University to JPT would be deposited in a bank account in the name of JVT's corporation. On April 5, 2007, JPT established My EZ WEB Solutions, Inc. (Solutions).

On April 16, 2007, JVT sent JPT a letter memorializing a conversation they had a few days earlier. In the letter, JVT stated that he was the president, secretary, treasurer, and sole owner of Solutions. JVT appointed JPT as Chief Executive Officer (CEO) of Solutions, but stated that JPT could not hire employees without his prior approval.

The letter also stated that JPT was required to report Solutions' monthly gross revenue to JVT. If Solutions' monthly gross revenue for any month exceeded $2000, JVT was to receive forty percent of that revenue. In addition, the letter stated that if JPT received permanent resident status in the United States and created another corporation, JVT also was to receive forty percent of the gross revenue from that entity.

Thereafter, JVT and JPT opened a corporate bank account for Solutions, which listed JVT and JPT as the persons who were authorized to sign on behalf of the corporation. Moreover, according to the complaint, JPT repeatedly reported to JVT that the monthly gross revenues from the University were less than $2000.

In mid-2012, JPT requested JVT's advice regarding his relationship with the University. Plaintiffs claim the University had questioned JPT about his activities and requested a letter from the owner of Solutions stating that JPT wasnot outsourcing work to himself for personal financial gain. JVT wrote a letter to the University stating that he was the sole owner of Solutions. Plaintiffs allege that several weeks later, JPT told JVT that he had been forced to resign from the University due to "'inappropriate' financial activities."

Plaintiffs further allege that JPT continued to seek business advice from JVT, including advice regarding "serious problems" that JPT had with a regulatory agency in New York State concerning a corporation that JPT had established. That corporation also engaged in IT outsourcing, but was larger and had more employees. JPT met with JVT and informed him that JPT could be liable for "numerous possible [sic] serious . . . business violations" in New York. JVT claims he provided JPT with "proper business advice."

In June 2017, JVT spoke with an employee of the University while waiting on line in a donut shop. This individual allegedly told JVT that the University had fired a person with a similar name, and that person had "bilked" the University of more than $2 million. JVT contacted JPT and asked for Solutions' bank records, and any records pertaining to the gross receipts JPT received for billing the University for outsourced IT business. JPT refused to provide JVT with the requested documents and information.

Thereafter, JVT obtained Solutions' bank records, which allegedly showed that $66,000 had been deposited into the account on March 1, 2012, and on March 14, 2012, the same amount had been withdrawn. The bank records also allegedly showed that another $1500 had been withdrawn from the account on March 15, 2012, and deposits totaling $15,000 had been made in January 2015 and March 2016. JVT removed JPT as a co-signatory on the account.

Plaintiffs alleged JPT breached his agreement with JVT by failing to provide him with forty percent of the gross receipts that JPT received from the University for the outsourced IT services. Plaintiffs also alleged JPT breached the implied covenants of good faith and fair dealing by: failing to "provide faithful and honest services to" Solutions; failing "to provide accurate reports of the gross revenues" he received; "misus[ing] his position as CEO [of Solutions] to . . . charge personal expenses to the" corporation; and "otherwise . . . fail[ing] to comply with [his] agreement" with JVT.

Plaintiffs also asserted claims of legal and equitable fraud. They alleged JPT knowingly and intentionally lied about the amount of monthly gross receipts he received from the University by stating that they were significantly below $2000 per month, and that no payments or distributions were due to Solutions. They claimed JPT violated the agreement by "caus[ing] invoices to . . . be sentout under the name of [another] [c]orporation, believed to be [defendant] Symbiosis, Inc." (Symbiosis), and depositing those payments in a bank account other than the account for Solutions. They alleged JPT knowingly made false material representations to JVT regarding the agreement with the intent that plaintiffs would rely upon them.

In addition, plaintiffs asserted claims of conversion, embezzlement, theft, and unjust enrichment against defendants. They claimed JPT breached his fiduciary duty and sought to pierce the corporate veil of Symbiosis and hold JPT personally liable. Plaintiffs sought compensatory and punitive damages, interest, costs of suit, attorney's fees, and such other relief that the court deemed just and equitable.

On February 6, 2018, defendants filed a motion to dismiss pursuant to Rule 4:6-2(e) for failure to state a claim upon which relief can be granted. Defendants argued that plaintiffs' claims are barred by judicial estoppel because JVT failed to disclose in a bankruptcy petition an ownership interest in Solutions or claims to monies owed to that corporation. Defendants further argued that the claims against Symbiosis for fraud, conversion, theft, embezzlement, breach of fiduciary duty, and to pierce the corporate veil should be dismissed on other grounds.

In support of their motion, defendants submitted to the court a copy of a voluntary petition in bankruptcy that JVT and his wife filed on September 30, 2015, in the United States Bankruptcy Court for the District of New Jersey. In that petition, JVT stated that he did not have any interest in any "incorporated [or] unincorporated businesses"; any "[i]nterest[] in partnerships or joint ventures"; or any "[a]ccounts receivable" owed to him.

In the petition, JVT also stated that he did not have any interest in any "[o]ther contingent or unliquidated claims" and JVT stated he was not a director, executive, or more than five percent shareholder in any business. Defendants also presented the order of the bankruptcy court dated February 3, 2016, which granted JVT and his wife a discharge in bankruptcy.

In further support of their motion, defendants submitted documents showing that in November 2009, JPT's wife had incorporated Symbiosis, and that she was the sole owner of that corporation. According to defendants, JPT and his spouse successfully worked for Symbiosis developing online educational content. Defendants also claimed that in February 2017, JPT formally dissolved Solutions.

Plaintiffs opposed the motion. They argued that judicial estoppel did not apply because JVT's failure to state in the bankruptcy petition that he had aninterest in Solutions or that Solutions had any claims against defendants was merely "a benign omission." Plaintiffs also argued that they had pled sufficient facts to support the claims against Symbiosis.

In opposing the motion, JVT submitted a certification in which he disputed defendants' assertion that he never had an ownership interest in Solutions. He also stated that he did not assert that he had an interest in Solutions in his bankruptcy petition because he filed his bankruptcy petition in 2015. JVT said that at that time, Solutions "was an inactive entity and the omission of the stock from [his] list of assets . . . was at best a technical oversight."

JVT also stated that it was his belief that Solutions had not earned any income since the University terminated JPT's employment in 2012. He asserted that he did not know who filed the certificate dissolving Solutions, but said, "it was not me." JVT further asserted that JPT used his wife to establish Symbiosis, and then utilized that corporation to receive the income JPT earned from the University,...