Trundy v. Strumsky, Civ. A. No. 87-2221-Y.

• Decision Date: 19 January 1990
• Docket Number: Civ. A. No. 87-2221-Y.
• Citation: 729 F. Supp. 178
• Parties: Christopher C. TRUNDY, individually and in behalf of National Equity Corporation, Plaintiffs, v. Richard STRUMSKY, Joanne Strumsky, Edward McCormick, Debra McCormick, Wayne C. Krupsky, and Sidney J. Dockser, Defendants.
• Court: U.S. District Court — District of Massachusetts

729 F. Supp. 178

Christopher C. TRUNDY, individually and in behalf of National Equity Corporation, Plaintiffs, v. Richard STRUMSKY, Joanne Strumsky, Edward McCormick, Debra McCormick, Wayne C. Krupsky, and Sidney J. Dockser, Defendants.

Civ. A. No. 87-2221-Y.

United States District Court, D. Massachusetts.

January 19, 1990.

Christopher C. Trundy, New Bedford, Mass., pro se.

Paul McDonald, Eileen Morrison, Grannan, McDonald Maloy & Steinkrauss, Arlington, Mass., Gary Ritter, Lawrence, Mass., Sidney Dockser, Needham Hts, Mass., for defendants.

MEMORANDUM AND ORDER

YOUNG, District Judge.

On September 8, 1987, Christopher C. Trundy ("Trundy"), acting pro se on his own behalf and, pursuant to Fed.R.Civ.P. 23.1, as a shareholder derivative action on behalf of National Equity Corporation ("National"), commenced this action against Richard Strumsky, Joanne Strumsky (together "the Strumskys"), Edward McCormick, Debra McCormick (together "the McCormicks"), Wayne Krupsky ("Krupsky"), and Sidney Dockser ("Dockser"). The complaint alleges as Counts I through V against various of the defendants: a civil violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. sec. 1964 (1982) ("RICO"); breach of contract, breach of loyalty, conflict of interest, fraudulent delay in refusing legal demand for return of corporate records, conversion, and intentional infliction of emotional harm. In particular, all counts are alleged against the defendant Krupsky, and the alleged RICO violation is alleged by Trundy individually against all the defendants. Trundy invokes federal subject matter jurisdiction under 18 U.S.C. sec. 1964(c) (1982).

The matter is presently before the Court on Krupsky's motion for summary judgment on all counts. At a hearing on February 3, 1989, this Court ordered Krupsky to produce documents requested by Trundy by March 3, and both parties were given until April 3 to file further affidavits and memos.

I. FACTUAL BACKGROUND

For the purposes of a motion for summary judgment, the Court must examine the record and view the facts in the light most favorable to the non-moving party. Raskiewicz v. Town of New Boston, 754 F.2d 38 (1st Cir.1985). Having done so, the Court may grant summary judgment only if the moving party has shown that there is no genuine issue of material fact and that he is entitled to judgment as matter of law. Fed.R.Civ.P. 56(c). Accordingly, the recitation which follows sets out events entirely from Trundy's point of view.

A. General.

On November 1, 1981, the Strumskys, McCormicks, and Trundy formed National, a debt collection agency, as a Massachusetts corporation. Trundy left his employment at Merrill Lynch in order to assume the presidency of the new company. The Strumskys and McCormicks received 49% of the National shares, while Trundy received 51% in consideration of his business contacts, deferral of salary for several years, and giving an unsecured note to Richard Strumsky for five thousand dollars. Richard Strumsky was to provide twenty thousand dollars start-up capital plus any additional amounts as needed. As president, Trundy's primary responsibility was to solicit new business. Joanne Strumsky was to serve as secretary and clerk, and was also responsible for monitoring the client escrow account. Edward McCormick was to serve as treasurer and bookkeeper. Trundy and Joanne Strumsky were the only two with checkwriting authority.

At some time in 1983, responsibilities for bookkeeping and monitoring the client escrow account were "dumped" on Trundy. Apparently the promised funding from Richard Strumsky had not been entirely forthcoming, and when Trundy asked Joanne Strumsky how he was going to pay the company bills, she responded by handing over the escrow account books to him, saying, "Get it from here." It seems that this was the beginning of a continued use of escrow funds to pay company debts. Trundy paid himself $18,840 between November 4, 1982 and January 25, 1984, as reimbursement for travel and entertainment expenses.

In April, 1983, Krupsky, a certified public accountant and friend of the Strumskys, was hired by Trundy on a consultant basis to reconcile the balance of the corporate checking account, determine liability for funds unremitted to clients from the corporate escrow account, prepare various unaudited financial statements, prepare quarterly tax returns, and render accounting advice. He was not, however, hired to keep the daily books.

In January, 1984, the Strumskys asked Krupsky to prepare an accounting of the client escrow account as of December 31, 1983. Krupsky calculated liability to clients of $43,186.04, but a cash balance in the escrow account of only $8,676.87. On January 27, 1984, the Strumskys and McCormicks met to discuss the shortfall without Trundy's knowledge. The Strumskys and McCormicks apparently believed the problem stemmed from Trundy's political activities. On January 28, 1984, Trundy discovered numerous corporate documents and records were missing from the office, which he claims were taken by Joanne Strumsky (Trundy's averments are somewhat contradictory on this point). He called the Strumsky residence, then drove there and found the Strumskys, Edward McCormick, and Krupsky. Trundy was confronted with the news of the shortfall. Trundy maintained that he knew there was probably some shortfall, but that the amount was small and not anything close to the $34,509.17 calculated by Krupsky. He asked to look at the calculations and records himself but the others refused. He asked that certain fees and other items be taken into account and that an independent audit be done, but these suggestions were likewise refused. Instead, the Strumskys and Edward McCormick, with Krupsky remaining silent, threatened to report Trundy to the Massachusetts Banking Commissioner with criminal prosecution to follow.

On January 30, Trundy called Krupsky by phone and fired him. Krupsky responded that he considered that he was accountable to Richard Strumsky. He refused to turn over any National records to Trundy on the grounds that an accountant has the professional responsibility to return documents only to the corporate officer or director who gave them to him — this despite the fact that, on January 26, 1984, Trundy had personally delivered to Krupsky's home in Georgetown, Massachusetts, various payroll and financial records of National so that Krupsky could work up tax statements.

The "Krupsky Report," detailing Krupsky's findings regarding the escrow account, was issued February 4, 1984, and addressed to "Board of Directors, National Equity Corporation," at the Strumsky's home address, not the corporate address. The report noted that "... it appears that the transactions initiated in the escrow account were controlled by Mr. Christopher Trundy," and stated that Krupsky had "... not ... discussed the results ... with Mr. Trundy. Therefore I am not aware of any adjustments that may be necessary to such accounts other than those included in the documents provided. Such documents were lacking in explanatory notation which, if available, may alter the results." The report gave as its understanding that the escrow shortfall was in violation of state regulations, and recommended that the shortfall be discussed with Trundy and the application of the missing funds investigated.

B. Extortion.

On Sunday, January 29, the day after the confrontation with Trundy, the Strumskys, McCormicks, Trundy, and Robert Bippus ("Bippus"), the vice-president of National as well as a potential investor, discussed how to raise new capital. It was agreed business would proceed as usual the next day. On the evening of Tuesday, January 31, McCormick told Trundy by phone that Richard Strumsky had been in touch with the brother of the Massachusetts Banking Commissioner. Trundy alleges that this brother was then current counsel to the Strumskys. McCormick told Trundy that if he (Trundy) would sign over his interest in National to Richard Strumsky without compensation, and get out of the collection business, the Massachusetts Banking Commission would not prosecute him. This threat was repeated on February 1, 1989, by Richard Strumsky.

Trundy apparently stopped participating in the conduct of National's business after January 31, 1984. Trundy attended a meeting at which Bippus presented a plan of action for the company, but he "said not one word." He never signed over his share of the company nor did he relinquish any claim to it. The defendants do not appear to dispute this. United States Corporate Income Tax Form 1120 and Massachusetts Department of Revenue Corporate Excise Return, both prepared by Krupsky for National, listed Trundy as the owner of more than 50% of the voting stock of the company as of October 31, 1984. The latter also listed him as president.

Sometime in February, 1984, Trundy avers that Edward McCormick and Richard Strumsky gave him a letter they wrote to the brother of the Banking Commissioner, saying that all attempts to remove Trundy without compensation had failed. On April 26, counsel for the Strumskys — one Sidney Dockser — offered to buy National from Trundy for five thousand dollars ($5,000.00). Joanne Strumsky, who was present, burst out that if Trundy did not accept, she knew where she was going and to whom she was going to talk. Richard Strumsky calmed her down. From May to the end of July, 1984, Dockser offered either to buy Trundy's interest in National from him, or to sell the interests of the other shareholders to him, for twenty-five thousand dollars ($25,000.00). Trundy agreed to sell on condition that he be allowed to review the books. He was shown some records but apparently not enough to satisfy him.

On September 7, Richard Strumsky confronted Trundy in person and said "we've arranged to have this whole thing blow up on you by election day September 18th." Nothing happened. On September 19th, Dockser wrote "I thought you would...