Rick v. Profit Mgmt. Assocs., Inc.

• Decision Date: 13 March 2017
• Docket Number: CIVIL ACTION NO. 15–11171–IT
• Citation: 241 F.Supp.3d 215
• Parties: Errol RICK, Assignee of Comfort Bedding and Furniture, Inc., Plaintiff, v. PROFIT MANAGEMENT ASSOCIATES, INC. d/b/a Profit Management Promotions and/or Profit Management Associates East, Inc.; Michael J. Egan, as President and Individually; John "Hector" Mustafa, Individually; and Ronald Cooper, Individually, Defendants.
• Court: U.S. District Court — District of Massachusetts

241 F.Supp.3d 215

Errol RICK, Assignee of Comfort Bedding and Furniture, Inc., Plaintiff,

v.PROFIT MANAGEMENT ASSOCIATES, INC. d/b/a Profit Management Promotions and/or Profit Management Associates East, Inc.; Michael J. Egan, as President and Individually; John "Hector" Mustafa, Individually; and Ronald Cooper, Individually, Defendants.

CIVIL ACTION NO. 15–11171–IT

United States District Court, D. Massachusetts.

Filed March 13, 2017

Errol Rick, Acton, MA, pro se.

Howard E. Stempler, Seder & Chandler, Worcester, MA, for Defendants.

MEMORANDUM OF DECISION AND ORDER ON INDIVIDUAL DEFENDANTS' MOTION TO DISMISS

Judith Gail Dein, United States Magistrate Judge

I. INTRODUCTION

The pro se plaintiff, Errol Rick, was the former President and 50% owner of Comfort Bedding and Furniture, Inc. ("Comfort Furniture"), a company that was liquidated pursuant to a Chapter 7 Bankruptcy Proceeding in the United States District Court, District of Massachusetts (No. 11–42740–MSH). He brings this action by virtue of an assignment from Comfort Furniture authorized by the Bankruptcy Court dated January 20, 2014.

On or about February 24, 2011, Comfort Furniture entered into a Sales Promotion Agreement with Profit Management Associates, Inc. d/b/a Profit Management Promotions ("PMP") pursuant to which PMP was to conduct a high impact promotional sale on behalf of Comfort Furniture for 60 days, commencing on March 24, 2011. Problems arose virtually immediately. By April 18, 2011, Comfort Furniture served PMP a Notice and Demand letter pursuant to Mass. Gen. Laws ch. 93A. According to the individual defendants, but denied by the plaintiff, PMP and Comfort Furniture entered into a Sales Promotion and Settlement Agreement dated May 16, 2011, which addressed their issues.¹ Comfort Furniture filed for bankruptcy on June 28, 2011.

Plaintiff commenced this action on March 24, 2015 against PMP. The complaint was subsequently amended to add the individual defendants, Michael Egan, John "Hector" Mustafa, and Ronald Cooper, to the claims originally brought against PMP, namely breach of contract, fraudulent misrepresentation, and violation of Mass. Gen. Laws ch. 93A. PMP never filed a responsive pleading. The individual defendants contend that PMP is no longer in business, although the plaintiff contends that it is continuing to do business under various other "Profit Management" names. A default has been entered against PMP.

This matter is presently before the court on the individual defendants' motion to dismiss the amended complaint. (Docket No. 37). The parties have agreed to have this motion finally resolved by a Magistrate Judge pursuant to 28 U.S.C. § 636(c). (Docket No. 46). After consideration of the parties' oral and written filings, including the supplemental materials filed after the hearing, the motion to dismiss is ALLOWED WITHOUT PREJUDICE. The plaintiff may file a motion to amend his complaint consistent with this decision, if appropriate, within 30 days of the date of this order.

II. STATEMENT OF FACTS

Scope of the Record

When ruling on a motion to dismiss, the court must accept as true all well-pleaded facts, and give the plaintiff the benefit of all reasonable inferences. See Cooperman v. Individual Inc. , 171 F.3d 43, 46 (1st Cir. 1999). Where, as here, the plaintiff is proceeding pro se , the court must construe his allegations liberally. See Estelle v. Gamble , 429 U.S. 97, 106, 97 S.Ct. 285, 292, 50 L.Ed.2d 251 (1976) (a pro se complaint, however inartfully pleaded, must be liberally construed). Of significance in the instant case, "[o]rdinarily, a court may not consider any documents that are outside of the complaint, or not expressly incorporated therein, unless the motion is converted into one for summary judgment." Alt. Energy, Inc. v. St. Paul Fire & Marine Ins. Co. , 267 F.3d 30, 33 (1st Cir. 2001). "There is, however, a narrow exception ‘for documents the authenticity of which are not disputed by the parties; for official public records; for documents central to plaintiff['s] claim; or for documents sufficiently referred to in the complaint.’ " Id. (quoting Watterson v. Page , 987 F.2d 1, 3 (1st Cir. 1993) ). Here, the parties have submitted affidavits and various documents which go beyond those which are appropriately considered in connection with a motion to dismiss. As detailed below, this court has only considered those materials which fall within this narrow exception. This court has not converted the motion to dismiss to one for summary judgment.

The Sales Promotion Agreement

Comfort Furniture sold furniture and home furnishings at its retail store located in Lowell, Massachusetts. On February 24, 2011, "Comfort Bedding & Furniture, Inc." entered into a Sales Promotion Agreement (the "Agreement") with "Profit Management Associates East, Inc., d/b/a Profit Management Promotions (‘PMP’)" to conduct "a high impact promotional sale" at the store. See Agreement² at recital; Amended Complaint (Docket No. 34) ("Compl.") ¶ 7.³ Comfort Furniture was experiencing financial difficulties, and PMP promoted itself as a business with the expertise to run a promotional sale that would get Comfort Furniture out of its financial troubles. See Compl. ¶ 29. The Agreement provides that it "shall be construed and interpreted under the laws of the State of Pennsylvania." Agreement ¶ 13.4.

Pursuant to the Agreement, PMP was to provide personnel and funding for the sale, among other things, in exchange for which it was to be paid a commission. See Agreement ¶¶ 1–3, 8, 10. From the outset, Comfort Furniture was dissatisfied with the personnel PMP provided, and with its business practices. Compl. ¶¶ 9–16. Comfort Furniture felt that PMP was running a "going out of business" or liquidation sale, instead of helping Comfort Furniture stay in business. Id. ¶ 12. In particular, but without limitation, PMP priced inventory in such a way that PMP received a large commission, but Comfort Furniture ended up with a deficiency. Id. ¶ 13. PMP also allegedly failed to pay bills it was contractually obligated to pay, and failed to obtain necessary lines of credit to be able to obtain product from manufacturers to fill customer orders. Id. ¶¶ 14, 16. In addition, Comfort Furniture contends that PMP employees were disrespectful and abusive, in addition to being incompetent, thereby causing Comfort Furniture to sustain significant losses. Id. ¶¶ 10–11, 15.

As a result of PMP's conduct, Comfort Furniture allegedly suffered damages. According to Comfort Furniture, these damages are in the form of (a) sales taxes and delivery costs that were collected by PMP but not turned over to Comfort Furniture, which was liable for the expenses ($23,445); (b) $25,000 in "cash advances" taken by PMP employees without authorization; (c) the balance of the parties' joint bank account, which was created for the promotional event and which PMP wrongfully retained for its own use ($8,727.01); (d) costs paid by Comfort Furniture for promotion items that were properly the responsibility of PMP ($4,707); (e) refunds to customers paid by Comfort Furniture on sales proceeds retained by PMP ($54,929.71); (f) pre-promotion invoices PMP had promised to pay in consideration for the Agreement ($134,000); (g) a check that was improperly issued by a PMP employee to himself ($3,179); (h) lost profits from the sale ($318,733.50); and (i) lost profits from sales lost due to PMP's improper sales practices ($320,000). Id. ¶ 18. For their part, the defendants argue that damages are capped, and point to ¶ 13.6 of the Agreement, which provides:

In the event that Client has a claim against PMP for any reason, PMP's liability shall in all circumstances and for all claims be limited to the amounts actually paid by Client to PMP hereunder.

Id. ¶ 13.6. The defendants contend that these amounts are far below the $75,000 threshold necessary to support the diversity jurisdiction of the federal court.

The Bankruptcy

It is undisputed that Comfort Furniture filed for protection under Chapter 11 of the United States Bankruptcy Code on June 28, 2011. Defs. Mem. (Docket 38) Ex. D (Docket Sheet for Bankruptcy Petition # 11–42740, United States Bankruptcy Court, District of Massachusetts (Worcester)).⁴ On August 5, 2011, the motion of the debtor, Comfort Furniture, to convert its case to Chapter 7 was allowed, and "an order for relief under Chapter 7" was entered on that date. Id. Ex. E (Bankruptcy Trustee's Motion) at ¶ 1. On August 9, 2011, David Nickless accepted his appointment as Trustee in Bankruptcy for the estate of Comfort Furniture. On December 27, 2013, the Trustee filed a motion to sell the claims of the estate of Comfort Furniture against Profit Management Associates Inc. to Errol Rick. Id. Ex. E. The sale was subject to any defenses of PMP. Id. Ex. E at ¶ 15. The motion was allowed on January 30, 2014. Id. Ex. F. Rick commenced this action on March 24, 2015.

Additional facts will be provided below.

III. ANALYSIS

A. Motion to Dismiss Standard of Review

The individual defendants have moved to dismiss the complaint against them on the grounds that this court lacks subject matter jurisdiction due to an alleged insufficient amount in controversy, and because the complaint allegedly fails to state a claim upon which relief can be granted. Motions to dismiss for failure to state a claim test the sufficiency of the pleadings. Thus, when confronted with such a motion, the court accepts as true all well-pleaded facts and draws all reasonable inferences in favor of the plaintiff. Cooperman , 171 F.3d at 46. Dismissal is only appropriate if the complaint, so viewed, fails to allege a "plausible entitlement to relief." Rodriguez–Ortiz v. Margo Caribe, Inc. , 490 F.3d 92, 95 (1st Cir. 2007) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 559, 127 S.Ct. 1955, 1967, 167 L.Ed.2d 929 (2007) ).

"The plausibility inquiry necessitates a two-step pavane." Garcia–Catalan v. United States , 734 F.3d 100, 103 (1st Cir. 2013). "First, the...