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Paramount Financial Communications, Inc. v. Broadridge Investor Communication Solutions, Inc.

United States District Court, E.D. Pennsylvania

July 7, 2015

PARAMOUNT FINANCIAL COMMUNICATIONS, INC., doing business as

MEMORANDUM

JAN E. DUBOIS, District Judge.

I. INTRODUCTION

This breach of contracts/torts case arises out of two contracts: a Marketing Agreement between plaintiffs Paramount Financial Communications, Inc., doing business as "Plan Management Corp., " ("Plan Management") and Jonathan Miller and defendant Broadridge Investor Communication Solutions, Inc. ("Broadridge") and a Stock Purchase Agreement between plaintiff Miller and defendant Broadridge. Plaintiffs allege that defendant entered into the Marketing Agreement despite knowing that it could not perform under the contract. Plaintiffs further contend that defendant fraudulently and/or negligently induced plaintiffs to enter into the Marketing Agreement and plaintiff Miller to enter into the Stock Purchase Agreement.

Presently before the Court is defendant's Partial Motion to Dismiss Counts II, III, and IV of the Complaint. For the reasons set forth below, defendant's Motion is granted in part and denied in part.

II. BACKGROUND

In the Complaint, plaintiffs allege the following facts:[1] On March 8, 2010, plaintiffs and defendant entered into a five-year Marketing Agreement, with a term extending from March 8, 2010 to March 8, 2015. (Compl. ¶ 7.) Defendant terminated the Marketing Agreement as of March 10, 2015. (Id. ¶ 24.)

Section 1 of the Marketing Agreement provides:

By the date that is twelve (12) months from the Effective Date, Broadridge will use commercially reasonable efforts to refer at least 200 Viable Clients to Plan Management (as adjusted, the "Referral Target"). During each twelve (12) month period thereafter during the Term [March 8, 2010 to March 8, 2015], Broadridge will use commercially reasonable efforts to refer such number of Viable Clients as equals or exceeds the Referral Target applicable to the previous twelve month period multiplied by one hundred and ten (110%) percent. As used herein, "Viable Client" is a corporate issuer that has any type of securities or securities related incentive plan or that expresses an interest in implementing such a plan and expresses to Plan Management or Broadridge an interest in learning about Plan Management's services and which observes a demonstration of Plan Management's OptionTrax® system.

(Id. ¶ 12.)

As of the date plaintiffs filed the Complaint, January 28, 2015, defendant had referred only fourteen "Viable Clients" to Plan Management. (Id. ¶ 14.) Plaintiffs aver that the Marketing Agreement required defendant to use commercially reasonable efforts to refer at least 1, 221 Viable Clients by March 8, 2015, and that defendant "intentionally failed and refused to refer" Viable Clients to Plan Management. (Id. ¶¶ 13, 16-17.)

Plaintiff Jonathan Miller, the principal shareholder of Plan Management, also entered into a Stock Purchase Agreement with defendant's affiliate, Broadridge Output Solutions, Inc. ("BOSI"). (Id. ¶ 19.) Under the Stock Purchase Agreement, BOSI purchased shares of Stock Trans, Inc. from plaintiff Miller. (Id. ¶ 19.) Plaintiffs allege that defendant entered into the Marketing Agreement to induce plaintiff Miller to enter into the Stock Purchase Agreement and never intended to perform its obligations under the Marketing Agreement. (Id. ¶¶ 20-21.)

On June 5, 2014, plaintiffs sent a letter to defendant's counsel as a formal notice of defendant's alleged breach of the Marketing Agreement. (Id. Ex. B.) On June 25, 2014, defendant's counsel sent a letter to plaintiffs that stated, inter alia:

The Marketing Agreement's definition of "Viable Client" requires that clients referred to Plan Management express an interest in learning about Plan Management's services... Plan Management has not had a feasible infrastructure to support the types of services required by Broadridge's clients. For example, Plan Management does not have the name recognition in the industry necessary to compete for the type of clients served by Broadridge's transfer agent business. Due in no small part to Plan Management's lack of ...

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