Schnurr v. Winklevoss Consultants, Inc. et al

Filing 1

COMPLAINT against Winklevoss Consultants, Inc., Winklevoss, LLC ( Filing fee $ 250 receipt number B010365.), filed by Rick D. Schnurr.(Simpson, T.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
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RICK D. SCHNURR
:
:
:
v.
:
:
WINKLEVOSS CONSULTANTS, INC. :
and WINKLEVOSS, LLC
:
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CASE NO.

JUNE 15, 2005

COMPLAINT
ALLEGATIONS OF JURISDICTION
1.

Plaintiff Rick D. Schnurr is a citizen of Canada and resident of the

Commonwealth of Massachusetts.
2.

Defendant Winklevoss Consultants, Inc. ("WCI") is a Delaware corporation

with offices at 500 West Putnam Avenue, Greenwich, CT 06830.
3.

Defendant Winklevoss, LLC ("WLLC") is a Delaware limited liability company

with offices at 500 West Putnam Avenue, Greenwich, CT 06830. Upon information and
belief, WLLC was a wholly-owned subsidiary of WCI at all times relevant to this lawsuit.
4.
costs.

Mr. Schnurr claims damages in excess of $75,000, exclusive of interest and

5.

The United States District Court has jurisdiction over each count of this

complaint pursuant to 28 U.S.C. § 1332(a)(2).
6.

Venue lies in the United States District Court for the District of Connecticut

pursuant to 28 U.S.C. § 1391(a).
COUNT ONE: BREACH OF CONTRACT
1.

Mr. Schnurr started working for WCI in 1993, shortly after receiving his

university degree. In 1999, WCI formed WLLC. Mr. Schnurr was employed either by WCI
or by its subsidiary WLLC until his employment was terminated on June 15, 2004. Over his
11-year tenure, he was promoted to Executive Vice President.
2.

WCI, either by itself or through its subsidiary WLLC, was engaged in the

business of providing, among other things, insurance consulting and brokerage services, and
charitable giving vehicles for non-profit organizations (the "Business").
3.

On December 5, 2002, Mr. Schnurr and WLLC executed an agreement (the

"Stay Bonus Agreement") whereby Mr. Schnurr became entitled to 9.53% of 2002 profits and
8.33% of 2003 profits. WLLC further agreed to negotiate an operating agreement in good
faith, by which Mr. Schnurr would become a member of WLLC and be "entitled to an initial
profits interest of 8.33% of distributions." WLLC executed similar stay bonus agreements
with four other key employees (the "Key Employees").

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4.

WLLC executed the Stay Bonus Agreements because WLLC's president had just

been terminated and WLLC wished to encourage Mr. Schnurr and the Key Employees to
remain employed in the Business. In exchange for staying employed in the Business and
working to prevent the Business's clients from following the departed president, Mr. Schnurr
and the Key Employees were each to receive an equity interest in the increased value of the
Business. In addition, Mr. Schnurr and one Key Employee were to receive an equity interest
in the then-current value of the Business. During this transitional period, Mr. Schnurr served
as President of WLLC.
5.

In the first quarter of 2003, the Defendants agreed that Mr. Schnurr would have

a 9% equity interest and 9% profits interest in the Business (much of which flowed through
WLLC), and that the interests would be formally conveyed once a regulatory matter involving
WLLC was resolved. Although negotiations to clarify certain collateral terms were ongoing,
the parties expressly agreed that Mr. Schnurr and the Key Employees would receive the benefit
of having been granted the equity and profits interests in the first quarter of 2003.
6.

During the 17 months between the execution of the Stay Bonus Agreement and

early May 2004, Mr. Schnurr and the Key Employees negotiated an operating agreement with
Howard Winklevoss, apparently the sole shareholder of WCI. The negotiating parties
prepared a list of issues that needed to be completed before the operating agreement would be
executed and specified who was responsible for each issue.

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7.

Mr. Schnurr and the Key Employees addressed the issues assigned to them in a

timely manner. In addition, Mr. Schnurr encouraged progress by arranging regular meetings
of the negotiating parties. However, Dr. Winklevoss delayed addressing the issues assigned to
him, rather than "attempt[ing] to finalize and execute in as reasonable time as is practicable,
the terms of an operating agreement", as required by the Stay Bonus Agreement.
8.

By early May 2004, the regulatory matter was resolved, but the issues that Dr.

Winklevoss was to address remained open. However, rather than addressing the issues and
executing the operating agreement, Dr. Winklevoss, on behalf of WLLC, terminated the
employment of (i) Mr. Schnurr, (ii) the only other Key Employee slated to receive an equity
interest in the current value of the Business, and (iii) one other Key Employee.
9.

Dr. Winklevoss informed Mr. Schnurr that the reason for the terminations was

financial: which, whether true or false, would indicate that the Defendants had not been
negotiating in good faith.
10.

Mr. Schnurr substantially performed under the Stay Bonus Agreement and other

express and implied agreements concerning membership and compensation.
11.

WCI and WLLC denied Mr. Schnurr: (i) the equity and profits interests in the

Business; (ii) the benefit of having been granted the equity and profits interests in the first
quarter of 2003; and (iii) the profits interests for the years 2002 and 2003.

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12.

WCI and WLLC failed to negotiate in good faith when they: (i) delayed the

execution of the operating agreement; (ii) terminated Mr. Schnurr's employment rather than
executing the operating agreement; and (iii) negotiated the operating agreement while planning
to significantly scale-back or cease operating in the line of the Business where he was
employed.
13.

Accordingly, WCI and WLLC breached the terms of the Stay Bonus Agreement

and other express and implied agreements concerning membership and compensation.
14.

As a result, Mr. Schnurr has suffered and continues to suffer damages.

COUNT TWO: IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING
1-12. Plaintiff realleges each allegation contained in paragraphs 1 through 12 of Count
One.
13.

Dr. Winklevoss failed to negotiate in good faith and delayed finalizing the

operating agreement as an agent of WCI and WLLC. Dr. Winklevoss' actions denied Mr.
Schnurr the benefit of the Stay Bonus Agreement and other express and implied agreements
concerning membership and compensation.
14.

WLLC breached the covenant of good faith and fair dealing implicit in the Stay

Bonus Agreement and other express and implied agreements concerning membership and
compensation by: (i) failing to distribute profits; (ii) inducing or permitting ledger entries
designed to conceal profits; and (iii) failing to characterize payments to members or employees

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as "profits distributions". WCI and WLLC further breached the implied covenant of good
faith and fair dealing by failing to convey the equity and profits interests in WLLC to Mr.
Schnurr and by failing to negotiate in good faith and consummate the operating agreement in
good faith.
15.

As a result, Mr. Schnurr has suffered and continues to suffer damages.

COUNT THREE: CONNECTICUT UNFAIR TRADE PRACTICES ACT
1-9.

Plaintiff realleges each allegation contained in paragraphs 1 through 9 of Count

10.

Mr. Schnurr never received: (i) the equity and profits interests in the Business;

One.

(ii) the benefit of having been granted the equity and profits interests in the first quarter of
2003; and (iii) the profits interests for the years 2002 and 2003.
11.

WCI and WLLC engaged in unfair or deceptive practices in the course of their

Business in violation of Section 42-110g of the Connecticut General Statutes when they: (i)
failed to convey the equity and profits interests in the Business to Mr. Schnurr and the
terminated Key Employees; (ii) failed to give Mr. Schnurr and the terminated Key Employees
the benefit of having been granted the equity and/or profits interests in the first quarter of
2003; (iii) failed to convey the profits interests for the years 2002 and 2003 to Mr. Schnurr;
(iv) induced or permitted ledger entries designed to conceal profits; (v) failed to characterize
payments to members or employees as "profits distributions"; (vi) terminated Mr. Schnurr and

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the terminated Key Employees rather than executing the operating agreement; (vii) misled Mr.
Schnurr and the terminated Key Employees to continue to work in the Business; and (viii)
negotiated the operating agreement with Mr. Schnurr and the terminated Key Employees while
planning to scale-back or cease operating in the line of the Business where they were
employed.
12.

WCI's and WLLC's actions offend public policy, common law, or established

notions of fairness.
13.

As a result, Mr. Schnurr has suffered and continues to suffer damages.

COUNT FOUR: PROMISSORY ESTOPPEL
1-8.

Plaintiff realleges each allegation contained in paragraphs 1 through 8 of Count

9.

In late 1998, as part of a compensation plan, WCI promised to compensate Mr.

One.

Schnurr with salary, bonus and a commission on gross revenue from new business in the
Business (the "1998 Compensation Agreement"). The parties agreed to modify the 1998
Compensation Agreement in early 1999 so that Mr. Schnurr would be compensated with
salary, bonus, 5% of all profits from the Business, and an ownership interest in the Business
(the "1999 Compensation Agreement"). WLLC was organized to implement the 1999
Compensation Agreement.

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10.

On December 31, 1999, Mr. Schnurr signed a letter agreement prepared by

WCI whereby he agreed not to compete with WCI in exchange for, among other things,
membership in WLLC with an interest of at least 7.5%.
11.

Beginning in 1999, WCI and WLLC began holding Mr. Schnurr out as a

member of WLLC. His business cards identified him as a "Principal", as did WLLC
marketing materials. WLLC referred to him as a member or Principal in communications with
its clients.
12.

WCI and WLLC denied Mr. Schnurr: (i) the equity and profits interests in the

Businesses; (ii) the benefit of having been granted the equity and profits interests in the first
quarter of 2003; (iii) the commission to which he was entitled by virtue of the 1998
Compensation Plan; (iv) the percentage of profits to which he was entitled by virtue of the
1999 Compensation Plan; and (v) the profits interests for the years 2002 and 2003.
13.

Mr. Schnurr reasonably relied upon WCI and WLLC's promises that he would

become a member and be paid certain profits interests and commissions.
14.

Mr. Schnurr relied upon WCI and WLLC's promises to his detriment because

he continued to work for WCI and WLLC when he could have worked elsewhere at higher
total compensation, and was not compensated for his work in the manner that WCI and WLLC
promised that he would be.

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15.

As a result of his detrimental reliance, Mr. Schnurr has suffered and continues

to suffer damages.
COUNT FIVE: NEGLIGENT MISREPRESENTATION
1-12. Plaintiff realleges each allegation contained in paragraphs 1 through 12 of Count
Four.
13.

WCI and WLLC failed to act with reasonable care when they made their

representations regarding making Mr. Schnurr a member of WLLC, paying him a percentage
of profits, paying him commissions and negotiating in good faith.
14.

Mr. Schnurr reasonably relied upon WCI's and WLLC's representations to his

detriment because he continued to work for WCI and WLLC when he could have worked
elsewhere at higher total compensation, and was not compensated for his work in the manner
that WCI and WLLC represented that he would be.
15.

As a result of Defendants' negligent misrepresentations, Mr. Schnurr suffered

and continues to suffer damages.
COUNT SIX: BREACH OF CONTRACT
1-2. Plaintiff realleges each allegation contained in paragraphs 1 through 2 of Count
One.
3.

In late 1998, as part of a compensation plan, WCI agreed to compensate Mr.

Schnurr with salary, bonus and a commission on gross revenue from new business in the

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Business (the "1998 Compensation Agreement"). The parties agreed to modify the 1998
Compensation Agreement in early 1999 so that Mr. Schnurr would be compensated with
salary, bonus, 5% of all profits from the Business, and an ownership interest in the Business
(the "1999 Compensation Agreement"). WLLC was organized to implement the 1999
Compensation Agreement.
4.

Mr. Schnurr substantially performed under the 1998 Compensation Agreement

and the 1999 Compensation Agreement.
5.

WCI, either directly or through its subsidiary, WLLC, breached the 1998

Compensation Agreement and 1999 Compensation Agreement by: (i) failing to grant the
ownership interest in the Business pursuant to the 1999 Compensation Agreement; (ii) failing
to pay any commission under the 1998 Compensation Agreement; and (iii) failing to pay a
percentage of profits under the 1999 Compensation Agreements for the years 2001, 2002, 2003
and half of 2004.
6.

As a result, Mr. Schnurr has suffered and continues to suffer damages.

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WHEREFORE, Plaintiff Rick D. Schnurr demands judgment and the following relief:
1.

Damages of $1,700,000;

2.

Punitive damages pursuant to C.G.S. § 42-110g;

3.

Attorneys' fees pursuant to C.G.S. § 42-110g;

4.

Costs;

5.

Interest; and

6.

Such other and further relief as this Court deems just and equitable.
JURY DEMAND

Pursuant to Fed. R. Civ. P. 38(b), Plaintiff Rick D. Schnurr hereby demands that all
triable issues in this matter be tried before a jury.
THE PLAINTIFF, Rick Schnurr

_________________________________________
Ward J. Mazzucco (ct05941)
Frances Codd Slusarz (ct24442)
Chipman, Mazzucco, Land & Pennarola, LLC
Attorney for Plaintiff
30 Main Street, Suite 204
Danbury, CT 06810
203 744-1929 phone
203 790-5954 fax
P:\Client (Active) Based Directories\Schnurr, Rick\litigation\Draft Complaint V4.doc

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