Schatzki v. Weiser Capital Mgmt., LLC
| Decision Date | 25 November 2013 |
| Docket Number | 10 Civ. 4685 |
| Court | U.S. District Court — Southern District of New York |
| Parties | DEBRA SCHATZKI and BPP WEALTH, INC., Plaintiffs, v. WEISER CAPITAL MANAGEMENT, LLC, WEISERMAZARS, LLP and HOITSZ (A/K/A "CARIJN") MICHEL, Defendants. |
APPEARANCES:
Attorneys for Plaintiff
LAWLER MAHON & ROONEY LLP
By: Albert K. Lawler, Esq,
Christopher S. Rooney, Esq.
James J. Mahon, Esq.
Attorneys for Defendants
STARK & STARK, P.C.
By: Scott I. Unger, Esq.
Defendants Weiser Capital Management, LLC ("WCM"), WeiserMazars, LLP ("Weiser") and Hoitsz Michel ("Carijn" or "Michel") (collectively, the "Defendants") have moved pursuant to Rule 56 of the Fed. R. Civ. P. for partial summary judgment and dismissal of Counts II (Conversion), III (Breach of Contract), V (Civil Conspiracy) and VI (Unjust Enrichment) of the Third Amended Complaint ("TAG") of Plaintiffs Debra Schatzki ("Schatzki") and BPP Wealth, Inc. ("BPP") (collectively, the "Plaintiffs") and under Fed. R. Civ. P. 19 to dismiss the TAC for failure to join an indispensable party. The Plaintiffs have cross-moved under the same rule for partial summary judgment on Counts II (Conversion) and VI (Unjust Enrichment). Based upon the facts and conclusions set forth below, the motions with respect to Counts II (Conversion) and VI (Unjust Enrichment) of the TAC are denied, and the Defendants' motion with respect to Count V (Civil Conspiracy) is denied. The Defendants' motion for summary judgment and dismissal of Count III (Breach of Contract) is granted, and the Defendants' motion to dismiss the TAC for failure to join an indispensable party is denied.
This heavily litigated action has resulted in extensive motion practice, mediation and the instant motions. It is hoped that the disposition of these motions and the pending in limine motions will lead to a resolution by settlement or trial in the near future.
This action was initiated by the Plaintiffs on June 16, 2010 arising out of the termination of the relationship between the parties and a dispute over the use of the internet-based management program, SmartOffice.
A motion for a temporary restraining order and a preliminary injunction was resolved after conference with the magistrate. A motion to dismiss the First Amended Complaint was denied on January 26, 2011. A Second Amended Complaint was filed on August 4, 2011. A motion by the Defendants for partial summary judgment and a cross-motion by Plaintiffs were determined by opinion on January 19, 2012 (the "January 2012 Opinion"). A motion to amend by the Plaintiffs was granted in part and denied in part by opinion on June 30, 2012 (the "June 2012 Opinion"). The TAC was filed on July 23, 2012.
The magistrate on May 8, 2013 considered discovery complete except for one short deposition. In limine motions have been filed and the instant motions and cross-motion were heard and marked fully submitted on September 25, 2013.
The facts have been set forth in the Defendants' Rule 56.1 Statement, the Plaintiffs' Objection to Defendants' Rule 56.1 Statement, the Plaintiffs' Rule 56.1 Statement and the Defendants' Responses and Objection to the Plaintiffs' Rule 56.1 Statement. The facts described below are undisputed except as noted.
Schatzki is a financial planning professional who has worked in the financial services industry for more than 30 years. She is a certified financial planner, independent financial advisor, chartered life underwriter and accredited estate planner who also holds Series 6, 63 and 65 and life and health insurance licenses.
Over the course of Schatzki's career, she has developed a portfolio of clients and prospective clients comprised principally of high net worth individuals, along with several businesses. She has provided financial planning services to these clients, including life, health and long term care insurance, financial and estate planning and investment advisory services.
Schatzki started working for Marcum & Kliegman, LLP ("M&K") in 2000. She ran M&K's investment advisory and financial services division until September 2007.
In 2002, Schatzki formed BPP which holds an insurance brokerage license and provides insurance and financial planning services for wealthy individuals and consulting services for accounting firms. Schatzki was a seventy percent (70%) owner of BPP. Defendant Michel was a twenty percent (20%) owner of BPP and on May 3, 2010, she was an officer of BPP. Brian Edelman ("Edelman") was a ten percent (10%) owner of BPP. BPP developed systems to provide structure and processes for wealth management businesses in accounting firms. Prior to October 2007, Schatzki and BPP used this system with the accounting firm of M&K. BPP remained an independent entity while Schatzki served as managingdirector of M&K's financial services subsidiaries, M&K Financial Services LLC and M&K Investment Advisory LLC (collectively, the "M&K Wealth Management Subsidiaries").
Weiser is an international accounting firm, and from 2007 to 2010, Weiser was Schatzki's personal and business accountant. WCM is a wholly-owned subsidiary of Weiser, and provides financial and wealth management services.
In September 2007, Schatzki and BPP reached an agreement with Weiser and WCM to bring Schatzki's team of advisors and office staff, including Michel, from M&K to WCM. Schatzki and her team were at-will employees. Details of the agreement and its form are disputed. The terms on which the BPP service marks and processes were used by WCM are in dispute.
While at WCM, Schatzki and BPP continued to serve their own financial services clients and collected "trail commissions" for policies sold before joining WCM. Schatzki and BPP served M&K financial services clients and Weiser financial services clients. Schatzki did not sell her book of business to WCM, nor did BPP sell its service marks or processes to WCM.
The parties split the commissions and fees earned by Schatzki, with 75% kept by WCM when it was the source of the client and 65% kept by WCM when Schatzki was the source. The commissions and fees were paid directly to WCM, which channeled Schatzki's share to her. All of the licensed sales people had the same salary plus commission arrangement, and all of them split commissions on the same percentages.
During her first year of employment with WCM, Schatzki's compensation was an annual base salary of $150,000 plus the split of commissions and fees with an advance of $100,000 against those commissions. In 2008, Schatzki earned commissions and fees that exceeded her advance, and WCM paid her the balance of the earned commissions and fees.
Following the termination of its former CEO, Jordan Berlin ("Berlin"), Schatzki's compensation in 2009 increased to $400,000. According to Schatzki, following Berlin's termination, in addition to her own initial duties and responsibilities, Schatzki was directed to assume many of Berlin's duties and responsibilities. According to Defendants, those duties were assigned to Michel. According to Schatzki, she continued to earn incentives that included commissions on her insurance sales andfees for assets under management. Defendants deny that she continued to earn commissions.
SmartOffice is a client management program that was licensed to BPP by EBIX, Inc. ("EBIX"). According to Plaintiffs, SmartOffice stores valuable electronic data pertaining to clients' insurance policies, investments, dates of birth, family members and notes of interactions and conversations with clients. Such data helps financial planners identify planning and sales opportunities.
Schatzki began using SmartOffice more than 20 years ago to store all contact information for clients, prospects or contacts. This included personal contact information for all her clients, such as cell phone numbers, email addresses and social security numbers, as well as notes of conversations, copies of their insurance policies and records of other financial products that they purchased. When Schatzki joined M&K, she brought the SmartOffice license to M&K. According to the Defendants, M&K reimbursed Schatzki or BPP for the SmartOffice licensing fees while Schatzki was an M&K employee. BPP licensed SmartOffice from EBIX, pursuant to a written user agreement. BPP was the sole licensee of SmartOffice. WCM was not a licensee as of May3, 2010, the date that Weiser terminated its agreement with
All of the data in SmartOffice as of October 1, 2007 was the property of Schatzki and BPP. As of the date of this action, there were approximately twelve thousand three hundred (12,300) entries in SmartOffice, including clients, contacts and prospects. Certain of those clients required the services of a registered investment advisor, and some required the services of a broker-dealer.
Schatzki instructed M&K, and later, WCM employees to enter their clients' data on the SmartOffice database. Prior to October 2007, Schatzki and BPP provided access to that database to Schatzki's team of financial service providers, who at that time were employees of the M&K Financial Services Subsidiaries. The database was available to those employees who were working with Schatzki at the M&K Financial Services Subsidiaries.
Schatzki had a series of meetings with WCM in the summer of 2007 during the course of which she discussed the possibility of her and "her team" joining WCM. Schatzki's "team" consisted of Michel, David Weinstock I ("Weinstock"), WendySiegal ("Siegal"), Jill Maerkle ("Maerkle") and Al Rivers ("Rivers") and, according to Plaintiffs, Paul Lentini {"Lentini"). They were trained by Schatzki and utilized BPP systems. Siegal, Maerkle, Weinstock and Rivers were not employees of BPP.
Schatzki joined WCM on October 1, 2007, according to Plaintiffs, on a non-exclusive basis. Schatzki did not have a formal, written employment contract with WCM; she was employed at will. According to Plaintiffs, the law firms of Bryan & Cave and Stark & Stark prepared an...
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