Neill Corporation v. TSP Consulting, LLC
Filing
108
ORDER granting in part and denying in part 55 Motion to Dismiss; granting in part and denying in part 77 Motion to Dismiss for Failure to State a Claim; granting in part and denying in part 88 Motion to Dismiss; granting in part and denying in part 88 Motion for More Definite Statement; denying 92 Motion to Dismiss; denying 92 Motion for More Definite Statement. Signed by Judge Jay C. Zainey. (jrc)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
NEILL CORPORATION
CIVIL ACTION
VERSUS
NO: 15-964
TSP CONSULTING, LLC, ET AL.
SECTION: "A" (3)
ORDER
The following motions are before the Court: Motion to Dismiss Third Party
Complaint (Rec. Doc. 55) filed by Edwin H. Neill; Motion to Dismiss (Rec. Doc. 77)
filed by TSP Consulting, LLC (“TSPC”) and Thomas C. Petrillo (“Petrillo”); Motion to
Dismiss or Alternatively for a More Definite Statement (Rec. Doc. 88) filed by TSPC
and Petrillo; Motion to Dismiss or in the Alternative for More Definite Statement
(Rec. Doc. 92) filed by TSP Institute, Inc. (“TSPI”). All motions are opposed. The
motions are before the Court on the briefs without oral argument. 1
I.
Background
Neill Corp. has been an Aveda product distributor since 1979. Petrillo is a former
Aveda executive who now distributes Aveda products in Florida. Neil Corp. and its
principals, Debra Neill Baker and Edwin Neill, have had a business relationship with
1 TSPC and Petrillo have requested oral argument but the Court is not persuaded that
argument would be beneficial in light of the excessive amount of briefing that the parties
have filed in this case. The parties have made requests for leave to exceed the page limits
imposed by the Local Rules a common occurrence in this case, not only with the prior
motion to remand but also with the instant motions. Counsel for the parties are forewarned
that the Court is not inclined to grant such leave in the future.
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Petrillo for many years. When Neil Corp.’s founder passed away in 2004, Petrillo was
already an outside director of Neill Corp.
A crucial aspect of Neil Corp.’s business is its Distributorship Agreement with the
Aveda company. The current agreement was a ten year agreement and it is in effect
through June 30, 2019. It is the Court’s understanding that Neill and TSP, a company
owned by Petrillo, together have the Distributorship Agreement with Aveda; TSP has a
minority interest. Petrillo has his own distributorship agreement with Aveda covering
parts of Florida.
The parties do not dispute that in 2010 Neill Corp. and its affiliate companies fell
upon hard times and sought business help from Petrillo. Petrillo's expertise lies in
helping others in the beauty industry to become more successful. (Rec. Doc. 2, TSPC
Answer, Counterclaim, and Third-party Demand & 36). Petrillo formed TSPC as a
consulting company to market his expertise in the beauty industry. Neill Corp. and its
affiliates, Beauty Basics, Inc., Vital Information Systems, Inc., and Neill Technologies
entered into a Consulting Agreement (Rec. Doc. 1-1 Exhibit A) with TSPC so that the
Neill Companies could benefit from the expertise and services of Petrillo, the principal of
TSPC. According to the Neill parties, one of the goals of this arrangement was to
advance Neill Corp.’s relationship with Aveda. (Rec. Doc. 68, Amend. Comp. ¶ 9). The
Consulting Agreement shifted daily operational control of the Neill entities to Petrillo. (Id.
¶ 10). Having Petrillo protect and ultimately extend the agreement with Aveda was of
critical importance to the Neill companies in contracting for Petrillo’s services. The Neill
companies here in Louisiana and Petrillo’s companies in Florida also entered into
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various symbiotic and advantageous relationships that involved sharing resources,
including employees.
Neill Corp. initiated this litigation in state court against defendant TSPC. The
petition was one for declaratory relief only. Neill Corp. alleged that Petrillo, as TSPC’s
sole member/employee, had violated the terms of the Consulting Agreement by
engaging in certain self-dealing conduct, in essence trying to usurp control of Neill’s
Distributorship Agreement with Aveda. (Rec. Doc. 1-2, Petition ¶ 7). Neill Corp. sought a
judicial determination that Petrillo's actions constituted "Material Actions" under the
Consulting Agreement that were not subject to cure, thereby triggering cancellation
provisions in the Consulting Agreement that favored the Neill entities. According to
TSPC, Neill Corp. was trying to manufacture cause in order to prematurely terminate the
Consulting Agreement without financial penalties. (Rec. Doc. 2, TSPC Answer,
Counterclaim, and Third-party Demand && 56-57).
TSPC removed the action to this Court on the basis of diversity jurisdiction. The
Court denied Neill Corp.’s motion to remand on June 22, 2015 (Rec. Doc. 34).
II.
Discussion
What started as a simple and straightforward case in state court is now a morass
of counter-claims and third-party demands which evince the parties’ desire to harass
each other in any way possible including via this litigation. 2 Beauty Basics, Inc., Vital
2
On July 2, 2015, the Court granted the parties’ joint motion to stay the litigation and close it
so that the parties could engage in settlement negotiations. (Rec. Docs. 38 & 39). The Court
was encouraged by the reasonableness of this course of action because this case is one that
should settle for business reasons.
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Information Systems, Inc., Neill Technologies, Edwin H. Neill, III, Thomas C. Petrillo,
and TSP Institute, Inc. have all been joined as additional parties in this case. In
response to the plethora of allegations and claims that have been made, the parties now
call upon the Court to test the legal validity of each claim that every other party in the
case is asserting against them. The Court has reviewed all of the parties’ arguments
and will address only those suited to disposition via a Rule 12(b) motion.
In the context of a motion to dismiss the Court must accept all factual allegations
in the complaint as true and draw all reasonable inferences in the plaintiff=s favor.
Lormand v. US Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009) (citing Tellabs, Inc. v.
Makor Issues & Rights, Ltd., 551 U.S. 308 (2007); Scheuer v. Rhodes, 416 U.S. 232,
236 (1974); Lovick v. Ritemoney, Ltd., 378 F.3d 433, 437 (5th Cir. 2004)). However, the
foregoing tenet is inapplicable to legal conclusions. Ashcroft v. Iqbal, 129 S. Ct. 1937,
1949 (2009). Thread-bare recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice. Id. (citing Bell Atlantic Corp. v. Twombly,
550, U.S. 544, 555 (2007)).
The central issue in a Rule 12(b)(6) motion to dismiss is whether, in the light most
favorable to the plaintiff, the complaint states a valid claim for relief. Gentilello v. Rege,
627 F.3d 540, 544 (5th Cir. 2010) (quoting Doe v. MySpace, Inc., 528 F.3d 413, 418
(5th Cir. 2008)). To avoid dismissal, a plaintiff must plead sufficient facts to Astate a
claim for relief that is plausible on its face.@ Id. (quoting Iqbal, 129 S. Ct. at 1949). AA
claim has facial plausibility when the plaintiff pleads factual content that allows the court
to draw the reasonable inference that the defendant is liable for the misconduct
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alleged.@ Id. The Court does not accept as true Aconclusory allegations, unwarranted
factual inferences, or legal conclusions.@ Id. (quoting Plotkin v. IP Axess, Inc., 407 F.3d
690, 696 (5th Cir. 2005)). Legal conclusions must be supported by factual allegations.
Id. (quoting Iqbal, 129 S. Ct. at 1950).
Motion to Dismiss (Rec. Doc. 55) filed by Edwin Neill
TSPC filed a third-party demand against Edwin Neill personally for declaratory
judgment and breach of contract. (Rec. Doc. 2). Neill contends that he was not a party
to the Consulting Agreement and therefore is not amenable to suit. Neill admits that he
signed a Side Letter but he contends that the Side Letter absolves him of any personal
liability in this matter. TSPC responds that its claims are not based on the Consulting
Agreement itself but on the Side Letter, which does not absolve Neill of personal
liability. 3
The motion is GRANTED as to any claims brought under the Consulting
Agreement itself and DENIED as to any claims brought under the Side Letter that Neill
signed in what appears to be his personal capacity.
Motion to Dismiss (Rec. Doc. 77) filed by TSPC and Thomas C. Petrillo
Motion to Dismiss (Rec. Doc. 88) filed by TSPC and Thomas C. Petrillo4
The motion is DENIED insofar as TSPC and Petrillo move to dismiss the request
3
To the Court’s dismay, no party thought to attach a copy of the Side Letter to the motion,
opposition, or reply, instead directing the Court’s attention to the in globo Exhibit E
appended to Attachment 1 of the Notice of Removal. Attachment 1 to the Notice is 115
pages. Exhibit E spans pages 96-115 of the attachment and actually contains several
letters. The Court assumes that the letter at issue is the one located at pages 100-103 of
Attachment 1.
4
Motion to dismiss 88 adopts the legal arguments presented in motion to dismiss 77 but
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for declaratory relief, and the claims for breach of contract and repudiation.
The motion is GRANTED as to any claims for breach of a fiduciary duty owed by
TSPC. All contracts must be performed in good faith, and the conduct of all parties to
the contract is governed by the standard of good faith. Terrebonne Concrete, LLC v.
CEC Enters., LLC, 76 So. 3d 502, 509 (La. App. 1st Cir. 2011) (citing La. Civ. Code arts.
1759, 1983). This principle alone, however, does not serve to elevate a contractual
relationship to a fiduciary relationship between the parties. Id.
The motion is DENIED as to any claims for breach of a fiduciary duty owed by
Petrillo individually. Corporate officers and directors owe a fiduciary duty to their
corporation and its shareholders. Id. (citing La. R.S. §§ 12:91(A), 12:226(A)). The
defining characteristic of a fiduciary relationship is the special relationship of confidence
or trust imposed by one in another who undertakes to act primarily for the benefit of the
principal in a particular endeavor. Id. A fiduciary cannot further his own interests and
enjoy the fruits of an advantage taken of such a relationship and must make a full
disclosure of all material facts surrounding the transaction that might affect the decision
of his principal. Id. (citing Plaquemines Parish Comm’n Council v. Delta Dev. Co., Inc.,
502 So. 2d 1034, 1040 (La. 1987)).
The motion is DENIED as to the claim for tortious interference with contract.
The motion is DENIED as to Count 7 of Beauty Basics, Inc.’s (“BBI”) claim for
conversion against Petrillo personally.
applies them to the claims asserted by BBI. Motion to dismiss 88 additionally challenges
Count 7 if BBI’s pleading. The motions will be referred to collectively in the singular.
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Motion to Dismiss (Rec. Doc. 92) filed by TSPI
The motion is DENIED as to Count 8 regarding the employee lease agreement
between BBI and TSPI because the Court is not persuaded that the claim is governed
by ERISA. The Court is likewise not persuaded that the allegations are impermissibly
vague.
Accordingly, and for the foregoing reasons;
IT IS ORDERED that the Motion to Dismiss Third Party Complaint (Rec. Doc.
55) filed by Edwin H. Neill is GRANTED IN PART AND DENIED IN PART;
IT IS FURTHER ORDERED that the Motion to Dismiss (Rec. Doc. 77) filed by
TSP Consulting, LLC (“TSPC”) and Thomas C. Petrillo (“Petrillo”) is GRANTED IN
PART AND DENIED IN PART;
IT IS FURTHER ORDERED that the Motion to Dismiss or Alternatively for a
More Definite Statement (Rec. Doc. 88) filed by TSPC and Petrillo is GRANTED IN
PART AND DENIED IN PART;
IT IS FURTHER ORDERED that the Motion to Dismiss or in the Alternative
for More Definite Statement (Rec. Doc. 92) filed by TSP Institute, Inc. (“TSPI”) is
DENIED.
April 18, 2016
_______________________________
JAY C. ZAINEY
UNITED STATES DISTRICT JUDGE
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