Walpert v. Jaffrey

• Decision Date: 28 August 2015
• Docket Number: No. 13 Civ. 5006(PGG).,13 Civ. 5006(PGG).
• Parties: Gary WALPERT, Plaintiff, v. Syed JAFFREY, Wingate Capital, Inc. a/k/a Wingate Capital New York, and U.S. Defense Fund Management LLC, Defendants.
• Court: U.S. District Court — Southern District of New York

127 F.Supp.3d 105

Gary WALPERT, Plaintiff,

v.Syed JAFFREY, Wingate Capital, Inc. a/k/a Wingate Capital New York, and U.S. Defense Fund Management LLC, Defendants.

No. 13 Civ. 5006(PGG).

United States District Court, S.D. New York.

Signed Aug. 28, 2015.

Blair Courtney Fensterstock, Evan Steele Fensterstock, Fensterstock & Partners LLP, New York City, NY, for Plaintiff.

Deborah J. Denenberg, Gallo Vitucci Klar LLP, New York, NY, for Defendants.

MEMORANDUM OPINION & ORDER

PAUL G. GARDEPHE, District Judge.

Plaintiff Gary Walpert brings this action against Defendants Syed Jaffrey, Wingate Capital, Inc., a/k/a Wingate Capital New York ("Wingate"), and United States Defense Fund Management LLC ("USDFM"), alleging claims of (1) breach of contract against Defendants Jaffrey and Wingate; (2) quantum meruit against all Defendants; (3) unjust enrichment against all Defendants; (4) violation of New York Labor Law § 193 against all Defendants; and (5) conversion against Defendants Jaffrey and Wingate. (Am. Cmplt. (Dkt. No. 19)) Plaintiff has moved for a default judgment and a turnover order—or in the alternative, a pre-judgment attachment—against Defendants. (Dkt. No. 53) Defendants have moved to dismiss the Amended Complaint for lack of subject matter jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(1). (Dkt. No. 72) Plaintiff has cross-moved to drop USDFM as a defendant pursuant to Federal Rule of Civil Procedure 21. (Dkt. No. 69)

For the reasons stated below, (1) Defendants' motion to dismiss the Amended Complaint will be denied; (2) Plaintiff's Rule 21 motion to dismiss all claims against Defendant USDFM will be granted; and (3) Plaintiff's motion for a default judgment against Defendants Jaffrey and Wingate will be granted.

BACKGROUND¹

I. FACTS

Plaintiff Gary Walpert is a practicing lawyer who received a J.D. from Harvard Law School and a Ph.D. from the Massachusetts Institute of Technology. (Dec. 1, 2014 Hearing Tr. (Dkt. No. 65) at 17) He is currently a partner at the law firm Byrne Poh LLP, and before that he was a partner at K & L Gates, Wilmer Hale, and Fish & Richardson. (Id. at 17–18) Walpert specializes in intellectual property law, as well as transactional law relating to technology. (Id. at 18)

Plaintiff met Defendant Jaffrey in 2006 or 2007, while Plaintiff was working at Wilmer Hale. (Id. at 18–19) Jaffrey was a client of the firm and retained Walpert to work on issues relating to the intellectual property of Delta Search Labs, a company Jaffrey controls. (Id. at 18) Walpert performed legal work for Jaffrey on Delta Search Labs until about 2010. (Id. at 19) At the beginning of 2010, Jaffrey "asked [Plaintiff] whether [he] would be interested in working for him on a new [private equity] startup that [Jaffrey] was going to create." (Id. ) Jaffrey wanted Plaintiff to become the general counsel of Wingate Capital, Inc.—one of Jaffrey's companies—and a second entity that Jaffrey was planning to form, which became United States Defense Fund Management. (Id. ) Plaintiff and Jaffrey agreed that Plaintiff would be paid $900,000 a year to serve in these positions. (Id. at 20)

In 2010, Plaintiff arranged for an employment agreement to be prepared that memorialized his agreement to work at Wingate (the "Employment Agreement"). (Id. at 20–21; PX 1) Plaintiff and Jaffrey signed the Employment Agreement in July of 2010.² (Dec. 1, 2014 Hearing Tr. (Dkt. No. 65) at 24) The Employment Agreement states that it is "made effective as of the 11th day of June, 2010 ..., by and between Wingate Capital, Inc. ... (‘Employer’), and Gary A. Walpert (‘Executive’)." (PX 1 at 1) The Agreement states that "Employer wishes to hire Executive in connection with the creation, management and operation of certain private equity funds and such other legal or related tasks as may occur[.]" (Id. ) It also states that Plaintiff "agrees to serve as Executive Vice President and General Counsel of Employer," and that he "shall report to the Chief Executive Officer (CEO) of the Employer"—i.e., Jaffrey. (Id.; Dec. 1, 2014 Hearing Tr. (Dkt. No. 65) at 32) The Employment Agreement states that the "term of this Agreement and the Period of Executive's employment under this Agreement shall begin as of [June 11, 2010] and shall continue for a period of thirty-six (36) full calendar months, and shall continue thereafter until terminated...." (PX 1 at 1)

With respect to Plaintiff's duties, the Employment Agreement states that Plaintiff "will devote all of his business time, attention, skill and efforts to the faithful performance of his duties under this Agreement, including activities and duties directed by the CEO." (Id. ) As to compensation, the Employment Agreement provides that "Employer will pay Executive a salary of not less than $900,000 per year," which "will be payable in accordance with the customary payroll practices of Employer but not less often than on a pro rata basis, monthly." (Id. at 2)

While employed at Wingate, Plaintiff had an office at Wingate's offices, which were located at 601 Lexington Avenue in Manhattan. (Dec. 1, 2014 Hearing Tr. (Dkt. No. 65) at 23) Plaintiff had "some personal furniture at the office in Wingate," which is worth "somewhere around $20,000," including a desk, a credenza, and a high-backed office chair. (Id. at 23, 47–49) He also had some paintings on the walls, and about "25 boxes of documents that [he] had brought with [him] from K & L Gates," most of which were "business" documents, and most of which were "irreplaceable." (Id. at 47)

Plaintiff testified that his "primary work" for Wingate "was the formation of [two] [limited liability companies], USDFM and Collingwood." (Id. at 26) "Collingwood was created by Mr. Jaffrey" and lawyers at Kaye Scholer. (Id. at 43) Plaintiff testified that Collingwood "was another investment company that was supposed to make a huge amount of money." "It didn't have a parent ... [b]ut it was controlled by Mr. Jaffrey." (Id. at 43–44) "[I]n addition to [doing work for USDFM and Collingwood], [Plaintiff did] work relating to other investment targets that Mr. Jaffrey came up with[,][a]nd there were dealings with the lawyers who helped Wingate get its space[, who] were not paid...." (Id. at 26)

Plaintiff also worked on personal matters for Jaffrey and his wife, including a lawsuit "by [the law firm] Quinn Emanuel against Mr. Jaffrey personally in connection with [$6 million in lost fees] that were [allegedly] owed by him to the law firm," as well as a "dispute [Jaffrey] had with an interior decorator relating to work done by the decorator that he did not pay for, or refused to pay for." (Id. at 25–26, 29) Plaintiff also performed services for Jaffrey's other companies, including Delta Search Labs and Ovalia Resorts. (Id. at 25) Plaintiff's work for Delta Search Labs "related to a claim that Delta had for losses as a result of flooding in [its] space." (Id. at 27) Plaintiff's work for Ovalia Resorts related to "a suit that Jaffrey [had] brought against HSBC for HSBC's failure to perform in a contractual arrangement," under which HSBC was "going to help raise ... money" to "create a casino and resort in Gulfport, Mississippi." (Id. at 30) Plaintiff also performed work in connection with a lawsuit that Hussain al-Shibib—Ovalia Resort's sole employee—brought against Jaffrey "for non-payment under his employment with Ovalia Resorts." (Id. at 30–31)

During the time period that Plaintiff worked for Wingate, he also worked "part time" for the law firm Byrne Poh. Plaintiff spent "under an hour a day[,] maybe [two] ... to three ... hours a week" on Byrne Poh-related work. (Id. at 46) Plaintiff was "able to work for Byrne Poh while [he] was under [the] contract with Wingate" because he and Jaffrey "agreed that [Plaintiff] could keep some of [his old practice] ... as long as there wasn't a conflict of interest." (Id. at 46–47) The Employment Agreement memorializes this understanding: "Employer agrees that Executive may continue to practice law for outside clients as Of Counsel to a private law firm of his choosing, as long as such representation does not unreasonably interfere with, or create a conflict of interest with respect to, the performance of his duties for Employer." (PX 1 at 2)

Plaintiff testified that Jaffrey was "the CEO of Wingate Capital"; "the CEO and president of Ovalia"; "the managing partner" of USDFM; the "managing partner" of Collingwood; and he "may have been CEO" and "a board director" at Delta Search Labs. (Dec. 1, 2014 Hearing Tr. (Dkt. No. 65) at 32) Plaintiff's "understanding is that all the funds [to operate these companies] came from Mr. Jaffrey, whether it was Wingate or any of the other companies," because "when anyone needed money, they asked ... Mr. Jaffrey for it, whether it was for petty cash or rent." (Id. at 40–41) Jaffrey was the source for all money needed by Ovalia, USDFM, or Collingwood: "He was simply the place money came or didn't come from. There was no other source." (Id. ) Plaintiff also testified that "Mr. Jaffrey didn't really recognize corporate bounds and he was the sole controlling entity, from [Plaintiff s] perspective, of all of the companies that he was involved in, and he didn't really separate who worked on what." (Id. at 47–48)

In October 2010, Plaintiff and Jaffrey executed another employment agreement in connection with Plaintiff's work for USDFM.³ (Id. at 33; PX 2) This agreement states that "[USDFM] is pleased to extend [Plaintiff] an offer of employment as General Counsel and Compliance Officer effective September 1, 2010." (PX 2 at 1) It also states that, "[i]n addition to [Plaintiff s] annual salary of $600,000, which shall be paid on a monthly basis, at the end of the month, [Plaintiff] shall receive a payment of $175,000 in recognition of [his] efforts from May 17 to August 31, 2010. A special [payment] of $500,000 will also be paid annually." (Id. ) Plaintiff testified that USDFM is a limited liability company, and that "the members of...