GERALD J. PAPPERT, District Judge.
Milton Roy, LLC sued Northeast Pump & Instrument, Inc., Christopher Marcos and JoAnn Chateauneuf Marcos on December 29, 2017, alleging damages arising from a former business relationship between the companies. The Complaint alleged claims against NPI for breach of contract (Counts I and II), Lanham Act violations (Counts III and IV) and fraudulent misrepresentation (Count V), a claim against Christopher and JoAnn Marcos for breach of fiduciary duty (Count VII) and claims against all three defendants for fraudulent transfers (Count VI) and civil conspiracy (Count IX). Milton Roy also sought to pierce NPI's corporate veil to hold Christopher and JoAnn Marcos liable for any judgment against NPI (Count VIII).
On April 26, 2019, Milton Roy moved for summary judgment on all claims. (ECF No. 44.) During oral argument on the Motion (ECF No. 50), the parties informed the Court that they had agreed to a consent judgment encompassing Counts I-IV of the Complaint and dismissing all claims against JoAnn Marcos with prejudice. (ECF No. 51.) Milton Roy also withdrew its Motion as to Counts V, VII and IX, see (id. at 7:10-11), leaving for the Court to determine whether Milton Roy is entitled to summary judgment on Counts VI and VIII.
NPI was incorporated in Massachusetts more than twenty years ago. (Pl.'s Mot. Summ. J. ("Pl.'s Mot.") Ex. 1 ("Marcos Dep.") 7:23, 8:19, ECF No. 44-5.) Christopher Marcos and his former partner, Dennis Hunt, each made capital contributions of $50,000. (Id. at 8:1-14.) Marcos has been NPI's sole owner and shareholder since 2004. (Pl.'s SMF ¶ 34, ECF No. 44-2; Defs.' Resp. Pl.'s SMF ¶ 34, ECF No. 46-1.) NPI pays Marcos an annual salary; in 2014, 2015 and 2016, he made $214,403, $196,535 and $8,933, respectively. (Pl.'s SMF ¶¶ 77-79.)
According to Marcos, NPI does not keep meeting agendas or minutes. (Marcos Dep. 47:1-48:1.) Nor does NPI pay dividends to Marcos, its sole shareholder. (Id.; Pl's SMF ¶ 34.) During discovery, NPI stated it is not in possession of its own articles of incorporation or any other corporate documents because "[t]hey are held by [a] former attorney . . . [who] is not available and has been disbarred." (NPI's Resp. Pl.'s Reqs. Produc. ¶ 1.)
Marcos is also the sole owner of Genesys Holdings, LLC, a realty trust formed in Massachusetts in 2004. (Pl.'s SMF ¶¶ 50-52.) Genesys owns two properties: NPI's warehouse in Lunenburg, Massachusetts and Marcos's home in Stratham, New Hampshire, a mixed-use commercial/residential property. (Id. at ¶¶ 54-55, 62-63; Marcos Dep. 83:23-84:1.) Genesys secured mortgage loans for the Lunenburg and Stratham properties in 2004 and 2006, respectively; NPI signed a commercial guarantee for both loans.
Although NPI operated out of the Lunenburg property, it never executed a lease. (Id. at ¶ 56.) NPI wrote monthly checks to Genesys for $8,900 from at least January of 2014 to December of 2015.
On May 7, 2012, NPI entered a Domestic Sales Distributor Agreement with Milton Roy, a developer and manufacturer of controlled volume metering pumps. (Compl., ECF No. 1; Compl. Ex. 1 ("Agreement").) The Agreement authorized NPI to distribute Milton Roy's products within a designated territory. (Agreement § 1.) On March 6, 2015, Milton Roy notified NPI it would be terminating the Agreement on July 4, 2015 due to NPI's failure to make timely payments. (Compl. Ex. 2.) Between March 6 and July 4, NPI continued to place orders for Milton Roy products totaling $240,910.27. (Pl.'s SMF ¶ 8.) This lawsuit was initiated, in part, because NPI never paid for those shipments; the parties' consent judgment obligates NPI to pay that sum plus interest. (ECF No. 51 ¶ 3.)
Sometime in 2015, NPI applied for a $200,000 loan, hoping it could "get current" on its payments to Milton Roy before Milton Roy terminated the Agreement. (Marcos Dep. 53:9-17; Pl.'s SMF ¶ 80.) According to Marcos, NPI "got the loan too late" to avoid termination. (Marcos Dep. 54:8-11.) NPI still approached Milton Roy about paying off its debt and reentering the Agreement, but "[b]y that time [Milton Roy] had already appointed another distributor." (Id. at 54:18-19.) NPI accordingly paid Milton Roy "whatever the number was that . . . [it] needed to pay to be able to continue to have product shipped to [it] . . . . And then at that point Milton Roy began to take orders from [NPI] directly again." (Id. at 55:23-56:2.)
Summary judgment is proper if there is no genuine issue of material fact and if, viewing the facts in the light most favorable to the non-moving party, the moving party is entitled to judgment as a matter of law. Smathers v. Multi-Tool, Inc./Multi-Plastics, Inc. Emp. Health & Welfare Plan, 298 F.3d 191, 194 (3d Cir. 2002); see Fed. R. Civ. P. 56(c). A genuine issue of material fact exists where "a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A mere scintilla of evidence in support of the non-moving party will not suffice. Id. at 252. There must be evidence by which a jury could reasonably find for the non-moving party. Id.
The movant bears the initial responsibility of informing the Court of the basis for its motion and identifying those portions of record which it believes demonstrate the absence of a genuine issue of material fact. Conoshenti v. Pub. Serv. Elec. & Gas Co., 364 F.3d 135, 145 (3d Cir. 2004), holding modified by Erdman v. Nationwide Ins. Co., 582 F.3d 500 (3d Cir. 2009) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). Reviewing the record, the Court "must view the facts in the light most favorable to the nonmoving party and draw all inferences in that party's favor." Prowel v. Wise Bus. Forms, 579 F.3d 285, 286 (3d Cir. 2009). The Court may not make credibility determinations or weigh the evidence. See Reeves v. Sanderson Plumbing Prods., 530 U.S. 133, 150 (2000); Goodman v. Pa. Tpk. Comm'n, 293 F.3d 655, 665 (3d Cir. 2002).
Milton Roy argues that NPI fraudulently transferred $8,900 to Genesys each month during 2014 and 2015, a time when NPI was consistently late in its payments to Milton Roy in violation of the Distributor Agreement. See (Pl.'s Mem. 9.) In support of its claim, Milton Roy points to the fact that the $8,900 checks do not contain a memo line explaining their purpose, see (Pl.'s Mot. Ex. 6), that there was no lease agreement between NPI and Genesys, (Pl.'s SMF ¶ 56), and Marcos's testimony that the checks were divided by Genesys three ways: to pay off the mortgages on the Lunenburg and Stratham properties and to compensate Marcos. (Marcos Dep. 82:15-22.) Milton Roy asks the Court to "claw back these transactions," apparently referring to every $8,900 check written during 2014 and 2015, under the Pennsylvania Uniform Fraudulent Transfer Act, 12 Pa. Cons. Stat. § 5101, et seq.
12 Pa. Cons. Stat. § 5104(a).
Several genuine issues of material fact preclude summary judgment for Milton Roy on this claim. Milton Roy has not met its burden under § 5104(a)(1) to show that NPI actually intended to defraud Milton Roy when it wrote a check each month to Genesys, particularly given that NPI was merely late in making payments prior to March 6, 2015. There is no dispute that Milton Roy was eventually paid for shipments before that date. Nor has Milton Roy met its burden under § 5104(a)(2) to show that there is no genuine issue of material fact as to whether NPI received a reasonably equivalent value in exchange for the checks to Genesys. Marcos testified that some of the money paid for the Lunenburg property, NPI's place of business, and some was used to fairly compensate Marcos for his services. He explained that if any part of the $8,900 was used to pay for the Stratham property, it is because NPI planned to open a second location there. (Marcos Dep. 83:25-84:1.)
Milton Roy also argues that the Court should pierce NPI's corporate veil because Marcos used the corporate structure to enrich himself to NPI's detriment. Under Massachusetts law,
Kraft Power Corp. v. Merrill, 981 N.E.2d 671, 681 n.11 (Mass. 2013) (quoting Scott v. NG U.S. 1, Inc., 881 N.E.2d 1125 (Mass. 2008)).
Viewing the facts in the light most favorable to Defendants, Milton Roy has not met its burden to show there is no genuine issue of fact precluding the Court from piercing NPI's corporate veil. Some factors do weigh in favor of veil-piercing—Marcos's pervasive control of NPI and NPI's failure to observe many corporate formalities, keep corporate records and pay dividends.
"[C]ontrol, even pervasive control, without more, is not a sufficient basis for a court to ignore corporate formalities: `There is present in the cases which have looked through the corporate form an element of dubious manipulation and contrivance [and] finagling . . . .'" Scott, 881 N.E.2d 1125, 1132 (2008) (quoting Evans, 574 N.E.2d 395, 400 (Mass. App. Ct. 1991)). Without more, the Court cannot find as a matter of law that Marcos ignored NPI's financial, legal and practical formalities in furtherance of his own financial interests. See Zimmerman v. Puccio, 613 F.3d 60, 75 (1st Cir. 2010).
An appropriate Order follows.
Although Milton Roy asserts Count VI under Pennsylvania law in its Complaint, see (Compl. ¶ 93), it argues in its Motion that Massachusetts law applies. (Pl.'s Mem. 8-10.) NPI believes Pennsylvania law applies. (Defs.' Mem. Opp'n Mot. Summ. J. 12.) To determine which state's law applies, the Court applies Pennsylvania's choice-of law-rules. Pac. Employers Ins. Co. v. Glob. Reinsurance Corp. of Am., 693 F.3d 417, 432 (3d Cir. 2012) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). Under Pennsylvania law, the Court must first consider the substance of the laws in question and look for actual, relevant differences between them. Id. (citing Hammersmith v. TIG Ins. Co., 480 F.3d 220, 230 (3d Cir. 2007)). If there is no conflict, a choice of law analysis is unnecessary. Id. (citing Hammersmith, 480 F.3d at 230).
Milton Roy acknowledges that the PUFTA and the Massachusetts Uniform Fraudulent Transfer Act, Mass. Gen. Laws ch. 109A, § 1, et seq., "have basically the same standard." (Hr'g Tr. 22:3-4.) Indeed, the text of the statutes is nearly identical. See United States v. Rocky Mountain Holdings, Inc., 782 F.Supp.2d 106, 113 (E.D. Pa. 2011) (noting that "a wide range of cases from other districts . . . have found that no choice of law conflict exists where both states have adopted the same relevant portions of the UFTA" and citing cases). Finding no true conflict between Pennsylvania's and Massachusetts's fraudulent transfer statutes and presented with none by the parties, the Court will apply Pennsylvania law.
12 Pa. Cons. Stat. § 5104(b).
