Neal v. Asta Funding, Inc.
| Decision Date | 30 June 2016 |
| Docket Number | Civ. No. 14-3932 (KM) (MAH),Civ. No. 13-6981 (KM) (MAH),Civ. No. 14-2495 (KM)(MAH),Civ. No. 14-3550 (KM) (MAH) |
| Parties | DAVID SHAUN NEAL, Plaintiff, v. ASTA FUNDING, INC., Defendant. ASTA FUNDING, INC., Petitioner, v. DAVID SHAUN NEAL, ROBERT F. COYNE, ESQ., and NEW WORLD SOLUTIONS, INC., Respondents. ROBERT F. COYNE, Plaintiff, v. ASTA FUNDING, INC., Defendant. |
| Court | U.S. District Court — District of New Jersey |
:
This case presents interrelated issues surrounding the validity of an arbitration award. David Shaun Neal ("Neal") provided information technology ("IT") services to Asta Funding Inc. ("Asta"), under an agreement between Asta and New World Solutions, Inc. ("NWS") (the "ITS Agreement"). NWS was co-owned by Neal and his business partner, Robert F. Coyne ("Coyne"); the two were NWS's sole officers and directors until Coyne transferred his entire interest to Neal. Asta, claiming breach of the ITS Agreement, terminated it and instituted arbitration proceedings against NWS, Neal, and Coyne, pursuant to the Agreement's arbitration clause. Neal and Coyne resisted arbitration; they could not be bound to arbitrate, they insisted, because they as individuals (as opposed to NWS) were not parties to the ITS Agreement. Neal and Coyne took to the federal courts to fight the arbitration and to assert affirmative claims against Asta. The arbitrator, however, determined that he had jurisdiction over Neal and Coyne, found in favor of Asta on its claims, and awarded Asta over $3 million in damages against NWS, Neal, and Coyne, jointly and severally.
As the dust has settled, there are seven pending actions before me involving Asta, NWS, Neal, and Coyne. I here focus on four, which have been consolidated for pretrial purposes. Those four consolidated actions are (1) Neal's action seeking a declaratory judgment that he is or was not individually bound to arbitrate (Civ. No. 13-6981 ("Declaratory Judgment Action")), (2)Asta's petition to confirm the arbitration award (Civ. No. 14-2495 ("Confirmation Action")), (3) Neal's petition to vacate the arbitration award (Civ. No. 14-3550 ("Neal's Action to Vacate")), and (4) Coyne's petition to vacate the arbitration award (Civ. No. 14-3932 ("Coyne's Action to Vacate")).
Now before the Court are the following motions:
For the reasons set forth below, the arbitration award is confirmed against NWS, Neal and Coyne. Summary judgment is granted in favor of Asta, and denied to Neal and Coyne. Neal and Coyne's petitions to vacate the arbitration award are dismissed. The remaining motions are denied as moot.
In 2004, Neal applied for an information technology service position with Asta, a financial firm incorporated in Delaware with its principal place of business in New Jersey. Neal was hired, not as an employee, but as an independent contractor through a separate entity, Bach Consulting, which was owned by Coyne. (Id. ¶¶ 36, 37) This engagement lasted until 2007, when Coyne sought to discontinue the operations of Bach Consulting. (Id. ¶ 39) In its place, Coyne and Neal would establish New World Solutions, Inc. (Id. ¶ 40)
New World Solutions, Inc. was incorporated in Delaware on March 26, 2007 ("NWS-DE"). (Asta SOF ¶ 20) Neal and Coyne were the sole owners, officers and directors of NWS-DE, each owning fifty percent. (Id. ¶ 21) Neal continued to perform IT services for Asta, while Coyne, on behalf of NWS-DE, negotiated the terms pursuant to which NWS-DE (through Neal) would provide such services. (Id. ¶¶ 41, 44) On July 1, 2009, Coyne, on behalf of NWS-DE, entered into the contract with Asta (the "ITS Agreement"). (Id. ¶ 48)
For reasons unknown (and without informing Asta), Coyne dissolved NWS-DE and formed a new NWS entity. (Asta SOF ¶¶ 22-25) New World Solutions, Inc., was incorporated in Wyoming on May 25, 2010 ("NWS-WY"); NWS-DE was dissolved on July 12, 2010. (Id.) As before, Neal and Coyne were 50/50 owners and the sole officers and directors of the NWS-WY entity. (Id. ¶ 31) Two years later, on July 10, 2012, again for undisclosed reasons and without notice to Asta, NWS-WY was administratively dissolved by the Wyoming Office of the Secretary of State. (Id. ¶ 29) NWS-WY was reinstated on July 26, 2012. (Id. ¶ 30) On December 6, 2012, Coyne assigned his interest in NWS-WY to Neal, making Neal the sole owner of the entity. (Id. ¶ 132) NWS-WY was again administratively dissolved on July 10, 2013, for failure to file certain reports and pay license taxes. (Id. ¶¶ 32, 137) Neal attempted to reinstateNWS-WY in November 2013, but that application was rejected by the Wyoming Secretary of State. Neal made no further efforts to revive the company. (Id. ¶¶ 139, 140)
As noted, Asta and NWS-DE entered into the ITS Agreement on July 1, 2009. The agreement contemplated that NWS, "acting through its personnel," would provide certain IT-related services called "Basic Services." These "Basic Services" included IT and computing services that "are reasonably necessary for Asta to conduct its operations in the ordinary course of business." The Agreement provided that the provision of Basic Services was to be "consistent with past services provided by NWS to Asta." (Id.) Thus, the contract memorialized, and was a necessary step to ensure, Neal's uninterrupted provision of IT services. (Asta SOF ¶¶ 60-62)
The ITS Agreement provided that, for its three year term, NWS would be the "exclusive provider" of the Basic Services. (Ex. 1 § 3.1) Both Asta and NWS were to designate an "IT Services Manager" to serve as a point of contact. (Id. § 6.1) Neal was designated to fill that role for NWS. (Asta SOF ¶ 52)
On June 27, 2012, Asta terminated the ITS Agreement, claiming that NWS had breached material terms of the contract. (Asta SOF ¶ 74) According to Asta, as of the date of termination, it had paid NWS over $4 million. (Id. ¶ 75)
On July 26, 2012, Asta initiated arbitration against NWS pursuant to the arbitration clause in the ITS Agreement. That clause provided:
In the event that a dispute, controversy, or claim between the Parties arising directly or indirectly out of or in connection with this Agreement cannot be resolved by the IT Services Managers, either Party may elect to have such dispute, controversy, or claim resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA").
(Asta Ex. 1 § 6.2) Asta asserted claims against NWS for breach of contract and unjust enrichment, alleging that NWS failed to meet the requirements of the ITS Agreement. (Asta Ex. 8) Specifically, Asta claimed that (1) NWS failed to properly advise and support Asta's automated dialer system and negligently created a malfunctioning replacement system, (2) NWS entered into a third-party contract to retain workers in the Philippines without Asta's consent and submitted inflated bills to Asta for those workers, (3) NWS retained a third-party, Sun Interactive Services, Inc. ("SISI"), to provide IT-system monitoring but despite large payments by Asta, SISI performed negligible services, (4) NWS failed to cooperate with Asta in tracking IT requests or in providing information on system functioning, and (5) NWS failed to properly provide transition services at the time the contract was terminated.
NWS was represented by the law firm of McLaughlin & Nardi, LLC until October 18, 2012, when Coyne took over the representation. (Asta SOF ¶ 77) On November 8, 2012, NWS filed a Counterclaim in arbitration against Asta for breach of the ITS Agreement. (Id. ¶ 79; Asta Ex. 10) The Counterclaim asserted that Asta failed to remit amounts due to NWS, obtained services from third-party providers in violation of the "exclusive provider" clause of the ITS Agreement, and failed to provide sufficient notice of termination.
On August 7, 2013, Asta filed a Supplemental Statement of Claim adding claims under the New Jersey Consumer Fraud Act, the Computer Fraud and Abuse Act, New Jersey Computer Related Offenses Act, trespass, and conversion. These were based on, inter alia, NWS's alleged failure to abide by the confidentiality terms in the ITS Agreement and an order regarding confidentiality entered in the arbitration proceedings. (Asta Ex. 14) Specifically, Asta alleged that NWS and Neal had accessed certain confidential information contained on Asta computers without authorization and had forwarded those documents to Neal's personal email account, and that Neal had improperly wiped all electronic data and documents from an Asta-owned computer. Asta also alleged that Neal had used documents produced in the arbitration,...
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