Sipko v. Koger, Inc.

70 A.3d 512, 214 N.J. 364, 2013 WL 3305391, 2013 N.J. LEXIS 602
CourtSupreme Court of New Jersey
DecidedJuly 2, 2013
StatusPublished
Cited by27 cases

This text of 70 A.3d 512 (Sipko v. Koger, Inc.) is published on Counsel Stack Legal Research, covering Supreme Court of New Jersey primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sipko v. Koger, Inc., 70 A.3d 512, 214 N.J. 364, 2013 WL 3305391, 2013 N.J. LEXIS 602 (N.J. 2013).

Opinion

Justice PATTERSON

delivered the opinion of the Court.

This case arises from a bitter dispute that divided a family and its successful software development business. In 2006, in the wake of a family conflict over a woman with whom he was involved, plaintiff Robert Sipko (Robert) became estranged from his father George Sipko (George) and his twin brother Rastislav Sipko (Ras). Robert then left his employment with the company that George had founded, Roger, Inc. (Roger), and signed documents memorializing a transfer of his interests in two other family-owned corporations, Roger Distributed Solutions, Inc. (RDS), and Roger Professional Services, Inc. (RPS). At a board meeting of Roger later that year, George initiated a recall of 1.5 percent of Roger stock that he had given Robert in 2000.

In 2007, Robert filed this action against George, Ras, Roger, RDS, RPS and a fourth family-owned corporation, Roger Limited (Dublin) (collectively, defendants) seeking damages and equitable relief. Defendants filed a counterclaim asserting several causes of action. This appeal arises from two determinations made by the trial court following a bench trial: its ruling that George’s gift of 1.5 percent of the stock in Roger was unconditional and therefore irrevocable, and its ruling that Robert’s transfer of his stock in RDS and RPS was voluntary and legally binding. The Appellate [368]*368Division reversed both trial court findings. The panel held that George’s gift of Roger stock to Robert was conditioned on Robert’s continued employment in the family business and that Robert’s transfer of his stock in KDS and KPS was void for lack of consideration.

We affirm in part and reverse in part the Appellate Division’s determination. We reverse the panel’s order reversing the trial court’s determination with respect to George’s 2000 gift of Roger stock to Robert and reinstate the trial court’s finding that the gift was voluntary and irrevocable. We affirm and modify the panel’s decision regarding Robert’s transfer of KDS and KPS stock. We hold that, in accordance with their terms, the KDS and KPS stock transfers required consideration, and that no consideration was given to Robert in exchange for his surrender of the stock. We therefore reinstate Robert’s claim seeking an accounting of the revenues, distributions, assets and liabilities (Count One), his claims requesting appointment of a provisional director or special fiscal agent to protect his interests (Counts Two and Three), his claim requesting injunctive relief (Count Four), his claims requesting dissolution or the forced sale of his interests, pursuant to N.J.S.A. 14A:12-7, as an oppressed minority shareholder (Counts Five and Six), and his claim seeking compensatory and punitive damages for breaches of fiduciary duty by George and Ras (Count Seven), insofar as those claims relate to KDS and KPS. We remand to the trial court for consideration of those claims and a determination of the appropriate remedy.1

I.

George, an experienced computer programmer, emigrated from Slovakia to the United States in 1990. After several years working in the programming field, George decided to start his own [369]*369business. On December 15, 1994, George and an associate with business expertise, Paul Piringer (Piringer), merged two preexisting entities into Roger, a New Jersey “S” corporation.2 Initially, George and Piringer were Roger’s only employees, with George developing software and Piringer handling marketing and other business functions for the company. At Piringer’s suggestion, the company focused its marketing on one customer base, the hedge fund industry. Piringer’s role in Roger ended in late 1999 or early 2000, when George bought out his interest in Roger. George involved his sons in Roger’s operations almost from the company’s inception. Robert joined Roger in 1997, left in 1998 and returned in 2000. Ras joined the company in 1998.

After a modest beginning, Roger began to attract clients. By 2000, Roger had five employees: George, Ras and Robert, as well as the manager of the company’s Irish operations, Roger Limited (Dublin), and a software engineer based in Slovakia. Two years later, the company had between ten and fourteen employees and had expanded its client base within the hedge fund industry.

On an unspecified date in or around 2000, when Ras and Robert were actively involved in Roger and the business experienced rapid growth, George made a gift of 1.5 percent of Roger stock to each of his sons. The gift was not documented in any writing.

On June 5, 2002, RDS was incorporated as a New Jersey “S” Corporation, with Ras and Robert each owning fifty percent of the stock. On December 15, 2004, RPS was incorporated as a New Jersey “S” Corporation, and again, fifty percent of the stock was given to each of the Sipko sons. According to the trial testimony of George and Ras, George created RDS and RPS as a component of his estate planning. In addition, RDS and RPS were designed to execute contracts for Roger’s products, thereby shielding Roger [370]*370from liability, but had no independent function, employees or office space. In his testimony, Robert agreed that KDS and KPS were created for estate planning and liability purposes but testified that the two companies were also formed to develop software.

KDS and KPS reported substantial gross and net income in their first few years.3 All profits from the three companies— Koger, KDS and KPS — were shared by George, Ras and Robert at George’s direction, with George receiving fifty percent, and each son receiving twenty-five percent. This arrangement was not set forth in any writing. In addition, George, Ras and Robert used them corporate credit cards for a litany of personal expenses.

The family and its businesses invested in real estate, including a house in Mahwah, in which the entire family lived, that was fifty percent owned by George and twenty-five percent owned by each of the sons, and a separate undeveloped property in Mahwah. In 2003, Koger spent between $400,000 and $686,000 in profit, which would otherwise have been subject to the normal allocation (fifty percent to George and twenty-five percent to each son), on the “Koger Building” in Slovakia, which housed the company’s team of Slovak engineers. According to Robert, he and Ras understood that they would eventually inherit the building.

In 2004, unbeknownst to his parents, Robert began dating a California resident whom he had met on a vacation. In the fall of 2005, Robert disclosed the relationship to his mother. She was upset that Robert was romantically involved with a woman who [371]*371was older than him, was not Slovak, was married to her third husband and was the mother of three children. According to Robert, on February 3, 2006, George learned from his wife about Robert’s relationship with the woman and became enraged. In an account vehemently denied by George, Robert testified that George tried to hit him with a hockey stick and threatened to kill him. According to Robert, during this heated encounter with his father, George threatened to “drive [Robert’s] head through the kitchen table” unless Robert signed certain documents presented to him by George. George and Ras deny Robert’s account of the meeting and contend that any document signed by Robert was executed voluntarily.

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Bluebook (online)
70 A.3d 512, 214 N.J. 364, 2013 WL 3305391, 2013 N.J. LEXIS 602, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sipko-v-koger-inc-nj-2013.