Opinion
Civil Action No. 04-3551.
November 22, 2005
ORDER
AND NOW, this 22nd day of November, 2005, upon consideration of defendants' motion for summary judgment (docket entry #29), plaintiff's response thereto, defendants' reply, plaintiff's motion for summary judgment (docket entry #28), defendants' response thereto and plaintiff's reply, and the Court finding that:
Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). In ruling on a motion for summary judgment, the Court must view the evidence, and make all reasonable inferences from the evidence, in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). The moving party bears the initial burden of proving that there is no genuine issue of material fact in dispute. Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585 n. 10 (1986). Once the moving party carries this burden, the nonmoving party must "come forward with `specific facts showing there is a genuine issue for trial.'" Id. at 587 (quoting Fed.R.Civ.P. 56(e)). The task for the Court is to inquire "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law." Liberty Lobby, 477 U.S. at 251-52; Tabas v. Tabas, 47 F.3d 1280, 1287 (3d Cir. 1995) (en banc).
Defendants' response is consolidated with their reply to plaintiff's response to defendants' motion (docket entry #33).
(a) Plaintiff Matthew Martin worked as a salesman for defendant TriState HVAC Equipment, LLC ("TriState"), see Am. Compl. ¶ 9, a limited partnership comprised of a general partner, CGLM Industries, Inc., and a limited partner, CGLM Associates, LLC (together, the "CGLM Entities"), Defs.' Mem. in Supp. of Mot. for Summ. J. ("Defs.' Mem.") 4;
The complaint incorrectly names CGLM Associates, LLC as "CGLM, LLC."
TriState was formed in 1998 when Callahan, Greener, Long and Mayo formed the CGLM Entities and partnered with McQuay International to acquire Thermal Products, which carried on business as TriState. See Defs.' Mem. 4-5. In February 2002, the CGLM Entities bought McQuay's interest in TriState and, as part of the purchase price, gave McQuay two promissory notes.See id. at 5. These notes provide for quarterly payments from the CGLM Entities to McQuay. See id.
(b) TriState distributes industrial and commercial HVAC equipment, see id.;
(c) Under the sales commission agreement, Martin received a percentage of the profits from each project he booked, which were earned when he booked the projects and paid when the customer remitted the funds for the order, see Am. Compl. ¶ 15;
(d) On September 15, 2003, TriState fired Martin, see id. ¶ 13;
(e) Martin claims that TriState owes him $161,117.00 in sales commissions, see id. ¶¶ 18-20;
(f) Martin sued TriState, CGLM Associates, LLC, and CGLM Industries, Inc., as well as Joseph Callahan, Anthony Greener, Samuel Long and Joseph Mayo, in state court, asserting five state law claims, and one federal claim under the Racketeer Influence and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961- 1968 (2003), and defendants removed the case to federal court;
During the relevant period, Callahan, Greener, Long and Mayo were co-managers and sole members of TriState; sole officers, directors and shareholders of CGLM; and sole partners and members of CGLM, LLC. See Am. Compl. ¶¶ 22-24.
(g) Parties filed cross-motions for summary judgment, and because this Court's jurisdiction arises from a single federal claim, we turn first to defendants' motion seeking summary judgment on Martin's RICO claim;
(h) RICO permits "[a]ny person injured in his business or property by reason of a violation of section 1962" to bring a civil action in federal court, 18 U.S.C. § 1964(c);
(i) Martin alleges that defendants violated Section 1962(c), which requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity, see Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985).
In full, Section 1962(c) provides that:
It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.18 U.S.C.A. § 1962(c).
(j) A plaintiff has standing only if "he has been injured in his business or property by the conduct constituting the violation," Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985);
(k) Here, Martin claims that defendants TriState and the CGLM Entities engaged in two types of "racketeering activity" identified in 18 U.S.C.A. § 1961(1) — mail fraud and wire fraud, indictable under 18 U.S.C. § 1341 and § 1343, respectively — thereby diverting profits and injuring him by depriving him of bonus commissions on two payments received from Marx Sheet Metal ("Marx") for two school construction projects (the "Dunmore" and "Dallas" projects);
Section 1961(1) lists acts constituting "racketeering activity," and Section 1961(5) defines "pattern" as at least two such acts. See Banks v. Wolk, 918 F.2d 418, 421 (3d Cir. 1990).
According to defendants, in December of 2000 and February of 2002, the CGLM Entities had to make quarterly payments on the McQuay notes, but the amounts due were greater than profits TriState would have allocated the CGLM Entities in the normal course of business. See Defs.' Mem. 9. In December of 2000 and February of 2002, Marx Sheet Metal, the mechanical contractor on both projects, owed TriState $40,000 for the Dunmore project and $78,075 for the Dallas project, respectively. Id. Defendants state that, to make the McQuay note payments on time, the CGLM Entities directly invoiced Marx, used Marx's payments to pay the McQuay notes, and had internal accounting later "catch up" with the transaction. Id.
We note a date discrepancy that neither party has raised. Callahan stated that in February 2002, the CGLM Entities purchased McQuay's entire interest in TriState and gave McQuay two promissory notes as part of the purchase price. See Defs.' Mem. Ex. B, Callahan Aff. ¶ 6. However, one of the Marx payments alleged to have been used to pay a McQuay note was received inDecember 2000, more than a year before the notes are said to have been issued. That the CGLM Entities gave McQuay money in December 2000 is undisputed. Defendants have provided copies of a check from Marx to CGLM Associates dated 12/19/00 for $40,000, and two checks from CGLM, LLC to McQuay TPC Corporation dated 12/28/00, one for $63,233 and $10,859. See Defs.' Reply Ex. O.
Since neither party has addressed this date discrepancy, we do not know if defendants inadvertently gave an incorrect purchase date of February 2002, if the CGLM Entities had note obligations to McQuay prior to February 2002 which they fulfilled with the December 2000 payments, or if those payments to McQuay were for something other than note obligations. In any event, at this time it is unnecessary to resolve the discrepancy. Our task here — determining whether Martin has standing for a RICO claim — requires us to identify if there exists a material dispute about whether Martin was paid his bonus from the two Marx checks. Whatever the reason for the date discrepancy and whatever implications it may have for other claims, our analysis on the present issue is unaffected.
(l) Callahan has repeatedly testified that TriState paid Martin his portion of the Marx payments for the Dunmore and Dallas projects, Defs.' Mem. Ex A, Callahan Deps. 46, 59-55, Nov. 19, 2004; 18-23, Mar. 22, 2005; 41, May 6, 2005;
(m) Defendants therefore argue that Martin, having suffered no damages, lacks standing to sue under RICO;
(n) Martin does not dispute that he received the money Callahan identifies, and he even admits that he has no evidence that he was not paid for the Dunmore and Dallas projects:
Q. Well, do you have any evidence that you were not paid the commissions on the check sent from Marks [sic] to CGLM on Dunmore or Dallas?
A. No.
Defs.' Mem. Ex. F, Martin Dep. 90:17-21, Dec. 3, 2004;
(o) Nevertheless, he advances a number of reasons why the identified compensation does not derive from Marx's checks for these projects;
(p) First, Martin alleges that the timing of his November 15, 2000 $7,615.42 bonus commission proves he was not paid for the Dunmore project, because defendants paid him before they received Marx's $40,000 check, which contradicts TriState's policy of paying bonus commissions only after receiving customers' payments;
(q) Callahan admits that forty-five days before the $40,000 check arrived, TriState paid salesmen, including Martin, their bonuses for that project, and he states that this was done at Mayo's request, see Defs.' Mem. Ex. A, Callahan Dep. 36:11-20, May 6, 2005;
(r) While Martin does not believe defendants' explanation that this was done to ensure that the "roundabout mechanism" used for the Marx payments did not delay bonus payments, Defs.' Reply 7, he inexplicably offers no suggestion as to the "true" source of the bonus;
(s) Though Martin alleges that salesmen were never told how much customers were invoiced and what they paid, he must know what projects he was working on when he received the $7,615.42 bonus (a sum larger that his $5,000.00 salary earned in the same pay period), see Defs.' Mem. Ex. J at 3, so he should be able to suggest some source for the bonus;
(t) Moreover, even if defendants hid all information about customer payments during Martin's employment, he had four months of discovery to examine all relevant invoices, payments and project data, so his failure to offer any theory — much less any evidence — as to the source of the bonus shows that there is no material dispute about his having been compensated for the Dunmore and Dallas projects;
(u) Second, Martin highlights the discrepancy between the $7,615.42 he received in November of 2000, and Callahan's "bonus calculation" document, see Pl.'s Mem. Ex. D, which shows that Martin received $8,564.79 for the Dunmore project;
Martin also argues that the "bonus calculation documentation" Callahan produced in discovery deviates from the formula he presented in a Power Point presentation on January 12, 1999, the "Sales Engineer Bonus Example." See Pl.'s Mem. 31-33 and Ex. A. However, Martin does not state what figures Callahan should have arrived at using this example, so we address the discrepancy between the only bonus figures provided to the Court regarding the Dunmore project, $7,615.42 and $8,564.79.
(v) Martin states that Callahan's explanation of deductions for cell phone usage or computer expenses is false because all of Martin's payroll register show deductions only for 401(K), health insurance and occupational privilege tax;
While most of the deductions are for the three items plaintiff identifies, the Court found that five times Martin had deductions for "EXPENS-1," "LOANS," or "MISC." items. See Pl.'s Mem. Ex. 16.
In the future, when directing a court to supporting documents, counsel should refer to the numbers on the tabs separating the exhibits, rather than broadly stating "See Appendix," see Pl.'s Mem. 31, especially when the appendix is one inch thick.
(w) A closer examination of Callahan's deposition reveals that he said the discrepancy occurred because his bonus calculation goes to accounting, where adjustments to bonus — not salary — are made for various reasons, and then payroll gets the resulting number, Defs.' Mem. Ex. R, Callahan Dep. 14-16, May 6, 2005;
(x) Martin does not point to any facts that would discredit Callahan's explanation of how the accounting department makes adjustments to bonuses, so he again fails to show there is a genuine issue for trial;
(y) Third, Martin contends that defendants have not produced historical documents linking his compensation to the Marx checks;
(z) Defendants aver that they have produced relevant historical documents — namely, payroll documents and Excel spreadsheets, as well as documents that compile electronically stored data, see Defs.' Mem. Ex. A, Callahan Deps. 51-55, Nov. 19, 2004; 27, Mar. 22, 2005; Ex. J, K, L — which were generated from their computer system pursuant to discovery requests;
(aa) Defendants contend that because TriState maintains financial information on its computer systems and generates hard copies when needed and in the format needed, there simply do not exist contemporaneous papers documenting the flow of the Marx payments and the corresponding calculation and payment to Martin of his profit sharing bonus;
(bb) There is nothing unusual about "paperless" systems today, and since Martin has not pointed to any specific facts suggesting that defendants are being untruthful about how TriState stores information, defendants documents can be credited;
(cc) Fourth, Martin finds inconsistency in Mayo's testimony that Callahan told him Martin "would be" paid his share of the $40,000 check from the Dunmore project (citing to "Mayo NT, page 83"), and Callahan's statements that Mayo asked him to make sure that salesmen were paid from the $40,000 (citing to "Callahan May NT, pages 33-34, 55"), see Pl.'s Mem. 18-19;
(dd) Two of the three depositions Martin cites discuss the $78,075 Dallas check, not the $40,000 Dunmore check, see id. Ex. 4, Mayo Dep. 82-83, and Ex. 3, Callahan Dep. 55, and the third citation (pages 33-34 of the Callahan deposition) is not even contained in Martin's excerpts of Callahan's deposition, see id. Ex. 3;
Because these pages are included in defendants' exhibits,see Defs.' Mem. Ex. A, Callahan Dep. 33-34, May 6, 2005, we verified that Callahan said Mayo told him to make sure bonuses were paid from the $40,000 check.
(ee) Despite Martin's confusion of the facts, we consider the substance of Martin's argument that these comments are incompatible and find that the comments do not rise to the level of a genuine dispute over a material fact;
(ff) Mayo might have asked Callahan to make sure salesmen were paid from the Marx checks and at some other point Callahan could have reassured him they would be, and even if this is not what happened, Martin has not pointed to any testimony from Mayo or Callahan wherein one claims that the other misrepresented past conversations;
(gg) Fifth, Martin argues his compensation could not have come from the Marx checks because, according to defendants, they were used to satisfy the McQuay notes;
(hh) Callahan has said that he "normally" borrowed on a line of credit "to make payroll," Defs.' Mem. Ex. A, Callahan Dep. 45:14, May 6, 2005;
(ii) Martin has not pointed to any facts suggesting that Callahan is misrepresenting how employees are paid, and the fact that Martin's compensation was drawn from a line of credit, rather than from the precise account in which the Marx payments were deposited, has nothing to do with whether Martin's bonuses represent compensation for the Dunmore and Dallas project;
(jj) Sixth, Martin states that when he asked Mayo whether he would receive his commission from the $78,075 check, Mayo told him, "don't worry about it," Pl.'s Mem. Ex. 11, Martin Dep. 301:2-3, Dec. 3, 2004, and Martin interpreted this to mean he would not get his money, see id. at 303:1-4;
(kk) Since "don't worry about it" is most often used as a reassuring phrase indicating that there is no problem, Martin's interpretation is puzzling, and by no means raises a genuine dispute about a material fact;
(ll) Seventh, Martin asserts that an e-mail of February 17, 2004, in which Callahan told Mayo to "make sure the numbers work," see Pl.'s Mem. Ex. E, evidences a fraudulent scheme to get Marx to revise a purchase order;
(mm) Defendants contend that this e-mail is easily understood, as Callahan testified, see Defs.' Mem. Ex A, Callahan Dep. 42-54, Mar. 22, 2005, as one in a series of e-mails about ensuring the accounting was properly done on the Dallas project;
(nn) Given the context, deriving a fraudulent scheme from a single phrase goes too far into the realm of fancy;
(oo) Martin's final argument is that defendants' attorney's letter describing Martin's theories about the CGLM payments as "impotent" is a "tacit admission that Martin did not receive any compensation" for the Marx payments, Pl.'s Mem. 35-36 and Ex. G;
(pp) This argument is utterly implausible;
(qq) In sum, none of Martin's assertions raise a dispute about the material fact at issue, namely, whether he was compensated for the Marx payments for the Dunmore and Dallas projects;
(rr) After four months of discovery, ample time in which to obtain and review relevant data, Martin is unable to point to anything in the record suggesting that bonuses he unquestionably received were linked to something other than the Marx payments for the Dunmore and Dallas projects;
(ss) Because Martin has not come forward with specific facts showing a genuine issue for trial on the question of whether he was injured under RICO, he lacks standing under this count, and defendants are therefore entitled to summary judgment on the RICO claim;
(tt) Having disposed of plaintiff's sole federal claim, five state law claims remain;
(uu) Under the supplemental jurisdiction statute, "The district court may decline to exercise supplemental jurisdiction over a claim" if "the district court has dismissed all claims over which it has original jurisdiction," 28 U.S.C. § 1367(c)(3);
(vv) Our Court of Appeals has "recognized that, where the claim over which the district court has original jurisdiction is dismissed before trial, the district court must decline to decide the pendent state claims unless considerations of judicial economy, convenience, and fairness to the parties provide an affirmative justification for doing so," Hedges v. Musco, 204 F.3d 109, 123 (3d Cir. 2000);
(ww) Exercising supplemental jurisdiction might conserve some state court resources, but it would also require us to predict how the state courts would apply their law to five claims, see Erie Railroad v. Tompkins, 304 U.S. 64 (1938);
(xx) Because Martin initially brought the case in state court, returning it to his chosen forum can hardly be a surprising event;
(yy) Defendants would not suffer unfairness since they removed a case with a single federal claim — one for which they have demonstrated that plaintiff does not even have standing — and thereby knowingly accepted the risk that this case would return to state court;
(zz) Moreover, while parties will have some inconvenience in refiling in state court, it is relatively minor since they can use the information they have obtained in discovery in a state court;
(aaa) Because returning to state court is not unfair to the parties and serves them better by having a state court evaluate state law claims directly rather than putting us in the perilous enterprise of predicting how the Pennsylvania Supreme Court would rule, we find that considerations of judicial economy, convenience, and fairness, taken together, do not justify an exercise of supplemental jurisdiction in this case;
It is hereby ORDERED that:
1. Defendants' motion is GRANTED IN PART as described herein;
2. Summary Judgment is GRANTED as to Count V;
3. Counts I, II, III, IV and VI of the amended complaint are DISMISSED WITHOUT PREJUDICE;
4. Plaintiff's motion is DENIED AS MOOT; and
5. The Clerk shall CLOSE this civil action statistically.