Liveintent, Inc. v. Naples

293 F. Supp. 3d 433
CourtDistrict Court, S.D. Illinois
DecidedFebruary 23, 2018
Docket16 Civ. 9732 (KPF)
StatusPublished
Cited by11 cases

This text of 293 F. Supp. 3d 433 (Liveintent, Inc. v. Naples) is published on Counsel Stack Legal Research, covering District Court, S.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Liveintent, Inc. v. Naples, 293 F. Supp. 3d 433 (S.D. Ill. 2018).

Opinion

KATHERINE POLK FAILLA, District Judge:

In March 2010, Plaintiff LiveIntent, Inc. ("LiveIntent") contracted with Defendants Mark Naples and his company, WIT Strategy (collectively, "Defendants"), for Defendants to provide services to LiveIntent over a six-month period. According to Defendants, after six weeks of performance, LiveIntent determined that it could no longer afford Defendants' services, resulting in a modification to the parties' agreement by which LiveIntent agreed to pay Defendants cash for the first month of services and to provide equity shares in LiveIntent as compensation for "ongoing" services from Defendants. Defendants allege that they continued to provide services to LiveIntent, but discovered, more than six years after the contract modification, that LiveIntent had never issued them any stock.

After advising Naples of its belief that it owed no equity shares, LiveIntent brought this action, seeking a declaratory judgment to the same effect. Defendants then brought counterclaims against LiveIntent for breach of contract, fraud, and declaratory judgment. Before the Court are LiveIntent's motions to dismiss Defendants' counterclaims and for judgment on the pleadings. For the reasons that follow, the Court grants the motions.

BACKGROUND1

A. Factual History

1. The Initial Contract

Through his company, WIT Strategy, Naples provides "strategic public relations services [to] startup companies," including avenues for publicity "that would otherwise not be available to a startup company." (Countercl. ¶ 1). LiveIntent is in the business of providing "[email-]based marketing solutions" and was a startup company in March 2010. (Id. at ¶¶ 2-3). In or around that time, Naples began discussions with LiveIntent's Chief Executive Officer, Matt Keiser, and its Chief Operating Officer, Dave Hendricks, regarding WIT Strategy contracting to provide services for LiveIntent. (Id. at ¶ 3).

These discussions resulted in the parties executing a contract on March 10, 2010, under which WIT Strategy would coordinate "an initial public relations campaign"

*438to "launch" LiveIntent over the course of a six-month period from March 15, 2010, through September 15, 2010; WIT Strategy would then provide "ongoing" public relations services "after the anticipated expiration date of the [c]ontract." (Countercl. ¶¶ 3-6; see Letter of Agreement). In exchange, LiveIntent would pay WIT Strategy $2,500 per month over the six-month period, in addition to conveying to Naples equity shares in LiveIntent equivalent to $5,000 (in present-day value) each month during the six-month period. (Id. at ¶ 5). LiveIntent had the option to terminate the contract after three months' service, provided that LiveIntent gave WIT Strategy one month's notice of termination. (Id. at ¶ 7).

2. The Alleged Modification of the Contract

As Defendants recall, for the first six weeks of the six-month period, WIT Strategy performed under the contract, but LiveIntent then "determined that it was not prepared to sustain a six-month launch" because it could not afford WIT Strategy's services. (Countercl. ¶ 8). Due to LiveIntent's low cash flow, in April 2010, the parties modified the contract to provide that LiveIntent would pay WIT Strategy $2,500 in cash and the remaining two months' fees ($5,000) in equity shares in the company, in addition to the equity interests to which Naples was previously entitled. (See id. at ¶¶ 8, 11). Hendricks and Naples agreed further "that Hendricks would contact Naples in the future ... to provide the services that [WIT Strategy] would typically provide ... following [an] initial launch, i.e., the 'ongoing basis' services specified in the [c]ontract." (Id. at ¶ 9).

LiveIntent thereafter paid WIT Strategy $2,500 in cash and provided Naples an Internal Revenue Service Form 1099 in relation to that payment. (Countercl. ¶ 12). LiveIntent did not, however, provide any corresponding documentation regarding a transfer of stock to WIT Strategy or Naples.

3. Defendants Continue to Provide Services to LiveIntent

Despite receiving no record of any stock transfer, Naples remained in contact with Keiser and Hendricks, and, indeed, continued to provide services for LiveIntent. (See Countercl. ¶ 13). Naples contends that he did so, without additional compensation, because he "believed that he was a [LiveIntent] shareholder," and "that by performing these services[,] he would increase the [company's] value." (Id. at ¶ 18). The Counterclaim describes several instances of such services and provides email correspondences between Naples and Hendricks suggesting that the parties had an ongoing business relationship.2

For example, on November 22, 2011, Hendricks emailed Naples requesting "assistance in gaining entrance to an industry media summit." (Countercl. ¶ 14; see also Hendricks Nov. 22, 2011 Email). Nearly four months later, on March 16, 2012, Hendricks emailed Naples, thanking him for an introduction to another individual that resulted in the release of an article in a trade publication that featured an interview with Hendricks. (Countercl. ¶ 15; see also Hendricks Mar. 16, 2012 Email; Naples Mar. 20, 2012 Email). And on March 19, 2012, Hendricks emailed Naples commending WIT Strategy's efforts in organizing a panel presentation for LiveIntent. (Countercl. ¶ 16; see also Hendricks Mar.

*43919, 2012 Email). The Counterclaim also alleges that Keiser made at least one statement suggesting that Naples held shares in LiveIntent: In 2011, after Keiser hired Naples's nephew as an intern, Keiser complimented the intern's work, telling Naples, "as a shareholder, [Naples] should be proud." (Countercl. ¶ 19).

4. Naples Discovers That He Holds No Equity Interest in LiveIntent

It was not until September 21, 2016, that Naples requested a copy of a stock certificate from LiveIntent's CEO Keiser. (Countercl. ¶ 21). Naples explained that he was required to disclose certain corporate interests in light of his then-current work for a client that also did business with the United States government. (See id. ; Naples Sept. 21, 2016 Email). Rather than responding to Naples, Keiser forwarded the email to Hendricks, who responded a day later, stating, "[a]ccording to [LiveIntent's] records, [Naples was] not 'granted' any options outright, and none were ever exercised or purchased." (Hendricks Sept. 22, 2016 Email; see Countercl. ¶¶ 22-23) ).

Instead, Hendricks stated that any equity interest Naples had would have been subject to "a Company Advisor plan with a 1-year cliff and 2-year vesting (if [Naples was] still offering services to the company)," but that LiveIntent and WIT Strategy had "terminated [their] advisor relationship before the options hit their 1-year vesting cliff, so they were automatically canceled." (Hendricks Sept. 22, 2016 Email). Naples contends that he had no knowledge of any such Company Advisor plan and was not provided a copy of it even after requesting one. (Countercl. ¶ 24).

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