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Martin v. Snap-Tite, Inc.

United States District Court, W.D. Pennsylvania

February 27, 2015

HARRY D. MARTIN, Plaintiff,
v.
SNAP-TITE, INC., JOHN S. CLARK, GEORGE P. CLARK AND GARY L. CLARK, Defendants.

MEMORANDUM OPINION

JOY FLOWERS CONTI, Chief District Judge.

I. Introduction

This case involves breach of contract and unjust enrichment claims brought by plaintiff Harry D. Martin ("Martin") against defendants Snap-tite, Inc. ("Snap-tite"), [1] John S. Clark, George P. Clark and Gary L. Clark (collectively, the "Clarks"). Martin asserts that he provided the Clarks with extensive management consulting services from December 2008 to April 2012 for which he was never compensated. (ECF No. 7 ¶ 29).

Pending before the court is the Clarks' motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. (ECF No. 31). Upon consideration of the parties' submissions and because there was an express contract for the services provided by Martin, the Clarks' motion will be granted.

II. Factual Background and Procedural History[2]

Martin was licensed to practice law in Pennsylvania for forty-seven years until retiring at the end of 2004. (ECF No. 38-1 ¶ 2). From the early 1960s until his retirement, Martin practiced with the law firm of Elderkin, Martin, et al. (the "Elderkin Firm"). (ECF No. 38-1 ¶ 3). From his education and years of practice, Martin developed expertise in the fields of corporate law, business law, mergers and acquisitions, tax, commercial real estate and other specialties. (ECF No. 38-1 ¶ 4).

Snap-tite is a manufacturing business located in Erie County, Pennsylvania, and at all times relevant to the instant action, was privately owned and the majority shareholders were members of the Clark family. (ECF No. 38-1 ¶ 5; ECF No. 42 ¶ 2). For several years prior to 1965, Martin was Snap-tite's primary legal counsel. (ECF No. 33-1 at 9, 21, Martin Dep. 33-35, 82-83). In 1965, Martin became a member of Snap-tite's Board of Directors (the "Board"). (ECF No. 42 ¶ 3). Between 1965 and 2004, Martin, through the Elderkin Firm, regularly billed Snap-tite for the legal work he performed for Snap-tite and Snap-tite paid those bills. (ECF No. 42 ¶ 8). During this same time frame, Martin also represented members of the Clark family, including the Estate of George Clark. (ECF No. 42 ¶ 5).

In the mid-2000s, the Board formed a long range planning committee (the "Planning Committee"), which originally included the three Clark brothers (the inside directors), and Zack Savas ("Savas"), David Nevins ("Nevins") and Martin (the outside directors). (ECF No. 42 ¶¶ 25-26). Each member of the Planning Committee was also a member of the Board. (ECF No. 42 ¶ 27). After the death of George Clark, the Clarks decided they wanted to begin considering selling Snap-tite. (ECF No. 42 ¶ 24). The purpose of the Planning Committee was to prepare Snap-tite for sale, and Martin acknowledged that this committee was created "to sharpen up Snap-tite for eventual sale." (ECF No. 42 ¶ 31).

In 2008, Snap-tite engaged Schneider Downs to act as a broker in the sale of Snap-tite. (ECF No. 42 ¶ 35). Schneider Downs worked on a commission basis, receiving expense reimbursement until the ultimate sale of Snap-tite, at which time it would receive an agreed upon commission. (ECF No. 42 ¶ 36). Schneider Downs provided many services as broker, including the preparation of a confidential investment memorandum ("CIM"), contacting potential purchasers, creating a "Data Room" that potential purchasers used to conduct necessary due diligence, and overall management of the sales and marketing process. (ECF No. 42 ¶ 37). Snap-tite also engaged Scott Wornow ("Wornow") as outside legal counsel to represent it, and Wornow participated in drafting a stock purchase agreement for Snap-tite's use. (ECF No. 42 ¶¶ 38-39). Following Wornow's departure from his law firm, Lee Charles ("Charles") from the same law firm, was retained as outside legal counsel. (ECF No. 33-1 at 33, Martin Dep. 129).

Martin and other members of the Planning Committee were involved in various aspects of Snap-tite's sales effort. (ECF No. 42 ¶ 40). Martin contends, however, that his involvement in the sales effort exceeded that of both Savas and Nevins in amount, quality and importance. According to Martin, he played a significant role in the selection and decision to engage Schneider Downs, Wornow and Charles. (ECF No. 33-1 at 26-27, Martin Dep. 101-02, 105-06; ECF No. 38-1 ¶ 24). Martin claims that he provided valuable services complementing the work of Schneider Downs, including extensive revisions of the CIM, as well as gathering, organizing and presenting financial information about the company. (ECF No. 33-1 at 26, Martin Dep. at 101-04). Martin further contends that he performed extensive work in revising, editing, and improving the draft stock purchase agreement prepared by Wornow. (ECF No. 33-1 at 33, Martin Dep. at 129-30).

Defendant John Clark agrees that Martin was responsible for bringing Wornow in as outside legal counsel, and that Martin also interviewed Charles. (ECF No. 33-6 at 2-3, J. Clark Dep. 8, 13). He acknowledges that Martin worked on document preparation with Wornow while Nevins did not, but indicated that Nevins was copied on all important documents. (ECF No. 33-6 at 3-4, J. Clark Dep. 14, 17).

The efforts to sell Snap-tite in 2008 failed due to the economic downturn in the United States. (ECF No. 42 ¶ 41). According to the Clarks, between 2008 and 2010 Snap-tite, through its Planning Committee, continued to position Snap-tite for sale, and ended up selling its Hose Unit. (ECF No. 42 ¶¶ 42-43). Martin claims that his efforts in readying Snap-tite for sale during this period exceeded those of the Planning Committee as a whole, and that he provided substantial assistance in the pricing of the assets of the Hose Unit, as well as negotiating with the buyer and documenting the transaction. (ECF No. 33-1 at 26-27, 30, Martin Dep. at 104-05, 117-20).

In 2010, Snap-tite increased its efforts to once again sell the company. Negotiations occurred with United Technologies, a potential buyer, but no sale was consummated. (ECF No. 42 ¶ 44). Martin contends that he provided significant assistance in dealing with United Technologies, including evaluating offers, attending meetings, and developing strategy for the sale, and that no other director, except the Clarks, played any significant role in the negotiations and analysis. (ECF No. 33-1 at 31-32, Martin Dep. 121-26).

Ultimately, Parker Hannifin was identified as a potential buyer of Snap-tite, and it purchased Snap-tite in April 2012. (ECF No. 42 ¶ 55). In connection with this sale, Martin states that he provided the following services to Snap-tite:

• Negotiations, tax advice, document preparation, and supervision of legal and investment banking services for the potential sale of stock to Parker Hannifin
• Extensive advice, support, and direction to counsel retained by the defendants to negotiate and complete the Stock Purchase Agreement with Parker Hannifin
• Reviewing, commenting upon, and revising all transaction documents, including the Stock Purchase Agreement ultimately used in the sale to Parker Hannifin

(ECF No. 38-1 ¶ 21(e)-(f), (k)).

Martin was initially paid $500.00 per meeting to compensate him for his service on the Board. (ECF No. 41 ¶ 9). Martin's compensation for serving on the Board increased to a flat fee of $32, 000 per year, although the parties dispute the date this increase occurred. (ECF No. 42 ¶ 10). In addition to his Board service fee, Martin received other payments from Snap-tite over the years, the nature of which the parties dispute. According to Martin, he received payments from Snap-tite for consulting work he performed, above and beyond any services he provided as a director. (ECF No. 33-1 at 36-39, Martin Dep. 141-53). Each year between 2005 and 2008, Martin would inform one of the Clarks about what he believed to be the amount Snap-tite owed him for the work he performed the previous year, the Clarks would agree to this amount, and Snap-tite would pay him in the succeeding year. (ECF No. 42 ¶ 15).

Snap-tite paid Martin an average of $107, 625 per year for work performed from 2005 through November 2008. (ECF No. 42 ¶ 18). This average includes $75, 000 that Martin was paid in 2009 for work performed during 2008 as part of his specific sales efforts. (ECF No. 43 ¶ 10). Specifically, Martin was paid the following amounts according the 1099 Forms provided to him by Snap-tite:

(ECF No. 38-1 ¶ 13).

It is undisputed that after March 2009, Martin received only $32, 000 per year for his Board service. (ECF No. 42 ¶ 20). Martin contends that between December 2008 and April 2012, he spent roughly 2, 000 hours working on Snap-tite projects. (ECF No. 38-1 ¶ 22). According to Martin, just prior to Thanksgiving of 2011, he informed the Clarks that he believed he was owed additional compensation for the services he provided since 2009 in preparing Snap-tite for sale. (ECF No. 33-1 at 41, Martin Dep. 163-64). Martin stated that he informed the Clarks that he thought he "should be paid some more money" and mentioned a couple of "special contributions" that he felt made the deal a "lot better for everybody." (ECF No. 41 at 41, Martin Dep. 164). Martin did not request a specific amount, however, and acknowledged that he "had no number in mind at that time." (ECF No. 33-1 at 42, Martin Dep. at 166). Martin indicated that the Clarks did not "say much about it, " other than stating he had done a great job. (ECF No. 33-1 at 41, Martin Dep. 164).

In March 2012, Martin sent the Clarks the following letter:

I believe that I am entitled to a bonus because of my contributions to enhancing shareholder value. I have never raised this issue before because it is only now that Snap-tite shareholders are actually going to realize value for their shares.
I feel that I have made two major contributions. First, I was a key to Snap-tite being able to acquire Autoclave. The sale of Autoclave was "rigged" to limit competition to the offer of the management group. Parker, Shwaglock, and other likely prospects, never learned of Autoclave's sale. I learned of it, alerted your father, and got Tom Doolan at National City to issue a letter supporting Snap-tite's ability to finance the purchase. My relations with the Levinson's, and bringing Joe Allison on our team, contributed to Snap-tite's ability to beat out the management group.
Second, I was the one who thought to combine the reduced value of Snap-tite's stock in your father's estate with the availability of the life insurance case value and the on-going premium cost, to put Snap-tite in a position to redeem the estate's stock, and eventually the other stock under the option plan.
Without these two contributions, Snap-tite's shareholders would be only able to realize several thousand dollars per share for their stock rather than the $11, 000 per share realized in the sale price ...

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