Kramer, et al v. Pawlak, et al

Filing 16

REPORT AND RECOMMENDATIONS re 7 MOTION for Temporary Restraining Order and Preliminary Injunction and Order of Contempt filed by Glen E. Webster, Christopher Gates, Richard J. Kramer. Objections due fourteen days from receipt. DECISION AND ORDER DISMISSING 9 MOTION to Expedite Hearing on Motion for Preliminary Injunction and Contempt filed by Glen E. Webster, Christopher Gates, Richard J. Kramer, 8 MOTION to Expedite Hearing on Motion for Temporary Restraining Order filed by Glen E. Webster, Christopher Gates, Richard J. Kramer. Signed by Hon. Leslie G. Foschio on 9/26/2012. (SDW)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
RICHARD J. KRAMER,
CHRISTOPHER GATES,
GLEN E. WEBSTER, Individually and on behalf of
Nominal Defendant Armor Electric Motor
& Industrial Services, Inc.,
Plaintiffs,
v.
THOMAS M. PAWLAK,
LISA PAWLAK,
ARMOR ELECTRIC MOTOR & INDUSTRIAL
SERVICES, INC.,
Defendants.

APPEARANCES:

REPORT
and
RECOMMENDATION
-----------------------------DECISION
and
ORDER1
12-CV-813A(F)

HODGSON RUSS LLP
Attorneys for Plaintiffs
JOSEPH V. SEDITA,
REETUPARNA DUTTA,
KEVIN J. ESPINOSA,of Counsel
The Guaranty Building
140 Pearl Street, Suite 100
Buffalo, New York 14202
ANDREOZZI, BLUESTEIN, FICKESS, MUHLBAUER,
WEBER, BROWN LLP
Attorneys for Defendants
RANDALL P. ANDREOZZI, of Counsel
9145 Main Street
Clarence, New York 14031
GRASHOW LONG
Attorneys for Defendants
STEVEN K. LONG, of Counsel
5780 Main Street
Williamsville, New York 14221

1

Because the m otion for expedited hearing is non-dispositive and the m otions for tem porary
restraining order and prelim inary injunction are dispositive, the m otions are addressed in this com bined
Report and Recom m endation and Decision and Order.

JURISDICTION
By order filed September 6, 2012, this matter was referred to the undersigned by
Hon. Richard J. Arcara for all pretrial proceedings, pursuant to 28 U.S.C. § 636(B)(1)(A)
and (B) (Doc. No. 5). It is presently before the court on Plaintiff, Richard J. Kramer’s,
motion for a temporary restraining order and preliminary injunction (Doc. No. 7)
(“Kramer’s motion”) and ex parte motions for expedited hearings (Doc. No. 8, 9)
(“Kramer’s motions to expedite”) filed September 18, 2012.

BACKGROUND AND FACTS2
This action was commenced upon a summons and verified complaint filed in
New York Supreme Court, Erie County, New York, on August 9, 2012 alleging violations
of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961, et seq.
(“First Claim”), asserting Defendants engaged in mail and wire fraud (21 U.S.C. §§
1341, 1343) based on Defendants’ scheme to defraud Plaintiffs Richard J. Kramer
(“Kramer”), Christopher Gates (“Gates”) and Glen E. Webster (“Webster”) (together,
“Plaintiffs”), as well as Armor Electric Motor & Industrial Services, Inc. (“Armor Electric”
or “Armor”), a closely-held (Sub-Chapter S) corporation (“the corporation”) of which
Defendants Thomas M. Pawlak and Lisa Pawlak (“Thomas Pawlak” and “Lisa Pawlak,”
collectively “the Pawlaks” or “Defendants”) are majority shareholders and Plaintiffs are
minority shareholders. Armor Electric provides industrial motor refurbishing and crane
equipment services, fabrication, controls, and balancing. Since it was organized in

2

Taken from the pleadings and papers filed in this action.
2

2005 by Plaintiffs Kramer and Gates and the Pawlaks, it has increased revenues to $5
million from $750,000 and has now approximately 22 employees compared to four in
2005. Thomas Pawlak owns no shares in the corporation but serves as its president
and chief executive officer; Lisa Pawlak owns 54.98% of the shares and serves as
secretary. Kramer serves as vice-president and owns 26.41%; Gates serves as vicepresident and treasurer and owns 12.60%; and Webster serves as vice-president and
owns 6% of the shares of the corporation.
Plaintiffs also assert state law claims of breach of fiduciary duty owed to Plaintiffs
and the corporation, based on Lisa Pawlak’s position as majority shareholder and
secretary and Thomas Pawlak’s status as Armor Electric’s president and chief
executive officer and Defendants’ improper transfer of the corporation’s assets,
including payment of approximately $227,000 for Defendants’ personal expenses such
as luxury automobiles and excessive salaries (“Second Claim”). Plaintiffs also allege
claims for conversion of the corporation’s property and assets (“Third Claim”) and fraud
(“Fourth Claim”) based on Defendants’ misrepresentation concerning the nature of
approximately $150,000 of expenses incurred on behalf of the corporation and
Defendants’ alleged refusal to provide Plaintiffs with access to corporate books and
records. Defendants removed the action to this court on August 29, 2012. Defendants’
answer was filed September 5, 2012 asserting defenses and a counterclaim (Doc. No.
4). Plaintiffs’ Amended Complaint was filed September 18, 2012 which added a state
breach of contract claim against Defendants based on Defendants’ violation of a
Stipulation and Order entered in Plaintiffs’ state court action. In Plaintiffs’ state court
action, Plaintiffs also sought to have Gates appointed receiver of the corporation. A
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Shareholder Agreement among the corporation’s shareholders requires all directors
vote in favor of all resolutions and corporate matters approved by the Pawlaks and
against any opposed by the Pawlaks.
While the case was pending in state court, in order to resolve Plaintiffs’ request
that a receiver be appointed, the parties entered into a Stipulation and Order so ordered
by the presiding justice, Hon. John A. Michalek, on August 29, 2012, which provided
that during the pendency of the litigation, Plaintiffs shall have access to the
corporation’s financial records, accounts and credit card statements, the parties agree
to the amount and payment of bonuses, or commissions to the parties, and that “all
Plaintiffs and Defendants must agree to any adjustment to the salary of any of the
Plaintiffs or Defendants before such adjustment shall take effect” (“the Stipulation and
Order”). Plaintiffs allege that on September 14, 2012, Defendant Thomas Pawlak
terminated Kramer as an employee of the corporation in violation of the Stipulation and
Order. The Stipulation and Order also provides that “nothing in this Stipulation and
Order shall preclude or limit in any way any and all rights the parties enjoy under New
York law, including New York State Business Corporations Laws and/or the by-laws or
amended stockholder agreement of Armor Electric, and the parties expressly preserve
any such rights by entering into this Stipulation.” Under Article 12 of the Amended
Shareholder Agreement shareholders are prohibited from employment with another
business within 200 miles of the corporation’s offices on Elk Street in Buffalo that
competes with the business of the corporation while employed by the corporation, a
shareholder of the corporation and for three years following termination of the
shareholders’ employment with the corporation.
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In support of Kramer’s motion, Kramer filed the Plaintiff Richard J. Kramer’s
Memorandum of Law in Support of His Motion for a Temporary Restraining Order,
Preliminary Injunction, and an Order of Contempt (Doc. No. 7-1) (“Kramer’s
Memorandum”) together with Exhibits A - B (“Kramer’s Exh(s) ___”), the Declaration of
Richard Kramer (“Kramer Declaration”) with Exhibits A and B (“Kramer Declaration
Exh.(s) ___”) and the Declaration of Reetuparna Dutta, Esq. in Support of Plaintiff’s
Motion for a Temporary Restraining Order, Preliminary Injunction, and an Order of
Contempt (Doc. No. 7-4) (“Dutta Declaration”) along with Exhibits A - C (“Dutta
Declaration Exh(s). ___”).
A hearing on Kramer’s motion was conducted before the undersigned on
September 19, 2012 (Doc. No. 10) (“the hearing”). Following the hearing, at the court’s
invitation, Kramer filed on September 19, 2012, Plaintiff Richard J. Kramer’s
Supplemental Memorandum of Law in Support of His Motion for a Temporary
Restraining Order, Preliminary Injunction and an Order of Contempt (Doc. No. 11)
(“Kramer’s Supplemental Memorandum”), a Supplemental Declaration of Richard
Kramer (Doc. No 11-1) (“Kramer Supplemental Declaration”) and a Supplemental
Declaration of Reetuparna Dutta, Esq. (Doc. No. 11-2) (“Dutta Supplemental
Declaration”). On September 20, 2012, Defendants filed Defendants’ Memorandum of
Law in Opposition to Plaintiff Richard Kramer’s Motion for a Temporary Restraining
Order, Preliminary Injunction and an Order of Contempt (Doc. No. 12) (“Defendants’
Memorandum”), a Declaration of Thomas Pawlak in Support of Defendants’
Memorandum of Law in Opposition to Plaintiff Richard Kramer’s Motion for a
Temporary Restraining Order, Preliminary Injunction and an Order of Contempt (Doc.
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No. 12-1) (“Pawlak Declaration”) attaching an Exhibit A (“Exh. A to Pawlak
Declaration”), a Declaration of Fred Schmitt in Support of Defendants’ Memorandum of
Law in Opposition to Plaintiff Richard Kramer’s Motion for a Temporary Restraining
Order, Preliminary Injunction and an Order of Contempt (Doc. No. 12-2) (“Schmitt
Declaration”) and a Declaration of Steven K. Long, Esq. in Support of Defendants’
Memorandum of Law in Opposition to Plaintiff Richard Kramer’s Motion for a
Temporary Restraining Order, Preliminary Injunction and an Order of Contempt (Doc.
No. 12-3) (“Long Declaration”) attaching Exhibit A (“Long Declaration Exh. A”). Further
oral argument was deemed unnecessary. Based on the following, Kramer’s motions for
a temporary restraining order, preliminary injunction and contempt should be DENIED;
Kramer’s motions for expedited hearings are DISMISSED as moot.

DISCUSSION
The criteria for granting a temporary restraining order pursuant to Fed.R.Civ.P.
65(b) (“Rule 65(b)”) or a preliminary injunction pursuant to Fed.R.Civ.P. 65(a) (“Rule
65(a)”) are the same. Neopost USA, Inc. v. McCabe, 2011 WL 4368447, *3 (D.Conn.
Sep’t 19, 2011) (quoting Citigroup Global Markets, Inc. v. VCG Opportunities Master
Fund Limited, 598 F.3d 30, 35 (2d Cir. 2010). A party seeking either form of preliminary
equitable relief must “show ‘(a) irreparable harm and (b) either (1) likelihood of success
on the merits or (2) sufficiently serious questions going to the merits to make them a fair
ground for litigation and a balance of hardships tipping decidedly toward the party
requesting the preliminary relief.’” Citigroup Global Markets, Inc., 598 F.3d at 35
(quoting Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979)).
6

The injunctive relief requested must also be shown to be “‘in the public interest.’”
Carlson v. Medco Health Solutions, Inc., 2011 WL 3800017, *4 (W.D.N.Y. Aug. 29,
2011) (Arcara, J.) (quoting Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20
(2008)). It is “well-settled” that a showing of irreparable harm is a prerequisite for relief
pursuant to both Rule 65(a) and 65(b). Neopost USA, Inc., 2011 WL 4368447, *3. To
qualify as irreparable, the requisite harm must be “actual and imminent, not remote and
speculative, and not adequately compensable by money damages.” Id. (citing cases).
The party seeking injunctive relief carries the burden of establishing each of these
factors by a preponderance of the evidence. Carlson, 2011 WL 3800017, *4 (citing
Procter & Gamble Co. v. Ultreo, Inc., 574 F.Supp.2d 339, 344 (S.D.N.Y. 2008)). “The
irreparable harm requirement is the most important factor in determining whether
preliminary injunct[ive] [relief] should issue.” Chapman v. South Buffalo Railway
Company, 43 F.Supp.2d 312, 318 (W.D.N.Y. 1999) (Arcara, J.) (bracketed material
added). Moreover, absent “a showing of irreparable harm, it is not necessary to
examine the second prong of the preliminary injunction requirements.” Id. at 318 (citing
Shady v. Tyson, 5 F.Supp.2d 102, 109 (E.D.N.Y. 1998)).
Further, as applicable to the case at bar, termination from employment alone
does not constitute irreparable injury. See Moore v. Consolidated Edison Co. of New
York, Inc., 409 F.3d 506, 511 (2d Cir. 2005) (holding negative employment performance
evaluation that caused plaintiff to fear termination of employment was not an irreparable
injury for purposes of preliminary injunction because termination of employment was
insufficient); Chapman, 43 F.Supp.2d at 318 (citing Adamsons v. Wharton, 771 F.2d 41,
43 (2d Cir. 1985); Shady, 5 F.Supp.2d at 109.
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“In order for an employment discharge to rise to the level of an irreparable
harm the plaintiff must demonstrate the following:
[That he] (1) has little chance of securing future
employment; (2) has no personal or family resources; (3)
has no private unemployment insurance; (4) is unable to
finance a loan privately; (5) is ineligible for public assistance;
and (6) there are no other compelling circumstances
weighing heavily in favor of interim relief.
Chapman, 43 F.Supp.2d at 318 (quoting Shady, 5 F.Supp.2d at 109) (bracketed
material in original).
To meet this exception to the irreparable harm prerequisite, a high burden is
placed on a plaintiff seeking such relief. “In essence, the plaintiff must quite literally
find himself being forced into the streets or facing bankruptcy before a court can enter a
finding of irreparable harm.” Chapman, 43 F.Supp.2d at 318 (quoting Shady, 5
F.Supp.2d at 109 (additional quotation marks and citation omitted)).
Here, Kramer contends that, as a result of his recent termination, as required by
the Non-Competition Agreement, (part of the Shareholders Agreement), his future
employment is limited to machine shops located more than 200 miles from Buffalo
which do not compete with Armor Electric for the next three years. Kramer’s
Memorandum at 4. More specifically, Plaintiff states that because his past and
extensive experience as a machinist with Armor Electric does not include familiarity with
modern computerized machinery used for machining services, utilized by “nearly every
business that currently performs machining services,” Kramer Declaration ¶ ¶ 6-7, and
because Kramer’s skills are limited to “industrial engine and crane repairs,” id. ¶ 8,
Defendants’ termination effectively renders Kramer unemployable as a machinist and
thus incapable of gainful employment. Id. ¶ 9. While lacking in particulars, Kramer

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appears to aver that the advanced computer machining technology he describes in his
Supplemental Declaration is not used in the “industrial engine and crane repair
industry,” like Armor and its direct competitors, thus limiting his employment
opportunities to Armor and such competitors. Kramer Supplemental Declaration ¶ ¶ 5,
8.
Defendants dispute Kramer’s assertion regarding Kramer’s employability as an
experienced machinist pointing out that Armor Electric has few competitors and that
Kramer’s skills qualify Kramer for a wide range of “tool and dye [sic]” related work
including “general machining companies,” Pawlak Declaration ¶ 12 (underlining in
original), “are not limited to electric motors and cranes and Plaintiff’s skills enable
Plaintiff to be employed in general machining companies.” Id. Kramer fails to provide
the court with any opinion by a vocational economist or other expert supporting
Kramer’s broad assertions regarding the limited scope of his marketable skills as a
professional machinist. Thus, even if, as Kramer argues, Defendants’ termination
without cause renders the Non-Competition Agreement unenforceable under New York
law, Kramer’s Supplemental Memorandum at 7 n. 24 (citing Grassi & Co., CPAs, P.C.
v. Janover Rubinroit, LLC, 918 N.Y.S.2d 503, 505 (2d Dep’t 2011) (termination without
cause destroys mutuality rendering non-compete agreement unenforceable), such
contention, if correct, not only undermines Kramer’s claimed irreparable harm but must
await any attempt by Defendants to enforce the Non-Competition Agreement. Thus,
Kramer’s claim of irreparable harm based on the unavailability of adequate money
damages, resulting from any future attempt by Defendants to enforce the NonCompetition Agreement, is premature. See Neopost USA, Inc., 2011 WL 4368447, *3
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(irreparable harm must be “actual and imminent”) (underlining added).
Nor, significantly, does Kramer make any effort to satisfy the requisites for
application of the narrow exception to the rule that mere termination does not
demonstrate Kramer has suffered irreparable injury not compensable by money
damages, which Kramer seeks, Amended Complaint at 23-24, including that, absent
injunctive relief prohibiting Kramer’s termination without maintaining Kramer’s salary
during the pendency of the action, Kramer will become effectively destitute. See
Carlson, 43 F.Supp.2d at 318 (citing cases). As such, Kramer has failed to meet his
burden to demonstrate that in the absence of a temporary restraining order or
preliminary injunction, Kramer will suffer irreparable harm not subject to compensation
by an award of money damages should Kramer succeed on any claim for which money
damages may be awardable. Chapman, 43 F.Supp.2d at 318, and the court need not
address Kramer’s burden to establish a likelihood of success on the merits of Plaintiffs’
claims. Id.
Additionally, Kramer’s assertion, as a basis for preliminary relief and Kramer’s
request for a finding of contempt against Defendants, that because the parties entered
into the Stipulation and Order while the matter was being litigated in state court, such
Stipulation and Order precludes Kramer’s termination without continuation of Kramer’s
present salary payable by Armor Electric for the pendency of this case, is without merit.
As relevant, the Stipulation and Order provides that “[d]uring the pendency of this
litigation, all Plaintiffs and Defendants must agree to any adjustment to the salary of any
of the Plaintiffs or Defendants before such adjustment shall take effect.” Dutta
Declaration, Exh. A ¶ 6. Kramer contends that by terminating Kramer, Defendants have
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unilaterally decreased Kramer’s salary to zero thus violating the express language of
the Stipulation and Order. Kramer’s Memorandum at 3-4. However, stipulations, like
other agreements, are to be construed in accordance with the ordinary meaning of the
actual language used by the parties. See Werner v. Katal Country Club, 660 N.Y.S.2d
866, 868 (3d Dep’t 1996) (applying rule that unambiguous terms of contract must be
given plain and ordinary meaning to stipulation. Salary is compensation paid to an
employee based on employment. See N.Y. Labor Law § 517 (defining “remuneration”
to including every form of compensation, including salaries, commissions, and bonuses,
paid by an employer to his employee). Therefore, upon Kramer’s termination, an action
Kramer’s attorney conceded was not prohibited by the Stipulation and Order, Dutta
Supplemental Declaration ¶ 3, Kramer was no longer an employee of Armor Electric
and as such Kramer was not thereafter entitled to compensation absent an express
agreement to that effect. See Murphy v. American Home Products Corporation, 448
N.E.2d 86, 89 (N.Y. 1983) (recognizing “long-established” rule that employment for
“indefinite term” is terminable “for any reason or no reason at all.”). A fair reading of the
Stipulation and Order fails to reveal any such agreement.
It may well be the fact that Kramer and his attorneys who participated in the
drafting of such a limitation on what Kramer now concedes was a power retained by
Defendants believed the Stipulation and Order meant to place an absolute restriction on
Defendants’ power to terminate any Plaintiff during the pendency of the litigation, but
simply, that is not what it says. Werner, 660 N.Y.S.2d at 868 (requiring unambiguous
terms of agreement be given “plain and ordinary meaning”); see Cucchi v. New York
City Off-Track Betting Corporation, 818 F.Supp. 647, 650 (S.D.N.Y. 1993) (holding an
11

at-will employment arrangement is not contractual and does not provide for employment
protection in the absence of an employment contract). Moreover, as Defendants point
out, the Stipulation and Order also reserves to Defendants the authority to manage the
corporation in accordance with its by-laws and New York law. Defendants’
Memorandum at 5 (citing Stipulation and Order ¶ 8). The purpose of the Stipulation
and Order was to assure Plaintiffs that the corporation’s funds would be properly used
while the case was pending, thereby obviating the need for a receivership provisional
remedy as Plaintiffs had then requested while the case was before Justice Michalek.
Defendants’ Memorandum at 5 n. 15 (citing to “Plaintiff’s Memorandum in Support of
Plaintiffs’ Order to Show Cause Seeking the Appointment of a Temporary Receiver of
[sic] a Preliminary Injunction, August 3, 2012" (Doc. No. 1-9 at 2-6) (requesting
appointment of Plaintiff Gates as receiver to safeguard the company’s funds and assets
against Plaintiffs’ alleged improper transfer of funds and conversion of assets)). A
careful review of Plaintiffs’ request to Justice Michalek reveals it is devoid of any
reference to the risk that any plaintiff may be terminated by Defendants in Defendants’
discretion. It is therefore highly implausible that Defendants would have acquiesced in
Kramer’s present interpretation of the Stipulation and Order, particularly paragraph 6 on
which Kramer specifically relies, in the absence of express language restricting
Defendants’ authority to terminate any Plaintiff, and Kramer’s present construction of
this provision is unfounded. Accordingly, although the Stipulation and Order continued
in effect following removal, see 28 U.S.C. § 1450 (following removal prior state court
orders remain in effect until modified or annulled by district court), and was therefore in
effect when Kramer was terminated on September 14, 2012, the Stipulation and Order
12

provides no ground for preliminary equitable relief or a finding of contempt as Kramer
requests.

CONCLUSION
Based on the foregoing, Kramer’s motion (Doc. No. 7) should be DENIED;
Kramer’s motions for expedited hearings (Doc. Nos. 8 and 9) are DISMISSED as moot.
Respectfully submitted,
/s/ Leslie G. Foschio
________________________________
LESLIE G. FOSCHIO
UNITED STATES MAGISTRATE JUDGE

SO ORDERED as to Kramer’s
motions for expedited hearings.
/s/ Leslie G. Foschio
________________________________
LESLIE G. FOSCHIO
UNITED STATES MAGISTRATE JUDGE
Dated: September 26, 2012
Buffalo, New York

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Pursuant to 28 U.S.C. §636(b)(1), it is hereby
ORDERED that this Report and Recommendation be filed with the Clerk of the
Court.
ANY OBJECTIONS to this Report and Recommendation must be filed with the
Clerk of the Court within fourteen (14) days of service of this Report and
Recommendation in accordance with the above statute, Rules 72(b), 6(a) and 6(e) of
the Federal Rules of Civil Procedure and Local Rule 72.3.
Failure to file objections within the specified time or to request an
extension of such time waives the right to appeal the District Court's Order.
Thomas v. Arn, 474 U.S. 140 (1985); Small v. Secretary of Health and Human Services,
892 F.2d 15 (2d Cir. 1989); Wesolek v. Canadair Limited, 838 F.2d 55 (2d Cir. 1988).
Let the Clerk send a copy of this Report and Recommendation to the attorneys
for the Plaintiffs and the Defendants.
SO ORDERED.
/s/ Leslie G. Foschio
_________________________________
LESLIE G. FOSCHIO
UNITED STATES MAGISTRATE JUDGE
DATED:

September 26, 2012
Buffalo, New York

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