DENNIS MAAS VS. HOYT CORPORATION

• Court: New Jersey Superior Court Appellate Division
• Decided: October 17, 2017
• Docket: A-2983-15T3
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-2983-15T3

DENNIS MAAS,

Plaintiff-Appellant,

v.

HOYT CORPORATION, a corporation of the State of New Jersey; MICHAEL BRADFORD; SUSAN NIXON BRADFORD; NICHOLAS B. NIXON; MARIA ESPARRAGUERA; THE WILLIAM H. NIXON REVOCABLE TRUST; and THE ESTATE OF WILLIAM H. NIXON,

Defendants-Respondents. _________________________________

Argued September 14, 2017 – Decided October 17, 2017

Before Judges Alvarez, Currier, and Geiger.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-10204-15.

William A. Feldman argued the cause for appellant (William A. Feldman, LLC, attorneys; Mr. Feldman and John J. Stern, on the briefs).

Michele L. Ross argued the cause for respondents Hoyt Corporation, Michael Bradford, Susan Nixon Bradford, Nicholas B. Nixon and Maria Esparraguera (M. Ross & Associates, LLC, attorneys; Ms. Ross and Jill A. Ellman, on the brief). Daniel Case Gibbons argued the cause for respondents The William H. Nixon Revocable Trust and The Estate of William H. Nixon (Nixon Peabody LLP, attorneys; Mr. Gibbons, on the brief).

PER CURIAM

Plaintiff Dennis Maas appeals from the February 12 and

February 16, 2016 orders dismissing his complaint against all

defendants with prejudice. The Law Division judge dismissed the

complaint under the entire controversy doctrine (ECD), asserting

that the complaint at issue was identical to a prior complaint

that had been dismissed without prejudice in the Chancery Division.

Because we find there was no adjudication on the merits of the

action in the Chancery Division, we reverse the dismissal orders.

Plaintiff was employed by defendant Hoyt Corporation from

1986 until his termination in 2015, serving as its vice president

and chief financial officer. In 1986, the two principals of Hoyt,

William Nixon1 and Donald Maguire, entered into a Shareholders

Agreement (Agreement) that restricted the two principals from

transferring stock. The Agreement also required Hoyt to purchase

life insurance policies on each of the stockholders. Upon the

1 Nixon was the majority shareholder and owned 206 shares; Maguire owned a minority interest with thirty-nine and one-half shares.

2 A-2983-15T3 death of either of the principals, Hoyt was to purchase that

stockholder's shares.

On the same day the Agreement was executed, plaintiff was

sold one share of stock and he executed a different agreement,

memorializing the purchase and providing that upon his

termination, the stock would be sold to Hoyt. Plaintiff's

employment was defined as "at will."

In late 1986, Hoyt, Nixon, and Maguire executed an amendment

to the Agreement that permitted Nixon to transfer his majority

interest to defendant William H. Nixon Revocable Trust (the Trust),

a trust for the benefit of his spouse and descendants, making the

Trust the majority shareholder of Hoyt.

Nixon served as president of Hoyt until 1999, at which time

Maguire became president until his retirement in October 2014. In

November 2014, defendant Michael Bradford became the interim

president. A new Board of Directors was elected in December 2014

to include defendants Susan Nixon Bradford, Nicholas B. Nixon, and

Maria Esparraguera (the Nixon defendants). Hoyt purchased

Maguire's stock after his death in March 2015. In April, defendant

Michael Bradford purchased two shares of the corporation, ensuring

plaintiff's status as minority shareholder. Nixon died in May

2015, and in August, plaintiff was terminated on allegations of

improper conduct in the workplace.

3 A-2983-15T3 The Chancery Action

In June 2015, plaintiff filed an Order to Show Cause (OTSC)

and verified complaint in the Chancery Division against Hoyt,

Michael Bradford, the Nixon defendants, the Trust, and the Estate

of William H. Nixon (Estate).

Plaintiff's OTSC and complaint alleged that all of the

defendants had "mismanaged or acted oppressively . . . in breach

of their fiduciary duties to [p]laintiff as a stockholder and

employee [of] the [c]orporation" by refusing to effectuate

plaintiff's request to buy back the stock formerly owned by Nixon,

and currently held by the Trust. Plaintiff sought the appointment

of a custodian or provisional director to repurchase all of the

corporation's stocks, including the stock owned by the Trust and

Michael Bradford. He also sought a declaration that he was the

sole remaining stockholder.

The OTSC alleged additional causes of action for breach of

contract; breach of the implied covenant of good faith,

cooperation, and fair dealing; and specific performance. The

Chancery court denied the OTSC.

Following his termination, plaintiff amended his complaint

to assert three additional claims: violation of the Conscientious

Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -14;

4 A-2983-15T3 conspiracy; and tortious interference with contractual and

economic rights and expectations.

All of the defendants moved to dismiss the complaint under

Rule 4:6-2(e). They argued that plaintiff was not a party to the

Agreement, and therefore, had no standing to assert a claim as an

oppressed shareholder under N.J.S.A. 14A:12-7(1)(c) (the Act). As

there was no contract, defendants contended that plaintiff could

not establish a claim for breach of contract, breach of the implied

covenant of good faith and fair dealing or tortious interference

with contractual and economic rights and expectations. Defendants

asserted that plaintiff was only entitled to the value of his one

share of stock. Defendants argued further that plaintiff had not

alleged a violation of a law, rule, or regulation as required to

establish a claim under CEPA or for civil conspiracy.

On November 6, 2015, the Chancery judge issued a written

opinion granting defendants' motions. Quoting Kieffer,2 the judge

stated that as the motions were brought under Rule 4:6-2(e), he

was cognizant that the "non-moving party need not prove the case,

but need only 'make allegations which, if proven, would constitute

a valid cause of action.'" After advising that he had accepted

plaintiff's version of the facts and accorded it all legitimate

2 Kieffer v. High Point Ins. Co., 422 N.J. Super. 38, 43 (App. Div. 2011).

5 A-2983-15T3 inferences, the Chancery judge found that the facts "set forth in

the pleadings are insufficient to state any causes of action

against Defendant[s] due to improper pleadings."

As to the Act, the judge stated that plaintiff had no legal

standing to allege a cause of action because he was neither a

party to nor a third-party beneficiary of the Agreement. He

advised, however, that plaintiff could raise this allegation under

a derivative theory in a new pleading.

The counts alleging breach of contract and implied covenant

of good faith and fair dealing were similarly dismissed without

prejudice as a result of the judge's conclusion that plaintiff was

not a party to the Agreement. The judge again noted, plaintiff's

allegation that he was an intended beneficiary of the Agreement,

and advised that the claims could be brought in a derivative

action.

Quoting Maw,3 the Chancery judge also dismissed the CEPA count

without prejudice, asserting that plaintiff failed to "plead a

violation of any activity on the part of [defendants] that was

'unlawful or indisputably dangerous to the public health, safety

or welfare.'"

3 Maw v. Advanced Clinical Commc'ns, 179 N.J. 439, 445 (2004).

6 A-2983-15T3 In addressing the allegation of civil conspiracy, the judge

found that the complaint failed to set forth sufficient facts to

"establish Defendants agreed to inflict a wrong or injury upon

Plaintiff, or that the Plaintiff suffered damages as a result of

any such agreement." The count was dismissed without prejudice.

Finally, the judge dismissed the tortious interference with

a contract claim, reiterating that plaintiff was not a party to

the Agreement and, therefore, had no standing to assert this

contractual claim. The judge advised again that if plaintiff was

an intended beneficiary, he could pursue claims to enforce any

rights of Hoyt in a derivative action.

In conclusion, the Chancery judge noted the general premise

that a dismissal for failure to state a claim is without prejudice

because there has been no adjudication on the merits of the claims.

He said:

Therefore, in granting Defendants' motions[,] all of Plaintiff's claims are dismissed without prejudice. The [c]ourt notes that some of Plaintiff's claims seek money damages, and Plaintiff also filed an Amended Complaint seeking a jury trial. Should Plaintiff continue to seek these claims, the claims may more appropriately be brought in the Law Division.

The Law Division Action

Plaintiff did not appeal from the Chancery court's order.

Instead, he filed an action in the Law Division asserting identical

7 A-2983-15T3 claims and adding a count for a shareholder derivative action

pursuant to Rule 4:32-3. Defendants moved to dismiss the

complaint, reiterating their arguments made before the Chancery

judge. In addition, defendants contended that plaintiff was unable

to maintain his derivative action, as he only sought to enforce

his own rights and not the rights of all stockholders.

The Law Division judge determined that the ECD required the

dismissal of all of the claims in the new complaint previously

asserted in the Chancery complaint. He stated that the Chancery

judge's decision to dismiss without prejudice "can only be read

as allowing plaintiff to address the deficiencies of the pleadings

when re-filed in the Law Division." Since plaintiff failed to set

forth any new facts or legal arguments in the second complaint,

the Law Division judge dismissed the previously asserted claims

with prejudice. He similarly dismissed the new derivative action

count as he concluded that because plaintiff was the only

stockholder, the derivative suit was "representative of only his

personal concerns and alleged injuries."

On appeal, plaintiff argues that the Law Division judge erred

in dismissing his complaint under the ECD. We agree.

"The [ECD] bars a subsequent action only when a prior action

based on the same transactional facts has been tried to judgment

or settled." Arena v. Borough of Jamesburg, 309 N.J. Super. 106,

8 A-2983-15T3 111 (App. Div. 1998). "Only a judgment 'on the merits' will

preclude a later action on the same claim." Watkins v. Resorts

Int'l Hotel & Casino, 124 N.J. 398, 415 (1991). The Chancery

judge did not adjudicate any of plaintiff's claims on their merits.

He reviewed the complaint under the standard set forth in Rule

4:6-2(e) and found plaintiff's pleadings insufficient to state a

cause of action. The Chancery judge specifically stated he was

dismissing the complaint without prejudice because the claims had

not been adjudicated on their merits. Anticipating that the

complaint would be re-filed, the Chancery judge advised that the

Law Division was the appropriate forum for any subsequent action.

The Law Division judge, therefore, erred in his determination that

the ECD barred the second complaint. The claims were neither

adjudicated nor settled.

Because we review judgments and orders, however, and not the

reasoning for their entry, see Neu v. Union Twp. Planning Bd., 352

N.J. Super. 544, 551 (App. Div. 2002), we must address whether the

dismissal was nevertheless proper. Our review of the trial court's

order is plenary; we apply the same test as the trial court,

granting a motion under Rule 4:6-2 "only if, accepting all well-

pleaded allegations in the complaint as true, and viewing them in

the light most favorable to plaintiff, plaintiff is not entitled

to relief." Smerling v. Harrah's Entm't Inc., 389 N.J. Super.

9 A-2983-15T3 181, 186 (App. Div. 2006). Moreover, we are not bound by the

trial court's legal conclusions. "A trial court's interpretation

of the law and the legal consequences that flow from established

facts are not entitled to any special deference." Manalapan

Realty L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).

Limiting our review to the "legal sufficiency of the facts

alleged in the complaint[,]" Donato v. Moldow, 374 N.J. Super.

475, 482 (App. Div. 2005), we are satisfied that plaintiff provided

adequate and sufficient facts to support his allegations in the

Law Division complaint. The twenty-eight page complaint contains

detailed factual support for each asserted claim.

Plaintiff presented sufficient facts to support his claim

under the Act. The pertinent count provides detailed allegations

to meet the requirements of N.J.S.A. 14A:12-7(1)(c). As to the

contractual claims, plaintiff alleges that he was an intended

third-party beneficiary to the Agreement. Without the opportunity

for discovery to explore these allegations, it was an error to

dismiss the contractual claims.

In the CEPA count, plaintiff alleges that: (1) Hoyt employed

him; (2) defendants violated the Act and N.J.S.A. 14A:7-12; (3)

he complained of Hoyt's failure to repurchase Nixon's stock; and

(4) defendants retaliated against him by terminating his

employment. Plaintiff has factually supported his CEPA claim.

10 A-2983-15T3 Finally, we review the derivative shareholder claim.

Plaintiff alleges that the Nixon defendants have mismanaged the

corporation, including their refusal to purchase the Trust stock

following Nixon's death. Plaintiff further alleges that the Nixon

defendants' refusal deprived Hoyt from the benefits of

repurchasing the stock. Because the only other shareholders are

Michael Bradford and the Trust, plaintiff describes himself as the

only bona fide shareholder. He acknowledges that his individual

rights as a shareholder and his derivative rights on behalf of the

class of all bona fide stockholders overlap. These allegations

are sufficient to meet his pleading burden.

Whether any or all of the pled claims will remain viable

after discovery and potential summary judgment motions is not

before us and we express no view as to the likelihood of success

of any such motions. We need only be able to "glean" a cause of

action from the complaint for it to survive a dismissal motion

under Rule 4:6-2. See Printing Mart-Morristown v. Sharp Elecs.

Corp., 116 N.J. 739, 746 (1989). As a result, we reverse the

dismissal of the complaint and remand to the trial court for

further proceedings.

Reversed and remanded. We do not retain jurisdiction.

11 A-2983-15T3