STANTON et al v. GREENSTAR RECYCLED HOLDINGS, L.L.C. et al

Filing 44

MEMORANDUM OPINION filed. Signed by Judge Mary L. Cooper on 8/2/2012. (eaj)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
JOHN STANTON, et al.,
Plaintiffs,
v.
GREENSTAR RECYCLED HOLDINGS,
L.L.C., et al.,
Defendants.

:
:
: CIVIL ACTION NO. 10-5658 (MLC)
:
:
MEMORANDUM OPINION
:
:
:
:
:
:
:

COOPER, District Judge
Plaintiffs, John Stanton and Harv Straus (collectively,
“Plaintiffs”), commenced this action in New Jersey Superior Court
against defendants, Greenstar Recycled Holdings, L.L.C. (“GRH”)
and Greenstar, LLC (“Greenstar” and collectively with GRH,
“Defendants”), alleging claims for breach of contract with
respect to Plaintiffs’ employment agreements and seeking a
judgment declaring that restrictive covenants contained in the
employment agreements are unreasonable, unduly burdensome and not
enforceable.

(Dkt. entry no. 1, Rmv. Not., Ex. A, Compl.)

On

March 31, 2011, the District Court granted Defendants’ motion to
dismiss with prejudice parts of the Complaint, and remanded the
action to state court.

(Dkt. entry no. 16, 3-31-11 Mem. Op.;

dkt. entry no. 17, 3-31-11 Order.)

The Court, on a motion for

reconsideration, subsequently vacated the 3-31-11 Order, and

granted Plaintiffs leave to re-plead Counts I-IV in an amended
pleading.

(Dkt. entry no. 23, 8-29-11 Order.)

This action was reassigned to the undersigned on December
27, 2011.

(Dkt. entry no. 31, 12-27-11 Order Reassigning Case.)

On January 18, 2012, Plaintiffs filed the Second Amended
Complaint, which asserts the four counts contemplated by the 829-11 Order vacating the dismissal of certain claims with
prejudice:

(1) breach of contract - failure to pay two-year

bonuses; (2) breach of contract - failure to pay five-year
bonuses; (3) breach of contract - failure to provide vacation pay
to John Stanton; and (4) declaratory judgment - restrictive
covenants.

(Dkt. entry no. 36, 2d Am. Compl.)

Defendants now move to dismiss Count 1 insofar as it alleges
breach of contract for failure to pay a “$25,000 single stream
bonus,” and Count 2 in its entirety, for failure to state a claim
on which relief can be granted, pursuant to Federal Rule of Civil
Procedure (“Rule”) 12(b)(6).
Def. Br. at 2-3.)

(Dkt. entry no. 37, Mot. Dismiss &

Defendants also move to dismiss Count 4

insofar as it is asserted by Straus for lack of subject matter
jurisdiction, pursuant to Rule 12(b)(1), on the basis that the
restrictive covenant challenged in that claim has expired and
thus there is no case or controversy requiring resolution.
Br. at 2-3.)

2

(Def.

The Court decides the motion on the submissions of the
parties, without oral argument, pursuant to Local Civil Rule
78.1(b).

For the reasons stated herein, the Court will deny the

motion with respect to Count 1 and Count 2, and grant the motion
with respect to Count 4.

Furthermore, the Court will sua sponte

consider the question of mootness of Count 4 with respect to
Stanton, and dismiss that claim with respect to both Plaintiffs.
I.

Background - Employment Agreements
Stanton and Straus were principals of Global Recycling

Solutions, LLC (“Global”), which was acquired pursuant to an
asset purchase agreement (“APA”) by Greenstar New Jersey, LLC, in
July 2008.

(2d Am. Compl. at ¶ 7.)

The acquisition included

Global’s recycling operations at the Monmouth County Reclamation
Center (“MCRC”).

(Id. at ¶ 9.)

By the terms of the APA,

Plaintiffs entered into Employment Agreements with Recycled
Holdings, LLC, to assist with the transition, including
operations at MCRC.

(Id. at ¶¶ 10-11 & Ex. A, Stanton Employment

Agreement; Ex. B, Straus Employment Agreement (“Employment
Agreements”).)

Recycled Holdings, LLC, was subsequently acquired

by GRH, and became a subsidiary of Greenstar.
¶¶ 16-17.)
Agreements.

(2d Am. Compl. at

Thus, GRH is now party to Plaintiffs’ 2008 Employment
(Id. at ¶ 17; Def. Br. at 4.)

3

A.

Bonus Provisions

The Employment Agreements contained provisions conditioning
Plaintiffs’ receipt of certain “Special Bonuses” upon meeting
specified performance milestones.

(2d Am. Compl. at ¶ 35.)

The

“Two-Year Milestones” established that Plaintiffs would receive
(1) a $25,000 bonus for the installation of “single stream”
recycling at MCRC (“single stream bonus”); (2) a $25,000 bonus
for achieving a Total Recordable Incidence Rate below five at
MCRC; and (3) a $75,000 bonus for Plaintiffs’ reaching a volume
of 500 tons per month of net new business since January 1, 2008.
(Id.)1

The “Five-Year Milestones” provided for (1) a $75,000

bonus if Plaintiffs achieved a volume of 1,500 tons per month of
net new business since January 1, 2008 (“tonnage bonus”); and (2)
a $50,000 bonus if Plaintiffs successfully obtained a new fiveyear contract with Monmouth County (“renewal bonus”).

(Id.)

Count 1 of the Second Amended Complaint alleges that
Defendants breached the Employment Agreement by refusing to pay
each of the two-year bonuses.

(Id. at ¶ 153.)

Specifically with

respect to the single stream bonus, Plaintiffs allege that
“Defendants intentionally frustrated the intent of the Employment
Agreements by making it impossible for Stanton and Straus to

1

“Single stream” recycling refers to recycling technology that
allows consumers to collect all their recyclables in one
container for collection and processing, as opposed to requiring
consumers to separate recyclables by type of material. (2d Am.
Compl. at ¶ 32.)
4

achieve this bonus by, among other things, not installing the
Single Stream screen . . . even after purchasing it for the MCRC
but then intentionally and in bad faith divert[ing] it to another
facility.”

(Id. at ¶ 150.)

Plaintiffs allege in Count 2 that

Defendants breached the Employment Agreement by refusing to pay
each of the five-year bonuses.

(Id. at ¶ 166.)

With respect to

the tonnage bonus, Plaintiffs allege that they met the milestone
as of 2010, and “are entitled to that payment within 60 days of
the Five Year Milestone Date.”

(Id. at ¶ 163.)

With respect to

the renewal bonus, Plaintiffs allege that “by rejecting the New
Global County Contract . . . [Defendants] intentionally and in
bad faith unfairly frustrated the bonus provisions of the
Employment Agreements by making it impossible and/or
impracticable for [Plaintiffs] to achieve” the renewal bonus.
(Id. at ¶ 165.)
B.

Non-Competition Covenants

The Employment Agreements also contained “non-competition
covenants,” prohibiting Plaintiffs from engaging in certain
business practices for a two-year period following the date of
termination of their employment from GRH anywhere within 200
miles of any GRH facility (Stanton) or within 100 miles of such
facility (Straus).

(Id. at ¶¶ 24-29.)

Straus was terminated without cause from GRH effective June
26, 2009.

(Id. at ¶ 71.)

Stanton was terminated without cause

5

from GRH effective June 21, 2010.

(Id. at ¶ 74.)

In Count 4,

Plaintiffs seek a judgment declaring that the non-competition
covenants are null and void because they do not protect a
legitimate interest of Defendants, impose an undue hardship on
Plaintiffs, and injure the public interest.
II.

(Id. at ¶ 186.)

Motion to Dismiss Standard
A.

Rule 12(b)(6)

In addressing a motion to dismiss a complaint under Rule
12(b)(6), the Court must “accept all factual allegations as true,
construe the complaint in the light most favorable to the
plaintiff, and determine, whether under any reasonable reading of
the complaint, the plaintiff may be entitled to relief.”
Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008).
At this stage, a “complaint must contain sufficient factual
matter, accepted as true to ‘state a claim to relief that is
plausible on its face.’

A 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 alleged.”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
“[W]here the well-pleaded facts do not permit the court to infer
more than the mere possibility of misconduct, the complaint has
alleged--but it has not ‘show[n]’--that the ‘pleader is entitled
to relief.’”

Iqbal, 556 U.S. at 679 (quoting Rule 8(a)(2)).

6

The Court, in evaluating a Rule 12(b)(6) motion to dismiss
for failure to state a claim, may consider the complaint,
exhibits attached thereto, matters of public record, and
undisputedly authentic documents if the plaintiff’s claims are
based upon those documents.

See Pension Benefit Guar. Corp. v.

White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993).

The

Employment Agreements are attached to the Second Amended
Complaint and provide the basis for Plaintiffs’ claims, and will
be considered by the Court in deciding the motion.
B.

Rule 12(b)(1)

A motion to dismiss an action under Rule 12(b)(1) raises the
question of the Court’s subject matter jurisdiction over the
action.

A complaint must be dismissed for lack of subject matter

jurisdiction if no “case or controversy” exists, as required by
Article III of the United States Constitution.

Cospito v.

Califano, 89 F.R.D. 374, 379 (D.N.J. 1981) (citing Baker v. Carr,
369 U.S. 186, 198 (1962)).

Defendants’ challenge to the Court’s

subject matter jurisdiction over Count 4, pertaining to the
enforceability of the non-competition covenants, constitutes a
facial attack “directed to the sufficiency of the pleading as a
basis for subject matter jurisdiction,” and therefore the Court
must accept the allegations in the Second Amended Complaint as
true for purposes of resolving the motion.

See Duruaku v. BB&T

Bank, No. 05-5285, 2006 WL 1805887, at *2 (D.N.J. June 29, 2006).

7

A claim fails to present a case or controversy and is
constitutionally moot where “it is impossible for the court to
grant any effectual relief.”

Church of Scientology of Cal. v.

United States, 506 U.S. 9, 12 (1992).

“To avoid mootness, a

claim must (1) present a real legal controversy, (2) genuinely
affect an individual, and (3) have sufficiently adverse parties.”
Cinicola v. Scharffenberger, 248 F.3d 110, 118-19 (3d Cir. 2001).
III. Analysis
A.

Count 1 - Two-Year “Single Stream” Bonus

Count 1 of the Second Amended Complaint alleges, inter alia,
that “Plaintiffs are entitled to the $25,000 Single Stream twoyear bonus because Defendants . . . [made] it impossible for
Stanton and Strauss to achieve this bonus by . . . not installing
the Single Stream screen.”

(2d Am. Compl. at ¶ 150.)

They

further state that “Defendants unforeseeably failed to install
the screen even after purchasing it for the MCRC.”

(Id.)

To

state such a claim, Plaintiffs must plead (1) a contract, (2) a
breach of the contract, (3) damages resulting from the breach,
and (4) that the party alleging the breach performed its own
contractual duties.

Video Pipeline, Inc. v. Buena Vista Home

Entm’t, Inc., 210 F.Supp.2d 552, 561 (D.N.J. 2002).
Defendants contend that as a matter of contract law,
Plaintiffs have failed to state a claim with respect to the
single stream bonus because they admit that they did not satisfy

8

the condition precedent contained in the Employment Agreements of
installment of the single stream technology at MCRC.

(Def. Br.

at 8; 3-31-11 Mem. Op. at 7; dkt. entry no. 20, Pl. Br. Supp.
Mot. for Reconsideration at 7 n.3 (“Plaintiffs have not achieved
the remaining two-year milestone requiring installation of a
single stream recycling screen because Defendants diverted the
screen from the MCRC to another Greenstar facility outside of New
Jersey.”).)

They further argue that nothing in the Employment

Agreements required GRH to install such a screen regardless of
whether one had been obtained.

(Def. Br. at 8; see also

Employment Agreement at Section 3.1(d)(I);.)

Plaintiffs respond

that they have alleged a viable claim because the fact that the
screen was not installed at MCRC was due to the bad faith of
Defendants.

(Dkt. entry no. 40, Pl. Br. at 9.)

A covenant of good faith and fair dealing is implied in
every contract in New Jersey, and implied covenants are as
effective components of an agreement as those that are express.
Wilson v. Amerada Hess Corp., 168 N.J. 236, 244 (2001); see also
Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 421 (1997)
(“In every contract there is an implied covenant that neither
party shall do anything which will have the effect of destroying
or injuring the right of the other party to receive the fruits of
the contract.”).

Where a contract vests one party with

discretion, that party “must exercise discretion reasonably and

9

with proper motive,” not arbitrarily, capriciously, or in a
manner inconsistent with the reasonable expectation of the
parties.

Wilson, 168 N.J. at 247, 251.

The Court finds that Plaintiffs’ allegations regarding the
reason for their inability to satisfy the condition precedent
allow this claim to survive the motion to dismiss.

Although the

3-30-11 Opinion dismissed Count VI of the Amended Complaint,
which alleged a stand-alone claim for breach of the implied
covenant of good faith and fair dealing, it did not address the
single stream bonus in doing so.

(3-30-11 Mem. Op. at 8-9.)

Defendants analogize to the contract renewal bonus in arguing
that the single stream bonus reserved discretion to GRH with
respect to installation of the single stream screen, by the
Employment Agreements’ specification that such screen must be
installed “to the company’s satisfaction.”

(Def. Br. at 8.)

However, the Court finds that a reading of the Employment
Agreements indicates that the parties all expressly contemplated
that the single stream screen would be installed at MCRC,
notwithstanding the “to the company’s satisfaction” language, and
Plaintiffs have alleged that Defendants “intentionally frustrated
the intent of the Employment Agreements by making it impossible
for [Plaintiffs] to achieve this bonus by . . . not installing
the Single Stream screen. . . . [and] divert[ing] it to another
facility.”

(2d Am. Compl. at ¶ 150.)

10

Furthermore, as noted

above, it is incumbent on a party vested with discretion to
exercise such discretion in a reasonable manner, and Plaintiffs
have alleged that Defendants failed to do so.

See Wilson, 168

N.J. at 251 (stating that the implied covenant of good faith and
fair dealing is breached where “a party exercising its right to
use discretion . . . exercises its discretionary authority
arbitrarily, unreasonably, or capriciously, with the objective of
preventing the other party from receiving its reasonably expected
fruits under the contract.”).
The Court will therefore deny the motion insofar as it seeks
to dismiss with prejudice the part of Count 1 pertaining to the
$25,000 single stream bonus.

The claims for the other two-year

bonuses set forth in the Employment Agreements also remain
pending in Count 1.
B.

Count 2 - Five-Year Bonuses

Count 2 of the Second Amended Complaint asserts a breach of
the Employment Agreements’ promise to pay two separate five-year
bonuses conditioned on certain milestones being met.
Compl. at ¶ 166.)

(2d Am.

Defendants contend that Count 2 insofar as it

pertains to the $50,000 county contract renewal bonus must be
dismissed because it is undisputed that the Plaintiffs did not
achieve that milestone; Plaintiffs concede that the contract was
never renewed.

(Def. Br. at 9.)

Defendants further argue that

Count 2 insofar as it concerns the $75,000 tonnage bonus must be

11

dismissed because the Employment Agreements clearly and
unambiguously state that whether the tonnage condition precedent
has been satisfied “is to be determined on July 2, 2013.”

(Id.

at 12.)
Plaintiffs respond that they have pleaded that they achieved
the tonnage bonus as of sometime in 2010, and that the Employment
Agreements expressly contemplate that the five-year bonuses are
payable if achieved “prior to” the “Five-Year Milestone Date.”
(2d Am. Compl. at ¶¶ 163-65; Pl. Br. at 16-20.)

They further

argue that the renewal bonus was not met because the Defendants,
in bad faith, refused to execute the renewal contract, and
furthermore that the Employment Agreements only require that
Plaintiffs “obtain” such renewal contract, not that GRH actually
execute it.
1.

(Pl. Br. at 20-21.)
Tonnage Bonus

The Court finds that the interest in judicial efficiency
counsels against dismissal without prejudice of the part of Count
2 asserting a breach of the Employment Contracts insofar as
Defendants refuse to pay the tonnage bonus.

The plain language

of the Employment Agreements indicates that the five-year bonuses
are not payable until “within 60 days after the fifth anniversary
of” the date of execution of the Employment Agreements, or July
2, 2013.

(Employment Agreement at Section 3.1(ii).)

However,

such bonuses are ultimately payable at such time if either

12

milestone was “achieved on or prior to” that date, and Plaintiffs
have alleged facts supporting their claim that they achieved the
condition precedent to being paid the tonnage bonus sometime in
2010.

(2d Am. Compl. at ¶¶ 159-64.)

There is no indication in

the record that Defendants have any intention of paying
Plaintiffs the tonnage bonus, insofar as they deny that
Plaintiffs satisfied the threshold that would entitle them to the
tonnage bonus.

(Dkt. entry no. 38, Def. Am. Ans. to 2d Am.

Compl. at ¶¶ 154-66.)

Plaintiffs will be permitted to supplement

their pleading after such time as the tonnage bonus becomes due
to reflect whether nonpayment of the tonnage bonus occurs.
2.

Renewal Bonus

The contract language covering the renewal bonus reserves
discretion to GRH to accept or reject any proposed renewal
contract insofar as the putative contract’s “[t]erms . . . must
be acceptable to the Company,” and the Employment Agreements
themselves do not require GRH to accept a contract negotiated on
its behalf by Plaintiffs.

(See 3-31-11 Mem. Op. at 7; Employment

Agreement at Section 3.1(d)(ii).)

Plaintiffs’ pleadings concede

that the contract renewal milestone was not achieved.
Compl. at ¶¶ 134, 165.)

(2d Am.

Thus, Defendants contend that Plaintiffs

cannot state a claim for breach of contract for Defendants’
failure to pay that bonus, insofar as Plaintiffs failed to meet
the condition precedent.

13

Plaintiffs respond that (1) they have pleaded that
Defendants “arbitrarily, capriciously and unreasonably refused to
execute the new five-year agreement” despite numerous efforts by
the Plaintiffs to negotiate a renewal contract with terms
acceptable to Defendants as contemplated by the Employment
Agreements, and (2) the term “‘obtaining a new contract with the
County of Monmouth’ which is ‘acceptable to the Company’” is
ambiguous, insofar as Plaintiffs contend that term can be
reasonably understood to encompass their negotiations with the
County, but Defendants contend must be understood to require that
a contract actually have been “executed.”

(Pl. Br. at 19-20; 2d

Am. Compl. at ¶¶ 101-136, 165.)
Whether a contractual provision is ambiguous is a question
of law for the Court, requiring the Court to consider, based on
the plain language in the contract, whether it is subject to
reasonable alternative interpretations.

Nye v. Ingersoll Rand

Co., 783 F.Supp.2d 751, 759 (D.N.J. 2011).

Furthermore, “if the

relevant terms in a contract are ambiguous, the issue must go to
a jury.”

Emerson Radio Corp. v. Orion Sales, Inc., 253 F.3d 159,

163 (3d Cir. 2001).

The Court finds that to the extent

Plaintiffs allege a breach of the express terms of the renewal
bonus, ambiguity of the contract language augurs against
dismissal.

Specifically, we find that the term “[t]he obtaining

of a new contract” in the renewal bonus language is ambiguous,

14

insofar as it is not clear whether it requires that a putative
contract be actually executed by Defendants, or simply negotiated
and presented to Defendants for their approval.
Agreement at Section 3.1(d)(ii).)

(Employment

It is therefore plausible that

the contract renewal negotiations detailed in Plaintiffs’
pleading, paired with the allegations pertaining to Defendants’
allegedly unreasonable rejection of the contract terms negotiated
by Plaintiffs, state a claim for breach of contract with respect
to the renewal bonus.

(2d Am. Compl. at ¶¶ 101-36, 165-66.)

See, e.g., Barton v. RCI, LLC, No. 10-3657, 2011 WL 3022238, at
*8 (D.N.J. July 22, 2011) (allowing breach of contract claim to
proceed based on finding that “confusion exists with respect to
the application of the ‘network integrity’ clause”).
The Court further notes that it will not dismiss the breach
of contract claim pertaining to the renewal contract bonus for
lack of ripeness, for the same concerns of judicial efficiency
discussed above with respect to the tonnage bonus claim.

The

Court will therefore deny the motion to dismiss insofar as it
seeks dismissal of the part of Count 2 pertaining to the renewal
bonus.
C.

Count 4 - Non-Competition Covenants

The Employment Agreements each contain a non-competition
restrictive covenant precluding Plaintiffs from engaging in
certain business practices for two years following the date of

15

termination.
Section 7.1.)

(2d Am. Compl. at ¶ 24; Employment Agreement at
The Employment Agreements further provide that the

“two-year Non-Competition Period may be extended by the Company
for an additional year upon written notice given to Employee
within 18 months following the date of termination and provided
the Company continues payment to Employee of Base Salary” as set
forth in the agreement.

(Employment Agreement at Section 7.4.)

Defendants contend that Count 4 is moot with respect to Straus,
because the two-year non-compete period expired as of June 26,
2011.

(Def. Br. at 14.)

It appears to the Court that the two-

year non-compete period expired as of June 21, 2012, with respect
to Stanton.

(See 2d Am. Compl. at ¶ 74.)

Plaintiffs state in their opposition that they would agree
that Straus’s covenant not to compete is moot in this action if
Defendants conceded that “(1) the non-compete covenant has
expired, and (2) Straus’ non-compete covenant cannot be extended
by Defendants or other affiliates for any reason.”
22.)

(Pl. Br. at

Defendants conceded both of these points in their reply.

(Dkt. entry no. 41, Def. Reply Br. at 8.)

As a matter of law, a

claim seeking a declaratory judgment providing relief from a
contractual provision, court order, or the like, becomes moot
when the provision expires by its own terms.

See Desi’s Pizza,

Inc. v. City of Wilkes-Barre, 321 F.3d 411, 428 (3d Cir. 2003)

16

(citing Hodges v. Schlinkert Sports Assocs., 89 F.3d 310, 312
(6th Cir. 1996)).
The Court observes that to the extent Plaintiffs suggest
that an actual claim or controversy may still exist due to the
contractual provisions in the Employment Agreements permitting
extension of the non-compete period, Plaintiffs have not alleged
that Defendants have provided the notice contemplated in Section
7.4 of the Employment Agreements as a prerequisite to extending
the non-compete period beyond a two-year term.

Thus, there

appears to be no contractual basis on which Defendants could at
this point invoke the 18-month extension of the non-compete
period with respect to either plaintiff.

Were Defendants to

attempt to invoke that extension, they would be estopped from
doing so after making the representations discussed above.

(Def.

Reply Br. at 8; Pl. Br. at 22.)
We therefore find that the validity or enforceability of the
Non-Competition Covenants, insofar as they have expired on their
own terms with respect to both Plaintiffs, presents no live case
or controversy over which the Court could exercise its
jurisdiction.

The Non-Competition Covenant in Straus’s

Employment Agreement is no longer enforceable on its own terms,
and Count 4, seeking a declaratory judgment, is moot as to
Straus.

Cf. Cinicola, 248 F.3d at 119 (holding physicians’

claims not constitutionally moot where potential contractual

17

obligations remained).

The Court finds no basis for concluding

that the same reasoning would not now apply to Stanton as well,
and therefore sua sponte finds that Count 4 is moot as to
Stanton.

Count 4 will be dismissed with prejudice in its

entirety.
CONCLUSION
For the reasons discussed supra, the Court will deny the
motion with respect to Count 1 and Count 2, and grant the motion
with respect to Count 4.

The Court will further dismiss Count 4

with respect to Stanton.

The Court will issue an appropriate

Order.

s/ Mary L. Cooper
MARY L. COOPER
United States District Judge

Dated:

August 2, 2012

18