Roberts v. Bennaceur

BENJAMIN ROBERTS, Plaintiff, v. SOPHIEN BENNACEUR, et al., Defendants.

No. 3:12-cv-01222 (JAM)

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

March 31, 2015

ORDER ON PENDING MOTIONS

This case arises from a disintegrated business relationship between plaintiff Benjamin Roberts and defendants Sophien Bennaceur, Imed Bennaceur, and TriPlanet Partners LLC (TriPlanet). Sophien and Imed Bennaceur are brothers and managing members of TriPlanet. After defendants suddenly terminated plaintiff from his high-level financial services position at TriPlanet, plaintiff brought suit to recover millions of dollars in overdue equity payments and unpaid salary. Following the issuance of a prejudgment remedy in plaintiff's favor and in the midst of innumerable discovery disputes, TriPlanet filed for bankruptcy and was subject to an automatic bankruptcy stay. I now address plaintiff's second motion for sanctions and other pending motions only as to defendants Sophien and Imed Bennaceur. I conclude in principal part that the Court has personal jurisdiction over Sophien and Imed Bennaceur and that, in light of their flagrant abuses of the disclosure and discovery process, plaintiff's motions for sanctions should be granted and default judgment should enter against Sophien and Imed Bennaceur in the amount of $8,136,222.60.

BACKGROUND

As this Court has described in prior rulings (Docs. #78, #184), plaintiff Benjamin Roberts was Vice President and Chief Information Officer at The Hartford Insurance Group inConnecticut when he met Sophien Bennaceur while vacationing in Miami in April 2010. Sophien discussed a potential business venture with plaintiff, and over a period of several months he recruited plaintiff to work for a new consulting group that Sophien had formed with his brother Imed—TriPlanet Partners. In July 2010, Sophien offered plaintiff the following compensation package: over $500,000 as an annual salary, a 15% equity ownership interest in the company, an annual equity payment conditioned on his satisfaction of enumerated performance criteria, and the possibility of earning an additional 10% interest in the company pending satisfaction of additional performance goals. Plaintiff accepted that offer, left his position at The Hartford, and began working full time for TriPlanet in August 2010.

While working at TriPlanet, plaintiff provided financial services to TriPlanet's primary client, the Royal Bank of Scotland (RBS). Throughout 2011, both Sophien and Imed repeatedly assured plaintiff that he had been successful, that they were pleased with his performance, and that he was entitled to payment of a 15% equity interest for 2010 as well as a 25% equity interest for 2011 (based on his satisfaction of performance goals). But plaintiff never received any equity payment for 2010 or 2011. In June 2012, shortly after he inquired about the overdue equity payments, the company suddenly terminated him.

Two months later, plaintiff filed this lawsuit seeking compensation for his salary from May and June 2012 and his annual equity payments for 2010 and 2011. He alleged breach of contract, violation of the Connecticut wage statute, fraudulent inducement, common-law fraud, securities fraud, breach of fiduciary duties, and conversion, and he sought damages, an accounting, a constructive trust, and a declaratory judgment.¹ Defendants responded inNovember 2012 with a motion to dismiss, alleging that the Court lacked personal jurisdiction over them (Doc. #21).

In October 2012, plaintiff moved for a prejudgment remedy (PJR) on his breach-of-contract and wage statute claims. See Docs. #14, #78 at 1-2 n.1. At a hearing on March 12, 2013, the Court (Stefan R. Underhill, J.) denied defendants' motion to dismiss based on the pleadings, but stated that defendants could raise the personal jurisdiction issue again after jurisdictional discovery. Doc. #80 at 4-8, 17, 28. The Court also heard evidence on plaintiff's motion for PJR, taking testimony from both plaintiff and Sophien. To estimate his damages, plaintiff calculated TriPlanet's 2010 and 2011 profits using underlying documentation of RBS invoices and staffing costs, as well as his personal estimates of operating expenses. See Pl.'s Exhs. 17, 21 (admitted at March 12, 2013 PJR hearing). Defendants submitted TriPlanet's financial spreadsheets, prepared internally, which tallied cash received, payroll costs, and other operating expenses. See Defs.' Exhs. A, B (admitted at March 12, 2013 PJR hearing). Neither Sophien nor Imed had first-hand knowledge of the spreadsheets' contents, and they submitted no supporting documentation; instead, Sophien assured the Court that they would provide that documentation to plaintiff at a later date.

In April 2013, defendants filed their answer to plaintiff's original complaint, asserting several affirmative defenses and one counterclaim for breach of contract, but omitting any claim that the Court lacked personal jurisdiction over them. Docs. #65, #66. In May 2013, the parties submitted a Rule 26(f) Planning Report indicating that they intended to engage in discovery regarding personal jurisdiction. Doc. #72 at 7.

On June 20, 2013, Judge Underhill awarded plaintiff a PJR, finding that defendants were more likely than not liable on both the contract and wage statute claims. Doc. #78 at 8, 10, 12.The Court accepted plaintiff's claim that he had met his performance goals and found that he was probably entitled to equity payments, because Sophien voiced only weak opposition at the PJR hearing and had not reviewed the company's financials to verify whether the goals had been met. Id. at 7-8. Critically, the Court found that all defendants were likely to be liable under Count II—the wage statute—for both plaintiff's base salary and the unpaid equity distributions, because "the unpaid equity distributions constitute a form of bonus for which both the payment and the amount are nondiscretionary under the terms of the Employment Agreement." Id. at 10.

The Court also adopted plaintiff's revised damage calculation, which substituted plaintiff's own revenue and expense estimates with defendants' numbers to support a downward revision of his original damages estimate. Compare Pl.'s Exh. 17 with Pl.'s Exh. 21. It awarded $8,858,949 for plaintiff's contract claim, equal to a 15% share of TriPlanet's 2010 profits, a 25% share of 2011 profits (converted from pounds to U.S. dollars based on the 2011 average exchange rate), and unpaid salary for May and June 2012.² On the same day, the Court ordered defendants to disclose assets sufficient to satisfy the PJR.

About two weeks after the PJR hearing, on March 29, 2013, Sophien transferred his Manhattan loft apartment, worth millions of dollars, to his brother Moez Bennaceur for no money. On October 1, 2013, the Court granted plaintiff leave to amend his complaint to add claims against both Sophien and Moez for statutory fraudulent transfer (Count XII) and common law fraudulent conveyance (Count XIII),³ and the amended complaint was filed the same day.Docs. #110, #113 at 3. Two weeks later, defendants filed their answer to the amended complaint, repeating their affirmative defenses and counterclaim, but now without asserting a defense of lack of personal jurisdiction. Doc. #114.

Discovery and disclosure disputes have since ensued. The Court has issued several orders, and in November 2013, plaintiff filed his first motion for sanctions. See Doc. #121. This case was transferred to my docket on March 24, 2014. On May 8, 2014, I dismissed the sanctions motion without prejudice to renewal, noting that I intended to impose sanctions if defendants did not comply with a new order compelling them to produce enumerated documents. Doc. #184 at 11. The following day, TriPlanet filed for bankruptcy, resulting in an automatic stay in these proceedings against the company pursuant to 11 U.S.C. § 362(a).

The Court held a hearing on May 28, 2014, to ascertain the state of the parties' discovery compliance, at which it declined to stay proceedings against the individual defendants, and at which plaintiff represented that defendants had not complied with discovery orders. Subsequently, plaintiff renewed his motion for sanctions. Doc. #199. On August 15, 2014, the Court scheduled a hearing on the renewed motion in light of the evidence discussed at length below, and instructed the parties to prepare to "address defendants' compliance with . . . court orders" and "whether an appropriate sanction should be default judgment for plaintiff against the individual defendants in the amount of $8,858,949." Doc. #228. At the sanctions hearing on September 4, 2014, plaintiff appeared represented by counsel and withdrew his fraudulent inducement claim (Count III). See Doc. #239 at 85-86. Neither defendant was present, and theirattorney indicated that neither Sophien nor Imed had responded to counsel's emails alerting them of the hearing date and the prospect of sanctions as sought by plaintiff.

On September 25, 2014, the Bankruptcy Court for the Southern District of New York (Robert D. Drain, J.) issued an order extending the bankruptcy stay specifically to Counts I, V, VIII (as to only TriPlanet), X, XI (as to only TriPlanet), XII, and XIII. The court reserved decision as to Count II and declined to extend the stay to the individual defendants as to Counts III, IV, VI, VII, VIII, and XI. Doc. #261-1 at 2-3. At a subsequent hearing on October 15, 2014, the bankruptcy court issued a decision declining to extend the stay as to Count II. Doc. #263 at 3-5.

On October 31, 2014, defendants filed a motion to dismiss plaintiff's amended complaint for lack of personal jurisdiction. Doc. #265.

I now describe in detail the record of non-compliance by defendants Sophien and Imed Bennaceur with the Court's asset disclosure and discovery orders.

Asset Disclosure

To effectuate the PJR, the Court required all defendants to disclose property. First, in June 2013, the Court ordered...