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Martin K. Hunt, Sr. v. Custom Cable Industries

June 7, 2011


The opinion of the court was delivered by: Dalzell, J.


Plaintiff Martin K. Hunt, Sr. ("Hunt"), has filed this action against three directors of his former employer, Custom Cable Industries, Inc. ("CCI")*fn1 -- Gary Jaggard, Gregg Stewart, and Donald Clarke -- for allegedly failing to pay him $425,000 --being his severance package of $390,000 plus compensation for his unused vacation days -- after he tendered his resignation. Specifically, Hunt asserts claims of breach of contract against CCI (Count I), unlawful withholding of wages against all defendants (Count II), and civil conspiracy against all defendants (Count III).

I. Factual Background

CCI was engaged in the business of fabricating communications cable assemblies, harnesses and communication-related devices, and with the installation of cabling networks and communication-related devices. Compl. ¶ 6. On July 14, 2008, Hunt and CCI executed an Executive Employment Agreement (the "Agreement") through which Hunt accepted the position of Chief Executive Officer of the company. Id. ¶¶ 9-10. Hunt worked as CEO of CCI from July of 2008 until January of 2010.

Id. ¶ 18. The Agreement could be terminated with or without cause provided that the party terminating the Agreement gave the other party at least sixty days' prior written notice of termination. Id. ¶ 11. Prior written notice was not required if the Agreement was terminated for cause. Id.

Pursuant to the Agreement, the parties agreed that Hunt would be entitled to eighteen months of severance regardless of whether a termination was with or without cause. Id. ¶ 12. The Agreement dictates that it shall be governed by the laws of the Commonwealth of Pennsylvania and that CCI and Hunt agree to jurisdiction in Chester County, Pennsylvania, "with respect to any proceeding arising out of or relating to [the] Agreement or its subject matter." Id., Ex. A at § 15. CCI and its parent company, HWI Technologies, LLC ("HWI"), maintained office space and Board level records in Pennsylvania from 2008 to 2010. Id. ¶

15. Hunt avers that he continued to perform many of his duties as a Company Director and its Chairman from offices in Pennsylvania. Id. ¶ 17. Hunt is a citizen of Delaware. Id. ¶ 1.

In December of 2009, at the insistence of CCI's funding partner, ComVest Capital, LLC, CCI's board of directors sought Hunt's resignation. Id. ¶ 20. On December 28, 2009, the Company's board resolved to seek and accept Hunt's resignation. Id. ¶ 23. Jaggard, Stewart and Clarke were not on the Company's board at that time. Id. Hunt resigned that day, id. at ¶¶ 22-23, and this became effective on January 11, 2010. Id. ¶ 25. Shortly after Hunt resigned, CCI replaced three of the five Directors on its Board of Directors with defendants Jaggard, Stewart, and Clarke, who were all affiliated with ComVest. Id. ¶26. Jaggard, Stewart, and Clarke are citizens of Florida. Jaggard Affidavit ¶ 1; Stewart Affidavit ¶ 1; Clarke Affidavit ¶1. In late January of 2010, ComVest became the majority owner of HWI and CCI. Id. ¶ 27.

By the terms of the Agreement, CCI was obliged to tender Hunt's severance payment no later than February 10, 2010. Id. at ¶ 29. On April 9, 2010, Hunt filed a demand for arbitration with the American Arbitration Association ("AAA") against CCI seeking recovery of his severance payment and vacation pay. Id. at ¶ 30. On April 22, 2010, the AAA sent a letter to Hunt and CCI requesting the parties' written consent for the AAA's continued administration of the arbitration because the Agreement's arbitration clause was silent as to a governing arbitration tribunal. Id. at ¶ 32. The next day, CCI filed an action in the Thirteenth Judicial Circuit in Hillsborough County, Florida, against Hunt, seeking a declaratory judgment that the Agreement's arbitration provision was not valid. Id. at ¶ 33 (the "Florida Action").

Hunt initially filed this action in the Court of Common Pleas of Chester County on April 30, 2010. See generally, plaintiff's Complaint ("this action" or the "Pennsylvania Action"). The defendants removed the case to this Court on the basis of diversity jurisdiction on June 1, 2010 and filed a motion to dismiss the action or transfer it to the Middle District of Florida. On July 30, 2010, while defendants' motion to dismiss the Pennsylvania Action was pending, CCI filed a Chapter Eleven Voluntary Petition for Relief in the United States Bankruptcy Court for the Middle District of Florida. On August 6, 2010, CCI filed a Suggestion of Bankruptcy in this action.

On August 11, 2010, CCI moved to transfer the Florida Action to the Bankruptcy Court for the Middle District of Florida. The Court found that the Florida Action was "related to" the bankruptcy case, and, on September 9, 2010, granted the motion. MTD, Ex. F.

On August 24, 2010, certain plaintiffs, including Hunt, instituted an adversary proceeding in the Bankruptcy Court that sought to impose personal liability on Stewart, Jaggard, and Clark for their actions relating to CCI. On February 14, 2011, plaintiffs amended the Complaint in the Adversary Proceeding so that Jaggard, Clark, and Stewart, and their companies, are now the only defendants. Id., Ex. G.

On October 12, 2010, Hunt filed a proof of claim in the bankruptcy in which he sought the same severance and vacation pay that he sought in the Pennsylvania Action. MTD, Ex. H. On January 10, 2011, Hunt voluntarily dismissed without prejudice CCI as a defendant. On January 28, 2011, we denied without prejudice defendants' first motion to dismiss and directed defendants to respond anew to the complaint.

Defendants argue that we do not have personal jurisdiction over them because Jaggard, Stewart, and Clarke have never resided in Pennsylvania. Jaggard Affidavit at ¶ 1; Stewart Affidavit at ¶ 1; Clarke Affidavit at ¶ 1. None of them owns property in Pennsylvania. Jaggard Affidavit at ¶ 3; Stewart Affidavit at ¶ 3; Clarke Affidavit at ¶ 3. None of them pays taxes, maintains a residence, office, bank account or assets in Pennsylvania. Jaggard Affidavit at ¶¶ 4, 7; Stewart Affidavit at ¶¶ 4, 7; Clarke Affidavit at ¶¶ 4, 7. Clarke and Stewart have never traveled to Pennsylvania on CCI business. Stewart ...

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