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Pernice v. Bovim

United States District Court, District of Columbia

August 26, 2015

THOMAS J. PERNICE, et al., Plaintiffs,
v.
ERIC BOVIM, et al., Defendants.

MEMORANDUM OPINION

JAMES E. BOASBERG UNITED STATES DISTRICT JUDGE

Without the assistance of hindsight, ill-fated corporate combinations, like bad marriages, may be as challenging to resist as they are unlikely to succeed. The coupling at the center of this case is no different. At first so alluring, the union of two public-relations firms has now soured, leaving one of the participants believing he was lured into formalizing the relationship with false promises. That jilted partner, Thomas Pernice, and his holding company, Modena Holding Corp., now seek relief from this Court. They have sued three defendants – McBee Strategic Consulting, LLC; its former owner and Chief Executive, Steven McBee; and its current employee (and Pernice’s former business partner), Eric Bovim – each for some combination of breach of contract, fraud, civil conspiracy, and unjust enrichment. Defendants now move to dismiss in part, contending that three of the five asserted counts are facially deficient. The Court agrees and will grant the Motion.

I. Background

Although the Court must accept the facts as alleged in the Complaint as true at this stage, the parties appear to agree on the rough contours of the case. Sometime in 2007 or 2008, Thomas Pernice and Eric Bovim, both known players in the District’s strategic-communications industry, teamed up to start a public-relations firm named Gibraltar LLC. See Compl., ¶¶ 15–16, 19. Despite a rocky and often tumultuous relationship between the two principals, the business survived its infancy, growing into an enterprise that, by 2011, had captured the attention of a competitor: McBee LLC. Id., ¶¶ 26, 41.

In the latter half of 2011, the two companies flirted with the idea of starting a formal corporate relationship, bringing in a D.C. law firm to chaperone the negotiations. Id., ¶ 42. A big sticking point was whether, if McBee LLC acquired Gibraltar and hired its two principals, they would be entitled to an equity stake in their new corporate home. Id., ¶ 43. At the time, McBee LLC did not have an equity-sharing program for its employees, but the firm’s head, Steven McBee, represented to Pernice and Bovim that McBee LLC had been working to develop one, and that, if it did, they would be among the first to receive an equity stake. Id.

The negotiations resulted in a Letter of Intent indicating that the two firms “desire[d] to enter into a business combination” subject to a five-page list of “non-binding terms.” See Mot., Declaration of Richard W. Smith, Exh. B (Letter of Intent) at 1.[1] As part of that plan, McBee LLC proposed hiring Bovim and bringing on Pernice as an independent consultant through his S-Corporation, Modena, for an 18-month term. Id. at 3–4. The letter also stated in noncommittal terms that McBee LLC “intends to implement a new compensation system, which will contain an equity, profit sharing, or a similar component, ” and that Modena “will be included in such compensation system either directly or by some reasonable approximation as the plan may allow.” Id. at 3.

On January 1, 2013, the parties moved ahead with the combination, opting to join forces with an asset purchase agreement (APA) in which McBee LLC agreed to buy Gibraltar’s pipeline of contracts for a price of $100, 000. See Compl., ¶¶ 57, 59; Smith Decl., Exh. A (APA) at Schedule 1.2 (listing assets Gibraltar agreed to sell under APA). The agreement included several key features relevant to this dispute.

First, it provided that, as a prerequisite to closing, both sides had to ensure that a contract for independent-consulting services (the IC Agreement) between McBee LLC and Modena was fully executed. See APA at 12–13. That contract, which was attached to the purchase agreement as a separate exhibit, id. at 2, largely mirrored the terms that had been agreed to in the Letter of Intent. McBee LLC would pay Modena a monthly retainer of $80, 166 for 18 months, and, if McBee LLC fired Modena without cause before such term expired, McBee LLC would be on the hook for the remainder of the payments. See Smith Decl., Exh. C (IC Agreement) at 1–2.

Second, unlike the Letter of Intent, the APA made no mention of an equity-sharing or other compensation program. The IC Agreement, in contrast, did, albeit in wholly conditional terms – stating that, “[i]f McBee [LLC] implements an equity incentive program in which [Modena] is offered participation, [Modena’s] Retainer Fee may be replaced or adjusted” should Modena participate in the program. Id. at 1 (emphasis added).

Third, under the APA, McBee LLC did not assume Gibraltar’s debt. See APA at 3–4. To help Gibraltar pay its obligations, however, the APA provided that Gibraltar could keep its receivables for any work it had done prior to closing. See Compl., ¶ 57; see also APA at Schedule 1.3 (listing Gibraltar’s assets excluded from APA).

Finally, both agreements included nearly identical integration or “merger” clauses disclaiming any other oral or written commitments that were made prior to those contracts’ execution, but were not included in the final agreements. See APA at 17; IC Agreement at 9.

Notwithstanding the auspicious New Year’s timing of the deal (“Hope smiles from the threshold of the year to come, ” 10 Alfred Lord Tennyson, Works, The Foresters 33 (1894)), things went south – and fast. In the early months of 2013, Pernice was given the cold shoulder by his new boss, McBee, and was “systematically cut out of communications, meetings, [and other] contact with McBee or other senior leader[s] . . . .” Compl., ¶ 65. Pernice also found that his former partner, Bovim, made himself scarce and, ostensibly in cahoots with McBee, took “affirmative action to isolate Pernice from participation in the new joint company . . . and ma[d]e the performance of the [IC Agreement] difficult or impossible . . . .” Id., ¶ 66. Despite Pernice’s efforts to perform according to his (or, rather, Modena’s) contractual obligations, he was handed a pink slip on June 5, 2013, which informed him that the IC Agreement had been terminated “for cause.” Id., ¶ 75.

Adding insult to injury, the following month Pernice filed, on behalf of Gibraltar, a voluntary petition for Chapter 7 bankruptcy. See In re Gibraltar Assocs., LLC, No. 13-14937, ECF No. 1 (Bankr. C.D. Cal., Jul. 26, 2013). During those proceedings, he articulated his suspicions that the present Defendants had committed a number of wrongs against Gibraltar, including acts of “fraud, breach of contract, and other . . . wrongdoings.” Id., ECF No. 27, at 2. Believing that the soon-to-be-liquidated LLC had a number of meritorious claims against Defendants, Pernice proposed to the bankruptcy Trustee that he be assigned all of the estate’s legal claims arising from that wrongdoing in exchange for returning one third of any recovery he obtained. Id. But Defendants had a different idea. They proposed that, instead of assigning the estate’s litigation interests to Pernice, they would buy a release of all of the estate’s claims against them for a flat $25, 000. Id., ECF No. 40, at 2. Pernice consented to that settlement, making clear, however, that he reserved “all of his individual claims, if any, against” Defendants. Id., ECF No. 42, at 3–4.

With the bankruptcy case closed, Pernice and Modena filed the present suit. Counts I and II of the Complaint, neither of which Defendants currently seek to dismiss, consist of contract claims by Modena against McBee LLC for breach of the IC Agreement. In Count III, Plaintiffs allege that McBee and McBee LLC fraudulently induced Pernice to sign the APA, causing harm to both Plaintiffs by making promises that these two Defendants knew at the time they would not keep. Count IV consists of a civil-conspiracy claim by Pernice against Bovim, who is accused of making agreements with McBee to commit the fraud alleged in Count III. And finally, Count V alleges that ...


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