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Spina v. Refrigeration, Service and Engineering, Inc.

United States District Court, E.D. Pennsylvania

October 7, 2014

THOMAS SPINA, Plaintiff,
v.
REFRIGERATION, SERVICE AND ENGINEERING, INC., et al., Defendants.

MEMORANDUM

ROBERT F. KELLY, Sr., District Judge.

Presently before this Court is Plaintiff, Thomas Spina's, "Motion to Enforce Business Rights Under Section 1508 of the Pennsylvania Business Corporation Law, " and Defendant, Refrigeration Service and Engineering, Inc.'s, Response in Opposition. For the reasons set forth below, Plaintiff's Motion is denied.

I. FACTUAL BACKGROUND

A. The Underlying Litigation

On August 11, 2014, Plaintiff, Thomas Spina ("Plaintiff"), filed an eighteen (18) count Amended Complaint against Defendant, Refrigeration Service and Engineering, Inc. ("Defendant")[1], and Defendants Robert E. Hepp ("Hepp"), Cynthia A. Fitzgerald-Hepp ("Fitzgerald-Hepp"), and Kenneth C. Philo ("Philo") (collectively, the "Shareholder Defendants"), for alleged breaches of statutory and common law. See Am. Compl. The catalyst for Plaintiff's claims is a merger agreement entered into between Industrial Refrigeration and Engineering, Inc. ("IRE") and Defendant on December 29, 2011, which subsumed IRE into Defendant. Am. Compl. ¶ 11. At the time of the merger, Plaintiff possessed a thirty-three-and-one-third percent (33 1/3%) ownership interest in IRE. Id . After the completion of the merger, Plaintiff acquired a thirty percent (30%) ownership stake in Defendant. Id . ¶ 46. The Shareholder Defendants possessed the remaining ownership interests in Defendant. Id . ¶ 66.

At some point on or before May 4, 2014, Hepp and Fitzgerald-Hepp reached an agreement in principle (the "Sale of Assets Agreement") with Stellar Refrigeration Services, Inc. ("Stellar"), of Jacksonville, Florida, to sell all of Defendant's assets, excluding cash and accounts receivable to Stellar for a sum of $475, 000, payable over a period of three years. Id . ¶ 51. Although, this Sale of Assets Agreement was never consummated, it forms the basis of Plaintiff's claims and was a source of major contention between Plaintiff and Shareholder Defendants.[2] Id . Generally speaking, Plaintiff believes that the Shareholder Defendants have promoted their own interests at the expense of his interests. (Pl.'s Mot. for Jud'l Supervision.) The Shareholder Defendants reject this contention and assert that Plaintiff's real motive is to exact retribution against his former business partners for leaving him, and to receive thirty percent (30%) of the net liquidation proceeds without paying for a thirty percent (30%) interest in RSE. (Defs.' Resp. in Opp'n, 2.)

B. Plaintiff's Instant Motion

On June 13, 2014, Plaintiff sent Defendant a letter demanding to exercise his right to inspect the books and records of Defendant in accordance with the procedures of the Pennsylvania Business Corporations Law, 15 Pa.C.S. § 1101, et seq . (Pl.'s Mot. for Inspect. of Docs. ¶ 2.) Plaintiff asserted the inspection was necessary for the following purposes:

1. To determine the propriety, nature and extent of RSE's (Defendant) expenditures since December 31, 2011, that impact my rights as a shareholder of RSE including, without limitation, the value of my interest in RSE and entitlement to any distributions of RSE's profits accruing since December 31, 2011;
2. To determine the fair market value of my 30% shareholder interest in RSE;
3. To determine the terms, conditions, fairness, propriety and validity of the Putative Stellar Transaction and its impact on my rights as a shareholder of RSE;
4. To determine the scope and magnitude of any self-dealing, conflicts of interest, breaches of fiduciary duty, fraud, conversion and other misconduct engaged in by Robert Hepp, Cynthia Hepp and/or Kenneth Philo regarding RSE's operations and/or the Putative Stellar Transaction that impact or have impacted my rights as a shareholder of RSE including, without limitation, the value of my interest in RSE and entitlement to any distributions of RSE's profits since December 31, 2011; and
5. Such other purposes within the purview of Section 1508 of the Business Corporation ...

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