Salvitti v. Lascelles

578 F.Supp.3d 712

Alfred SALVITTI, et al., Plaintiffs,

v.Scott LASCELLES, et al., Defendants.

CIVIL ACTION NO. 19-00696

United States District Court, E.D. Pennsylvania.

Signed January 6, 2022

Joel Max Eads, Greenberg Traurig, LLP, Kathleen M. Kline, Duane Morris LLP, Philadelphia, PA, Peter J. Russo, Mechanicsburg, PA, for Plaintiffs Alfred Salvitti, Nico Salvitti, John-David Potynsky.

Robert N. Feltoon, Conrad O'Brien, Alfred W. Zaher, John J. Powell, Montgomery McCracken Walker & Rhoads LLP, Christopher Lucca, Conrad O'Brien PC, Philadelphia, PA, for Defendant Scott Lascelles.

Robert N. Feltoon, Conrad O'Brien, Philadelphia, PA, for Defendant Dana Disabatino.

MEMORANDUM

EDUARDO C. ROBRENO, District Judge

I. INTRODUCTION

Presently before the Court are parties’ cross-motions for summary judgment. Plaintiffs Alfred Salvitti and Nico Salvitti (collectively "the Salvittis") patented and designed a knife and partnered with Plaintiff John-David Potynsky (collectively "Plaintiffs"). Plaintiffs seek a declaration that Plaintiffs are members of The Colonel, LLC, an entity at issue in this matter, and that Defendant Scott Lascelles converted Plaintiffs’ property. Defendants Scott Lascelles and Dana DiSabatino (collectively "Defendants") seek summary judgment with respect to Plaintiffs’ claims for breach of contract (Count II), breach of fiduciary duties (Count III), unjust enrichment (Count IV), conversion (Count V), conspiracy (Count VI), aiding and abetting (Count VII), and money had and received (Count VIII). Defendants also seek summary judgment with respect to Plaintiffs’ claims for injunctive relief and preliminary injunction based on Plaintiffs’ breach of contract and breach of fiduciary duties claims (Counts XI, XII).

For the following reasons, Plaintiffs’ motion will be denied. Defendants’ motion will be granted with respect to Plaintiffs’ claims for breach of contract, breach of fiduciary duty, preliminary injunction, injunctive relief, conversion, money had and received, conspiracy, and aiding and abetting. Plaintiffs’ claim for unjust enrichment, however, will survive.

II. BACKGROUND¹

In 2013, the Salvittis designed a knife and partnered with Potynsky to produce the knife under the name "Colonel Blades." Potynsky Dep. at 69: 16-25; 70: 1-9, ECF No. 78-4. Potynsky, through a company he co-owned, arranged for 200 knives to be produced. At the end of 2013, Plaintiffs reached out to Lascelles to assist with the marketing and sales of Colonel Blades. The Salvittis, Potynsky, and Lascelles orally agreed to work together to sell the 200 knives that remained from the initial production.

Since 2013, Lascelles has managed the day-to-day operations of marketing Colonel Blades, including managing internet sales, working with manufacturers, and distributing the product. Lascelles also involved his spouse, DiSabatino, in developing a business plan. In early 2014, Lascelles was advised by his accountant that it would be beneficial to form a limited liability company ("LLC") to facilitate the management of Colonel Blades. In March 2014, the parties agreed to form an LLC to help manage the production of Colonel Blades.

On March 28, 2014, Lascelles registered The Colonel, LLC with the Pennsylvania Department of State and listed himself as the sole member. The tax liability of The Colonel, LLC flowed through Lascelles’ personal taxes. Lascelles managed the day-to-day operations of The Colonel, LLC and maintained a Citadel bank account on behalf of The Colonel, LLC. DiSabatino was tasked with managing several operational activities of The Colonel, LLC including website development, social media campaigns, e-mail campaigns, and contracting with vendors. Presently, the parties dispute whether the parties agreed that Plaintiffs would be made members and/or owners of The Colonel, LLC.

The parties never formally executed an agreement that provided Plaintiffs would become members of The Colonel, LLC. In 2015, the parties circulated a draft agreement that contemplated forming a new legal entity to sell Colonel Blades with Plaintiffs and Lascelles as members. The parties, however, did not formally execute this agreement. Later, in 2018, the parties circulated a draft agreement that contemplated Plaintiffs becoming members of The Colonel, LLC. The parties never formally executed this agreement either.

The parties also did not formalize an agreement that provided how the parties would split any profits from Colonel Blades. Defendants admit there was an understanding that the Salvittis were to receive 1/3 of the profits, Potnysky was to receive 1/3 of the profits, and Lascelles was to receive the remaining 1/3. However, the parties did not memorialize a profit-sharing agreement in writing, nor did they specify the definition of "profits" or when the profits would be split.

Lascelles did not distribute any profits from Colonel Blades between 2013 and 2018 because the parties agreed that any revenue should be rolled over to purchase more inventory. Lascelles made a profit distribution in spring of 2018. Alfred Salvitti received $10,000, Potynsky received $10,000 and, in lieu of Lascelles receiving a distribution, DiSabatino received a payment of $15,500. Lascelles contends that DiSabatino's distribution intended to cover Lascelles’ distribution and services DiSabatino performed on behalf of the LLC. Plaintiffs argue that the $15,500 payment to DiSabatino was improper. Lascelles did not cause any additional profits to be distributed because, prior to filing the present suit, Plaintiffs issued a demand that no assets be moved or disposed of in any way.

On February 18, 2019, Plaintiffs filed suit. Plaintiffs brought the following claims: (1) breach of fiduciary duties against Lascelles, (2) breach of contract against Lascelles, (3) unjust enrichment against Lascelles and DiSabatino, (4) conversion against Lascelles and DiSabatino, (5) aiding and abetting against DiSabatino, (6) money had and received against DiSabatino, (7) claims for injunctive relief with respect to Plaintiffs’ claims for breach of contract and breach of fiduciary duties against Lascelles, and (8) claims for preliminary injunction with respect to Plaintiffs’ claims for breach of contract and breach of fiduciary duties against Lascelles. Lascelles filed counterclaims against Plaintiffs for (1) breach of contract, (2) unjust enrichment, (3) conversion, and (4) tortious interference with contractual relations.

Plaintiffs seek a declaration that they are members of The Colonel, LLC and that Defendants converted property owed to Plaintiffs and The Colonel LLC. Defendants seek summary judgment on all of Plaintiffs’ claims. The parties do not seek summary judgment with respect to any of Defendants’ counterclaims.²

III. LEGAL STANDARD

Summary judgment is "appropriate only when ‘there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’ " Physicians Healthsource, Inc. v. Cephalon, Inc., 954 F.3d 615, 618 (3d Cir. 2020) (quoting Fed. R. Civ. P. 56(a) ). A fact is material "if it ‘might affect the outcome of the suit under the governing law.’ " Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). A factual dispute is genuine "if the ‘evidence is such that a reasonable jury could return a verdict for the nonmoving party.’ " Id. (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505 ).

The moving party bears the initial burden of showing the absence of a genuine issue of material fact. If the movant meets this obligation, the nonmoving party must "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 250, 106 S.Ct. 2505. At the summary judgment stage, the Court must view the facts "in the light most favorable to" the nonmoving party and "draw all reasonable inferences in favor" of that party. Young v. Martin, 801 F.3d 172, 174 n.2 (3d Cir. 2015).

The guidelines governing summary judgment are identical when addressing cross-motions for summary judgment. See Lawrence v. City of Phila., 527 F.3d 299, 310 (3d Cir. 2008). When confronted with cross-motions for summary judgment, "[t]he court must rule on each party's motion on an individual and separate basis, determining, for each side, whether a judgment may be entered in accordance with the Rule 56 standard." Schlegel v. Life Ins. Co. of N. Am., 269 F. Supp. 2d 612, 615 n.1 (E.D. Pa. 2003) (alteration in original) (quoting 10A Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2720 (3d ed. 1998) ).

IV. DISCUSSION

A. Membership in The Colonel, LLC: Plaintiffs’ Motion for Partial Summary Judgment and Defendants’ Motion for Summary Judgment as to Plaintiffs’ Claim for Breach of Fiduciary Duties

Plaintiffs’ motion for partial summary judgment, Plaintiffs’ claim for breach of fiduciary duty (Count III), and Plaintiffs’ claim for preliminary injunction and injunctive relief with respect to the issue of breach of fiduciary duty (Counts XI, XII) fundamentally raise the same questions: was the Colonel LLC formed during the telephone call in March 2014 between the Salvittis, Potnysky, and Lascelles, and did the Salvittis and Potnysky become members of The Colonel, LLC along with Lascelles? If so, Defendants could be liable to Plaintiffs for breaching their fiduciary duties to Plaintiffs. If not, Defendants cannot be liable to Plaintiffs because Plaintiffs were never members of the LLC.

Plaintiffs have moved for summary judgment and seek a declaration that they are members of The Colonel, LLC. In turn, Defendants have moved for summary judgment on Plaintiffs’ claim for breach of fiduciary duties. Because these motions are mirror images of one another, they are predicated on the same set of facts, and subject to the same legal standard, the Court will treat both motions as cross-motions for summary judgment.

1. Plaintiffs’ Motion for Partial Summary Judgment

In their motion for partial...