The Buckeye Group, Inc. v. The Miss America Organization

REPLY BRIEF to Opposition to Motion

D.N.J.July 11, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY CAMDEN DIVISION ____________________________________ : The Buckeye Group, Inc., : : Case No. 1:14-cv-04214 Plaintiff, : (RMB-JS) : v. : Judge Bumb : The Miss America Organization, : Magistrate Judge Schneider : Defendant. : Document Filed Electronically ____________________________________: PLAINTIFF'S NOTICE OF FILING REPLY PAPERS IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT TO: Clerk of Court United States District Court District of New Jersey Mitchell H. Cohen Federal Building & U.S. Courthouse 4th & Cooper Streets Camden, New Jersey 08101 Eric M. Wood, Esq. Christopher C. Fallon, III, Esq. Fox Rothschild LLP Midtown Building 1301 Atlantic Avenue, Suite 400 Atlantic City, New Jersey 08401 PLEASE TAKE NOTICE that Plaintiff, The Buckeye Group, Inc., by and through its attorneys, submit the attached reply papers in support of its Motion for Summary Judgment filed on May 2, 2016. The current Motion Day is July 18, 2016. Case 1:14-cv-04214-RMB-JS Document 95 Filed 07/11/16 Page 1 of 2 PageID: 1791 - 2 - This notice and the corresponding reply papers have been served on counsel for all parties in this action as set forth the attached Acknowledgement of Service. Dated: July 11, 2016 Respectfully submitted, /s/ Ira Treuhaft Ira Treuhaft TREUHAFT & ZAKARIN, LLP 305 Broadway, 9th Floor New York, New York 10007 (212) 725-6418 (646) 924-0554 (Facsimile) treuhaft@gmail.com Rex H. Elliott (admitted pro hac vice) Adam P. Richards (admitted pro hac vice) COOPER & ELLIOTT, LLC 2175 Riverside Drive Columbus, Ohio 43221 (614) 481-6000 (614) 481-6001 (Facsimile) rexe@cooperelliott.com adamr@cooperelliott.com Attorneys for Plaintiff The Buckeye Group, Inc. Case 1:14-cv-04214-RMB-JS Document 95 Filed 07/11/16 Page 2 of 2 PageID: 1792 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY CAMDEN DIVISION ____________________________________ : The Buckeye Group, Inc., : : Case No. 1:14-cv-04214 Plaintiff, : (RMB-JS) : v. : Judge Bumb : The Miss America Organization, : Magistrate Judge Schneider : Defendant. : Document Filed Electronically : ________________________________________________________________________ =========================================================== PLAINTIFF'S REPLY IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT =========================================================== Motion Day: July 18, 2016 Dated: July 11, 2016 Ira Treuhaft TREUHAFT & ZAKARIN, LLP 305 Broadway, 9th Floor New York, New York 10007 (212) 725-6418 (646) 924-0554 (Facsimile) Rex H. Elliott (admitted pro hac vice) Adam P. Richards (admitted pro hac vice) COOPER & ELLIOTT, LLC 2175 Riverside Drive Columbus, Ohio 43221 (614) 481-6000 (614) 481-6001 (Facsimile) Attorneys for Plaintiff The Buckeye Group, Inc. Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 1 of 21 PageID: 1793 i TABLE OF CONTENTS Page I. MAO Owes Buckeye $226,93……………………………………. 1 II. Buckeye Is Owed the Annual Guarantee Under the Third Agreement…………………………………………………. 6 A. Buckeye's Assertions Regarding MAO's Breach of the Implied Covenant of Good Faith and Fair Dealing Are Properly Before the Court…………… 6 B. Buckeye is Entitled to Summary Judgment on the Annual Guarantee Issue……………………………….. 10 1. MAO Breached the Third Agreement……………… 10 2. MAO Clearly Violated the Implied Covenant of Good Faith and Fair Dealing in Connection with the Third Agreement…………………………… 15 Conclusion…………………………………………………………………. 16 Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 2 of 21 PageID: 1794 ii TABLE OF AUTHORITIES Cases Page Alcoa S.S. Co. v. Ryan, 211 F.2d 576, 578 (2d Cir.1954)……………….. 8 Decaro v. Newark Pub. Sch., No. 15-CV-5540-SDW-LDW, 2016 WL 3545075, at *2 (D.N.J. June 28, 2016)……………………….. 7 Gomez v. Toledo, 446 U.S. 635, 640, 100 S.Ct. 1920, 64 L.Ed.2d 572 (1980)…………………………………………………... 8 Henry v. Wyeth Pharm., Inc., No. 05 CIV. 8106WCC), 2007 WL 4526525, at *6 (S.D.N.Y. Dec. 19, 2007)……………………. 7 Hoke, Inc. v. Cullinet Software, Inc., 1992 WL 106784, at *2 (D.N.J. Apr. 28, 1992)…………………………………………………… 3 Rosen v. Brookhaven Capital Mgmt., Co., 194 F. Supp. 2d 224, 227 (S.D.N.Y. 2002)…………………………………………………………. 8 Rosenberg v. Whitehead, No. CIV.A. 10-4419 SDW, 2012 WL 1551294, at *5 (D.N.J. Apr. 27, 2012)……………………….. 8 Speirs v. Spanko, 7 N.J. Super. 421, 425, 71 A.2d 395, 397 (Ch. Div. 1950)…………………………………………………………. 14 St. Paul Fire & Marine Ins. Co. v. Wells Fargo Alarm Servs., No. CIV. A. 95-712, 1995 WL 306642, at *5 (D.N.J. May 9, 1995)…… 16 Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 3 of 21 PageID: 1795 iii Rules of Procedure & Evidence Page Fed. R. Civ. P. 8(a)(2)…………………………………………………….. 2, 7 Fed. R. Civ. P. 8(e)……………………………………………………….. 2 Fed. R. Civ. P. 9(c)………………………………………………………. 9, 10 Fed. R. Civ. P. 12(e)……………………………………………………… 2 Fed. R. Civ. P. 54(d)……………………………………………………… 3, 5, 6 Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 4 of 21 PageID: 1796 1 REPLY BRIEF Plaintiff, The Buckeye Group, Inc. ("Buckeye"), submits the following Reply Brief in support of its May 2, 2016 Motion for Summary Judgment. I. MAO Owes Buckeye $226,993.1 Buckeye brought this action seeking the payment of certain fees MAO owes Buckeye under the Second (2010) and Third (2011) Agreements. See generally, ECF No. 6. Since bringing this action, the parties agreed to and the Court entered a Consent Order defining the issues Buckeye is pursuing. See ECF No. 87. The Consent Order expressly states Buckeye's "remaining claims are…related to Plaintiff seeking the following monetary damages: (1) $226,993; and (2) 2,550,000…, plus any allowable fees, costs, expenses, and interest." Id. at p. 2. The above should make clear that Buckeye's claims in this action for collection of the $226,993 are properly before the Court.2 If this is not conclusive on the issue, Buckeye's Amended Complaint clearly seeks these damages. Count One of Buckeye's Amended Complaint is for breach of contract related to the Second Agreement. In this Count, Buckeye states it is seeking to enforce "the Second Agreement and requiring defendant to immediately pay all amounts due and 1 MAO's expert admits this amount is owed. See ECF No. 82-1 at PageID 1031-1048, ¶¶ 112, 122, 131, 145, 147, 151, 153. 2 The Consent Order did not dismiss "Count One" of the Amended Complaint in its entirety, but only Buckeye's "requests for…rescission." Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 5 of 21 PageID: 1797 2 owing under the Second Agreement, which far exceeds $75,000.00…". Id. at ¶ 31. Count Two in Buckeye's Amended Complaint is also for breach of contract, but seeks to enforce the Third Agreement and to recover "the damages owed by MAO for breaching the Third Agreement…". Id. at ¶ 37. The above is more than sufficient to plead a claim for damages under both agreements and put MAO on notice of its claim for recovery under both agreements. See Fed. R. Civ. P. 8(a)(2); Fed. R. Civ. P. 8(e)("Pleadings must be construed so as to do justice."). If MAO was at all unclear or confused as to the claims or damages Buckeye was pursuing, it could have requested that Buckeye clarify its claims under Fed. R. Civ. P. 12(e). Of course, and as the parties' agreement a shows, MAO was fully aware of the claims Buckeye is pursuing. Discovery and MAO's own expert report also show MAO was on notice of these claims. Having established Buckeye's damages claims for the $226,993 are properly before the Court, there is no question the Court should enter summary judgment in Buckeye's favor. "MAO does not dispute that its expert has opined that MAO owes Buckeye $226,993." ECF No. 90 at PageID 1436; see also, supra at ft. n. 1; ECF 81-2, Page ID 599 at ft. n. 1 (MAO admitting to owing Buckeye $226,993). The evidence shows Buckeye is owed money under both agreements. See ECF No. 82-1 at PageID 1014-1049, ¶¶ 71-153, 157 (MAO's expert calculating and explaining damages owed and finding that MAO owes Buckeye fees under both the Second and Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 6 of 21 PageID: 1798 3 Third Agreements). Despite this admission, MAO still has not paid Buckeye a dime of this money. See ECF 82-1 at ¶¶ 28-30. As an undisputed issue that Buckeye had to file a lawsuit over, pursue discovery on, and file the present motion on in order to enforce, Buckeye is a prevailing party. As a prevailing party, Buckeye is entitled to applicable costs under Fed. R. Civ. P. 54(d) and mandatory statutory interest for prevailing on its breach of contract claim. While the issue of what costs, interest, and other fees can be taxed to MAO is still open for resolution, the Court should not delay in entering judgment in favor for Buckeye for the $226,993 amount MAO admits to owing Buckeye. MAO's only defense to the above is that the Court should not enter summary judgment yet because "any alleged breach of the [Second] 2010 Agreement is not before the Court and because Buckeye's claim is premature at this time." ECF No. 90 at PageID 1436. MAO's argument is based on two false premises. First, MAO incorrectly claims the Court dismissed Count One of Buckeye's Amended Complaint. The only issues Buckeye decided not to pursue in this matter are those related to "rescission" and "accounting." See ECF No. 87 at p. 2. Rescission is not a standalone claim, but a remedy. See Hoke, Inc. v. Cullinet Software, Inc., 1992 WL 106784, at *2 (D.N.J. Apr. 28, 1992) (stating "rescission" refers to a remedy, not a cause of action). Thus, in agreeing not to seek rescission under Count One of Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 7 of 21 PageID: 1799 4 the Amended Complaint, Buckeye did not dismiss its breach of contract action under the Second Agreement in its entirety. The record of evidence shows that Buckeye is owed - as MAO concedes - the $226,993 under both the Second and Third Agreements. MAO admits that it agreed to and entered into the Second Agreement. See ECF no, 81-1 at ¶ 5. The Second Agreement makes clear that even if it was terminated, MAO is nevertheless obligated to continue to compensate Buckeye. Particularly, § 7 of the Second Agreement states: …Notwithstanding the expiration or termination of this Agreement, MAO shall be obligated to continue to pay [TBG] compensation pursuant to Sections 3 and 4 of this Agreement with respect to revenue both prior to and following such termination or expiration…. See ECF 82-1 at PageID 945; e.g., McMaster Dep. at pp. 43:16-45:1; Haskell Dep. at pp. 53:5-54:12. The Second Agreement also provides that MAO must promptly pay Buckeye, which has not occurred. See ECF 82-1 at PageID 944, § 4 (stating fees are owed "within 15 days following the end of the calendar month in which MAO receives revenue for which Buckeye is entitled to compensation"). MAO also owes Buckeye the $226,993 under the terms of the Third Agreement. While MAO may dispute the Second Agreement being before the Court, there is no dispute that damages under the Third Agreement are properly before the Court. See ECF 81-2 at PageID 605 (MAO admitting "[t]hrough Count Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 8 of 21 PageID: 1800 5 Two of the Amended Complaint, Buckeye seeks damages for MAO's alleged breach of the [Third] 2011 Agreement."); e.g., ECF No. 87. MAO also concedes that it agreed to and entered into the Third Agreement. See ECF No, 81-1, ¶ 10. In relevant part, the Third Agreement makes clear that all the same fees owed to Buckeye under the Second Agreement are still owed under the Third Agreement. See ECF 82-1 at PageID 953, § 1. c-d; see also, ECF No. 82-1 at PageID 1014- 1049, ¶¶ 71-153, 157 (calculating and explaining damages owed). The Third Agreement provides that MAO must promptly pay Buckeye, which has not occurred. See ECF 82-1 at PageID 953, § 2 (stating payment is due by MAO in seven days of receipt of money from which Buckeye is entitled to compensation). Based on the above, summary judgment should be entered. In a last ditch effort to convince the Court to hold off on entering judgment in favor of Buckeye, MAO argues that because there is a possibility that MAO could prevail in connection with Buckeye's "Annual Guarantee" claim, MAO could potentially be entitled to costs under Fed. R. Civ. P. 54 to serve as "an offset against the $226,993."3 What? Buckeye is already the prevailing party. MAO admits to owing Buckeye fees; yet, Buckeye was forced to bring this action in order for MAO 3 MAO has fallen well short of showing that it could be a prevailing party in this action or that the Court would exercise its discretion to tax any costs against Buckeye. Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 9 of 21 PageID: 1801 6 to pay Buckeye the fees. MAO has never offered any settlement to Buckeye. Thus, regardless of whether or not Buckeye also prevails in showing MAO owes the Annual Guarantee, Buckeye has already prevailed in this action. It should be of no surprise that MAO cites zero case law for its argument. Essentially, MAO argues that when a party refuses to pay an undisputed amount owed under a contract, a Court should hold off on entering judgment in favor of the party who is owed the undisputed amount upon the mere possibility that the party owing the money may prevail as a defendant on another aspect of a claim and possibly be entitled to discretionary costs under Fed. R. Civ. P. 54. This goes against every principal of fairness and the notion of a quick and speedy resolution held dear by our system of justice. If MAO owes Buckeye money, it must be paid now, and the parties should proceed to briefing the other issues regarding any additional amounts that should be awarded to Buckeye in connection with MAO holding Buckeye's commissions' hostage for years. II. Buckeye Is Owed the Annual Guarantee Under the Third Agreement. A. Buckeye's Assertions Regarding MAO's Breach of the Implied Covenant of Good Faith and Fair Dealing Are Properly Before the Court. First, although not separated out as an additional "Count," which is not required, Buckeye's Amended Complaint alleges facts sufficient to state a claim for breach of the implied covenant of good faith and fair dealing. Count Two of Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 10 of 21 PageID: 1802 7 Buckeye's Amended Complaint incorporates all of the Amended Complaint's prior allegations. See ECF No. 6 at ¶¶ 25, 32-37; see also, ECF 81-2 at PageID 605 (MAO admitting that "Count Two of the Amended Complaint" is for "damages for MAO’s alleged breach of the [Third] 2011 Agreement."). Moreover, Paragraph 25 of the Amended Complaint, which is incorporated under Count Two, states that Buckeye believes "that MAO breached its contract with IG, resulting in IG discontinuing payments under the MAO/IG contract." See ECF No. 6, ¶ 25. This is the general factual predicate for Buckeye's claim that MAO breached the implied covenant of good faith and fair dealing, and this factual allegation is more than sufficient under Fed. R. Civ. P. 8(a)(2). Decaro v. Newark Pub. Sch., No. 15-CV- 5540-SDW-LDW, 2016 WL 3545075, at *2 (D.N.J. June 28, 2016) (stating complaint need only allege "a short and plain statement of the claim showing that the pleader is entitled to relief."). Holding otherwise would "violate the command of the Federal Rule of Civil Procedure that "[p]leadings must be construed so as to do justice." Henry v. Wyeth Pharm., Inc., No. 05 CIV. 8106WCC), 2007 WL 4526525, at *6 (S.D.N.Y. Dec. 19, 2007) (holding that limiting a claim because it is improperly labeled is improper") (citing Fed. R. Civ . P. 8(e)). Moreover, the parties clearly have been litigating this issue by consent and have completed ample discovery on it, including deposing two Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 11 of 21 PageID: 1803 8 witnesses (Cory Baker and Ike Franco) from Infinity regarding MAO's breach of its agreements with Infinity. Even if the Court finds Buckeye did not sufficiently state a claim in its Amended Complaint for MAO's breach of the implied covenant of good faith and fair dealing, and it did, the burden shifting nature and structure of this case did not even require Buckeye to plead this issue. The law is clear: "a plaintiff's complaint should contain allegations that support its claim, but a plaintiff has no obligation to anticipate and refute potential affirmative defenses." Rosen v. Brookhaven Capital Mgmt., Co., 194 F. Supp. 2d 224, 227 (S.D.N.Y. 2002) (holding that complaint need not anticipate statute of limitations, which is an affirmative defense) (citations omitted). Anticipation of defenses in a complaint was not recognized at common law and is now barley tolerated. Id. (citing Alcoa S.S. Co. v. Ryan, 211 F.2d 576, 578 (2d Cir.1954)). Rather, Rule 9(c) of the Federal Rules of Civil Procedure actually imposes on the defendant (MAO) the burden of pleading in its answer any matter "constituting an avoidance or affirmative defense." See Gomez v. Toledo, 446 U.S. 635, 640, 100 S.Ct. 1920, 64 L.Ed.2d 572 (1980) (holding that defendant in civil rights case has burden of pleading defense of qualified immunity and plaintiff has no obligation to anticipate such defense); e.g., Rosenberg v. Whitehead, No. CIV.A. 10-4419 SDW, 2012 WL 1551294, at *5 (D.N.J. Apr. 27, 2012) (same). Arguing that a failure of a Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 12 of 21 PageID: 1804 9 "condition precedent" precludes Buckeye's claims is an avoidance and/or affirmative defense. Thus, when asserting the defense of the failure of a condition precedent, it is incumbent on the defendant to state such defense with peculiarity. See Fed. R. Civ. P. 9(c) (stating "when denying that a condition precedent has occurred or been performed, a party must do so with particularity."). The above rules apply in this case. Buckeye preemptively raised the implied covenant of good faith and fair dealing issue in anticipation of MAO asserting the defense that MAO does not owe money to Buckeye because Infinity never paid MAO. Thus, Buckeye is only raising this issue in response to MAO's defense that it does not owe Buckeye any money under the Third Agreement because a condition precedent under the Third Agreement was not satisfied.4 Compare, ECF No. 81-2 at PageID 605-609, with, ECF No. 91-1 at PageID 1559-65. In response to this defense, Buckeye is arguing, among other things, that: (1) MAO still had an obligation to negotiate a deal with Infinity that guaranteed MAO would receive sufficient money from Infinity to pay the Annual Guarantee for at least 10-years or not do anything to prejudice Buckeye's rights to force MAO to pursue Infinity for 4 In other words, one of Buckeye's claims in this matter is for breach of contract alleging, among other things, that MAO failed to pay Buckeye the Annual Guarantee under the Third Agreement. There is no dispute that the Annual Guarantee Buckeye is seeking was not paid. MAO's response to this argument is that it does not owe the Annual Guarantee because there is a condition precedent that was not satisfied in the Third Agreement related to the Annual Guarantee - i.e. MAO does not have to pay Buckeye unless Infinity pays MAO. Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 13 of 21 PageID: 1805 10 payment; and (2) if MAO's failure to receive money from Infinity to pay the Annual Guarantee was due to MAO's own improper conduct, it cannot use the condition precedent as a defense to Buckeye's claim. Accordingly, had MAO defended this case on the failure of a condition precedent, in turn, Buckeye would not have raised the issue of MAO's breach of the implied covenant of good faith and fair dealing. It is ironic that MAO is claiming Buckeye failed to meet its obligations, when in actuality, it is MAO that failed to properly plead the failure of a condition precedent. See Fed. R. Civ. P. 9(c) (stating "when denying that a condition precedent has occurred or been performed, a party must do so with particularity."). Nowhere does MAO's Answer state its defense of the failure of a condition precedent with particularity. See ECF No. 11. B. Buckeye is Entitled to Summary Judgment on the Annual Guarantee Issue. 1. MAO Breached the Third Agreement. The express terms of the agreements at issue and the undisputed facts establish that MAO's actions and breaches of the Third Agreement resulted in the nonpayment of the Annual Guarantee to Buckeye. Breach through unilateral release of Infinity: There is no dispute that MAO entered into three separate agreements that released all claims MAO had against Infinity. See 82-12 at PageID 1360, § 10 (MAO releasing Infinity); 82-11 at PageID Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 14 of 21 PageID: 1806 11 1356, § 5 (MAO releasing Infinity); 82-13 at PageID 1361, § 1.a (MAO releasing Infinity and terminating all obligations of Infinity to make any guaranteed annual payments to MAO).5 Each of these releases impaired Buckeye's rights and prevented Buckeye from exercising its contractual right to force MAO to pursue Infinity for payment of the Annual Guarantee. The Third Agreement states: MAO shall not agree to any amendment or modification of the IG Agreement without the prior written consent of [Buckeye] if such amendment or modification would have any negative impact on the amount or timing of the Fees payable to [Buckeye] under the [Third] Agreement. ECF 82-1 at PageID 995, § 6(b). The Third Agreement also required MAO to pursue and enforce any provision of its agreement with Infinity that negatively impacted the fees due to Buckeye. Id. at § 7. However, if for some reason MAO did not to pursue Infinity for any such breach, Buckeye had the right to force MAO to sue Infinity. Id. If Buckeye compelled MAO to pursue Infinity, MAO was required to "fully cooperate with" Buckeye. Id. Finally, MAO was contractually prohibited from terminating its agreement with Infinity without Buckeye's written consent. Id. 5 E.g., ECF No. 81-1 at PageID 590, 592, ¶¶ 39-40, 47 (MAO admitting to entering into agreements that released Infinity). Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 15 of 21 PageID: 1807 12 MAO breached all of the above provisions because "on or about May 14, 2014, Infinity and MAO terminated the IG Agreement" without Buckeye's consent. ECF No. 81-1 at PageID 592, ¶ 47. Further, in the termination/release agreement, MAO released all of MAO's claims against Infinity. 82-13 at PageID 1361-62, § 1.a. This hijacked Buckeye's contractual right to force MAO to pursue Infinity to recover the money or other assets to pay the Annual Guarantee to Buckeye. Thus, the termination/release agreement MAO entered into with Infinity was an amendment or modification that had a negative impact on the amount or timing of the fees payable to Buckeye under the Third Agreement. MAO's decision to enter into the the termination/release agreement violated of Section 7 of the Third Agreement, which precluded MAO from terminating its agreement with Infinity without Buckeye's written consent. The letter MAO cites from Jack Plackter highlights the fact that MAO clearly knew that it needed Buckeye's consent to enter into the release/termination agreement with Infinity.6 MAO has presented no evidence that Buckeye consented to MAO terminating its agreement with Infinity and releasing Infinity from all 6 See ECF No. 81-1 at PageID 591-92, ¶¶ 43-46. Other than the admissions contained therein, Buckeye is not offering this letter for the truth nor can MAO offer it as evidence. It is hearsay. See ECF No. 91-1 at PageID 1566-67. Further, MAO has committed to not calling Mr. Plackter as a witness in this lawsuit. See Richards Decl. at ECF No. 82-1, ¶¶ 14-15. Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 16 of 21 PageID: 1808 13 claims. In fact, the evidence shows that MAO totally disregarded Buckeye and acted in its own self-interest. After receiving the letter from Jack Plackter, Buckeye requested information from MAO regarding MAO and Infinity's relationship, the disputes at issue, and other facts that would enable Buckeye to determine whether it should compel MAO to pursue Infinity. ECF No. 91-2 at PageID 1588-89, at ¶¶ 45-46. MAO refused to provide any information to Buckeye. Id. Less than one-week after MAO sent the letter to Buckeye, MAO entered into the agreement with Infinity thereby impacting Buckeye's rights. To add insult to injury, a few months after MAO terminated its agreement with Infinity, MAO entered into an agreement with Dick Clark Productions, which resulted in a yearly $6 million dollar payment to MAO that it did not have to share with Buckeye. ECF No. 82 at PageID 898-99, ¶¶ 83-84. MAO's breach by failing to enter into an agreement with Infinity and secure an agreement with Infinity sufficient to pay the Annual Guarantee for 10- years: The Third Agreement required MAO and "IG" to enter into a contract. ECF No. 82-2 at PageID 1108 (stating MAO is entering into an agreement with "IG" and defining IG as "Infinity Lifestyle Brands" and "Infinity Group (together with all of its affiliated entities)"). This did not occur. Instead, MAO entered into agreements with affiliates of Infinity (i.e. "MAP" and "MAE"). See ECF No. 81-1 at PageID 586-87, ¶¶ 21-23. Entering into agreements with affiliate entities of Infinity Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 17 of 21 PageID: 1809 14 negatively impacted Buckeye's fees. Particularly, because MAO did not enter into an agreement with "IG" (as defined in the Third Agreement), the collectability of the fees MAO owed Buckeye was not as secure because the overall assets available to recover any missed payments by Infinity to pay the Annual Guarantee were reduced.7 MAO also failed to enter into a 10-year deal with the Infinity affiliates. The Third Agreement represented that the agreement MAO entered into with Infinity was for 10 years. ECF No. 82-2 PageID at 1108, 1110, § 1.a, 5.8 The Third Agreement did not state or represent that Infinity could terminate its relationship with MAO prior to the initial 10-year term. ECF No. 82-2 PageID at 1110, § 5 (stating Buckeye "understands that the IG Agreement is for a ten (10) year term with an option to extend the term for an additional ten (10) year term and that if the IG agreement…"). The Third Agreement did not include any provision allowing Infinity or MAO to terminate the agreement prior to the initial 10-year term. Yet, MAO entered into agreements with Infinity affiliates that provided the Infinity 7 It is Buckeye's belief that the Infinity affiliates had sufficient assets to satisfy any judgment entered against them had MAO not improperly released them. 8 Buckeye believes the express terms of the Agreement required MAO to enter into a 10-year non-terminable agreement with Infinity, but to the extent there is any ambiguity on this issue or any other issue, parole evidence can be used to show the parties' intent. See Speirs v. Spanko, 7 N.J. Super. 421, 425, 71 A.2d 395, 397 (Ch. Div. 1950) (parol evidence may be used "when the language of a contract is ambiguous or otherwise doubtful…to explain the real intent of the parties…"). Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 18 of 21 PageID: 1810 15 affiliates the option to terminate its relationship with MAO for any reason prior to the 10-year term expiring. ECF No. 91-3 PageID 1600-01, 1603-04, ¶¶ 19(c), 28. 2. MAO Clearly Violated the Implied Covenant of Good Faith and Fair Dealing in Connection with the Third Agreement. MAO argues that it does not owe Buckeye any money under the Third Agreement because Infinity did not pay MAO. This argument misses the mark. MAO breached the Third Agreement and damaged Buckeye by destroying Buckeye the right to force MAO to sue Infinity to recover the fees that would have resulted in the payment of the Annual Guarantee. MAO also breached the Third Agreement because the deal it negotiated did not comply with the promises it made to Buckeye in connection with Buckeye agreeing to enter into the Third Agreement. See supra at pp. 13-14. These actions breached the Third Agreement and impacted Buckeye's ability to recover the Annual Guarantee irrespective of whether or not MAO received any money from Infinity or its affiliates in order to pay Buckeye. Even if Infinity's failure to pay was an applicable defense, because MAO's actions caused Infinity not to pay MAO the money that would go to Buckeye as the Annual Guarantee, MAO cannot rely on this condition precedent as a defense. Namely, the implied covenant of good faith and fair dealing "prevents a party from undertaking intentional acts that would injure the right of the other to receive the fruits of the agreement." St. Paul Fire & Marine Ins. Co. v. Wells Fargo Alarm Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 19 of 21 PageID: 1811 16 Servs., No. CIV. A. 95-712, 1995 WL 306642, at *5 (D.N.J. May 9, 1995); ECF No. 82 at PageID 896-97, ¶¶ 73-74 (citing testimony from Infinity stating it would have paid MAO if MAO had not breached its agreements). This issue has been briefed in Buckeye's response to MAO's Motion for Summary Judgment. See ECF No 91-1 at PageID 1561-65. For the sake of judicial economy Buckeye will not reiterate its arguments hereunder, and simply incorporates its same arguments as to why and how the implied covenant of good faith and fair dealing applies in this case to prevent MAO from using the paid-if-paid provision as a defense. Finally, even if the implied covenant of good faith and fair dealing did not apply, as explained above, MAO still breached and harmed Buckeye and its ability to recover the Annual Guarantee by releasing Infinity from all claims without Buckeye's consent. Thus, under any factual scenario, MAO breached the Third Agreement, and its breach damaged and/or barred Buckeye from receiving and/or recovering the 10-year Annual Guarantee MAO promised Buckeye to induce Buckeye to enter into the Third Agreement. CONCLUSION For the foregoing reasons, the Court should grant Buckeye's Motion for Summary Judgment. Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 20 of 21 PageID: 1812 17 Dated: July 11, 2016 /s/ Ira Treuhaft Ira Treuhaft TREUHAFT & ZAKARIN, LLP 305 Broadway, 9th Floor New York, New York 10007 (212) 725-6418 (646) 924-0554 (Facsimile) treuhaft@gmail.com Attorney for Plaintiff The Buckeye Group, Inc. Case 1:14-cv-04214-RMB-JS Document 95-1 Filed 07/11/16 Page 21 of 21 PageID: 1813 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY CAMDEN DIVISION ____________________________________ : The Buckeye Group, Inc., : : Case No. 1:14-cv-04214 Plaintiff, : (RMB-JS) : v. : Judge Bumb : The Miss America Organization, : Magistrate Judge Schneider : Defendant. : Document Filed Electronically ___________________________________: PLAINTIFF'S L. CIV. R. 56.1 RESPONSIVE STATEMENT OF MATERIAL FACTS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT Ira Treuhaft TREUHAFT & ZAKARIN, LLP 305 Broadway, 9th Floor New York, New York 10007 (212) 725-6418 (646) 924-0554 (Facsimile) Rex H. Elliott (admitted pro hac vice) Adam P. Richards (admitted pro hac vice) COOPER & ELLIOTT, LLC 2175 Riverside Drive Columbus, Ohio 43221 (614) 481-6000 (614) 481-6001 (Facsimile) Case 1:14-cv-04214-RMB-JS Document 95-2 Filed 07/11/16 Page 1 of 7 PageID: 1814 2 Pursuant to L. Civ. R. 56.1, Plaintiff, The Buckeye Group, Inc. ("Buckeye"), submits the following response to the Statement of Disputed Material Facts (ECF No. 90-4) submitted by Defendant, The Miss America Organization ("MAO"). 1. Admit; however, Buckeye relies on other evidence in support of its claim that MAO breached the Infinity agreements. See ECF No. 80 at PageID 895-896, ¶¶ 67-70 (citing Exhibits 8, 9, 11, 12, 13, 14, 27, 64, 65, 66, 69 to Franco Dep.); e.g., ECF Nos. 82-14, 82-15, 82-16, 82-18. 2. Denied. Defendants' hyperbole calling Buckeye's claim that MAO breached its agreements with Infinity "unfounded" is contrary to the plethora of evidence in the record. See Id.; see also, Franco Dep. at pp. 62-64, 66-68, 70:19- 77:23, 83:3-86:22; ECF Nos. 82-14, 82-15, 82-16, 82-17, 82-18. Moreover, Infinity testified that if MAO did not breach its agreements, Infinity would have fully compensated MAO, which, in turn, would have resulted in Buckeye receiving its yearly guaranteed payment for $300,000.00 for a minimum of 10-years: Q. If MAO lived up to its obligations under the terms of the Agreements, would [Infinity] have fully compensated MAO? A. Sure. Franco Dep. at p. 105:16-20. Defendant's cite to Mr. Haskell's testimony is improper. Whether or not MAO breached its agreements with Infinity is a legal issue for the Court to decide. Case 1:14-cv-04214-RMB-JS Document 95-2 Filed 07/11/16 Page 2 of 7 PageID: 1815 3 3. Buckeye does not dispute Infinity sent a letter to MAO on March 22, 2013 claiming MAO breached the Infinity agreements. Infinity's letter outlines a proposal based on a meeting MAO and Infinity had a week earlier and proposes alternative acceptable ways Infinity believes MAO could cure its breaches of the parties' agreements. See ECF 90-5 PageID 1511 (stating the proposal is in response to a meeting last week); Id. at 1514 (stating, "[a]s a reminder, this letter is being sent for the purpose of discussing a possible resolution arising from MAO's breaches of the MAP/MAE Agreements"). It also outlined money that MAO owed Infinity as a result of MAO improperly withholding and not paying Infinity pursuant to the terms of the parties' agreements. Id. 4. Buckeye does not dispute that Jack Plackter sent the March 22, 2013 letter; however, Buckeye disputes all of the actual content and statements within the letter itself. For example, Ike Franco and Jeff Heckman of Infinity never approved the ABC Deal. See ECF No. 90-5 at Page ID 1538 (stating, "neither Ike Franco nor Jeff Heckman approved the execution of the ABC Agreement"). Further, MAO has committed to not calling Mr. Plackter as a witness in this lawsuit; thus, this document should not be considered and should be stricken from the record as hearsay. See Richards Decl. at ECF No. 82-1, ¶¶ 14-15. Finally, whether or not MAO or Infinity actually breached Infinity/MAO agreements is issue for the Court to decide. Buckeye believes that MAO did breach the Infinity Case 1:14-cv-04214-RMB-JS Document 95-2 Filed 07/11/16 Page 3 of 7 PageID: 1816 4 Agreements for the reasons stated in ECF No. 90-5 at PageID 1513-14, 1538-43; e.g., ECF Nos. ECF Nos. 82-14, 82-15, 82-16, 82-17, 82-18. 5. Denied. MAO did agree to reduce the annual payments it received from Infinity without the consent of Buckeye. See ECF No. 82-12, PageID 1358- 59, §§ 5-6 (agreement between MAO and Infinity reducing Infinity payment to MAO from $2,000,000 to $1,500,000); Haskell Dep. at pp, 120:20-24, 122:20-22, 126:13-127-6, 131:2-5, 140:9-141:5, 149:20-150:3, 150:15-24; Pearce Dep. at pp. 29-34:4. 6. Misleading as presented. Buckeye does not dispute that MAO sent a notice of default to Infinity on April 17, 2013; however, it was issued in response to a notice of default Infinity issued to MAO earlier that same day. See ECF No. 82-16; Franco Dep. at p. 105:4-9. Moreover, Buckeye disputes all of the actual content and statements within the notice of default MAO issued to Infinity. Further, MAO has committed to not calling Mr. Plackter as a witness in this lawsuit; thus, this document should not be considered and should be stricken from the record as hearsay. See Richards Decl. at ECF No. 82-1, ¶¶ 14-15. The April 17, 2013 letter from MAO to Infinity also improperly contains legal conclusions. 7. Buckeye does not dispute that Infinity issued the referenced notice of default to MAO on April 17, 2013. As set forth above, Exhibit G was issued prior to MAO issuing any notice of default. Exhibit G speaks for itself, refers to Case 1:14-cv-04214-RMB-JS Document 95-2 Filed 07/11/16 Page 4 of 7 PageID: 1817 5 additional issues, and refers to breaches other than the ABC Deal. See ECF No. 90-5 at Page ID 1538-39. 8. Buckeye does not dispute that Infinity issued the referenced notice of default to MAO on April 18, 2013. See ECF No. 90-5 at Page ID 1541-43. 9. The evidence cited does not support this statement. Buckeye does not dispute that MAO and Infinity amended the terms of their agreements on June 27, 2013. See ECF Nos. 82-11, 82-12. Buckeye disputes MAO rebuffed the efforts by Infinity to reduce the annual money Infinity paid MAO. In fact, the annual payment from Infinity to MAO was reduced. See ECF No. 82-12, PageID 1358- 59, §§ 5-6 (agreement between MAO and Infinity reducing Infinity payment to MAO from $2,000,000 to $1,500,000). Buckeye admits that MAO was required to pay Buckeye 300,000.00 each year it received any money from Infinity. The evidence cited by MAO states "when coupled with the exclusivity threshold or $800,000.00 and the required 300k Buckeye payment you need to explain to me how this works," and mentions nothing about Buckeye only getting paid if MAO gets paid. Moreover, for the reasons argued herein, Buckeye denies that MAO does not have to pay Buckeye just because it did not receive money from Infinity in any given year. 10. Not disputed. Case 1:14-cv-04214-RMB-JS Document 95-2 Filed 07/11/16 Page 5 of 7 PageID: 1818 6 11. Buckeye admits that the referenced amendments have release provisions; however, Buckeye disputes, and the testimony shows, that Buckeye was never informed of these release provisions or amendments. See Franco Dep. at pp. 79:6-81:25; Sam Haskell Dep. at pp. 118:11-19, 120:20-24; John Bermingham Dep. at 145:7-147:8, 151:13-153:8, 153:8-154:3; Goldberg Dep., Vol II., at pp. 407:5-408:5. The release provisions are also not binding on Buckeye and Buckeye claims the release provisions violated the Third Agreement because Buckeye did not approve them. Further, it is clear that, despite what the release language in the amended Infinity/MAO agreements state, Infinity still strongly believes MAO breached its agreements with Infinity. Franco Dep. at pp. 70:8-19, 73:3-77:18. Here is what Infinity stated: Q. If MAO lived up to its obligations under the terms of the Agreements, would [Infinity] have fully compensated MAO? A. Sure. Franco Dep. at p. 105:16-21. Further, with respect to the specific statement in the amended agreements regarding retracting default letters, here is what Infinity testified to under oath in this lawsuit: Q. Mr. Wood asked you questions about the provisions in the License Agreement where your statements regarding agreeing that violations of the prior MAP and MAE agreements didn't occur. Do you recall that? Case 1:14-cv-04214-RMB-JS Document 95-2 Filed 07/11/16 Page 6 of 7 PageID: 1819 7 A. Yes. Q. Irrespective of the statements of the agreement, did that change your view about whether or not MAO violated the Agreements? A. It did not. Q. If you actually look at the provision, it actually mentions that the agreements between the company and the AC entities as well as ABC are in direct violation of the Representation Agreement as in such representative reserve our right to assert that such provisions and any amendment or subsequent agreement which violates the Representation Agreement shall constitute a default thereof by the company, that specifically ends the agreement, isn't it? A. Yes. Q. In a similar provision regarding that is in the Representation Agreement as well at section -- at the end of Section 2. Do you see that? A. Yes, I do. Cory Baker Dep. at p. 83:8-84:21. Dated: July 11, 2016 /s/ Ira Treuhaft Ira Treuhaft Attorney for Plaintiff The Buckeye Group, Inc. Case 1:14-cv-04214-RMB-JS Document 95-2 Filed 07/11/16 Page 7 of 7 PageID: 1820 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY CAMDEN DIVISION ____________________________________ : The Buckeye Group, Inc., : : Case No. 1:14-cv-04214 Plaintiff, : (RMB-JS) : v. : Judge Bumb : The Miss America Organization, : Magistrate Judge Schneider : Defendant. : Document Filed Electronically ____________________________________: ACKNOWLEDGEMENT OF SERVICE I, Ira Treuhaft, Esq., certify as follows: 1. On July 11, 2016, I filed electronically the attached Notice and related Reply Papers of Plaintiff. 2. I have sent one (1) courtesy copy via regular mail of the foregoing stamped "Courtesy Copy" to the Honorable Renee Marie Bumb, United States District Judge, Mitchell H. Cohen Federal Building & U.S. Courthouse, 4th & Cooper Streets, Courtroom 3D, Camden, New Jersey 08101. 3. I served a copy of Plaintiff's Notice and related Reply Papers via the ECF system on Defendant, The Miss America Organization, c/o Eric M. Wood, Esq., Christopher Fallon, Esq., Fox Rothschild LLP, Midtown Building, 1301 Atlantic Avenue, Suite 400, Atlantic City, New Jersey 08401. Pursuant to 28 U.S.C. §1746, I certify under penalty of perjury that the foregoing is true and correct. Dated: July 11, 2016 /s/ Ira Treuhaft Ira Treuhaft Case 1:14-cv-04214-RMB-JS Document 95-3 Filed 07/11/16 Page 1 of 1 PageID: 1821