SCHOOL SPECIALTY, INC. v. FERRENTINO et al

Filing 79

OPINION. Signed by Judge Robert B. Kugler on 7/5/2016. (dmr)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
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SCHOOL SPECIALTY, INC.,
Plaintiff,
v.
THOMAS FERRENTINO and EDUCATION
OUTFITTERS, INC.,
Defendants.

Civ. No. 14-4507 (RBK/AMD)
OPINION

KUGLER, United States District Judge:
This case stems from alleged misappropriation of proprietary information and trade
secrets by Thomas Ferrentino (“Ferrentino”) during and after his employment at Plaintiff School
Specialty, Inc. (“Plaintiff”). Presently before the Court is Plaintiff’s Motion to Dismiss
Ferrentino’s Second Amended Counterclaim pursuant to Federal Rule of Civil Procedure
12(b)(6) (“Plaintiff’s Motion” [Dkt. No. 62]). For the reasons set forth below, Plaintiff’s Motion
to Dismiss will be GRANTED and Ferrentino’s Second Amended Counterclaim will be
DISMISSED WITH PREJUDICE.

I.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY
This Court outlined the factual background of Plaintiff’s Motion to Dismiss Ferrentino’s

First Amended Counterclaim in its prior opinion [Dkt. No. 51], reported at School Specialty, Inc.
v. Ferrentino, 2015 WL 9587619 (D.N.J. Dec. 30, 2015) (“MTD Opinion”). The relevant facts
are repeated here:
Plaintiff is an education company that supplies K through 12 schools with
instructional tools ranging from basic supplies and furniture to curriculums. The
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Complaint alleges that Ferrentino, a former Account Manager with Plaintiff,
misappropriated Plaintiff’s confidential and proprietary information and trade
secrets, bringing multiple claims, including, but not limited to, breach of duty of
loyalty, violation of the New Jersey Trade Secrets Act, tortious interference with
business relations, unfair competition, and unjust enrichment.
On January 30, 2015, Ferrentino filed an Answer and Amended Counterclaim
against Plaintiff seeking in excess of $5,000,000.00 in damages for sales he made
as an employee. According to Ferrentino, many of Plaintiff’s customers became
customers because of Ferrentino—they followed him when he began working for
Plaintiff in 1996 and remained Plaintiff’s customers for the entirety of Ferrentino’s
employ. From 2011 to 2013, Ferrentino generated approximately $10,500,000.00
in sales for Plaintiff. Ferrentino claims he is entitled to these sales because they
resulted from his prior relationship with Plaintiff’s customers. In addition,
Ferrentino was apparently not compensated for sales made between October 27,
2013 and January 6, 2014.
MTD. Op., 2015 WL 9587619 at *1–2 (citations omitted).
Plaintiff filed a Motion to Dismiss Ferrentino’s First Amended Counterclaim pursuant to
Federal Rule of Civil Procedure 12(b)(6), and this Court agreed that the counterclaim, as well as
the reply brief asserting unjust enrichment, failed to state a proper claim entitling Ferrentino to
damages. See generally id. Specifically, the Court found that there was “no context to
determine that it was unjust for Plaintiff to retain the benefits of Ferrentino’s sales while he was
employed with Plaintiff.” Id. at *2. The Court further held that “Ferrentino’s assertion that he is
entitled to the sales he generated for Plaintiff on 2011, 2012, 2013—without more—is
insufficient to give rise to a plausible claim to relief.” Id. The Court additionally noted that
“Ferrentino has offered no justification for his damages calculation other than asserting that he is
using the same theory as Plaintiffs, which is incorrect.” Id. at *2 n.2. Ferrentino was then
granted leave to amend his counterclaim and filed his Second Amended Counterclaim (“SAC”)
[Dkt. No. 53] on January 11, 2016. (See generally SAC.)
The SAC incorporates supplementary allegations in an attempt to support the claim for
unjust enrichment. It raises a new factual assertion that “Ferrentino as well as other
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representatives of Plaintiff were regularly furloughed in the last quarter of the year and rehired in
the first quarter of the ensuing year.” (SAC. ¶ 11.) Ferrentino contends that no compensation
has been received for any sales made during the furlough periods. (Id. ¶ 14.) Additionally,
Ferrentino alleges that the practice of furloughing was carried out “in order to present a better
profit and loss statement to investors to the detriment of Ferrentino.” (Id. ¶ 12.) According to
the Ferrentino, this practice represents a violation of the Sarbanes-Oxley Act of 2002, Pub. L.
No. 107-204, 116 Stat. 745. (Id. ¶ 12.) Ferrentino argues that this conduct demonstrates that
Plaintiff has been unjustly enriched beyond its rights. (Id. ¶ 17.) Plaintiff now moves to dismiss
the SAC.1

II.

LEGAL STANDARD
In considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the

court must confine its review to the face of the counterclaim. Barefoot Architect, Inc. v. Bunge,
632 F.3d 822, 835 (3rd Cir. 2011). The Court must accept the truth of well-pleaded factual
allegations and construe them in the light most favorable to the nonmoving party. Phillips v.
Cty. of Allegheny, 515 F.3d 224, 228 (3d. Cir. 2008). In other words, a [counterclaim] is
sufficient to withstand a motion to dismiss if it contains enough factual matter, accepted as true,
to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “The inquiry is not whether [a
counterclaimant] will ultimately prevail in a trial on the merits, but whether [he or she] should be
afforded an opportunity to offer evidence in support of [his or her] claims. In re Rockefeller Ctr.
Prop., Inc., 311 F.3d 198, 215 (3rd Cir. 2002). However, legal conclusions and “[t]hreadbare

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For the reasons expressed in a prior decision, (See Opinion (Dec. 16, 2014) [Dkt. No. 13] at
4–5), this Court exercises jurisdiction pursuant to 28 U.S.C. § 1332(a).
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recitals of the elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Iqbal, 556 U.S. at 640.
To determine whether a complaint is plausible on its face, courts conduct a three-part
analysis. Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010). First, the court must
“tak[e] note of the elements a plaintiff must plead to state a claim.” Id. (quoting Iqbal, 556 U.S.
at 675). Second, the court should identify allegations that, “because they are no more than
conclusions, are not entitled to the assumption of truth.” Id. at 131 (quoting Iqbal, 556 U.S. at
680). Finally, “where there are well-pleaded factual allegations, a court should assume their
veracity and then determine whether they plausibly give rise to an entitlement for relief.” Id.
(quoting Iqbal, 556 U.S. at 680). This plausibility determination is a “context-specific task that
requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556
U.S. at 679. A claim cannot survive where a court can infer only that a claim is merely possible
rather than plausible. Id.

III.

DISCUSSION
Plaintiff moves to dismiss the SAC pursuant to Federal Rule of Civil Procedure 12(b)(6)

on the grounds that it “[f]ails to plead any statute, common law claim, contractual claim, or legal
theory that entitles him to in excess of $5,000,000 in alleged damages.” (Pl.’s Mot. at 6.) As
will be explained, the Court finds that Ferrentino’s newly asserted facts, along with the realleged facts, are insufficient to furnish the basis for a cognizable cause of action. Ferrentino has
again failed to provide context that would permit a determination to be made that Plaintiff has
been unjustly enriched.
To state a claim for unjust enrichment in New Jersey, a plaintiff must allege “(1) that the
defendant has received a benefit from the plaintiff, and (2) that the retention of the benefit by the
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defendant is inequitable.” Hassler v. Sovereign Bank, 644 F. Supp. 2d 509, 519 (D.N.J. 2009)
(quoting Wanaque Borough Sewerage Auth. v. Twp. of W. Milford, 144 N.J. 564, 575 (1996))
(internal quotation marks omitted), aff’d, 374 F. App’x 341 (3d Cir. 2010). “The unjust
enrichment doctrine requires that plaintiff show that it expected remuneration from the defendant
at the time it performed or conferred a benefit on defendant and that the failure of remuneration
enriched defendant beyond its contractual rights.” Commerce Bancorp, Inc. v. BK Int’l Ins.
Brokers, Ltd., 490 F. Supp. 2d 556, 561 (D.N.J. 2007) (quoting VRG Corp. v. GKN Realty Corp.,
135 N.J. 539, 554 (1994)) (internal quotation marks omitted). As a quasi-contractual remedy, a
claim for unjust enrichment is permitted in the absence of a contract governing the relationship
of the parties where it can be shown that a reasonable expectation to compensation formed the
basis of a quasi-contract.2 See Scagnelli v. Schiavone, Civ. No. A. 09-3660 (MLC), 2012 WL
3578163, at *9 (D.N.J. Aug. 20, 2012), aff’d, 538 F. App’x 192 (3d Cir. 2013).
Ferrentino asserts that he was not compensated for any sales made during the term of his
alleged furlough and that those sales yielded a benefit to Plaintiff resulting in its unjust
enrichment. (SAC ¶ 14; Def.’s Opp. at 4.) The SAC is conspicuously devoid, however, of any
specificity regarding when exactly the furloughs occurred. (See SAC ¶ 11 (only discussing
quarters and not giving precise dates, or explaining in what years these furloughs occurred).) In
addition, the SAC contains no allegations detailing whether Ferrentino made sales or whether
Plaintiff transacted with clients brought by Ferrentino over the course of the furloughs.

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Ferrentino correctly states this proposition, and appears to argue that because there is no
contract, his claim may proceed. (Def.’s Opp. [Dkt. No. 66] at 2–3.) However, the lack of a
contract does nothing to advance the argument that his counterclaim sufficiently states a claim
for unjust enrichment, and Plaintiff does not appear to argue that as a basis in its motion.

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Therefore, the SAC fails to allege sufficient facts to plausibly show that Ferrentino conferred a
benefit or service on Plaintiff during the furlough periods for which he reasonably expected
remuneration.
Even assuming that Plaintiff did transact with clients originating from Ferrentino during
the period of the furlough, the SAC does not demonstrate that unjustness would proceed from
Plaintiff’s retention of profits attributable to those sales. As noted by Plaintiff, Ferrentino fails to
allege that there was an arrangement that entitled him to the benefits he is claiming. (See Pl.’s
Mot. at 7.) Thus, the Court cannot conclude based on the allegations of the SAC there was an
understanding among the parties that Ferrentino reasonably expected to be compensated for sales
made during that time. Absent such an understanding, the claim for unjust enrichment cannot
survive.
Similarly, the allegations that the furloughs violated the Sarbanes-Oxley Act are
insufficient to support a reasonable inference that Plaintiff was unjustly enriched beyond its
contractual rights. (SAC ¶¶ 11–12.) Ferrentino acknowledges that the violation is not asserted
in an attempt to seek civil damages or whistleblower status.3 (Def.’s Opp. at 5.) Instead,
Ferrentino argues that he references the Sarbanes-Oxley Act only to show “the violation of the
law in the conduct of [P]laintiff which, along with the other conduct directly against [Ferrentino]
shows that [P]laintiff has been unjustly enriched.” (Id.) However, this argument fails, as this
alleged Sarbanes-Oxley violation does nothing to sustain the plausibility of a claim for unjust
enrichment given the deficiency of facts demonstrating Ferrentino’s reasonable expectation to
remuneration for sales having taken place during the periods of his furlough.

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The Sarbanes-Oxley Act provides no private cause of action for an employee aside from a
whistleblower action. See 18 U.S.C. § 1514A.

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IV.

DISMISSAL WITH PREJUDICE
Finally, Plaintiff requests that this Court dismiss the SAC with prejudice. (Pl.’s Mot. at

9.) When a party seeks to amend its pleadings, “[t]he court should freely give leave when justice
so requires.” Fed. R. Civ. P. 15(a)(2). However, “[a] District Court has discretion to deny a
plaintiff leave to amend where the plaintiff was put on notice as to the deficiencies in his
complaint, but chose not to resolve them.” Krantz v. Prudential Invs. Fund Mgmt. LLC, 305
F.3d 140, 144 (3d Cir. 2002) (citing Rolo v. City Investing Co. Liquidating Trust, 155 F.3d 644,
654 (3d Cir. 1998)). Here, the Court has already given Ferrentino an opportunity to amend his
counterclaim to properly state a claim, yet the SAC suffers from similar deficiencies identified in
the Court’s prior opinion. See MTD Op., 2015 WL 9587619 at *2. Specifically, Ferrentino has
still failed to articulate a legal theory for damages, despite the Court’s earlier holding that the
First Amended Counterclaim offered “no context to determine that it was unjust for plaintiff to
retain the benefits of Ferrentino’s sales while he was employed with Plaintiff.” Id. at *2. Justice
does not require giving Ferrentino another chance in these circumstances. Thus, the Court
exercises its discretion to dismiss the SAC with prejudice.

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V.

CONCLUSION
For foregoing reasons, Plaintiff’s Motion to Dismiss will be GRANTED, and

Ferrentino’s Second Amended Counterclaim will be DISMISSED WITH PREJUDICE. An
appropriate order accompanies this opinion.

Date: July 5th , 2016

s/ Robert B. Kugler
ROBERT B. KUGLER, U.S.D.J.

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