ELITE PERSONNEL, INC. v. PEOPLELINK, LLC
Filing
21
OPINION. Signed by Judge Jose L. Linares on 5/26/2015. (ld, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
ELITE PERSONNEL, INC.,
Civil Action No. 15-1173
Plaintiff,
V.
OPINION
PEOPLELINK, LLC,
Defendant.
JOSE L. LThJARES, U.S.D.J.
This matter comes before the Court upon motion by Defendant, PeopleLink, LLC, to
dismiss the Complaint (the “Motion to Dismiss”). (ECF No. II). Pursuant to Rule 78 of the
Federal Rules of Civil Procedure, no oral argument was heard. Upon consideration of the Parties’
submissions, and for the reasons stated below, Defendant’s Motion to Dismiss, (ECF No. 11), is
granted in part and denied in part.
I. BACKGROUND’
This is an action for breach of contract against Defendant arising out of a breach of its
contractual obligations to Plaintiff under an asset purchase agreement and promissory note.
(Complaint, ECF No. 1, ¶1).
In August 2012, Plaintiff, Elite Personnel, Inc., and Defendant,
PeopleLink entered into an Asset Purchase Agreement (the “APA”) pursuant to which Elite sold
‘The facts are taken primarily from Plaintiff’s Complaint, (ECF No. 1), and are properly accepted
as true for the purposes of this Opinion.
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all of its assets, properties and rights related to Plaintiff’s business (the “Purch
ased Assets”) to
Defendant for $6,400,000.00 (the “Purchase Price”). (Id. ¶11). Plaintiff’s
business consisted of
providing temporary staffing services, including, but not limited to, tempo
rary hire, temp-to-direct
hire, and direct hire, managed service and longterm staffing services, recruit
ing and placement
services, background checking services and skills assessment services primar
ily throughout the
State of New Jersey, and also in the States ofNew York and Pennsylvania
(“Plaintiff’s Busine
ss”).
(Id. ¶12), Defendant was required to pay $3,880,000.00 of the Purchase
Price in cash at closing
while the remaining $2,520,000.00 of the Purchase Price was eviden
ced by a promissory note
delivered by Defendant to Plaintiff in the principal amount of $2,520
,000, which required
Defendant to pay the $2,520,000.00, plus interest at a rate of three percen
t (3%) per annum, in
eight equal quarterly installment payments of $315,000.00 (the “Promissory
Note”). (Id. ¶J1 314). The first seven of these eight payments were made by Defendant.
The eighth payment
remains outstanding and is one issue of this litigation.
Pursuant to Section 2.02(b) of the APA, the principal amount due
under the Promissory
Note would be reduced in the event certain business targets were not reache
d by Defendant after
execution of the APA. Specifically:
[tjhe principal amount of the Note will be reduced, as of the end of
each Measurement Period (as defined below), by an amount equal
to sixty percent (60%) of any amount by which the Margin (as
defined below) for the Business as billed by Buyer during each of
two (2) twelve-month Measurement Periods (as defined below)
following the Closing is less than ninety-five (95%) of the Target
Margin for the corresponding twelve-month period. For purposes
of
this Agreement. (ii) “Measurement Period” will mean the twelve
month period beginning each October 1 and ending September 30
of the next calendar year; (iii) “Target Margin” will mean: (a) as it
relates to Measurement Period ending on September 30, 2013, Two
Million Four Hundred Thousand Dollars ($2,400,000.00); (b) as
it
relates to the Measurement Period ending September 30, 2014, Two
.
.
2
Million Five Hundred
($2,528,000.00).
Twenty-Eight
Thousand
Dollars
(Id. ¶17). Further, as a condition of permitting any reduction of
the amount due under the
Promissory Note as a result of Defendant’s failure to reach the busine
ss targets, it was agreed that
Defendant would not substantially change the operating methods by
which Plaintiff had conducted
its Business prior to execution of the APA. This was memorialized by
Defendant’s representation
and agreement in the APA that it had “all requisite power and author
ity to own, lease, and operate
properties used by the Business, to carry on the Business (as presently
being conducted)” (see Ex.
A,
§ 3.01) and that it would “not substantially change the compensation of any employee that was
employed by [Plaintiff] at the time of Closing without the consen
t of [Plaintiff].” (Id. ¶18). In
addition, Defendant could seek an adjustment of the Promissory
Note in the event it believed it
had not reached its target margin only if it provided Plaintiff with written
notice of the proposed
adjustment “not less than thirty (30) days prior to the date on which
the applicable quarterly
payment of the Note is due and payable[.]” (Id. ¶19). The relevan
t measurement period for the
Seventh Installment (due on November 25, 2014) and the Eighth Install
ment (due on February 25,
2015) was the period that began on October 1, 2013 and ended Septem
ber 30, 2014 (the “Second
Measurement Period”). (Id. ¶20).
Not until December 8, 2014, did Defendant advise Plaintiff for the
first time that it had
purportedly failed to reach its target margin for the Second
Measurement Period and that,
accordingly, the principal balance of the Promissory Note should
be reduced by $467,800. 15 (the
“December 8, 2014 Notice”). Defendant therefore advised Plainti
ff that it would reduce the
amount due under the Eighth Installment to $0. (Id. ¶24). Plainti
ff’s Complaint therefore claims
that Defendant remains obligated to pay the full amount of the Eighth
Installment of $315,000.00
that is due on February 25, 2015. (Id. ¶28). In addition, after execut
ion of the APA, Defendant
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substantially changed the operating methods of Plaintiffs Business by
substantially changing the
compensation of Plaintiffs former employees (now PeopleLink’s emplo
yees) without Plaintiffs
consent, which in turn substantially reduced the employees’ productivity.
(Id. ¶29). As such, if
Defendant did not reach the target margin for the Second Measurement
Period, Plaintiff claims it
was solely due to Defendant’s unilateral substantial change in the operati
ng methods of Elite’s
Business. (Id. ¶30). In lieu of filing an answer, Defendant moved to dismis
s Plaintiffs Complaint
claiming notice was timely under the APA and Plaintiffs claims for
breach of implied covenant
of good faith and fair dealing must be dismissed. Plaintiff opposes
only the former of Defendant’s
arguments.
II. LEGAL STANDARD
For a complaint to survive dismissal, it “must contain sufficient factual
matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.’ “AshcroJi’
v. Jqbal, 556 U.S. 62, 678
(2009) (citing Bell Ad. Corp. v. Twombly, 550 U.S. 544, 570
(2007)).
In determining the
sufficiency of a complaint, the Court must accept all well-pleaded
factual allegations in the
complaint as true and draw all reasonable inferences in favor of the non-m
oving party. See Phillips
v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008). Additionally
, in evaluating a plaintiffs
claims, generally “a court looks only to the facts alleged in the
complaint and its attachments
without reference to other parts of the record.” Jordan v. Fox, Rothsc
hild, O’Brien & Frankel, 20
F.3d 1250, 1261 (3dCir. 1994).
III. DISCUSSION
Defendant’s Motion to Dismiss is premised on three arguments.
First, Defendant claims
that because notice was provided more than thirty days before
the due date of the quarterly
payment, this notice was timely under the APA and there was no
breach of contract in this regard.
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(Brief, ECF No. Il-i at 6). Second, Defendant argues that Plaintiff’s claim
for breach of the
implied covenant of good faith and fair dealing should be dismissed becaus
e it is duplicative of
the breach of contract claim and has nonetheless, failed to be sufficiently plead.
(Id. at 7). Lastly,
Defendant claims that the parties agreed to a binding alternative dispute
2
resolution mechanism
under the express terms of the APA and therefore this provision should
be enforced. (Id. at 12).
For the reasons that follow, the Court grants Defendant’s Motion as to Plainti
ff’s claim for breach
of the implied covenant of good faith and fair dealing only.
The Court first notes that Defendant and Plaintiff hotly dispute whether
or not Defendant
provided timely notice under the APA. By the terms of the APA, Defend
ant could seek an
adjustment of the Promissory Note in the event it believed it had not reached
its target margin
only
if it provided Plaintiff with written notice of the proposed adjustment “not
less than thirty (30)
days prior to the date on which the applicable quarterly payment ofthe Note
is due and payable[.j”
(emphasis added) (Id. ¶19).
It appears that the relevant measurement period for the Eighth
Installment (due on February 25, 2015) was the period that began on Octobe
r 1, 2013 and ended
September 30, 2014. Defendant did not provide written notice to Plaintiff
until December 8,
2014,
so this argument fails. In any event, this is a question of fact which is not
appropriately tackled at
the motion to dismiss stage.
Further, as a condition of permitting any reduction of the amount due
under the
Promissory
Note as a result of Defendant’s failure to reach the business targets
, it was agreed that Defendant
would not substantially change the operating methods by which Plainti
ff had conducted its
business prior to execution of the APA. This was memorialized by
Defendant’s representation
2
The Court notes that such provision refers only to adjustment of the
payments by Defendant, not
to any breach of contract as to employees’ compensations.
5
and agreement in the APA that it had “all requisite power and authority to
own, lease, and operate
properties used by the Business, to carry on the Business (as presently being
conducted)” (see Ex.
A,
§ 3.01) and that it would “not substantially change the compensation of any employee that was
employed by [Plaintiff] at the time of Closing without the consen
t of [Plaintiff].” (Id. ¶18).
Plaintiff properly alleges that Defendant breached this provision
of the APA by altering
employees’ compensations. With this allegation in mind, and it being
clear that such is not the
subject of binding alternative dispute resolution, the Court will not
dismiss Plaintiffs breach of
contract claim.
However, the Court (and Plaintiff) agrees that Plaintiffs claim
for breach of implied
covenant of good faith and fair dealing should be dismissed. Although,
under New Jersey law,
every contract contains an implied covenant of good faith and fair dealing
, see Ati. City Racing
Ass ‘n v. Sonic Fin. Corp., 90 F. Supp. 2d 497, 510 (D.N.J. 2000),
courts have repeatedly
recognized that “a plaintiff cannot maintain a claim for breach of
the implied covenant of good
faith and fair dealing when the conduct at issue is governed by the
terms of an express contract or
the cause of action arises out of the same conduct underlying the
alleged breach of contract,” Hahn
v. OnBoard LLC, No. 09-3639, 2009 U.S. Dist. LEXIS 10760
6, at *15 (D.N.J. Nov. 16, 2009)
(citing Wade v. Kessler Inst., 172 N.J. 327, 339 (2002)). Plainti
ffs claims for breach of the
covenant of good faith and fair dealing are governed by the expres
s terms of the APA and Note
and they arise out of the same conduct underlying Plaintiffs claims
for breach of that agreement.
Thus, Plaintiff shall not be permitted to maintain separate claims
for breach of the implied covenant
of good faith and fair dealing with regard to the APA and the
Note, as they are duplicative of the
claims for direct breaches of those agreements. Plaintiff does
not deny this point and thus, the
Court dismisses Plaintiff’s claims for breach of implied covena
nt of good faith and fair dealing.
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IV. CONCLUSION
For the reasons stated above, Defendant’s Motion to Dismiss, (ECF No. ii), is granted
in
part and denied in part. An appropriate order accompanies this Opinion.
U.S.D.J.
May*.2O15
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