Opinion
DOCKET NO. A-1987-12T1
09-04-2014
JOSEPH M. GUIDO, Appellant, v. BOARD OF REVIEW, ALLSTATES AIR CARGO, INC., AND ALLSTATES WORLDCARGO, INC., Respondents.
Kiernan & Strenk, attorneys for appellant (Charles A. Strenk, on the brief). John J. Hoffman, Acting Attorney General, attorney for Board of Review (Alan C. Stephens, Deputy Attorney General, on the brief). Kenneth J. Isaacson, attorney for Allstates Air Cargo, Inc., and Allstates WorldCargo, Inc.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Ashrafi and Haas. On appeal from the Board of Review, Department of Labor and Workforce Development, Docket No. 34 8,993. Kiernan & Strenk, attorneys for appellant (Charles A. Strenk, on the brief). John J. Hoffman, Acting Attorney General, attorney for Board of Review (Alan C. Stephens, Deputy Attorney General, on the brief). Kenneth J. Isaacson, attorney for Allstates Air Cargo, Inc., and Allstates WorldCargo, Inc. PER CURIAM
Claimant Joseph M. Guido appeals from a final decision of the Board of Review, Department of Labor and Workforce Development, denying his claim for unemployment compensation benefits. We affirm.
The facts of this unemployment compensation appeal involve a number of lawsuits in the Superior Court brought by Guido and others pertaining to certain business transactions and corporate acquisitions. Guido was the founder and the chief executive officer of a corporation named Allstates Air Cargo, Inc. (AAC). In 1999, he sold AAC to a corporation named Audiogenesis, Inc., and he received shares of a majority interest in the latter corporation as part of the consideration for the sale. Audiogenesis, Inc. was renamed Allstates WorldCargo, Inc. (AWC) but continued to operate under the name Allstates Air Cargo. Guido was the chairman of the boards of directors of AAC and AWC. At the time he applied for unemployment compensation in 2011, his stock interest in AWC was 59% of the total shares of the company. AWC, in turn, held 100% of the shares of AAC; in other words, AAC was a wholly-owned subsidiary of AWC.
In 2004, Guido had filed a lawsuit in the Chancery Division of the Superior Court against AWC and the other three members of its board of directors to compel them to take certain actions. Guido personally negotiated with the other directors to resolve the lawsuit, and in 2005 entered into a settlement agreement against the advice of his attorneys, Duane Morris, LLP. The facts regarding that litigation and settlement are described in judicial opinions pertaining to a subsequent legal malpractice lawsuit that Guido and his wife filed against Duane Morris, which reached the Supreme Court on an interlocutory legal issue. See Guido v. Duane Morris, LLP, 202 N.J. 79, 82-86 (2010).
In a recent decision of another panel of this court, we affirmed dismissal of Guido's malpractice lawsuit against Duane Morris after the Supreme Court's remand. Guido v. Duane Morris, LLP, No. A-5568-11 (App. Div. Aug. 1, 2014). We described in detail the pertinent facts of Guido's several lawsuits. Id. at 1-13. The essence of Guido's 2005 settlement with AWC and the other directors was that Guido agreed to relinquish certain rights that he had as majority owner of the corporation in exchange for lucrative employment agreements for him and his wife and the addition of three new members to the board of directors, initially to be appointed by the court. The employment agreements would last for at least five years, and Guido would be paid a salary of more than $300,000 per year plus a potential bonus depending on profits. Guido agreed not to vote his shares of AWC to appoint different directors from the three directors that he had sued and not to transfer his stock in the corporation without that restriction being imposed on the buyer of the stock and without the approval of the board of directors. Id. at 10-11.
Guido's job title became Chairman Emeritus of the board of directors. His salary was paid by AAC. His wife also received a position, for which she was paid a salary by AAC. According to AWC, Guido's only duties of employment were to attend four board meetings per year as Chairman Emeritus. His W-2 statement for 2010 issued by AAC showed income of $325,574.94 for that year. In the six-year period from 2005 to 2011, Guido received compensation from AAC totaling more than $2 million.
In 2010, the estate of a former business partner of Guido filed a lawsuit against him and both AAC and AWC. A judgment of almost $2.5 million was entered against Guido personally. Guido sought to have AAC or AWC satisfy the judgment. In April 2011, by means of another settlement agreement among all the parties to the 2010 litigation, AWC agreed to satisfy the judgment for $1.1 million. In exchange, Guido agreed to relinquish his employment position. Guido would continue to receive payments from AAC of $12,245.19 every two weeks through January 2012, totaling about $250,000, and his health insurance premiums would be covered during that time period by AAC. He was not required to perform any further services for AAC or AWC. The corporations agreed not to interfere with Guido's lawsuit against Duane Morris and to assist in locating communications between that firm and the corporations pertinent to the underlying 2005 lawsuit.
On July 11, 2011, three months after he relinquished his employment with AAC by means of the April 2011 settlement, Guido applied for unemployment compensation benefits. By notice mailed on August 7, 2011, a deputy director of the Division of Unemployment Insurance notified Guido that he was disqualified from benefits because he was an owner of AAC, and he was not considered unemployed from his own company.
Guido sought administrative review of the denial. Counsel for the employer, AAC, opposed the appeal in writing, raising objections to Guido's claim on the grounds that he was an owner of the company, that he had left his employment voluntarily as a result of the April 2011 settlement, and that he was continuing to receive compensation through January 2012. A telephone hearing before the Appeal Tribunal was conducted on June 11, 2012, at which both Guido and the corporations were represented by counsel. The Appeal Examiner limited the scope of the testimony to the issue of Guido's ownership interest in AAC and stated that a hearing would be conducted later if necessary with respect to the circumstances of Guido's separation from employment.
On June 14, 2012, the Appeal Tribunal affirmed the determination of the deputy director and found Guido ineligible for unemployment compensation benefits pursuant to N.J.S.A. 43:21-19(m)(1)(A) and N.J.A.C. 12:17-12.1. The Appeal Tribunal found that Guido had an equitable interest of more than 5% in his employer, AAC, thus making him ineligible for unemployment benefits.
The Board of Review affirmed the Appeal Tribunal by letter dated November 26, 2012. It also added as a reason for denial that Guido continued to hold the position of Chairman Emeritus of his employer corporation during the base year for benefits, and therefore, was disqualified from receipt of unemployment compensation.
On appeal before us, Guido argues that his employer was AAC and not AWC, the parent corporation in which he owns a 59% interest. He argues that each corporation is a separate entity, and he has no ownership or equitable interest in the corporation that was his employer. He also argues that, as a result of the 2005 settlement and a court order, he is required to vote his shares in AWC to maintain the other three adverse members of the boards of directors of AAC and AWC, and he has no control over those corporations.
Our standard of review is limited. Pub. Serv. Elec. & Gas Co. v. N.J. Dep't of Envtl. Prot., 101 N.J. 95, 103 (1985). We will reverse a decision of an administrative agency only if it is contrary to law or arbitrary, capricious, or unreasonable. Brady v. Bd. of Review, 152 N.J. 197, 210-11 (1997). "[I]f substantial credible evidence supports an agency's conclusion, a court may not substitute its own judgment for the agency's even though the court might have reached a different result." Greenwood v. State Police Training Ctr., 127 N.J. 500, 513 (1992); see also Mullarney v. Bd. of Review, 343 N.J. Super. 401, 406 (App. Div. 2001) (scope of appellate review in appeal from denial of unemployment benefits).
N.J.S.A. 43:21-19(m)(1) defines "unemployment." Subsection (A) of that statute establishes an exception to the definition, which states:
[A]n officer of a corporation, or a person who has more than a 5% equitable or debt interest in the corporation, whose claim for benefits is based on wages with that corporation shall not be deemed to be unemployed in any week during the individual's term of office or ownership in the corporation.
The Board of Review found that Guido was applying for unemployment compensation during a time when he continued to have more than a 5% equitable interest in his employer, AAC. Because he owned 59% of the shares of AWC, and AWC owned 100% of AAC, he was not considered to be unemployed and could not receive benefits. We find no factual or legal error in the Board's findings and conclusion.
Contrary to Guido's argument, the statute does not require that proof be presented regarding whether the claimant was able to exercise control over his corporate employer's decisions. The statute presumes that a person with 5% or greater interest in a corporation has sufficient influence over its affairs that the decision to discharge or lay off that individual as an employee of the corporation should be attributed to the individual as his own employer. See Nota v. Bd. of Review, 231 N.J. Super. 341, 343-44 (App. Div. 1989).
Guido cites several cases based on corporate law that recognize the separate existence of a parent and a subsidiary corporation. E.g., Mellon Bank, N.A. v. Metro Commc'ns Inc., 945 F.2d 635, 643 (3d Cir. 1991), cert. denied sub nom. Comm. of Unsecured Creditors v. Mellon Bank, N.A., 503 U.S. 937, 112 S. Ct. 1476, 117 L. Ed. 2d 620 (1992); Verni ex rel. Burstein v. Harry M. Stevens, Inc., 387 N.J. Super. 160, 198-99 (App. Div. 2006), certif. denied, 189 N.J. 429 (2007). But these cases do not address eligibility for unemployment compensation. Nor is our prior holding in MBL Holding Corp. v. State, 215 N.J. Super. 418 (App. Div. 1987), relevant to application of N.J.S.A. 43:21- 19(m)(1)(A). In MBL Holding, we held that a subsidiary was not responsible to make contributions to fund unemployment compensation on behalf of employees of the parent corporation who performed services for the subsidiary. Id. at 422-25. We did not address eligibility of the employees for unemployment benefits.
Simply stated, Guido was the majority owner of a corporation that was the sole owner of his corporate employer. Consequently, he was also an equitable owner of the corporate employer even if the stock in the latter company was not issued to him in his name. Under N.J.S.A. 43:21-19(m)(1)(A), the termination of his position with the employer is not within the definition of unemployment, and so, he is not eligible to receive unemployment compensation benefits.
We note that the employer has raised additional arguments on appeal that Guido was ineligible because he left his position voluntarily by means of the April 2011 settlement and because he continued to receive compensation through January 2012. Guido argues we should disregard these points of the employer's brief because they were not a basis for the Appeal Tribunal's and the Board of Review's decisions denying him benefits. While that is true, the employer raised the same arguments during the administrative appeals. Therefore, the only remedy to which Guido would theoretically be entitled, if he were to prevail in his argument that he is not a 5% owner of AAC, is a remand for consideration of these additional grounds for disqualification.
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION